Transcripts For CNBC Squawk Box 20180222

We have somebody here who can give us icnsight into all of tha dow futures look to be down 35 points part of what happened in the market was because of tenyear yields topping 2. 96 right now the tenyear is at 2. 926 the 2year at 2. 2 26 . In asia, the nikkei off by 1 . Shanghai is up about 2 . In europe, the early trading there, the stock markets there are mostly in the red. Dax is off by 0. 8 ftse is down by almost 1 . Barclays shares are up sharply despite the uk Bank Reporting a big drop in 2017 profits. Barclays says it lost 2 2. 7 billion once again why would that happen . Yep. They its accounting for the u. S. Tax overhaul. But also a weaker dollar there were some bright spots Barclays Says its pretax profits rose 10 customer deposits were up and its doubling its didividend. Jeff staley says he is optimistic about the future. There are a number of tailwinds. During the next year and half we will be retiring a lot of debt Interest Rates are in a much better position than they were before weve closed noncore noncore was a significant drag on this bank in 2017 you take those things around taxes, noncore expenses, thats about 150 basis points of that 350. Then we have costs cost guidance of 13. 6 to 13. 9 billion for 2019 we have great visibility on how to get to that number. This bank dropped its costs by 5 billion pounds over the last few years. We know how to do that all youre talking about to get to that number, you have to believe we can increase earnings by 125 basis points. Staley also said he had no plans to leave the bank despite an Ongoing Investigation by investigators about his treatment of whistleblowers fords north american president has been ousted from the company. Ford fired raj nair effective yesterday after conducting an internal investigation into reports of inappropriate behavior thats all we know the specific allegations are not clear. The ford ceo said the firm is depositi deeply committed to providing and nurturing a safe and respectful culture and we expect our leaders to fully uphold these values. There have been allegations about a plant in the 90s and harassment of female employees hes been there 30 years in charge of Product Development for a long time. Its a loss they just got rid of fields. Shares did take a hit when the news broke late yesterday. Its time for the squawk planner. On the earnings agenda, hormel foods and blooming brands will post before the bell hewlettpackard enterprises, hp and intuit will post results after the close this afternoon then when you check out the data calendar, weekly jobless claims will be released at 8 30 a. M. Eastern time Randy Quarles and fed president bill dudley, Raphael Bostic and rob kaplan all have scheduled events today quarr quarrels made comments at a speaking event in tokyo overn t overnight, but we have somebody here live. Blooming brands, you know what that is blooming ononions a lot of casual dining f youre going to focus, what should they be known for those grease y beautiful onion rings. Bloomin brands. They have all these different things, if you want to define that company bloomin onion. You had one of those things theyre good. Wouldnt have too many of them the big thick ones, but these are just any way. Im totally distracted now lets get to our special guest, jim bullard is our guest host for the hour great to have you here the journal, the lead, fed gives bullish signals on the economy. A s that the correct determination . Brdz, a b, are you more convinced as a group that the 2 inflation target is coming sooner . And this did not cause you to change the path in Interest Rate hikes. Has the journal got all of those things right 2017 was a good year. U. S. Economy surprised to the upside Global Economy surprised to the upside that drove earnings. That drove a good year for u. S. Equities it was natural for us to be meeting in january and saying good things about 2017 that part is accurate. Weve got core pc inflation at 1. 5 market base core is at 1. 2 year over year. We have a ways to go on this inflation story. Inflation has been below target for a long time here i dont think we have to be in a hurry. I also think the market is doing our work for us with the tenyear moving up i dont think we have to chase the tenyear up. Except the tenyear moves every time one of you guys if your left eyebrow raises its not all of us. Thats true in january the cut isstalk i got more bullish than the previous projections i have a problem with main stre stream economists on how long it takes them to raise projections. You have all this stimulus, what i think are growth policy tass have been enacted, and deregulation yep the fed, it seems like you guys still look in the Rearview Mirror arent you supposed to anticipate growth . I think good things have happened i like the deregulatory agenda i think the tax plan has some chance of working ap find firinp investment but youre kicking and screaming. In the forecasting world things happen slowly youre better off inching up your forecast. Thats all thats going on there. I think people are optimistic and hopeful that well have another good year in 2018. Stock markets seem to get it before you guys. I will say this the idea that we have to go 100 basis points in 2018, that seems like a lot thats price for perfection. Everything would have to go just right. The economy would have to surprise to the upside a bunch of times im not sure if thats a good way to think about 2018. I remember when you kind of switched you found religion at some point. You wanted to raise rates for a while. You seem more hawkish, then suddenly about a year and a half ago you got very dovish based on inflation . We had a forecast but you, jim bullard. I used a forecast that was traditional. That inflation was going to move above target we had to get out in front of it that forecast turned out to be wrong for three or four years in a row. I decided to switch gears and were just in a low rate environment globally and one thing im concerned about is if a bunch of hikes this year fed policy will turn restrictive. Youre not used to thinking of it that way. Thats where we are. The neutral fed funds rate is pretty low if we go up 100 basis points in this environment you will be restricted in an environment where inflation is still below target if youre looking for growth you dont have to go that high just to get to neutral. You pointed out growth around the globe was stronger than expected relative to the u. S. , could you expect to see global Interest Rates coming up, which is what weve seen with the german bund, part of the reason why the market brought rates up here europe surprised to the upside if they have another good year, i would expect upward pressure on rates from that will they have another good year i dont know any better than anyone else. If the long end is moving up in tandem with better growth prospects, then the bond market is doing the work for us that doesnt mean the fed has to move to a restrictive stance you said basically all of us need to recalibrate what we think is high and low in terms of Interest Rates. Its not the absolute level t could be the relative level from where they were. Dalio and others have warned that a lot of people have borrowed a lot of money. And theyre paying a certain level of debt service right now. Even if its only back to what seems historically low levels, they have to pay more including the government. Yeah. Let me ask you this we recently had the well, first, the stock market is up 40 since the election i used to think a lot of the stock market was you guys. It was staying at zero, extraordinary measures, big Balance Sheet. Animal spirits, you tried doing asset value. They go up as you stay at zero, maybe it wasnt fundamentally based. Is there any truth to that do you think that you handed off the stock market baton to the real economy in the last year . I would say this. 2017 was not the fed definitely not then youre admitting before that it was the fed . It was a better argument a couple years ago when i was here last year it was really the Global Growth surprise as i was saying, it was bigger outside the u. S. That growth surprise than it was inside the u. S. But everyone was up. It was up simultaneously china was up japan was up europe was up. And naturally on equities, of course, 50 of the profits are coming from overseas that was a big driver for the market plus the deregulatory agenda the growth agenda. All good and that will help drive equities also just a banner year. You didnt have anything going wrong in 2017. Can i parse what you said a moment ago you said the idea that we have to go 100 basis points in 2018, you think the market is getting ahead of itself, because that would be price for perfection for that to happen i think yesterdays action, fwrant e granted this was knee jerk reaction, if you look at yesterdays market reaction, traders looked at this and thought, great, this is going well, there will be growth then they thought, gosh, things are going well, the fed will raise rates faster than anticipated. What you just said makes me think they jumped to the wrong conclusion yesterday afternoon iny the nthink there will be continuity, we have to give jay powell a chance to settle in, but this is all about continuity very deliberate. Very data dependant. You know, the idea that were going to go in lockstep without paying attention to the economy is too much. It will be data dependant. A lot of things would have to go right through 2018 to get the full 100 basis points coming in. For stock market investors, it was amazing for the last year you get a 40 move in stock prices so a 10 correction was welcomed by a lot of people not surprising but we all look for reasons. We all look for something under the surface that could 10 into 20, 25 or whatever everybody says theres no housing bubble theres no we dont have these crazy instruments that are totally leveraged. Theres nothing like that. I always come back to a fed policy mistake as the thing that people in the back of their mines are still worried about. The Balance Sheet is so big. You still have not extricated yourself from staying at zero for so long. Is there a potential for a policy mistake by the fed . Would it be either way would it be tightening too fast or staying low for too long . Could you screw up on either side im mostly scared about plowing ahead, raising rates thats the new bullard. Based on the conception of the 80s and 90s, which is not word were living in today were just living in a lower level of Interest Rates today. We dont have to do as much to get to naught raeutral supposedly its never been done, where you get one. How do you know youre not behind the curve you know, core pc inflation is 1. 5 . It will come up in march and april. So it wont surprise you. Thats not a surprise no were still below 2 at that point. These phillip curve effects are so weak. Even unemployment gap of 1200 basis points,you think the natural rate of employment is 5 , were at 4 . If you look at the estimates that will cause 7 basis points of inflation thats how flat the phillips curve is today the idea that you will all of a sudden inflation will be upon us in this world where we have not hit the inflation target for five years, thats a little much you are convinced what do they call that risk . Asymmetric as data comes in during the year, we can make a judgment i wouldnt pencil in well do these rate increases without you think the risk is not staying low too long you think the risk is changing and tightening too quickly yeah. The other aspect is were shrinking the size of our Balance Sheet and thats been gradual. But that will start to kick in during 2018. So you have that going on in the background so maybe just letting stuff roll off right maybe you dont have to do as much on rates since you have that aspect of the policy tightening going on. So for the year you would put gdp in the range of what for 2019 what would the range be you know, 2. 4, 2. 5 for the year for 2018. Yeah. Then slower after that in 2019 i hope its better i hope the growth agenda works my idea about that is that we can wait and see we dont have to get out in front of that. Wait and see if thats what happens. If it does and rates are naturally moving higher what have we been averaging the last eight years . 1. 5 to 2 2. 1 . So were back to that in 2019 . The potential growth is low for the u. S. Most people think labor force is not growing fast productivity has been low. What i need is the investment boom thats got to feed into productivity thats what you need so thats possible. Yeah. Absolutely then would have to raise 2019 but you dont have to get in front of that. You dont have to be preemptive. As the fed you have to react to things . I think shoe in thu you shous environment. I wouldnt be preemptive here. God, i can do that. You dont need to anticipate anything at the fed . You looked a what happened how much does it pay this environment thats the best way to go that served us well the last two years. Thank you youre going to be here is that okay yeah. Things are going well, dont you think. I think so but i think the markets need to sit up and listen to what jim is saying it was down 100 earlier this morning. Down 20 a second ago i dont know who you are i thought i knew you you should not be dogmatic in this business. You have to change your opinion. Jim will be with us for the rest of the hour when we come back, well talk more about what hes been seeing our guest host at the top of the next hour is david novak, the former yum ceo hes tackling the Biggest Challenges to American Business leaders. Well also talk to brian cornell, the chairman and ceo of target well talk about the tough retail landscape, competing with amazon and what we heard there wa from walmart this week first, andrew, what do you have coming up . The american women are hockey champions once again beating canada in a huge nail biter, decided by a shootout. If you stayed up late enough you might have seen it highlights when squawk box continues. Tomorrow, its a day filled with promise and new beginnings, challenges and opportunities. At ameriprise financial, we cant predict what tomorrow will bring. But our comprehensive approach to Financial Planning can help make sure youre prepared for whats expected and even whats not. And that kind of Financial Confidence can help you sleep better at night. With the right financial advisor, life can be brilliant. Wow record time. S. At cognizant, were helping todays leading Life Sciences companies go beyond developing prescriptions to offering subscriptions with personalized, realtime advice for lifelong, healthy living. Honey . You almost done . Nope. Get ready, because were helping leading companies see it and see it throughwith digital. Welcome back to squawk box. Commerce secretary wilbur ross is taking the lead on the trump administrations push to open up the commercial space race. A new wall street journal article calls secretary ross in its words the deregulation czar of the serheavens. The Commerce Department tapped to be the prime cattalyst for loosening controls over rocket launches to asset mining, which we need for cobalt or the lithium for our cell phones and for our cars cobalt and lithium oxide. Secretary ross will join us live at 8 30 a. M. Eastern time to talk about that and what else is happening in his neck of the woods. His part of the world. Check it out. Lets look at futures this morning as jim bullard was speaking he turns the s p futures positive theyre looking up by almost 3 points dow futures still down, just barely down 8 points. The nasdaq is off by 2 points. This comes after that hectic day of trading at the end of the session where we saw the big swing in the last 90 minutes of trading as traders were die justing what thjus digesting what they heard from the fed yesterday. Andrew is live in south korea. Exciting times last night. We finally have some good news some u. S. Good news. The curse is officially broken the u. S. Womens team, hockity Team Emerging victorious in what was a remarkable nail biter. Lamoureuxdavidson scoring the winning goal in a dramatic shootout the usa pulled off a thrilling 32 comeback and it wasnt known until the bitter end this is team usas first olympi championship in 20 years the game was a near mirror image of the last matchup four years ago when the canadians tied the game at 2 and then won it in overtime everybody here erupting about that news. Heres how the team reacted to the win. Im just so happy i could help in any way possible i pictured it, visualized moments like that thousands of times. For me to get the nod, coach throwing me out there, there was no doubt it was going to go our way. After i scored, i knew maddie would stop it. I knew it would happen big day for team usa. Mikaela shiffrin, well talk about what she did and look at standings. The u. S. Was not on this screen about a day ago. We have moved up now to number four we have 21 netherlands at 16. Norway with the top spot at 33 thats whats going on here. Its been quite a day and a lot more to come well show you more footage throughout before i go from here, ive been listening to your conversation i have a question for mr. Bullard. Which is this, you talked about being reactive, that the strategies i want to know what it would take for you to decide you dont want to be in a reactive mode, you want to be in a pro active mode what would be the Tipping Point for you . Inflation would have to move up from where it is now. Get up to target Inflation Expectations would have to be higher than today they have moved up but theyre shy of where they need to be you would have to have the idea that well be tamp down on inflation moving back from the high side. Were not in that environment now. Core pc inflation at 1. 5 . If strategically the fed is in a reactive mode, isnt that a dangerous place to be . I think we all thought it was interesting to hear you say that we all think the fed has access to numbers that we dont have or knows something we dont and it is going to be ultimately be proactive. If you tell the market were sitting around looking at this stuff just like you and well wait and see, isnt that putting you in a tougher spot . If inflation was at 3 and threatening to go higher, i would be mr. Preemptive. I would be saying we have to get ahead of this process. Thats not the world that were in today the phillips curve is flat. Doesnt look like well get action out of that we can be lets not call it reactive lets call it data dependent lets see how the economy evolves until 2018 and make moves appropriately. What i dont want is for markets to be pricing in 100 basis points of fed moves before anything is actually happening in 2018. It was a big day yesterday, andrew keep it up number one, you know, just having the gold medal in hockey is big but then what you showed, the medal count, theres hope. We can pass. One more medal, were tied with canada. Weve not given the hockey team their due this is amazing. Lamoureuxdavidson was playing since she was four years old there. Amazing. Big day and we might be able to beat germany. Keep it up we can like its up to me. Keep it up i like it. I will try to keep it up here. I wasnt going to say anything about quintanilla are we using the leaderboard . If were using the leaderboard, do we think we can get a bronze . Certainly get above canada. For for what . Where the us sta. S. Stands were number four we were number six the united who this is better i dont know what quintanilla was doing over there going to that Italian Restaurant i dont know if we have video to show you. I was training with a biathlete. I was trying to help them. See, this is me. Well show you more. This is me gettinga little bit of a lesson. We have more of this later as you can imagine we raced. You know who won because that is just a bit of a tease. I come back. Have you Cross Country skied before the edges are not quite like they are in downhill ive only been a downhill guy. The only time i Cross Country skied, you remember when i fell on my fannie yeay years ago in s the heels are not attached. The heels are not attached. The shoes are completely different. Similar but theres an ankle situation. Its im ruining the segment for later. Any way all right all right. Thank you, andrew well see you in a bit. Coming up, much more from jim bullard, st. Louis fed president. And author amy chua joins us as we head to break, heres a look at yesterdays s p 500 winners and losers female vo breaking news from washington as lawmakers; male vo raging wildfires continue to scorch parts; male vo allegations of misconduct; oh, why you look so sad, the tears are in your eyes, mvo how hard is it just to take some time out of your day to give him a ride to school and show him you support him. And dont be ashamed to cry, let me see you through, cause ive seen the dark side too. When the night falls on you, you dont know what to do, mvo when disaster strikes to one, we all get together and support each other. Thats the nature of humanity. Ill stand by you, wont let nobody hurt you. Ill stand by you, so if youre mad, get mad, dont hold it all inside, come on and talk to me now. Hey, what you got to hide . Mvo its a calling to the nation of how great we are and how great we can be. Im alive like you. When youre standing at the cross roads, and dont know which path to choose, let me come along, cause even if youre wrong ill stand by you. Ill stand by you. Wont let nobody hurt you. Ill stand by you. Even in your darkest hour, and i will never desert you. Ill stand by you. Youre watching squawk box live from the Nasdaq Market site in times square. Good morning u. S. Equity futures were positive last i saw on the dow well done, jim. We shouldnt attribute things like that to you i have to say i think the traders misinterpreted some of the fed stuff yesterday. You were just telling me its not up to central banks. Its now the all about central banks. Not today i attributed the entire gains of the Obama Administration to the fed staying at zero. If i did that, maybe this was you today. Lets look at some stocks to watch. Shares of roku are down sharply. The maker of streaming devices is forecasting a bigger than expected loss this year. The down beat outlook overshadows a surprise profit in the Fourth Quarter pandora reporting a narrow Fourth Quarter loss. Revenue beat forecast as the Internet Radio company added more subscribers the total number of new customers rose 25 to nearly 5. 5 million. Amy chua is known for her provocative books, battle hymn of the tiger mom and the triple package and now shes tackling tribal allege genjans jans allegiances in the United States. Her book political tribes Group Instinct and the fate of nations talks about that. Talk about what tribalism is it can be a literal tribe people often use it to mean an ethnic affiliation, like the jewish tribe or the japanese tribe. All i mean is a special kind of group or allegiance where your identity becomes so bound up with the group that its intense. You feel like these are my people you know, kind of like your reaction to the olympics its like we within a this team to win we dont care what everybody says im totally tribal when it comes to that. You think weve come to a new era in the United States where everybody is feeling tribal, whether minority or a majority tribalism is hard wired in us we cant ignore it if we dont fight it, we are all tribal when tribalism takes over the political system, that is much less healthy thats what were seeing now because what happens is so many different groups feel threatened, not just minorities, but whites feel threatened, not just muslims and jews and buddhists, christians people threatened when people feel threatened they retreat into tribalism and they get more insular and defensive the problem is with tribalism you see everything through your tribal lens. You kind of ignore facts you want to stick to your team and be loyal to it thats preventing us from having National Conversations first of all, what happened how did we get to this point is it a reflection of the 2008 financial crisis thats only a part of it. We all want to point fingers i think both sides of the political spectrum are to blame. I dont think anybody is blameless here on the left i think theres been too much focusing on identity mongering, victim worshipping, and people didnt expect they knew it might take over College Campuses, but they didnt expect that to come to the rise of donald trump on the right, rage mongering, Conspiracy Theory peddling they thought that would stay on talk show media but not to contribute to the rise of donald trump. So the book is explaining this antiestablishment movement. Both sides have a little Conspiracy Theory mongering, unless we do find collusion. You should pull up the bill murray interview we did at pebble beach started by saying up the country wakes up in the morning, its a clash of clans, and how one of the fault of the left is they pick out groups to say we represent you and almost exploit that group to say we represent you but not everyone they said almost the identical things youre saying did you see that interview i didnt. Ill look for it ptchlit progressives are making important points, but the discussion because of our tribalism, we cant talk about the problems its almost like, oh, you said wrong thing. Im a huge fan of immigration. Im the daughter of immigrants its a source of our vitality in the country, but its ridiculous if somebody in america cant express their anxiety and say im worried about immigration. Can we talk about how we do this, how we have limits at this point its like if you say that, oh, my god, zoenophobi racist my work is looking at twiribalim how it has broken down countries. Both sides have been playing with fire and not realizing it the good news is studies show if you pull people out of their tribes and have them interact as human beings, unbelievable progress can be made if you take people who hate each other politically and say get together and talk about dogs, your pets, pizza, children people find common ground. Thats the next step we have to realize, you know, we cant see people that we disagree with on the other side of the political spectrum as enemies. Theyre just people we disagree with not unamericans or immoral people at that point were just going to fracture into two i tried to do that with pets. I bring up my dogs then someone will Start Talking about cats stupid cats. They dont please come over and let me pet you i know. This is tribalism. Ive tried to bridge the gap. Cat people i cant oh. Thats part of it. She says less social media, more Human Interaction she doesnt like anyone winning medals apparently im the only american fan here. People from norway, we cant watch their achievement and celebrate it they have their own people cheering for them. Tribalism is okay when it comes to the owe olympicses. Or football teams have you tried talking to people about their football teams, trying to switch allegiances thats tribal. Cats. Thank you i love this conversation i hope you come back again thank you very much by the way, check out the new book, appreciate your time today. Coming up, former yum brand ceo david novak will be our guest host at the top of the hour hell talk about leadership and the American Economy well talk about this guy at chip chip, whether chipotle and whether he thinks its a good idea and the ceo of target joins us live to talk about the retail landscape and competing with amazon. And later well talk infrastructure and trade with commerce secretary wilbur ross stay tuned, youre watching squawk box on cnbc stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley welcome back to squawk box this morning live from pyeongchang. Big air snowboarding making its debuting as an olympic sport in pyeongchang. The best two of three runs determines the winner. American Jamie Anderson the slopestyle gold metalist earning her second gold of these games with a silver. That happened today. When snowboarders get big air here in pyeongchang, its burtons name that you see on the bottom of the snowboard. Vermonts burton is a sponsor of team usa this is the fourth time theyve done it. We caught up with ceo donna carpenter and talked about the sports approach to the business and making her company a supportive environment for female athletes. We wanted burton to be a brand of choice for women and an employer of choice its very related. You cannot go after the womens market if you dont have women in strategic decisionmaking rolls. We went from under 10 of our leadership 14 years ago being female to over 40 my team is almost 50 50. Its a remarkable story we also got carpenters thoughts on how the Business Community can respond to the me too movement i think it was because of trumps election i think having somebody who brags about sexually assaulting women, you know, i think the me too movement was a reaction to that i felt so lucky. I was like i dont think youre at risk of that if you have women in leadership. Youre not going to get its the power dynamic, right if you have all men in leadership and women subordinate, thats where you have but if youre more likely to have a female boss or just as likely to have a female boss as a male boss, you dont get those Power Dynamics i felt very proud of our group that we had addressed this 14 years ago. Well have more of our conversation with burtons ceo later on but its an amazing story. One of the few women, by the way, that runs a sports a Sporting Company like this you dont find a lot of female ceos running these Companies Back to you. Thank you very much well see more of andrew coming up in the next hour. Much more from our guest host for this hour, st. Louis fed president , jim bullard also a programming note. On monday Berkshire Hathaways Warren Buffett will join us live for three hours. Hell answer your questions. Just send them to us on twitter, askwarren or submit them on our facebook m. As, and tune in monday at 6 00 a. Etern time and see which ones we pick stick around well be right back. To manage t, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. I thyou never got the brakes looked at . L. Oh yeah. No. At cognizant, were helping todays leading manufacturers make things that think and do automatically. Imagine that, a world of new Digital Products and services all working together for you. Can i borrow the car when its back . Get ready, because were helping leading companies see it and see it throughwith digital. Most people come to la we came with big appetites. With expedia one click gives you access to discounts on thousands of hotels, cars and things to do. Like the Garland Hotel for 40 off. Everything you need to go. Expedia. The Federal Reserve in january across the board talked about stronger growth than its previous forecast. These minutes were relative to where the world was in january. We are down 160 points. We have been of the belief we need to test the old lows. He gave all of that back they went out at the drop of more than 150 points right welcome back, everybody. Our guest Federal Reserve James Bullard. We have been talking about a lot of different issues. Jim, one of the things you brought up before was core inflation, taking a look at that at around 1. 5 that doesnt necessarily paint the picture. I saw a chart that floored me, looking over the years at inflationary and deflationary, tvs down over 100 over that Time Software and toys, Cell Phone Service down over 50 . At the top end of that you have college techbooks, College Tuition up over 200 oh, perfect. You guys got the chart, thank you. Its a stunning chart when you think about the reality if you get sick, if you need child care, if you plan on going to college, those things are off the chart. How do you deal with issues like that with the feds this is a great issue one of the things i have been concerned about the markets have been concerned about is there is this wave from technology that is keeping inflation lower than it would otherwise be and there might even be mismeasurement there, so if you properly measured it, inflation would be low were than we are measuring it today because those technology grids are known for declining prices they are becoming more and more important in the economy although you think about it, technolo technology, you think eb should have cell phones and tvs him theyre not necessitys Like Health Care costs and child care costs. You see Health Care Services costs going up year after year after year, they will be incentives to substitute away from the high priced goods thats what the technology is doing. Its giving rise to new companies. Only economists can explain how something can go down 1 harris in price this is the reality its deflation. Its not keeping place its the reality of the tech world. Theyre paying you to pick up the samsung, ill give you 50 to peck it up. Its fought keeping pace with deflation. I didnt say below zero not keeping track with inflation. Thats whats happening here these economist, man. I set it up that way. I saw it on the chart im trying to figure it out. Somethinglike college techbooks, something talked about a lot. You would think somebody is going to have a revolution here. Maybe thats what were saying when we hear things like j. P. Morgan, amazon teaming up to take on Health Care Costs there are opportunities in places they think at those prices, i will make lot of money. Besos said your margin is my opportunity. Goldman over the week said we are passing the Tipping Point, this is in the journal, why americans are going broke, entitlements, is driving everybody to debt. The bug is adding to the deficit. When does it become a problem . Thats a longrun issue thats something the u. S. Has to fix. I wish we would get on that while its not rain. You should think about enfightment reform heres a simple thing you can do you can index it to gdp. So if you have resources in the future you can pay people. If you dont, are you fought going broke. Excellent thanks for being here today thanks for having me, always fun. About the cardinals, reds, maybe. Im worried about the yankees. Xavier will win. Xavier beat george town last night. Coming up, we will challenge American Business with david novak, a former yum brand ceo and david refers themselves as the great one i think and he has a website now. Well be right back. Lets begin. Yes or no . Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. The original place to invest online. Throwing cold water on the stock rally. Wow the fomc giftves a green lig for bond yield rise, the latest reaction again guest host founder and former yum ceo joins us he brought great guest, that interview minutes away. Trouble if toyland toys r us can close another 200 stores as it struggles to erupt from bankruptcy. That and more as the second hour of squawk box begins right now. [ music playing live from the beating heart of business, new york city, this is squawk box. Good morning, everybody, welcome back to squawk box here on cnbc we are live for the Nasdaq Markets in times square im becky quick. We will be hearing andrew in a few minutes live from pyeongchang. Hello. Reporter hello, hello. We have a lot going on him we will show you cool stuff we will talk about everything happening at the olympics in a few minutes. Take a look at the u. S. Equities in the meantime, lets get to our headlines at this hour part of it may be what the fed chairman jim bullard said to us in the last hour he said some Market Participants may be over estimating the number of times the feds will raise rates. The idea we have to go 20 basis points in 2018, that seems lot. Egg would have to go just right the economy would have to upside during the year. Im not sewer if thats a good thing to think about in 2018 bullard said the fed will not be theidoing this in lock step. By the way, speaking of data, the Labor Department is issuing its weekly look at initial jobless claims at 8 30 eastern time 90 minutes later the Conference Board is out with the leading economic indicators. Among the earnings reports this morning, we have hormel foods matching proftsz at 44 cents per share. Hormel did raise the full year earnings forecast. It announced it is offering Stock Options to employees and raising wages as a relative reform that stock is relatively flat right now. Our hosts david novak, yum brands, former chairman and ceo. He is now a founder of ogo lead. Com and a man that in the anals of American Business almost iconic, no, taking yum brands, spearheading the National Expansion into the biggest chain in the world under your leadership. All those things are great, reaching the pinnacle today you are a cnbc contributor things have really gone the wrong way. No, after that intro you are going to i am thrilled to be here. You have been step wise adding to that point embrace it i am really excited about this its good i have been passionate about leadership throughout my career. Ive started this new ogo lead company. Were trying to develop better leaders, to come on this show, talk about that and contribute on any of the leadership issues that you see for the day there is a big day probably quarterly, you will come and do things for us. We have two hours to talk about these things one of the things that, i want to talk about the news i want to talk about all these things, lets talk about leadership i think you have a passion for that one of the points is there is a toxic brands of leadership. If you say that, half the country right now is thinking politically. You are talking about even in the ceo suites, there is a way to do it there is a way not to do it. I think across all business, government, schools, you ic the industry, coaching, theres a lot of toxicity that exists. What do you mean . By that what i really mean is leaders that put themselves above the organization, above the people that they have the privilege of leading and as a result, whats happened, joe, its like the trust levels are i think in 2018 had the biggest decline in recent history you got, when you look at the work force, you have almost 70 of employees who are literally theyre not engaged. Then you got millenials at three times the turnover rate of previous generations thats really the reality we face today i think the biggest thing the leaders have to do is define reality and create hope. What i hope to do is spend the rest of my life developing leaders at all levels. I first started this when i was at yum brands, i caught a Leadership Program called taking people with you. I did it over eight times a year the reason i did that, if you show me a good leader, ill show you a Good Business the Work Environment the best possible results. I think the real answer for america and anybody who wants to be more successful is leed really leadership. I formed o go lead to form better leaders. What went wrong are things done differently today or are the workers perceiveing it differently what happened . I think were moving from a big air and big shift in what leadership was and what lead isship needs to be leadership needs to be. 20 years ago, it was top down, hiroshima arc y hire arcualial hierarchyial i think its a big shift the millenials, i dont like the term, theyre the now generation the people the largest and Fastest Growing part of the work place. They want to be in a Work Environment and a culture that develops them. Frankly, theyre very frustrated, 70 of millennials which they had more training i think almost 90 of people who become first line supervisors wish they had more training, theyre not getting it what im trying to do is create the hope give people the training they are looking for, that will help them become the best leaders the best way you can grow yourself, protect family and flourish is by becoming a better leader, yourself thats what im focused on with ogo lead, i have 29 podcasts, becky, ive interviewed dame dijamie dimon,i do weekly blocks, now were launching today this Digital Online Leadership Program called hard wire and hard wiring your success. Heard wiring. I think thats the thing, nobody will ever care about you unless you care about them the leaders who get elt right tod get it right today, they have an organization that theyre committed to them, helping them succeed, help them reach their potential. Then all of a sudden, guess what man, will you have a fired up organization and a fired up team that to me can be taught i think it can be taught at all levels id like to talk about that later. We had news from ford today i see what you are saying. There is a sort of a, lets say you have a net just neutral on leadership and thats, i dont know whether you call that toxic. Its not bringing everyone along with you then leadership can be so toxic in the me too world. That plays into what is happening right now. How does that happen, following your advice, i dont think that would have happened a lot of things wouldnt have happened, that certainly wouldnt have happened i dont think it happens, joe. The reason why it doesnt happen if you are a leader, thats doing the right things, you have an empathy and respect for everybody at your company. Exactly you dont take advantage of them i think what you are seeing with me too its that vase that says, hey, look this cant go on anymore. Its good, it raises the attention level to create the environment where everybody feels valued i have a daughter, two grandkids, believe me, i want them coming up in a level playing feel leadtaries create that level Playing Field that allows people to succeed and flourish and creates more leaders thats really the name of the game all right we will see you here between 7 00 and 9 00. We have a lot more to talk about. I think you will talk next time. I want to get in on this taco bell thing yeah, im so excited with chipotle i might be able to go there if they get taco bell stuff others say, o, no, yeah, taco bell, yeah its a controversial hire why show them how to make a taco. I was kauch watching kramer. He said you will bring in this guy from taco bell he will change things. I have a lot of respect for jim. See thats the thing, he has a mexican restaurant. The fact i think is important is brian nichol who i know well is a good brand builder. The reason that stock has gone up 20 people see that. He came to yum from Procter Gamble he had been there ten years. He never once said at Procter Gamble, we did it this way he will not be so stupid, people throw him out of that place, but at the same time, he can use his brand building skills i think to take the business to the next level. You also pointed out food safety brian, i was sad to see him leave. We have a great ceo at yum brands brian really understands digital. He really understands innovation hes 43yearsold, hes young him i think he will bring in a vibrancy to that business. Over the years i mean, you know, few people have talked about taco bell like i have. Finally, did you bring any more of those things i would have, you called them crappy little cars if all you get after ten years ago i could have been on a retainer now you get nub i could have been on a retainer 5 goes a long way at taco bell im kidding i love those cards, ive used them good, im glad. But you got rid of the people are begging for more you see the chicken taquita, it was like a one shot deal. I went in to get more, that offer was gone thats the only thing i dont like to talk about they have these great things and for a certain amount of time im not that close to yum anymore. I am. I know innovation drives the business what i say, becky, i would move he said hed like one in his back yard. Id have an apartment next to it a lot of people would like to have a taco bell there are cat people, dog people, taco bell and chipotle person andrew, you are a chipotle person. Reporter i just went on a mechy d run. We have been eating Chicken Nuggets like crazy here the whole team, actually last night, mcnuggets everywhere tonight, mcdonalds we should say a longtime sponsor of the olympics this year, no longer anyway, we have great fuse here if you are a fan of team usa, it has been a remarkable day. One of the first throughout the past couple weeks the u. S. Has taken gold and silver in mens half pipe. Breaking through on his final run to give the u. S. His third gold medal in the halfpipe, david wise 96. 4 points. Its remarkable to watch those guys get the air that they do. Also a little bad news for russia russian curler alex crucikrushed his partner and wife will be stripped of the olympic bronze medal they won in mixed curling the medal will now be awarded to the norwegian team, who the russians meconium is widely used to treat people with heart conditions in russia also, guy, the ioc will decide on saturday if the olympic athletes from russia will be permitted to walk in closing ceremonies on sunday under the russian flag so we will see if this impacts their decision so lots going on here. I dont know if we can show you the leaderboard. We are in fourth place at the moment we do have a chance over the next couple days to maybe get, its going to be a while to get to norway him we have a chance on canada and germany as well. Joe, back to you with you onment that although im not like lek becky with the xenophobia are you rooting for these olympics, david in. Yes. We are tribal when it comes to this. Participation medals. Thats my idea, i think in this day and age i cant believe you, people will start tweeting you. I will try to bring you back a participation medal. Thank you coming up, well see new a second blackstones new exempt strategist joe zid hle he went working from richard bernstein, now hes like this big job with blackstone. Hell be on after the brake. Later, target ceo Brian Kornell talks sweet leadership, the Retail Industry and more u are watching squawk box on cnbc big thinking in the finger lakes is pushing the new new york forward. Were the number one dairy and apple producers in the eastern United States supported by innovative packaging that extends the shelf life of foods and infrastructure upgrades that help us share our produce with the world. All across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov all right, welcome back take a look at the equity futures. For the most part, theyre in positive territory we were down about 100 points before the show started for the dow futures. Right now theyre up by 17, the nasdaq is up by just over 7. Joining us is joe zidle. He is the new investment strategist in the group at blackstone welcome. Thank you for having me three weeks into the new roam. I appreciate you having me on here this morning. Are you nervous its a lot to learn im enjoying being back at a big company. I enjoyed everything i was doing at richard burns. Hes cheap. You got to have a huge raise going to blackstone, this is big, right the opportunity was the platform it really was. I love the routine, to be at blackstone and help them build out that Investment Strategy product is for me an opportunity. You look more wealthy to me you look like its already im wearing it now in the suit looks better bernstein comes in kind of rumpled. I dont know. You are saying this particularly for rich, arent you . I am. He watches and im totally saying it so, joe, lets talk about what you think with the markets right now. You are still pretty positive on where you think were headed, especially with the pullback we have seen . I would say we are bullish. We think stocks will continue to roll higher. I wouldnt rule out the possibility of nearterm volatility i wont say we wont go back and test the lows over the past couple weeks we seem to be in this environment, where good news is bad news for stocks. Exactly it kicked off a couple weeks ago, yesterday, where investors were having to digest maybe the feds view on inflation, so were in this environment, where that good news to the economy is bad news, i think the biggest mistake people make is, theyre not stopping to ask why would this be the case why would higher wages for the u. S. Worker be a bad thing why would inflation egrates be bad . If you look back, you how old see stocks selling off initially, they recover, 12to18 months, they recover. Where where we will in 12to18 months i think the answer is this bull is not over. Let me play devils advocate. If we have rates rising, Interest Rates are like gravity within it comes to stock prices, because they have been so low, that is a part of the reason you seen stock prices pushed up so enormously any kind of writeoff the critics will argue, with the high Interest Rates, its raises the capital for business, you look at cycles, where rates were going up, you find stocks beat bonds, growth beats value number three, large cap beats small cap the reason why, company, particularly in stocks have the ability to grow to offset the costs of higher Interest Rates and i think if an investor is looking at his or her portfolio, they are looking at the equity side versus the fixed income side, they have to perform better as expectations rise i think the real risk is on the income side of the portfolio stocks can adjust for higher rate through growth. Bonds the only way is through lower pricings risk managers get paid to worry. There were a couple ways they found better in mappinging risks said Something Like the chances for a bad outcome have increased with the nearterm tax plan along with this budget that theyre talking about. Goldman over the week, this wasnt void, but goldman had came to a similar conclusion that were at a point in the cycle where weve primed eight little too much. Where i think this can be the peak we need to worry about, you know, in the past weve seen what happens things get going too well and then the fed has to step in to control things are we anywhere near that . Or did the market this last break of 12 , whatever it was, was that a reflection of those worries, do you think . Or a normal correction i think a very normal correction in the context of a bull mark. Clearly were in a late cycle environment. It might be the eighth or ninth inning, almost ten years into an economic expansion eighth or ninth inning. You said for 18 months we will be higher. Is there an extra inning game in when you think of baseball times, innings are not time dependent. This is one of the arguments we always made, they can be shorter or longer the advantage we have in this siege, almost ten years into it, were not i dont remember near reheating. It will be the yield curve i think people ought to be looking at the yield curve its above average steep thats a signal things are healthy. My guest is the fed will hike, more aggressively than people think. They will eventually flatten that yield curve, once it does that its lights out you heard bullard, you think the take away yesterday, somehow thats the conclusion they came to after the minutes then he came on with i dont know if it was his intention he certainly sempered those expectations had to walk people back yeah. I think one of the Big Questions out there is how do you model in supply side stimulus in an economy where unemployment is low and accelerating. I think thats something people get chronically, theyre chronically wrong on how to model and the impact of. That because whats really difficult. For folks to model is Business Confidence and Consumer Confidence so were at a point, where were adding stimulus to an economy with edo well. We put money back through peoples pockets through tax cuts i think it means this cycle will continues. Things will probably accelerate. That will be very good for stocks i think one of the things i see, from everybody i talked to, everybody seen earnings being really strong this year the outlook is exlen the big question that i also hear in many circles is how sustainable is this . I come from the world, if you borrow more than you make, you ends up in tears you know, so how do you look at the debt load that we have oh, its a problem. The debt and the deficit out there is a problem and i think you know youve heard a lot of people talk about the bum market and bonds is over, right i think i very much agree with that i think rates will head higher so the problem we will have is the government will have to issue more debt at a time when bonds are in a bear market that is bearish i think that will be problem mat tic ic problematic how does the fed fix it . If you are already increasing your deficit, your debt levels, everything else. If you take your deficit to who knows a trillion dollars when the economy is good, what do you do when the economy rolls over i think that creates a problem the cycle will play out the way it plays out it will roll over. Well have a recession it is probably years until then, over the next couple of years the things that would warn an investor of the end of a bull market, those warning science arent in a home place. That was like a home run, zidle, you are out from the shadow of richard bernstein. Now you got your own deal at blackstone dont you think hes like it was a home run no kidding thank you, joe. Keep coming on, we cultivated this relationship. Now you can give back a little certainly, maybe some day i will tep tell you what richards middle name is effin in. I signed an agreement when we come back, we talk toy len land. . In. I signed an agreement when we come back, we talk toy len lanin i signed an agreement when we come back, we talk toy len lann. I signed an agreement when we come back, we talk toy len lan i signed an agreement when we come back, we talk toy len lan i signed an agreement when we come back, we talk when we come back, we talk toy len landass network, and we developed devices. To track environmental conditions. This device allows people to understand whats happening with the location, but also if its too hot, if its too cold, if its been dropped. Its completely unique. dennis woloshuck if you have a sensor that can keep track of your product, it keeps everybody kind of honest that way. Who knew a tiny sensor could help keep the food chain safe . People dont invest in stocks and bonds. They dont invest in alternatives or municipal strategies. What people really invest in is what they hope to get out of life. But helping them get there means you cant approach investing from just one point of view. Because its only when you collaborate and crosspollinate many points of view that Something Wonderful can happen. Those people might just get what they want out of life. Or they could get even more. What they want out of life. Trust 1 doctor recommended dulcolax. Use dulcolax tablets for gentle dependable relief. Suppositories for relief in minutes. And dulcoease for comfortable relief of hard stools. Dulcolax. Designed for dependable relief. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Sure, yeah, thats from mr. Blue all right. I wont make any outgoing calls. Good morning, welcome back to squawk box here on cnbc live from the nasdaq times square. The morning Restaurant Operator bloomin brands, they make the bloomin onion, 2 cents above u. S. Estimates this is the parent of they make steak with outback steakhouse, carabbas, bonefetch grill, which is good, it comes down to the bloomin onions have you had them you see what im Say Something i love it you cant have them all the time leak anything, with understand in a while, its great this report comes a day after activist barrington capital called for the company to spin off all of its brands except for outback. Chesapeake Energy Results were helped by higher prices for oil and natural gas. Norwegian Cruise Line Holdings came in 4 krepts above estimates a quarterly profit of 58 cents a share the company sees Current Quarter profit above forecast. It does expect fuel costs to be higher this year that could impact the bottom line. It happen a pretty choppy week for retail, thanks entirely to a few disappointing numbers from walmart the lottery retailer found themselves on santas nice list over the holidays they are hoping to continue momentum through 2018 the chairman and ceo of target brian tennel joins us. Good morning. Great to be here you are a brave man to come on to talk about a lot of things we got going on. I real ice iize you are in a quiet period and cant talk about your actual results because you are reporting march 6th. We will thread the needle. I know you had some strong numbers you reported for the november and december time frame the Holiday Season was good. You had komps, 3. 4 . You had strong traffic in the stores and strong Digital Sales as well. How would you characterize the economy right now and how you are all able to play in that space . Becky, i think we saw a strong Holiday Season. Its reflected in some of the reports you saw so far him we felt great about our performance the comps up over 3rs. A strong Digital Performance for the fourth year in a row traffic grew in our stores so all around a solid holiday performance. We felt good about the fact, literally in every one of our gentleman og graves we saw growth over every one of our quarter, when saw positive growth our team did an outstanding job of executing during the important Holiday Season lets talk about the shift investors have recalibrated their thinking when it comes to Retail Stocks this week. Thats because of what we heard from walmart. They warned they will be changing the Digital Strategy. The goat they had seen for the Fourth Quarter was not what they had seen in the previous three quarters that had a lot of people thinking bricks and mortar are under a huge assault and the people to compete maybe not. How are you doing with your Digital Strategy i ask, your stock was down about 4 on the day walmart came out with these numbers becky, we continue to make Great Strides from a physical and digital stand point. We will be up over 25 in the quarter. We have been doing that for several years. We continue to see great traction, both our physical and our Digital Performance. So its a blends of both i think the winning retailers in the future are going to combine a great physical asset and experience with the ease that comes along with that digital interaction. So for us, its a combination of both and we will make sure as we go forward, we provide a great physical experience and combine that with the ease that were delivering through our digital capabilities him thats where we have been focusing our energy. Your strategy is we want to make it easy to shop at target your strategy is shift. Thats the acquisition you are taking it. That will mean what this is a Delivery System that allows you to get same door delivery to how many people from how many stores . Yeah. So, becky, let me try to unpack what we are doing from a fulfillment stand point. Shift is one of the different tools we are now bringing forward to the mark place. So with target over the last few years, we try to make it easy to order from your desk or kitchen. Come by and pick it up in our store. We started a test last year in minneapolis a driveup service, can you convenient drive in the park lot within two minutes, well put it in the trunk we will expand that next year. In new york, we created our Grand Junction capabilities to allow to you shop and at checkout, will you deliver this right to my home we will have a courier deliver it in the next couple hours. Now with ship, we will have personal shoppers, moms who shop for moms across the country in all of our major markets be i the Holiday Season of next year. So were combining a number of Different Services to really make target the easiest pleas in america to shop. Ship is the latest investment we made we are seeing a great response as we roll that into new markets. We will combine that with order in line, pickup in store, twoday delivery, pittsburgh up that order so anyway you want to shop our stores, including shopping in our 1,800 stores, we want to make that a great experience for the target shopper you have a big problem in our country. What are you doing unique at target to get your employees, team members, associates engaged . David, when i think about our strategy today, it all starts with the investment we are making in our team and whether its the investment weve made with our merchants who are building the brands, our Marketing Team thats bringing this brand to life the investments weve made from a digital stand point or in our supply chain, but most importantly, we made a big decision last year that we were going to reinvest in our stores and increase hours, invest in training, we went too the Holiday Season hiring over 100,000 new team members and importantly, we went into the season saying we will increase our wages with a path by 2020 to get to 15 so were really making sure that everything we do starts with an investment in our team i couldnt be happier with the response weve seen. We placed a big bet in our stores a lot of people questioned the direction we were taking him well, those investments in our stores paid back big in the Fourth Quarter its our store teams that drove our sales, both our physical sales, but also they enabled all of those Digital Sales that we drove in the Fourth Quarter. So everything were doing right now starts with the investment in our target team hey, brian, lets talk about the Digital Sales, though. We had jerry storech on this week, hes a former retail executive, worked at target for a long time. Shower sure the top guy there he was talking broadly about retail, not specifically target. His point was, we want to see more and more Digital Sales, thats what wall street is clamoring for. As we see those things, thats a much lower margin business does that mean that overall were going to have to live with lower margins and less profitable business as brick and mortar retailers keep up with the amazons and make sure they are able deliver online Digital Sales, too again, becky, we will see a balance of both. For the foreseeable future, the majority of u. S. Retail sales will still take place in the store. And well continue to see the acceleration of digital, but when i talk about some of the things that we are doing its store enabled so its fought just delivering that package to somebodys doorstep its letting them order online and then they are coming to our store to pick that up. Over the balance of this year as we expand driveup, theyre coming to our stores, one of our team members will walk from the store out to the parking lot, put it in their trunk. We call it a digital stal. Its an enable by stores the sisters still become a point of leverage they become the hub that checks our brand to the guests. Thats a much more profitable interaction as we go forward. We had gene munster join us at the end of last year. He talked about his big idea is amazon will buy target he didnt have any inside information on this he thought it made sense because amazon needs to have a lot of ways to have stores around and reach people too we havent had a chance to ask you about that report. What did you think about snit. I started out about thinking, it must have been a slow news day. Obviously, when i look at that report, to me, it validates our strategy and everything we have been talking about for many years now, that success in u. S. Retail is going to be that combination of stores and digital. And i think were just uniquely positioned target is one of these unique and very iconic american brands. We deliver both style and essentials we now have great stores and a digital capably. We deliver a great experience and value. We have this great multicategory portfolio when i heard gene talk about that, to me it was a valuation that everything we are doing at target is on track and the winning retailers are going to have to combine both a great experience and capability. Speaking of physical experience, what are the new targets going to look like in the future yeah, david, they have been really well received i was actually in chicago with my Leadership Team last week we did some inhome immersion work, just talking to consumers. And they were talking to us, talking to me about the great new experience when weve remodelled a store were seeing that across the country. Last year we remodelled 110 stores next year, well triple. That every time we remodel the stores, we see a great sales uptick and importantly a great reaction from the guests they love the experience our team is happy to work in that environment it will accelerate next year the new urban stores we opened up. Like Harolds Square in new york or on the College Campus if texas him these College Stores and these urban stores are bringing us into new neighborhoods and there is a lot of excitement as we open up these new formats in new york, boston, chicago and los angeles and on College Campuses across the country. So its bringing us into neighborhoods and maces where we havent participated in the past the consumer saying, thank you, target, for coming to town brian, have you gotten to the point, where you are looking at wages, wage pressures, thinking of margins, have we hit that point where ceos will start thinking, this is on my radar now . I got to worry about this . Joe, its on our radar. We took a proactive stance we increased our wages in the Fourth Quarter we made a commitment of a starting wage to 15 by 2020 so thats built into our modem thats built into our plans. Its actually the right investment for us to make in our team. You dont insist on employees when they refer to you saying, oh great one, like novak did for all those its not true, joe. Its my grandfathers name. Whats the website name ogo, not oh great one, guy. I retract the question. You need to listen to the podcast i did with brienl one of the things i did is the wisdom you gain by seeing how people grew up in their careers hes got a great story but i think the big think he brigg forward is huh michigan the leaders say i need you, tells the team members, are you important. I admire brian for that leadership great i dont see how oh great one is humility. Humility and oh great one, anyway sorry about that brian. Brian, thank you, it was great to see you great to see you. Thank you. More from the great one, david novak, as he head to break, take a look at u. S. Equity futures are up sharply, anyway, eyerdoth we wn, its not shamp sharp. Well be right back. Is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Welcome back to squawk box this morning a very special guest joining us from the olympics. Kikkan rand caall. Take us to the moment when you watched your partner jessie go over the finish line i just did three laps, my legs were so full of lactic acid, i could barely stand i saw jesse come around that final turn i was standing next to the swedish girl we were both screaming our lungs out as our teammates crossed the line when she crossed, it was too close to call. I saw usa number one, i immediately ran out and tackled her, it was incredible so you are wearing the gold, whats it feel like . Its heavier than i thought there is no joke, this is an olympic medal. Its such an amazing feeling to feel it around my neck. Something else happened for you today. We should tell people about. I got exciting news i was elected by my pierce to be on the c commission i hope to improve the olympic movement. What will you do . One of the things you did do the audience doesnt know already. You had a son last year, we should say a baby boy. I did then you pushed the fis to change the rules around mothers in your sport. Yeah, because i was actually one of four, now actually one of seven women coming back to competition after having a baby with sights set on the olympics. I think it benefits our sport to encourage our top athletes who are a known quantity to stay involved and dont have to decide between career and family, knowing wed have our children with us on the road, challenges him we needed to place to change diapers, we would have care takers with us i brought that to the attention of the international federation. They were supportive they had baby rooms on site a warm place to take our kids inside so they dont do that here at the olympics, your son is with the grandparents yeah. Unr unfortunately, i couldnt afford to bring him to the olympics i have been face timeing him l week do you think he know what is mom did . I showed him it he might eat it he likes to lick things him i think he might turn no a bobsledder you have one big sponsor l. L. Beeven bean i imagine you are getting more sponsors its fun to tell our Cross Country story. We are definitely embracing this moment there are a lot of people with us through the journey before the medal ever happened. So its a great reward to give back to those people that have been along this journey. It opens newves for the cro r the Cross Country team congratulation. Its awesome its feels great to contribute to the gold medal count. As we take a breaking look at european markets right now squawk returns in just a moment. I think we should do that meeting tomorrow. Well wait. What did you think about her . Its definitely a new idea, but theres no business track record. Well, have you seen her work . No. Is it good . Good . At cognizant, were helping todays leading banks make better lending decisions with new sources of data so, multiply that by her followers, speaking engagements, work experience. Credit history. That more accurately assess a business chances of success. This is a good investment. Shes a good investment. Get ready, because were helping leading companies see it and see it throughwith digital. [fbi agent] youre a brave man, your testimony will save lives. Mr. Stevens . This is your new name. This is your new house. And a perfectly inconspicuous suv. You must become invisible. [hero] ill take my chances. All right. A big monday next week we will be talking to warren buffet on monday you can send your twitters to ndyo ses ur questions in, well ask the oracle squawk box will be right back. It brings your business up to speed, doing more with systems you have in place. It can bring all your apps to life and run them within your data center. It is. The new ibm cloud private. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for smarter business. You know whats not awesome . Gigspeed internet. When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids, and these guys, him, ah. Oh hello. That lady, these houses yes, yes and yes. And dont forget about them. Uh huh, sure. Still yes xfinity delivers gig speed to more homes than anyone. Now you can get it, too. Welcome to the party. Coming up, well talk market and rising rates they go handinhand and commerce secretary wilbur ross in charge of space projects. Squawk box returns after a break. And highdividend strategies. Sure, these are investments. But theyre not what people really invest in. What people really invest in, is what they hope to get out of life. But helping them get there takes a pure focus. Because when you invest their money without distraction, hidden agenda or competing interests, Something Wonderful can happen. They might just get what they want out of life, and maybe even more. But prevagen helps your brain with an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Bullard raises a red flag. The idea we have to go 20 basis points in 2018 that seems like a lot to me. Reaction to what the st. Louis fed president said right here on squawk box. Thats coming up squawk box news makeer, commerce secretary wilbur ross joins us live to talk trade deregulation and the space race. Plus me versus the machines. Fi, fo, hum were going to show you the future of robotics here in south korea as the final hour of squawk box begins right now. Live from the most powerful city in theworld, new york this is squawk box. Good morning, welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square, im joe kernon, Andrew Ross Sorkin is across the globe in pyeongchang we will check with him. That was so cool. The robot was so cool him andrew is unfashionedly first. You are unabashedly reporter were doing a lot of things we should be proud of over here, thats all i got to say. Ive watched you grow so its good its wonderful no participation awards. Here on set with us dividend novak, founder of ogo lead and a newly minted cnbc contributor, which were glad to have you thank you probably not going to capping your life in terms of complication like zero basically lets get a check on the markets right now. The future last time i saw was 22 cents on the dow. We had been down, more than that, down 100 points at one point. We have been positive, up 30 jim bullard will talk about that in a second on squawk box, the president said some interesting things, which we will delve into, given what happened yesterday, the 400 point swing based on the fomc minutes, jim bullard sounded different tan what we heard yesterday. Well talk about that the treasury yields got above 295 a fouryear high on yields over the tenyear note. 292 is where we are this morning. Lets get you caught up on this mornings biggest movers. First up shares of chesapeake higher, earning thirpt cents a share for the Fourth Quarter, results were helped by higher prices for oil and natural gas the stock is up 6. 5 avis having an ad judd 5 per share. Revenue came in above forecast for the Car Rental Company the results were helped by an increase the rental days and Stronger International business. That stock is up by 8 . Wayfair losing 58 cents a share for the latest quarter that was less than analysts had been expecting the order value increased from 229 to 203 a year ago, investors are focusing on the bottom line. Stock is off by 8 then there is billionaire investor ray dalio, who he thinks there is a relatively high chance the economy will see a recession before next election in 2020 the founder of the Largest Hedge Fund said the economy is not currently in a bubble but he says it may not take long to get there and move to the buzz phase he puts it before the next president ial election at 70 and we were alluding to this, the st. Louis fed pratt James Bullard speaking out on what he feels the next rate hikes will be over the next year. Listen to this. The idea that we have to go 100 basis points in 2018, that seems like a lot to me thats kind of a price for perfection everything would have to go just right. The economy would have to surprise in the upside a bunch of times during the year im not sure if thats a good what i to think about 2018 and joining us now, kevin j. J. Diddis at riemd james and chris resler, a funds manager at needam small growth fund how do you read . Yesterday you saw what happened. And it seemed like it was hot. The fomc said. It looked like they were raising growth estimates, also feeling more comfortable with where inflake was him so bullard comes on today and talked that down saying i think even 100 basis points might not be in the cards. So do they do that on purpose . Is that just his feeling or does his feeling matter when you have j. Powell that will do what he wants anyway what do you make of this i think its obvious the feeling matters prior to what he spoke in the futures afterwards some think of the bond market as a showhorse. Right. There is qualifying points, disqualifying points what we saw yesterday were all qualifying points. A fiveyear note auction that had good demand. Fomc came out and said, further gradual increases, words very carefully selected that would give you the impression that market may be worried more about inflation and where theyre headed than they are still data dependent and then corporate spreads remain tight thats a good indicator of where we think were headed. I think the 7year will go well. Are youine of the 30 on the yield. So all of these are qualifying points for a gradual increase in rates. Not anything that worries us i dont think the fed is either. The dalio will come as you just heard, chris f. There is Something Like that, were it to happen, i would imagine the fed would somehow maybe not cause it completely but maybe a policy mistake might get us to what he is worried about could the fed make a policy mistake and would it be if staying low too long or going up to quickly which side do they need to be more worried about they probably stayed too low too long already him but for 2020, were trying to figure out earnings estimates for one year out. So its easy to say recession before the next election its certainly probable. The yield curve is coming up on the shortenshor end they have finally a white house thats positive on business. So theyre investing money theyre with their business plans. I think you will continue to get growth we may not get that 3 plus everybody is talking about i think there is wage pressure probably at the lowest levels. Those are just risks in the bond market, we didnt see it over react in the last month like we did in the equity market the volatility blew out there. The bond market didnt kind of confirm that we found opportunities to put money to work. David, as a ceo, you probably had to worry about this stuff. For the fed, is the rick greater that theyre too early or too late in terms of what theyre doing . There is a lot of this ipgs that i can probably talk about but fought that im pretty good at selling tacos, chicken im trying to figure out. If someone will keep me up, would it be they are behind the curve, which you indicated or what bullard says, if they go too quickly, then they can cut off the economy prematurely . Do you know . I think the fed is president is spot on at this point you do . They will save us, go to zero and go to the right amount they will not mess this up in. Core pc at 1. 8 instead of 1. 5, were getting crazy about it at 4. 5 trillion and the amount of cash in cirque lakes now, you got to have in circulation now. There is about a 2. 5 trillion move they will start on. I dont think the Balance Sheet will be a problem for the fed. I dont think their tightening pattern, maybe were more like 3 instead of 4 i think if we can hold our Heads Together the market will gradually move up in rates and you sound like a you, what, you believe they stayed too long there will be negative consequences or are you getting the multiples in the market have certainly been elevated because the fed has suppressed volatility over by a longer period of time than they should have we saw those stresses come out of partly come out of the market in the last month. I dont think theyre all completely out you know, i think volatility is back to a level where it should have been for a while. But for a stock pecker, i think its a great opportunity you know your management companies. You invest in things you know. You invest in great growth i think there is opportunities there. That free money, though, was obviously created an unbelievable market, unlike any eve seen its very concentrated. People are moving into other investment areas, bitcoin, you read about a 500 million da vinci art. Everything seems to be priced for perfection. It seems to be moving money and the world from different groups it may not be able to remove it in the legal system. The treasures and inkrabls the volatility for bonds market peaked ten days ago. Its actually in a lower vol area of where we were. Compare the u. S. Yields to germany, to italy, to campaign spain, to the uk, it makes sense. More of the outside risks of what they will do with their rates, how that will impact our rates. They have officially dragged us down rates around the world are unbelievably low lower than ever. We havent seen this in a long, long time. You also have Global Growth. Its amazing does that make a difference for ceos who physical out if they will be investing in plants, equipment, hiring . Absolutely. I think the tax reforms weve had here in the United States will also, china is talking about looking at their tax, everybody. So its going to create a wave everybody wants to compete no question. So do either of you see a down market in 2018 in the s p we could certainly go down from here. But i think overall the year we will be up probably around 10 thats what everybody says. What about you until we get a real spike in inflation, its going to be an orderly rise it will be up this year, but fought like 35 . High Single Digits in. If the fed raises rates four times . You will look at cracks in the economy tant i think, joe, thats why ceos, business leaders, you have to put your ego in your business performance. Are you growing your business the right way . Ultimately the stock will take care of itself thank you both. When we return, a live from andrew, who is live at the olympics with some very special guests and a cool robot, too. Later, we will get to another news maker, commerce secretary wilbur ross. Stay tuned you are watching squawk box on cnbc its all yours. Wow record time. At cognizant, were helping todays leading Life Sciences companies go beyond developing prescriptions to offering subscriptions with personalized, realtime advice for lifelong, healthy living. Honey . You almost done . Nope. Get ready, because were helping leading companies see it and see it throughwith digital. All right, will come welcome back andrew has some guests thank you i am here with olympic gold Medal Winners in hockey tonight. This was an extraordinary thing. I want to know how you felt, maddie, when you started this thing, because you, the save what was going through your head its an unbelievable feeling. It was amazing for you, have you done this before you have been through this rodeo . On the swing side of it. Not this side of it. What was it like for you a dream come true i remember i was jumping up and down on the coach and 20 years later winning a gold medal doing exactly what they did. What does this mean for womens hockey we had debates what is going on with professional hockey . Smr we have two lesion, whl and id love to see them collaborate and take ice hockey to the next level. What will you do next next . Next. Not tonight but next in life i cant think about that right now. You cant even get over whats happening right now in. Im going back to college what will happen with you guys sponsor wise . I dont know if we can get a shot of this, you have the coolest sneakers on, nike is one of your sponsors you had these made in advance . I asked for them in advance, i wanted god i snuck them on the bus and wore them on the bus. Theyre not usually game day shoe, but i rocked them. It worked out tonight in a big way. With the kid. Unbelievable. You scored, too that was an amazing, how did that feel when that happens . Oh. Celebrating. Ituits amazing. I catch kendall every time, to have that ton is the special. You guys are sponsored by ralph lauren, you are wearing the coats. And nike for you personally and the team yeah. What happens after this when you when, do you get calls . I hope so we have a lot of ceos who watch the show wa way. What itself the ideal sponsorship . I am currently with nike. Who can we get for you . Im so college. Anything afterwards anyway, congratulations, guys. Its an amazing thing. Thanks, thanks so much guys, i will send it back to you. Andrew, theyre amazing thats fantastic so glad to see them, thank you for that we will get back to andrew in a bit. In the meantime, a conversation, our millennials losing taste for casual dining. We will ask david novak next at 8 30 eastern time, we will speak to commerce secretary wilbur ross. Wilbur ross. Stay tuned today, innovation in the finger lakes is helping build the new new york. Once home to the worlds image center, new york state is now. Leader in optics, photonics and imaging. Fueled by strong university partnerships, providing the worlds best talent. And supported with Workforce Development to create even more opportunities. All across new york state, were building thnew new york. To grow your business with us in new york state, visit esd. Ny. Gov. To grow your business with us in new york state, show of hands. Lets get started. Who wants customizable options chains . Ones that make it fast and easy to analyze and take action . How about some of the lowest options fees . Are you raising your hand . Good then its time for power e trade the platform, price and service that gives you the edge you need. Alright one quick game of rock, paper, scissors. 1, 2, 3, go. E trade. The original place to invest online. All right, welcome back, everybody. Dine equity, the Parent Company of appelbys and ihop, they say they have failed to win them over more on casual denying kate good morning good morning. Casual dining struggles will likely to continue and preferences among younger consume, may be to blame they point to speed and mobile and delivery options for fast food success strauvents like mcdonalds and shake shack are getting back to basics thats appealing to young consumers. The trend can be seen in analytics, which found overall Consumer Spending at fast food and Quick Service restaurants at 227 billion last year casual dining was at is 85. Spending Quick Service restaurants, thats set to grow at 3. 5 . Casual dining will grow its important to point out twothirds are actually independently owned noncanes. Whats more, unit growth for the top 500 dhans will increase by. 6 in the fast food space. It will decline 1. 4 in the casual dining space the top performance chains were mcdonalds, starbucks in sales and unit growth, casual names, red robin, wing stop and bjs were ranked 41, 46 and 48 respectively but chashl issues, they extend beyond millenials, analysts point out to declining customer experience, one that has simpl been under invested in millenials recognize they like the speed the convenience, the new men new innovation its more than just that. Stay right here we will on the our conversation. David novak the former chairman and ceo at yum brands, you talked about how millenials are different as employees, when you were working with them how are they different as customers . I think millenials want a great environment a social environment, where you need up to date assets, you need to be contemporary, its not surprise, appelbys is down, ihop is down him you go look at their restaurant they havent invested and stayed up with the times, im sure management is working on that i think whats going on right now is very interesting, obviously, with the Interest Rates coming in and the people have more money, you know, are you going to compete it away or not . I think if you look really whats going on in food service, i think its a value hate it youve got wendys 4 meals, mcdonalds has been very successful 2 meals. Have you domins at 5 so basically i think there is a lot of competition there always has been competition. Its fierce right now. So i even think in the Restaurant Industry even though the techs, obviously, helps the Balance Sheet. Im not sure anybody will be able keep it. Thats a value added proposition. Its more for less you have casual dining, which is really has the problem. Casual dinings, there is nothing worse than being in the middle. You are not high end with the fast casual restaurants. Whats the solution . I think those are very old line brands. They have a lot to do. Really tough contempt morize your assets innovation, great service, it makes it harder when Unit Economics are going the wrong way. So you got to break out of that cycle. It will take great leadership, great thinking. We tend to look at chipotle versus taco Bell Millennials want fresh food, its not coming from a centralized source is that true . I think millenials, chipotle that brand exploded. It was food with integrity, an ingredient store i think taco bell has grown because we have unbelievably great tasting food, Great Innovation great value, good facilities and were convenient we have the drive through. Food with integrity and other things make you run to the bathroom but i think thats one thing that you have to have with millenials is i think contrast\seoulers in general. They said have you to have nice surrounding, theyre on their phone. They want a good environment. Looking at a screen a lot are looking at apple screens . Because its so much expense balls its cool. They could buy a lot of cell phones a lot cheaper okay so where you hang says a lot about who you are. They got to change the name of dine equity we did dine brands now. I think thats the word, not a problem. Bloomin brands, think of the food maker, they had to change it ihop and apple buys cant come one pigs in a blanket brands they ought to be able get the dineic with i the i. I do actually have a question him analysts point to dardens success with olive garn 9, theyre offering these specials. Dine brand is trying that with 1 drinks at appelbys, 399 all you can eat at ihop, do you think a it will bring millennials in is it not quick enough the less you spends is better i have been rich and poor, its much better to be rich if you can get good food at a lower price. Its something you can do. If value is the only thing you have, boy, i dont want to invest in that brand you will have to do the total. Innovation. Have you to have the innovation is there a stepping point like a sears or a kmart, they under invested so long it seems its too late to change that. When competition changes the total game on you, thats when it hams. I dont know with then is. Sort of like we are talking about the market some day there will be a correction you tell me when that will be, its into is to know i know if you dont invest in your asset, your people, you dont info rate is, you dont stay country, are you dead in the water. Gow into the red zone. All right david will be with us the rest of the show. Kate, thank you very much for being here thank you all right, coming up, all you can see pancakes thats like a bad thats too much pancakes. We got to go. No, no, no, coming up, but i thought about it coming up, breaking nieconomic news, wilbur ross will talk about the space race, an interview you wont want to miss believe me when we head to breaks, wweill talk about u. S. Equities futures. Where can investors seek predictable income in an uncertain world . Pgim sees alpha in real assets. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over one hundred fifty billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Two,that was awful. Why are you so good at this . 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We are a few seconds away from the weekly jobless numbers, positive territory right now we have been all over the place. The dow was down at one moment right now, its up over two points the nasdaq up by about 11. And we have been watching the ten year, which right now is yeeltding 2. 95 . Yesterday it was a fouryear high lets go right now to rick santelli. Reporter all right, becky, jobless claims moved down 7,000 from a slightly revised 229,000. It was down to 222,000 were toying with the bell bought tam era of the 1970s, obviously the world has changed a bit since then, continuing claims moved down from shy of 1. 95 million to 1. 87andahalf. Are you correct. We are above 290 getting ever closer to 2 the yield curve, not the flattest its been has been definitely flattened a bit. Its deepening in the intense periods and equity volatility a week first half, two weeks ago we will continue to monitor the minutes yesterday. I dont know if they excited the treasury complex much. But certainly that rise in rates caught the equity markets attention. Thats a dynamic traders will be paying close attention to back to you okay. Rec. Yep, 295, were getting there well talk again when we finally hit 3 and talk about whats more likely there is no data tomorrow, so how am i going to talk to you . Yeah, if it goes to 3 i think we will get there then you dont know what, whether we go to 2. 6 or 3. 5. Reporter we do know were not allowed to share yet. I didnt realize that we can only share in the current time slot. I cant give future information. You cant do both, direction or time. One or the other time now for a special guest u. S. Commerce secretary wilbur ross joins us now. Great to see you, mr. Secretary. Did you know you were going to be in charge of space the space czar or did you say, sure, give it to me it doesnt em encompass that much encompass that much i dont think czar is the right term we will regulate the old regulations. Lot of space regulations are 25 years old. As the whole world has changed a lot in 25 years, but particularly satellite communications, satellite imagery, mission propulsion systems, all have changed. So its time to create a more permissive Regulatory Environment so that the u. S. Is the country of choice for space. I wondered about that, wilbur, because you, you know, you see how many dig branson, elon musk. All these things are happening an nothings changed in terms of oversight and federal regulations. The whole, that whole park of the progress is happening without, you know, thats the way thats the way it should work bake science, obviously, that the government does, but after that, let the private sector take over and the governments got to be a partner, not an impediment thats what you are trying to do thats exactly right. We think the pace of regulatory change has to match the pace of Technological Change Technology is booming. You saw this incredible spacex launch, which i was privileged to be at it was really quite an amazing thing. At the end of it, have you that little red tesla hurdling off to an orbit around the sun and the moon well, there need to be rules of the road, but there soon be a lot of uturns there shouldnt be a lot of oneway streets. There surely shouldnt be a lot of dead ends so thats what we will try to fix with the deregulation in space and creating permissive regulation, so that we can encourage Space Development here just to spark the imagination, then we will get back to the here and now, wilbur when you talk to experts and im talking about asteroid mining, just yesterday or the day before we had a story aboutco ballot and how expensive it will be because of lithium batteries, apple will mine its own cobalt the idea of what is out there on an asteroid, supposedly you can have mineral wealth that eclipses the entire World Economy if you did that. What is the actual time frame, when it will be feasible, five years, ten years, 50 years, do you know i think that depends upon how successful we are in turning the moon into a keechd of gind of gn for outer space. The dark surfaces when you look up at the moon are actually hundreds of feet of solid ice. So the plan is to break the ice down into hydrogen and oxygen, use those as the fuel propel lent so what it would mean is liftoff against the gravity of earth would fought need to be nearly the 5 million 100 pounds of thrust that spacex had to have because you would now only have to get to the moon and then at the moon, you have very low gravity, so you dont need so much thrust to go from the moon to mars, for example or to another asteroid so the technological break through really is going to be in the number of areas, one of which should be using the moon as a gas station secretary ross, i understand what you are trying to do to make sure that private industry can really make a lot of these advances its been amazing what weve seen in the last few years from private industry right but if were not there carving out the rules of the road and how it gets done, do we worry we are no longer setting the rules for other nations, too . That Chinese Companies or somebody else can go over and it will be the wild west out there . Oh, there needs to be the rules of the road. There needs to be means for policing, if you will, the debris in space. Right thats one of the big problems and as more and more launches occur, more and more old satellites reach the end of their life, thats going to be a problem we have to deal with. We had astronauts tell us thats their biggest fear when theyre in space sure, when things are going at a great speed, even a small object can create a great deal of damage. Wilbur, i know that you have submitted some recommendations to the president on steel and alluminum and such and you have already spoken out on that issue. Can you give us any insight as to when we will hear or the likely outcome is, whether there is any, i dont know, repercussions or recriminations about whether its a right movgs given that things seem to be going good globally right now. I dont think we want to necessarily mess with the pick. Things are going well, especially going well in the u. S. , because the president s policies, cues me, on Regulatory Reform and on tax. But on the narrower issue of trade, you noticed the markets have been the equity marks have been fine since the details of the two, 232 investigations were released to the public last week so there surely hasnt been any great distress in the financial marks resulting from them. The decision will be the president s and he has until april 11 for one and april 19th for another. I have no idea when between now and then he will make his decision, but im sure he will do it in a very thoughtful an very systemmatic way. Im trying to figure this, is this going area, the eu looking into our tax reform legislation to see if it breaches the wto . Do you think that breaches anywhere i could be cynical about the whole idea, we get our tax rate down near where they, are they are carping about that i dont think get it i think its a little weird for the eu to be trying to determine what the United States tax policy should be but i think what is significant is they know its going to have an impact. They know its going to have an impact on building more Foreign Direct Investment in the u. S they know its going to have an impact on building domestic investment in the u. S. And they dont like that. Because theyve had it too easy for too long when we had an unrealistically high tax rate. Now were getting into a proper zone it will be good for our economy. I dont think that necessarily has to be bad for theirs, but for sure its a big help for ours. Whats their grounds . I dont understand the grounds on how they take that to the wto . Whats the thesis behind it . I think it gets into potentially some technical issues i think the real thing behind it is the u. S. Is the least protectionist major country. The eu, if you think of it as one country, because for purposes, it really, is one of the more protectionist countries. So anything that changes their favorable tradebalance with us gives them a little anxiety, and, frankly, thats a good thing. We have been passing for too long him we have been suckers for too long President Trump is now trying to fix that wilbur, when we were in davos, i spoke to the president. He floated i dont know what it was, there was a problem about tpp, if it could be better that he might consider going into the multilateral deal like that. Theyre moving forward anyway. Do you know, did anything ever happen in terms of actual policy moves in contacting anyone there to say the occupation might be interested have you done anything with that i dont think the president s policies have changed at all him when he withdrew from tpp in the very early days of the administration, he made it clear that we werent vacating interests in asia. Now hes introduced this indopacific policy that is even more encompassing because it has both india and the original tpp countries. So, first of all, from a geographic ale point of view, hes always been focused on asia hes spent a lot of time there Vice President pence says, secretary tillerson is to devoting a lot of time to asia what do you tell me you have not gone back and said lets talk to the goebtors and tpp negotiators and tpp the United States will not be a part of it . Is that what you are telling me . Io, i dont think thats the case at all. The tpp folks have been getting their own act together there was a text released apparently this morning, which i just looked at very briefly that seemed to have implications for rules of origin. We havent had a chance yet to study it what President Trump wants in an agreement that makes sense for the United States, whether its called tpp or its called a bilateral, or anything else the key is the terms of the deal and do they help u. S. Trade in the tpp what the 11 nations still in it has probably gotten a little less likely to be something america gets into based on the idea they stripped out some of the intellectual property rulings put in originally to satisfy some of the United States concerns. Does that make it less likely wed go back in anything we see tpp from where it had been is a negative factor the exact terms of it taken as a package that the president would be giving consideration to as i mentioned, they indicated there was some sort of a side letter about rules of origin on autos. But i havent really had a chance to study it yet wilbur, how do you feel about a gas tax . The president said 25 cents. Others say 10 cents a federal increase in the gas tax for infrastructure would you try to talk the president into that or out of that well, the funding of infrastructure is a very key issue. There is a certain degree of logic to creating some semblance of user fees certainly, users of highways are one potential source for that. Also a lot of states have been raising individual state gas taxes right along. So its one of many ideas that the president is considering because there seems to be pretty good bipartisan support for the idea of infrastructure particularly the idea of substantial expenditures on infrastructure but in a relatively budget constrained period, the question comes down to how do you pay for it yeah. And, you know, you bipartisan issues are so difficult to find anywhere, wilbur you know, you come out with, you know the president calls eight trillion dollars, but it includes all this private Partnership Type money the democrats look at it and say this is peanuts, the actual federal contribution are they right to if you are going to do things that only the government can do, does the federal government just have to step up and do it . Or do you think you can do it in a way where its mainly funded by the private sector . Well, there are lots of different kind of issues to me, there are several different times of infrastructure, one has natural user fees, bridge, tunnels things of that sort. Those are pretty easy to finance, because they can support that, they can support the Interest Payments and the principle payments the second ones at the extreme opposite ends are ones for some political reason there are no user fees attached those are ones that some level of government is going to have to dip into its pocket and make the investment because if there isnt the political will for users fees, the only other way to do it is with grants. Its a great limit on the amount of grants that the federal government can make him then you have in the middle ones that have some kind of user fee potential that maybe its not as clear cut as in the cookie cutter modem those are ones where maybe some consideration a private partnership could be used. Last question then we got to go in the past, your past life when you would take over a company that had top debt and try to figure it out, are we at a point some people are saying the u. S. Is finally at the ting point where the tax bill and then this current bug together we are worrying about how much dead we have compared to gdp are we there by you . I dont think by a long shot. Those increase in debt were based on a much lower growth rate than gdp that we are experiencing let alone the positive impact that there will be on those from the tax cuts in the other measures so if we grow 3 or close, are you not going to really have a problem with debt. Thats the best outcome, 3 plus, maybe 4 growth. Thank you for your time, secretary, appreciate it good talking to you. Up next, we will head back to the olympics, where the robots have taken over. Reporter guys, when we come backhe t future robotics, yes, im the robot. Welcome back to squawk box live here in pyeongchang, in one of the most advanced cities in the word we found a company developing a robot called the method 2. We showed you the video. This thing is 13feet high it weighs more than 1. 6 tons the Company Technology future technology if the robot looks out of a scifi film, they brought in a hollywood special effects guy to consult on the design and jeff bezos took this thing for a spin last march and tweeted that it was awesome. The robot cost 100 million to develop and paid outofpocket by the companys chairman and it is not available for sale, guys. But i know weve shown it to you before it was like being inside a transformer, whatever you think being when you were a kid if you had a transformer, when i moved my arm, it went up, when they moved the feet would move, the whole thing was crazy. There was one it was a little scary, i will say, you can see youre being hung the robot is hung from the ceiling. When they start to moving the legs, its anxiety producing there youll see they didnt give you control of the legs, right they only give you control of the arms i only had control of the arms and they were controlling the legs. You can topple that if you make the wrong move. They were doing a dance with me in it and you can see i have a seat belt going on but any way what is the Practical Applications with these things thats a good question. Manufacturing like Armed Services reporter so this exact robot is probably not going to be used in any real meaningful way its the design pieces and machine the machine behind it a lot of the programming that they are putting into it and ultimately the idea is if they design robots that are much smaller, that a human is not inside are that are controlled remotely or perhaps even autonomously but the idea to get the Design Elements when they are big and then try to shrink them, sort of a what was that movie, honey i shrunk the kids. Thats the idea behind the science they are approaching. Where you were looked like the scene from robocop and he kind of loses it and shoots it reminded me of it i would not want to be there with you controlling that thing if i was like in your immediate vicinity stomp him. You would do something with arms to me or something. Reporter you could do things with the fingers too by the way. They are not going to show you but we were playing with the fingers. Pop my head like a grape. I dont think thats what he meant. Hes going to hold up a single finger . Not the pointer finger. Thats fine thanks, andrew. Seal you in a little bit. Well get back to our guest host, former yum brand ceo david know vak sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. I thyou never got the brakes looked at . L. Oh yeah. No. At cognizant, were helping todays leading manufacturers make things that think and do automatically. Imagine that, a world of new Digital Products and services all working together for you. Can i borrow the car when its back . Get ready, because were helping leading companies see it and see it throughwith digital. I we worked with pg eof to save energy because wenie. Wanted to help the school. They would put these signs on the door to let the teacher know you didnt cut off the light. The teachers, they would call us the energy patrol. So they would be like, here they come, turn off your lights those three young ladies were teaching the whole school about energy efficiency. We actually saved 50,000. And thats just one school, two semesters, three girls. Together, were building a better california. All right, folks, the future of leadership in america, when we come back, stay tuned, we have more with david nakov, youre watching squawk box right here on cnbc as Investment Management professionals, lets measure up. Cfa institute. Notheyre not investing iney commoditiesies. Or fixed income. What people are really putting their money into is what they hope to get out of life. But helping them get there requires a real refusal to settle for average. Because when you approach investing with a tireless desire to beat the status quo, Something Wonderful can happen. Those people might just get what they wanted out of life. Or maybe even more. Than you. Imagine if the things you bought every day. Earned you miles to get to the places you really want to go. With the united mileageplus explorer card, youll get a free checked bag. Two united club passes. Priority boarding. And earn fifty thousand bonus miles after you spend three thousand dollars on purchases in the first three months from account opening plus, zerodollar intro annual fee for the first year, then ninetyfive dollars. Learn more at theexplorercard. Com transparency. Expertise. These are the Building Blocks enduring relationships are built on. As Investment Management professionals, lets measure up. Cfa institute. After similar moves, the index tends to gain 3. 8 a month later. Welcome back, everybody, our guest host has been david novak of yum brands, former ceo. We started off talking about leadership and talked about what that means for ceos. But you are somebody who is preaching leadership to every age group. I formed it to go for aspiring leaders and thats why i do the podcast and its been fun and the blogs and also this new online digital Leadership Program. But im my Family Foundation is passionate about developing leaders at all levels. We created this problem called lead to feed, the largest privately funded Leadership Program in middle schools and high schools in america. We reached over a million kids for the last five years in all 50 states. We teach people principles of taking people with you and they form project teams and go out and solve needs in the community. This is really fantastic stuff team building. And recently, we ran into this Company Called global Game Changers for Elementary School teachers we go in and teach kids what is their gift, that becomes the super power. You put your heart into it and use it to ignite good in the world. And were finding that Elementary School students and middle School Students and high school they are passionate about leadership and they learn and discover that theyve got this within them i think this really is a game changer. In the world today, people arent really teaching leerdship and thats the reason we formed the institute at the university of missouri as well the. We have nine acredited hours and we want that institute to become the best practice for other colleges to come to. Were going to talk to you about this a lot moreover the months to come. Its a honor and real privilege. That does it for us today, make sure you join us tomorrow right now its time for squawk on the street. Good thursday morning, welcome to squawk on the street. Cramer is off today. Futures modestly in the green following the wild finish on