Transcripts For CNBC Squawk Box 20170216

Wow. 20 . Thats thats a real add on to the 5,000. Thats real money to people that are yes. I heard Carl Quintanilla say yesterday weve seen more points added to the nasdaq this year than all of last year and its only february. Six weeks into the year. Theyre doing some kind of calculation again on historically in a new president , the quickest stock market gains out of the gate. Is this this month is the fastest. Since lbj. This must be from january 20th. This is from the inauguration. Its funny. Remember, we had a lot of naysayers who said, from november 8th to december 8th we got gains, then it stalled. Then it was about three weeks ago it started again. Whats the that would be january 20th, right . Well just over 3 1 2 weeks. Okay. A lot of stuff. The back drop for you, i know, your water cooler stuff. A lot going on for you. It is kind of shocking to see some of the turmoil thats before us and the headlines and the market ignoring it. The market could always if it became very serious, where its holy cow, this is donna brazile, shes one to talk. She said this is watergate to dan rather. Another one, hes another one to take. Any way, if it did turn into something truly existential, the market can go down 1,000 points if it wants. It keeps going up when it looks like nothing it will come from it. If it finally did our mutual friend ben white has an explanation. He made an argument that even if donald trump were to be impeached effectively, you would still have a republicancontrolled house, congress, senate. From a policy perspective, it doesnt matter. When you see the regulation coming down. Im just explaining why. Maybe thats what it is. Bens opinion. I thought you were going to talk about ben rhodes, not ben white. Ben white is still worried about the Second Amendment and what he said about that judge. You should have a modicum ben was the poster child for i miss ben white. It was the end of the campaign. Do you have no do you have a modicum of anxiety of any of this . I dont know what to make of it. I dont know whether the intelligence this is more leaks here in the journal the spies keeping intelligence from trump. Thats a bad headline. There hasnt been a president sings reagan that didnt have at least one cabinet pull out, obviously. You know this, right . Yeah. How many did obama have . Any cabinet at this point its because of republicans. Right. But go back and look what happened one had five that didnt make it. I think obama had three that had or i dont know. I almost sent you have all the numbers . I almost sent it to you. I sent it to you because i knew you would be hyperventilating about the cabinet pullout im suggesting things in this country are anxiety producing. A poll yesterday said 57 of americans are stressed out by the presidency, by the administration, by politics. You add the im stressed out about russia. Did you hear theres a russian spy submarine 30 miles off the coast its not a submarine spy vessel. Its a vessel that is near where our submarines are. But then i think mattis totally down played it. Ill get you the some sabre rattling from russia at this point. That and another in the meantime you do some of those numbers. Coming after flynn, its like two guys in the its puzder and flynn, thats a bad week. But cabinet guys getting pulled back for illegal help they had. Whatever reason, not since reagan has someone gotten all their cabinet nominees in. The numbers are this. Trump had one. Trump had three. George w. Bush had two. Stop talking go ahead. Here you go. Obama had three guys pull out. But these not arguing that point. Yeah, he is. No, im not arguing the point. How many did bill clinton have . Cabinet guys that he nominated and didnt make it. Five. Put that in your brain. Its not its not unusual for one. Im just saying people have anxieties about whats going on in the world right now. Theres headlines every day thats anxiety producing. The market is ignoring it. That was the whole reason to talk about it. In the history of history, theres no president that had the most unfavorables that he has had. There are people who have questions about this. It is a weird dichotomy to be watching those headlines against the market. Thats all were saying. That was the whole point, if the market saw something serious in all this, it would not probably be acting like this. To your point it could go down a thousand if it had to. Eamon javers has more on this. Part of this whole conversation is not just not what the leani leaks have told us but the process of the leaks, where its coming from, whether the Intelligence Community is so mad about what was happening during the campaign that theyre there are conspiracy theories that theres some deep plants in the Intelligence Community. Maybe even some of them tied to prior administrations, that are theyre actually orchestrating some of this. Its like tom clancylike. Thats what the president said yesterday. The president said that he believes that the Intelligence Community is upset about the loss of the democrats back in the election. And thats part of what is spurring these leaks. But when you have that story in the wall street journal this morning that and just just held up saying spies are withholding information from the president , i cant match that reporting. I know the two reporters who worked on that story. Theyre rock solid. They are saying that u. S. Intelligence community is withholding information in terms of sources and methods, where its getting the information, who the spies are were relying on, what techniques were using as a nation to spy on adversaries. Theyre withholding some of that from the president of the United States. Thats an astonishing thing to read in a major american newspaper. We should noted that the office of the director of National Intelligence overnight put out a statement denying that. Saying it is not true. Then you see this story in the New York Times this morning, president wants alley to review u. S. Spy agencies saying he may have a broad review of american spy agencies by steven fineberg, a cofounder of cerbrus capital management. That is also the thing that will give the Intelligence Community some angina here in terms of what the president s plans are for that community. Theres tension here between this white house and the Intelligence Community. Thats something that will make it difficult for donald trump to navigate Going Forward if we get into some kind of International Crisis where he needs that Intelligence Community. With that level of mistrust, thats a worrisome thing. When i read t the irony is kind of glaring. The intelligence officials are withholding the Sensitive Information because theyre worried it could be leaked. And this was leaked by, it says here, current and former officials familiar with the matter. So, the same i had a conversation back in january with a former cia they leaked the worry about the leaks. Leaking is a tool of bureaucracies that are frustrated and angry. And were definitely seeing that happening. I had a conversation with a longtime former cia agent back in january about this, when the president was mocking the Intelligence Community, using scare quotes around the word intelligence in his tweets. All of that. Right. I said what does the cia do here . How do they respond to this . He said the cia has to just lie back and take it. They cant respond. Any response from the Intelligence Community against the sitting president of the United States could be treasonous. Thats where you are headed. Yesterday they said they doubted the voracity of the story because of that. Well how about the director of the National Intelligence Office Denies this is happening. Its not true. We should emphasize that point as well. Did you read the Evan Mcmullen stuff . He says this is like some deep it almost sounds like a movie. The deep state, right . The deep state. The intelligence bureaucracy, the thousands who work for the Intelligence Community largely in the d. C. Area. Do you know anything about ben rhodes . Have you seen any of that. I have not. Lets not say anything to former high ranking obama people were speaking as well. It was on fox, they had picture of ben rhodes ready to go. I had a whole hit prepared for you guys on andy puzder. Lets do it. Look. Fast food executive andy puzder withdrew his nomination yesterday. It was an intense fight. They delayed this hearing, delayed it, delayed it. He could not get his paperWork Together in terms of ethical disclosures. Finally republicans on capitol hill signaled they didnt have the support for him. Alerted the white house to that and he withdrew his nomination. Heres the statement from puzder. Im honored to have been considered by donald trump to lead the department of labor and to put americas workers and businesses back on a path to sustainable prosperity. That from the possible department of labor nominee, now withdrawn. Part of the straw that broke the camels back, the allegations of spousal abuse from his 1988 divorce, a leak of an Oprah Winfrey tape involving his exwife making some spectacular allegations. She has now said she withdraws those allegations, and that they were made in the heat of a divorce. Even with that, even with her current support, that made a lot of republican members nervous. A lot of other issues were here as well. This was a tough day for andy puzder. And youre not going to go to the mat for i dont know fizz a second tier or third tier but labor is not the most thats not on the top of the list. Puzder himself had second thoughts. Who wouldnt. Who wouldnt after all that. I dont know what this means i was thinking they may go to bat for everybody else. You lose one, then you dont want to Susan Collins said shes not going to vote for scott pruitt now. Thats one down there, right . Susan collins didnt vote for i dont know what she is. Look, losing one or two cabinet nominees is not at all unusual. Thats not going to give the trump team. We were going to try to make it unusual. If theres any way we can, our theres plenty unusual going on in washington today. We can make it all unusual. Market at new highs. Thank you, eamon. You bet. One comment on this ben rhodes piece. Fake news . I dont know whether its fake news or not. Theres not one what you might consider Mainstream Media outlet that has picked this up. I know. Including fox news. I dont know what they were doing on tv, but in terms of any of their own reporting, anywhere in the world, so to repeat it is i saw it, they brought his picture up last night. I recognize they may or may not do that. Im saying to talk about this in some way is crazy to me. We didnt say i dont know what the story is on him. We didnt go into the details. Among the top stories in terms of the corporate world, the wall street journal reporting snap inc valuing itself between 19. 5 billion and 22. 2 billion. This prices snap at 14 to 16 per share. That would be at the low end of the 20 to 25 billion range that snap previously targeted. Is snap more like facebook or twitter, i thought you were asking in the context of how it works. I thought you were asking from the context of how it works, too. No. Whether its whether it can monetize everything. Whether its a good company or not. Thats the real question. I think it may have a better chance of monetizing things than twitter, but not the same opportunity as twitter. Verizon close to a rephrased deal to buy yahoos core Internet Business from 250 million to 350 million less than planned last year. They have been working a discount to the deal price to reflect the damage to the company caused by two highprofile data breaches. And re codes ed lee will join us with more on this at the bottom of the hour. On weekly jobless claims, january Housing Starts and the monthly philly fed survey released at 8 30 a. M. Eastern time. Katherine harris had a lot of stuff on fox but its Katherine Harris on a main i think on brett baers show or marthas show afterwards. Its okay. Makes me uncomfortable to slam somebody when we cant verify. Im saying his name came up. They had the head shots ready to go. I got my name dragged through stuff. But Katherine Harris is not hot haair or totally ones who a not reputable. You heard what the president said about cnn and said that many times. Doesnt say anything about squawk box. Just not being mentioned is hurtfu hurtful. If you want to see whats going on with the market. Rising stocks lifting markets to a fifth straight day of record closing highs. Joining us now is Marianne Bartels and david bianco. One of the one of our shows on our network stole our btig, katie stockton, they stole her and now are using her to say it broke out. Were headed to higher highs. Do you think that . Over the course of the year i think the s p will make it to 2400 or higher, particularly if we get effective Corporate Tax reform. Youve liked it. You said it has to do with earnings and improving sentiment around the world, doesnt really have to do with trump. Thats right. Theres been you didnt like him before he got elected. When i was going around talking to clients, i said it doesnt matter who got elected. There was a lot to of things and momentum in the economy. Baby boomers are driving healthcare, consumer discretionary, millennials. We couldnt get out of our way for eight years, do you think we can do three this year . Does that have to do with policy at all . At bank of america, Merrill Lynch i dont think we have a 3 handle yet on gdp growth. We think it will take a while for policy changes to impact the economy. That includes tax cuts. But the markets already started to price this in. Weve been through earnings. Earnings are improving. The market is expensive but parts are very inexpensive. For example, financials. Energy. Okay. And weve seen a rotation out of the Growth Stocks into the value stocks. They sold towards the end of last year, technology stocks. Now tech is coming back. What were not celebrating, i think we should be celebrating like new years eve with party hats, noise makers, confetti is the nasdaq is now above the 2,000 high, one of the big themes at the firm is innovation in the digital era. Thats where those stocks are. Theyre housed in the nasdaq and its beating the dow and s p. I think we need to pay more attention to that index and those companies. David, when would you say okay, all these policy positives are getting dragged down. All this all these distractions, they could become more than distractions. When would you say im worried . Theres a lot of intrigue going on right now. I like that the market is staying rational and focused on the improving trends in the economy. Earnings trends have improved. I would agree thats happening especially even after the election, but beginning to see that before the election. At deutsche Asset Management we like financials, health care. I think its true that well have a longlasting expansion that many Growth Stocks that you will find in the nasdaq, tech, healthcare, theyll do well for the next few years. The market is probably most concerned about this tax reform. I think what investors see is that the border tax adjustment is something that is becoming less likely. We need to see what the alternative is, because its important that we do get Corporate Tax reform this year or early next year, but the bordered a justed t ed or early next year, but the bordered a justed t but the bordered a justed t e a bordered a justed t djusted ta momentum every day. If we dont get tax reform in the next year what happens . I think we will get it. The border adjustment tax is seen as the worst idea since the british tax tea. I believe the senate will block that. Now were looking to the Trump Administration to show us some alternatives. A lot is up in the air right now. I think well get the Corporate Tax cut. Have you ever done any math that is even remotely revenue neutral that can get you within get you at a 20 rate 25 is easy. 25 you can get there. Thats what i think 28 you can easily get there. I think it will turn out to be a much simpler tax reform, dropping the tax rated in line with global averages. You dont need to do a lot with the tax code to make that revenue neutral. All right. Thank you, mary ann. David, appreciate it. Was that was that trump story you asked sell l kelly an about better sourced . Was a filed lawsuit. But that was dropped also. But they filed it in court. There was documentation that you could go read, you can go online right now that fell by the wayside. That case was ultimately dropped. Fake news. Is that fake news . I think. If i file a lawsuit, thats a real lawsuit. I dont think there was ever anything to it. Ah. Coming up, gearing up for the snapchat ipo. The company valuing itself at the low end of the expected range. Details straight ahead. Matter w thrkchange. At trori. Ouiplined proachemains. Obal martsay be ununrtain. Fefe confid lls your advir. Arnd world. Ice. In witcoidence. Advir. Arnd world. Welcome back. Warren buffetts right hand man, Charlie Munger addressing share olders yesterday. He said some of the president s ideas might be good for the country. About a year ago he said the president would not be good for the white house. He discussed Berkshire Hathaways recent stakes in apple and in the airlines. Think of the hooting weve done over the years about hightech, we dont understand it. Theres no confidency, worst business in the world is airlines. What do we appear in the press with . Apple and a bunch of airlines. I dont think weve got weve gone crazy. I think the answer is were adapting reasonably to a business thats gotten very much more difficult. I dont think we have a cinch in either of those positions. I think we have the odds a bit in our favor. That was munger speaking at the Daily Journal to shareholders there. Also a programming note, Warren Buffett will join us monday, february 27th to answer your questions and ours. This will be the first time he comments on berkshires holdings after the release of those 13f filings we talked about yesterday with increased holdings in the airlines and apple. Send your questions for Warren Buffett to us on facebook or on twitter. Notable comments late yesterday from new york fed president bill dudley. Dudley offered a similar view to what we heard from janet yellen on capitol hill this year. The baseline forecast is pretty similar in 2017 to 2016. Slightly above trend growth, a bit more pressure on the labor market. Gradual rise in inflation back to the 2 objective. If that happens, if we stay on that trajectory, as chair yellen said yesterday and today, we would expect to gradually remove further Monetary Policy accommodations, snug up Interest Rates further in the months ahead. We also heard from boston fed president , Eric Rosengren yesterday. He said he sees at least three rate hikes this year. Coming up, retail ceos voicing their objections to the border adjustment tax. Steve sadove will talk about the tax and how it could shake up the industry. As we head to break, heres yesterdays winners and losers. Ay, cuera21yeard mama. Now shes intoisc ortsah, no t ncwhen sie no es into tai. E d disc sports too ressl. Hon. Et me as. Steve. Have on aeare . Six nthsno . E. Anexis. Uhno. Stjute. E ves, pered bp. Ou live, u rump de pct, thers thwato sayhi ve ive found a pmanet espe from moto. Togeth, re peecy lanc, our sens awa,found a pmanet espe from moto. R heing o. I ts sn, r heinthseit free. Love somhi. See yon giulia we in life, e cotraveltake ieasy. Any mkt swgs but weve never beethtypestit b. En weveoto much morey. Any mkt toiv swgs when ye thright beethtypestit b. Finaial advisor,ifbebrlit. Amri welcome back. Youre watching squawk box live from the Nasdaq Market site in times square. Good morning. U. S. Equity futures at this hour, just pulling back slightly early on. Now theyre up. Now theyre up. Its like a beach ball, trying to pull it down under the water. The s p is down less than a point. The s p whats our number . Dont chase the rally at 2316. 2349 now. 33 points. Not that much. 1. 5 . Yeah. Thats all you get in a euro bond. Snapchat parent is out with its amended if you can find it. Amended ipo filing. The ipo range is 14 to 16 per share, lower than prior estimates given last year. This would be the biggest tech ipo since alibaba in 2014. Ive been complaining about snap because . My kids. Its like what are you doing now . What are you doing . What are you doing . Making faces on snapchat. Our kids are on it, too. It makes me nervous. This is the one that disappears standl instantly. What about when you used to pass notes in school, you dont do anything else. These kids are always but you understand it youve been through the productivity killers in the past, too. Wait a second. I got a message from someone. Yeah. In the meantime, while joe is dealing with that. President trumps roundtable with retail ceos focus the on the proposed border adjustment tax, jobs and the consumer driven economy. Kevin brady met with retail ceos as well. Heres what he had to say about the Controversial Border adjustment tax yesterday on the closing bell. Is this border adjustment tax, congressman, definitely going to happen as part of tax reform . It is. Look, if you dont have that in there, tax rates on local businesses, small and large will go up. Our tax code will continue to favor foreign products over American Made products. And will continue to have major incentives to drive jobs and headquarters overseas. Joining us now is steve sadove, former chairman and ceo of sachs. Watching whats happening with this border adjustment tax, it hits nobody harder than retailers. I view it as an existential threat to the retailers. This is probably the biggest threat theyve seen in years. The entire industry is mobilizing against it. You saw a number of ceos that represented the large retailers going to washington yesterday, meeting with the president , meeting down on the hill with a number of the legislators. The National Retail federation has an allout effort to mobilize everybody. This is war. I read a note from btig yesterday that said 6 of the 16 hard line retailers they cover, they could see a decline in 16 or more. Why is it such a problem for retailers . Because you rely on goods coming in from overseas to be sold cheaply . Lets take electronics, about 90 imported, about 97 of apparel is imported. If you cant deduct the cost of goods, have to pay a tax on the full amount of revenue and your margins are not high in retail to begin with, you will essentially be paying tax on money you dont make. Ducts just go up in price . The question is why not just raise prices. Because the consumer will find something else. Isnt that what donald trump wants . He wants the cost of products from abroad to go up, so you end up buying American Products and you force products made abroad to be made here. Thats the whole goal. Im not saying hes right or wrong, thats the project. But some products cant be made in the United States. You cant make some of the electronics products. You wont import a diamond you cant mine a diamond in the United States. So theres certain products that physically could not be made in the United States. Some of them are not practical if you look at the cost of manufacturing apparel, the labor costs in the u. S. Is so much higher than the cost that youll see in some emerging markets that it wouldnt be practical. Kevin brady is a very important powerful voice in this entire argument. He says its definitely going to go through because you cant bring rates down. Corporate rates down overall if you dont have a way of paying for it. What do you think . I think tax reform is a necessity. Theres no question that we need to have tax reform. He didnt say tax reform, he said the border adjustment tax. I think its a mistake to be linking the lower tax rate, which needs to happen, whether its going from 35 to 20 or 25. Im sure you will see a modification as negotiations go on with some form of offset. Theres a trillion dollars that is at play relative to the border adjustment tax. You cant do away with that and make this revenue neutral. Where should how would you change it . I think clearly i would certainly look at going from 20 to 25. That will fund part of it. I think you have to look at loopholes, other means of generating revenue. Im not sure it all ought to be falling on the backs of the retailers and to the benefit of some of the very large exporters. The large multinationals that export will end up paying no taxes. This will clearly set up winners and losers. Retailers being on one side, multinationals on the other. Multinationals will be the winner, but the consumer, the prices will go up. But the question is they wont go up enough to offset the losses. We have a tweet. We have a tweet. From the president . I said he wasnt watching, i think maybe he is watching and is responding to you, andrew. Okay. He said stock market hits new high with longest winning streak in decades. Great level of confidence and optimism even before the tax plan rollout. Its almost like he was watching and do you think thats possible . Its possible. Hes watched and been on the show, as you know. Trump tuesdays. Trump tuesdays. President trump, if youre watching, thank you for your rely. We appreciate that. They dont need the tax plan rollout to hit new highs it seems like hes addressing your concerns. Right. The president himself has said that the border adjustment tax is confusing. I guess that leads some to really question whether or not it goes through. Alan rifkin, from btig saying he thinks its not likely because of those concerns, because of the lobbying effort put forth and the president already said it is confusing. I hope it doesnt go through. I think its a mistake for the consumer. We have momentum in the economy. Were starting to see growth, but this is not big answer. You saw Warren Buffett jumping out of a big number of shares of walmart. Broadly retail. Irrespective of what happens in washington. The border adjustment tax is one piece of whats going on in retail. You ha you have an overall consumer who is healthy. The concern is the consumer is changing and buying differently. Traditional retailers that have not adjusted and are not adjusting fast enough are losing. The amazons of the world and others are winning. Its not that its an unhealthy consumer but a fundamentally changed consumer. The stocks that are hit hard, is that the consumer, border adjustment tax or both . I ask that because if the adjustment border tax goes through, there may be more pain to be felt. Its a reflection of both, i think more a reflection of performance and disappointment in the Fourth Quarter. I think if the border adjustment tax would go through, you would see more pain on the backs of retailers. Steve, thank you very much for joining us. What happens with macys . You know, thats a long question. I know we dont have much time. Theres a lot of value in the real estate, but the problem in monetizing real estate, unless you just go sell a building and pocket the dollars, putting a mortgage on it, doing a sale lease back, that is Balance Sheet macinations. Macys has to get back to growth. When we return, the ceo of intrexon will join us on set. Earlier bill miller named the company one of his top stock picks. And hasbro trading near alltime highs. And later high profile setbacks in President Trumps cabinet, we will talk to bill daley. Stay tuned, you are watching squawk box here on cnbc. Time for the executive edge. President trump is promising businesses both big and small. He will usher in an era of more business friendly practices. But how does main street stand to benefit from deregulation and what do Small Businesses wanted to see perform . Kate rogers joins new from englewood cliffs. Have we been yes, our headquarters. We decided to look at the federal regulatory burden. Just last year as a whole more than 400 regulations were finalized costing 164 billion to implement. Thats according to the conservative Research Group m p American Action forum. Separate data from the National Small Business Association finds companies are spending about 12,000 a year to comply with federal regulations alone. We reached out to different businesses to hear what regulations they would like to rereformed in washington. First up, taxes. Heres the owner of tribute inc, a Small Business software company. The greatest burden of federal taxes is around compliance. Simply understanding what the tax code is requiring of us. Doing all the Work Associated not only with the annual filings, but also quarterly filings, monthly filings, payroll taxes around that. It can just just the sheer quantity of work that we have to put into to put into the project to pay our taxes, which diverts our attention away from building our businesses. Each year reynolds says he is spending about 50 hours complying with the federal tax code. Thats even with using an accountant for help with details which costs him around 15 now a year. Thank you for that. Coming up, well talk yahoo and verizon. They reportedly reached an agreement on a revised deal on two major security breaches. As we head to a break, take a quick check on whats happening in european markets right now. Squawk box returns in just a moment. Mis ur. Celin , evmillis s. Bo on e k d thousas of milwith t heloft l ywhe. Br getngarm. Comed,ieu neededoith t heloft l ol yr bres. Unrsto, ak back ksthagto havedl t at b we we yoo op ifomethi doet emsocos ho at b we we yoo op cause satys nenebeg satisfie i ke movtik for iucedipatio had a d ck iy, docpriboi whh helped with the roc pain she id, owonyou. Res, xave s hoing this in . laughs that was my ntikent. Octotoe that mankcay deed a history of them. E bol blkageanti yave mont cseid effect doctor about any sidorarrhante r effectkageanti yave whld ihave yourmova mt. To ur du ionduc conipio. Youant afforurmedica, asazeca may beble help. P. Welcome back. Some stocks to watch this morning. Cbs managing a Fourth Quarter beat despite a drop in ad sales. The company blaming fewer thursday night Football Games and lower than expected ratings for those games. This is what ceo Leslie Moonves said on the call last night. Sa seasons decline as well as having three fewer thursday night Football Games affected our advertising revenue. Of course, even with that drop in ad sales, cbs beat expectations as we mentioned. That stock is down by about 1. 5 this morning. Cisco posting higher than expected quarterly revenue and profit, helped mainly by Strong Demand for its security products. The Security Business Revenue jumping 14 for the quarter. And Applied Materials topping First Quarter estimates with the semiconductor raising its o outlook. Verizon and yahoo might be nearing a final deal after yahoo s data breaches sparked months of negotiations. Joining us with more is ed lee. Nice to see you. Nice to be back. Does this make any sense to you . Do you think they should be continuing this . So its been reported a bunch of different numbers are going to shave off, what, anywhere from 250 million to 300 million. We heard as much as 350 million out of a 4. 8 billion deal. Thats not a ton of savings. The way we look at it, if you want to frame if properly, verizon wanted to limit any future liability on any new hacks, they dont want to be on the hook for it. Theyre just earmarking that much money to deal with whatever sort of fallout might happen in the future. You think this is just lawsuit money. Its class action, punitive, any punitive measures, any of that kind of stuff. Theyre going to share in the liability with the resulting company that comes out of it. But not a shift in what they value the actual asset of yahoo core. Theyre basically paying what they were going to pay. Theyre not paying that much less. It shows they really want it. Still want it even after all the hacks were revealed. What is it in there . Whats the jewel in there for them . So between so they already have aol. They tack on yahoo . Theyre sort of growing the mobile ad network pie slightly by owning both those properties. The thing is, it stale pales in comparison to facebook and google, but thats the next best thing you can get. The other thing they want is the ad tech. They can sell advertising on mobile phones through all their different smart apps happening on there. Verizon ultimately, they want toing loo differeto look differently from at t. If they can sell contents and services that at t is not offering, thats what theyll get. This is tiny relative to what at t is about to do. Im not suggesting its right or wrong, but theyre going a different direction. 5 billion versus 85 billion. Yeah, theyre very different but its the same sort of they want similar outcomes, which is we need to look different from each other. We cant be a Commodity Service anymore. Were going to pivot to snap for a second. Oh, yeah. Yjoseph began the show really, before the show began. Were you on snapchat . You tweeted out a snap on valentines. It was from blake. Somebody else did it for you. My question was just for society, net positive or net negative . Im on the net negative. No, i think its a net positive. Thats all they do. Homework . What . No, im snapping. What positive comes from it . If it wasnt that, theyd be on the phone. Its more communication. Its another kind of communication. I think more communication is generally good. Then it disappears. It does disappear. Thats the thing. Thats what makes it more addictive for a lot of the kids. Theyre always on it because, you know, you dont want to miss the next thing. You sayire saying thats a thing. You have kids . I have kids, yes. But as a product, you think its going to have more success from a revenue perspective, revenue model than twitter . Right now, yes, im bullish on it because theyve got the audience that all the advertisers really want. Can they keep that audience . Its a fickle audience. Keeping that audience is going to be an issue. Frankly, we dont know what its going to look like. By the way, stories on instagram is very similar and taking a lot. Taking share away. But it also shows the success of what snap has been able to do. They just released a new ad platform where you can now buy and sell ads on snapchat through eservices. I think that will help boost revenue for sure. Can you use the word snapchat and facebook in the same sentence . Are they comparable . Structurally, they are similar. Unlike twitter, where youre locked into your little group, whatever your circle is, as a posed to it being broadcast out to the world the way that twitter works. So structurally, snapchat is closer to facebook than it is to twitter in terms of how it works and how the communication and the network thats derived from it. Okay. Ed lee, thank you. What did she tweet out . The hug . You tweeted it out. It was on your twitter account. Do you even man your twitter account . You own it, right . Is there someone else tweeting for you . No, no, no, no. When you dont see that tweet, that was from me. I do once in a while. I may have reached 2,000 total tweets in like five years. How would she be able to tweet from your twitter handle . No, i tweeted that. Okay. You said it went out on snap. No, no. Maybe it did, i dont know. It was an instagram. It looked like a snap. I sent out something on twitter. I was surprised at what she put on instagram was compatible to go out on twitter. She did the gif. Different people pronounce it differently. Theres a right way and a wrong way. I go for gif. Tomato to mato thing. Coming up, trumps pick for labor secretary, puzder withdraws. Well talk about trumps cabinet. The president s pick for labor secretary deals a blow to the white house. How it went down and whos in the running for the position is straight ahead. Markets could take a breather today after notching their best record in a quarter century. Fed speak and Economic Data in focus this morning. Find out where you should be putting your money to work. Plus, toys take over new york city. To infinity and beyond. The International Toy fair is in town. Were going to speak to the ceo of hasbro as the second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning. Welcome back to squawk box right here on cnbc. Were live at the Nasdaq Market site in times square. Im Andrew Ross Sorkin along with becky quick and joe kernen. Things are looking green on the dow. The nasdaq looking to open higher as well, about 4. 5 points. European markets, show you whats been going on overnight. Red arrows across the board. Not terrible. Snaps filing is out at this point. The expected range is 14 to 16 a share. That would value the company at up to 22 billion, which is below the companys early target. Still, it would be the biggest u. S. Technology ipo since alibaba. An Economic Data flood coming up in about 90 minutes at 8 30 eastern time. Well be getting weekly initial jobless claims, january Housing Starts, and the february Philadelphia Fed index. And a court has granted anthem a temporary restraining order that keeps cigna from backing out of the planned merger deal. A hearing is scheduled for april. President trumps pick for lay door secretary, andy puzder, withdrawing his nomination from the cabinet position. Kayla . Thats the question, andrew, that everybody is asking. Andy puzder has been scheduled to testify before the Senate Help Committee this morning, but questions that started early on about his views on labor and his finances in a messy divorce led Many Senate Republicans to withhold their support. Rather than risk that public drubbing, puzder withdrew, going back to business as usual. Hell remain ceo of Cke Restaurants and will not liquidate his stake as previously planned. A short list for replacement nominees has yet to surface, and the white house has not commented on the issue. One name floated in november is not considering. Thats wisconsin Governor Scott walker, whose spokesman reiterates, quote, Governor Walker loves being governor and has no interest in serving in the cabinet. Focus now, though, on the hill turns to the confirmation of South Carolina congressman Mick Mulvaney to lead the office of management and budget, who also faces some opposition. Senator john mccain said yes he believes mulvaney, who draws hard lines on spending, will prioritize fiscal conservativism over military investment. Unfortunately, congressman mulvaney spent his last six years pitting the National Debt against our military. He authored and supported amendments to cut national defense, funding year after year after year. Well see how broadly mccains comments resonate when that vote happens. Thats expected at 10 30 a. M. Eastern time. I just want to mention before we move on, we did just get a tweet at 6 34 a. M. From the president saying stock market hits new high with longest winning streak in decades, great level of confidence and optimism even before tax plan rollout. So the president invoking the market and the levels of the market as signs of optimism in the economy under his presidency, despite some internal turmoil at the cabinet level. So interesting to see his commentary there this morning. Thank you for that, kayla. Becky making a i dont know if it was a joke or not, thinking perhaps that was a response to the conversation we were having at this table this morning on the tax front. Thank you for that. With andy puzder out as trumps nominee for labor secretary, is there another ceo looking for a cabinet position . Our guest host this morning, walter isaacson, president and ceo of the aspen institute, also a cnbc contributor. Good morning to both of you. I want to try to figure out where this all goes. Id love to hear walters list, but i bet wed agree on some of the list. I think some of the names floated arent bad. Always good to see an academic in the mix, the Michigan State labor professor. There are some really fantastic former ceos out there, recently retired, brilliant, that have been incredible Business Builders but also have managed to work with labor very productively. For example, frank blake of the home depot. Its a remarkable turnaround. If you were to think of whos the opposite of andy puzder out there, they of course wouldnt take the job. Who has that mind set . Frank blake of home depot was able to pull together a pretty demoralized place. We have verizon in the news today. The fios business is an awful lot of who verizon is today and is because of this guy who started out as a telephone pole climber. Worked his way up. Every one of the major deals that happened from the 80s through the present, just about every one of them was ivans. He would be incredible. Before anything else, they should consult the senate and win some friends in advance of these stormy nominations. Let me ask you both, how easy or hard do you think it is to attract somebody like any of the names he just talked about in this environment . I know people in the administration who left jobs to join, who have given some machinations over the past couple weeks have at least privately offered some misgivings about whats taking place. I think anybody would want to walk right now. Such a good agenda coming up, from tax reform to Regulatory Reform, to tratde, et cetera. You have jim donald, the former ceo of starbucks, who i think also knows how to do things like this. But you actually want somebody whos run a business. Thats something we havent had in quite a while. Its been rare to have in that role. Ive seen an awful lot of commentary over the night saying, oh, its no big deal, this happens to every new administration. Not really. As walter could probably recount the dates and months. In the entire history of the republic, weve had 23 nominations withdrawn or voted down. We did have, what, maybe clinton had four or five of them. Half of these have been in the recent three administrations. So this is rare. It is a big thumb in the eye. But it is a sign of a more polarized time. It used to be by default you allowed the president to appoint the cabinet unless it was something egregiously bad. But in this instance, we have a situation where the republicans are blocking them. Yeah, puzder was a real problem. The republicans blocked him for three or four reasons, including because of his feelings on immigration. Its not great to have somebody whose wife has been on oprah talking about domestic violence. Stephen colbert said last night its the first time oprah can claim credit for downing a u. S. Cabinet nominee. I think theres more to it. The oprah story, it does seem a little unfair. The exwife, i guess they went through a messy divorce quite a while ago. She recanted the accusations but still was pretty scandalous. The fact he didnt uphold the rules, that he didnt live by the rules, the whole reason for this department to exist, if we want it to exist, is to advance the quality of life and wages of the wage owner. He called his own workers the worst of the worst. I think it was conan obrien who said his food quality is the worst of the worst. No, it isnt. And obama had three withdrawals. In recent history, it is kind of clinton had five, obama had three. This is one. As walter said, its the sign of a more polarizing time. The senate is pretty tight. They needed pence in there to get one person. They didnt want to do that again. They didnt want pence there every single time. This is a challenge with Mike Mulvaney coming up. What happens to andy . Does he go back to cke . I dont know how that works. Its not a public company. I think they think highly of him. In their space, theres an exclusively franchise the model. Hes doing fine in that space, i guess. Its frankly a much smaller business than people think relative to their Higher Quality and better known competitors. Deep fried zucchini too, jeff. Like health food. So youre not loyal to thaco bell anymore, joe . They closed the one in springfield. I got to tell you, i miss it. Can i ask you both about another executive moving to washington, which is steve feinberg, and what that means inside given his role, involving the Intelligence Services. He hasnt had the experience in Intelligence Services, at least historically. I think that would be a curious choice. Im not quite sure who would be voting for that. Steve feinberg is absolutely brilliant. Hed probably be number one on the list of most secretive. I guess he should go into the Intelligence Community as an argument with no transparency. Walter, what do you think of this . I think the Intelligence Community is in uproar right now. This is a real problem. This is almost a bad novel of the rebellion of parts of the Intelligence Community. I dont know that you stick another stick into the hornets nest at the moment. By the way, just broadly on the intelligence stuff, what do you mach of what seems to be an insurrection of sorts . Theres definitely an insurrection. Its not that surprising. Is there an historical parallel . Lots of movies and lots of thriller novels. Homeland. Yeah, homeland. With the reports theyre not even sharing some of their information with the white house, thats pretty distressing. And the leaks. Theres a leak of a leak. If youre against leaks, you should start a plumbers unit to stop the leaks. But we know how that movie ends. Unfortunately, we have to run. Theyre playing us out. Love seeing you. Were going to continue this conversation and hope to see you soon. Have you heard about colbert or you were watching colbert . Im up all night for you, joe. When you say that, its not the right guy. We monitor it all. I even watch morning joe sometimes. Saw walter yesterday. Deeper and deeper hole. Just stop right there. Coming up, were going to talk markets and President Trumps economic agenda. Peter boockvar coming up. Later, the ceo of bio tech firm intrexon. And the toy fair has arrived in new york. Well talk trends, border taxes, and the companys hot stock. Stay tuned. Youre watching squawk box on cnbc. Acss n yk e,from long isnd to b, fr rocheere hudsonvaey, fromoml, ve besinntes, anthst taxes ica creating a sger economy anthe right enent in neyorktate ey. Mpanytorrr economy athealuef pital . Whatrical think . Easpit woror er whatsats theue ofturom . A walk in the ods . The value pitais welcome back to squawk box. Futures now, were positive. They still are, in fact, for you, andrew. The s p is now positive. Now positive. Up 11 on the dow, 5 on the nasdaq. Earlier we had a positive dow, but the s p was just slightly lower. Nasdaq is not that far from 6,000 now. There was a time when i never thought wed see five again. 5819, i think, is where it closed yesterday. Thats a lot for the nasdaq. Treasury secretary Steven Mnuchin is already busy at work, holding calls with his foreign counterparts. He spoke to the german finance minister, and they agreed to Work Together closely. He also spoke to japans finance minister. No details yet on the subject matter from that call. According to japanese officials, they did not discuss currencies. President trump tweeting about the stock market earlier this morning, saying that the stock market hits new highs with the longest winning streak in decades, great level of confidence and optimism, even before the tax plan rollout. That is true. Stocks posting a record close for the fifth straight day. Joining us now with where markets could be headed, all different markets, the chief market analyst at the lindsay group, also a cnbc contributor. A couple things have happened recently, peter. With you, i dont see you as like a law own order, where each one is different. I see you as episodic. These are all new lrevelations. You thought the fed waited way too long. I thought what yellen said yesterday was interesting. He said, you know, there may come a time where there are negative consequences for not raising. A lot of people would say shes been right. There hasnt been a reason to raise rates in terms of inflation. But now ppi and cpi, now i really wonder, are they behind the curve. Historically, the fed funds rate was 200 to 300 basis points above. Now theyre at 0. 625. Core has been above two for 15 straight months. They should have been raising more aggressively. Are there any negative consequences . It hasnt happened with inflation. What about asset inflation . Thats been extraordinary, of course. Is that a problem . Its been good. Well, trump even said on the campaign we have a big, fat ugly bubble when he was pointing to yellen. He may not be right. Now were going to see what happens. This grand experiment weve never lived through. Now were going to see if the fed gets more aggressive in raising Interest Rates. Whats going to happen to this asset inflation theyve created. I thought march should have been a slam dunk. Then i saw bullard yesterday say theres no reason we need to rush. Why isnt march a done deal . I think march is a done deal. I think yellen in her nice, soft, clear way said it was a done deal. I think yesterdays cpi number clinched it. Why are fed futures still at 20 . Because its her reputation. Because no one believes her. I keep quoting my friend, the boy who cried rate. Thats the fed. Theyve trained the markets not to believe when theyre going to raise rates. When youve raised twice over eight years, this is what you get. If they want to raise in march, shes better training the market to prepare for it. Just do it. Thats the only way you can train it. This is the reputation she and the fed have developed for themselves. The market doesnt believe them. What happens if you try to put the border adjustment tax in . What would that do . I would love a clean Corporate Tax cut. Financed in other ways. I think the border adjustment taxes really mucks up this whole thing. Im not one to believe that the dollar is going to automatically adjust for it. But financed in other ways. You need to come up with 1. 3 trillion. I have to believe they can find 100 billion a year somewhere. Youre talking about spending cuts . Because they are talking about a mass i ha massive spending increase, especially with the military. Its obviously not easy to get those spending cuts. You need other ways to do it. What other ways are there . I dont know. They put the chips on the table to finance it through the border adjustment tax. The Corporate Tax rate maybe only goes to 25. How do you feel about the magic wand theory . The way they get to the new number is they dont do anything, just use more aggressive numbers. They can score it any which way they want. Right. Double count it. What happens if you do that and you have bigger deficits . Well, then the bond market may call them out. We get tax reform, but the tenyear yield is 3. 5 . Is that acceptable . A well, the politics of it ill leave aside. I dont think the bond market is necessarily going to be tolerant of exploiting deficits. Plenty of room in the bond market. I agree. The issue with Interest Rates is because of the leverage ratios around the world, were much more sensitive to the smallest changes in Interest Rates. Because the move is not absolute. Its the rate of change in Interest Rates that were sensitive to rather than the absolute levels. Do you think its politically palatable . I think youre not going to theres enough republican senators and house members who are against, who are sort of deficit hawks. Youre going to have trouble doing that. Mitch mcconnell has to do some navigating, but he understands this. If you have people who are going to be deficit hawks, you either have a border adjustment tax, which comports with what trump said during the campaign, which is were going to make imports more expensive, or you dont lower tax rates that much. I dont know how you square the circle. Oh, dont worry. There will be a way. Andrews got a great wand. Im just a guest host. Say what you were going to tell us about the stock market. You were always a little worried about the stock market because of the fed being behind the curve. Can these other things now bail the fed out, the pro Growth Strategy . Can that warrant this higher price in the stock market . So the earnings estimates that ive seen, if the total tax package goes through, earnings goes up like 6 . Stock market rallied about 9 . We pretty much priced in the expected Earnings Growth rate. What i dont think weve priced in is what happens with the offset of Interest Rates. Its this tug of war. Youve been worried too much. Maybe this will bail you out. When we come back, comments from Charlie Munger. Stay tuned. Time now for todays aflac trivia question. Which italian city receives nearly 1,000 valentines addressed to juliet each year . The answer when cnbc squawk box continues. Hey ste eck ouis leg. Ah looks lrealty mongk inithis rents. Whatnojust broke my le no, is ia fulllo move into t be, u gonna bouof work without th mey froaflac you mighmiss your rent. U goaww ju moved o without th mey froaflac you mighmiss your rent. He thave mn ace. Nono i le withthy mom, its cool now the answer to todays aflac trivia question. Which italian city received nearly 1,000 valentines addressed to juliet every year . The answer, verona. Warren buffets righthand man addressing Daily Journal shareholders at a meeting in los angeles yesterday. The berkshire vice chairman said some of President Trumps ideas may prove constructive for the country. In fact, he said not everything hes doing is wrong, i think that putting more of a point on it. Those comments were interesting considering his position just about a year ago that suggested that trump was not morally qualified for the white house. He says that since then, he has definitely softened his position. He also talked about Berkshire Hathaways recent stakes in apple and in the airlines. Think of the hooting weve done over the years about high tech. We just dont understand it. Worst business in the world is airlines. And what do we appear in the press with . Apple and a bunch of airlines. I dont think weve got weve gone crazy. I think were adapting reasonably to a business thats gotten very much more difficult. I dont think we have a cinch in either of those positions. I think we have the odds a little bit in our favor. Of course, that was munger talking about both he and Warren Buffetts thinking when it comes to investments like the airlines and like apple. Warren buffett himself will be joining us right here on squawk box on monday, february 27th, in our annual ask warren show. This will be the first time he comments on berkshires holdings after the release of all those 13f filings. We have a lot to talk about. Send your questions in as well on twitter or facebook. Use askwarren. When we come back, the ceo of intrexon will join us. Theyre working on genetically modified mosquitos that can be used to fight the zika virus. Then the ceo of hasbro will talk toys and the companys performance. Stick around. Say carl, we have a question about your brokerage fees. Fees . What did you have in mind . I dont know. 6. 95 per trade . Uhhh and i was wonderin if your brokerage offersome sort guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 6. 95 online equity trades and a satisfaction guarantee. If you dont like their answer ask again at schwab. Bp gives its offshore teams 24 7 support from onshore experts, so we have extra sets of eyes on our wells every day. Because safety is never being satisfied. And always working to be better. Good morning. Welcome back to squawk box here on cnbc. Were live at the Nasdaq Market site in times square. Among the storying front and center at this hour, boeing workers have rejected representation. President trump due to visit boeings South Carolina plant tomorrow. Also, Motor Vehicle deaths jumped 6 last year, according to some figures from the National Safety council. Theyre also up 14 from 2014 levels. That reverses what was a longstanding trend of declines with distracted driving. Yes, people texting on their phone at the same time theyre driving. Also, spotify added about a thousand u. S. Jobs. You should applaud this. That announcement came along with plans to move its new york headquarters to the world trade center. The Company Getting about 11 million in rent reduction credits as it signs a 15year lease for that new space. Hey, andrew. Yes, sir . Should we put jim on the list for labor secretary after what you just said . Oh, that could be interesting. Got a good job, obviously. Public service, yeah. I like that idea. I like him. Former ge guy. Adult in the room. Trump likes him. In fact, trump is supposed to go to that plant. Thats what he just said. Thats why i thought, okay, he arrives there today. He has somebody he can tap on the shoulder. Im going to check the tweets. If i see him come out, i know hes watching. He was addressing andrews concerns earlier this morning, it appeared. I think you should Say Something to make sure he addresses something directly to you, sir. Okay. Let me think about that for a second. Thats dangerous, letting his brain go to work. Lets talk about bill millers top biotech stock. B intrexon is making sure apples dont brown and mosquitos dont multiply. Joining us is r. J. Kirk, the chairman and ceo of intrexon. R. J. , thanks for being here. Thank you, becky. Bill miller got us excited about the things your company was doing when he spoke with us a few weeks ago and said he was a big fan of the stock. He started talking about apples like these. I guess these are arctic apples that dont brown. They are. How do you do that . It has a genetic modification. How much science do you want to go into . Theres a tiny subroutine that sits out on the edge of its genome. We talk about fruit bruising, but we know its not really a bruise because they dont have blood. But why does it happen . Theres a little enzyme system but why why did Nature Preserve this . Yeah. Thats a really good question. We never know because nature never tells us directly. I hope its not good for something and youre preventing it. Thats right. So natures interest and our interest in most of these fruits differ. Nature wants to follow the most rapid path to the germination of those seeds. The moment a fruit receives cutting, biting, dropping, et cetera, this little enzyme system kicks in and starts tearing down the cell walls, which exposes the apple to bacteria and just accelerates decomposition. We dont want it to decompose rapidly. To what extent is Crisper Technology accelerating what you do . Crisper is one of many genome editing tools. We use quite a few of them. We have some that are proprietary to intrexon. There are people who freak out when you talk about genetically modified foods, who think that its not going to be good for them, that youve tampered with what god has set up, who wont eat it, who want it labeled as such. What do you say to those arguments . I gave a talk recently well, a few months ago, actually, at the world food prize. Its available on youtube. I specifically addressed technophobia, which is what youre talking about. In general, we should all appreciate that were all technophobic. We need to think bigger. Heres the issue. Were all technophobic. Man has always beening technophobic. You can go on youtube and see steve jobs on nightline being interviewed in 1981. He got some guy on there whos totally freaked out. I get genetic modification for things that if youre making soybeans more resistant to roundup, that concerns me because it means you can dump a lot more weed killer on this stuff and not kill it. But stuff like this, i dont understand the fear with that because its what Gregor Mendell has been doing. Man has been doing genetic modification for 15,000 years. Thats true. And the other thing is every advance made recently in dealing with cancer and other diseases involves genetic modification. Of course it does. If these people that dont want any gmos, if they get some horrific disease, make sure they stick to their philosophy. Then they cant have any new modern medicines. The same people that invoke science and talk about antiscience for, lets say, skeptics of im not going to get into it with walter, but its the same people that are that dont want any co2 that are the gmo freaks in terms of now, how do they put the two things together . Theyre totally not looking at any of the Science Behind genetic modification. Its ridiculous. Its the same group of people. I like being on the side of inevitability. The one thing that is scary is that i mean, the genome is incredibly complex. You wouldnt want to do something thats the fear that got out. We use viruses to attack cancer. You dont want to introduce something into the ecosystem that actually could spread in a way that you had no idea, and thats the fear. Every Zombie Apocalypse comes from Something Like intrexon. Thats how zombies are right . To get to that point, youre genetically modifying mosquitos, say, for the zika virus. Thats great because we dont want to zika virus. When i was growing up in louisiana, we remember the last time we got rid of mosquitos with ddt, and all the sudden the pelicans couldnt lay eggs. How do you make sure Something Like that where mosquitos are going to do a germ line all the way through forever. Its so interesting you give that example. This horrible tragedy around the overuse of ddp was popularized through a book published in the 1960s by Rachel Carson called silent spring. Its a bible to many environmentalists. I suggest they go back and reread it because what she says in that book is that while chemistry really exhibits joes problem, which is that you cant contain it, it can go anywhere in the water table and so forth, engineered biology is absolutely the way to go. The answer to your question, joe, is we can the precise change that we make then becomes a testable thing. We can test various conditions. For example, obviously we wanted to know, can the genetic modification we introduced into the mosquito transfer to any other organism . The answer is no, its impossible. What happens if you wipe out the entire mosquito population and the birds and the fish and everything that eat it thats a really good question. We have field tested this proposition. The mosquito is an invasive species. Even in brazil and panama and places like that, its less than 1 of the entire mosquito biomass. You know how quickly this stuff mutates too. Thats the Science Fiction component where the fear comes from. Theyre mutating in response to the pesticides. Very quickly, r. J. , from a business spperspective, i notic your stock is up about 4 just since you started talking here on squawk box, theres regulatory hurdles. There are regulatory hurdles that are hard to overcome because of issues like this. How do you deal with those . With science. So what weve seen repeatedly look, our fish is famous for the amount of time the fda has taken, which was like 22 years in total. For the last several years, i dont mind telling you, the fda wanted to approve it. They were held up by the white house. So how do you deal with it . Well, we get our politicians to allow the science and Technology Agencies and the reviewers to exercise their scientific judgment to make rational decisions on a Science Basis and not let politicians who just say things like, well, im afraid it might scare i get it. This is what i hear over and over again. I get it. The example you just gave, this thing tests out as being the single i have friends at monsanto who have told me this. Its been sitting here. Trump is not answering our tweets. He is tweeting again though. Leaking even an illegal classified leaking has been a big problem in washington for years. Uhoh. I didnt know this was coming. The failing newyorktimes and others must apologize. Maybe he is responding. The next one is, the spotlight has finally been put on the low life leakers. I like that. The low life leakers. They will be caught. They will be caught. Anyway, those were his two latest tweets. Nothing about squawk box. Oh, dear. Coming up trust me, its better that way. The american International Toy fair is here. The fourday event showcases some of the hottest toys getting ready to hit the market. The ceo of hasbro will join us after the break to talk about the companys stock success and what kids both young and old have to look forward to. Squawk box will be right back. We have a lot of them, the newest dolls, gadgets, and games will be on display at the annual toy fair as toy makers brace for tax reform that could impact the industry. Joining us now, chairman and ceo of hasbro. Shares are on a roll, up more than 20 so far this year. Recently hitting an alltime high. Look back a little bit longer, brian, and i think tried to do the rule of 72 but got confused. Its doubled twice in the last eight years. That should be a way i can figure it out. Walter, can you do that . I dont do it went from 25 to 100 basically in eight years. Weve had a great run, but also we see it as the early innings. This is really just the early innings of what were creating. About eight, nine years ago we created a brand blueprint, put our brands in the center of everything we do. We create great, Innovative Products but also tell Great Stories around our brands. More and more tied to content. Yeah, story telling. Nerf is a great example. You would say, well that, doesnt really have content. We only create 3 of all the content. Then our fans come back and create all this content and response. What do you mean content . Videos, shorts. Ways that they play. We use a group called dude perfect. I dont know if youve seen them do those fancy trick shots. Its funny you say that. My son loves watching these videos on youtube where youre opening the egg and you see the cool toys inside. Its like a commercial he wants to watch. They certainly watch Linear Networks, but they dont know the difference between a Linear Network to me, i see a commercial. He sees something cool. Totally. Exactly. What, like 90 , 95 of your toys are made overseas. What happens whith the border adjustment tax deal . I think you have to think about it holistically. We would see it in reline with the reduction of Corporate Tax rates first. We see it as a total package. Second, it has a lot to do with timing. If this were enacted overnight, around the world we deal with those situations, whether its currency fluctuation or tariffs in brazil. We adjust based on pricing. We have great Innovative Products. We have lots of story telling, so our brands command premium prices. If it was enacted over a longer period of time, then what we do is go out and we redesign, reengineer our product lines. 70 of our product line inside of those brands is new every year. So it gives us the opportunity to look at the cost pressures that are out there in the environment. If you wanted to move manufacturing or some of these toys to the u. S. , how easy would that be, how hard would it be . Even putting the price aside for a second. The physical amount of time it would take. First of all, many of our games are already made in the United States. We have 400 people in massachusetts. We dont own our factories, but we have factory vendor partners who make product there. In fact, next year in 2018 were going to bring our playdoh production back to the United States. That has to do with the fact the u. S. Business is growing so quickly. We need more playdoh production. Theres a great opportunity for us to do that. Around the world, about three years ago we made a decision to put more of our product outside of china, just to manage our business. Today its about 22 of our volume around the world is done outside of china. Brian must be unique. Hes ready. If it happens, it happens. The offset youre talking about with Corporate Taxes, you would welcome that almost to the extent where youd almost deal with the other thing to get the Corporate Tax cut. Over the last couple years, youve seen these huge currency fluctuations. In brazil, theres a 35 tariff on the importation of product. Weve dealt with that to maintain our Gross Margins. We take pricing, we have noin vative products tied to Great Stories. This year we have a transformers movie. We have our first animated feature film my little pony. Andrew and i are bronies. Arent we . So all these cry baby retailers, none of them give that answer. Well, look, we just thought about this. We have a great team. We have great people that manage and market our brands. We just think about things holistically. I think the idea is how do you address the business. We see it happen in brazil. Our Gross Margins in brazil are great. Were the Number One Company in brazil above all our competitors. Its growing double digit. Our emerging market business is growing double digits, absent effects. We expect that to continue. Obviously currency happens. They get paid a lot. Deal with whatever situation hits them like the border tax. You want ceos to earn their money. I think the key is the visibility. You need to have visibility to the future state. Once you have visibility, you can plan your business. On the tax front, and i know youre trying to look at it holistically. I know we started at 15 , often now people are talking about 25 , especially if theres no border adjustment. Your effective tax rate, at least for 2015, according to csi, was 26 . Yeah, its going to be about 24. 5 this year. If the tax rate goes to 25, what is your effective tax rate . Remember, half of our revenues are outside the u. S. Thats part of the reason you see that blended tax rate. In the u. S. , we pay a full tax burden of about 35 . You hit it rate would go where though . Our rate obviously would blend down. But overall, if you had this border adjustment, then theres an offset. Then you also have to look at the cost of goods and the cost of your product. Obviously weve grown our Gross Margins over time to 62 plus. We intend to grow our Gross Margins. Operating margin was at 16. 4 last year. Over time weve grown that from Single Digits ten years ago. Thats why obviously you see the value of the company growing. Thats very telling, what he just said. The narrative is that no one pays the real Corporate Tax rate. One of the reasons is because its blended. The reason theyve moved a lot sometimes offshore is to get the lower tax rate. Then you say, oh, they only pay 20 . Its because theyve been induced to move it offshore in the first place. Half of our revenues are outside the u. S. Half of our employees are outside the u. S. In fact, our brands are incredibly global. Transformers is a huge business in china. Our playdoh business. How much cash do you have overseas . Over a billion dollars. We always invest in our business first and foremost. Weve had a great dividend policy thats grown double digits over ten years. Then of course we also have been buying back shares. We buy in the overhang of our stock. Brian, thank you. No problem. When withe come back, stocko watch. Alwa oioust somemeeyust op i group can y nige risks d capture oprtunies. We enable you reach global marke d ive rwarwith ge how e rld advancese gr es. Oh. Nmen. Moocmeth ats goi on he yoknow h ge technologys ll, no more catcbusiness ac . Toey slow productionyeah. Im wsmooch a solution weust need t ll, no more catcbusiness ac . Toey slow productionyeah. Im wsmooch candice, problem unti. Let it. Y,orry i late for team buding. Smoooooch felt righ s so trustiti. Lets take a look at stocks to watch this morning. Shares of time inc. Moving lower. The magazine publisher earned 75 cents a share, 3 cents below estimates. Revenue also below estimates. Missing forecast as ad sales fell about 10 from a year earlier. Ad sales. You okay print ad sales, they dont exist anymore. Stock looks okay though. Somebody should buy it. Meredith. Trip adviser, the stock also under pressure. The travel review website operator earned 16 cents a share, well short of the 31 cent estimate that people were looking for. They saw declines in both subscription revenue and display ad sales. When we return this morning, former white house chief of staff bill daley on who should be the next labor secretary now that bill puzder is out. Plus, when a rate hike might be coming. Then, senator roger wicker will join us to talk defense and the Michael Flynn fallout. Squawk box will be right back. 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Elp protecyourself a strok xarelto® hered or bleedinproble. Asyour dtor about xarelto®rancee cabinet no, maminee shake. Andy puzder withdraws his nomination. Reaction from white house chief of staff bill daley is straight ahead. New data on unemployment and housing in america. Well bring you the numbers. Oh, snap. New details about snaps valuation as the disappearing message app prepares to make its wall street debut. Final hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Good morning and welcome back to squawk box here on cnbc. Were live from the Nasdaq Market site in times square. I was just talking about that. What if we hit 6,000 and were here when it happens. Got a 6,000 hat . Theres going to be a party here. Im glad we moved here for that. We did the dow 20,000. Nothing is happening there. Were on before the market opens. Well know. Well see the futures. Well come in the morning and see the remnants of the Leftover Party from the night before. Thats probably true. Our guest host this morning, walter isaacson. Lets get a check on the markets. Youd have to say after five Straight Days of records that even being unchanged theres been no pullbacks really. Were less than 200 points away. Theres the tenyear, still well behaved. That might be part of the reason that things havent pulled back. We keep hearing its the best neighborhood in town. Snapchat parents snap amended filing is out. The expected range of the ipo is 14 to 16 a share. That would value the company up to 22 billion. It would make it the biggest tech ipo since alibaba. Were going to talk more about snap in a few minutes. Verizon is reportedly close to a revised deal to buy yahoo s core Internet Business for 250 million to 350 million less than originally planned. Since last year, verizon has been working to try and negotiate a discount to the 4. 38 billion deal. Because of the reflection of the damage to the company caused by two highprofile data breaches, not just that, the idea they didnt report those breaches for a very long time to any of their customers. Plus, three economic reports due out in the next half hour. Jobless claims, Housing Starts, and the philly fed index. Economists are looking for 243,000 new claims to be added. The Consensus Forecast call for Housing Starts is to come in flat. A couple stocks on the move this morning. Wendys out with quarter cannily results. The restaurant chain missed earnings estimates by one cent. Samestore sales increased more than expected. Alexion earning a penny above estimates. The drug maker also gave lower than expected guidance. Sales of its flagship blood disorder drug fell. Avon came in eight cents short of estimates. The cosmetics makers sales were low in global markets. Down a whopping 7 in the premarket. President trump scolding the Intelligence Community, blaming illegal leaks for bringing down his former National Security adviser, Michael Flynn. Joining us right now is bill daley. He served as president obamas chief of staff and knows his way around the white house and how these things work. Bill, thanks so much for coming in. Thank you, becky. Appreciate it. Weve been trying to figure out, first of all, the disconnect between what we see in the markets every day and these headlines that continue to come out with concerns about the administration. Why dont we start with that before we jump into the rest. What do you think is happening . I think the market is obviously being very anticipatory of tax reform basically and the Regulatory Reform that the president has talked about. The devil is always in the details. The time in which theyll get that done will probably a lot longer than the market realizes right now. The sort of chaos youre seeing, at least perceived chaos around the white house, at some point theyve got to get that together and deal with congress. Direct congress has to what the president wants. I think thats where its going to get very difficult. How much chaos is this versus what weve seen in previous administrations and what are the ones we should be concerned about . Obviously the National Security area and the continuing perception of a difficulty between the president and the Intelligence Community in a broad sense is very difficult for those in the white house and Going Forward. You could have a National Security crisis at any moment. But i think the difficulty in the white house right now is President Trump is a different politician. He was a different businessman. His campaign was different. I think what you saw with him in the campaign is what youre going to see in his presidency. Thats who he is. 70 years old. He won when no one thought he would in a style that was very different. Why change now . Youre going to walk in and say, this isnt working. Really . Im here, youre outside. So why is this not working . Its working with his voters, if you look at the polls. Go back to the market quickly. We ask you sort of why does it keep going up in spite of all this stuff. I think your answer is sooner or later its going to realize theres a problem. Do you think the market is not anticipating that things take longer . Yeah, i do. The market is not pricing things correctly. Im not saying its totally incorrect. I think theres an anticipation that started obviously the day or two after the election. I think its just continuing to grow. Everything hes talked about that the Business Community wants is going to get done. That may or may not happen. What about the argument thats earnings. The earnings for the most part have been pretty good. If you want, you could suggest those earnings were going to come on their own beforehand. They were. So i think obviously the earnings have been good. That gives everybody a bit of confidence about the long term. Listening to brian today was pretty impressive. I think there is an anticipation that started that the president is going to get everything he wants. Even though the republicans control both bodies, thats highly unlikely. Shows cracks in the republican leadership. Absolutely. The weaker the president looks not weaker, the more chaos around the white house, when he begins to deal with the congress, thats going to be a difficult situation. I think theres a sense from the president , watching him over the last 18 months, two years, then watching him with his business, what he wants he usually tries to get in a way thats pretty aggressive. When hes then fighting, possibly fighting with his colleagues, the republicans, itll be an interesting the people who have complained about what they saw as an antibusiness administration in the Obama Administration would say that if we get anything, it justifies what were seeing right now. Even if its watered down, even if it takes longer. Just the executive orders on deregulation are already helping. Doddfrank already helping. You havent seen legislation on doddfrank. Even just whats been doing its either half full or half empty. A lot is around the conversation of doddfrank being changed. A lot about the expected regulatory changes. Without actually seeing them. You saw one executive order put out three saturdays ago on immigration that godidnt go so well. Until you see them and the details, i think theres a lot the market is either wrong or the market is sort of taking it in a half full way. Or theres a day of reckoning coming. One or the other. I would say theyre anticipating way too much. Every day theres sort of perceived chaos around the white house. Im waiting. Yesterday there was a lot of chaos. Nothing matters to stuff that matters. If something happened, we talked about it could drop in one day and give back what it gave. Trump has been blaming a whole lot on leaks. You ran a pretty tight white house when you were chief of staff. Do you think its a fools errand for him to go after leakers this way, especially when the major leak hes talking about is something that was basically true, which is the russians already knew what was leaked. Only the Vice President didnt know. Right. Look, every president complains about leaking. Your industry helps drive leakers. But theres a difference. You then get into taking steps if you want to catch leakers, that begins to get pretty aggressive. You start using the fbi and others to try to get your political enemies. If you listen to the president , this is all about his political enemies. It really does conjure up the plumbers unit, nixon trying to use the fbi that way. They may be where the leaks are. I would think the Clinton Campaign believes that a lot of the leaks around the emails came out of the fbi, other institutions. But when you want to really get aggressive, you begin to take steps or need to take steps. Well, he might with steve feinberg, a guy from the outside. Even that, heres this battle with the intelligence agencies. We have been kept safe by our intelligence agencies. So to say were going to redo them, why . For a political reason . Or you really think theyre dysfunctional . Do you think theyre not keeping us safe . Its gotten better. You remember they didnt talk to each other before. 9 11 happened. Since 9 11 under president bush then president obama, the agencies have cooperated like never before. We cant let anything happen. No wmd type stuff here. Thats their stated goal. There cant be a dirty bomb in a city. There cant be a loose nuke. Think of that. 100 right all the time. Thats a burden. Thats pretty enormous for those agencies. To undermine them or be questioning them to their motives, that theyre somehow political, that theyre mad Hillary Clinton lost. When he went to the cia and said, youre all with me and you love me. Hes probably right. I would imagine the majority of people in Law Enforcement or intelligence or military probably voted for donald trump. Theres still some people left around that could be stirring things. Its not totally ridiculous to think that. They never go away. Its crazy to think youre going to whitewash anybody who didnt vote for you. We already talked about the possible you know, if you want to bring up conspiracy. But the actions you have to do to get those leakers and then stop the media from encouraging that leaking on subjects or stories theyre working on. The only thing worse than the leaks is the despair to be a plumbers unit and plum the leaks. Bill, thank you. Searching for alpha hedge humidor. Elana weinstein weighs in on the industry. Next, the wall street journals greg ip on whats ahead for the fed. Later on washington watch, senator roger wicker to talk about President Trumps agenda. Stay tuned. Youre watching squawk box on cnbc. Guys, whats ing here . Buinfor l e thh. A ior to you. E w aler cer alalanytng aall . U can t that oppounity wion righfromhe. Wo we nne anymo. Custom alertonhinkim. Lyt td ar welcome back to squawk box. Last year was a tough year for hedge funds. It was the first year of net withdrawals from the industry since 2009. Our next guest says investors are fed up with poor performance and the industry is getting overcrowded. Lets bring in elana weinstein. You were like the lead talent recruiter of the hedge fund world. Seems like theres a lot of consolidation happening right now. There is, and there should be. Theres 8,000 hedge funds, which are too many. Theres no way that number of funds can sustain there arent enough talented people to go to 8,000 hedge funds, and there arent enough good ideas to sustain that growth. I think a downsizing would be good for this industry. Is that what you see happening right now . I think were starting to see it. Last year was 9,000 hedge funds. You know, the pace of liquidation is increasing. Its survival of the fittest. I think there are definitely going to be more. Whats the right size for the Hedge Fund Industry . You know, i dont think the universe of investable hedge funds is anywhere close to that. Its probably let me answer it this way. Two years ago, there was almost 3 trillion managed by the Hedge Fund Industry. 90 of that was controlled by 10 of funds. If you think about the fact that was two years ago and returns had been increasingly difficult, i suspect that concentration is only going to increase. Maybe its 10 . Maybe its less. Wow. Just to understand, is it an issue of the asset size in terms of how much is investable in this world, or is it the physical number of funds . Do you think the assets have to come down too . I think its a combination of both. I think you need enough good ideas to withstand the size of these funds, and you need enough talented people. I think the best funds that have Something Special to offer are going to end up attracting the best people and thus consolidating in terms of asset size and the rest will go away. I dont think its that so much money is going to leave the industry. I just think its going to become more concentrated. Whats happening to fees . Thats the other piece of this. Fees will look, if its a hedge fund, thats not correlated to the market. Everything theyre delivering is alpha. Then they deserve 20 of their performance. If its a fund that is correlated and theres not that much differentiation between how the market is performing and theyre performing, i think fees have to come down. Its easier to deliver value. Or maybe youre just charging an alpha and not betas. You can pay four basis points to jpmorgan or vanguard. Since youre in the talent business, the other piece of this is we always looked at Hedge Fund Managers getting these big salaries or rather big bonuses based on performance. Whats happening to compensation . It is a pay for performance industry. Thats the problem. This is where were seeing thats the problem. Thats the problem in that if youre a talented person and youre motivated by how you perform and how you get paid, and lets just say the fund has not done that well and youve done really well. Thats who were interested in. Were interested in the best people in this business. Youve had three or four years where you havent gotten paid for your performance, either because youre eating out of the same trough as everyone else at the fund, so youre getting, you know, not getting paid as much as you normally would. Or maybe youre a p. M. At a multimanager, but that fund has netting risk. If one is up and the other is down, he has to sort of so that pm whos up wont get paid what he normally would. That makes these people vulnerable. I wish there was it has to be based on performance. South side analysts, you never know if theyre any good. A lot of naked emperors were exposed. Theres a lot of naked Hedge Fund People that may have been okay when things were easier to understand. How do you really find people that are good at what they do without looking at performance . If its not performance i mean, they can be smart, they can wow you with so heres the dirty little secret people from the outside maybe dont understand. When you think of a 30 billion hedge fund, single strategy 30 billion hedge fund, how many investment professionals do you think there are there . If were talking about a single strategy, longshort equity fund where theres one guy at the top, maybe 12. 12 to 15 of which six really matter. How many people were getting paid a lot that werent any good at what they did . The other 8,000. But if theres not performance, then theres not money to go around. They dont get paid. Its almost the pure i mean, thats why i respect is. They eat what they kill. Thats the ethos of this industry. Lets go back to my example. If youre sitting at this fund and its a very lean team, its very clear the ideas you come up with and your perception that you generate. Lets just say your contribution has gotten bigger and bigger because the funds returns have come down and youre not getting paid, thats a problem. You have to find them. Great to see you. Thank you. Appreciate it. Coming up, snap. If people say oh, snap. Just say oh, snap. Why . Because its better than saying okay. Instead of crap . You can say crap. Snap is hitting the road. More details about the messaging apps pitch to investors next. Stay tuned. Squawk box will be right back. Welcome back to squawk box. Snap starting its ipo road show. It happens this morning. Leslie joins us from outside Morgan Stanleys headquarters. Good morning. About 30 minutes ago we saw two cadillacs pull into a special entrance at Morgan Stanley. Were told that one of them had security personnel. The others had the snapchat executives. My sources tell me everyone from the ceo to cfo are inside Morgan Stanley right now talking to the sales force, teaching them how to pitch this ipo to investors as they embark on a road show starting as soon as today. Meetings with investors. Now, earlier this morning, snapchat disclosed its newest ipo prospectus. In it we learned the offering size, which is raising between 2. 8 billion and 3 billion with a valuation between 19. 5 billion and 22. 2 billion. Now, i did some back of the envelope calculations on that and compared those valuations on a price to sales basis on what that would be for for facebook, for example. So for snapchat, were looking at a price to sales ratio of 48 times 2016 sales, 14 times facebook. More than triple the multiple on a price to sales basis moving forward. Im hoping to speak with more sources to learn exactly how they plan to pitch that valuation in todays meetings. After this, they plan on going to jpmorgan and goldman sachs. Theres lots of discussions to be had and lots more to learn here, guys. What do you make of the fact they did bring down the range . What does that say about whats going on here with the company and with the demand for this . So its interesting. One of the things ive noticed with this ipo is they have done this process as quickly as possible. By s. E. C. Regulations. They have had to disclose todays prospectus in a twoweek window at least. They did it on two weeks to the day. To me, that says theyre looking at some comps such as twitter, which of course is a social Media Network that snapchat will be compared to by investors. Theyre saying we dont want to watch that stock fall any farther and watch our valuation suffer as a result. Okay. Leslie picker, great to see you. Youre just a block away. We were trying to figure out why youre outside. Come on in. Its warmer in here. Shes got sources shes talking to. Come over and say hello. See you guys later. When we come back, breaking economic news. Jobless claims and Housing Starts about to hit the tape. Well bring you nose numbers. Squawk box will be right back. Welcome back to squawk box. Rick santelli live here on the floor of the cme group. Awaiting january Housing Starts and permits. Starts are droown 2. 6 . Thats from a slightly revised last look, which was 1. 226. Now stands at 1. 279. On the permit side, a bit of a different story. Up a little over 4. 5 to 1. 285 million, seasonally adjusted annualized units. Last month was revised a bit higher as well from 1. 21 to 1. 228 million. If we look at whats going on with jobless claims, our last look stands unrevised at 234,000. Add a fist full of jobless claims, and you have 239,000, where we now sit. Of course, go back to the early 70s, and what youll find is the comparison for current initial jobless claims and the noncurrent comparison to whats going on today with watergate. If we look at philly fed, this is a february read. That moved to 43. 3. I dont even need to look. Man, thats a record. Im pretty darn sure theres nothing thats going to be on my sheet thats any higher. I believe the high read was under 40. In march of 2011 wow, keep going, keep going. Youre not going to find a higher number. Maybe the fed isnt paying much attention to whats going on in the psyche of investors in america. Philly fed, university of michigan, consumer confidence, and for the most part the markets do. Becky, back to you. Rick, i was going to ask you, weve been talking about that all along, whats happening with the markets. You tie it back to all of these things youre just mentioning, all of this confidence thats suddenly built up. Yeah, no, it kind of amazes me. Much of the world always finds something to cheer about, always finds hope in every stock market. This particular rally, because of the president , everybody wants to put cold water on it. Maybe some day theyll all get their wish. When they go look at their pension funds, if theyre teachers, they can see how smart it was to wish for that. Ive had at least three or four conversations, rick, that it was the earnings were already in an upswing. The rest of the world was already recovering. And theyre all busy wasting their time looking for rocky, bullwin bullwinkle, and natasha. My main question is, all the years the fed created a faux financial asset rally. Every time they were dragged up to the hill, fed speakers or janet yellen or ben bernanke would say, we cant do it alone, we just cant. We need some fiscal help. Now we have shovel fulls of potential fiscal help, and theyre going, oh, boy, i dont see anything different on the horizon. I dont get much of whats going on, to be honest with you. It was exactly it took eight years for the economy to have set it up. It was right on the cusp of that. Very coincidental, we just made it above stall speed. Think about it. If the fed models actually had some type of wizard brain that really did something, they would look at the jump in equity values supported by the notion that were going to get some better landscape for business ahead and use this opportunity to normalize rates. In the past, theyd hint, stocks would go down, theyd bite their fingernails and hide in the conference room. This was like served on a silver platter and they walked away from the meal. The market is ignoring all the bad things. It could be one day of reckoning. Thats the latest narrative. I understand the one day of reckoning. Ive been in the markets for, what, 37 years. Were always one day away from reckoning. One thing ive always understood is that investors may have political biases, but their biggest bias is to their wallet. Thats why we Pay Attention to markets, at least those that arent driven by quantitative easing. Exactly. Thats a nice fat wallet, rick. Thats a George Costanza wallet. It is. Its the only way i can sit high enough on the seat to see out the window on the train ride. I hear that. Rick, what time is hinserling on with you . I think around 10 10 eastern. All right. Thank you, sir. Well see you. In the meantime, Steve Liesman is here looking through the numbers. I was wowing. Rick didnt have the database. I do. 1984 is the last time weve seen the philly fed this high. If you look at a chart suddenly thats very popular again. I am not meaning anything by that. Its just what the data say, joe. Its my fault, again. Im getting yelled at back there. Whats important about this philly fed number, look at the chart, it looks like a post recessionary bounce. Im seeing it in the real data and in the expectational data as well. What we should have gotten eight years ago. Two days of testimony from the fed chair in Congress Makes clear that the fed is on the firing line when it comes to new policies coming from the Trump Administration. Heres senator pat toomey criticizing the fed for not boosting its forecast based on coming trump policies. It just looks on the surface like the fomc members either believe its unlikely that any of those things will actually happen or they think that those things are not particularly pro growth. Obviously the rest of the world is of a different opinion. Most of my colleagues decided that they would not speculate on what Economic Policy changes would be put into effect and what their consequences would be. So for now, yellen can say correctly that nothings been proposed. The bigger question is what happens when stuff is proposed. If the fed doesnt boost the forecast, its going to be seen in opposition. If it does, it could be seen as endorsing those proposals. Thats before we get to the feds actual policy response. What if the fed sees trumps policies as inflationary . What if, as yellen has suggested, it sees the immigration policies with decreasing job growth. All this is inadvertent. Its going to be seen as politically judging what the Trump Administration is going to be doing. Isnt there a vice chair seat open . There is a vice chair seat open. He could name a vice chair and imply that person will be the next fed chair, right. I dont think so. I think hell be looking for different qualities in the fed vice chair. That would be a Bank Supervisory role. He could appoint a fed governor. Theres two seats open. That could be a potential fed chair as well. Ways to make her more of a lame duck, if you sort of janet yellen was very insistent on that. Said, you know, you appoint one person, but all the of the fed board is required to approve changes on the Bank Regulatory front. That one person can decide what the fed votes on, i think, and write the rules, but the whole fed board has to vote on them. Lets continue this conversation. Stay right here, steve. Greg ip from the wall street journal joining us this morning as well. Greg, why dont you weigh in on this. This is a bit of a dance were seeing. People are talking about how the fed is no longer the only game in town. The question is what happens next and how much does it matter. Well, i think that, you know, steve is actually on to something here. Trump has said he wants 4 growth. Theres just no way the fed, even if theyre incredibly optimistic about the effects of fiscal stimulus, theyre just not going to put a number like that in their forecast. They might get super optimistic and say maybe 2. 75 . That creates bad optics. I would add that the fed will have a lot of people in the same camp, most importantly the congressional budget office, which thinks longterm growth is only around 2 . Thats what matters. Theyre the ones who Tell Congress how much the deficit is going to blow up when they cut tax rates. The ore point i would like to make is what i think is really important about the fed is not what they say but what they do. When janet yellen sets Interest Rates, it wont be based on Donald Trumps forecast. It will be based on her and her colleagues forecast. They think growth is only going to be a little over 2 . Theyre not going to be in a rush to raise Interest Rates. Thats the main source of potential tension with the administration. If the fed is not rushing to raise Interest Rates, i think that takes the most potentially contentious issue off the table. We dont think the fed will be anxious to raise Interest Rates. Maybe the administration doesnt want that either. You can talk tough about it, but deep down does donald trump as president really want to fight rising Interest Rates while hes trying to juice the economy. Yeah, no, look. If i were a betting man, i think well see a couple of inflammatory tweets by the president about the federal reserve. What matters is do they perceive the fed as getting in the way of their agenda, the way for example george h. W. Bush did in the early 1990s when he was attacking for not lowering rates enough. Greg, some people have pointed out to me this notion there had been no inflammatory tweets yet. Some are saying the silence is potentially deafening. Is there any possibility that President Trump looks at the fed and says, you know what, if i break it, i own it, and maybe it pays for me to keep a dovish chair yellen in place there. I think thats possibly definitely going to be brought to his attention. We can read the newspapers. We know that his hands are full with a lot of stuff that have absolutely nothing to do with the fed. I would take note, however, that Steve Mnuchin has been very treasury secretary like in all his discussions about things like the dollar and the fed. You do not see this guy sort of like being a nicolas brady, picking fights with the federal reserve. Not yet. I think he and people like gary cohn will advice trump that his purposes are better served by not picking fights with the federal reserve. I think the key thing here is if growth does actually accelerate the way the philly fed index is, is what happens to unemployment inflation at the same time. If it happens against a backdrop of unemployment staying where it is or perhaps going up, we can say, look, productivity is picking up, participation is picking up. The fed will love that. That will give them more running room. If they see that against a backdrop of worsening inflation pressure and falling unemployment. I want to get your take on march. Are you on board with a march rate hike . I wasnt a few weeks allege. Now i definitely think the odds are somewhere between 10 and 20 . Thats nothing, greg. Come on. Either get out there and make a stand or dont. Its a binary thing for guys in the market. Then im going to say no. Like some other people you and i follow closely, im data dependent. Greg, great to see you. Thank you. Like a big rock you can hide behind. Thats right. You learn from the best, the fed. The economic team, gary cohn and Steve Mnuchin, theyre a tight ship compared to whats happening on the National Security team. Up next, the white house considering whos going to replace Michael Flynn as President Trumps National Security adviser. I heard harwood yesterday and said, oh, my god. Its a different harwood. Well talk to senator roger wicker next. Ke movantik for oic, ioinduc constipatio haa injury, octor prescribed opioids backede e bimro pa, e said, ow lonyobeen. Ldinthis in . That my movant moment. My dtoldlde th manti is spefically desi foc and can help youre ten. Nketiif youavea bowel ockage or a hisryf them vantik may c serioide effes, including sytoms of ioidwithdra, sech pain and ordirheaea effes, antes in ttoma orinteine. Tell yr doctorbout a se fect movaikay intact withmine. Usindets. Holdt in . Have youvantoment. Lk to yourocr out opioidi cstipation. If you cant afforyomedicaon trenma ae h the kwhowhite house is considering whos going to replace Michael Flynn as President Trumps National Security adviser. Reuters is reporting the job has already been offered to someone by the president , admiral robert harward. Its not clear if hes accepted the offer at this point. Joining us now, mississippi senator roger wicker. Senator, do you know the admiral . I hear hes a tough guy. N Naval Academy graduate, friend of general mattis. But what i heard was that cnbc had reported this so youre reporting somebody else, from what i understand. He was like one of the top special ops guys. This guy, i think he was referred to as a real bad ass. I dont know if im allowed to say that. I hear hes got a scar on his face from a bar fight and hes a pretty tough hombre. We use that term a lot. The latest, all you got to do is look at the newspaper, the front pages. Whats the crux here, whether the Trump Campaign was colluding with the russians or the way these leaks are being orchestrate for political ends . Or both . Well, i think they will be investigated. I really hope the intelligence committees do this. I think thats the appropriate forum. We dont need a special commission, and we dont need to blow this out of proportion. Look, if the National Security adviser spoke to the russian ambassador, you would think they would talk about policy. You would think they would talk about sanctions that might have just been imposed by the Obama Administration going out the door. If, for example im just speculating. If the National Security adviser said lets dont get overly worried about these recently imposed sanctions, well see what happens after the inauguration and well visit about that. Im just not totally shocked if thats the sort of conversation that went forward. I think probably the mistake was not leveling with the Vice President and sending him out to the press to say the wrong thing. Were pretty sure there were similar conversations in prior administrations, maybe with iran, about things that might be in the future. Ill have more flexibility after the next election. That famous quote right there. I guess it is not being forthcoming with Vice President pence. What about all the idea that, you know, hes a private citizen, there probably wasnt a warrant. I guess they were listening to russians and inadvertently heard this conversation. Is that the word . The whole process is sort of interesting, not just the issue itself. The process of how this all came about is kind of interesting. Well, you know, general flynn has been around the track a couple times. I just cant believe that it didnt occur to him this would be recorded by the russians at least and that somebody was listening in on our side to a conversation with a diplomat. To me, i think he probably was mindful of that. Im willing to give general flynn the benefit of the doubt and say that he didnt realize the significance of his conversation with the Vice President. Senator, you think any of this is payback for what President Trump said before, Intelligence Community in quotation marks. Is there any conspiracy out to get him within the Intelligence Services, do you think . I couldnt say. I do think president s have always been concerned about leaks. I think if i were advising donald trump, id say we need to get to the bottom of this. But please, lets not get overwrought about this and lets get back to the things that put us in office and really pretty terrific accomplishments weve been able to have in the first few weeks. That includes killing a lot of jobkilling regulations, getting those off the books, putting a really good team in place. I think were off to a good start, if we could get these distractions out of the way. Senator, you call them distractions, but the larger question does involve and still hangs over the administration in terms of what has taken place with russia. Whether what happened on the call was legal or not, lying both inside the administration and the lies that were then retold to the public, you have no concerns about those things . I think we have to put it in perspective. And i expected it was going to be as i described it, i do think the Vice President needed to be concerned about going out and saying something based on what he was told and turning out that that was false. I think he was correct to be upset about that. And i think all in all it was good for the general to resign. Either way, whether its right or wrong for the leaks to be happening, clearly theres some form of insurrection taking place, or at least a disconnect between the Intelligence Services and donald trump, and he has to somehow deal with it. How should he deal with it . What is the answer . How do they get back on track . Because if we do have a crisis at some point and theyre not on the same page, thats a much bigger problem. I think he should put his National Security team in charge of it. Have them thoroughly investigate to the extent that they can. And i think they have the resources to do that. Then i think he needs to get back to the business at hand and do the sorts of things that got him elected president to start with. Real quickly, senator, its walter isaacson. Hey, walter. Hey, good to see you again. This report that Steven Feinberg may be brought in to run everything, does that help or hurt . Thats speculation. You know, i really think Reince Priebus can be a good white house chief of staff if hes got the authority to manage the white house staff. We hear he might not have a lot of authority. There was a lot of people trying to push him. What do you know about that . I dont know anything about it. So i wont comment. All right. I guess, yeah, you dont think the president should have stood by flynn, do you . No, i think we know who flynns enemies are. You know how much the last administration didnt like this guy. Should he have stuck by him . Did he get pushed out . I think he was correct to ask for the resignation. And i think general flynn was correct to resign under the circumstances. All right. Senator, thanks. We appreciate your time. Thank you. When we return, jim cramer will join us live from San Francisco with his take on todays top stories. Squawk box will be right back. Gofter ithe same way . Y chasing afr short rm. Gofter ithe same way . Y instd etting ughtp th trowd thinvestnt mergim taong termiew, wiwiiskmanagement rig, seek oub ughtp th opportities. Managover arilliodoarthay wiwiiattrti many theg, seek oub worldleadg vestors. Th p e global iestment management oub worldleadg vestors. Sinesses of prudential whether its nnting one of ev orngg wi t6500s. Campuses sinesses cou commication, a cmution unn ntyl time now for your kensho stat of the day. How do the broader markets perform in february . Since 1990, the russell tends to lead the way up nearly 1 . Lets get to jim cramer. He joins us now from San Francisco. Are you finishing up out there today, jim . Are you going to be there tomorrow, too . Yes, i am. Finishing with cisco, twilio and twitter. And with twitter. And thats all on the show tonight . No. Well be doing twitter both in the squawk alley and on tonight. But, yes, i think it will be exciting because theres obviously a lot of questions and a lot of viewers dont spend a lot of time on twitter. Anybody else on mad money tonight . Is that it . Nobody else, right . Who else . Theyre not letting us go into the 7 00 7 30 block so that will have to be it for tonight. Okay, good. Five Straight Days, jim. Thats one thing weve talked about all morning. If you look at the front page of every paper its like, oh, my god, theres like a constitutional crisis on the horizon, why is the market going to new highs every day . The companies im seeing are having unbelievable big quarters. There was a big acceleration, you talked about it, about the magical coincidence, biggest acceleration in the Fourth Quarter near the end. Its continued in the First Quarter. A lot of great strength out of europe and asia. Great strength particularly in china. These are not issues that are necessarily covered by congress. Were not going to spend a lot of time on them on the show because the companies have Great Stories to tell themselves. And philly index great day. Well, by the way, a lot of hot sauce there. I hear philly thats just me, i think. I hear philly fed and i see a cheesesteak sandwich. Thats from not eating enough. No, its me too. Well be there this weekend probably. You get peppers on them too, dont you . Of course. Yeah, me too. Hey, jim, ive heard you talking before its walter, what do you think of snap . You know, look, i think theyre going to walk it up to 19. 20. Theres a nice cohort people want to organize against younger people but Instagram Stories really killed the momentum, walter. Great to see you. All right, jim. See you at the top. Anneget ti. Are you entilypreparedo t . Plan younever tiring retiring retid tires retiment with e ade. Plan younever tiring retiring im estsndavestesr ests retid tires retiment with e ade. Inst with trade, where inveors can vestateiring im estsndavestesr ests retid tires retiment and inve in st. Up to six red lls. N ivests. Gn up at etrat we droing in informati wher in l thi s tt ers . The stakes are so high, s ttve ts . S . Ans, futur the stakes are so high, r th a fthat visegornmes d une 0, and, can deler insight perso r th a fthat on what matters you. Good thursday morning. Welcome to squawk on the street. Im Carl Quintanilla with david faber at the new york stock exchange. Cramer wrapping up his great week at one market in San Francisco. A lot from jim in a moment. Premarkets a little soft this morning, but pretty steady after significant run of record highs. S p has its longest win streak going in the three years. Europe pretty flat early on, tenyear settles back to 2. 48 amid some worry about slow progress