Transcripts For CNBC Squawk Box 20240713

Cutting back production of the 737 max. Could announce a decision as soon as today. The board began a regularlyscheduled meeting yesterday that is set to continue today just last week the head of the faa told us right here on squawk box that the 737 max wouldnt be cleared to fly before the end of the year u. S. Regulars then warned boeing that it had been setting Unrealistic Expectations for the jet to return to service further Production Cuts would inflate boeings costs and take a toll on Financial Results as fixed expenses would be split among fewer planes the ability to effectively amoretize all of those costs and would also be a real pushback on the company and on the companys ceo. To me, if there really is a production halt, then theres going to be a succession story that i think we havent had yet. The Ripple Effects of what that means not only for boeing but all their suppliers along the way. Thats a much the reason you halt it, i mean, youre just blowing money if you keep making them and not sending them out, right . Right and its also a recognition that their time line that boeing had been hoping for is not the timeline that the faa is working on we heard that loud and clear from the faa administrator on this show last week. And this is the Ripple Effect of what happens from that. So this is a stealth rally in the dow then today up 65. Relative to a 12point gain youre looking at for the s p 500 and the futures this morning. Thats why its holding it back. Boeing is down almost 8, 8 times 7 is 56 points 56 or whatever plus 65, we would be up 120 or 130 gain of 12 poimpbt points fft s p future is a much bigger move. However many points that is eight times 60 points being taken off just from boeing so we would be much higher in the dow. The trade story were talking about Robert Lighthizer saying the phase 1 deal with china is, in his words, totally done it will nearly double u. S. Exports, he says, to china over the next two years we dont have a date. We have to get this. We have to get the final translations worked out the formalities. Were going to sign this agreement, but ill tell you this, the second phase 2 is going to be determined also by how we implement phase 1 phase 1 is going to be implemented right down to every detail it really is a remarkable agreement. But its not going to solve all the problems questions still remain obviously about some of the details of the deal and the time line for beginning phase 2 talks, which could actually saying start immediately and now they could come in stages. So thats what im excited about is the stage 2 may have three or four stages that we can agonize over the details of. Thats my question, has anything changed i know we put off the tariffs for now. Cease fire. Remember he said 20 we get just a little bitty thing or, no, that was 50 the 20 was that we have some earth shattering change in the relationship this is about exactly what he thought. Right this is what the market thought, too. This was the good Case Scenario from the markets perspective. We dont know the details of the i. T. Stuff. Thats the thing. They keep saying this is a finalized deal show us the details. Some of the things that china agreed to in recent years in terms of shuffling them around. Here it is. Change the language a little bit, put it up here and down here and other stuff down here back up here. Right. I dont know. Markets like it any way. Eunice yoon joins us now with the latest on the deal the other thing, eunice, that people keep questioning is whether theres the demand in china for twice as much grain as or ag products as we had been exporting in the past is there demand for that is that pie in the sky, do you think . There is a lot of demand for u. S. Soy beans as well as pork, especially right now, because the government here is trying to sure up the pig population after the african swine fever had ravaged the pig herd here. And then because Lunar New Year is coming up in january, this is a time when everybody likes to buy pork and there has been a serious concern on the part of the government here that there isnt going to be enough pork on the dinner tables during this multiday traditional holiday. And the concern there is that people could get pretty angry about it and then that could fall on the lap of the government so, there is definitely a big push for that. But what you guys were talking about, one of the things that i think is interesting is that the chinese and the u. S. Do both agree that this truce is good for the markets because the National Statistics bureau released the november data and as part of that they said the phase 1 trade agreement would help to improve Market Expectations so that is the official line that weve been hearing quite a lot. There are, though, questions and concerns as you guys were talking about that some of these key points have been lost in translation. So, the hard targets, as you guys were talking about, lighthizer had said could be 40 to 50 billion dollars that china promised the chinese have not confirmed that number. The chinese have said that the u. S. Agreed that they would roll back tariffs and there would be a phase out step by step lighthizer has said we have not made such a promise. And then on the phase 2 negotiation, as you guys were discussing, President Trump had said this was going to happen immediately, but then the chinese said that this phase 2 negotiation is going to be dependent on the phase 1 implementation so, still a lot of question marks. I got on the phone ive been talking to a lot of people today and most of the people i talked to are either governmentlinked or are close to the negotiations but a bit outside. And they all think that in terms of the tariff roll back, there is no real disagreement. And that the u. S. Understanding is that there would be removals of tariffs but its based on conditions where as the chinese believe we are going to meet those conditions so, therefore at some point there will be a phase out. Thats not a real concern. The other area, though, that might be a little bit more challenging is with those hard targets because the way it was explained to me is that the Chinese Government doesnt want to publicly acknowledge these hard targets because of the possible backlash they could have with their citizens so there is not going to be any discussion about the hard targets, but most people do believe even the one source i have who is pretty close in the government that is that china did agree to those 40 to 50 billion of Agricultural Products the question, though, or one of the things that people have also been saying, though, is that they think that this is the soft target and its what was described to me as a best endeavor target. That the u. S. Would accept if the chinese make a best effort to get as close as possible to this target, but it was just exactly what you were talking about, joe, the number and the math might not work for china. As long as theyre buying a lot of american stuff they can kind of get away with it. Right okay eunice, just to put a finer point on this, all the sources that you talked to are on the chinese side of the negotiating table because the idea of those roll backs yeah, yeah, yeah, yeah. Im guessing, we havent heard anything about the roll back of the additional tariffs im guessing that might be one of the things that might have gotten lost in translation in this. Yeah. No, that was one of the points and so, again, i was talking to a lot of people on the chinese side and so their understanding was its kind of linguistic that when you say phase out that the reason why the chinese officials when they said there was going to be a phase out, its going to be step by step and then later lighthizer had said, no, actually we have not agreed to a future roll back that again its all based on conditions. So that the u. S. Would allow for removal of tariffs but only if the chinese meet conditions. Its not really so different in their understanding of whats going to happen. So do you think its really lost in translation or do you think they really understand the translation they just want it to be one way and the other side wants to be another way . Agree to disagree we may not see eye to eye on things but were not going to continue to ratchet things up at the moment. We talk about the rationalization of the language and you think it this way. Is it that they dont understand or they dont want to understand or we dont want to understand, or whatever it is. Gray area in there personally i think thats what keeps things moving ahead. Youre not introed yet. I couldnt help myself. I want to ask eunice one more thing. So eunice, the second major sort of teteatete with a soccer or with a Sports League is happening over there now yeah, thats right. After the nba and these are told a big game, arsenal against Manchester City, the marquee matchup of the week. Did you talk to wolf . Yeah. Im channelling him. And so this player actually just mentioned the uighurs. Hes muslim. So they immediately pulled that off the air waves, right theyre pulling us off the air waves right now . He is german of turkish origin he is muslim and he is a midfielder for arsenal. And he has a massive population on twitter so he tweeted in turkish that his support for the uighurs and criticizing beijing for the crackdown on this Muslim Minority population and also criticizing muslims at large for the silence, the collective silence. So that has that just got a very strong reaction from beijing. The state, as you were talking about, the state tv, the broadcaster cctv dropped the game so there were a lot of people as you know, just with the nba, there are a lot of football fans here people were looking forward to it the signal, the decision was that the broadcast wouldnt happen and then the Chinese Football Association came out and said they were outraged. There was a lot of discussion online state media was putting out several different editorials one of them said that if hes bad mouthing xinjuang this is very foolish they meant if hes bad mouthing beijing. But its still got a very strong reaction i think what was also kind of comical, though, about this, that there was such strong reaction and online there were a lot of people wondering what he actually said because it was in turkish and the government was trying to figure out if they should translate it and put it online to show it or not so, a lot of people left wondering what is going on here when it comes to arsenal. I had quite a bit of money on that arsenal Manchester City 5 . Im not betting on soccer yet. Womens ncaa. You did almost. Almost because theres some big the good teams win cover. I saw it i wonder if i had a lick in that because i had such a bad day yesterday. Any way, thanks, eunice. I dont want to talk about it. Below. 600 . No, no, no no, but from above 800 down to the mid 600s horrible. Joining us now to talk about what the phase 1 trade deal means for the markets, ryan payne, president of Payne Capital management you like the colts tonight, do you know and jeff sau chief investment strategist ap Capital Wealth Planning jeff, after 25 gain, you point out typically you get at least 9 or 10 the next year and people are still talking about very muted 3, 4 . So once again we still havent convinced anyone that this is a good market. Thats right. Theres not many people left around that have seen a secular bull market. The phase 1 trade deal, the people i talked to d. C. And i used to live there have a hard time believing that the president is going to sign a phase 1 trade deal that has a snapback clause in it. So, i think beckys questions are right. Theres a lot of questions about whats going to go on with this phase 1 deal. Nearby we have a pullback or next year we get 9 or 10 in your view or its unlikely after a big gain like that you point out historically to have a 10 loss or more, that thats not usually in the cards i think how many years did that not happen where we had a 25 gain well, typically after a 20 plus gain you get an 11 gain the next year. And i think youre going to get that again in 2020 joe, theres a lot of people that still do not believe this rally. The economy is reaccelerating. Earnings continue to come in better than people think and the investing public, the individual investor is scared to death. Thats not the way bull markets end. Actually, ryan, you feel the same way im 100 with jeff on this. Jeff is one of the only strategists that was really bullish last year or this year on wall street jeff, im a big fan. Just wanted to say that. Thank you thats what we see here with our clients. They come in you have perspective clients come in, sitting with so much cash right now you look at we had a quarter trillion dollars come out of the market this year Retail Investors are not invested in this market. You were actually, ryan, pointed out about barrens, i guess, the barrens being in the low z i like to make fun of strategists. Theyre saying up maybe 4 , very muted as they were this year and if you look at most strategists they have been dead wrong because we have been in a booming bull market this year. So its still a p irinot mar, theres not a lot going on there is no alternative to and actually the journal has an interesting piece today they finally noticed investors are pulling back from safe havens as worries have eased about global slow down, right yeah, exactly right you look at were in a yield starve world and if you look at bond yields you know the world has to be crazy when you have yields like that on a place thats defaulted only in the last couple years. Where as stock yield, look at globally right now, buy Global Portfolio paying over 4 and those yields are increasing. There is no alternative if youre trying to informs your money to grow over inflation. At this point you dont see Interest Rates headed up at all, but you Like International you think we ought to go all around the planet, why, because valuation, stocks are cheaper elsewhere. Valuation matters get is same growth rates overseas. You cant. No look at earnings specifically, earnings look just as good overseas as they do here and get a valuation thats cheaper. Some valuations we could be jumping out of the basement window theyre so low. Very low risk and yields just not getting into other aset classes. Are you content here, jeff . Plenty to pick from in the United States . Yeah, thats right, joe we have a head strategy at Capital Wealth Planning were up online with the Dow Jones Industrial average this year and generating roughly 5 taxable distribution for the baby boomers, which i am certainly one of them, its like the ideal investment okay. Yeah we know that youre not you might be the m word, arent you im more with andrew. I think were generation x on the younger side ill take that. Millennial x. S. Millennial s. So you identify with them but youre a little older, is that what thats a fair assessment. How do you feel, andrew . Oh, he is hes millennial s. Straight up x. Straight up triple x, baby. Jeff, thank you. Whats wrong thank you. When we come back, senator Elizabeth Warren speaking to cnbc about her wealth tax plan thats part of the problem is government listens disproportionately to rich guys who dont want to pay taxes. Much more from that interview next, including her call to break up Big Companies squawk box will be right back. [ dramatic music ] this holiday. Ahhhhh ahhhhh a distant friend returns. Elliott. You came back and while lots of things have changed. Wooooah woah its called the internet. Some things havent. Get ready for a reunion 3 million light years in the making. Woohoo yeah senator Elizabeth Warren speaking to john harwood here is what she said about taxing billionaires. You would have to ask them. Butly say this, a lot of them just dont want to pay the taxes. You know, and thats part of the problem weve got here is government listens disproportionately to rich guys who dont want to pay taxes. Remember, for everybody who says that this government is caught in gridlock, remember, that when the question was cutting taxes for the richest and for the biggest corporations, it took the republicans about five weeks in order to call everybody in and do a trillion and a half dollars in tax breaks, tax breaks that went mostly to those at the top senator warren also outlining the reason that shes calling for the breakup of some Big Companies. I see this as whats the best way to grow our economy Going Forward . So you talk about lets break up big ag, lets break up the big banks. Thats enforcing antitrust laws that have been around for more than 100 years, and unfortunately for decade now have been underenforced. And let these giants come in who not only scoop up all of the profits, they also undercut wage growth, they undercut innovation in our economy, they stamp out little businesses in small towns. We need some enforcement of our antitrust laws. But youre not worried that the scale of all of this is going to have big unintended consequences i think the intended consequences here are pretty clear that when you dont have just one place or two places that you can buy seed from, theres more competition in the industry you can see the full speak easy interview right now at cnbc. Com. Just one comment about the last part of that. You know, i know a lot breaking up the big banks. Breaking up Big Companies because i think shes referring to amazon and facebook and everybody else there are people, democrats who often say that they dont sort of what i call wall street democrats who say i dont really like Elizabeth Warrens policies but i really dont like President Trump and im happy to vote for Elizabeth Warren because i somehow think even if she gets in the role she wont be able to do any damage or do anything, but im not sure they fully appreciate what can be done without the help of congress, which is to say she would appoint whoever runs the department of justice. She would appoint whoever runs the antitrust department. And even if you dont have the justices who are going to necessarily agree with you at the end of the day, these companies, whether you believe theyre too big or not but if you dont believe theyre too big will ultimately get hung up in some kind of court system and some kind of long investigative situation. Somewhat bipartisan what happens happen now whether the Trump Administration who is looking into this go through with it. Executive order which has been used so extensively over the last 12 years. Shes way down. Way below bernie not so far below buttigieg, just in the betting markets. She started with medicare for all and other issues. Bernie sup near biden has been rising. Where is mayor bloomberg . So far down the list. Still tied with andrew yang not that thats anything wrong with that. But for who will be president in to 20 its much worse. Hes way down. Well look at all that in just a little bit. We have a lot more on squawk. The tieup between duponts Nutrition Business and International Flavors and fragrances well talk about that next and so much more when we return. Do you have concerns about mild memory loss related to aging . Prevagen is the number one pharmacistrecommended memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Weveryone, looknk isntat your phones. The design thinking, the digital engineering, security, blockchain, and we will be first to market yes. When we do we launch . Unfortunately, in 2 or 3, hours. Why the delay . Cognizant is helping banks use Digital Technologies at scale to advance speed to market. International flavors and fragrances announcing its going to merge with duponts nutrition and bio science unit a company company. Iff ceo Andreas Fibig will lead the combined company and Service Chairman the deal values dupont the unit, at about 26 billion. Programming note, the ceo iofiff and executive chairman of dupont will be on squawk on the street at 9 00 a. M. On a first on cnbc interview. We will start with an ipo report card for 2019 and a look ahead at the ipo pipeline of 2020 joining us is Nelson Griggs nasdaqs president good morning to you. So if i were to say to you the big theme of this past year. Yeah. What is it . To me i would say it would be overvaluation in the private market and a sort of rationalization or shift in the public market. I think you would Say Something very different. No. I would add on to that is there was a fundamental shift from the demand for high, high growth to saying when are you going to be profitable that was a clear change. The pivot kind of took place earlier in the year and really accelerated as we got into the stoma summer months and then the fall deals . Why is that go back five, ten years theres moments where the market decides they want Something Different and the whole market goes aed a herd mentality and that happened. I think it was a good thing, no no, it was great. Yeah. Left holding the bag. I think it was a very good thing. Im trying to understand the psychology it is a herd mentally, right yeah. Something happened where it all seemed to happen at once. Got so overvalued in the private market. A lot of companies that did do well, enterprise, tech, cloud, still did pretty well, right . So i think it was a decent market in pockets, but just the high, high growth was went out of favor. So what does that mean for 2020 in terms of kinds of companies that youre probably trying to get to go public next year it feels like the first half of the year is going to be pretty busy. I was out on the west coast last week, that was really a big theme getting out before the september time frame. Thats interesting. You have a good eight to ten cloud Enterprise Companies will hit the market the first half of the year. Right. We had a nice two months in bio tech we think the bio tech market will be good. The window you talk about the six months prior to the election, do you think thats also reflective of the way the rest of the Corporate America is thinking about snefeverything yes. So is that about cap x . How much when people think about sort of everything in 2020 in that regard . Well, i think that theres going to be depending on how the election shapes up, have a continuation of pro growth policies or theres a moderate candidate on the democratic side, i think people feel pretty strong that the market continues to be Pretty Healthy and have a lot more predictability as some fundamental change could be seen on the other side far left then you might have some holding back of investment. Holding back of investment, you think that just the idea, the prospect of i think its uncertainty. You look at going into 2016, it was really uncertainty and once uncertainty kind of cleared out of the way, you saw a lot of regulation would soften a bit so you saw really some strong growth. Final question for you, over the weekend, i dont know if you saw the wall street journal. I did. Reported a big story about adam newman in wework. Did you see this piece. Part of it, yeah. And in this piece it said that wework selected nasdaq as its exchange. Yep. Had the ipo gone forward. That was in the public filing, yes. So you know this. Yes. So my question is but the piece looked at what they call enablers of wework how do you think about the role of the nasdaq and how do you think about the role of those banks and institutions that were involved in it well, our role is to accept companies black or white they meet or dont meet our standards. We compete vigorously for ipo. We competed vigorous already for that one we have combination of banks, the s. E. C. , they met the criteria. Just so were clear, though, the exchange itself, nasdaq in this case, doesnt really vet per se the actual mechanics of whats going on inside the company . We have qualitative and quantitative standards we have to apply the u. S. Markets work we have qualitative, quantitative standards we meet those, any company can meet on the nasdaq. Is there any company we dont want on the nasdaq certainly when you talk about governance issues, doesnt meet the standards, we have we send out a list of questions, clarifying questions, that isnt about a twomonth process to qualify for nasdaq once you go through that, if you meet those standards, were okay. Nelson, thank you coming up, frozen dethroned at the box office by another sequel that rex reed here, Andy Sorkin Reed jumanji 2. You were emailing the entire time on your phone. No, i wasnt. Thinking about it. But did surprise analysts with its weekend take. Were going to break down the number. Max sorkin gives it a thumbs up. Your son likes it yes. You didnt like it at all we can talk more about my full review after the break. Tease it that way. But not two thumbs up, thats r re through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Good morning and welcome back to squawk box on cnbc live from the Nasdaq Market site in times square. U. S. Equity futures are once again in the green dow is indicated up almost 67 points with boeing down 7, so that would be triple digits if boeing wasnt impacting the trading and the dow. Solidly higher and the s p up 14 nasdaq up 39 and what we referenced before we went to break, jumanji the next level topped the Weekend Box Office bringing in better than expected 60. 1 million disney frozen 2 was second bringing in 19. 2 million in its fourth week. The movies global total crossed the 1 billion mark, disneys sixth movie to hit that milestone just this year it was disappointing for richard jewel, the movie debuted with 5 million in the u. S eastwoods take of the real life take on the Security Guard initially celebrated as a hero for saving lives after the bombing in atlanta at the 1996 olympics then vilified when he became an fbi target and was reported as a suspect by the Atlanta Journal constitution. I want to see that movie. The Atlanta Journal constitution going after the movie because of the way the female reporter was being treated played by olivia wild i did see jumanji. We were talking about it before. Max sorkin really liked the movie. Did you like the first one . The Robin Williams version. The first one of this, this is the second go around with the rock. I know. Im going back to the original classic. That was my taste. You know, as kid movies go, i was okay with both of them. Yeah . Okay. I dont want to say it was bad. I didnt it was a kid movie. Yeah. I didnt but boy did max sorkin like it. You prefer adult movies, adult films . In the clint eastwood. What else would by talking about . I know you too well. No, you do not know me. You dont like kids movies you like adult films i heard you say that many, many times. I know you all too well, my friend all too well when we come back, well have more on the phase 1 china trade deal and what come, next in the negotiations. Whats even in this deal well show you what treasury secretary mnuchin told cnbc over the weekend. Stay tuned youre waping squawk box on cnbc todays big number, 4. 5 billion. Thats the net assets of the fxi, the largest etf to track ngonese stocks traded on the ho kg Stock Exchange drivers just wont put their phones down. We need a solution. Introducing. Smartdogs. The first dogs trained to train humans. Stopping drivers from liking. Selfieing. And whatever this is. Available to the public. Never. Smartdogs are not the answer. But geico has a simple tip. Turn on do not disturb while driving mode. Brought to you by geico. vo the flock blindly flying south for the winter. They never stray from their predetermined path. But this season, a more thrilling journey is calling. Defy the laws of human nature. At the season of audi sales event. Ugh, another electronic signature. You have to print, walk, sign, scan, recycle, walk, email yourself. Really . More walking, try again, waiting, recycle, walk, email yourself, then get back to your day. Or not. This isnt working. Introducing samsung paperless workflow solutions. With the galaxy tab s6, you can sign Digital Documents onscreen, with a finger or your s pen. Samsung business solutions. Welcome back, everybody. The Trump Administration taking a victory lap for phase 1 of the trade deal with china. Hadley gamble spoke with treasury secretary Steven Mnuchin over the weekend in a cnbc exclusive interview. The deal will be signed in early january, and then well start phase 2. And phase 2 may be 2a, 2b, 2c. Well see. But this is this in to itself is a huge accomplishment for the president. What do you say to those critics who complain that this phase 1 didnt accomplish anything really . Well, in all fairness, people are just beginning to understand the details of phase 1 were in the process of putting out fact sheets that go through what it is you know, this has been a long process over the last two years and people have seen the ups and downs. I think its going to take a little bit of time for people to digest the significance of this. All right, joining us right now to talk about the significance of the deal is kevin rutd, the former australian Prime Minister and the president of the Asia Society Policy institute kevin, its good to see you today. Good to be with you so here we are, the day after those additional tariffs were set to be put on it sounds like we have a deal. Not sure whats in the deal, but we know that additional tariffs arent coming at this point. Wall street sees that as a day taunt and futures have been up as a result. What do you think happened behind the scenes. Whats in this deal and what needs to happen next look, becky, i think the bottom line is we now got a cease fire and this trade war has been raging for a year and a half now, and a cease fire which is no new tariffs, thats good news for markets and the second son some of the existing tariffs theres been a reduction as well. So in terms of doing no further damage to the Global Economy and the u. S. Economy, the chinese economy, that actually is on the upside but your question is right, on the substance of the agreement, look, there is some advances in terms of forced Technology Transfer and intellectual Property Protection, Market Access into the financials sector, but we have got an 86 page document yet which still hasnt been translated and we dont see all the gory detail. We have to wait for that. What would be the upside, the downside of these the gory details, as you put it, what would be good news if youre sorting through that stuff and what would be bad news well, look, if youre look in at it from an american exporters perspective, President Trump and Bob Lighthizer have been pretty hard line with the chinese in trying to extract lets call it a purchasing order of American Goods and services in manufacturing, in agriculture and in other sectors of the u. S. Economy over the next two years. The number which the american side is putting out is 200 billion worth of additional export sales by the United States to china over the next two years using the 2017 benchmark as the way you calculate that now, if youre in american agricultural and those sort of sectors, assuming these numbers are reflected in the actual detailed document to be released, thats good news for the American Farm belt as for the other parts of the agreement, which is on intellectual Property Protection and forced Technology Transfer, Market Access to two closed parts of the american economy, look, its still too difficult to see what material progress has been made, but ill give Bob Lighthizer one thing, theres a dispute resolution mechanism built into this Draft Agreement and that, i think, would have been what the chinese pushed hardest against and Bob Lighthizer, i think, has got a win there. Do you anticipate that there will be a phase 2 that takes place before the election or does Everything Else at this point get pushed off until later next year and beyond you know, becky, whats fascinating is to look at the different scripts being used in beijing and washington on this core question of what about the phase 2 negotiations the american side have been very plain in saying that as soon as this thing is done and dusted, thats the phase 1 deal. Then theyll be at it again in january to recommence the negotiations for phase 2 the chinese side have said something quite different. They said, well, we intend to wait for the full implementation of the phase 1 agreement before we look at phase 2 now, why is that the case . The real stumbling block in all these negotiations over time has been this, and that is chinas own domestic subsidies to its own firms in what they what they how they operate in the international marketplace. Whether its huawei or others. And then that lies so much at the absolute center of the chinese economic model that the chinese are going to resist a whole lot any attempt by the u. S. Side to reign those subsidies in to create more of a global level Playing Field kevin, i want to thank you for your time today and we will have you back in studio soon to talk more about this coming all the best, becky. Thank you. Coming up when we return, the trial around sprint and t mobile merger. Its heating up. Urat to expect this week in the cots well do it after the break. Cr eated by apple, so its simple and transparent with a new level of privacy and security. It lives here and here on your iphone, and it will save you 6 on Holiday Gifts at apple; like iphone, apple watch, airpods pro and so much more. Apply in as little as a minute, right in the wallet app. Apply in as little wat t. Rowe price, hundreds of our experts go beyond the numbers to examine Investment Opportunities firsthand. Like a biotech firm that engineers a patients own cells to fight cancer. This is strategic investing. Because your investments deserve the full story. T. Rowe price. Invest with confidence. Welcome back to squawk box this morning the second week of the trial surrounding the potential merger of tmobile and sprint kicking off this morning at the heart of the debate is what will happen to consumers phone bills. We have Joanne Lipman and ed lee, New York Times media reporter what do you expect to happen this week in court i mean, well, now theyre getting into the defense side. Right theyre presenting their arguments. When youre refereeing the judge on the sidelines during the you never win, right right. The plaintiffs did present interesting arguments more recently where it came out that tmobile sprint even though theyre going to lower their prices, device promotion might not might go away in other words, your devices might be more expensive. Therefore, the whole bill is more expensive. Thats exactly right. When you have fewer companies, the law of economics says the prices will go up. Is that absolutely true there are instances where if you have in this case i could argue verizon, at t are in one business and you could argue tmobile sprint are in another business including the kinds of consumers theyre trying to cater to part of the issue is theres not been enough competition on at t and verizon . Well, i think and and is this going to give you more competition for those two . I mean, i think thats the real question first of all, do we know of anyone whos really happy with their Cell Phone Service do we . I mean, you know im on verizon at the moment and im not is unhappy. Youre not complaining . I want you to know, im not so unhappy i wish it was cheaper but we all wish everything was cheaper. Everything could be cheaper cell phone bills have gone down a little bit in the last few years, largely because of saturation in the market, right . Tmobile, verizon, sprint, at t, theyve just been sort of stealing market share away from each other. Well, wait, theres a bill . Someone gets a bill . Yeah. You probably get no, hes at work. He has a work phone im very satisfied. Were going to switch gears for a moment the New York Times publishing a report over the weekend related to amazons aws cloud dominance. Some of the tactics that its used as its continued to grow, mostly around this idea of using open Source Software and some of the folks who had been on top of the aws Service Feeling like the features were being effectively taken by the company. A lot of technical words there. What are you talking about open source . I know exactly what youre talking about. Open source being open Source Software right. Its for free its used for developers can tap into it. Can adjust it even for their own needs. Amazon said, hey, were going to adjust it as well and supply it to our subscribers its an interesting argument i think its a little bit hard argument to make stealing the software thats meant to be stolen. Its interesting because there are merchants on top of amazon in the retail world, right . Yes they get very upset when one of their products is copied by amazon and its sold i get that and i am very sympathetic to that. In the open source world the whole point was to take on the big guys effectively, open source was meant to be copied that was the whole idea. Now you have the big guys actually copying no one ever thought that an amazon or microsoft would start using open Source Software but they are to me theres an almost more Interesting Development here, which is should they be . Does the model of open source need to fundamentally change or do you think it really is an antitrust issue . I think that its worth looking at as an antitrust issue because of the very question that youre raising, right because and this is, as you point out, this is part of the amazon playbook and it has been from the start weve seen it with products where they have amazon basics. Right. Where they know exactly whats popular they have much better insight into how people are using their apps and so on batteries, i 100 agree with you. Yes but on open source im saying the whole premise of open source is to be copied is to be open, yes. Is to be open by the way, some of those companies have made a small fortune on top of the amazon service. So its a very complicated sort of little dance that everyone is playing. Maybe that isnt the best example to illustrate amazons market power or dominance if there is to be an antitrust dominance. The vendor argument, the batteries, the fiscal goods. Right thats the thing, i think Elizabeth Warren has been talking about this the way shes framing it, you can own the network or the product, you cant own them both at the same time this is one example. Can i bring in weve got to go were out of time. Come on we have props, i think i have props. I wanted to show you some Historical Perspective this is this is the wall street journal from 1998. Oh, my god. This is a cover story by becky quick and joanne. About this is about what is called this may be the first echristmas and it is about amazon and at that time at that time when she wrote this story, all ecommerce was less than 1 of all christmas retail sales and in the story theres questions. She has a howto guide on how to buy things on amazon. You know what, 20 years ago what is remarkable is this is 1998. Is this all true . You can do that . In 1998 when becky becky wrote this amazing story in 1998, but whats really interesting is it wasnt that long afterward that amazon actually got into cloud computing, that amazon started ripping off products no one anticipated, not the retailers, not the competitors, not the open source, nobody anticipated that it was going to get its tentacles into icy. Ything so qukl thanks for bringing the article. Squawk box returns with two big hours straight ahead the trade deal and your money. Reaction from beijing and wall street straight ahead. More problems for boeing a production halt for the 737 max. Somewhere in a portfolio far, far away. Use the force, luke let go could investing in space be the next banking frontier . Let the countdown begin as the second hour of squawk box begins right now. Welcome back to squawk box right here on cnbc this morning. Im Andrew Ross Sorkin along with becky quick and joe kernen. Joining us is Mohamed El Erian, friend of the show and its good to see you, sir. Thanks for having me. I want to show you whats going on with the futures this morning. Looks like the dow would open up higher 65 points higher we should say thats being weighed down to some degree at least life is relative by some boeing news. The s p 500 looking like it would open up 14 points higher the nasdaq is up 40 points higher after the u. S. And china announced progress a critical point remains in question and that is over agricultural purchases i want to get straight to eunice yoon in beijing but before we do that we want to get to Kayla Tausche. We can actually hear the differences between what everyone is thinking in washington, what everyone is thinking in china. We will start with kayla good morning to you. Reporter good morning, andrew the white house is in the home stretch finalizing the trade deal with the u. S. In response the u. S. Will soften tariffs put on in september and shelf the tariffs that would have taken place yesterday Bob Lighthizer acknowledged its only part of what the Trump Administration hopes to achieve. The chinese did it. It was always going to be in phases the question was how big was the first phase. Anyone who thinks youre going to take their system and our system that have that have worked in a very unbalanced way for the United States and in one stroke of the pen change all of that is foolish. The president is not foolish, hes very smart. Reporter the terms reached in the socalled phase one deal must go through a legal deal and approved by either side once translated they must schedule a signing lighthizer told people they were aiming for the first week of january in washington and it would only be ministers, not the leaders signing the deal now over to eunice yoon in beijing. Reporter thanks so much, kayla. Beijings official message is that the trade truce is good for china, the u. S. And the world but there are indications that there are a few key points that have been lost in translation and that could potentially threaten a deal. First, on the hard targets the u. S. Says china has promised to buy 40, maybe 50 billion of u. S. Farm goods. China hasnt confirmed this. On the tariff roll back, the u. S. Pledged that it would be phased out step by step. The u. S. Says it hasnt agreed to that. On the phase 2 negotiations, President Trump says the talks are going to start immediately the chinese say theyre going to wait first for the phase one implementation speaking to sources on the chinese side one of them in the government and they say that for the most part they dont see a real disagreement when it comes to the tariff roll backs, that the u. S. Believes that the roll back would be conditional and the chinese believe that they would be able to meet those conditions so from the chinese perspective they think that there will be a phaseout on the issue of the hard targets, thats a bit trickier because most people do actually believe that the chinese have agreed to some sort of big number those numbers though cannot be publicly acknowledged because of possible backlash that they could see from their citizens, but what i also was hearing is that there is most people believe that these targets are soft targets or what was described to me as a best he endeavor target so that the chinese would continue to buy a lot of goods from the u. S. And that they think that if they make a great effort that the u. S. Will accept that. All right well see. Were going to talk to a man that i was referencing actually earlier in just a second, eunice leave your eye in as long as were still being broadcast over in china we never know. Treasury secretary Steve Mnuchin commenting on it over the weekend. This is an historic deal. Weve never had anything like this it addresses very significant issues, Technology Transfer, intellectual property, structural agricultural issues, Financial Issues and currencies. So we couldnt be more excited about the impact that this is going to have on the u. S. Economy and u. S. Jobs. There he is lets bring in Mohamed El Erian, chief Economic Advisor at allianz and maryanne hold on one second please, professor. Mohamed, i remember long ago you had the scenario of what would happen with the trade war. This is in the 60 that you talked about sort of an incremental almost truce but something that can be signed and we can Say Something happened at least, right explain what you said first about it so, its a truce. That was the high part of the outcome. 60 . 60 of something that was kind of okay and not earth shattering right that number kept going up. I think youve got to remember two points when you look at this the first one is yet another constructive shortterm added to massive liquidity, added to good numbers out of china, added to the Service Sector holding up and but importantly those that extrapolate this as a long, durable, comprehensive trade deal are wrong the most likely next step is further tensions and all were getting here is interest to the truce. You echo mohameds comments to some extent at least we can say this is a ceasefire which is a positive for the markets. Absolutely. Its like when you stop slapping yourself in the face right things are Getting Better hopefully well see a big pickup hopefully in Business Investment which is crucial for the future. But theres also a lot of as you said, a lot of concerns that are just a little bit farther out on the horizon. The other things that are happening, the i. P. That we you know, its kind of nebulous. Its almost a black box. There are some things that were agreed to. What do you think that means what is the actual is there meat on the bones for anything with i. P. . In transient issues that we were talking about . China has been working on these for a while, not only i. P. Protection and changing the way cases are settled or adjudicated within china, having the ability of firms to appeal to a higher authority, especially when they feel that their technology is being taken by local governments or government affiliated firms so thats on the thats already on the way another thing is, of course, the new Foreign Investment law that took place in january which raised criminal penalties for stealing technology. So these things were in the works. Phase 2 is going to have much harder items, including industrial subsidies and broader Market Access for american companies, which i think is something that Many Companies are talking a lot about, really need they need to get into the market and play on a level playing zblee field. If we step back and look at this whole incident, will it be a positive in u. S. China relations do you think no, i think theres a couple of things. First, we still have a lot of tariffs on a lot of businesses, small to Medium Enterprises are suffering. They dont have the resources to hire firms to get the exclusions they need. The worldtrading system has been hurt. The u. S. Has said its okay to have huge statedirected purchases to us. Where are the chinese going to put all of these new farm goods and exports . It clearly means theyd have to sort of change where theyre shopping that means that other countries are going to be cut out of these deals. The u. S. Is the leader of the global rulesbased system here just sort of sold it down the pike. So we should not are you in the camp that we should have confronted china differently or not at all i think we should have confronted them differently. This was a brute force we didnt think about where the key issues are, where are the key pressure points. We didnt get anywhere for a long time. I see which camp youre in im not sure i agree with it mohamed, will this be looked back as a positive i think its going to be looked back as a ceasefire that was a shortterm domestic interest politically on both sides. Should we have opened up this whole incident, this whole trade war . Oh, yeah, youve heard me say from day one, absolutely absolutely the only thing i would have done differently is bring europe on have a united front. I think europe shares the same grievances its interesting overnight china and germany have seen an increase in the tension. What happened in the last 20 years, mohamed i think that the u. S. Had an opening. I think where i differ with the professor, and its an important one, i dont think its going to lead to a pickup in Business Investment i think the uncertainty is still out there. What were going to see is simply a repositioning internally politically of both sides to get ready. Steve bannon brought up an interesting point, something i hadnt considered before the idea if usmca passes, would that actually increase Business Investment here in north america . I think so. I think what youre going to see over time is businesses focusing more on production in the u. S. And in north america and to the extent that theyre involved in china youre going to hear this phrase over and over again in china for china yes, base yourself in china to meet the Chinese Markets. For selling there yes this notion that you will base yourself there and feed the rest of the world, that is going to be increasingly fresh. Thank you both. Coming up, a lot more squawk box. Looking to the stars for investment theres still one problem, that is public support. Were going to speak with an astro physicist. Were going to be joined right after the break. And from taking off to being grounded boeing could suspend or halt production of the 737 max and an announcement could come as early as today what it means for investors and the company. It is all straight ahead rhtig here on squawk. What are you doing back there, junior . Since were obviously lost, im rescheduling my Xfinity Customer Service appointment. Ah, relax. I got this. Which gps are you using anyway . A Little Something called instinct. Been using it for years. Yeah, thats what im afraid of. He knows exactly where were going. My whole body is a compass. Oh boy. The my account app makes todays Xfinity Customer Service simple, easy, awesome. Not my thing. Welcome back to squawk. A former nasa engineer turned youtube star is taking on porch pirates this holiday season. Mark robber spent nearly a year to catch doorstep thieves who steal packages outside of shoppers homes. Ive seen this. Take a look at this. It is called the glitter bomb 2. 0. Its a stink bomb and includes a voice countdown and fake police chatter. Now the man who helped design the curiosity rover for the space agency has seen the video go viral it even has a guest cameo from home alones mccally call kin. Hes received hundredsof requests. Those are from people who go around stealing boxes off your porch when you get all of the deliveries at the holidays you have a bunch that you can have hooked up they get a glitter bomb all over their face, stink bomb goes off. Fun to watch the videos, too. Investment in the space industry has taken one giant leap this decade for a look at the future of space and more, lets welcome Neil Degrasse tyson. His new book is called letters from an astro physicist. Thanks for being here. Thanks for having me back what do you think about all of the commercialized private and Public Companies that are now working their way in to fill the jobs that nasa used to have . It should have happened years ago. When we think of space we think of nasa and spacex if you look at the value of hardware and business enabled or protected by space assets, it is vastly greater worldwide than anything weve ever put in nasa. Not ever but in modern times nasa is a small fraction of what is going on in space right now world wide think about gps, which was, of course, a military project entire industries exist only because of that. So thats the future. I mean, its kind of amazing to me, but i will admit it gives me a little bit of pause when you think of all of these private Companies Going into space. It was hard enough to control when it was a few countries sending things up there. How do we control whats happening in space when, you know, its a companys game. Thats why theres regulations. How do you control airplanes and make sure they dont fall out of the sky. Are there enough regulations for space right now . No. Its a little bit of a wild west what happens if you put up a satellite and i put up one and my satellite irritates your satellite . Right i think of a lot of space junk he said thats what he worried about most, space junk would puncture i think thats why aliens havent visited us theyve seen our space junk. Two elements of that. One, so much junk around and the other one is in addition to enabling good things, you enable bad actors. Yes. At what point does regulation react to the enabling of bad actors its hard and thats kind of the point of a space force normally when we think of the branch of the military, you think theres an invading army coming across your borders. Right. But a military force also ought to be protecting our assets, and the larger our assets in space, again, not only the value of the hardware itself but the conversation, then the more you would need such a thing. Space force has been on the table for quite some time. Are you a big proponent of it i dont tell people what to do but i alert them of the values or the the pluses and minuses of it. Theres always been a Space Command within the air force, and that has been there for decades. Weve had spy satellites and things so thats not a new are you surprised that there hasnt been any military action in space, meaning, if you think of the politics of space well, depends what you mean by military action if i have a satellite and you are a bad actor and you put up another satellite that whose Magnetic Field disrupts my operations, thats no, its not warriors fighting each other, but its you interfering with my commerce. What about allowing bad actors to have incredible mapping of places . Just allowing this notion of asymmetric conflict and suddenly the weak force is much stronger because thats been the history of war. You dont think if someone invents a bow and arrow and you dont have one, thats asymmetric advantage. Were not preventing another country from putting up satellites, are we no, unless in our judgment that salt light has the purpose of disrupting our operations and so part of what it is to have free access to space is free access, free undisturbed commerce and the like. So, yeah, all of these all of this matters thats why i mean its kind of a wild west. I think it will shake itself out but it will require International Agreement and cooperation. I want to shift gears to something that i saw that you tweeted about recently where you got into it a little bit with elon musk. You raised the point from a physics perspective there were some questions about what happened with his cyber truck towing the ford f150. Go ahead i think a zillion people saw that video it was impressive. It pulled the f150 backwards while the wheels were spinning, but the bay of the f150 was completely empty if your drive train has no weight over it, then a child could pull it uphill im exaggerating a little, so had the by the way, youve seen suburban people who have f150s who want to shovel your snow they load the back of the truck with piles of snow so that you can have traction. So it was not a fair contest you pointed that out and elon musk responded. Yes, he did oh, youve got it up there whats your relationship with i have a rear engine car so i dont need front wheel drive because i can have snow tires on the back. Right, because the weight of the engine over the drive train. Same phenomenon thats what it is. I could have done your tweet and i dont need a stinking ph. D. I didnt think i needed a ph. D. Either but a lot of people were surprised by it yeah. Neil, i want to talk about your book, letters from an astro physicist. You have lots and lots of people who write to you and ask you questions about space, all kinds of things, you write back to them. Keeping the car analogy, this has been going on under the hood with me and the public for decades. It involves topics that generally am not public on. People ask me about god. They ask me about career choices. They ask me about meaning in life where theyre at some low point. For me, its kind of like a contract i dont give them a wiki answer. I want to stand where they are and have some sensitivity to where theyre coming from. I think most people have never even met a scientist much less claim one as their friend. Do you have time to explain the duality of light. Light wave particle duality . Oh, sure. How can it be both . Because our brains are not wired to think of the duality of anything its why advertising works its a massless particle though yes yes. And if you accelerate it it goes to infinite mass . No. No it only exists at nothing or as the speed of light what im saying, its why advertising works. Is it less filling or is it do you under is it a candy or gum . Do you understand general relativi relativity if you attack it geometrically you can understand it thats a good answer. These are hard things you dont have to understand it, you have to know that it works and then embrace that and move on otherwise you could be time and link contraction those are both so hard to understand. Theyre freaky and you go into the quantum world and thats even more freaky. People ask this. Do you read a brief history of time and understand anything after the first paragraph. I can say this now that hes gone some of that could be explained a little bit more access sibley. You think yeah. All right we have to go. I guess were not going to get to the bottom of these things. Not in the next 30 seconds. Stay curious. Are you an atheist . I count myself as an agnostic i thought you were an atheist. I dont think its mutually exclusive. I think were not in a position to say unequivocally theres a higher power. I never have. If the high power that you have requires that the universe is 6,000 years old, i will say i understand carbon i have it. Neil degrasse tyson, thanks for coming in. Did they find the arc boeing may curb or halt production the arc noahs arc which would have been a total pain think about that check out the futures at this hour up about 60 points dont forget to subscribe to our podcast. Youll get interviews, original content and behind the scenes access look for us on apple podcasts or on your votefari podcast app and subscribe to squawk pod today. But with opportunity comes risk. And to manage this risk, 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. Cme group weveryone, looknk isntat your phones. The design thinking, the digital engineering, security, blockchain, and we will be first to market yes. When we do we launch . Unfortunately, in 2 or 3, hours. Why the delay . Cognizant is helping banks use Digital Technologies at scale to advance speed to market. Still to come on squawk box this morning. Grounded for good . Boeing is taking a hard look at the future of the 737 max jet. A full report straight ahead boy, would that be a turn in this story and then the House Judiciary Committee releasing its full report on the impeachment of the president overnight. We are going to washington live to get the latest details. And then to the top of the hour, the ceo of tool manufacturer snapon joins us with his thoughts on the trade deal with china. Nick punchek will be here, our special guest, right after this. Boeing considering further cuts or suspension of the 737 max and an announcement can come as early as today. Phil lebeau joins us with more stock is getting hit pretty hard, joe. Reporter its a Production Cut or a production stop that will really hit the shares of boeing the board is meeting today this is apreviously scheduled twoday meeting. First day was yesterday. Second day is today. Heres what the board is discussing do they halt altogether, stop production of the 737 max until there is a recertification or do they move to a slower build rate they are going to be more maxrelated charges with either decision the question is how much will those charges be remember, theyve already taken more than 8 billion in costrelated charges in some fashion over the last couple of quarters heres the production rate right now for the 737 max. It was at 2 in 2018. Thats where it was at the beginning of this year it was supposed to go up to 57 at the beginning of 2019 it spent most of 2019 at 42 per month. They have built 450 737 maxes that are built, waiting delivery parked on the tarmac, in parking lots in roenten, washington. Down in san antonio. There comes a point where you say, okay, how do we do we keep buildings these planes or do we shut down production, which has its own costs that are related to that . I mentioned earlier that these guys, boeing have already taken a number of charges. They took a 5. 6 billion charge in the Second Quarter related to 737 max delays and nondelivery of those aircraft. Well, they also took another 2. 7 billion in maxrelated costs in october so there will be further costs incurred whether they cut production and go from, lets say, 42 down to 37 or 32, and there is a point where people say this just doesnt make sense, or if they halt production altogether. By the way, guys, about 12,000 workers are out at that roenten plant in seattle some could go to the everett plant or a few other plants but likely many of them would face some type of furlough, whether its for 45 days or 60 days. Again, that depends in part on what the board decides to do we could get announcement after the bell today or perhaps tomorrow morning phil, thank you for that. Right now want to bring in an analyst voice into this conversation ron ep stestein is here. Hes the Research Analyst joining us to sort of walk through this i want to know what happens to Dennis Muilenburg at this point, ron. So much of this has been about expectations yeah, i think its a good question to ask. Many investors are asking that question boeing has, like you pointed out, set expectations and missed them set expectations and missed them in this case in particular, i think on your very show you had the chairman of boeings board come on and say, you know what, were going to get this airplane back in service by the end of the year he was very confident. The stock rallied on that. Here we are. Looks like the airplane will not be in service by the end of the year, best case possibly the end of february, maybe a little bit later. I think the broad question is when you look at the top of management, not just Dennis Muilenburg, the entire c suite and the board, whats going on here in terms of not communicating well to the Investment Community and also their own customers, right they had to have known several weeks ago when they spoke to you that getting the airplane back into service by december was an unrealistic expectation. If youre right, what does that mean about the credibility of the management of this company . What does it mean Going Forward . Yeah, i mean, its clear, right . Right now in the Investment Community, and i would imagine even in their customer community, management doesnt have a heck of a lot of credibility right now. Its been if you remember when this first happened back in march a slow trickle forward itll be back in a couple of months, itll be back in a couple of months, itll be back in a couple months now here we are with a possible threat of production and we still dont know when you look at the Investment Community, when they think about the boeing stock, probably the most important thing they look at is the Free Cash Flow generation of the company. If you push out 737 production, that has a Material Impact on cash flow. And if they do end up shutting down production, be it for, you know, six weeks, eight weeks, a quarter, two quarters, however long it is, that will have a Material Impact on cash flow i think the board has to come back and think deeply and hard about how theyre communicating, why theyre communicating and some changes. You would want them to halt production given the timing . No. Its another interesting question, right . So theres a balance here. When you look at if they halted production, what exactly would they save, right so many of their suppliers have take or pay contracts. Many of their supplies are contracted that boeing wont change rate unless theyre given at least ninemonth heads up so if they were to halt production and theyre undertake or pay situation like they are with many suppliers, they would still have to take the goods so what would happen here if they halted production is they would have less finished goods inventory and more nonfinished goods inventory. They wouldnt spend some money on some labor but they wouldnt have a bunch of finished airplanes. Its a bit of a head scratcher, right . So unless they were to halt for a long enough period of time, it might not make sense to shut down i think in the Investment Community this would come across as a big surprise. This is seen as sort of the Nuclear Option that something really must be wrong because if you think about boeing financing the working capital required to restore these airplanes, that has been seen as a less expensive option as opposed to slowing down the supply chain because thats very disruptive to the banking process. Hey, ron, phil in chicago has a question for you reporter hey, ron, how are you . You talk about the suppliers lets talk about spirit arrow systems. They keep building at 52 fuselages per month. They did not go down to 42 at some point if there is a complete halt, would you expect a company like that or lets take a look at some of the other engines or other key components, would those suppliers have to say, okay, we cant still do this we have to drop down our production and halt our production and could there be Ripple Effects within the Aerospace Suppliers . There could be. For that to happen things would have to get quite bad. The reason that spirit aero systems continues to produce at 52 is to keep the production process steady manufacturing an airplane is a complicated process with a very complicated supply chain you want to keep it as steady as possible if spirit aero systems were to cut rate, that would be a meaningful sign to myself and the Investment Community that boeing isnt going to bump up for a long period of time. That has to be balanced at spirit building at 52, boeing building airplanes at 42 theres been ten 737 fuselages piling up. Thats 100 fuselages just sitting around, right . Ultimately how many can you keep in storage and how much does it make sense because when you store them, then when you bring them back and you use them, you have to clean them out you have issues of moisture, damage, so on and so forth, right . So the more you change the rate in supply chain, the more disruptive it is for sure, phil, like you said, there is a Ripple Effect that goes out into the supply chain. Ron, before we go, just to put a fine point on it next time we talk to you do you think Dennis Muilenburg is going to be in a job its a speculative question its hard to say im certain theres people at boeing thinking of that all the time. Political way to answer the question happy holidays thanks for joining us this morning. Happy holidays, guys. Thank you. When we come back, the Impeachment Vote of President Trump expected to take place wednesday in the house well get the latest from washington and speak to pollster frank luntz. 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You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. Coming up, pollster frank luntz joins us to discuss the latest from washington as Congress Read yis for an Impeachment Vote and then nick pinchuk joins us, the ceo of snapon tools. It lives here and here on your iphone, and it will save you 6 on Holiday Gifts at apple; like iphone, apple watch, airpods pro and so much more. Apply in as little as a minute, right in the wallet app. Apply in as little as a minute, johnsbut were also a cancer fighting, hiv controlling, joint replacing, and depression relieving company. From the day youre born we never stop taking care of you. [ drathis holiday. Ahhhhh ahhhhh a distant friend returns. Elliott. You came back and while lots of things have changed. Wooooah woah its called the internet. Some things havent. Get ready for a reunion 3 million light years in the making. Woohoo yeah . The House Judiciary Committee, 658 page report was released overnight it outlines two articles of impeachment against President Trump. Abuse of power for withholding aid to ukraine while pressuring the country to investigate political rival joe biden and obstruction of congress for blocking white house staff from testifying about it. Eamon javers joins us for more it feels like the democrats are moving forward with impeachment at a pretty quick pace its 658 pages heres the argument from Judiciary Committee democrats in laying out their case. They write, this is not the first time he has solicited foreign interference in an election, then exposed and attempted to obstruct the resulting investigation. He will almost certainly continue on this course. Democrats arguing they need to protect the 2020 election and thats why theyve got to move forward. Republicans, by contrast, making the case that the democrats havent made their case. Heres the republican response saying its no surprise the allegations shifted from quid pro quo, bribery and extorsion to settle on an undefined abuse of power thats the picture in the house of representatives over in the senate the jockeying has already begun with a vote in the house seen as a foregone conclusion the jockeying beginning in the senate with the question of how are they going to shape a senate trial of President Trump Chuck Schumer sending a letter to Mitch Mcconnell laying out the democrats case for why there should be an expansive trial in the senate including witnesses which is something that they didnt do in the 1999 clinton trial. Theyre saying that they want Mick Mulvaney and john bolton to testify. The democrats do theyd like the trial to begin january 7th. Otherwise they would largely model it on the 1999 clinton trial format Mitch Mcconnell suggesting hes going to work very closely, however, with President Trump. Saying there will be no difference between the president s position and our position as to how to handle this guys, it looks like were headed for a christmas week Impeachment Vote on the president of the United States and then the jockeying over what to do about all of that in the senate when they move forward to the trial phase. Eamon, thank you. Good to see you. Reporter you, too. Lets continue the conversation about this weeks Impeachment Vote were joined by frank luntz. How do you think this plays out in terms of what it means politically for republicans . What it means politically for democrats . I havent seen a single i literally cannot find one person whose opinion has changed over the last two weeks 48 support impeachment, 48 oppose it. Its been that even split for weeks now. The fact that they had weeks and weeks of testimony and hearings on the house side has not moved anyone if you are a trump supporter, you believe hes innocent and this is a sham if you are opposed to donald trump, you want him removed at all costs. And there has not been an impact what we have found is that the interest in the 2020 election, that has increased on both sides. I believe were going to have the highest turnout that americans are going to the polls higher than at any point in the last 50 years. Thats the consequence of this everybody wants to vote in 2020. All right let me ask you about who you think will eventually walk away with the democratic nomination i bring this up because we had a Market Strategist on earlier this morning who said that markets will be fine if its a moderate candidate if its a far left candidate with a lot of different ideas about breaking up Big Companies, about finding different ways to add taxes and a lot of different places, that that would mean bad news for the markets for our viewers who are kind of watching and trying to figure out what to do with their investments, how would you advise them at this point . I have never ducked that question in the months that ive been doing this show and for the first time i cant tell you. Joe biden has remained the frontrunner at about 24, 25 , but as ive told viewers, what really matters is iowa, New Hampshire. The problem is the iowa caucus vote and New Hampshire primary vote are simply too close to call mayor pete who was surging about a month ago has plaid towed. Elizabeth warren who had surged before that has actually fallen back a little bit. Bernie sanders has gained some of his vote. We have essentially a fourperson race right now in both iowa and New Hampshire. So i really dont know at this point. I know that thats not helpful to you, but it is simply too close to call. What happens if a different candidate wins each of the early elections . Im watching to see what happens to bloomberg on super tuesday. Weve talked about this before theres a significant percentage, a majority of democrats who would not vote for a billionaire, but i could see three different candidates winning those first four states and having no money left when you get to super tuesday and if you look at the Democratic Party rules, you have to get this 15 of the vote to get delegates. There is a greater and greater likelihood that youre going to have three or four candidates getting enough delegates, raising enough money that they can stay through super tuesday once again, too close to call. So, frank, i want to go back to what you said earlier about the impeachment process not changing anything on the ground other than getting people to vote the marketplace has brushed off the whole process. From what you say, thats been the correct call so far. Do you see anything in the next few weeks or months that would make the market Pay Attention to this process well, were going to have to see what happens in the senate its going to get loud im actually on a personal level, im concerned about the ranker and what it could do to the institution of the senate. The house is going to vote for impeachment. There is no doubt. 100 there may be two or three democrats that break away, but thats a sure thing. On the senate side it does not look like theres more than one republican, everybody is going to be watching mitt romney to see what he does but it does not look like theres going to be any other republicans who are going to break with the white house and so were going to have status quo. The vote will be taken at some point in january and then we move right into iowa and New Hampshire. Lets listen. Senator Elizabeth Warren actually speaking to john harwood as part of cnbcs speak easy series. Heres what she said about taxing billionaires. Government listens disproportionately to rich guys who dont want to pay taxes. Remember, for everybody who says that this government is caught in gridlock. Remember that when the question was cutting taxes for the richest and for the biggest corporations, it took republicans about five weeks in order to call everybody in and do a trillion and a half dollars in tax breaks, tax breaks that went mostly to those at the top. Frank, i know you said that she has dropped in the polls, that she doesnt have the same standing what happened . Which of her proposals was it that you think actually caused her some of this pain . Thats a good question, and its very clear. Medicare for all that the public realized that this was going to be so expensive that theyre probably going to lose their doctor, lose their hospital, lose their private insurance. Their taxes are going to go up they dont know what kind of care theyre going to get or who theyre going to get it from this is a real problem for her even among democrats there is growing doubt that the cost of her proposals are so expensive with already were facing a trillions of dollars in debt and a deficit thats a trillion dollars. The public is so nervous at this point that she has dropped back and her votes went to mayor pete however, everyone seems to have frozen in place and this debate on thursday in california, if it does happen, and you know that the unions have threatened to boycott the debate if the debate does happen, this could be a deciding moment for the democrats in the pursuit of the nomination. You thought, frank, that the i dont know what you call what Elizabeth Warren was just talking about i have some problems with her analysis of just calling corporations fat cats. I understand theres ceos and Everything Else, but, you know, when you do a even democrats thought we should lower corporate taxes to get more in line with the rest of the world so they can compete and jobs and flourish, et cetera, et cetera she just writes it off to, you know, rich getting richer. You thought that that was resonating and would resonate in a big way. Now you say shes fallen because of the medicare for all. Are you sure thats still going to resonate, just the politics of envy and just soak the get the fat cat soak the rich or soak the rich thats going to play thats still playing well . The warren on success, which is what ive heard people call it her challenge is that shes gone too far, that she started to cost out these proposals and even among democrats, there is some concern that shes going to lose the independents, shes going to lose the swing votes because shes simply taxing too much, spending too much and its the more we learn about the details of her proposals the tougher its going to be. Frank, thank you. Good to see you. Coming up when we return, snapon ceo nick pinchuk is going to talk to us about the trade deal and what it means about manufacturing and agricultural jobs. Check out the future we are on the green. Ow 72 points, s p 500 looking topen a little more than 16 points right now were back in a moment when i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. Phase one done the top u. S. Trade negotiator saying the first phase is settled. What does that mean for american manufacturers the ceo of snapon joins us live for reaction to the deal. And boeing reportedly looking for halting production of the 737 max well look at the fallout for investors, suppliers and the public as the final hour of squawk box begins right now. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square. Im joe kernen along with becky quick and Andrew Ross Sorkin our guest is Mohamed El Erian. All of these averages close to either at new highs or close to them treasury yields this morning, as you might imagine with the trade deal done, theyve been moving up a little bit. Well take a quick look at the tenyear you can see about 1. 85 this morning. Here are some stories investors are going to be talking about today. Boeing is considering whether to halt or cut production of the 737 max jet. That is according to multiple reports. Boeing issued a statement in response to the story saying it would continue to assess production decision based on timing and conditions of a return to service for the max. Were going to talk much more about boeing later this hour as joe mentioned, that stock is down by 4 and that is adding pressure to the dow. Also this story to tell you about, International Flavors and fragrances will be combined with duponts Nutrition Business. They will own a little more than 55 of the share p company with iff holding 5 of the rest iff shares down 5 on the news but dupont up by 4 . And ceo and of iff, the executive their man of dupont are going to be on squawk on the street. Thats a first on cnbc interview. Also, democratic president ial candidate Elizabeth Warren going after the influence of billionaires in the American Government heres what she told john harwood as part of cnbcs speak easy series. Youd have to ask them, but i will say this, a lot of them just dont want to pay the taxes. You know, and thats part of the problem weve got here, is government listens disproportionately to rich guys who dont want to pay taxes. Remember, for everybody who says that this government is caught in gridlock, remember that when the question was cutting taxes for the richest and biggest corporations its a trillion and a half dollars in tax breaks, tax breaks that went mostly to those at the top the speak easy interview here at cnbc. Com. The top american trade negotiator says the first phase of a u. S. China trade deal is done and in the books. Some questions remain on the details of the agreement as well as what may come next when you get to Kayla Tausche this morning. The immediate aftermath, theyre working to finalize the legal text and get a full text to sign in january Robert Lighthizer said the two sides hope to have ministers sign the deal the first week in january in washington but its not set yet. We dont have a date, no. What we have to do is get the final translations worked out, the formalities. Were going to sign this agreement. Ill tell you this the second phase two is going to be determined by how we implement phase one. It really is a remarkable agreement but its not going to solve all the problems. Reporter at least two issues appear still unsettled first, the u. S. Says china will purchase 200 billion in its goods including up to 50 billion in goods from farms. China says it will buy on a market basis second, the u. S. Says there is no commitment to removing additional tariffs after the deal is signed china says the white house committed to removing them in stages andrew, still a couple of thorny issues that might be difficult in this phase. Well see what happens in the intervening weeks. Kayla, thank youfor that. Well talk about the first phase of this trade deal and what it means in the business. Joining us is somebody who is impacted by all of this. The chairman and ceo of snapon is nick pinchuk. Thanks for being here. Pleasure to be here whats your take away thus far . Well, i think its positive its kind of like a commercial deal it progressed like some of us expected october 1st the celebration was over october 11th the president announced there was a phase one. Took a couple of months to do the deal and it seems encouraging. National association of manufacturers says positive things about it. There are these elements that seem to still have a question mark next to them. Sure. Im thinking this agricultural buy. Yes. 50 billion is it 50 billion. It was 24 billion last year. Does it happen at all, right . Thats true. These are sort of real questions and my question to you is how does that Impact Business well, i think theres a couple of things i think one is the specifics of the tariffs still have to be understood you know, theres a pull back in tariffs and i think thats positive for business. Certainly lists 4b which is the reduction in 120 from 15 to 7 is nother positive. And theres been i think companies overtime that have been adjusting their supply chain. After you heard this on friday, what phone calls did you make what did you say about this . Anything i didnt make any phone calls because we werent that troubled by the tariffs necessarily from our perspective, we werent necessarily troubled by the tariffs. I did talk to the National Association of manufacturers who was ecstatic about it. Their membership is very positive its like this, i think. You could have looked at the progress of the negotiations and you could have said some people were saying that this is going to be a permanent dislocation between china and the United States. Right. And the stock prices and many of the forecasts for companies are based on being able to participate in that market this kind of says, i think, number one, were cooling down on the tariffs and the chinese in the south China Morning post, the straits times, they talked about the chinese acknowledge that theyre talking about i. P. , trade secrets, things like patten linkage that are positive in terms of creatingan even Playing Field which is what the manufacturers always want. Nick, let me ask to be, if you could, a little bit more precise. Theres two impacts. What it does to prices and profitability in the short term and secondly how it fundamentally changes business behavior. Yes. Do you believe the positive reaction of business that you refer to will mean that people will now invest more that the uncertainty has been lifted or are they going to continue waiting and take the benefits on the price hike lifted is a binary statement, right . I think this makes it more positive for manufacturing. Will they change their behavior i think they will i think each time you evaluate an investment you look at the Current Situation, and i would say the Current Situation looks like were making progress the administration said, you know, were going to were going to divorce commercial activity in the market with strategic activity i think this agreement really demonstrates that. The administration censored the china over hong kong, a strategic action associated with ideology our idea about the rights of the individual, rights of individuals we protect them, but at the same time we did a commercial deal, phase one deal was agreed to, and i think this in itself ideologically is very important. I do believe the fact that the administrations able to do that is a very encouraging sign to business men and, therefore, their confidence and the ability to access the Chinese Market and consider it a source or a place to invest has increased over this certainly the National Association of manufacturers whos been involved with this deal from the beginning says so. They called it a watershed or a victory for manufacturing. You dont think i dont know if you read, there was a speech that hank paulsen gave two weeks ago. He said, even if a deal was reached, you were you probably saw the speech. You were actually there. I was not there but i saw it. Effectively what he was saying was even if a deal is reached and he was, by the way, praising the deal on friday in some comments, that the sort of larger structural war between the u. S. And china would continue and may even get worse. Yes, but thats exactly the point about this deal, i think is that we can make progress commercially, open the market. You said there was a better opportunity, bigger opportunity to invest in china directly. What i meant was is that your feelings about china, your confidence about investing in china i think goes up based on this deal. I think there could be no other conclusion i mean, the question and debate is how far are we going . How much does that confidence the other conclusion is in both sides its shortterm interest to call a truce not in the longer term interests, in the shortterm interests and that truce is going to be used for reinforcing resilience or decoupling as opposed to a stepping stone for something more comprehensive thats the argument. Yes yes. If you assume that you cant dekud decouple commercial interests with longterm ideological issues were never going to make china america. When they lived on farms 50 people lived in the same village using the same water in america we lived individually on our farms we believe the rights of the individual are ascended. They believe the rights of the community are ascended therefore, were never going to make them the same their economy is based on subsidies. It takes them time to move away. I view this as a positive. I believe the National Association of manufacturers does as well manufacturers will look at this and say, well, maybe the tariffs arent favorable for me. If you make power tools in the United States, this isnt necessarily as positive as it might have been. It would have been better to put tariffs on power tools from china but in general i think its viewed as a positive because of the underpinning of plans and stock pliess in america for Manufacturing Companies i think are based to some extent on companies in the u. S. s ability to access those 1. 2 billion you seem skeptical. I totally am. I agree with him on the short term, i dont agree on the longer term. In november were going to be back on the trade war. Trade war, investment war, currency war. You may be right. I just came back to china. Ive been to china twice since october. The censor of the chinese over hong kong did not go down well with the government or with the people on the street in china or in singapore there is that possibility for dislocation of the future. You could be right, i could be right. I think im right. Nick, thank you. Sure. Appreciate it happy holidays. Where some of the biggest names in tech are headed in 2020 possibly and the story lines that will drive them there were talking about apple, netflix and more luke ventures gene muenster joins us on set and with insights that could make a pofoo. Ence for your rtli stay tuned, youre watching squawk box on cnbc what are you doing back there, junior . Since were obviously lost, im rescheduling my Xfinity Customer Service appointment. Ah, relax. I got this. Which gps are you using anyway . A Little Something called instinct. Been using it for years. Yeah, thats what im afraid of. He knows exactly where were going. My whole body is a compass. Oh boy. The my account app makes todays Xfinity Customer Service simple, easy, awesome. Not my thing. Phase one. Boost the stock. This morning, we can do it in 2020 gene muenster, founder and managing partner at luke ventures do you have a price target in mind for next year for apple yeah, i think its 350 to 400. I think what were seeing here is a shift away from the old way, which we consider the disconnected way to think of apple versus what i think is a more prudent and realistic way to quickly talk about that, those who believe that this is 275 or below group, which is the majority of analysts are disconnected with the reality that hardware businesses in combination with Software Businesses actually are great longterm reliable growth stories. The reason why people have flawed assumptions that this hardware businesses are one year away from demise is because of what happened 12 years ago with rim. That collapse i think has really shooken investors to the core. I was talking to a buy side person on friday and they were reminiscing about rims shortcomings so ultimately if as you look at the most important benchmark this is where i come down to this, the most important benchmark for success is ultimately gap earnings. Apple produces more gap earnings with a hardware and Software Business combination than the entire faang combined. If you assume, therefore, they should get lets give it a Facebook Like multiple which is fair market value. Its a 371 stock. I recognize thats out of consensus, but i think that is realistic that shares should trade with that multiple. It shouldnt just be about the hand sets or how many theyre selling or all the people who say the reason that you shouldnt be buying into this stock is because the handset sales are coming down or not as important to repeat that doesnt tell the story . Its about gap earnings and wevegotten away from that but ultimately and gap earnings seem to be powered by Revenue Growth if you can build a case or if i can build a case that this can grow at 10 Revenue Growth and grow earnings at 15 , i think that that deserves at least a multiple consistent with its peer groups. Maybe the peer groups are over valued. The earning got driven by the fact that apple can charge the pricing and theres a mystique to it. As they expand in hardware and that becomes more of the driver, do you think they can maintain that and they will continue to pay so much for his yes. Do you think they can continue to do so . The history again, im basing this on 12 years of history is that they can continue to maintain or increase pricing theyre going to play around with some of the pricing with five different phone models. The first one will be a slightly different style. I think whats most important is this were shifting away from just a simply our mobile is phone only to different devices whether its hearables, air pods and apple is the best company to bring that together and that should drive some form of a premium pricing. The hardware piece i understand my question is as weve been talking a lot about antitrust issues and Elizabeth Warren and others on tech across the board, you know, what risks do you think really apple faces in terms of its Services Business the apps business. To the extent that somebody will say to them or that theyll even feel pressure to try to get ahead of it to say, you know, we cant advantage our own services over other Peoples Services maybe instead of taking a 30 cut on some of the apple pay product weregoing to take it down and youre already starting to see that for certain of people who are layered on top of that what do you think that will do its a risk 18 growing at 20 thats part of the reason why im optimistic if you are going to say the probability of whats going to happen, even though its in a risk, its a probability. Next stop, 2 trillion yes im with you. I think it is a low risk but i also think that they may have to proactively change some of their own approach to try to head off that risk and, therefore, that would might take down the ability to grow that services piece as quickly yeah. And around the margins, if you had taken the worst Case Scenario, which i think just as analysts we need to i always kind of think about all the cases here you know, that could diminish some of that Services Growth i think its unlikely but i dont think it changes the underlying core. No cars, no tvs, no nothing still the same stuff Pretty Amazing 2 trillion valuation yeah. Just quickly on the same stuff just thinking about watch here they dont break it up but you can cut back into the numbers. Its about 3 of total iphone owners own a watch. Like stealth, thats the thing. Its the same stuff but its not the same stuff never did buy ear pods, all of that stuff thats the magic. But its all sort of incremental. I do have one ask for investors. Being an analyst one ask one ask. Why do we continue to obsess about this is simply a Hardware Company that should trade at historical range of Hardware Companies . Why cant we think a little bit bigger about this in the context of this should grow at call it 10 . That multiple forever. That flawed assumption, with all due respect, doesnt mean that flawed view doesnt mean that assumption is true, that it should always trade at that. By the way, all of this stuff, the additional stuff that you bring into it locks you into the ecosystem. It makes you so that youre buying a different phone im completely locked in yeah. Theres 900 Million People that are locked and thats growing despite the fact that iphone sales dipped this year. They should get a sports book you should see lock you up even more. Lock me up even more. Do all of my betting the vig is killing me. But, i mean, im looking for ancillary stuff. Its not going to be a car flying car flying electric car . Flying electric flame throwing car. The other stuff im always apprehensive my prophecy that tv was incorrect. The end of the day is that there are innovations still alive at apple. Take over the content world and entertainment . I think theres something bigger out there around ai and im reluctant to put a stake in the ground i just want to say, im up to 8 of the morning show and it is so good and so much better than all those terrible reviews out there. If i subject myself to what looks like awful to me and i dont feel that way, im going to be mad at you. Get into t. That would change things. A lot more on squawk when we come back a closer look at the u. Smpu. S. A trade deal will manufacturers and consumers feel some relief in the months ahead . Plus boeing thinking of halting the max production what it means and well talk about it squawk returns in a moment were going to take a quick look at the shares of utility pg e the bankruptcy plan reorganization has been rejected by gavin knnewsome. They are looking to exit bankruptcy and pay billions of dollars to victims of wildfires. When we return, what would a complete production halt of boeings 737 max mean for the company, for investors, for airlines and the flying public boeing is reportedly thinking about it theyre in the midst of a Board Meeting right now. We have an analyst waiting to weigh in on the potential callout next stay tuned, yoare tcngu wahi stay tuned, yoare tcngu wahi squawk box next on cnbc. man we weave security into their business. second man virtualize their operations. woman and build ai customer experiences. second woman we also keep them ready for the next big opportunity. Like 5g. Almost all of the fortune 500 partner with us. woman when it comes to digital transformation. Verizon keeps business ready. Lower carbs. Lower calories. Higher expectations. The light beer youve been waiting for has arrived. Corona premier. Has arrived. Welcome back to squawk box. News in from cnbcs Parent Company comcast. The Company Making it official that Nbc Universal ceo steve burke is going to be retiring in august it had first been reported on friday some Additional Details this morning. Jeff shell will assume the ceo role hell start that role on january 1st. Reporting to burke will be moving to role of chairman a new development there. The perfect bosses weve known steve burke for quite some time. Im sorry to see him leaving but excited for jeff shell as well. Boeing is reportedly considering cutting output of the 737 max again or suspending production of the jet. Phil lebeau joins us now with this story good morning again reporter outright suspension of production as im talking with people in the company that seems like a more likely option if they do make some kind of a production decision so the two choices are or three, really, leave it as it is at 42 per month or do you slow down production or do you out and out halt it for 5 days, 60 days, however long that is the most likely option to change the current production rate the board may pause the 737 production they are meeting today and they met yesterday. This was a regularly scheduled twoday meeting of the board heres where the monthly production rate is at. Its 42 per month. Once they lowered it back in april. We put 57 in there because that was the plan originally if none of this had happened, they were originally going to be at 57 per month for most of 2019 now they are also considering that when they ramp up production eventually, eventually when this is recertified and they have to start making up for lost production over the last ten months that theyre going to go at a slower rate in 2020 and then into 2021 this company has incurred more than 8 billion in maxrelated costs. Remember, there was a 5. 9 billion charge that happened back in the Second Quarter. They took a greater cost charge in october or maybe not a whole new charge they said its going to be another 2. 7 billion. By the way, this doesnt change implications for boeing. Look at aero they make the fuse is he larges for boeing its down but if there is a Production Cut or a halt, an outright halt in production, that will also have an impact on Spirit Aerosystems and the entire supply chain that boeing uses for the 737 max guys, back to you. Phil, thank you very much joining us is carter copeland. He is Founding Partner at Melius Research he has a buy rating at boeing at 521 price target. Do you think about that at all today, carter, in terms of this latest news . Does that change your mind about the price target or whether youre telling people to buy ultimately, becky, what matters is longer term what happens with the 737 when you get back to return to normalcy there is a point where youve got somewhere between 12, 13, 14 billion worth of airplanes sitting on the tarmac. At this point there is a Tipping Point where you consider halting production so i think this is a natural evaluation the more the return to Service Assumption slips to the right however, at some point you get that return to service, you ramp back up and you get an earnings and cash flow profile out on the horizon that ultimately will be what the stock is priced on. So, you know, this news, what you evaluate, is there anything permanent in terms of the impact on the productivity of the work force and in the factory and that will be left to evaluate so as we think about what the company can ultimately earn, that will influence price targets but thats a good ways off. You know, right now everyones focused on the short term. Carter, you have a 521 price target is that in the next 12 months . 24. In the next 24 months okay yeah. So you are talking about a longer term. Because i think what weve been hearing for a while and what the faa administrator drove home last week on the program here when he talked about how theyre going to be on their own time line it doesnt matter to them what boeing would like to see happen. I think theyre much less focused on the fallout of boeing and the suppliers and much more concerned about the safety and making sure this is something that other regulators around the globe can follow and feel confident in their decision. I think thats right. Look, i think what the market is going to do is say when is the first year of lets call it normalized earnings and Free Cash Flow. Thats not 2020, not 2021, the market is settling on 2022 as that first period. What is the number out there i think a decent set of assumptions is going to get you in the 31, 32 a share of Free Cash Flow. On a relative Free Cash Flow that will get you north of 500 bucks. The question is are there lingering impacts that reduce it by 1 or 2 . Thats where the debate has to shift. Ultimately 12 months from now well be firmly focused on those sorts of numbers, not what were the nonrecurring costs from halting production. Given how far boeing is from the first desk, they are so deep in the fourth or fifth as to what to do with the 737 max. Question number one, is in this period to what extent do clients start switching away to boeing in favor of airbus question number two, phil referred to the longer term impact on the suppliers. Can you talk to the longer term impacts on the suppliers and the workers . Yeah. So question one, you cant switch so airbus is struggling to deliver, you know, the planes they have on order so the industry is incredibly capacity constrained to the extent they dont deliver the airplanes, customers arent going to have that lift. Both manufacturers are sold out for a long time. There isnt an ability to switch like you find in so many other markets, which is why boeing stock is where it is and not down more, because of this industry structure in terms of the suppliers, you know, phil mentioned, you know, Spirit Aerosystems theyre more 737 than boeing is 737. Theyre going to get impacted. The ges of the world that makes the engines solely for the 737s will be impacted the same calculations will happen which is when i furlough employees in a production halt, how many of those people do i lose in a tight labor market whats the impact when i need to ramp back up on productivity there will be some impact whether thats 100 basis points of profitability or 300 basis points of profitability. Thats kind of what you talk about. Thats not catastrophic but it is an impact for some of those firms that are struggling, that will have an impact on the whole profitability. Carter, thank you for joining us today again, i want to point out to the viewers at home that 521 price target is a 24 month price target which makes it look a lot more reasonable. Thanks for coming on. 13 points from boeing is equal to 90 dow points. 90 plus 80, the dow would be up 170 so the other 29, we would be up by 27. Thats fair if you look at the s p 500 which is the futures there are indicated up significantly. 17 points which is a much bigger percentage. Meantime, want to get back to one of our top stories that is the phase one trade deal between the u. S. And china specific industries likely to feel some relief from the agreement, but what about the broader u. S. Economy thats the question of the morning. Steve liesman is here with the answer of the morning. Some answers. Wall street forecasters giving the trade deal mixed reviews over the weekend applauding it and criticizing it for lacking detail and yawning at it for already being perhaps priced in. Jpmorgan writes Global Growth is still slowing but the case for rebound is building. Its the removal of the threat for further u. S. Tariff hikes and an escalation of the conflict the question is whether this deal will lessen the uncertainty of Business Executives that is partly to blame of capital expending. The Business Roundtable ceo Economic Outlook continued to decline. Its given up a lot of gains meanwhile, the economy has to digest the impact of the tariffs that remain. Obvious for the writes the deal lacks in substance and features only a minor tariff roll back leaving duties on two third of our imports from china the macro effects are negligible wont prevent gdp from falling below 20 wells fargo said the up side may be limited i would add this the market gets some trade improvement and the trade war insurance fed rate cuts on top of all of that, and those two may not have been anticipated by the market the idea that the rate cuts would lower fed funds rate. Steve, thank you. Lets get some thoughts from our guest host, Mohamed El Erian there seems to be confusion between what beijing thinks and when the roll backs are going to come and what the u. S. Administration said on that point. Its hard to figure out what the overall impact will mean for the economy over the course of the next year. Yeah, i think what it means is short term for the economy, lifted somewhat in uncertainty this is a market thats going to continue to be driven by liquidity. Weve had the biggest relaxation of financial conditions since 2009 thats an enormous statement and thats why the markets doing so well and has been so constructive. Just in terms of how the fed has taken down rates not just the fed, around the world. Weve had rate cuts around the world and weve had massive injections of liquidity by the fed. They dont want us to call it qe 2 but it has that impact i want to ask steve something. We so far have assumed that Business Investment is an issue but consumption is fine. Right. Over the last five days yeah, we had a little had three indicators that have suggested that maybe, maybe we should leave it at that there are partial indicators to what extent are you starting to look at the household sector and asking yourself, is it as solid as mohamed has assumed for such a long time im definitely asking myself the question, but when i look at the things that under pin the consumption, job growth, wage growth, sentiment, those three things are the three things weve got to make that forecast, they still look pretty good. Against the jobless claims . Hold on, hold on, hold on i dismissed jobless claims then we have retail sales. Thats the and then over the weekend we got the extent of discounting by retailers which has continued to be much higher otherwise, they believe they cant sell their goods yeah. So to what extent are we starting to see something that we really should have on the radar screen what happened last year was a huge surprise. November, december really upset. My bet is that the lousy november numbers are made up for in december because of the short season and the seasonal adjustments. I dont think the consumer is going to do it to me twice, which is two upsets in a row i still remain relatively optimistic about average to above average holiday selling season the idea that the discount is going on, i cant really say what to do with that i think the pieces are in place for a decent holiday by the way, mohamed, christmas i think is not what it used to be. Theres all kinds of buying that goes on all through the year we have a problem right now dealing with prime day in july, right . That upsets august you also had purchases pulled forward we think because of tariffs. So i think over time youre still going to have an aboveaverage consumption if we can get Business Investment back perhaps then we can do somewhat above potential growth which im hoping for the second half of 2020. Definitely bernstein, he got me thinking. What are the tips . Have you seen anything, anything at all that worries you inflation wise i think youre going to have a snap back in some of the places where you had good comps. Youll have a little bit higher inflation. I am not worried about inflation. Is anybody . Ill tell you who wore rigs about inflation. If europe comes back europe to me is the unrecognized swing factor on u. S. Growth, fed policy and inflation if europe were to come back and you were to have aboveaverage numbers in europe, then you would Start Talking about a fed reversal, higher that may be part of bernsteins forecast hes coming on and part of his thing, all of this accommodation, 3. 5 unemployment, nobody talking about it. It might be, joe, that theres an easy, inexpensive hedge to be bought in which case, you know, you could buy the a lot of people are buying fixed. You could buy it. I dont know volker . Makes us all remember what he did and how long can you kill it forever . I think i think you can. Im looking at what the outlook is for the fed and we dont even have a rate cut built in for the second half of july now. All right thank you, steve. Thanks, steve coming up, here we go, top stocks making some moves ahead of the opening bell. Only two full trading weeks remain before wall street closes the books on 2019. Well talk about what kind of gains and losses are possible. Heres a reminder, dont forget to subscribe to squawk pod, interviews, behind the scenes access get it wherever you get your podcast. It might be better because its only audio you dont have to deal with any of the other tnghis. Stay tuned, squawk box will be right back less than an hour to go before the opening bell on wall street dom chu joins us he has a look at the stock biggest movers what can you tell us lets kick things off with a couple of dow components Goldman Sachs getting a boost alongside the rest of the Broader Market the 1 plus gain, 5 shares of premarket volume is being helped by analysts at citigroup. Theyve upgraded goldman to buy. They have a risk reward scenario for brokers given their limited level exposure to Interest Rate and credit risk. They could see more of an up side if the fed keeps it in place. Those shares getting a help here we have fellow dow component United Health group which is up 1. 5 now roughly 3,000 shares of premarket volume. Health insurance and managed care getting put on Goldman Sachss conviction list. They have more confidence in the near and longterm outlooks. They have Medicare Advantage markets and slightly discounted market valuation driven by uncertainty around the 2020 elections. Those shares going to help out as well. Then well end on news shares of ww are higher by around 5 premarket and 10 volume the Company Formerly known as Weight Watchers says they will extend their deal with media mogul oprah winfrey. She is already one of the biggest shareholders, joe, in ww ill send it back over to you. Dom, thanks. For a deeper look at the markets, lets bring in the afore mentioned richard bernstein. Ceo and cio of richard fm bernstein. You needed a middle name, i gave you one. Everybody knows it we just had one of our previous guests talk about record profits. Yeah. Next year you still are in the camp that there is at least not a zero chance of a profit recession for next year. Why . Correct i think theres its a whole cocktail of events i think when people talk about record profits, theyre talking about the dollar value of profits and theyre missing that the rate of change has been slowing all year even some of the companies youve talked about this morning earlier on on the show, yeah, profits are slowing quite dra dramatical dramatically people have kind of missed that. I think theres a cocktail of events that could cause a profit recession next year, whether its rising wages, whether its continuation of tariffs, whether its the lack of Pricing Power all these different issues i think thats the issue of Profit Growth kind of interesting i was thinking your inflation angst seemed to be incongruent with the profit recession unless the profit recession is caused by margins from higher wages. Exactly you could have higher inflation and lower profits. Exactly do you think ive got that right . Pretty much, joe. Very good. I dont know if we okay im thinking they seem mutually exclusive but theyre not. I came up with that myself. The question is, as Profit Growth turns negative, the Companies Keep eating all the costs and the odds are they dont, they stay laying people off, they start cutting back on wages, there is all kinds of things going one thing that people cant believe that would happen would be that they start raising prices and there has been Company Reports this quarter that have come out or last quarter that came out, where companies started talking about returning of Pricing Power it wasnt a lot of companies, it wasnt widespread, but it started to happen. And i think thats, you know, if you think about tariffs, you think about wage costs, the input prices going up, eventually thats whats going to happen. You just squeeze the corporate sector and they lay everybody off. And the consensus, no doubt as you point out, it is, like, a pin drop when you mention inflation. Everybody is on the same side i think there is two huge consensus views right now, one is that the consumer is healthy and nothing will stop that and number two, there is never going to be inflation again. And if you think what is the contrary there, it is a little more inflation, the consumer starts getting heard thats so im in the consensus of we need to not worry about inflation now, okay, it is not because i dont think wage costs are going to go up, theyre going to go up if you look at the supply side of the national and Global Economy, most companies, not all, will find it very hard to pass on that to higher prices. Absolutely. I think, you know, mohammed, youre right, thats the cap on inflation for many years now has been globalization i would actually argue to joe is going to love this, bearish here for the next 15 seconds, i think we have seen the peak in globalization and i think in the next five to ten years we will see globalization contract im with you on that. But to say that thats going to lead to shortterm inflation let me clarify. I would say not inflation like 4 , 5 inflation, but could it be higher than people think . I think thats a by how much by how much . If people are expecting two, what if it is 2. 5 or 3 that wouldnt be a lot of inflation. Because of the end of globalization because everybody is going to go back to manufacturing on their own shores and not looking for us, it is a very unproductive economy here in the United States, that means inflation here we just dont make stuff. Right it is good news for the jobs front. It could be it could be, right but you could have where wages go up, prices go up, purchasing power may not change that dramatically. In your mind anything that diminishes globalization is in your mind, i would view, bearishly. Im not i do view it there is certain pockets that are very, very it is great for. If youre buying small domestic companies, that could be very bullish over the next decade if youre buying Raw Materials here in the United States, that might be very bullish. It may not be bullish for, say, the consumer, where, you know if you think about everything that were buying, you know, none of it is made here. So thats a big issue. So your big call, in your notes, is that 2020 we dont have gains as big as 2019. Youre sticking your neck ut. Really sticking my neck out, yes. Dont do 25 , thats still a wide what do you think we can i think it will be just single digits. That says something. Up would be up would be good up is not down, exactly. I dont think were benchmark weight equities, not under our desk in the fetal position i think thats an important differentiation. But i think what is interesting is that people are getting more and more and more bullish. Late cycles are dominated by momentum, where people get more bullish, because the market is going up and then they find reasons why the market is going up and they react accordingly. That should be a warning sign to everybody, momentum is driving, starting to drive sentiment. Richard bernstein, you could be any one of 500,000 in new york probably or exactly. Your parents just didnt figure that i love living in anonymity. You do . Yeah. Except for the f. Part. All right. Down to the new york Stock Exchange, jim cramer joins us now, really only one topic, a lot of topics, but the one topping i want topi i want to talk about is boeing what do you do this is the scenario you most didnt want. I think it is the scenario that says that 2020 is in question. So i think that you have to with the stock barely down for the year, it is okay to exit it, it is no sin i think you can revisit it at a lower level. I genuinely believe that boeing is going to come out of this, just a matter of time. The time frame got pushed back to more realistic level by boeing that other people are expecting. So the decline seems reasonable. Again, i boeing is a Great American manufacturer, i know theyll pull out of this the stock cant just stay here i think the stock can go lower how much lower . You know this is one that i think is reasonable that you go to 300 we need more clarification about cash flow. And what the cash flow looks like without this kind of production i also worry about the entire gdp and whether this hurts gdp a lot of Companies Involved with making the max so you can say, listen this was just a foregone conclusion i know that there was a lot of hope in the stock because it was still up for the year. It is a big blow but it is also a blow that i think that boeing was late to acknowledge. We got to go, knock gone effects. Ge would tell you, they need this i dont want to give up on ge. They got so many other good things going. Jim, see you in a couple of minutes. Rebongs youll be telli u mo aut your views on that and more etf . Dont just track an index, help me meet a clients need. Is the fund built to sell or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. And when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk want to thank our guest host, Mohamed Elerian great having you here. Thank you thank you for joining us. Come back soon i will. Okay. Promise, well hold you to that. The dow futures indicated up by triple digits even with boeing make sure you tune in to squawk on the street to see it all next bye. Every little step i take you will be there good monday morning, welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the new york Stock Exchange. Futures are solid despite the notable drag from boeing this morning, china phase one, usmca, brexit and flash pmis that mostly disappoint. Uk and france up empire was in line road map begins with boeing under pressure shares down nearly 4 ahead of the bell as the compan