Transcripts For CNBC Squawk On The Street 20161205

Our road map begins with a tweet storm from president elect trump weighing in on trade and china. Italian Prime Minister renzi says hell step down after losing that key referendum vote. And rbc suggests an espn spinoff could create value for disney. More on that coming up this hour. First up, president elect sounding off on twitter from everything from china to ta wan to taxes businesses moving from the u. S. To china. Did china ask us if it was okay to devalue their currency making it hard for our companies to compete, the u. S. Doesnt tax them or to build a massive military complex in the middle of the South China Sea . I dont think so. Jim, this was the talk of the weekend. As it should be. I think that one of the things thats happened is that were used to a very formal way things are done. First you hear about a call from taiwan. Obviously its not supposed to be taken in the old regime. And then youre supposed to if you do take it minimize it. But this was maximizing it. I think trump is breaking with all sorts of protocols, whether it be state department, whether it be environment. And this is all part of it. Its a way to be able to state your case that china cant take the jobs. It does seem like right now we have two issues of trump. Weve got that repatriation lower taxation issue. Okay. And then weve got the, listen, were defending the working person. And i think that wall streets going to be a little surprised about the real defense of the working person. I think people felt that maybe that wasnt sincere. Well, these actions are certainly sincere. Right. But is it free trade . Is it a free market . Again taking on rex nard now, right . Yes, its not free trade. Historically known as fair trade. Some people feel fair trade means tariffs. Other people feel maybe this is just a way to be able to say, hey, listen, guys, youre americans first, youre not globalist first. So i dont know which ones which, but theyre both very subtle. Im going to try to explore them tonight with United Technologies, greg hayes, great manufacturer, building a new engine where were going from. Its better than everybodys, but will it be hurt by this . What do you want to ask hayes tonight on mad money . First time weve heard from him after the carrier deal. Again, because the notion were coming from the floor and brand new engine they have, out of respect to where we are, about american manufacturing, well address that. But i also do want to know whether have things changed for American Business people . Are you supposed to be an american first and then a globalist . What do you get if you move overseas now if youre in a situation where a president might take aim at you . And maybe moving to mexico made sense until now. So, i mean, i think when i saw the rexnord, it felt so much less oneoff. Its still indiana, but thats very significant they can move that plant to mexico. Its turning out to be a little more than talk. Yes. I think thats generally the take on the tweets over the weekend. David, im sure youve been watching this as well. Words like retribution, words like consequences. You got ben sassy now saying how does this not translate into a 35 tax on the consumer if this tariff actually happens . Yeah, that is a key question of course, carl, as you say, are things going to become a lot more expensive when you go to walmart and buy them . You know, weve used the word uncertainty so often over these last eight, nine years since the financial crisis first hit as you take a look there of course in terms of president elects tweets on rexnord and others. But youve got to imagine, guys, right, if youre running a multinational right now, and certainly im interested to hear what greg hayes has to say, jim, but if youre running one, youve got a lot of uncertainty. Particularly if youre selling a lot of things in china or doing a lot of business in china, whether its manufacturing there or anything else. Because it is clear that that relationship is in some sort of flux, it would seem, as a result of the incoming administration. And i dont know what you do other than just wait and see how everything settles, jim, if youre running a multinational business right now. David, youre so right. I looked at how Many Companies in the s p that can be hurt by this and theres a huge number of companies that have benefitted from our china policy. And i think that somehow were forgetting that that could go away or that the chinese could make life very hard. If you just look at qualcomm, theres a very good example of how hard china can play. And if they played hardball with all our companies, whether it be Proctor Gamble or a company like Skyworks Solutions makes a lot of equipment there, i think you would start paying less for these companies. So far were not. So far theres an air of good feeling willing to overlook what could happen to caterpillar, which would be so, so lets say just a number cutting event. Right. Be big. Right. But when youre making decisions now in terms of investing, do you need to look at the revenue side and see, well, what percentage comes from overseas . What percentages derive from any market, forget china . And separately, if youre apple, jim, and youre in manufacturing and employing so many people there, youre employing so many people in china, but at the same time what about your manufacturing . Yeah. Well, theres also your supplier base, which in many cases is domestic focused. Yes. And i think that now its absolutely true you could bring a chinese plant back to mexico without running afoul of the president. The president is perfectly willing to have a onestate win over another, but obviously thats always been the case in our country. But, yeah, i spent most of the weekend saying, okay, look, whos got stuff overseas, whos got stuff in china . Making a long list. And the list was too long. Frankly, its way too Many Companies in the s p. You got to go to the small caps, you got to go to the russell. And maybe did the russells big run anticipate exactly whats happening here . Speaking of that run, stocks are poised to open higher as markets all around the globe essentially shrug off the rejection of the italian referendum. The euro did recover from the 21month low earlier this morning, jim. As we said, looking at a dow record at the open, s p though first losing week since the election. Right. Is the rally fading . Thats the question. I think the rally has to struggle here. Good example, italy comes out and immediately i get hit by a half dozen hedge funds notes saying, okay, the lira is coming back. I was at one point talking to my wife about if you go to italy with the lira, how about the overarching hedge fund this is the end of the world no matter what happens contrasted with the recognition that the brexit poll was wrong, trump poll was wrong and whoever thought renzi was going to stay i mean, i was thinking is it going to be 70 30. So weve kind of adjusted the idea that the pollster haves no clue, not that the people have no clue. Now the surprise is austria, right . Shocker. Shocker. I mean, look, i think we all kind of recognize that those who sold on brexit, those who sold on trump, they never got back in. Those who sold on, you know, linkedin and tablo data in february didnt get back in. So the sellers are not numerous, how about that . Yeah, a lot of debate this morning on whether or not this is in fact a pro brexit vote because a majority of italians still favor the euro. And the rules that would have been changed could have been used for any type of politician who came in after renzi. Well, there are two italys. Theres the italy in the North Industrial manufacturer that very much favors the euro, and then theres the italy in the south, which is poor and desperately needs help. So i think what we recognize from this vote is that its not one italy. And therefore its not as scleer cut that they are going to abandon the eu. For more on the referendum lets get to julia chatterley who joins us live in rome. Reporter good morning, guys, as youre quite rightly saying the latest from rome here is at 12 30 eastern time were expecting Prime Minister renzi to hold his final cabinet meeting. Then hell go off and present his formal resignation to the president. At that point the president has two choices, he can either accept it or he can reject it. Now, if he rejects it, it means renzi stays around, he has to face a confidence vote in parliament likely by the end of the week. But for all the reasons, guys, you were just mentioning, tough to see him win this. Whats more likely is the president accepts it and then the hunt is on basically for his replacement. Someone to lead an interim caretaker government at least in the short term. Now, so far so expected, if you trust the polls. And i think if you look at this, we were questioning to what extent this result was in the price. Look at the banks yeartodate down 50 . Today theyre losing a further 4 to 4. 5 , but i think investors will remain sensitive to headline here particularly surrounding the countrys Third Largest bank, whos actually trying to raise cash this week if possible. So, guys, watch headline risk still around the banks and of course wait for that decision from the president later. Back to you. All right. Julia will be watching for that. Lets get more here from david about the heavy hitters of the no labels conference today, david. We do have some coming up on our show. Yeah, we do, carl, thats right. Of course the conference itself is sort of a focus on secenteri politics. Were going to be speaking with the likes of nelson peltz of trian. Want his take on what he thinks about investing in multinationals as of course his firm has done to a large extent. Both domestic and internationally. And were going to talk about business. But we will hit a bit of politics with him. Also be talking with Scott Sperling of th lee about the private equity landscape. And again coming back as we so often do and need to here, what does it actually mean in terms of this Incoming Trump administration for the way these guys view the world . Well have them coming up. All right, david, sounds good. When we come back, is it time for disney to sell espn . Rbc has a note out on that this morning. Also ahead, exclusive with new york fed president bill dudley, a lot to talk about next weeks fed policy meeting a week from wednesday. Take another look at the premarket. For the dow record we need 19,225, looks like well get it. Back after a short break. Those . They are. Do i look smarter . Yeah, a little. Youre making money now, are you investing . Well, ive been doing some research. Let me introduce you to our broker. How much does he charge . I dont know. Okay. Uh, do you get your fees back if youre not happy . dad laughs wow, youre laughing. Thats not the way the world works. Well, the worlds changing. Are you asking enough questions about the way your wealth is managed . Wealth management, at charles schwab. Is that they contour to your body. Rpedic mattresses. It keeps us comfortable and asleep at night. Get your tempurpedic. The most highly recommended bed in america for as low as 25 per month and 90 night free trial. With concerns about espn subscriber numbers weighing on disneys stock this year, rbc is out with a note this morning saying the dow component should consider divesting the Sports Network because such a move would create value. Approach suggested by rbc including spinning off espn into a publicly traded Company Selling the network in a taxed transaction. Title of the report is, its not you, its me. And its about how this used to be considered the crown jewel, now its considered a liability. Well, i do think the piece makes one point that is very important, which is called d rating. D rating in wall street term meaning that wall street is espn is now pulling down disney stock. And if you freed it from espn, which is really incredible because just a few years ago when they were 100 million, the idea of freeing i wanted to free espn from the rest of disney because i wanted to own espn. This seems a little fickle to me, but it does seem and i want to defer to david that this kind of piece would not be sanctioned, so to speak, if bob iger hadnt said, hey, why dont you float it. David, is that too calculated and too cynical a view . Yeah, i dont know, jim. I mean, there are times when companies sort of want the Analyst Community to soften up the Investor Base for something thats coming that may not have been expected, or that might have been received unhappily if it were just a huge surprise. We mentioned this earlier at least last week when bernstein came out with that piece, remember, about them buying netfl netflix. This idea. But i dont necessarily think theyre behind it. You know, the fact is that companies are always considering all sorts of things. And theyre constantly getting called on by Investment Bankers to consider things. And it is my belief that disney has been brought this idea over the years. Hey, would you ever consider spinning out espn in some fashion, different structures for doing it. I think whats interesting now somehow an overhang on this company as opposed to a huge benefit to it is very interesting from an investor perspective. Whether or not anything comes of it who knows. And as you guys both know it was john malone on november 10th who i think started this conversation again during our interview, if you want to take a listen, less than a month ago when he had this to say about disney and espn. If i had to guess, what you will see is a split of disney with espn spun off and probably espn could be owned and protected by a distributor in the u. S. Right. So malone having this idea of doing that. And as distributor namely a Cable Company or what we call still Cable Companies owning it in some fashion, guys. Well see. But, jim, it is interesting to see how many pages have been written recently about disneys future. Yeah. I find it a little quizzical if only because in the last Conference Call in the last earnings there was just a tremendous, i think, ratification of why bob iger thinks that espn has turned. At the same time, david, we get these results from neilsen and show the last two months being very down. Now, one thing that bob iger has said is there are many ways to look at espn and that maybe the neilsen way is too narrow. I dont know, can we just dismiss iger was more bullish on disney and espn last time on . Can we what, jim, say that again . Can we dismiss the notion of that last Conference Call where iger pointblank said there are a lot of ways to look at this thing. That would be in reputation to this piece we read this morning. Yeah, i agree with you. I think those were important comments. And they certainly were taken by the market to have been important in the sense that many get is that this is not necessarily something that is keeping them up at night. But i dont know. You know, at t time warner still changed peoples perceptions of things, i think. And so we havent yet seen the ramifications of that deal, in fact if it actually occurs, which is most likely. And what thats going to really mean in terms of putting pressure on the other companies that are out there including disney. Whether you buy or whether you do consider something in the past you perhaps had already thought about and dismissed. They point out, i mean, rbcs view is that the very nature of live sports is changing. Just because of the changing channels of distribution. And as a result theyre no more about movies and shows and parks and products. Well, look, folks sometimes fickle. I remember moments in time when time warner thought spin out hbo and look at the value of time warner together. I was watching a lot of espn this weekend like many others looking whos going to be in the finals for ncaa and watching sports center. I just think that the idea that this is somehow not additive but is now subtracted because of some losses of subs seems a little, lets just say, fanciful, given the fact that if you had one month that was actually stable, then people would say, holy cow, why did they get rid of that . Yeah. Theres also the added irony that just last thursday, i believe, it was bernstein on why disney should buy in that case netflix, right . So everyones got thoughts on m a coming and going. I know. David was talking about how twitter may maybe they were looking at twitter. Every day i think davids so right, bankers hit anybody whos got a good Balance Sheet whose stock is going down. And disney in particular is just something people love to talk about. David, theres so much conjecture here its almost out of, lets say out of character versus every other stock i follow. Yeah, it is interesting. Again, a lot of pages being written by various analysts and various things. And so you do start to wonder. And ive gotten hit from so many investors as well sort of saying, well, is something going to happen here in some fashion . Its hard to imagine either way at this point that disney would make a big purchase and or ever consider a split that were discussing, but it is certainly not unimaginable. That may be the big issue. Yes. Not unimaginable. When we come back well get cramers mad dash and countdown to the opening bell. Take another look at the premarket on this monday morning. Busy week ahead more squawk on the street after a break. Which . Eees. Bees . Eese. Trees . Eese. Xerox helps hospitals use Electronic Health records so doctors provide more personalized care. Cheese . Cheese xerox healthcare services. Soon to be conduent. Thats it. How was your commute . Good. Yours . Good. Xerox real time analytics make transit systems run more smoothly. And morning chitchat. Less interesting. Xerox transportation services. Soon to be conduent. Just about seven minutes to the opening bell. Lets get cramers mad dash. Talking about apple, driving selfcar autonomous, saying dont really need to do this through the autos. I think people feel they have to do something car because cars such a big market. This is again the idea of moving away from just mobile. Why do they have to do that . One of the reasons is the note out from ubs saying shares good all over the globe but losing some share in china. A price target of 127, but hes been a faux bull. Hes had so many negative things to say, i wish he would go to a sell already. But this stock has been a battleground, as has tech. And im pointing to the fact tech is making a rebound today. I dont know if apple will dallasft. Worth, b do it, but the apple car issue people want to see because it has to do with the youve repeated source of funds meant to fund other areas of the market. Is that the case . I think apple is. I noticed facebook is making a stand, nvidias making a stand. A lot of companies were, i felt, has seen stocks go down after workday, they did go down, thats workday disappointment, and then they bounced back. I still find this is an area that you could easily relate a tweet about china from trump to this stock and say, you know, im going to pay lower multiple for it. Something we talked about at the top of the show, im very concerned about this because i think theres going to be some eggs broken to make an omelet of china being, lets say more ball playing, which is what trump really wants. And the ballplayers, well, i mean, if they get to get their way, maybe apple is going to be you dont want to buy a lot of tech. Yeah, a big story for 17 for sure. Well get the opening bell in just a couple minutes. Dont go away. Mapping the oceans. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the global economy. And you thought we just made the gas. Energy lives here. Guyhey nicole, happening here . This is my new alert system for whenever anything happens in the market. Kids a natural. But thinkorswim already lets you create custom alerts for all the things that are important to you. Shhh. Alerts on anything at all . Not only that, you can act on that opportunity with just one tap right from the alert. Wow, i guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. Youre watching cnbc squawk on the street live from the Financial Capital of the world. The opening bell two minutes ahead. Light on data but will get earnings, auto zone, lulu and some others. The italian referendum fails, renzi will leave. People are tweeting a picture that was taken this summer of obama, hollande, cameron, renzi. Only merkel is the one of this Group Standing that will be here next year. You know, there are a lot of people who just actually, actually said this weekend that this vote, the italian vote, is to force germanys hand to spend more money. Because germanys been very tight fisted. Germany said over and over again other people say, look, this is about immigration. If its all about immigration, then what youre seeing is this wholesale rejection that does fit in much more with trump, meaning that its about workers trying to keep their jobs or take jobs back. I think its more about economics. I think its more about the latter. And thats why germanys got full employment so theres not that much of an issue. Right. I dont know. Ive got to tell you that the reaction overnight of the chaos that we were going to have is just something that reminds me of the period say august of last year to august of this year where every bit of news was interpreted negative. This is not being interpreted negatively. No. Positively. Yeah. Something to watch. Whether or not were in the midst of a sentiment sea change when it comes to results like this. Let get the opening bell and the s p at the bottom of your screen. At the big board this morning its Insurance Company egon and at the nasdaq paragon, Parent Company of North Carolina based paragon bank. Oil as we said earlier highest since july of 2015, as were now above 52. There is there are two things going on with domestic oil. One is obviously they get this umbrella of the saudis. They make some pretty good money here because technology has driven down the cost, particularly in the permian. But also i think theres this understanding that this is a big winner under a trump regime. That there had been we had someone from north dakota talking in squawk saying that the obama period was about keeping fossil fuels in the ground. I feel that a lot of people think as trump immediately going to the dakota pipeline saying its a good thing, that this is an era about taking fossil fuels out of the ground. Whether it be coal, oil, youll see freeport up today. And thats a very big change. Again, i know that its to default constantly to trump seems wrong, but theres a reason why an eog or a pioneer have gotten well ahead of the majors. And i think its because theres a sense that these companies are going to have the most favored stocks. Think about whos being talked about for state department. Yes. Yes. And all the names you just mentioned along with chesapeake and cabot and range and murphy and hess are leading the s p. With the dow now keeping an eye on that at an alltime high. Look, i think these independent oils obviously they are able to open. We saw a rig count again baker hughes looking good last week. But i emphasize if you think Like Marathon Petroleum ceo when he came on mad money that trump is a good friend of this industry, that means friend of pipelines makes it more economic, it means that a friend of permitting, that permitting process taking too long. And, look, the army corps of engineers, viewed as independent but obviously trump feels you staff these different agencies and organizations with his people and what happened with the 3. 8 billion dakota pipeline will never happen under trump. Right. Any chance happens down the road . Yeah, definitely. I think one of the things trump has talked about openly is deregulation. The idea that the army corps of engineers would be able to get in and acede to what the protesters want would almost never happen under trump. Im saying deregulation is easier to permit. People understand deregulation has to do with getting something done in trumps eyes, and getting something done is not letting a 3. 8 billion pipeline that has a lot of money, a lot of ability to get bakken oil down, that doesnt get sidetracked anymore. Thats what he would be hoping to do. Yeah. Some research to get to. We havent done mcdonalds upgrade. I think that was important. Ups to buy. Last thursday guggenheim cut it. Remember we talked about that last week. Yeah. In this case they say november might be the best month of the year. When i read this i said to myself though, wait a second, if novembers the best month of the year, the shorts who were put out last week on that call will obviously be very wrong. Mcdonalds had a little softer number last time, this would be very positive particularly in the light of the fact the note goes onto say the pipeline we havent heard this term associated with mcdonalds in a long time, the pipeline including fresh beef is very promising. This also people should remember is a weak dollar play. And we have a very strong dollar, which people seem to have there was a time when all we did was think about, oh, my god, the euro at 1. 06, sell everything international. But the era of good feeling from trump doesnt seem to it obscures some of these negatives. You would have looked at italy, looked at the dollar versus 21month low of euro and you would have said, wait a second, i got to sell mcdonalds. But that isnt getting factored in. Is it form of bullishness . To some degree i think it has to be considered. Right. Forex has been replaced by other dynamics, deregulation, lower taxes. Exactly. Here we go. Lower taxes. More competitiveness. More u. S. Based competitiveness, right . Exactly. And i think that are we getting ahead of ourselves . Look, if mcdonalds does have good november numbers youll regret you sold it and then well be closer and closer to perhaps some big changes in washington. Theres a lot and a lack of cynicism on wall street. Idealism about trump that plays in every single day. And when i saw that euro plummet, i said, oh, boy, theyre going to come after cat, theyre going to find mcdonalds. I come in this morning and its almost irrelevant. What was relevant before is irrelevant now. Transition people at home have to understand. The things we were looking at before that made us sell, we dont care about anymore. Its so true. On that point the only dow component doing better than mcdonalds is goldman and visa. Goldman initiated at hsbc with a buy, 2. 50 target implies another 12 from here. I did a piece this weekend for real money and what it is is looking at what groups are unassailablely being used as positive. Banking group, goldman even though its come up a lot is behind the group for multiple years, but theres just no flies on the banking theory. It doesnt have worry about china. It doesnt have big labor issues that might come up in terms of offshoring. So its become the goto group. Its a very big group in the s p. And it can create a rosy pa numb ra over the markets. So sustained Energy Strength together where does that take you going into year end . Have you thought about that yet . Well, i think if you get people realizing, holy cow, i havent owned a bank stock, ive been avoiding bank stocks, those are very liquid stocks and they can absorb things. My concern though is that if you see more tweets about china, then rather than want to be in a Proctor Gamble, which has big chinese business, youll come back and say i want to be in bank of america. And thats the way these institutions think. They say i dont want to i want to sleep at night. Proctor gamble historically a sleep at night stock because they have worldwide growth. If president elect trump were to tweet right now, sorry, proktct, there are bigger issues at stake. Would that shock you . Its not about tide. Its about the american worker. If he watches, thatd be something and youd see that i think our neverves are getting deadened yes, im worried about pfizer. Last week Brent Saunders came out and said be very careful about maybe the president elect could tweet against pharma and then the fantastic executive from regeneron said maybe these price increases are nogo. A tweet, a vicious tweet from trump after reading Brent Saunders allergan piece, again, something new to think about. Indeed. Speaking of big cap pharma, barrons has a list of top stocks for next year, their favorite ten. Mercks one of them along with alphabet, apple, citi, delta, disney, unilever, toll. Merck has been so underrated ever since ketruda, a better drug for cancer perhaps many different cancers than opdivo. I like that list but my problem is if youre a globalist, you may be thinking incorrectly about the new white house. Because theyre not globalists. They want ceos from america to think about america first. And then the Global Markets. As opposed to globalist ceos who live in america. I know that sounds like all im doing is an anagram, but its not an anagram. Its about new policy. Jim, as were talking, amazon has unveiled a new product called amazon go. I want it. I got to find out what it is first. A new kind of store, they say, with no checkout required. Youd never wait in line, you walk out. You use an app to enter the store, you take the products you want, you exit. No lines, no checkout. Were going to find out more about this later. Kevin johnson being elevated at starbucks with the idea of technology being important in retail, well, this basically says whatever you buy is meaningless, what matters is speed, time, thats something Mark Zuckerberg talks about endlessly at facebook. Im told we have some video of it. Im not sure when we get it. I think it might be coming up here. This literally has just been sent to us a few moments ago by the company. When we get a look at it, well share it with the viewers. What can i say, im an amazon prime member. You can keep going. Amazon go. No lines. No checkout. No, seriously. So this is a this is a Retail Concept were being introduced to. A competitive advantage that, can we just please . Its still hard to be able to use the mobile app for starbucks, but yes, i mean, obviously lines are the bane of restaurants and retailers. Costco struggled for years. The line. And i think when you go back over if you parse what Howard Schultz has been saying in the last two years of Conference Calls, a lot is the mall is dead, but a lot is throughput, throughput. Chipotle talks about throughput. This is about throughput. If you eliminate the friction of the line, then, you know, i got to tell you i often buy nine things in the supermarket just to not be in the other line. Yeah. Start get the express lane, right . The heck with the lettuce. This is kind of a logical progression about what millennials want, what generation x wants, which is i want it now, i want it inexpensive. And i dont want to ever have to wait. That is, geez, i dont know, i got used to waiting. This does feel like a new push into perishables, right, given the limited amount of information we have. Well, i mean, those perishables, when you order, you kind of have to be there. You cant have to have a steak sitting outside on your porch on a warm summer day. Does not lend itself to delivery. Theres some cities with one hour, which we know about. Right. I just look, i mean, im sure if youre a kroger right now youre saying, come on, guys, would you give us a break . Could you just stop taking our business . Please. Is faber with us . Is he still listening in . Im here, guys. You are . What do you make of it, david . Im here, carl. Yeah. You know, look, the first question i have is do they need to have a lot more physical locations if theyre actually going to pursue this strategy . I would assume its something theyll roll out very, very limited initially. But does it in some way raise the question as to either theyre going to license this to other stores. I havent seen the release you have but i dont know if we have any of these questions answered. One things for certain, its cheaper to not have 15 an hour people at the register. This is about labor. They would have a competitive advantage over anybody who has to pay 15 an hour to a checker. Worth thinking about. Yeah. More jobs get lost by technology than by offshoring. Thats a lot of cashiers that you do not need. You got to develop the software and all of that. But, boy, People Matter too. Wow. Well watch that one. Bring you more on it later today. Meanwhile, we told you dow alltime high. Dot com which y dom chu is on the floor. We have a lot of vips behind me at post six, but if you take a look at the overall picture for stocks right now, were building off a very, very solid week last week. You can see gains here about half a percent to the upside for the nasdaq, the dow and s p 500. If you look at the sector leadership so far, at least in the first ten or 15 minutes of trading so far today, youve got the usual cyclical economically sensitive sectors, financials, materials, energy, those guys leading the way higher. Consumer staples, utilities, telecom, the Interest Rate sensitive big dividend paying stocks really lagging so far underperforming today. Focusing in on one sector specifically here and thats energy because over the course of the past week the Energy Stocks had been the best performer. We know on the heels of the opec Production Cut deal that happened, we know that oil future contracts had record high trading, a lot of options betting on bullish oil in the coming weeks and months here. But marathon, transocean, 14 of the s p 500 companies that were the top performers last week were oil and gas related. And thats carrying through and in trading today. One other sector i want to focus on is the gold miners, gold prices continue to fall this morning down about 10. Futures side 1167 so far. Downgrades from citi, newmont mining, kinross gold, Oil Price Slide not matching so much. Well watch the gold miners etf ticker gdx to see any kind of reaction on that front as well for the broader gold miner index. One other thing to hint at, we spoken so much about the idea that donald trump is tweeting against china. One other china headline that hasnt gotten a lot of attention here in the u. S. Is the fact their shenzhen hong kong stock exchange, their connect, that link between those two exchanges, has kicked off today on monday. Not a lot of fanfare, but the shenzhens kind of like the nasdaq, some people say, of china, versus the shanghai, which is like the nyse. Well see if there are any developments on the trading front between the mainland and hong kong, guys, back to you. Dom, see you in a bit. Lets get to the bond pits as well. Rick santelli at the cme in chicago. Good morning, rick. Good morning, carl. The referendum was predicted by all, but maybe the market response was a little bit more aggressive in a way unforeseen as we see most of the yields are up throughout europe especially italian 10s. Theyre up about 14 basis points around 2. 04. But if you look at those they really havent broken out of their more extreme range theyve exhibited as some market prepared. We have jobs numbers. Look at twoday charts of twoyear, were up, yes, but not as much as we were on the spike highs after the data. Same could be said for tens. Open to one week. You can clearly see we didnt quite reach up to the 2. 49 level that we did friday, but rates are still higher. Up five basis points on a 10, up three on a 2. So a little curve steepening, rather unusual of late. Lets go to the backyard referendum and look at a oneweek of bunds. In the mid 30s still havent broken out of their range, but maybe the most important thing to look at is the relationship of what is left of the relative value trade from the beginning of november, if you look at the difference to spread between our 10s and bund yields, its hovering around 2. 07. As extreme as that is, you can see its in a flattening range and holding actually quite stable. A oneweek of the euro versus the dollar, theres your money trade. You can see that it did a uturn, lower there and higher, weve talked about this. The fouryear chart cant be easier than this on a closing basis, you really need to close under 1. 05 to perpetuate any Downside Momentum to the euro currency. Back to you. Thank you very much, rick santelli. As we said earlier, oil at a high today. Jackies at the nymex. Breaking through 52 a barrel certainly was a key resistance level. And thats important here because we tested it last week. Now, the strength to move higher from here maybe somewhat muted, maybe 55 is what im hearing. Thats certainly the next level to watch. The dollar index is a big part of this trade. And theres two pieces to that story. Obviously one of them of course is the trump trade has brought the dollar higher, but also dollars come higher ahead of the fed. Were seeing that back off a little bit. And if we see what we saw last time ahead of the fed where the dollar index moves higher and then it comes down, that will be supportive of crude oil prices. Additionally, theres a trump bias to this trade as well. The belief of course that there will be positive changes to come from the administration and that those changes will come quite quickly, that the industry here will regulate itself to keep these prices higher. So thats not only going to move the futures but those stocks that dom chu mentioned as well. Back to you. Thank you very much, jackie deangelis. When we come back exclusive with new york fed president bill dudley, talk rates, Economic Growth and Trump Presidency on the agenda. And billionaire nelson peltz with his take on the investment climate, trump rally and a lot more. David has that exclusive interview coming up. And dow at an alltime high. Back after a break. My business was built with passion. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. With it, i earn unlimited 2 cash back on all of my purchasing. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Which adds fuel to my bottom line. Whats in your wallet . How do we know when irrational exuberance has unduly escalated asset values which then become subject to unexpected unexpect ed and prolonged contractions. 20 years ago today thenfed chairman Alan Greenspan delivered his irrational exuberance speech expressing concerns about stock valuations. Of course we know in three years after that s p almost doubled, again. Right. Thats why whether it be the biotechs and janet yellen, excuse me, or Alan Greenspan, it doesnt pay for the fed to comment on those kinds of things. The fed can comment obviously on rates and talk about the economy, but as soon as they kind of wade into the stock market, they really become forecasters. Theres no need to forecast. Just doing something they shouldnt do. Yeah, original quote was all about a low inflationary environment, right . So Something Like were in. Well, look, i think greenspan learned his lesson. I do believe that you set yourself up. Theres no reason for the Federal Reserve to ever put themselves in a situation where we rerun a tape that makes them look so foolish. Alan greenspan is not a foolish man, but thats one of those comments where you say to yourself what was he thinking, because it turned out to be rational and exuberant. Yeah. And were rational and exuberant right now according to the buyers taking the dow up, because they believe were in a new regime thats going to grow much more. Are they apropos of each other . There are times when animal spirits run and we cite cummins and caterpillar wont be hurt and by deregulation and by whats happening in oil and gas, so i struggle here like everybody trying to be not too bullish. Thats what i think people are trying to do. I know what you mean. And as for the fed its one thing for yellen to answer a question about biotech valuations on the hill. But its another to put words like that in a speech and read them off. Also puts them in a box. If he cuts rates, then suddenly you have an elevation. So why reduce something that may set you up into not being able to do Something Else . Well get stop trading with jim in just a moment. Dows up 95. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle. And it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. Generosity is its oyou can handle being a mom for half an hour. Im in all the way. Is that understood . I dont know what shes up to, but its not good. Cant the world be my noodles and butter . Get your mind out of the gutter. Mornings are for coffee and contemplation. That was a really profound observation. You got a mean case of the detox blues. Dont start a war you know youre going to lose. Finally you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Time for cramer and stop trading. Analysts keep fighting this bank rally. Another downgrade of key today. Its endless on what keeps happening, they go up. Bank of americas probably been the most stealth plus 29 rally i have ever seen in my life. This is a company that of course has a huge american franchise, benefitting from higher rates which were having again today. It would benefit tremendously by deregulation, it would benefit amazingly by the idea the fed raises. So just be aware these have been fought, these rallies have been fought. No one has been recommending bank of america. People have been downgrading banks. Look what this is about. I think its important to point out where the money is really going. The volume is huge in bank of america. Yeah. And it has been an unbelievable stock. But all it is is back to where it was in november of 2008. So just really quick, at what point would it be giddy to be buying . 25 is the price i would be saying is where i would now feel like, wait a second, its so far above book, have multiple rate hikes, but thats still a distance. These stocks are so far behind the market its painful. Fascinating. You have a big night tonight. Yes, were going to go up the plan we see the gear turbo fantasy a big engine greg hayes United Technologies talk about manufacturie ining might and Th Partnership i have quotes around that, between the government and business, and what does it mean . And i cant wait to get up there. Im excited about the engine which is very environment tally friendly, but im also excited to hear about what greg thinks about being a ceo in a new word, being american ceo or global ceo based in america and what does it mean for someone trying to sell a lot of engines and heating airconditioning and ventilation equipment. The ainterview is important, the fact youre doing it is important. I cant wait to see him. Well see you tonight, jim, mad money 6 00 p. M. Eastern time. When we come back, a power packed hour including exclusive interviews with new york fed president bill dudley, billionaire investor nelson peltz. Dows up 92. Good monday morning. Welcome back to squawk on the street. Im Carl Quintanilla with Kayla Tausche at post nine of the new york stock exchange. Saras off today. David fabers at the no labels conference in washington. Hes going to join us shortly with an exclusive interview with billionaire investor Trian Fund Managements nelson peltz. In the meantime quick check on the markets here. Dow did set an alltime high at the getgo. S p working off its first losing streak since the election and voters in italy delivering a stinging loss to that countrys Prime Minister, matteo renzi will step down after the referendum fails. Were watching that. Meantime donald trump issuing a hard warning to business overseas. U. S. Former managing director at the institute for International Finance charles here as well, but first, john harwood is outside trump tower with the latest on all of that. John. Reporter carl, weve had a step forward in the transition process today. The president elect has named dr. Ben carson as his choice to be the secretary of housing and urban development filling one of the vacant posts in his cabinet. Still waiting to hear on secretary of state. What the president elect has not made a choice yet, but donald trump made news over the weekend in ways other than with filling out his cabinet. First of all, he pushed back against the idea that the carrier deal he announced last week was simply accomplished by giving tax benefits to carrier. He sent out tweets saying companies in the future that look to leave will be subject to a 35 tax. Now, donald trump also made news by accepting a phone call from the leader of taiwan. This is something that ruffled the feathers of the chinese because of their onechina policy. They dont recognize taiwan as an independent country. Now, initially the trump team sought to dampen the impact of that call by saying that it was simply a call that was placed by the leader of taiwan, not by president trump. And mike pence yesterday on the sunday shows called it a curtesy call. We just say to our counterparts in china that this was a moment of curtesy. The president elect spoke with the president two weeks ago in the same manner that was not a discussion about policy. Reporter now, donald trump struck a much different tone in tweets within the last 24 hours. What he said was, did china ask us for permission to devalue their currency or make it harder for u. S. Firms to import through tariffs or to try to stake a claim on the South China Sea . So there you have donald trump not sending the signal that it was merely an inconsequential Courtesy Call but trying to make a point to the chinese. This is an unpredictable president elect and weve seen that and chinese are discovering that now, carl. Ill take it from there, john. John harwood outside trump tower. For now joined by former deputy u. S. Secretary of treasury, ambassador bob kimmet. Was this a Courtesy Call or sgung do you think it was intentionally provocative . Kayla, ill let the transition respond directly to that. I would just note that the taiwan relations act that was passed at the time of normalization of relations with china anticipates both a significant u. S. Presence on taiwan. Weapon sales have been allowed including in the most recent administration those have gone forward. And i think really important to note is that both the u. S. And taiwan sit in apec, the Asia Pacific Economic cooperation, so there has been interaction with taiwan. With regard to the call itself though i defer to the transition and the president elect. And apec which you just mentioned met a couple weeks ago at that meeting, china brought forth its own asia wide trade deal. What sort of position does that put our asia allies in as we discuss ripping apart tpp, putting a new trade deal in place, getting tougher on china. Is there a potential that another deal gets done in the meantime that puts our allies in a difficult position . I think our allies are looking for u. S. Leadership in the asia pacific region. I think that is political, military and economic. I think the president elect has said that he thought tpp was badly negotiated. I did not hear him say that there should not be a trade deal in the asia pacific region. Although it could be a collection of Bilateral Agreements rather than larger multilateral agreement, but personally i would like to see the rules written on the basis of what the u. S. , europe and other free market democratic economies see as the proper way to a successful global economy. Will there be some competitiveness with china . Absolutely. If that plays out in apec, plays out in the g20 and elsewhere, i think the u. S. Has an important leadership role to play on trade. I dont think the president elect is going to shrink from that leadership role. If you were a Company Mapping out your strategy for 2017, you have operations in china, you have operations in asia, how should you be thinking about what happens next year . I think i would engage right away with the transition, and certainly engage very soon after the inauguration with the new administration and with the congress. I think that there are going to be good opportunities. I hope on the basis of free and fair trade, Flexible Exchange rates, the free flow of capital across borders based on open investment policies, i think companies can help push for that. Companies also of course are going to want to work with the new administration on lowering taxes to leading regulations that are harming the opportunity to create good jobs in the United States. By the way, that includes investment coming from overseas. Theres 6. 5 million americans who work in this country for companies headquartered overseas. 40 of those jobs are in manufacturing. So we want to make sure theres an open investment and open trading system. And i would just judge it by one question, how does it effect those small and Medium Size Enterprises who create 75 of the new jobs in the United States . Finally, the net was widened over the weekend for potential designees for secretary of state to include former utah governor John Huntsman jr. , who of course was former ambassador to china. How strongly do you think the china relationship should figure as the president elect is choosing his secretary of state . The china relationship is one of the most important bilateral relationships. And so whether state, defense or treasury, it certainly should figure into the calculus when the president makes his final personnel decisions. By the way, not just at the cabinet level but the sub cabinet level. And i would say for the secretary of the treasury there are some things right on the agenda with regard to china, from the currency report to cases that come before the committee on foreign investment, which he will chair, to activities in the g20. And then also working with china on economic sanctions against iran and north korea in the permanent five for the u. N. Security council. State will be an important part for that, but so will treasury. Theres a long list of todos, but at some point we got to get started. Bob, we appreciate your time today. Thank you, kayla. Bob kimmitt is former deputy u. S. Treasury secretary. You saw the dow hit an alltime high at the open. Joining us here at post nine rk former managing director at the institute for International Finance, charles delara, now partner and vice chairman at the partners group. Good to have you back, charles. Good to be with you, carl, kayla. People cant even agree whether or not this was a center right vote or what voters had in mind when they considered the referendum to begin with. Its not even clear exactly what they were voting no on, is it . Because i think this was not exactly the best vehicle in my view for Prime Minister renzi to put his future and the future of italy at risk. I think weve had two situations now really where this was selfinflicted wounds. Cameron in the uk with the brexit vote. And now the vote on the referendum in italy. Lets hope, however, that this does not lead to a major shift away from reform in italy. Because if it could, it could be quite serious for italy and the entire eurozone. Do you believe with the loss now of hollande to come, renzi, cameron, obama, i mean, theres going to be a whole new slate essentially of global directors. Thats true, but its not exactly like hollande was the strongest market reformer in the world, right . I mean, unfortunately he was extremely unpopular. Weve had a sweep of change. And i think obviously the sweep of change here in the u. S. Has brought new dynamism, a new sense of tax cuts, of deregulation. And frankly europe needs some of that as well. You know, the entire european Banking System suffers under negative Interest Rates and excess regulation. And the italian Banking System of course is particularly burdened by nonperforming loans, carl, which are much larger than the average in the eurozone. There needs to be some new energy. There needs to be new investment in europe. But there also needs to be new fundamental economic reform. And well have to wait and see who can deliver that. Is recapitalization now a higher hill to climb now that this referendums been denied . I think temporarily it is. I mean, right in these very days as you know theres a recapitalization effort underway from monte de pasche, i think the hurdle has been increased but i think overall challenge hasnt changed very much. There needs to be however more flexibility in brussels. And the Italian Government has been telling brussels this for quite some time. In terms of how the state could step in and help facilitate these recapitalizations. Without this, i fear theres going to be very difficult to succeed. Well, what sort of negotiating or Bargaining Power does italy now have in brussels, if in fact the Financial Sector found itself on the ledge again . Kayla, they should have a good bit because i think brussels and berlin have to realize that theyre at the waters edge of a potential fragmentation of the eurozone. I know that sounds dramatic, but frankly with the british exit from the euro, with the greek problems still boiling, unresolved after over six years of crisis management, and with the eurozone having been in recession more or less, no growth for a decade and a half, i think there needs to be a wakeup call. And if this is not it, i dont know what will be for them to exercise a little more flexibility, to back away sharply from their austerity led programs to give more flexibility for how the government may play a role fdic type role here to support the recapitalization of these banks and to reaffirm the importance of italy in the eurozone. I mean, it was difficult enough a few years ago when some of us were involved in the restructuring of greek debt. Imagine the restructuring of italian debt. Its beyond the pale. And where does germany fit in all of that . Do they need to be less of the older responsible scolding sibling . I think germany needs to realize that eventually for the euro to work either theyre going to have to break it down and make it a much smaller eurozone with just a handful of countries, which no one really wants to do. Or theyre going to have to federalize the fiscal arrangements including their willingness to back the obligations of countries like europe, like italy, like greece including the Banking Systems here. Im afraid without this, carl, were going to be leflt in this continued slow motion fracturing of the eurozone. Theyre going to have to, i think, fundamentally rethink their approach toward this whole crisis. A lot of predictions from a long time ago coming home to roost, thats for sure. Im afraid so. Charles, good to get your take. Thanks so much for coming in. Pleasure to be with you. When we come back on squawk on the street, an exclusive interview with Trian Fund Managements nelson peltz, his take on the trump rally and more. Plus, well be joined exclusively by new york fed reserve president bill dudley ahead of next weeks meeting. Stay with us. You ready . Im ready. Good. Welcome back to squawk on the street. Im david faber at the knno labs conference yeah, here we are. In washington, d. C. And joined now by special guest nelson peltz, of course the chairman and ceo of trian. And a big participant in no labels as well. Thats correct. And were right in the middle of it. We got a big turnout, david. And let me tell you what no labels is. Its our watch word is bipartisanship. This organization started about five or six years ago because of all of the dysfunction that was in washington. And i think what were our goal is to bring people, reach across the aisle, there has been no penalty in the ballot box for obstructionists, and theres been no reward for problem solvers for people crossing the aisle. Particularly in congressional races. Thats correct. Where a lot of the districts are gerrymandered, i know you guys we have a solution. As you know theres capital on the left, theres capital on the right, we are now creating capital in the middle. We have a super pac were raising today 50 million discreet for primaries only. Americas been gerrymandered around, so were not going to change parties, but we are going to get those people out of the system want to solve anything. Youre going to raise 50 million for the 2018 races. Exactly. Youre going to basically support those who are running either against a far right candidate or, i guess, far left. Exactly right. We tried this summer with two races. Highly successful. Both guys were losers, they were double digits down. We put our money in and had our technology, we got 13,000 votes to 30,000 votes. And the people who vote in the primary are the real enthusiasts, the real hard core. And theyre effecting hundreds of thousands of people. So what we did is we got a bigger turnout, and we got our double digit down guys to knock out an extreme right guy in kansas. He was an incumbent and we got rid of two incumbentlike candidates in florida who were extreme left. And both these people couldnt even have been elected, theyre here, and theyre now problem solvers and obstructionists. Knowing the incoming administration, youve known donald trump and have for years, and i know youve spoken to him since he was elected. Quite often. He tweeted yesterday quite a bit about trade and china in particular. Of course you have the call with the president of taiwan a few days ago that seemed to raise some concerns. What are your expectations, particularly as an investor in multinationals like a mondelez, for what the Trump Administration is going to mean for companies that conduct business all over the world and also here in the states . You know, people are confused. Theres a difference between a Global Company and a company thats outsourcing. Mondelez is as you know has criticized occasionally. Yeah, he came after them for their oreo manufacturing. He loves oreos again, i think. And i explained to him that we have a dozen plants across America Today making oreos. We have one plant thats been open for about two years in mexico making oreos for mexico and for the United States. If you look at mondelez, 75 of our sales are done outside of america. Okay. Theres no way that were not going to have people employed outside america. However, i think that his tax plan if he gets the kind of tax reductions hes talking about, we will wind up having more employment, more companies coming back to the United States whether they have gone to ireland or theyre still america and theyve got their tax shelters in switzerland or holland or somewhere else. But this idea of placing a 35 tariff on manufacturing that moves abroad that then wants to send do you think, a, thats workable . And is it a concern to you . Well, thats more outsourcing. And thats certainly going to stop ceos who are thinking about doing it give them pause. And i think thats not a bad idea. Youre a free market guy though, thats not particularly free market, is it . I am a free market guy, but i think the scales have been shifted too much. I really do. I am a free market guy. I believe in globalization. I dont believe in tariffs for tariffs. You also believe in cost cutting. I mean, one of the keys to the success youve had at trian. Thats correct. In your investments is going into companies and saying, wait a second, youre way too fat. That typically does result in job losses. It does. Those jobs should never have been put on in the beginning. They should never have been there. Okay. Theres a suffocating bureaucracy that has created many large companies, and dont forget heretofore the Big Companies were unassailable. Private equity wasnt getting involved with ge or kraft or mondelez. They were not. So they were left to their own devices, bank of new york, et cetera. Those companies are healing themselves today and margins were thrilled. I mean, mondelezs margins when i got on the board we were coming off an 11 year in 13. And now theyre 15 to 16. Right. And Irene Rosen Feld has done amazing work. Shes cut a lot of costs. Of course youre a board member at mondelez. I wonder if you believe in the free market and you as an investor want to see the companies do whats best for shareholders, which typically means getting margins up. Right. If staying in the u. S. Is not the right thing for shareholders or your cost of goods is going to be higher as a result of staying in the u. S. , dont you want them to move . Yeah, but david, a lot of those jobs that were cut were not in america. There were lots of jobs cut all through europe, through asia. I mean, we were fat. And they needed to be cut. And thankfully theyre gone. And i think as a result we will grow faster and we will hire the right kind of people, productive people. Theyre going to help the company move forward. When you cut, you better be growing. Right. Its not just cutting for cutting. Its cutting to get growth and have the ability to hire more people. No, i understand that. And there can be a time when theres too much cutting. Thats correct. Some people say heinz, where you once of course waged a proxy fight and had board seats, has cut too much. Some could say that, yeah. Do you agree . Well, look, when i was at heinz and bill johnson was running heinz, we had 32 straight quarters of organic sales increases. There isnt a Consumer Company on the planet who could make that claim for that eightyear period. Theyre not enjoying that now at heinz. On the other hand, ebitda is growing dramatically. And look, youve got to cut fat. You have to know when you hit muscle and you better not be hitting bone. Those are fine lines. Theyre very fine lines. I wonder, were mentioning of course heinz, kraft heinz, which is controlled by 3g and Warren Buffett a big investor there, but do Foreign Companies, you think, face a tougher time now under a Trump Administration for doing deals and for example bying u. S. Companies and cutting costs dra matdicily . Well, ill tell you, Foreign Companies have issues all that aside because if youre a company in france and you want to lay people off, you got a really hard job in doing that. The government is going to make life so difficult for you to let people go. They have a great deal of difficulty. I think its going to be i dont know when the Trump Administration talks about foreigners buying u. S. Companies and then we still have capitalism. I think the trump rally is celebrating that capitalism is back. Right. Less regulation. Of course you mentioned tax reform is certain. Tax reform, infrastructure, deregulation. I mean, when i was a kid growing up, you know, my father told me we had the growingest middle class in the world. And he was right. And the middle class was composed of the Plumbing Supply house and the painting contractor. Yeah, but we didnt have a Global Market like we do now. And you have been a huge beneficiary of globalization. I agree. But those guys have been regulated out of business. And theres still a guy if you have your plumbing contractor and the paint supply house, you need those guys. And they cant be suffocated with regulation, david. Thats the problem. This regulation is so expensive for a small company. And its suffocating them. So were hiring more lawyers, and these Smaller Companies cant have their inhouse lawyers. Right. We mentioned mondelez a couple of times, of course the idea of the multinational with 75 of its sales overseas, a lot of talk though as well that kraft heinz, which we also mentioned, and mondelez, should get together. Recreating what was the original kraft, which you knew well. Do you think that deal makes sense . Look, im on the board of mondelez. I hear the rumors that you hear. I know nothing more about it than that. I think mondelez is doing a great job on their own. Theyve gotten margins from 11 to now going to 17, 18 by 18. Thats a 50 increase in margin. Look, theyre doing a great job. If someone wants to come in and make an offshoot of the company, i cant stop them. Thats life. It better be fair. It better be right. And well take them on as a board. Right. Well, other companies of course that you also have had continued investments on are dupont, which is in the midst of this deal to merge with dow. Right. A lot of doubts to a certain extent on the regulatory front. Not just here but in the eu as well. Are you still confident that deals going to be approved . Look, im positive about it. Im positive that its going to close. The eu has three chemical deals in front of them right now. Theyve got the bayer monsanto, chem china i think its going to be yes or no to all three and frankly were going to have a similar kind of issue, our Justice Department here is going to have the same kind of problem to say yes and no to either one of them. But dupont on its own whether the deal is approved and i do think it will be, is doing a phenomenal job. Ed breen has been a breath of fresh air. They have taken about a billion of costs out of the system already. This is no merger, no combination, just singing from the same song book we sing. Right. Your white paper of course was part of that. Nelson, i felt like we talked about trian but positions youve had for a long time, by the way you hold them for a long time. I know that. But i havent heard anything new in a while. But i have heard somethings coming. You know whats nice . Weve had a wonderful year this year. You guys have had a good year performance wise . Well, im not allowed to talk about performance, but the companys had earnings go up very nicely. And weve done that. And we dont have a new position. But we do have a new position, david. Weve started buying about two weeks ago. We of course cant announce it now, we bought quite a bit of stock and weve got quite a bit more to buy. And i hope that we will be able to talk in confidence with management and the board before it comes to you and the press. Ill try not to make that happen, of course, as you know. I know you will. Similar to the kind of stake you took in ge, sort of where youve forged this new area where your reputation, you like to think, is something Companies Want to embrace. So having you amongst shareholders is a benefit. You going along those linelines . We havent approached the company yet, but we approached them peacefully. We approached them with a thoughtful plan. And we think that they can improve what theyre doing today by adapting our plan. Hopefully theyll be like minded. And well see. We like to be the first one to go to them as opposed to you, but youve got to do your job and ive got to do mine. Right. Perhaps you and i will sit down for another interview about that investment at some time. I look forward to it. As do i. Nelson, thank you very much for today. Appreciate it. Thank you very much for having me. We may something to talk about, who knows. We definitely will. Thank you. David, thanks a lot. David faber in washington. When we come back, another exclusive, this time with new york fed president bill dudley. Well get his take on rates and Economic Growth in the trump era, so stay with us. The greatest population shift in Human History is happening before our 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 with pgim the Global Investment management businesses of prudential. Welcome back to squawk on the street. Lets get over to sue herera with the cnbc news update at this hour. Sue. Hi, kayla, good morning everybody. Heres whats happening at this hour. The death toll from a fire that tore through a california warehouse housing an artist collective now stands at 36. And officials expect to find more victims. Known as the ghost ship, that structure went up in flames friday night as people gathered for a dance party. In pakistan, at least 11 people are dead after a massive fire swept through a fourstar hotel in karache. Guests at that hotel used bed sheets to climb down from windows. Proceedings beginning at the uks highest court as the British Government attempts to overturn a ruling that Parliament Must hold a vote before the government can begin talks to exit the eu. Many legal experts expect the government to lose its appeal. And celebrations continued into the night after protesters against the construction of the north dakota pipeline learned of their major victory on sunday. The army corps of engineers denying the final permit for the pipelines construction. That is the cnbc news update this hour. Ill send it back downtown to you guys, carl. Sue, thank you very much. In the meantime lets get over to our Steve Liesman who has had a busy morning and now sitting down with a very special guest, steve. Yes, carl, thanks very much. I am here with new york fed president bill dudley for an exclusive interview. Bill, thanks for joining us. Great to be here. Its a good time for you to be here. Looking at the screen, 19,257, up 87 points, another record high on the dow. As a regulator, as a policymaker, do you look at these kind of numbers . Does it make you nervous . I look at financial conditions at large, so dollar, stock market, credit spreads and the bond market. What weve seen post election is weve seen bond yields up, equity market up, dollar firmer. And my judgment is that it seems to be that what people are factoring in is likelihood of more fiscal stimulus and reduced Downside Risk to the economy. Its the 20year anniversary of irrational exuberance, i wonder if youre willing to repeat that in terms of where we its almost, what, 1,200 points in a couple weeks, right . That kind of move, does it create concern . I dont think i would make a judgment about where the stock market should be precisely. Ive always been a little bit more concerned about where the bond market was when bond yields, you know, even a few weeks ago were extraordinarily low relative to the likely path of Monetary Policy in the years ahead. So i think the correction in the bond market probably a little bit more overdue. When you look at whats happened to markets, higher stock market, tighter higher yields on Interest Rates and a stronger dollar. On net, are financial conditions tighter, or are they looser than they were before . Obviously it depends on how much weight you put on those three factors, but i guess my judgment would be a little bit tighter. I dont think its a big problem though for us in terms of the Federal Reserve because you have to ask yourself the question of why are financial conditions tighter. I dont think its like the early 2016 where we had a very significant tightening of Financial Market conditions because of increase in risk aversion. People were more fearful about the Economic Outlook. That doesnt seem to be the case this time. Well, what is behind this as far as you can tell . What is motivating the recent change in asset prices . The best i can tell, one, the uncertainty around the election is over because weve had the election. So thats probably helpful. Number two, there is an expectation that the new administration and congress will Work Together to come forward with a set of proposals that make fiscal policy more expansive and thats more supportive for growth. So probably a little less worries about Downside Risk to the economy over the medium term. How does that change your outlook for policy, if there is indeed going to be more fiscal policy . Does that mean you can do less Monetary Policy, which i guess translates as raise rates faster . Well, well have to see what we actually get. I mean, at this point all we have an expectation by the markets that fiscal policy is going to turn more stimulative over time. We dont know what the fiscal policy is, we dont know how big it is and we dont know when its actually going to occur. Its premature for us to take onboard these Market Expectations because we just dont know what it is yet. But if fiscal policy were to turn more expansive and that would lend support to economic activity, then probably the Federal Reserve would probably remove accommodation a little bit more quickly over time. Im sorry, i got to go back to the original question i asked which you said those three things are unknown, how much its going to be, how big its going to be, when its going to be, doesnt it strike you that the market is out over its skis a bit then . I think theyre making some assumptions, broad directionally. The fiscal policy going to be more expansive, but without any detail. For us i think the details important. What would be the effect, would you say, of a substantial fiscal stimulus to the economy right now . Would it create more inflation . Would that be worrisome to you . I think it depends on what it is. So lets imagine we had a lot of fiscal spending on infrastructure. Uhhuh. More spending on infrastructure would actually increase productivity capacity of the economy. It would resolve bottlenecks. Think about new york city second set of rail tunnels in from new jersey. Thats probably decades overdue. Its finally moving forward with the gateway proposal. So doing things like that that lift the productive capacity, i dont think thats a problem. What about the idea that there arent a whole lot of workers right now and that could lead to higher wages . Would that create inflationary concerns through a wage push inflation spiral . It remains to be seen. Depends a lot on how big the fiscal stimulus is, when it occurs. Right now we actually would like to see wages up a little more because were actually not at we havent yet achieved our inflation objective of 2 . So inflation today if anything is a little bit too low. So having an economy that grows puts more pressure on labor resources in the nearterm at least thats a good thing, not a bad thing. Weve got a jobs report last week that showed the Unemployment Rate falling by 0. 3 down to 4. 6 but very little wage pressure. Does that tell you that maybe the full employment rate is lower than you thought . Well, i think we dont know. I mean, i think the general trend over the last year is that weve seen some uptrend in Wage Compensation inflation, been very volatile month to month. Last month 2. 8 average Hourly Earnings year over year, this month 2. 5 year over year. So i think a lot of volatility in the monthly numbers. But i think the general trend has been to a bit tighter labor market and a bit of acceleration in labor compensation. Nothing thats disturbing. We actually want this to happen. This is part of the mechanism that will drive us back to our 2 inflation objective. All of this is by way of asking you have another set of projections due to the fomc in about a weeks time. Are you inclined to raise your outlook for growth the way the market has been inclined to perhaps factor in more growth . I think everyones got to make their own decision. I think for me its a little premature because i dont know what it is, when it is or how much it is. So even if i thought fiscal policy stimulus were probably going to be moving in a more expansive direction, it would be hard to translate that in terms of what does it mean for Monetary Policy. I would like to see more detail myself. Given whats happened with rates however, especially on the short end, are you inclined to raise your forecast for how much policy tightening the fed will do next year . Again, i think its a little too soon to make strong judgments about 2017. In part because even if we do get a fiscal package, its going to take time for that fiscal package to actually come together and actually take effect and for that stimulus actually to be felt by the economy. So personally for me this is more over the horizon a little further. So youre inclined really to keep your forecast for growth and unemployment and rates pretty much unchanged after the election. I mean, i think whats changed in my thinking is that i just feel like the Downside Risk to the economy are probably reduced. Lets go to one other aspect well, couple aspects here. Theres talk about changing dodd frank, amending dodd frank. Do you have concern that the Regulatory Reform that was done since 2008 can potentially be watered down or otherwise be amended in a negative way . Well, i mean, i think the dodd frank act isnt perfect. So i think its completely reasonable to sort of look at the dodd frank act and say heres what worked, heres what didnt work so well and make changes. But the idea of just taking away the regulatory changes that were made post financial crisis, i think, would be a great mistake. I think the ones to me that are particularly important are raising the Capital Requirements for banks so more capital, Higher Quality capital, raising liquidity buffers for banks. Stress testing banks in terms of their capital adequacy so they cant do buyback ifs capital is completed in a stress environment. I think those changes are important. Weve also made important structural changes to the economy in terms of making it more financially stable. More money market reform i think has been a good thing reduce risk of people have loans from money market funds which obviously was something that led to a much more rapid and intense financial crisis. Should i reach something that you didnt mention the volcker rule as one of the things you think is important to making the bank system safer . I think the volcker rule does reduce the risk of firms being very aggressive in terms of proprietary trading. But do i think that was the central element of the financial crisis . No. One other aspect thats mentioned as a negative by many economists is the potential for trade, restrictions in trade and tariffs. As a fed official you dont necessarily get involved in that. How would you factor in greater protectionism at the border in terms of your Economic Outlook . Well, again, premature to speculate on whats going to happen on trade. We could end up with better trade deals and still have pretty open trade. I think that wouldnt be a bad outcome. Or we could have not as much Free Movement of goods and services, which i think would be a negative outcome for the economy because it would actually probably drive up inflation. And probably over time reduce productivity growth. So i think it really depends on where we end up. The dollar is stronger, which is something that can be seen as a negative for the economy. How much concern do you have that what could happen for example higher Interest Rates from the fed, more stimulus from the fiscal side, could create negative outcomes from a stronger dollar . Well, if the dollars firm because people view the u. S. s economy as having a better outlook, thats certainly a good thing. I think generally currency strength tied to peoples perceptions about the health of an economy is a positive element. And rising stronger currency is also consistent with rising living standards. So thats not something i would be particularly concerned about. Last question, bill. Do you as a policymaker, theres been the basic narrative over the last several years is its been the fed on the front lines in doing all the heavy lifting. Do you welcome the possibility that the fiscal side may come over and help with the economy . What id like to do is ensure that fiscal policy and Monetary Policy are well aligned. One thing i would like to see is greater automatic fiscal stabilizer pressures in the case of economic downturn. One of the criticisms of the fed is the feds been too aggressive in terms of monetary policies, quantitative easing, forward guidance. We had to do that because that was necessary to generate progress towards our goals of maximum sustainable employment and price stability, but it would have been helpful if we had more fiscal support during the economic downturn and making those stabilizers automatic i think would be helpful because they would come in place much more quickly and people could count on them. Bill dudley, thanks for joining us. Thank you. Kayla, new york fed president bill dudley from 30 rock. Back to you. Thanks so much, Steve Liesman. Good stuff. As we head to break take a quick look at where stocks are trading. Dow etched all new high at the open. All major averages on best track for best day in nearly a month. Ism services a touch higher than expected 57. 2 for november. Much more ahead on squawk on the street. Stay with us. Why pause a spontaneous moment . Cialis for daily use treats ed and the urinary symptoms of bph. Tell your doctor about your medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis. Get up to 2500 customer cash on select 2016 and 2017 models for these terms. See your lexus dealer. Yeah, the dows had a pretty nice run over the past month, but did you know really only three stocks have powered most of that . Is that sustainable . Find out at tradingnation. Cnbc. Com. More squawk on the street coming up. Tonight at 6 00 p. M. Eastern time on mad money, jim will sit down for an exclusive interview with United Technologies ceo greg hayes. Utx of course the Parent Company of carrier. And he negotiated that deal with president elect trump to keep some 1,100 jobs in indiana. Theyll discuss the deal, the climate of u. S. Manufacturing and its future under president elect trump. Meantime, as kayla said before the break, dows up 89 points. Transports now within 2 of an alltime high. That would be the first new high for transports, kayla, in two years. And would be something to watch for anyone who believes in dow theory having industrials and transports confirm the environment were in. Yeah, and pretty remarkable that the markets are able to shrug off the novote in italy over the weekend, which had been perceived as a negative for the markets. But clearly in the face of u. S. Data coming in stronger than expected, ism nonfactory manufacturing, i mean, its looking like a really resilient market at this stage. Indeed. That is a 13month high for ism services. Lets get to jon fortt, see whats coming up on squawk alley this morning, jon. Good morning. Were going to continue to follow Donald Trumps plans for trade, how much can we trust these tweets . What more might be behind them . Also, amazons got plans for instore shopping. Some technology that could make the checkout process faster. And Scott Sperling of thomas lee partners is going to join us for insights on deals and the economy and more. All that coming up on squawk alley. Moments ago we spoke with new yorks fed president bill dudley. Heres what he had to say about the markets. I dont think i would make a judgment about where the stock markets should be precisely. I guess ive been more concerned about where the bond market was when bond yields even a few weeks ago were extraordinarily low, relative to the likely path of Monetary Policy in the years ahead. I think the correction in the bond market would be more overdue. Definitely made our ears perk up, along with mike, whos here at post nine. Whats that mean . You know, i think dudley kind of declined a couple of opportunities to raise alarms, right, both about the level of the stock market, about Interest Rates, where they are right now, and also he declined to sort of accelerate the time table as far as he sees it of how far the fed is going to move next year. I think it fits in with what the market has been assuming, room and time before we have to worry about things in motion becoming a problem. When steve asked about the meeting next week, he used the word probably three times in the same sentence. I mean, is this any doubt in our mind at this point . Certainly no doubt about december, no, but i do think hes being very careful to say, look, unlike the markets, which is going to try to make a leap in terms of what fiscal policy will be, what growth is going to look like next year, he as a policymaker is going to wait for the details. He said that, too, i need to see the details on trade, on what the Infrastructure Spending might look like and that to me says the fed is not going to try to jump ahead of this thing. Going to let it run for a while and i think thats the working assumption. Meanwhile, your thesis on squawk this morning are the things working usually lead you out of a not so nice period. Exactly. Old bull market about to turn eight next march, yet its acting like a young one, early cycle, win streak for the 2000s, which happens at the acceleration phase earlier, auto stocks, mention the transports a minute ago, hotel stocks, bank stocks, so a couple of explanations for that. One we had a stealth bear market. Global markets were down that much and you had this refresh and reset. Another one is, look, this things been rolling for a while and keeps surfing to new things that seem to be working. Its not cheap. Okay, show me the next catalyst, ill chase that. A year and a half ago we were talking about fang and it made all kinds of sense why youd go for the big organic growers and not rely on Economic Growth. The story can change pretty quick. Maybe the f in fang stands for financials. Up another 1 today. Or ford motor. Exactly. But interesting to hear dudley, or any fed official which billionth dodd frank, not seem married to it, when steve asked about the volk rule, certain level of protection is needed. Exactly. I do think that a lot of people came to that conclusion, that proprietary trading as done on wall street was not really a core cause of the financial crisis, but yes, definitely interesting to say, look, im not wedded to every single rule change here, but if youre going to fall back on what he fell back on, the higher Capital Requirements, higher stress tests, those are still a lot of ropes restraining what banks can do. The question is, have the bank stocks gotten ahead and said, look, its basically liberation. Obviously, who likes to have a short leash, making comments about maybe your biggest dreams about deregulation dont come true. Exactly. The memories are fresh enough as to how bad things got that you dont necessarily want to dial the clock back to before that. Thanks, mike. All right, much more squawk on the street ahead. Stay with us. Including an exclusive interview with the ceo of celgene. Thats happening on squawk alley. Stay tuned. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Lets get a check on oil. Morning, jackie. Good morning to you, kayla. Energy stocks certainly on the move on the back of last weeks opec meeting and also as a result of the trump trade. Just cant really ignore it. Remember an energy Friendly Administration is expected to effect change swiftly, and that is not only been good for crude oil, up almost 20 in a month or so, but the individual names, as well. I want to walk you through some of these investment ideas. Lets start with the etfs, and the reason i start there is because the Retail Investor that wants to be in energy, they may be buying as a low fee way to get exposure to many different names in the sector. Look at the xle, up more than 10 in a month and the oih, the oil services etf up more than 20 in a month. Meantime, if you want to drill down more, pardon the pun, big oil names like exxon, chevron, hess, they move the major averages, as you know, and they are also moving higher. The servicers, halliburton, baker hughes, they are outperforming and the refiners, they take the crude oil and turn it into product for usage, vallero, phillips 66, they are also riding the wave. Whats interesting is the news out this weekend regarding the Dakota Access pipeline. As you know, this is a story that ive covered and they said that they will not grant the easement for construction. I think its a lastditch effort for the administration to try to make a stamp on that project, even though the Trump Administration is expected to overturn it. That shows you that people think donald trump is going to get into office and he is going to start to make the changes that will move this industry. Carl . All right, jackie, thank you very much. Thats a big story. Good morning, it is 8 00 a. M. At Amazon Headquarters in seattle, 11 00 a. M. On wall street, and squawk alley is live. Good monday