Transcripts For CNBC Squawk Alley 20170109

Good monday morning. Welcome to squawk alley. Joining us here, jon fortt, myself, mike san tolo. Well get to kayla tausche. The trump rally rolling on, the dow about a third of a point off 20k friday afternoon but reversing gains this morning. Now about 65 points away. Joining us to talk about that, cnbc senior markets common tator mike santoli and guys, good morning. Michael, got a nice postup, arguing that if the rally were truly about trump policies being enacted, this would have stopped working a while ago. Yeah, and in fact, in some measures, it has stopped working. Looking at the past month, you had about a fourweek rush when it was the obvious trump trades working and driving the rally. Since about middecember, youve seen those things actually lag a bit, right . So, you had bank stocks, heavy industrials, all thats lagged. The tech stocks everybody thought would be disadvantaged have been leading the way here. So to me, if you thought policy was a reason to be bullish in 2017, its not enough. And i think the good news is the markets telling you theres more to it, which is an earnings rebound and a Corporate Bond market that remains incredibly strong. So i think theres a little bit for both sides in this market that just kind of stalled here near the highs. Samir, do you agree its a good thing, maybe not all the eggs are in one basket . Yeah, we would agree. We said for some time this is not policydriven or trumpdriven. We saw economic surprises starting to get better in late october, early november. Earnings started to rebound from the kind of down swing that we saw in 2014 and 2015. In our opinion, those tend to be the biggest longterm drivers of stock prices. And the fact that theyre both turning positive and improving is really whats driving these markets. Mike, then how much do we need to focus on earnings coming up in a couple of weeks, given, i mean, we see some headlines on retail that are not so promising, the limited closing brickandmortar stores, for example. But then at the same time, tech largely continues to roll on. There could be some positives there. Yeah. I mean, the answer in short to your question, jon, is you have to focus a lot on earnings for the Fourth Quarter and the guidance. I think reading a little bit of the clues, you see that the estimates were not cut very much for the Fourth Quarter in november and december. That tends to mean that the numbers are probably kind of in the bag. And then the question is what do Companies Say about guidance . Because were expecting 12 . If you look at the published forecasts, 12 earnings for the s p 500 for this year. Now, its back end loaded. Over the course of a year, that always gets whittled down. So if you get 8 year over year, is that enough . Is the dollar going to get too strong . Will we hear more about that . Yes, the dollar is at a high but on a yearonyear basis is less now than it was a year ago, so maybe not much of a headwind. Sameer, it will be telling to hear the commentary that starts coming out of the companies as they report earnings, especially with regard to their international business. Last week, Morgan Stanley had a note out about whether the administration tilts toward protectionist policies and what effect that would have on gdp. And it concluded that it would be a negative effect on gdp because of the fact that so much of the business in the United States is export driven. Do you think that has potential to be a fly in the ointment here . If youre referring to trade policies possibly getting a little bit more contentious, then absolutely. You know, almost all the studies would suggest that global trade is very good for corporate profits. And we can get into as to whether the dollars a helper or a hurt. But if you were to see a slowdown in overall global trade, it would definitely be a headwind for corporate profits. The part thats tough to necessarily handicap is how the psychology works here. So, if the psychology of investors is sort of fixated on what are we going to get from washington, when are we going to get it, it reminds me of when we were in this feddriven market, where we kind of knew the fed had the markets back, we kind of knew the fed was going to be supportive, but you had periodic scares. They were going to go too fast or too slow or Something Like that. So, i think you can get policydriven scares based on headlin headlines, but not necessarily really changing the substance of what should matter for the markets in the entire year. But is it your guess that, at least people who are graduating to equities from bonds, for example, are doing that based on expectations of policy . Its not clear to me that its necessarily detailed expectations of policy. I feel as if the election, it sort of just broke this logjam. It got yields racing higher. It seems like you need treasury yields to go higher to convince people that something is changing. And i do think it did persuade people that maybe were in a new environment, maybe theres a confidence trade that reinforces itself. But i dont think its about we really need the border tax adjustment in order for stocks to work. In fact, maybe that wouldnt be such a great thing. Sameer, mike, thanks to you guys. A lot more still come later in the hour. Were going to switch gears briefly to politics. 11 days until donald trump is inaugurated as the president of the United States. Joining us this morning is the chairman and ceo of public broadcasting, a Major Republican Party donor, stanley hubbard. Mr. Hubbard, its good to have you with us. Good morning. Good morning. Glad we got you to the camera today after some adventures when we tried to get you on in the last hour. I wonder, early on in the primary process, you were not an original backer of trumps, but you found your way to him. How satisfied are you so far with the transition . Terrific. You know, starting with reince priebus, it shows that hes going to do the right thing. Hes picking terrific people. Im just as excited as can be for our country. What are your expectations in the early going . We just had a long discussion about what the market expects from a policy standpoint, whether their expectations are reasonable, how were going to match those expectations with the timing in policy. What do you think the first half of the year is going to look like . Well, youve got a guy in donald trump who gets things done. Hes not a guy hes not a politician. He doesnt stick around and just think about it. And hes got a lot of people on capitol hill very excited. And i think youre going to see things happen faster than youve ever seen before. The American People have made it clear they want action, and hes going to get action. And the congress is going to go along with him. I think its going to be fast. Stanley, what should we take away from the temperament question still surrounding the president elect . There was a lot of talk that the tweeting was going to shift after the election. It hasnt, as we see with the meryl streep tweets, and some people are thinking its not going to shift that much after Inauguration Day either. I cannot predict any more than you can, but i would rather have him say that people that are going to watch the Golden Globes to watch Meryl Streeps politics, they watch because they want to see whats going on in the movies. And if you stick it to that instead of saying shes an overrated actress, i think hed be happy. But i think tweeting doesnt help when he gets into personal issues. Weve been watching him. He tweeted about streep, of course, this morning, but not just about streep. He talked about these automakers, some of the commitments theyre making to investing in the United States, creating jobs in the United States. Well, thats good. Thats great. How would you from your corner, what is the ad market look like this year . Does it match sort of the sentiment and optimism about 2017 . Yes, it does. You know, when business gets better, advertisement market gets better. And were all very positive about this coming year. The year were in now, were very excited because all indications are that things are up. Confidence. People have confidence. Normally coming off of a political year, comps are tough. Will that not be the case this year . I think its going to not be the case this year because people are confident theres going to be change, less regulation, more business investment, which means more advertising. Given that, how high are your expectations for this congress to actually deliver on some of those promises, within say the first 100 days . Well, as i said earlier, i think things are going to happen fast. Donald trumps not a politician, hes a getthingsdone guy, and i think hes going to provide the leadership, and i think congress is going to go along with him. Obviously, some will be slow, but i think hes going to get what he wants and pretty fast. As you look, i mean, obviously, this is an important week on the hill, whether its the confirmation hearings, whether its his own press conference on wednesday. To the degree you expect any friction with congress or any questions he has trouble answering, whether its russian intelligence, whether its the conflicts of interest that people allege and hell be asked about on wednesday, what do you worry about . Well, im not worried, and its, of course, the thing about the intelligence, it will be interesting to see how that plays out with the new president. As for conflicts of interest, i dont know what you do when you own a big business. You cant just sell it. It is what it is. You know, we all have conflicts and weve got to separate them from our duty. And i think hes capable of doing that. But you think thats possible without a divestiture, without having to sell it to whoever he can whenever he can . He cant sell it. You cant sell it. You cant just sell a business like that overnight. Its ridiculous to think that you can. And hes going to have to make it very clear that hes going to separate his business interests from his interests as chief executive of the United States. I could do that. I know he can do that. Mr. Hubbard, we hope youll come back over the coming months and years. Its good to have you. Thanks so much. My pleasure. Thank you. Stanley hubbard, trump supporter coming to us from the midwest. When we come back this morning, ten years ago there was no such thing as an app store, facetime or apple pay. How far weve come since the iphone was unveiled ten years ago today. Alpha ones dan niles is going to join the program and talk to kayla at one market about his picks for 2017. And later, why jeff bezos got two shoutouts last night at the Golden Globes, when squawk alley comes back. Nnnnce. Todays the tenth anniversary of the unveiling of the iphone. Its an iconic product with a future thats hotly debated on wall street. Josh lipton joins us from one market with that story. Josh . Reporter so, on january 9th, 2007, steve jobs introduced the iphone. Today, apple is going to reinvent the phone. Reporter the device allowed users to make calls, check their email, and surf the web. Remember, there were no apps available. So, how popular would the iphone become . The numbers tell that story. Apple has sold more than 650 billion worth of iphones. In fiscal 2016, iphones generated revenue of 137 billion. If the iphone itself was a company, it would be among the top 40 biggest in the world, and there are now more than 2 million available apps. Apples stock has surged some 800 since the iphone was first announced. Investors have recently piled into the stock, which is now up some 20 in just the past six months. But today we know there are questions about the iphones future. The Smartphone Market is maturing. In its last reported quarter, apple said it sold 45. 5 million iphones, and that was 2. 5 million than a year earlier. Apples shareholders are hoping that the iphone introduced in the fall will jumpstart this franchise back to growth with new technologies like Virtual Reality. If apple is able to seize that opportunity and basically take advantage of that trend, theyll participate in the trend and theyll be an Exciting Company again. And if they kind of miss the boat on that, then i think it opens the market to people like google and facebook to take some of the excitement away from them in the future. Reporter tim cook is certainly sounding bullish, saying over the weekend, iphone set the standard for mobile computing in its first decade, and we are just getting started. The best is yet to come. For investors, the next read on the health of the iphone comes on january 31st. Thats when apple will report results for its most recent quarter. Jon, back to you. All right, thank you, josh. Its a busy morning in detroit, so were going to send it over to phil lebeau, whos live from the Detroit Auto Show with a first on cnbc interview. Phil . Reporter thank you, john. Im joined by the ceo of mercedesbenz usa. Well talk about the coup that you first introduced. So many ceos are talking about Donald Trumps presence here at the show. I know youre not in charge of production, but mercedes is in the process of building this plant and expanding in mexico. Do you think theres any chance that those plans are derailed, that donald trump says you cant bring these vehicles into the u. S. , im going to slap a big tax on them . Well, the plant in mexico is a plant for the world, you know. And theyre building cars that go to all countries in the world and a small portion comes to the u. S. As you know, phil, in the u. S. , we have a pretty big presence in alabama where weve invested over the years, a couple billion dollars in just a few months ago based on the huge success of our suvs. We started to invest, you know, another billion to increase the capacity for the production of gls, which we are doing in alabama for the world. Reporter and youve got production capacity, or actual production last year over 300,000 vehicles. Thats correct. Reporter how much more could you expand that . If the new tax code is essentially that you will get benefit from exporting vehicles, could it be expanded even further . I dont know. I know, you know, right now with the current footprint, the colleagues are doing everything, they are cranking around the clock to get us every last suv, but im not a production guy. I dont know how much more we could do out of that factory. We take everything they can give us and theyve done a fantastic job for us. Reporter you guys are showing the eclass coupe, right behind us, a gorgeous vehicle. But overall looking at luxury vehicle sales this year, while youre still number one, the market is meeting some resistance. Do you look at this and say i think that were pretty much at the limit for the next year or two, not just for mercedes, but the luxury market . Yeah. Well, i mean, were at the seventh year, depending how you count, eighth year out of the recession. We had terrific not just last year 2016 but also 2015, and it was around 17. 5 million in past years. So i think its pretty normal that we believe weve reached a limit. It may go down a little bit, but a new product like that will help us at mercedes remain successful in the market. Thank you very much, a first on cnbc here at the Detroit Auto Show. Guys, this ecoupe back here, its getting a lot of attention. Its a gorgeous vehicle, and its usually what you see when you come to the detroit show, a lot of people at the mercedes stand. A few more than usual this year. Phil, well take two, one for jon, one for me. Great stuff today, phil lebeau, at the Detroit Auto Show. When we come back, you also spoke with the ceo of weimo, the google spinoff, baig story. Kay will sit down with dan niles and talk about more coming up. Shaping up to be a busy week on capitol hill. Seven Trump Nominee confirmation hearings are scheduled for this week. Ten days to go before Inauguration Day. Dows down 27 points. Apple, by the way, 52week high, above 119. Nico ante t pl yopo inmy fst orats memeldy. Rgurdictgracias. T ons ante t pl yopo inmy fst orats take you to a picture of trump tower in midtown manhattan. Theres jack ma, executive chairman of alibaba, having met with the president elect upstairs. Were told, jon, perhaps discussing plans to invest more in this country, create as many as a million jobs in the next five years. He is a key figure as these tensions, at least when it comes to rhetoric, heat up between the Incoming Trump administration and china. Jack ma, a man whos done a very good job balancing the interests of east and west, of course listing here while running a company in china. And there he appears to be heading up the elevator. It will be interesting to see what, if anything, he is able to say after this meeting. Which begins, by the way, at 11 30, in just a few moments. Probably fair to say theres no more highprofile entrepreneur who has north american u. S. Exposure than him, to the chinese. I cant think of one. Hes also very adept at managing his communications in difficult political situations, as i suppose china will prepare one for. So, hes probably not going to make any kind of slips out of this. Hes very good at managing his communication, again. But this is an important meeting for i think donald trump and for alibaba as we look at how we manage this relationship of companies that increasingly find that market to be important, apple being one. We were just talking about the tenyear anniversary of the iphones unveiling. The growth is going to be in markets like china going forward. Yeah. Baba up almost 2 . Thats going to be the highest since before thanksgiving. Meanwhile, dow is taking a pause in that march to 20k. Lets get over to kayla, talk about what shes watching. Kayla . Well, carl, you said it, weve been watching how close the dow got to that psychologically important 20,000 mark on friday. But joining me now at one market, Alphaone Capital Partners Founding Partner dan niles. Dan, what a treat to sit with you in person. Nice sitting with you in person as well. Do you care about dow 20,000 . Is it meaningful to you . I dont Pay Attention to it. Its just another its a nice, round number and people get focused on it, but its not that relevant. Will it bring more Retail Investors back into the market . I dont think that will bring Retail Investors back. Its really what you saw since the election, where the market had sort of been floundering and been flat for 18 months or so. And then the market started to pick up and people started to feel better about growth, and if you believe that stock prices reflect growth prospects, thats what will get people excited. The election also caused a massive rotation out of some of the growth names that were in vogue in the last few years into the leastloved sectors, which interestingly you are here to talk about today. We normally talk tech and youre in the financials now. Yeah, i mean, financials are something we got involved with before the elections. Our view of whether hillary won or donald trump won, that sector would do well. Hillary continuing the policies of president obama, helping the economy. And donald trump, if he got elected, got a Regulatory Environment maybe a little bit more focused on growth, which would really get them going. So it worked out pretty well. Do you like the regionals, which are a little bit more u. S. Centric but still are leveraged to lower Corporate Tax rates and to deregulation, or do you like some of the bigger banks that have the most to gain from any leniency in dodd frank but also are more internationally focused . Well, its really a mixture of both. So, obviously, as you brought up, the regionals, you have much less risk. You dont have to deal with brexit or italian referendum or what happens with the german elections or french. We actually have a alphaone capital has a Small Cap Opportunities fund that focuses on that. So you get an idea of leverage. They have about 30 in the regionals that you just mentioned. That fund was up about 16 in the month of november, you know. It was up 26 for the year. Now, for the funds that i look at, you know, i like bank of america, i like jpmorgan. Bank of america trades at 0. 9 times book. So theres a lot of hatred in those banks. I mean, we talked about before, you know, barclays got sued by the government at the end of last year. Deutsche bank, Credit Suisse settled for multiple billions of dollars. For the last eight years, this groups really had a problem. You mentioned brexit and some of the global volatility, but interestingly that helped the big banks a lot because they saw huge spikes in Trading Volume that a lot of people are saying you cant replicate that in 2017. Do you think more volatility will come, that theyll be able to see yearoveryear gains . Yeah, the volatility is something, as you said, you cant predict. But you look at rates, and thats really why were bullish on the sector. I mean, if banks make their Money Lending out and charging a good rate for it, you know, rates were up at 16 for the 10year treasuries in 81. They were at about 5 before the Global Financial crisis and got down to 4. 1 in the summer. Even at 2. 5 , 2. 4 , which is where they are today, we think that will move up to 3 , 3. 5 , and banks can make some Money Lending and thats what will drive it. Volatility can get it, obviously, as you pointed out, very good for them, but thats not the main thing were talking about. Ill be talking about that today and thats a top question i have. While weve been talking, the nasdaq has hit a new intraday record, and im wondering what you think the story will be for tech in 2017, because growth has been completely repriced. Value, ironically, is looking expensive. And people are wondering where to put their money. Sure. I mean, i think with tech, the thing you have to remember is since the end of 2006, tech is up 127 . Its the bestperforming all 11 subsectors of the market. Meanwhile, if you look at financials, financials are down actually 22 from that period of time. Now, to your point about growth, the stocks that we like the most, some of them are like in the internet space. So if you look at google, for example, Revenue Growth was about 20 last year. I think the stock was up about 2 or so. If you look at facebook, revenues were up 50 last year. The stock was up i think about 10 . So things have gotten a lot cheaper, but these trends of more advertising flowing to the internet, thats going to continue. And so, quite honestly, some of the internet names we like the most. Semiconductors, on the other hand, you had Revenue Growth of 2 in that growth. The space was up 37 last year, so thats gotten super expensive. So i think some of this rotation youre seeing is actually pretty healthy. Storage is a play that was very popular in 2016. Thats why a lot of those chip makers ran up the way that they did. You look at a name like micron and the stunning growth that its stock had over the last year, does it take a pause . Yeah, i think you have to, because the thing you see with all markets is you get these periods of euphoria, and people think, oh, my god, it will be great forever then it will be, oh, my god, its going to be terrible forever. But i think with a lot of commodityoriented names, i think theyre going to kind of continue to do well through the first part of next year, but then i think you are going to see a pause as more capacity comes on. So some of the really over bullish views i think will be backed off for us. We like growth at a reasonable price. You know, facebooks never been this cheap since it went public. Googles 15 cheaper than it was starting last year. So we try to make sure we are balanced appropriately for the risk were taking. When facebook went public, it was viewed as expensive at the time, and people wanted to put their money into hardware and not software, especially not unproven companies at the time like facebook. But has the shift away from hardware and the sentiment that has really been negative for the last year in hardware, any way that they can win that back . I think its going to be hard with hardware because, you know, soft you dont go out of the and buy a Dell Computer for the hardware. You buy it so you can run something on it, so youre interested in applications. If you ask people whats in your iphone, they dont know. They dont care. They just want to be able to do their google searches, you know, look up facebook, instagram, whatever. And so, i think its going to be hard for companies, unless youre like an apple, which owns the software, the hardware, the apps, to really go ahead and bring back some of the excitement. But even in that space youve seen smartphone growth. You know, its not really growing. Apples down year over year in terms of unit growth. Your outlook for apple . Its not actually that positive. I mean, we think over the next two to three years, we think apples going to have a really big problem, because you can charge a premium for hardware if its really differentiated. If i put a Samsung Phone in front of you and an apple phone now, itd be very hard for the average person to tell the difference between that because they look so similar, they do so many similar things. I see the margins compressing. Thats the issue i have with apple. And what can your phone not do that you really want it to . Maybe Virtual Reality . But on a screen this size, im having a hard time thinking and thats not each pricing in the risk that the president elect tweets about the company. Well see what happens to apple in 2017. You need to tweet back. That is a job for cook, who is on twitter. Dan niles from alphaone. Carl, back to you. Thank you, kayla. Lets the european close from seema mody back at hq. Hi, carl. Most european markets are in the red to kick off the week, but the trade in the london stock market, the ftse 100 continues to be the focus this monday morning. The index on track to extend its winning streak to ten and post a new record closing high, this as the uk pound falls on those comments made by the Prime Minister of the uk, theresa may, in an interview over the weekend. She signaled that the uk would pursue a hard brexit from the eu, dismissing the idea that the country could keep bits of its membership. Now, when asked today if her comments had been misinterpreted, the Prime Minister said shes trying to get the best possible deal for the uk in terms of trading and operating within the single eu market, but the pound continues to weaken here. Uk exporters that rely on the currency, such as b. A. T. , unilever, diageo, burr numbberr. And european banks. Look at bianco popular moving lower after ubs downgraded the spanish bank from neutral to sell. You can see bank of popular down about 1 on the day. Another rough session for lufthansa after the German Airline said higher than expected fuel costs could affect profits this year, shares down 6 . And speaking of currencies, the turkish lira also grabbing a lot of attention, falling to another record low. Its certainly not a happy new year for the currency. Moodys today said that turkish bank profits will be hit significantly this year. The lira is down about 2 today. But already down 5 in 2017, making it so far the worst performing emerging market currency this year. Carl . All right, seema, thank you very much for that. Seema mody at hq. Lets get a news update and go to sue herera back at hq. Hi, carl, thank you. Heres whats happening, everybody. Esteban santiago, the iraq war veteran accused of shooting and killing five people at the ft. Lauderdale airport on friday escorted out of jail for his First Court Appearance later today. The hearing will focus on getting him a lawyer. Israeli Police Forces stepped up security measures in east jerusalem, focusing on the neighborhood of the palestinian attacker who rammed his truck into a group of Israeli Soldiers on sunday, killing four. The attacker was shot and killed. Police raided his house and then dismantled a mourning tent that was erected outside it. North korea announcing it can test a launch and launch a longrange Ballistic Missile at any time, blaming a hostile u. S. Policy for its arms development. North korea state tv says leader kim jongun would determine when and where the missile will be launched. And pope francis delivering his annual Foreign Policy speech at the vatican. He denounced violence committed in gods name as homicidal madness and called for peace at a time of mass migrations and economic stagnation across the globe. Youre up to date. Thats the news update this hour. Carl, back to you. Sue, thanks so much. When we come back, a busy week ahead for trumps cabinet nominees. Details and what investors should focus on in the next coming days. Plus, amazons jeff bezos getting a few shoutouts at last nights Golden Globes. More squawk alley after this. Thank you to amazon, jeff bezos. Thank you so much. What a huge supporter you guys were in roadside. I have to just thank everyone i know. I know its boring, but everyone made the movie. Otherwise, it wouldnt happen. ÷ alibaba executive chairman jack ma meeting with president elect donald trump at this hour. Ma arrived at trump tower a short time ago. On the agenda, reportedly, alibabas u. S. Expansion and commitment to create 1 million new jobs in five years. There are apparently no plans to discuss taiwan or the u. S. china relationship. 1. 5 million . Unclear if theyre using a multiplier in there or not, jon. Yeah, the math can get fuzzy when companies talk about this. Im reminded of apple talking about the impact of the app store on the economy. Theyre taking credits for jobs created when people were able to create apps that werent previously available. It seems like alibabas doing Something Like this, talking about the Economic Impact of opening up these easier trade and transaction possibilities with china. Yeah. By the way, Senate Majority leader mcconnell making some comments. Well get those to you in the next couple minutes. It is a big week in washington as trumps cabinet confirmation hearings get under way. Republicans have set at least nine for the week. Eamon javers, i saw a photo of some beds, some cots being rolled into the senate. Its going to be that kind of week, eamon. Reporter yeah, you know its intense when they roll the cots out up at capitol hill, carl. Check out the schedule and youll see what republicans are doing. Theyll be flooding the zone with these Trump Nominees, making it difficult for any one piece of bad news about any one of the nominees that spins out of any of these hearings to really dominate a news cycle, particularly because were also going to have that press conference from donald trump coming up on wednesday. So on tuesday, the 10th, were going to see Jeff Sessions, the attorney general nominee, and also general john f. Kelly of the United States marine corps, who is the nominee for homeland security. Theyll be on capitol hill to kick it off. Wednesdays the big day, though. Thats the day were going to see the donald trump News Conference in manhattan. Five big hearings in washington wednesday, rex tillerson, Jeff Sessions, michael pompeo, betsy devos, elaine chao, and then well have wilbur ross, rex tillerson, james mattis of the marine corps for secretary of defense, ben carson at hud, Andrew Pudzner at labor, all that happening thursday. So, a big week of hearings here. Watch for democrats try to pick off some of these nominees as potentially wobbly. Rex tillerson for secretary of state, the former exxonmobil ceo, youd have to say going into the week is probably the wobbleiest of those, given that hes attracted opposition from john mccain. There you see Jeff Sessions on his way into trump tower in some file footage. But clearly, there are some here that might have some difficulty up on capitol hill. Well see how republicans hold ranks here and make sure that some of the nominees get through, carl. All right. I will take it. Thank you, eamon javers. And there are 11 days to president elect trumps inauguration, and the anticipation keeps building on tax policy, trade tariffs and Financial Market impact. Weighing in on how the world might look different after january 20th is ever corps isis chrishna gura, who heads the policy and strategy team. Good morning and welcome. Thank you. Youve written in a note about the first half of 2017 being potentially frustrating as the bar is pretty high as far as expectations of what the president elect and Republican Congress are going to be able to get done. Whats the real marker that youre going to be looking for as to whether theyre on pace, and when should we look for it, july, august . Well, i think the key thing is that markets have really priced in pretty aggressively major changes under trump, in particular the possibility of sizable fiscal stimulus here, putting upward pressure on inflation, leading to that faster set of fed rate hikes, as well as important changes on the regulatory front and potentially also a tariff policy. Now, we think that this is coming, but we just think its going to take some time. Washington does not move in market time. Earliest you could imagine getting a serious fiscal package done is around august of this year, in our view. And its not impossible it could slip to the back end of the year or even 2018, in particular if republicans coalesce around some of these structural changes to the tax system, some more complicated changes, like border adjustment. Of course, what were looking at in the near term is to try to get some clues from trump press conferences, from the confirmation hearings, as to what mix of the socalled good trump bad trump, meaning, you know, deregulation and tax cuts versus trade conflict, were likely to look at in the period ahead. Yeah, you mentioned good trump bad trump. You say you cant ignore tweet tensions. And youre talking about trade, i imagine, there, and also corporate policy, as hes tweeted at Companies Including boeing, gm and ford. At what point does, i dont know i asked this earlier in the hour trumps temperament start to come into play from a market perspective . Tweeting that meryl streep is overrated. I mean, my goodness. Well, im not well qualified to comment on that particular judgment, but i do think that we are all having to get comfortable with, learn how to live with this onslaught of tweets. And i should think you really want to think about two audiences potentially getting rattled by this. One of course is the investor audience, but the other is the international audience. And in a sense, folks outside the u. S. Have even less context to put around trumps comments. So this can be destabilizing for foreign companies, also for International Relations and geopolitics. As far as u. S. Companies are concerned, i think the really key question here is whether you think that trump could unilaterally act, particularly on tarifftype issues. And our view is that he wont, that you have to remember these legislative authorities rest with the congress. And what the congress is saying, what people like ryan are saying, is that we dont want tariffs and trade wars protectionism. The house, of course, is suggesting that there are better ways of getting at this, for instance through this borderadjusted tax proposal. You mention august as the earliest we could get it. What indications are there going to be for you as to whether or not you take the over or the under on that timeline . Well, im afraid its sort of you know, look, the legislation is like a sausagemaking process here. Its not very simple or straightforward. Its not necessarily very pretty to look at, but were going to have to track in a sense the first thing to look at is, you know, is the house, the senate, and republican, white House Republican views of what tax reform should look like mutually consistent . Or is the senate going off in one direction, house going off in another direction, trumps team trying to go in a different direction . So, we need to see where those firm up. The house already has a plan out there. The senate doesnt. The white house doesnt. So we need to see, first of all, how those three opening bids shape up. Then, of course, we need to look to see how coherent those republican majorities are. Remember, tax reform probably gets done on reconciliation. So its all about holding the Republican Caucus together as opposed to winning over democrats here. And then were just going to have to watch the process. Remember, the president s budget, then it goes to the budget process, then midof april it goes to the tax rate writing committees. They will report back probably sometime in june, and then you have the final push to try to get an agreed version of tax reform through the congress and signed into law. All right. Krishna, thank you for joining us, krishna guha from evercore isi. Thank you so much. Speaking of all of this, senator Mitch Mcconnell addressed the trump cabinet confirmation hearings a few moments ago at trump tower. Lets take a listen. Well, the president elect and i had a good meeting with the Senate Agenda, which, of course, includes confirming the cabinet appointments, getting further down the road towards repealing and replacing obamacare. We just simply talked about the Senate Agenda and how were ready to get going once he gets down there. Will you pursue the process without actually going through the vetting of financial records yeah, everybody will be properly vetted, as they have been in the past, and im hopeful it will get up to six or seven, particularly the National Security team, in place on day one. Obviously referring to what eamon was just talking about, the vetting of those designates to the cabinet a few moments ago, then going on to say the meeting was good but that the agenda largely included repealing and replacing obamacare, which will be, jon, in some competition for priority with the taxes we just talked about with krishna. A lot of big promises. Its not clear to me how its logistically possible to vet all of these nominees, given where reports say we are on them, but i guess well see. Indeed. When we come back this morning, why wpp ceo sir Martin Sorrell says facebook needs to admit it is, in fact, a media company. Dows down 44. Our Rick Santelli making an appearance on meet the press over the weekend. The Santelli Exchange coming up next. When target gets hacked, i dont hear people saying, hey, was it kohls . Was it walmart . It doesnt matter. There was a hack, you deal with it. I think that whats going on here is really so politically driven. It doesnt matter who did what when. Working with russia we work with iran. Are they our friends . You have to take each situation uniquely. Listen, the president elect has a boatload of issues. I agree with the poll of his ego. But i think that the media the kbleed in general is just being quite unfair here. In l of t ss,s, fe. E. S . N ner fvised fo0, persotott coming up, big calls on dow components procter gamble, cocacola. Jim cramer will weigh in on all of them. Mrs. , an activist making his name but focusing on small cap stocks. Hes going give us his picks for 2017 as well. Were going to hit biotech and health care live from the market moving Jpmorgan Health care conference. Ceo of secellgene joins was as well. Lets get to the cme group in chicago. Check in with Rick Santelli. Nice appearance on the big network, rick. Thanks, carl. And id like to get to my first guest of the week. Charles biederman, biederman, biederman. Charles, youre all about trying to markets with flows and other ways you handicap what you write in your prospective. You believe it might be topping out. Why dont you tell us why. Well, theres been a record inflow into the market since the election. Over 100 billion has gone in, which is which always which is something that only happens at market tops. Last time we had this much going was 07. Similar to attend of 9900. Huge inflows by individuals or whoever is putting money into equity ets think that nirvana is ahead. You know, it could be that they they got in a little bit ahead of the improvement in the economy. Remember, corporate buying has been the sole source of money for the market since the end of 2011. No new money has gone in to mutual funds or u. S. Equity etfs by individuals or anybody. Theres been a net out flow and a net inflow balancing it out. 2. 5 trillion however came into the market as a result of companies sharing their own shares what via cash takeovers or via buy backs. The problem is higher Interest Rates means less buybacks and less cash takeovers because its more ebxpensives. As Interest Rates seem to be inching up. Thats scary to us. Charles, you bring up a great point. You need to follow the money. Yes. I guess ill come back to you with this. You are basically saying you dont i have the passive investing, the etfs will be enough to hold equities at these levels. I dont necessarily disagree but are there possibilities given the financial state of the globe in europe and capital in china, are there of this inroads of capital that could come in and help the situation you just depicted . Well, 2. 5 trillion repatriation of money will float stocks higher. But again, as a previous guest was saying, none of this is likely to happen until the ends of 17 at the early or late 17. So we have a long gap between now and then. Less regulation will help, lower tax rates will help. None of thats going to happen near term. In the near term were stuck with the same lousy economy weve had since obama took over. And we dont see any real improvement. Higher Interest Rates is not going to pick up the housing market. Higher Interest Rates is not going to levitate auto sales. Its going to hurt the economy until we get some offset from some fiscal changes. Thank you, charles. Its the timeline thats bugging you for the moment. Well stay in touch. Thank you, rick. During the Consumer Electronics show in las vegas we had a chance to speak to ppp group ceo sir Martin Sorrell. Heres what he had to say about social networks as media companies. Facebook cannot say that theyre not a media. In fact, i think Mark Zuckerberg has said recently were sort of a media company. Weve been saying for years theyre not technology company, theyre a media company. They have a responsibility. He cant claim hes a digital engineering using digital pipes. Hes responsible and the election shows that. Most popular headline is what, pope endorses trump. Right . So this year i think is a signal that they are responsible. One of the things here at ces is the media owners new media owners acknowledging that they have to take responsibility because the measurement issue reenforces it. The ford issue, you know, that thing that came out. We rigorously investigated that. Real interesting. And what was interesting is the four gillion stuff that we found was tiny. We have taken measures to root out fraud by using closed exchangesen, not open exchanges, very stringently. We are in this weird space where theres fake news out there, what you talk about, but fake views, problems in measurement that the companies are having. And then, you know, youve got facebook with its measurement data being off as well. Theres a lot of questions in the industry right now about just what you can base your business on. Yeah. On a difficult when re code is reporting, putting ads 20 seconds into a video, not just the top of the video. A lot of people watch that very closely. We membersed jack of alibaba meeting with the president elect at this hour. Pictures from moments ago. The two reportedly doesingal by ba bas plan expansion. One million potential new jobs here over the next five years. Kayla has more background whoon todays meeting was all about. Interestingly, carl, the outside Communications Consultant two jack ma is the former chief of staff to hank paulson when he was in treasury. Im told by a source that the meeting was actually brokered by mike evans who is the president of alibaba. And interestingly, is responsible for the globalization strategy, so of course as alibaba looks outward theyre going to be looking at creating jobs and doing business in the u. S. So this makes perfect sense from his perspective. Im told he knows donald trump personally and was able to make schedules work with ma already planned to be in new york. Thats a good call. Intriguing meeting. A could of them today. More squawk will continue after the wake. ÷÷ keeping an eye on this meeting between jack m a and the plelkt. If we get any more on what the meeting was about. Kayla brought us up to speed, but aside from that that is helping the nasdaq by 2 but a lot of chips today. Micron, lam, adi, we talked about the trump trade being policy driven. This is a tech rally today. Yeah, it sure is. And oracle also up 2 . Its tech and not Consumer Tech thats up. This meeting interesting, well continue to track to see what color we can get. Kayla, we look forward to seeing more from you this week. Lets get over to headquarters and the half. Guy, thanks. Welcome to the halftime report. Im scott wapner. Top trade this hour going big on the banks. Why one wall street firnl says the run in the financials is far from over. With us for the hour today joe terranova, josh brown, john nen nenlg ran and jim cramer, host of cnbcs mad money. Stay in the testimonies despite the big gains weve seen in this space. They say should i stay . Should i go . We say stay. Well, i think its run of those