Transcripts For CNBC Squawk Box 20170228

In germany, things are relatively flat there. Lets look at crude oil. Looks like right now wti is down by 8 cents to 53. 96. Couple big stories were watching. A crucial cabinet vote last night in the senate. Wilbur ross was confirmed as commerce secretary after a vote of 2727. Ross is key to the administrations plan to overall trade deals like nafta. The white house will hold a swearing in ceremony for ross today. On the economic agenda. Second estimate on Fourth Quarter gdp at 8 30 a. M. Growth forecast to be revised up from 1. 9 to 2. 1 . 9 00 a. M. , the monthly caseshiller home price index and chicago pmi at 9 45. Consumer confidence numbers at 10 00 a. M. San francisco fed president John Williams and st. Louis fed president James Bullard will speak today. Rob kaplan will be speaking with us at 7 30 a. M. Eastern time. Apple will hold its annual Shareholder Meeting at its cupertino offices. Investors will be asked to vote on nine proposals, including one to rope in a third party on executive compensation. Jpmorgan has its annual investor day. Jamen jamie dimon will speak there. Target Ceo Brian Cornell will present at their retailers annual investor day. Auto zone and target report results before the open. Salesforce. Com is out after the close. You dont want to miss this. We have an exclusive interview with target ceo, Brian Cornell, at 1 10 p. M. Healthcare, jobs, the budget, taxes are likely to be hot topics in President Trumps address to a joint session of congress tonight in prime time. Eamon javers has more. This is traditionally what we would call a state of the union address, but for the first year its called the joint address to congress. Yeah. The word that the president s aides are using to describe the speech are optimistic. Look at some of the bullet points we were given by Senior Administration officials last night in terms of where were going with the speech tonight. The theme will be the renewal of the american spirit. You can expect the president might cite jobs created already under his watch at ford, general motors, boeing and other companies as a result of the president s negotiations and interactions with those ceos. They also say the speech will include some surprises. And they said trump was still working on the speech as late as last night with his top aides. We were give an couple guests of the president of the United States who will sit with Melania Trump in the first laids box. Megan crowley, diagnosed with a vicious disease at a young age. Her father founded a Pharmaceutical Company in order to find a cure. Shes now a college student. We also see that Jessica Davis and susan oliver, the widows of officers killed in 2014 by an illegal immigrant will be in the first ladys box. And denisha merriweather, a graduate of the florida tax credit system. She is the first in her family to graduate from high school and college. You get a sense of some of the themes that will be woven through the speech as he tips his hat to those people sitting alongside the first lady in the chamber tonight. This is a president who doesnt like to stay on the teleprompter. State of the Union Speeches or joint session speeches are so generally crafted. Every line scrubbed. Parsed for every possible meaning. This president likes to go on long digressions, so will we see that tonight . Its a lot to look at tonight. He wont call humor like the head clown, will he . I dont know. I dont know either. Or cnn . I can think of so many things that could sneak in there. Sometimes i think he says, you know what, im not going to do. Im not going to do it. Then in the middle of something he goes im going to do it. Yeah. He gets up there, he cant help himself. I know the feeling. You know from experience, dont you. Think of some of the things that the democrats could call trump, but think of what democrats could call trump. Thats the problem. Theyll troll him. They say liar. You lie. Theyll troll him. I guess meryl streep is not coming. She was invited. Is it 8 00 . 9 00 tonight. Eamon are you going stay up . Do you toe go to bed early, joe . I go to bed early. When do you go to bed . I never sleep. I saw him on air last night at the 5 00 hour. Was that the 5 00 hour . Was. You go to bed at 9 00, you dont watch either. Im staying up. Im hard core, joe. This is what i do. This is it. Im locked in. I do not have to be in the chamber tonight. He is not looking worse for wear. Hes 22 years old. Hes not looking that great. I can sit on my couch, have a bowl of popcorn and watch it at home. I dont have to be on duty at a studio somewhere. Every day its something. Im waiting for that unscripted moment tonight. It will be an unscripted speech. It could be more than one moment. Even the times he has he has stayed on prompter a couple of times in the last three months or whatever. But even then theres du he throws in a big league or believe me. He gets himself in trouble when he goes off script sometimes. According to the media. According to his base, he even according to the white house. Yesterday he came out and said sort of unprompted, apparently unscripteded, that nobody knew that healthcare was so complicated. Thats the kind of statement you throw out there and you will attract criticism for it. Because people have beeen fighting healthcare for nine years now. Thats not how i took it. How did you take it . Absolutely true. Conceding when you had how many times did they put a bill in front of obama to sign and repeal it now they could send the same bill there, you cant do that. He acknowledges if you do it, its much more complex trying to keep 20 Million People in. If it collapsed completely within 18 months, they would be without it as well. Youre walking a fine line here. He keeps talking about this scenario where republicans let it collapse and blame the democrats and let the democrats sort of hang that albatross around their necks. He seems to be tempted to do that, every time he brings up that scenario as a thought experiment, he says that would be the wrong thing to do for the american people. He knows he has to do something. The problem is theres not a lot to of palatable options for this president. Bringing the idea that it would collapse under its open weight is his way of pointing out that this is a troubled policy. The problem with being president of the United States and barack obama faced exactly this, is that you dont get credit for the counter fafactua. You never get credit for the problems you stave off, but you get credit for the problems you fester. So you could pass a fabulous piece of legislation, but if there are knockon problems, you will get the blame for those, but never get the credit for stopping the collapse. We might hear about that. Might hear about some jobs created. You might hear the dow hit 12 Straight Records. You might. Back to the markets now. Another record setting session for the dow. I like 13. I got married on the 13th. I love 13. I dont have theres a difference between triskaidekaphobia and one is a fear of the number 13 and the other is the fear of friday the 13th. I think triskaidekaphobia is the fear of 13. I can say it, triskaidekaphobia. After yesterday just be careful. Lets keep it let me talk about it. The 12th Straight Record so far. The longest winning streak in 30 years. The dow is up almost 13 since the november elections. As we count down to the president s speech this evening, we have darrell kronk, chief investment far Investment Strategy from wells fargo. We have betting on faster growth here. Investors are bidding up share prices in watching that happen shows that better policies matter and theyre making the case that, you know, even if things dont go perfectly, just the second derivative, just headed this way, trying to grease the private sector, that makes sense for why stocks are doing well. Do you think thats true . Absolutely. Policies do matter. Just the directional change, the swing of the pendulum from where we have been the last eight years is why weve seen the last three months the market put a bid in. Economic data has strengthened, but we want to hear detail to hear how we will repeal and replace aca, what will we do around tax reform. The timeline is probably sometime around the august recess when they think. Aca will come before tax reform. If they can get more details out and the markets receive those well, its higher rates, higher equity prices and higher u. S. Dollar. I think its true, things have to go relatively well. But the idea that first you have to repeal and replace, thats an unbelievable as we know, unbelievably daunting. Then you have to assume once they do that, they can do this Corporate Tax reform and get near 20, much less 15. Thats going to be hard. There will be conservatives that dont want to do it. Middle of the road republicans, democrats. This is fraught with risk, but i think the market deserves to be where it is, just based on deregulation. If you get this other stuff i agree. Economic data, earnings, the market deserves to be where it is. Its fair valuation. I dont know that its cheap. We need to keep that data and earnings moving forward. I agree with joe for the most part which is shocking but arent you 40 . Yeah. Therefore something called wisdom and experience. But fair value today has no premium built in for this stuff. Thats what you just seemed to indicate. I wanted to make sure were in the same place. So were at 18. 5 times this years earnings. 60 of the time the market traded at more expensive valuations. Warren buffett said yesterdayesterday the reason the stocks look cheap comparatively is Interest Rates. As long as Interest Rates are so low warren had no answer for why its at 2. 3. What is at 2. 3 . The tenyear. He doesnt think about that. Its the global implications. You know . Theres no vix, no volatility in the tenyear . I will say one thing. Warren is such a major crux right now because this is the first time in how many years that the fed is 1b. 1a is policy, the tax cut propolicpropo policy. When this goes to congress what comes out of it will be kind of i think thats a bonus to what we already have. Particularly if we get this money back from off shore. We talked about the fed put. I think we had a tax put under the market with expectations that something will get done. It may not be what everybody wants, it may be a fist fight to get something out there, but there is a tax put underneath the market right now. Its been a you know, i think it was pointed out by some people on cnbc, the last 12 records have been up 11, up 9me9 me and it is like theres no sellers. People who are rotating sector to sector. What about the vix . Arent you mr. Vix . I will tell you whats interesting about the vix. Yes, its low. People are buying protection, but what theyre doing in the s p 500, theyre buying puts. In order to finance them, theyre selling calls. Were at alltime highs, im willing to give up upsides. Im already long stocks. In the past they may have bought protection, now theyre selling upside to fence downside. You know whats interesting about that . I was looking last night, since the end of q3, we have had one day where we have been down 1 . Theres bun no volatility in the market. Even prior to the election. Its been so anemic to say it needs to pick up, it will pick up. Weve been telling people for years the volatility would come back when the Central Banks were no longer the only game in town. Theyre no longer the only game in town and we still see v volatility. With details theres a lot to disagree on right now. Everything is crazy. We only had one day of snow in chicago since december 18th. Its nuts. Such a time of change right now people are having a difficult time saying where should i definitely be . Do you you can explain if were going to 58 million or whatever on defense, infrastructure, tax cut, 3 plus growth. Why are Interest Rates not moving higher . Because right now you have not seen growth leg higher. Well get the second reading of q4 gdp, because you have most estimates in the u. S. Lower, too. We have not seen it leg up to 3 . And secondarily now in the latest couple weeks theres a bit of disbelief by the bond market that well get this policy done and won. All right, gentlemen. Thank you. Well be watching. Absolutely well be watching. You can watch cnbc to see it, cant you . Yes. Youll get the best analysis. Pregame and postgame. Eamon javers. Are you guys going to tailgate before the speech . Paratriskaidekaphobia fear of the number 13 is triskaidekaphobia. I like 13. I use 13 a lot. Once you get married on the 13th, thats your anniversary. I used to have numbers, when i played soccer i was 13 . I was just fearful to begin with. Of what . Everything. The world. The new world. You are. I know. Many of you are. Many of you are. I read about it every day. News breaking overnight. Samsungs heir indicted on bribery charges in a case that brought down the companys president. Details straight ahead. And a billionaire ceo says computers will outsmart humans in less than 30 years. Squawk box will be right back. The greatest population shift in Human History is happening beforour eyes. Sixty to seventy Million People are moving to cities every year. At pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. Partner withgim the Global Investment management businesses of prudential. E trades powerful trading tools, give you access to indepth analysis, and a team of experienced traders ready to help if you need it. Its like having the power of a trading floor, wherever you are. Its your trade. E trade welcome back. Stocks to watch today. Priceline posting earnings boost analyst expectations thanks to a surge in hotel reservations. Fourth quarter revenue rising nearly 18 . Hertz announcing a wider than expected loss for the latest quarter. The company booking more than 254 million in charges amid continued weakness in its car rental box. That stock still up 2 . And workday beating on the top and bottom lines. The company sub prescriptions grew nearly 40 for the quarter. The workday ceo appearing on mad money last night and telling jim cramer about how oracles acquisition of net sweep helped this quarter. My guess is most of the net sweep Management Team will be gone in 12, 18 months, so most of those companies chose not to do business with oracle. I think they might come back to market and create an opportunity for workday. In spite of that, shares were down 6 . South korea will charge samsungs jay lee and four other executives with bribery and other offenses. We want to get over to pauline chu with more on this breaking story. This did not come as a surprise because the special prosecutor had telegraphed that at least a week and a half ago that these indictments would be coming. Today they announced jay y. Lee would be indicted on bribery, embezzlement and perjury charges. The question is was the 38 million samsung donated to charities actually a bribe back in 2015 . Those donations went to charities run by a longtime friend and informal adviser of president park. You mentioned the four other executives that will be indicted. They are the group vice chairman, who is sort of like a mentor to jay y. Lee. Hes been at samsung for 30 years. Hes resigned and will be indicted. So will the president and the president of Samsung Electronics and executive Vice President. After this announcement was made by the special prosecutors office, Samsung Group made an announcement they would dismantle the Corporate Strategy office. This is an office criticized because it had been called a lobbying center. When, in fact, it was a Government Relations office. Critics said it saw that the weaving and intertwining of competition is rising out chaebols and politicians, and it was the mix that was too much. So samsung said they are dismantling this. This is something jay y. Lee promised in improvements in transparency. Samsung Group Subsidiaries rallied after this announcement. Andrew, we talked with one investor, Aberdeen Asset management, who has 1 billion stake in Samsung Electronics, they said that they believe the companies are still strong, its just that from day one they were always very concerned and skeptical about the business infrastructure and the chaebols in his words having their fingers in every single pie in south korea. Thank you for that report. Japanese tech billionaire Masayoshi Son believes singularity will occur within 30 years. Thats late. Thats 47, isnt it . Thats r the softbank ceo says Machine Intelligence will surpass human intelligence and continue to improve itself at an exponential rate and by 2047 that will happen. Speaking in barcelona, he said he issing ing aggregating Cash Companies are developing arrest artificial intelligence. Its not just exceeding human intelligence its downloading your brain. You would hope. Where machine knowledge is a billion times the sum total of all human knowledge. The reason you call it a singularity, you dont know whats on the other side. We dont know what that leverage will allow you to do. It could include downloading your brain on to hardware. But then you have to pick an avatar you know how people do the dotcom . They preserve those . Right. I have yours. Did you set this up already . Its all done. Finished. Do you just you have to sue him to get it back. Did you make me on bitmoji . I made you on bitmoji. I will there. Live as andrew ross sorkin. Youll have a good time. Thin, tall. Wish you luck with that. Coming up, Warren Beatty no. I think you would feel like youre in a prison. Warren buffett revealing on squawk box the world is still turning after that mistake. I cannot believe that. Tafter the oscars. I cant believe the sun came up after that mistake. Yesterday he more than doubl doubled la la land no, were back to Warren Buffett. Doubled his apple holdings in january. Huge piece of news today. The stock coming off the best month since july. More on that next. Welcome back, youre watching squawk box live from the Nasdaq Market site in times square. Good morning. Take a look at u. S. Equity futures. As we see how things are setting themselves up for the morning. Dow would open up about 6. 5 points higher. S p 500 down marginally. Nasdaq off about a point and a half. Things may well change. Lots of news coming out on the earnings front and also getting a couple different economic numbers to watch. Then President Trump this evening, well hear what he has to say about the future of the economy. Stocks to watch. Perrigo agreeing to sell its royalty stream from tysabri tysabri. Its a famous drug. Had problems. Were problems in the brain. Then it was a great drug. Ica icahn, biogen. Tysabri, put it in your brain. You need to know it. Do it again. Tysabri. The one you came up with the dyslexic dont say it again. My tysabri. You have more to read. Will pay a royalty and warning that 2017 earnings will fall short me. Ms droug. It was elan in the same category, healthcare, Tenet Healthcare results falling short. The Company Forecasting lower than expected fullyear earnings. The hospital operator seeing revenues fall for the first time in six years hurt by weak demand. Thats surprising given the conversations weve had about changes in obamacare. And Frontier Communications losing customers and seeing average revenue drop as it missed sales target. Target is out with numbers. This is the problem. My earnings per share is not updating. T targets numbers tar get came in with an adjust the basis of 1. 45 versus 1. 51 the street was expecting. Talking about the guidance for the full year. Immediately went down. First quarter theyre looking for 80 adjusted level of 80 cents to 1 a share. 1. 33 is wrhere the street wa. Adjusted numbers of 3. 80 versus the street estimate of 5. 34. Thats a big number, doesnt surprise me given some of the language from Brian Cornell, chairman and ceo. He said Fourth Quarter results reflect the impact of a rapidly changing Consumer Behavior which drove digital growth but unexpected softness in stores. At the meeting they will provide detail on the meaningful investments theyre making in business and the Financial Model that they say will position tar get for longterm Sustainable Growth in the new era in retail. They realized these numbers would be a shock to the street. Wait until we hit them with the border adjustment tax. Brian cornell will be speaking to cnbc at 1 10 this afternoon. This is weird. This is a target thing. Because consumers are supposedly feeling better. Other people have done better. Youve seen a lot of physical retail stores, they had a tough time in the Fourth Quarter. The walmart effect and the amazon effect. Walmart, too. Has really upped its game in some stores. If youre getting hefty competition from the biggest competitor on the storefront and getting picked off on the dotcom front and stocks are going down on worries about border adjustment but the results shouldnt already be going down. Those are significant shortfalls in the current quarter, the next quarter, and the year. But some estimates, a read a hard line analyst report, by some estimates three quarters of the stocks he watched would look at their earnings dropping significantly. Maybe threequarters of them dropping to a loss based on a border adjustment tax being put in. If nobody is buying anything, that would explain the tenyear, too. Comp store sales down 1. 5 , versus the guidance they had given of 1. 5 . Youre talking about significant struggles getting people into the stores. The question is whether its going somewhere else, to amazon or whether its just problems in their own operations. Its not a 3 gdp economy maybe. I dont know, Warren Buffett said no. The Trump Administration doesnt think its a 3 economy. Theyre trying to get it there. But even their internal projecti projections remember the last jobs the jobs report is not this friday . It normally would be the first friday of the month. Bumps one more week. Its march 3rd. It must be different for february. Brfrn before we go away from that stock. Shares have been dropping rapidly. Now down 11. 5 based on the shortfall for the Fourth Quarter, guidance theyre giving for the First Quarter and fullyear. Warren buffett making news on apple yesterday here on squawk box. We bought a lot more apple after yearend. The holdings you had at apple was the fifth biggest 59 million or something. How much more did you buy . Im 7 billion. We could change our mind tomorrow and all of that. We have not bought apple in the last since the Earnings Report came out. Because it shot up some then. We would have one of the fellows in the apple has 10 million shares, i have for berkshire 123 million. We have about 133 million. Joining us with more on apple, will power, Senior Research analyst with robert w. Barrett and company. We knew he built up a stake. His stake was twice what was reported in those s. E. C. Filings. Great job on the interview yesterday. A lot of good information on apple. Its always encouraging to see Warren Buffett involved with a stock, given up his longterm track record and the way he looks at stocks, more from a value standpoint, from a consumer standpoint, and just the ground Level Research he eluded to. This is a platform. Thats the right way to look at iphone, a platform for additional services. The word he used that i like is sticky. Its a sticky product. One that induces us to continue to upgrade to the next version. He made a point that he liked the stock. He had done that research where he liked the platform, but he also told us he stopped buying on the day apple announced earnings. The jump in shares went from 120 to 127 or 128. He said he would be buying more if it didnt jump to those levels. What does that tell you . Does that concern you about where the price is now . I think theres still opportunity. Im more encouraged with the fact that hes involved with the stock and sees longterm value. The bigger question is if he started to sell, that would be a surprise given they just entered. They just bought into it. Well, exactly. I think our view is that this is a stock you want to own into the iphone 8 cycle. You have additional opportunities over time. With new products, services which we talked about a number of time in the past. We like the stock from these levels into the iphone cycle here this fall. What price would concern you if it continues to push higher . This is a stock that struggled to get past mid teens. Were starting to approach that to a degree. You can make a compelling evaluation case. I dont like to talk about the trillion dollar market value that joe will bring up at times in the past, maybe in this interview, too. The math suggests theyre not far from that. This is a company that most of the street thinks can do close to 10 of earnings. As you look at 2018, you put a 15 multiple on that, still below the market. Add back the current net cash and you approach that. If theres upside to that earnings, you move the multiple a point higher, you start to approach that type of level. We still theres nice upside from these levels. Will, thanks for joining us. Coming up, diane black weighs in on President Trumps call for a 54 billion defense spending increase. Then a cnbc exclusive interview with dallas fed president rob kaplan on growth targets and rate hike plans. Plus President Trump set to address a joint session of congress tonight. Congressman Jeb Hensarling will tell us what to expect from the speech. This car is traveling over 200 miles per hour. To win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley welcome back to squawk box. Target just out with earnings, missing on the top and bottom lines. The stock getting slammed. Kous Courtney Reagan breaks it down with us. Target out with full Fourth Quarter earnings. They did give us a warning with the holiday sales, so we knew a piece or part of the quarter for november and december. You can see here target shares down sharply, more than 11 premarket. Earnings per share off for the Fourth Quarter at 1. 45, compared to 1. 51 that analysts were expecting. Revenue also lighter than expected. Comp store sales, a key measure for retail, those down 1. 5 . Analysts were expecting those to be soft, down 1. 4 . What is most troubling is guidance going forward. For the First Quarter, target is guiding between 80 cents and 1. Analysts were looking for 1. 33. Today target is holding its Financial Community meeting. They will go through the plans for the future. Theyll address this new guidance, which is fairly shocking to the street, as you can tell by the stock price reaction. And last year at about this time target also held their investor day meeting. And they gave some lofty guidance there. They said comps would be growing at 3 for 2017 and beyond. They said that their earnings would be growing at 10 for 2017 and beyond. Appears they are walking this back. We dont know the details for the longer term, but we will learn that later today. Ceo, Brian Cornell, will join me exclusively on power lunch after 1 00 p. M. To break it down. Theres certainly a lot to of questions to be asked. The thing that jumped out at me most from the release is Brian Cornells own statement that the Fourth Quarter results reflect the impact on rapidly changing Consumer Behavior which drove our strong digital growth but unexpected softness at stores. Thats the scary thing. Thats the amazon factor that pops up. If consumers are not going to the stores in the same ways, that leaves all kinds of questions not only for target but other retailers. We should probably check on some other retail stocks. That is the huge unknown, thats part of the reason why weve seen so much pressure on retail shares. Walmart is down 1. 3 . Maybe some Department Stores getting hit by this news. Its interesting, walmart had a strong result. They do a big business in their stores. They do a big business when you look at the big picture online because of how large walmart is. When you look at the share, the online is very small. But theyve been trying to make sure they beef up the online offerings in a huge way. Target has been spending about 2 billion a year. Thats what they told us in the last analyst meeting. In order to get things to you faster, have a better Shopping Experience online and the integration within store, if you wanted to pick that item up in store. But clearly a lot of work to do. I think theyll have to walk back the positive expectations they posted last year, its troubling what amazon is doing to retail and the question is what will be the break even . What is the right number of stores to have . How much of your sales do you want to come online . Those come at a much lower margin as well. Yes, you want those sales, but you have to get that to scale. Youre not talking about easy fixes. Not at all. This is a longterm fix. Consumers are changing behavior. We have very high expectations. We want those goods to us very fast. We dont want to pay for that, by the way, to get to us quickly. We wanted the same selection almost everywhere. If you tell me its availability available in store, it better be there when i get to the store. Thanks. When we come back, squawk box on the auction block. The ceo of sothebys about join us next. The stock is up 13 this week after stronger Auction Sales and increased margins. As we head to break, a quick check of whats happening in the european markets. Things are still relatively flat. The ftse is slightly higher, so is the cac. The dax is slightly lower. What . I dont know. 6. 95 per trade . Uhhh and i was wondering if your brokerage offers some sort of guarantee . Guarante where we can get our fs and commissions back if were not happy. So can youff me whatchwab is offerin whaask your broker ifuestions . Theyre offering 6. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Welcome back to squawk box. Were joined now by cnbc wealthy editor robert frank. Wealth editor. Well, youre doing okay, arent you. I love my job. Okay. All right. You have a twoincome family. Yes, we do okay. Very successful life. Not quite well enough to bid on one of these paintings coming up. Tomorrow night, big london sales with more than 300 million worth of art coming up for auction, including this painting. You got to see this. It could sell for over 45 million. Tad smith is the ceo and join us us this morning. Welcome. Thank you. Great to be back. That stock move yesterday, 15 up. Obviously a lot of things you put in place starting two years ago are now coming to fruition, but a lot of it was also based on the assumption that the art market may finally be turning around after declining starting in the fall of 2015. Is it turning around, and is trump the big reason . Well, we feel good about the art market. We think well have a big week in london this week and next week, the entire art market does. I would say, yes, one of the things i look for in discretionary sales is the supply for bigger pieces loosening up. Were seeing that both in london. We see a lot of activity in the pipeline. What about trumps selection, what about trumps policies make art collectors feel better about buying 45 million paintings . It doesnt matter who is president. What matters is whether the policies are pro growth, whether theyre friendly for taxation and economic development. As long as we have that, i think people will feel better. The border adjustment tax, we go to tax reform specifically, that could have a negative impact. If youre an american buying a 45 million painting in london this week, if this tax existed, you would have to pay an import tax, right . So could there be a negative impact from that tax reform, if it passes . Were not sure whats going to happen, but one way to think about it is this. In 2016, about 6 of sales were in new york but from art that was imported to new york and sold to americans. Its an interesting question. If its a painting thats painted in new york but then somebody buys it overseas and you buy it again and bring it back here, is it an import . Is it based on where its painted . The way i understand it and by the way, its a moving target. The things that are imported from overseas and sold here but what constitutes an import . Is it an import because it was painted overseas or because its last home was overseas . Very good question. If youre an american citizen, you buy a painting in france, you want to sell it in new york and you sell it to someone outside of new york, sell it to somebody back in france, is that an import . Im not sure. If you sold it to an american who lives here, is that an important . Im not sure, but its not a business transaction. We help sophisticated collectors solve all sorts of problems. I want to show this image. This could show for 45 million when it comes up for auction thursday night. Oprah sold she flipped hers for 150 million even though she bought it for 88 million in 2006. That is beautiful. Its beautiful. Why do artists like this i mean, obviously hes been around for ages suddenly become hot . Is this just the flavor of the month in the art world . Well, a great deal of that particular painting is amazing. Sometimes its a matter of whats coming to market. Its not that they werent hot. Its just theyve been hidden for years. Thats a fresh painting. Its a beautiful painting. The artist is iconic. That particular piece is from an iconic period of the artists work. When they come up, everyone gets excited. All right. By the way, you can see them. And buy them. Tad smith. Great to be back. I want to use your art advisory services. Were ready. Youre going to buy a 45 million painting . Just for taxes. Coming up, chairman of the House Budget Committee is going to talk taxes, big president s speech tonight. The dow notching its 12th Straight Record close. Investors now eyeing President Trumps speech to congress this evening. The president promising a bold agenda. A preview of what to expect is straight ahead. Fighting the inflation curve. Dallas fed president Robert Kaplan joins us for a squawk box exclusive interview. Details on what an Interest Rate hike may happen straight ahead. Plus, a surprise announcement from elon musk and spacex. Theyre launching a mission beyond the moon, and theyre taking some paying commerce along f customers along for the ride. That story and much more 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 here on cnbc. Were live at the Nasdaq Market site in times square. Take a quick look at the futures this morning. Its virtually unchanged across the board. The s p 500 down slightly. The dow jones up slightly. The nasdaq off about a point. Well call it basically flat for now. European markets right now looking pretty much in a similar place. Heres whats making headlines at this four. Well be getting a second look at Fourth Quarter gdp in about 90 minutes time. Economists think growth will come in at 2. 1 on an annual basis. Thats higher than the initial estimate of 1. 9 that we got a month ago. At least one of the models of the next iphone will reportedly have a curved screen. Thats according to the wall street journal. Quoting sources with direct knowledge of apples production plans. The expected price on the new phone, about 1,000. And good news for traders. A price war may be breaking out among brokerage firms. Fidelity has cut its commission for stock and etf trades by 3 to 4. 95. That undercuts charles schwab, which recently cut its fee. Td ameritrade still charging 9. 99 a trade. Very quick price war, prices going down rapidly. Mothers, dont let your kids grow up to be stockbrokers. Did you see those . Yeah. Cut in half. From nothing. From nothing to nothing. Its all moving digitally. Its all computers now. You dont want to be a stockbroker. Uhl take 1 , but ill help you find the right people to invest your money. We just found out yesterday they dont really exist. There are about ten individuals who could routinely beat the averages. You know what the rest of them are. Cpas . Yeah, yeah, yeah. Well use acronyms. I dont know. We broke some new ground. Doesnt need to stay broken. No, i agree. Stock on the move this morning, retailer target, shares getting slammed in premarket trading. Target came in 6 cents below estimates. Revenue came in short, as did its fullyear 2017 forecast. Ceo brian covrnell will be a guest on power lunch. Billionaire investor wilbur ross was confirmed as commerce secretary after a relatively noncontroversial senate vote of 7227. Ross is key to the administrations plan to overhaul trade deals like nafta. The white house is expected to hold a swearing in ceremony for ross today. You negotiatioknow, andrew, refers to not my side. You saw what they refer to wilbur ross as. What . Another serial forecloser. Right. I dont know. Is that mnuchins wrap on him . Those things do happen. They do happen. In a financial crisis, thats what happens. When you turn around a situation like that, theres going to be some foreclosures. Thats the way the law works. Its just these labels that are just used so frequently. In that instance, if you remember, to be fair is he a serial forecloser . Is that a pejorative . I will say there are a number of lawsuits and settlements that were paid, and it wasnt just for foreclosure but for improper foreclosure. But no evidence that anyone was foreclosed upon that wasnt supposed to be. I dont know the specifics of it. Im just suggesting that they paid a significant amount of money. I dont think anyone should pay back Student Loans or ever get kicked out of their house. We just need to be nice. We need to be nice, come what may. Lets talk about President Trump. Hes going to be addressing a joint session of congress tonight. Eamon javers joins us with a preview. Good morning, andrew. Speaking of being nice, we hear the word in the white house is opt mu optimism this morning. Senior Administration Officials briefing reporters last night, saying the president is going to shoot for that optimistic, sunny tone tonight. A couple bullet points from those officials talking to a number of us last night in terms of what to expect. They say some of the speech is going to be inspired by some of the feedback the president has gotten from these listening sessions weve been watching at the white house with ceos, law enforcement, union members. All those people have been coming through this white house. The president has had these sessions with a number of them. That feedback is going to be incorporated into this speech tonight, were told. Also, its going to be a forwardlooking forward, looking ahead to the next four years. But there will be a piece looking backward so far to the first 40 days of the president s term, recounting some of the promises hes made and the promises hes kept in terms of the executive orders hes signed and some of the legislation we can expect. The question is how much of the specifics well get on that legislation going forward. We also know there are going to be some guests sitting in the first ladys box along with the president of the United States. Some of the people who were invited include megan crowley. Her father founded a Pharmaceutical Company to look for a cure for a disease she was born with. Shes now a college student. Also, Jessica Davis and susan oliver, widows of officers killed in 2014 by an illegal immigrant. And denisha merriweather, a florida tax credit scholar. There you see some of the themes the president will weave in tonight. And youll see all the pomp and circumstance. Look for those spontaneous moments weve gotten in years past and see what we get tonight, guys. Eamon javers, appreciate that. Later this hour, Financial Services Committee Chairman Jeb Hensarling will join us. One topic the president is expected to address tonight is the budget. At the top of the list is defense spending. Joining us is chairman diane black, serving on the ways and means. Good morning to you. Good morning. Help us try to understand what we may hear this evening about defense spending, about tax cuts, but of course one of the things were not going to hear about is a change when it comes to Social Security and medicare, which raises the big question about the debt. Politically, where are you on that issue in terms of the ability to do all these things which may grow the economy in the short term, but there is the question of the debt on the longer term. Sure. First, ill be interested to hear what the president has to say as well. Weve gotten a little glimpse. As a matter of fact, probably just as much as you have. I will tell you from my perspective, were committed to moving forward with a balanced budget approach. Were going to be looking at things maybe a little differently than the president does, but thats our prerogative. We have the power of the purse and not necessarily are our budgets going to look exactly the same. Were committed to moving forward with looking at trying to get some sustainability in our budgeting. How much distance, given what youve heard about this evening, is between where you stand and where paul ryan has stood historically and where the president stands right now . I think that youll see a very similar thing to what weve had in the past where we want to go into each one of these agencies and take a look to see if the dollars are being used efficiently and where we can slim down. Obviously had it into 20 trillion worth of debt. We cant continue to grow at that pace. So it is up to the budget and the Budget Committee members to come up with a plan that shows we can get our budget in order and its sustainable. President trump acknowledged recently that he does have to or at least wants to try to repeal obamacare first from a tactical perspective in terms of before he goes after the tax issue given what it does to the budget and how you square those things up. How difficult do you think its going to be to get obamacare done first, and to the extent theres Political Capital thats going to be used on that, what does it mean later when we get to the tax front . I can tell you this. Were committed to repealing this bill that or this piece of legislation that has really hurt people in my district and all over this country. We see rising deductibles, rising copays, people may have an insurance card but theyre unable to use their insurance because of the deductibles. As a matter of fact, in the state of tennessee, we have some areas that we have no insurers willing to be in the marketplace any longer. So we see its collapsing all around us. We hear every day in our office from people who say help us, help us. Were committed to repeal a broken law that is falling apart under its own weight and put something in thats more patient centered. Do you imagine that some of this can be done in a bipartisan way, which is to say to you think democrats are going to come along and vote with you . I would hope that we make a case. I cant believe theyre not hearing the same kind of information from their constituencies that we are. Im hoping theyre going to come on board with us and say, yes, we do need to do something to give people some relief and to rescue them from this falling plan. Circling back to the tax front, one of the big issues we talk about on this show is the border adjustment tax. Where do you stand on that . Well, lets first of all say what this country is. Its a manufacturing country. We ought to be committed to make sure that we do everything we can to be fair to our manufacturers. We dont need to penalize them for manufacturing their product here in this country. Theres still more conversation to be had, but i think if we can just start out with that as a basis, we want to be sure that everything we do is not a penalty on our manufacturers but gives them the best opportunity to be the best trading partner in the entire world. Congresswoman, what does that mean in terms of the border adjustment tax . Thats where the Republican Party cant seem to agree. Well, as i say, were just at the beginning of that. Weve been working really hard on the obamacare. Were doing both things at the same time. The obamacare and the repeal of that is essential right now. It is taking most of the time. Weve begun talking about how we can be more fair to our manufacturers because right now they are at a disadvantage with the v. A. T. Tax and what we do here in this country, taxing their products as they leave. We have to find a way to make that more equal and fair to our manufacturers. To put a point on it, it sounds like youre a supporter of a border adjustment tax of some sort. Im supportive of making sure we dont disadvantage our manufacturers. However we get to that, as i say the conversation has begun, but we have a lot more conversation to be had. But i am very concerned that we dont disadvantage our manufacturers. Finally, just help us with this tactically, timingwise. Weve heard the president and Steven Mnuchin talk about trying to get this tax proposal done before you all go away in august. On vacation, that is. Do you think thats realistic given both the repeal of obamacare that you have just talked about and trying to work through the tax plan . Well, first of all, let me just say august break is not necessarily a vacation for everyone. It is a time for us to get back to our districts. I do a lot of work during that time. I do believe that we can come together. We have got a lot of ideas on the table. Its a matter of coming together and putting it together in a plan thats cohesive and making this country great again, as this president has continued to say. You already see that the economy is growing. Thats what we want. Congresswoman, if you get all this done, youll deserve a vacation. So thank you. Appreciate it. Thank you. When we return, former senator max baucus will join the conversation. Well talk trumponomics and what hes expecting from tonights address. Later, a squawk box exclusive with dallas fed president Robert Kaplan. Stay tuned. Youre watching squawk box on cnbc. Welcome back, everyone. President trump set to address a joint session of congress tonight. Among the topics on which Business Leaders are going to be listening for more detail, tax reform. Joining us for more on what we could see on taxes is former democratic senator max baucus. He also served as president obamas last ambassador to china. Thank you for being here today. You bet. Good to be here. Taxes are complicated. Its a bit right now the republicans cant seem to decide if theyre going to support Something Like a border adjustment tax or not. How would you size all of this up . Well, frankly, this is not rocket science. It takes a lot of cooperation working together. I know that doesnt make a lot of news. The two big tax cuts in the past that really worked, the reagan tax cut, the bush tax cut. Both cases, the president was firm firm firmly behind it. It took president ial capital to make things happen. We worked with the congress and with him. So President Trumps got a tax plan, hes got to really own it. Hes got to really be behind it. Meaning this isnt something that can necessarily start in the house unless he endorses it and says this is my plan and i want both these houses to come together and pass this. If it starts in the congress, i think its going to be difficult. Former congressman dave camp and i worked hard for two years to put together a major tax reform bill. It became clear obama was not in favor of it. That is, he was not willing to spend a lot of Political Capital, so it kind of fizzled. President trump has certainly said hes in favor of a tax cut. Well, yeah, but the question is whats the plan. Obama, bush, and reagan had actual plans that were fairly specific. He had a very qualified team. They have said that theyll release a budget plan or a tax plan come march, somewhere between early and midmarch. If we see the plan at that point, i guess the question becomes as long as the republicans control the house and senate and have a president whos in favor, is it something they can do not necessarily. The congressional rules are pretty complex. The democrats can throw a Monkey Wrench in it quickly. It does come down to working together. Its not rocket science. But the whole gamble is all of this does come together. Are you in the same place or no . With . Just the idea that this is all going to happen. You mean health care and tax reform . Both, all of it. I dont think health care is going to get very far. Its such a muddled mess. Even this mornings papers but if it doesnt happen, then it becomes even harder to get to the pactax piece. And to your bet, this doesnt happen at all. We need to work on this. The code is a mess. The only way you get this stuff passed is honestly do sit down and work things out together. Thats what Chuck Grassley and i did. Were we close with this with simpsonbowles, you had a lot of people from both sides of the table. You need that kind of an approach. Wow, senator. We miss you. Youre like reasonable, nice, talking about working together and stuff. When you look at whats happening right now, are you does it make you sad . No. Look, in life we only have two choices. Try or do nothing. So all of us have to do our very best and try to figure out how to put Humpty Dumpty back together again. We have to find solutions for the people we represent. The people are our employers. Were just the hired hands. We have to remember that and sit down and say, okay, what do our people want us to do . They want us to put this stuff together in a reasonable way. So whats the best hope . What would be something you think could be worked out between the sides . Well, first of all, people need to want to Work Together. That hasnt happened in a while. We hear the president is going to be more positive, rosier. Will it do any good . Itll do good look, where do you start . You know what the big news story was yesterday . The impeachment efforts. I know, i know. But that will disappear the more that will fade the more he really wants to work with the congress. Okay. So the onus is on him. Hes the president. He needs to work more with congress or he should be impeached. No. Im just saying hes the president. I was just alluding to the current state of affairs. I did read a story over the weekend how President Trump is starting to work with the staff from both democratic and Republican Congress Staff Members and bringing them in, letting them go bowling, things that the Obama Administration did not do for a long time. Is that a start, or does it have to be much heavier . Well, my former job as u. S. Ambassador to china, im concerned frankly about the United States worldwide. The chinese see this dysfunctional almost circus in the United States. They say, well, whats going on over there. Maybe we chinese can take advantage of all that. Do you think they think of it as more dysfunctional today than a year or two ago . Yes, they do. I do. And in terms of how we handle them and how we deal with them, President Trump has repeatedly said he will label them a currency manipulator. Hes said it in speeches since hes been inaugurated. The Treasury Department has said not yet. I dont think thats going to happen. Thats not going to happen. Where does that leave us in terms of a potential trade war with china, in terms of a rupp wi relationship with them . Lets talk about a border tax. How will the chinese like it . Theyre not going to like it. Lnch will they respond in kind . Could be a trade war. How do we go about changing this . We have to be very solid. I feel very strongly about this. United states needs a much more Strategic Policy toward china, which is more fair and firm. We stand up more than we have in the past, not get pushed around as much, in my judgment, as we have. That means a solid approach. None of this go to the press. You mean the rhetoric . The team has got to come up with a way to say to the chinese, you got to back off. If you dont back off, heres what were going to do. I would start doing that privately and make it clear we mean it. So carry a big stick, speak softly. Yeah. And back it up. Senator, thank you very much for your time. You bet. Great to see you. I like that you use the word morass. Is it just a boggy ground or also a hole you can fall in . I knew that was coming. It implies you would fall in. We have more to come. Target reporting results early this morning. The companys Top Executive coming up. Coming up, a squawk box exclusive with dallas fed president Robert Kaplan. When will the fed hike Interest Rates . How closely are they watching the president s policy moves . And what will it mean for investors . That exclusive interview is coming up right here on squawk box. Fees. Fees . What did you have in md . I dont know. 6. 9per trade . Uhhh and i was wondering if your brokerage offers some sort of 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 onli equity trades and a satisfaction guarantee. If you dont like their answer, theyre offering ask again at schwab. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Still to come today, dallas fed president Robert Kaplan speaks exclusively to Steve Liesman. From the state of the economy to when a rate hike should happen, well be hearing his economic outlook. Thats next right here on squawk box. Whats going on here . You know how Ge Technology allows us to fix problems before they. They slow production, yeah. Well, no more catchy business acronyms. Wait, we dont need to smooch . Im sure we can smooch a solution we just need to hover over the candice, problem until. Just let it go. Hey, sorry im late for team building. Smoooooooch that felt right. Whats wrong with you . Hes so trusting. Good morning, everyone. Welcome back to squawk box here on cnbc. Were live from the Nasdaq Market site in times square. Among the stories front and center this morning, President Donald Trump is set to address a joint session of congress tonight. Investors will be waiting to hear what he has to say the about tax reform, Obamacare Repeal and a host of other economic issues. The time for that address is set for 9 00 p. M. Eastern time. Well be getting a fresh read on housing prices later this morning. The case shiller report is expected to show a 5. 4 year over year increase. And Morgan Stanley sent out incorrect Tax Information to Wealth Management clients that caused them to pay an incorrect amount of tax over the past five years. That news coming in an s. E. C. Filing. The firm has set aside 70 million for the kotcost of resolving that problem and will reimburse customers affected by the error. Spacex going where no man or woman has gone before into deep space with two paying passengers. Elon musk announcing hes already taken two substantial deposits for a weeklong mission to the moon and back. Spacex dragon capsule will circle the moon, like the apollo 11 crew 47 years ago. But these passengers will be trained and called astronauts, but will not land as Neil Armstrong did. The names of their passenger, t their gender, and the price theyve paid remains a secret. Theyre not from hollywood. I wish they were. If spacexs adventure goes as planned, theyll take humans to space. Richard branson has been trying to sell tickets already not to the moon, but outer space. All right, becky. Lets bid for this. How much will you pay not to go . More than you. Ill pay more than you. No, no, no. I will pay more than you. Theres no way. I would give everything i had. Me too. Whatever i have, i will pay not to. I will pay whatever i have to send you. I made that joke about the hollywood people. Pick two, any two. Send them. So what do they mean they wont land . Theyre just going to orbit the moon, come back. Its about a week journey. I thought initially, wow, hes really going to thats much more logistical. We havent done that since the 70s. I love that whole story. Those men were i mean, Neil Armstrong. Coming down, he takes it manually. 20 seconds worth of fuel or they couldnt take off again. He calmly landed. No, thats not me. Whatever i can mortgage my house for to not go with you. Steve liesman. Maybe its steve. Steve liesman is in dallas this morning. He joins us with a special guest. Hi, steve. Hey, joe. Good morning. Im here with Robert Kaplan, the Dallas Federal Reserve president. Youve been around for over a year now. Veteran now. Im not going to be so crude as to ask you, are you going to hike in march. Im going a little bit more round about. Give me an idea what youre thinking about. What im thinking is that were making Good Progress on our employment objective. Were making Good Progress on inflation. My own forecast for 2017 is growth in excess of 2 . Even before potential policies that could provide some upside. So in that context, i think were getting closer to reaching our dual mandate objectives and we should begin the process of removing accommodation. I think even after we do that, well still be accommodative, but we should be taking steps to remove that sooner rather than later. Some have criticized the Federal Reserve for missing opportunities to hike. There were times you could have done it and you held back because you were afraid there would be bad economic outcomes that didnt come to pass. Does this look like one of those opportunities . I actually think were much closer to reaching our employment and inflation objectives. I think you need to take once youve decided that, i think you need to take advantage of windows when they present themselves because you could have market events that could give us some pause. I think if were moving close to our dual mandate objectives, we should take opportunities to remove some amount of accommodation in the context of a patient, gradual path of rates. So this is a little more direct. The fed funds futures probably is about 34 for that march hike. How do you gauge that . Is that about right . Having lived my career in the markets, i would say markets have a tendency to move those kind of probabilities and do it very, very rapidly. I think what the market probability probably suggests is between now and june and either the march, may, or june meetings youll see some action. I dont think the exact timing is the most important thing. I think the path of rates is. In that regard, i think the market is probably in the neighborhood of where were heading. So im going to do the same thing on the other big issue out there, which is fiscal policy. Tell us how you plan or currently incorporate potential changes to fiscal policy coming from the Trump Administration and the new congress into your forecast and into your thinking about Monetary Policy. Ill broaden it. Fiscal policy and structural reform. Structural reform for me could be just as important. Im looking at two things. I look at policies that either grow the work force or improve productivity. Some of the policies being discussed, regulatory review, if its done in a thoughtful way, potentially infrastructure spending, potentially tax reform, depending on the details could have positive impacts, in my view, certainly on productivity and im particularly zeroing in on policies and structural policies that could grow the work force. We need work force growth in this country to grow gdp. This is why im looking for improvement in education, v vocational training, and yes immigration policy, either on the positive or negative side, is a central element of work force growth. When you say positive or negative side, what has a negative immigration policy . Policies that might discourage growth in appropriate understanding its a sensitive issue in terms of appropriate immigration could slow work force growth. Heres my point. Over the last 20 years, immigrants and their children have made up over 50 of work force growth in the United States. Our view at the dallas fed, that percentage will increase in the years ahead. Why is that . Because the work force is ageing. One of the big reasons participation is declining is demographic ageing. We need to look at several ways to grow the work force if were going to grow gdp. I need to get back to Monetary Policy because theres another big issue out there, which is the Balance Sheet. Did you have an expectation for when you think the Federal Reserve might reduce the Balance Sheet . So weve said so far publicly that well wait until were well under way in terms of normalization before we start letting the Balance Sheet run off. I still think thats the case. But i think as the year goes on in 2017, well be actively discussing plans for addressing the Balance Sheet. I still think thats probably the appropriate base case. Well have to get a little f further along. We should allow the Balance Sheet to run off in a patient, gradual way for me that doesnt unduly affect the markets. If im getting you right, getting the Balance Sheet to go down is not an issue for this year. Its a decision for this year as to when. Depends on how much progress we make this year. Its something we should be discussing. I wouldnt take i wouldnt put a time frame on it yet. But i think as we make progress, i think its important that we start taking the opportunity to actually let this Balance Sheet run off. I want to get back to the economy and fiscal stimulus. Theres two thoughts. One is that there is quite a bit of slack out there, and we can pump up the economy and we can get it going, and theres plenty of resources out there. Capacity utilization, just 75 . 96 million americans are out of the work force. Now only maybe 5 million of them or 6 million say they want jobs, but theres a pool of labor there. The other idea is that were at or near full employment and that stimulus will create inflation and force the fed to raise rates more. Where do you stand . I look at whats called u6, which is the unemployment plus marginally attached workers, discouraged workers and those working part time who would like to work full time. That number is right now, as we sit here today, 9. 4 . The prerecession low was a little above 8 . So i think theres some room there. The problem is in a potential work force of 160 Million People, getting down to 8. 1 is 1. 5 Million People. That alone isnt sufficient to substantially grow the work force. That tells me were not at full employment yet. We still have some slack but were rapidly moving toward full employment. I think as we grow this year, that amount of slack will continue to decline. Okay. Robert kaplan, thanks for joining us. Andrew, back to you. Great conversation, steve. Thank you for that. When we come back, we got target getting slammed this morning. Details straight ahead on what happened there. Then Financial Services Committee Chair Jeb Hensarling will join us. Futures, dow up about fave points. S p 500 off about a point. Nasdaq flat for now. Back in is a second. Yes, sir, we need your password. The password that i use . Yes, sir, your password. Theres been another breach sir right. Okay. Iha. Temyjob1. Ihatemyjob1 . Wanna get away . Now you can with southwest fares as low as 59 dollars oneway. Yes to low fares with nothing to hide. Thats transfarency. Sfx clap, clap, ding welcome back, everybody. Target reporting earlier this morning. The company also holding an investor day in new york. The street not liking what its hearing. Take a look at those shares. Theyve been under extreme pressure. Courtney reagan is here with much more. Hi there. Good morning. Targets Fourth Quarter is far from a bulls eye. Ceo Brian Cornell has a lot to explain today. Adjusted earnings of 1. 45 on lighter than expected revenue that fell shy of kppgs. Forward looking guidance is really whats pulling down these shares. Down more than 11 . The guidance is lower for both the First Quarter and the full year. Also far shy of what target guided last year at this very analysts meeting when it was looking for 10 adjusted earnings growth. Margins fell. Target says the plan is to keep margins low in order to stay price competitive. Comp sales fell 1. 5 . That must have worsened in the final month of the quarter because target previously told us that comps for november and december were down 1. 3 . The retailer is now guiding low to midsingle digit declines in comparable sales for the full year. Thats a turn in the opposite direction from targets guidance at its analyst day last year when it forecasted 3 comparable sales growth for 2017 and beyond. Targets Digital Sales are up 34 in the Fourth Quarter. That contributed 1. 8 Percentage Points to overall comp. But targets online sales are under 4 of total sales. So they have been investing between 2 billion and 2. 5 billion a year, but is it muf enough . Target certainly has a lot of questions to answer today. All right. Courtney, a lot of questions, hopefully well get a lot of answers later today. Well see if theres catching up that can be done. My twitter feed and you know who i mean, i get you can imagine my twitter feed. Everybody says bathroom thing, bathroom boycott. Is it not material it is something thats come up in past quarters. Target has said repeatedly its not material. Theyve said that more than once. How do they measure that even . How do you know . Thats true. You look at the store traffic and you have to try to decide what those trends look like and how they change and why they changed. But what they told us is they did not see a measurable change in traffic. Comp store sales down 1. 5 . They had guided for being down 1 to 1. 5 . Even more so, last year they said, look, in 2017 and beyond, we see comp sales growing 3 . So it completely caught them off guard. And even then, that was an optimist you can forecast. Okay. Thanks, court. When we come back, congressman Jeb Hensarling. Stick around. Still to come this morning, marathons a tet management cofounder Bruce Richards talks investment ideas. And putting money to work now. Then, the trump trade agenda. Canadas minister of finance is here to talk possible border tax changes. And trump trade adviser and former ceo of new corp. Is our guest. Stick around. Another big hour of walk squawk is straight ahead. Welcome back to squawk box. President trump set to give his first major congressional address this evening to lay out his agenda, some of the issues americans are eager to hear about, jobs, taxes, and what lies ahead for the Affordable Care act. President trump also set to address his plans for the u. S. Military and defense spending. Joining us now with more on this, chairman of the house Financial Services committee, Jeb Hensarling. Good morning to you. Good morning, andrew. How are you . I got to hand this over to my good friend joe, who i know has a million questions for you. I got it in the rundown. Its mine. I dont know. Congressman, chairman hensarling, how are you . Im doing good, joe. You dont want a border adjustment tax. You think something will get done for tax reform. You want it done, but you will not waver on the border adjustment, right . Well, there are great economists on both sides of this issue. As the old story goes, i got friends on one side of the issue, friends on the other side of the issue. I stand with my friend. Im going to let chairman brady right this bill. What i do know is were going to pass some type of fundamental tax reform program. Its going to be fair. Its going to be simpler. Its going to make us internationally competitive. Whether or not the border adjustment tax stays or goes, i dont know. That will ultimately impact how low the rates will be. I think ill let chairman brady complete his work. So youve been around a while. Youve got to do repeal and replace then this. Are you approaching this with trepidation or you think this is something thats doable near term . Well, no, im not approaching it with trepidation. Ive never worked harder, never enjoyed it more. Somethings going to happen . Something will get done near term . Come on, the Congress Just started. We have two years. I mean, obviously its heavy lifting. Thats one of the reasons you havent had fundamental tax reform in a generation. When the senates committed to it, the house is committed to it, the president is committed to it. Nothing says Economic Growth quite like a fair, flatter, simpler, more competitive tax code. Its going to get done. Obviously there are differences that have to work out. Im not going to sit here and say its going to happen in the next 30 days or 60 days, but this Congress Just got started. Its twoyear congress. Hopefully well get to it sooner as opposed to later. Not only do we need fundamental tax reform, we have to have regulatory reform. At the detective i represent in texas, which is urban, suburban, and rural thrown into one, for every one complaint i hear about taxes, i probably hear about ten about the regulatory burden. Im certainly looking forward to the president addressing that tonight. Im glad that he is taking us towards a regulatory budget that for every new regulation, essentially two have to come off the books. Our Small Businesses are just drowning. Theyre just drowning in this regulatory burden. Congressman, you just talked about the idea that you have two years to get this done. The president has talked about this getting done by august. Realistically, what do you think is more probable . Oh, im not going to bet on the timetable. I think it can get done by august. Theres a lot of moving pieces, but theres a whole lot more that we agree on than we dont agree on. I think its a realistic target. I cant say for certainty itll be met. So much of the budget issue revolves around how much debt and how these things are going to be scored. Politically in terms of whats palatable to you, depending on how its scored, how much debt would you be willing to take on if you thought there was growth on the other side . Well, i do believe in dynamic scoring. So i want to see what the scores come out with. Again, every time weve cut taxes, particularly Capital Gains taxes in america, weve had increased revenue. So we know there will be a huge revenue feedback component, but ultimately, the way were going to have to treat our debt is with fundamental entitlement reforms. Thats reforming current entitlement programs for future generations. Not sure were going to see it in this particular budget. Ultimately, thats what we have to do to get ahold of this structural debt, which as we know the debt has just almost doubled under president obama. I certainly hope that President Trump will avoid that fate. I certainly stand ready to help him do that. But ultimately, again, its going to be modernizing health care programs. Frankly, Obamacare Repeal and replace is part of entitlement reform. So there we can get People Better health care at a more reasonable cost and still begin to deal with the entitlement reforms that we need to deal with ultimately to deal with the debt so that we dont become ultimately a backstop, bailed out, bankrupt society. Congressman, lets talk doddfrank. I dont know where we place that on priorities, but is it going to be piecemeal, the whole thing . I want to talk to you about something i was reading yesterday. You cant fire a guy without cause. I hear maybe that there is cause. Do you think theres cause to fire at this point for some of the action thats already been taken . Do you think thats what the president will do . Are you urging him to do that . You just gave me a lot to unbau unpack here. First, in every conversation ive had with the president and the Vice President and the speaker, dealing with doddfrank is a priority this year. Clearly it comes behind obamacare and tax reform. But its a thisyear priority. Second of all, i think theres a number of different ways, to quote our president , that you can do a number of doddfrank. One is the Congressional Review Act. The president s very first Congressional Review Act he signed into law was dealing with doddfrank. Part of its going to come through executive orders. Not unlike obamacare, much of doddfrank was done with pen and phone. Much of it can be undone with pen and phone. Through the reconciliation process, it takes a simple majority instead of a super majority. Much of doddfrank can be undone there. Im a anxious to get it done, anxious to help the president. What about cordray . You expect him to serve out his term . Frankly, i dont know. Ive encouraged the president to fire him. Nothing personal against him, but hes a national dictator for Consumer Financial products. Thats got to end. The president ought to fire him with cause or without. Chairman, thank you. We got to go. Squawk box will be right back. 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Bruce richards is here with his market call. Trump in prime time. The president expected to lay out his agenda for jobs, tax reform, and trade in his congressional address. Plus, fly me to the moon. Elon musk launches a Lunar Mission and tourists can go along for the ride, as the final hour of squawk box begins right now. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square. Im joe kernen along with becky quick and andrew ross sorkin. The futures have been flat for most of the morning. Now down 13 on the dow. Down just under two on the nasdaq. Treasury yields were up a little earlier. I saw 2. 36 or so on the ten year. Back to 2. 358 right now on the ten year. Thats something weve been paying some close attention to. Okay. Lets get you caught up on the head license of the morning. President trump will be addressing a joint session of congress tonight. White house Spokesman Sean Spicer says the theme of the speech will be the renewal of the american spirit, focusing on public safety, job training, health care, and tax reform. Also, dallas fed president Robert Kaplan telling Steve Liesman we should be in the process of removing accommodation in a conversation in the last half hour on squawk box. We should begin the process of removing accommodation. I think even after we do that, well still be accommodative, but i think we should be taking steps to remove some amount of accommodation sooner rather than later. Staying on the topic of the economy, a second read of q4 gdp. Economists think it will come in at 2. 1 . Thats higher than the initial estimate of 1. 9 a month ago. Target earnings revenue and same store sales all missing wall streets expectations. Sales declined for the sixth consecutive quarter. Sales were down by about 1. 5 , which was at the low end of expectations. The company also gave guidance for the quarter and the full year. Thats weak. As a result, that stock is down by 13 this morning. The company itself blaming issues with digital, hurting some of the traffic numbers in its stores. All kinds of questions swirling around as to whether this is a target only problem. Well talk more about that in a little bit. Valeant beating on the top and bottom line. They have been successfully resolving its legacy issues, but sales and volumes are declining and drug prices are coming under pressure. That stock is down by 3. 6 . Auto zone earnings and revenue falling short. The auto part retailer same store sales came in flat. The company saw higher supply chain costs. Priceline Group Estimates beating estimates as travel bookings increased. Joining us now to break down his next big calls on energy, coal, health care, and more, Bruce Richards. Has 13 billion in assets under management. Good morning to you. Weve been talking for several week, if not about a month, about what the Trump Administration will or will not do and how its impacting markets. Were going to hear from the president this evening. When you think about the environment right now, do you think its hot, too hot, cold . Where are you . In the hot to too hot category. Were starting to take down peel back risk as a result. The markets are so priced to perfection and so priced to the new administration getting through all the policies. Dare i ask, where were you in november . Taking up risk. This has hugely benefitted our investor and funds over these last two months. But now youre taking it off. Were taking risk down. Not off, just down. Were starting to sell off longs, add to some shorts. When did that start . In the last week or two. Just very recently. Two weeks would be 14 days, the last highs. You miss these latest new highs . Not really. Were still net long, so were grinding higher. Positions are just not as juiced as we were in terms of some positions we have. Because you expect theres going to be a turn here . Because the we want to see more evidence that the policy proposals that have been put on the table are actually going to occur on a timely basis. If not, the markets are stretched a bit thin. Okay. But the question and we ask every guest these days. Is the if you take the policies that we expect to happen or at least that we think are being anticipated, off the table, is the market fairly valued today . Its overvalued. By how much . Well, well give back at least this years gains and maybe a little bit more if its going to be strectched out or i the votes arent there to implement more fully the plan. Im not saying thats the way its going to go down. Its mustsee tv tonight. Well see what the president has to say. Well see what the follow up is. But right now its missouri, the show me state. The administration is going to have to get through some of these policies. They can do it through executive order, through reconciliation. Well see what gets passed and what doesnt. What do you do with the money you take off the table right now . Do you keep it in cash . Weve added some cash. Its always great to have dry pattern. Weve added to some shorts too. Can you talk about any of those shorts . I can talk about sectors. We dont like retail. We dont like sectors related to what might happen to the aca space. Specifically some of the pharmaceutical companies and some of the hospital systems. Particularly the rural hospital systems. Those are predications, at least with retail, because of the border adjustment tax. Its the amazon affect, the border adjustment tax, the way consumers today consume and not through big boxes and much more through amazon and other means. Is there any industry right now that youre still long and want to be longer just given the trends, taking off the policy issues . I think the trend is going to continue to still be positive for financials. Is that a function of whatever we think the repeal of doddfrank is going to be . I dont think doddfrank gets repealed. Its a peeling back of doddfrank. Its all about the regulations, all about the capital ratios. Let me walk you through. If a bank has a 6 capital requirement, they can leverage the Balance Sheet. Leveraging the Balance Sheet more, theres going to be more earnings, if they make more loans. Or they can use that freed up capital to pay out dividends or buy back stock. But heres the real kicker. If rates do inch up, and we think inflation will push forward, if rates do inch up, its very, very positive for banks. Think about this for a second. Jpmorgan has 2. 5 trillion in assets. They make 100 base points, thats 25 billion a year. They currently make earnings of 25 billion. Thatll double their earnings if rates go up. Maybe i misunderstand the assumption in terms of what parts of doddfrank get repealed, but im under the impression that gary cohn and some of the other folks in the Administration Want to raise Capital Requirements, not diminish them. Philosophically, their view is to get Capital Requirements to a certain degree and theres not enough leverage in the system to create the next crisis. It depends whether youre doing it in the commercial bank or Investment Bank. There may be some separation there. You may want a lot more capital for the Investment Bank than the commercial bank. I think the commercial banks are overly capitalized relative to global counterparts. Im not sure thats actually the focus of what theyre trying to do is get capital ratios up. I think theyre so well capitalized, and i think they believe theyre so well capitalized that would be preventive. When we teed up this conversation, we talked about energy and coal. At least i mentioned it. I didnt get your views on it. Energy has been the price of wti and brent has been stuck around the 55 a barrel trading range, up or down a few dollars from here, for about eight months now. Meanwhile, Global Growth is starting to push upward. You have emerging Market Growth accelerating. You have u. S. Growth. Well see Fourth Quarter gdp shortly. For the last year, around 2. 1. We think itll be about 2. 6 this year. We see europe moving a little faster as well, putting brexit aside for just a second. I think europe is moving. So Global Growth synchronized for the first time in many years. Meanwhile, Energy Prices half the level they were going back a few years. We think energy still has room to rally. Were not making any commodity bets, but my personal view is energy will go up over the next couple years. In terms of plays were making in the marketplace, about onethird of all Energy Companies that were in the highyield sector have defaulted in the last 12 to 18 months. Its a lot of companies that have come through a bankruptcy process. Heres one example of something weve recently done. Lin energy went into bankruptcy with about 5 billion in debt. Theyve come out with a revolver, no term debt. The billions of dollars of debt became ek wetized and the new equity. You could have bought that debt at a price of 20 cents on the dollar back in july when aoil prices already moved. Meanwhile, bonds are at an equivalent price of 50 to 55 today. So youve made 2 1 2 times your money. The Company Comes out with relatively little or no debt. Everyone missed that training except for you. No, a lot of people played that. Theyre still playing that now. There are several Companies Going through restructuring now that were involved with that have yet to monetize or pay out what we think theyre eventually going to pay out. Thats taking oil prices on a flat line. But what do i think happens . I think oil probably trends up. Its the one commodity thats relatively cheap when most other Asset Classes are so fully valued. Bruce, great to see you. Likewise. Coming up, dowell talk to barney frank. Plus, canadas finance minister will join us. Later, dan dimicco will be here. Stay tuned. Youre watching squawk box on cnbc. 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 wonderg if your brokerage offers some sort of guarantee . Arantee . 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 theyroffering 6. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. President trump will address a special session of congress this evening. He has repeatedly said he wants to roll back financial regulations like the wall street reform and Consumer Protection act, which is also known as doddfrank. That was enacted in 2010. Joining us now is one of the authors of that regulation himself, former democratic congressman barney frank, who is also a cnbc contributor. Congressman, thank you for being with us today. Youre welcome. We were just speaking with Jeb Hensarling, who was talking about how in every conversation hes had with both the president and the Vice President , they say that rolling back doddfrank is a priority for this year. He went on to say there are a number of different ways to do a number on doddfrank. Those were his words. He was citing the president using those words. I just wonder what you think is going to happen ginn all of this tough talk about doddfrank. Very little in terms of the basic structure of the law. The president gets to appoint the regulators. I am afraid, but thats the consequence of his winning, that hell appoint regulators who wont regulate as well as they should. Although, i have to say one of the biggest things we did in the bill was to create a regulatory structure for Financial Derivatives. That was a major cause of the problem. The decision was made as Financial Derivatives came to be that hay wouldnt be regulated. It was not a case of deregulating but of not regulating something in the first place. That became a terrible problem. Aig went to the Bush Administration in 2008 and said, were about 180 billion in debt beyond what we can pay off. That was the first big bailout of the Bush Administration without congress did for aig to pay off their debts. There was no set of rules about how you do derivatives. Basically, its a pro market thing. Put them on exchanges. If they for some reason cant go on an exchange, publish the price and put up margin to make sure you can make it up. I was worried about that, but i was interested to see both treasury secretary mnuchin and the new head of the cftc say they intend to stick with that. One argument has been about lending. The only restriction on lending in that law is the provision that says you cannot make the kind of subprime loans to lowincome people who dont have any assets that was a single greatest cause of the problem. Maybe they intend to loosen those restrictions. I hope not. I dont think that would be popular. Theres an irony that the republicans have falsely been claiming, oh, you democrats caused this problem by insisting all this lending to the very poor. We were trying to stop that. The wall street journal said, oh, you cant do that, youre interfering with the market. At this point, are we really going to go back to the point before 2010 when the law was adopted when people could get Mortgage Loans who really shouldnt be getting them. Then you get to the consumer bureau. Thats one of the most popular things the federal government has done. Now, they cancel through reconciliation change the financing mechanism, subject to appropriation. In terms of reducing the power of the cfpb, that would take legislation. We have seen through the massive amounts of regulations that banks have to comply with decline in the number of Small Community banks out there. Something like 15 fewer of those banks since 2010. When we talked to some of those banks ourselves, they say its because its too much for them to try and keep up with the regulation. They get taken over in a lot of instances or just cant keep up with it. If youre a bank with less than 1 million in market capitalization. When we passed the bill, we had a number of things that were supportive of community banks. Increasing the deposit guarantee, which was for them, and we changed the formula by which you contributed to buy your insurance in their favor. We said the Smaller Banks arent subject to examination of the cfpb. It turns out many of them are spending more time and money than i thought they would have to on complying with some things that really dont apply to them but theyre worried about it. So i supported in 2013 the chief regulator who just retired at the fed that banks under 10 billion should be exempt of the volcker rule. Interestingly, mr. Hensarling, who had the power to push some of this through, wouldnt do that because he does not want to do things that would be helpful to the Smaller Banks. He wants to frankly capitalize in their dissatisfaction to weaken more substantial parts of the law. But i do favor some statutory changes that would help the Smaller Banks. I should add this. It is not the case that the law has caused a problem with lending in general. It has meant theres been something of a shift from loans being given by the Smaller Banks, but that slack has been taken up. Last point. Yeah, the big banks have benefitted from that. Yes, but two spraeparate poi here. You cant always make one statement. Not that you made it. The president said, oh, theres not enough lending. Lending has not diminished. Lending statistics are that the economy is going fine from the standpoint of loans being made. It is true that there has been a shift. Not just the big banks, by the way, but the middle sized banks. The last point i would make is this. If you ask them, much of what theyre complaining about in terms of regulation has nothing to do with the financial reform law that i worked on. A lot of it has to do with Money Laundering. The antiMoney Laundering aimed at drug smuggling and terrorists. Know your customer, all those things. You have to report if people are taking out more than 10,000 at any one time. Those have nothing to do with our bill. They come from the patriot act and the antiMoney Laundering act. They ought to be looked at as well. Interestingly, the right tended to push those harder. They are glad to have some of the complaints about the Money Laundering and anticorruption things kind of be blamed on us. Congressman frank, there is the fact that banks have about 2 trillion that theyre keeping in reserve at the Federal Reserve instead of lending it back out. What do you think causes that . Why do you think weve seen that phenomenon . Why hasnt that gone back into the economy . Im told by banks that there isnt demand in the loans. You cant make loans if people dont want to borrow for it. T if you had a large set of complaints from Business People that werent getting loans that they wanted to get, then there might be something structural. By the way, they get interest on those deposits. But its very minimal if you look at the Interest Rate structure of today. I understand that. But thats look, theres a certain amount of reserves they have to have in capital. Over and above that, thats the banks choice. As i said, i have not seen or heard and certainly the st statistics do not show any lack of supply of loans when the loans are demanded. Do you expect Capital Requirements to, at least on the commercial side, go lower . Our last dpguest just made that prediction. Whos made the prediction . Our last guest just came on, a big investor, who was explaining he thinks that capital requirement, at least on the commercial side, are going to come down. They may, but i would say two things. First of all, mr. Hensarling wants to have Capital Requirements go up very much. People who argue that its an excessively tight set of Capital Requirements thats cutting lending, thats exactly what Jeb Hensarling wants to make worse, if thats your standpoint. He would significantly increase Capital Requirements. Its odd to have him say hes here to promote more economic activity. Beyond that, we did not in the bill try to set capital standards. That would have been a mistake. I would say this about capital. And i think some of what we did in the legislation contributes to that. To the extent that you have made banking less risky and the way we make it less risky. Lets be very clear. The innovation in the 80s, 90s, into the first part of this century was that Financial Institutions found a way to lend money and not be responsible if those loans went bad. They packaged them and sold them. They didnt have to put up initial margin. To the extent that the law makes it less likely that they will be making irresponsible loans, then you do need less capital. Capital is there to resolve a problem. If the loans go bad. One of the things we did in that law was to increase the safety and structural responsibility of lending. In that case, yeah, the regulators might decide theres a lot less risk here now and therefore we can reduce capital. Congressman frank, thank you for your time. Youre welcome. Okay. Still to come this morning, the final frontier. Two passengers heading to the moon thanks to tech billionaire elon musk. Details straight ahead. Squawk box returns in just a moment. Hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. Coming up, breaking economic news. The second read of Fourth Quarter gdp about to hit the tape. Well bring you the numbers and the market reaction. Plus, canadas finance minister will joan us to talk trade. Stay tuned. Squawk box will be right back. Today i am helping people everywhere do what they do. Better. I work with startups like alpha modus to predict markets five times more accurately. I am helping tv networks use social data to predict what people want to watch. And i worked with marchesa to turn fan feeds into a ess that thinks. Hello, my name is watson. Working together, we can outthink anything. Hello, my name is watson. The first stock index musicwas createdughout over 100 years ago as a benchmark for average. Yet many people still build portfolios but investing isntt justabout achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Welcome back to squawk box. Breaking news. Our second look at Fourth Quarter gdp. Last look, 1. 9. Ditto, 1. 9 again. Lets look through the internal. Consumption at 3. 0. Thats half a percent higher than our last look and pretty much higher than expectations. If we look at the gdp price index, 2 , 0. 1 on the light side. If we look at whats going on with inventories, down 0. 1 of 1 . Thats wholesale retail inventories month over month. They were up 0. 8 to 1 . Now lets look at the s p core logic by citi coming up later in the day. And we also want to look at whats going on with regard to the trade deficit. This ballooned a little bit. From a slightly revised 64. 4 billion to 69. 2. This is a january read. 69. 2 is bun of the hottest reads going back quite a while. Going back to march of last year. Actually, i take that back. That is march of 2015 no. Now, how is the market responding to all of this . 2. 36 on the tens. We basically hardly moved on it. Many are debating on whats going on with the fed fund futures. Certainly seems to me by using the math as its described, considering we now have target rates and looking at the effective rate, certainly looks like its a push. A close call in the 50 camp. I continue to say one or two ticks in fed fund futures and the optionalty of whats going on on the put side can really skew that. The reality is its ban lot of years since the crisis. Our target rates between 50 and 75. Well call it 62. 5. Seems a little bit low to me. Back to you. Okay. Thank you for that. Lets bring in Steve Liesman at the dallas fed this morning. Steve . Hey, andrew. Kind of unexpected number here. We had a lot of economists the consensus was 2. 1. Some were looking for 2. 3. You got the bump up people expected in Consumer Spending. Housing revised down a bit as well as Government Spending on the state and local level. Revised down from 2. 6 in the first read to 1. 3 . I never quite understood why the government cant count how much the government is spending, but be that as it may, they had a pretty substantial revision downward on this number here. The question becomes whether or not 2 was fine after the 3. 5 in the third quarter. The question is can we maintain it in the fourirst quarter. We had that seasonal weakness. R right now the estimates we see are running at around 2 , maybe a little bit better than that. Thats really what were hoping for, that we can do amid the overall weakness. Okay. Thank you for that, steve. Growing anticipation surrounding President Trumps plans for nafta has canada working on what our neighbors to the north are calling a Charm Offensive. Joining us for more is canadas minister of finance. Minister, thank you for being with us today. Great to be here. Would you call it a Charm Offensive . Thats a good way to think about it. Were here very much to engage with the new administration. This is my third time in the United States in the last three weeks. Its very much about talking about the importance of our relationship for middle class canadians, for middle class americans and the impacts it has. Youve been here at the white house meeting with people like gary cohn. Youve spoke within the treasury secretary Steven Mnuchin. What type of conversations are you having with them . Well, our discussions are very focused on how our relationship has an impact on the american economy, how it has an impact on the canadian economy. Were talking about the benefits of trade, the 9 million american jobs that rely on trade with canada. The 2. 5 million canadian jobs that rely on trade with the United States. Thats an important part of our discussion. The president , President Trump, has had some pretty harsh words for nafta. He talked on the Campaign Train and now in office about how nafta needs to be peeled back and renegotiated. Hes gone out of his way to say things like were in favor with canadians. Hes made some pretty happy talk when it comes to our neighbors to the north. What do you think when we actually get down the basis of potentially renegotiating nafta . Whats your stance on that . Well, we think nafta has had some very positive impacts on all three economies. We think the discussion, you know, it should be a threeway discussion because we can see the importance of, you know, our supply chains working together. My discussion today with the business sector and tomorrow im meeting with secretary mnuchin is very much about our relationship together. So engaging with my counterpart to talk about, you know, how we can improve both of our economies and the ways we can do that together. The Trump Administration has made a lot of talk about Bilateral Agreements instead of these trade pacts that wrap up a number of different countries. Would you be open to the idea of renegotiating nafta just between the United States and canada, or do you think mexico needs to be at the table . As i said, nafta has had a big impact on all three economies. Our supply chains are very linked. If you think about the auto sector. Im not here to start discussing nafta. Its very much thinking about what we can do together. Im here especially to learn more about the administrations plans in more detail and think about how we can translate that for canadians into growth. How much conversation have you had about the border adjustment tax . In canada . Were of course interested in details, but until we have details, its really not something that we can opine on. For us right now, its thinking about how we can talk about whats working, talk about the fact that the trade between our countries is working, is creating, you know, enormous day to day advantage. If there was a border adjustment tax implemented here in the United States, would you slap a similar tax on exports from the United States . Well, whats important for us is not to speculate on what we might or might not do until we have some sense of what that might or might not be. What we can say is that the relationship that we have you know, 35 u. S. States have canada as their number one export market. Its working for americans. The number of jobs is critical. The amount of twoway trade, 2 billion. Is there any tax on our imports into canada right now . Well, nafta of course takes most tariffs out of the picture, but in some sectors theres some tariffs, yes. What is the most important factor that the difference between why the surplus or deficit with canada is totally manageable according to the president . In mexico its its a much bigger number. On face value, if you look at the deficit, it looks horrific. Theres a lot of reasons for it. Sometimes if youre a wealthy country, youre going to be importing more things anyway. We have a very manageable trade relationship with canada. Its either a deficit or a surplus of like 9 billion or something. 15 billion in 2015. The deficit or surplus . U. S. Goods trades deficit with canada was 15 billion. You look at that and its like, okay, thats fine. Look at what it is in canada. Whats the difference . The canada u. S. Relationship is very balanced. The trade in goods is actually a surplus for the United States. Of course, it varies based on the amount of oil that goes back and forth between our countries. So thats a very big factor. You see why its a lightning rod with mexico. People say you cant look at that and just say trade deficits are always bad, but there does seem to be something amiss with well, you know, i think broadly speaking, what we as a small country can say is we see the benefits of trade. We see trade for us with other countries whats the difference and why is it not working in mexico . Canada and u. S. , theres some areas where were very integrated. In the auto parts business, thats a very integrated sector. Clearly we export a csignifican amount of oil to the United States. Thats a Huge Positive for Oil Refineries in the United States. I think our economies are integrated in a way that creates a very healthy balance. Does the talk of renegotiating nafta make canadian citizens nervous . You know, i think canadians are seeking for us to engage. The discussions we had last week with President Trump were very positive. There was a good sense of understanding of how we Work Together and for positive benefits for middle class americans and canadians. He could see the need to tweak nafta. Its important to remember naftas been changed 11 times over the last 20 years. Whats the most significant change thats taken place over that time period . Each one of those changes has been relatively modest. Youll see changes in specific goods that you might have a tariff adjustment. Were open to considering any changes that make sense. Right now its much more about talking about whats working. Wilbur ross has just been confirmed overnight as the next commerce secretary. This is part of his purview, to look into nafta and take a view of that. Have you spoke within wilbur ross at all to this point . We havent. Until he was confirmed, we havent engaged. I just spoke with secretary mnuchins Mnuchin Mnuchin for the first time last week. Have you had an influx of immigration requests, specifically from hollywood . Have you considered any . Can you expedite some . We have some great canadian exports to hollywood. Some excitement with ryan gosling the other night. You do, thats right. Anything i can do to expedite the exit . Doing a lot of filming up in vancouver. I did some filming in vancouver. They gave a nice tax credit. Its a great example of where our economies Work Together. In toronto, where im from, or in vancouver, we have an enormous amount of filming going on because the cities, you know, look so similar to American Cities in so many ways. So its another example where were working together. Minister, thank you very much. Really appreciate it. When we come back, well continue the conversation. President trump will address a joint session of congress tonight. Well talk to dan dimicco about what he wants to hear next. Nice to see you, sir. How are you . Really good. Youve been wanting this for a while. Wardrobe change. We were doing a quick little photo shoot during the break. As wild and crazy as i am, i said lets just leave them on, see what happens. You guys can do a lot in 2 1 2 minutes. I think you look handsome. You like it like this. It covers up a lot. On me. My whole attitude feels different. I dont like it. Oh, really . You feel too official . Yes. I kind of like the formality of it. I feel informal without. Were going to do it for dan dimicco. But youre so handsome. Look at you. Thank you. Joining us now, dan dimicco, former chairman and ceo of steel producer new corp. Its good to see you. Youve taught me a few things over the years. You taught me a whole new way to think about things in sort of my evolution or something. In looking at the way things are going right now, you were fully ready to fight fire with fire in terms of other countries that treat us unfairly. Sort of the thing that other people are saying now is we need to use a carrot stick. We dont need to bludgeon people with a baseball bat, with tariffs, with taxes. We need to make it better for people to stay here. You still are ready for the baseball bat, arent you . I thi take the baseball bat out, have it in your hand while youre negotiating. Be prepared to use it because whats happened over the years is people say one thing and do another. All too happy to get you involved in dialogue and then do nothing but continue to cheat behind the scenes. Every trade agreement weve had. Do you think if its bilateral just right from the start itll be easier to not get taken advantage of, easier to Pay Attention with that specific country, exactly what theyre doing, and then we can behave in a commensurate way if we need to . That may be one reason not to do these big deals. Listen, the whole concept of a bilateral deal is to have the maximum leverage on hand for both parties in dealing with one another to put together a deal that will be mutually beneficial, okay. Mutually beneficial doesnt mean theyll have a trade surplice and well have a trade deficit. Mutually beneficial doesnt mean well have a 13 trillion accumulated trade deficit in goods since the early 90s. Our middle class decimated and wages stagnated and our ability to provide for our own defense hampered significantly if not totally undermined. So bilateral deals offer you the opportunity to truly have a situation where america can be put first, but the party on the other side is also going to get a lot of benefit from the relationship. Theres another way to look at this. You can do multilateral agreements, although i dont think this administration will do that. But you have to set up the resolution process such that its treated as a bilateral. In other words, the United States has the upper hand, we have the largest market. People may not like that, but theyve been benefitting by us bending over backwards to undermine our Manufacturing Sector and our American Workers for decades now. Thats got to stop. And you need to be willing to walk the walk. With the wto absolutely. You need to say well leave. And your point is that whats the wto without the United States. That wouldnt work, would it . There wouldnt be a wto. No. Its like whats the tpp without the United States. Its nothing, all right. And people can speculate and they can wave their hands around and say, oh, china this and china that. Theyll take the lead in the world. You have to understand that what were experiencing with china, the rest of the world is also experiencing. Intellectual property theft, nonreciprocation of acquisitions in each others countries, trade cheating, currency manipulation. Theyre all experiencing it. They want the u. S. To be involved. They need us to be involved. We need to be involved but the right way, a way that brings balance to our trade, a way that brings strength to our middle class and a strong future for our country and our economy and to be able to be the Global Leader in the world. The world needs that. We need to finally get to the point where the folks in washington get it. Dan, is your expectation, though, if there were a border adjustment tax, for example, or some form of tariff we slap on goods coming into this country that youll see resip rciprocal tariffs put on elsewhere. Heres whats happened in the world, steven. This is steven, right . This is andrew. Andrew, my apologies. Andrew, listen, the world is not a pure place. Theres no such thing as free trade. All trade is managed. There are huge, huge, nontariff barriers to trade. When you talk about tariffs, oh, theyre going to put a tariff on us if we put a tariff on them, what we have in reality is massive nontrade barriers to us doing business in countries around the world. China happens to be the 100 pound gorilla doing it. The best example is the steel industry. Okay, because china decided pack in 2000 to create a strategic industry out of steel. They would not let any of us come in there and help them build 900 million tons of steel making capacity, even though we had the best technology, the best knowhow out there. They blocked us out. They blocked out our steel. They built massive overcapacity and dumped it around the world in every country, not just the United States. This is just one example. It is a blatant example, but it goes on in other manufactured products. It needs to stop. We need to stop worrying about, oh, theyre going to put a tariff on us. Theyve already created a nontariff barrier system in the world thats worse than tariffs because you cant get at them. The fact of the matter is, china has been waging a trade war on us economically for over two decades. It is time for us to stand up and say, enough is enough. The people who say were going to start a trade war have got their head someplace, buried in the sand. Weve been in a trade war with china. Theyve initiated it. Theyve been executing it. Weve been sitting there through our multinationalists allowing it to happen. Our whole government saying, it is best for the world if we let china develop. Its proven to be wrong. All right, dan. Thank you. I appreciate it. All good points. Interesting tonight. I know youll be watching. Well all be watching. Thanks for your time. You bet. Thank you. When when e come back, jim cramer joins us live from the new york stock exchange. Youre watching squawk box on cnbc. Fees . What did you have in mind . I dont know. 6. 95 per trade . Uhhh and i was wonderg if your brokerage offers some sort of 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. Which sectors outperform after the earnings buyback blackout period ends . The financials, energy and utilities sectors outperform. You cant get it off now. Not david muir. Youre andrew. Lets get down to the new york stock exchange. Jim cramer joins us now. Jimmy wears the jacket. You have to on the new york stock exchange, dont you . You have to look good. You cant look at dan, as much as i love him. He is a factory forward guy. Boy, do i love him. He has taught me like hes taught you. Yes. I cannot believe over a decade how much this guy changed my mind about things. I used to think, what a dinosaur. Listen to this union guy. Over time, im like, thats what he said. Suddenly, you start realizing, you know, it comes with age, doesnt it, jim . You dont know everything. Weve been in a trade war for years but were losing. Right. That was dans attitude when he was running new core. Ran the best Steel Company in the world. Dan is being consistent. His view is being the most Profitable Company in the industry. He isnt a complainer, he is a realist. Dumping is not fair. You know, a lot of times and i heard someone earlier in the show say our idea was that the rest of the world, we need to help bring them up to our standard of living. Thats eventually going to be good for us. Weve got to bring a billion people up to our standard of living. Our standard of living is falling so we dont have to worry. Were coming down, it is perfect. If we meet in the middle, doesnt seem like a good idea for america, you know. How about our longevity going down . Dan is about trying to figure out whats best for america. You know what, i live here. I dont think thats wrong. Jim, wont be belong. Well see you in 3 30. Tonight, marc nbenioff. The future of business in new york state is already in motion. Companies across the state are growing the economy, with the help of the lowest taxes in decades, a talented workforce, and worldclass innovations. Like in plattsburgh, where the most advanced transportation is already en route. And in corning, where the future is materializing. Let us help grow your companys tomorrow today at esd. Ny. Gov safety doesnt come in a box. Its not a banner that goes on a wall. Its not something you do now and then. Or when its convenient. Its using stateoftheart simulators to better prepare for any situation. Its giving offshore teams onshore support. And its empowering anyone to stop a job if something doesnt seem right. At bp, safety is never being satisfied. And always working to be better. Wed better do this fast. Take a look at the markets. Will it be 13 in a row for new highs . Were down about eight and we have a long way to go until 4 00. S p, down two. The nasdaq down 1. 25 . Well see if the dow is afraid. 13 straight new highs if we do it tonight. Have a great night. See you tomorrow. Now, it is time for squawk on the street. Good tuesday morning. Welcome to squawk on the street. Im karl kwiquintanilla with da faber and jiem kramm cramer. Investors await the president s address to congress tonight. Europe is flat. Macro data, unchanged at 1. 9 . Though Consumer Spending was revised. Breaking news, home