Transcripts For CNBC Squawk On The Street 20170126

And you can see we are up ever so slightly in france and generally across the board for the major european markets. The tenyear note yield yesterday crept above 2. 5. And this morning is hanging right in there at 2. 53. You can see crude oil also up a little less than 1 . Lets get to our roadmap this morning. And it starts with debating the dow 20,000. Is it behind us . And were going to drill down into the dow 30 stocks. Well have more on caterpillar, dupont, j. P. Morgan, goldman. Yeah, i know, dont look at me like that. Who knew . Man, ive been up since 3 30, im ready to go. Whats wrong with you . Youre slacking. Another busy day for earnings, ford, fiat, comcast and interview with Andrew Liveris on his recent meetings in the white house. Speaking of dow, Johnson Johnson makes a 30 billion cash acquisition this morning. Its actilion. A large cross border deal and we will take a closer look at it as we should. Could it be a faber . I think the whole show today is kind of my reporting and your repo reporting. Thats fair enough. You saw it happen here on squawk on the street, the dow surpassed 20,000 right at the open of trading yesterday before closing above that level as stocks aim for more record highs today. Dow component caterpillar posted Quarterly Earnings above estimates than analysts who follow the company had. Revenues a bit below consensus. Youve been talking a lot about cat, jim. I think we noted recent yearly highs, multiyear highs in the stock. I think they actually lowered the bar a little bit, which is perfect for new ceo coming in. O oebl leaving. This is interesting, construction in the u. S. Still not great. Why . Used equipment. Who sells a lot of used equipment . Who sells it . Look at a stock called United Rentals today, uri, thats going to be one of the biggest gainers in the market. Uri versus c. A. T. And whos going to win . Right now uri is winning and uri is also a tremendous play on trump because you need their equipment to build pipelines. What about building a wall . Would caterpillar benefit from that . No, uri would much more likely unless unless President Trump put through a ruling which said that you have to buy american to work on the wall rule which then the rule would favor cat over komatsu, which is their immortal enemy. They hate each other. Its not like yale and harvard, david. Its not . Why . Its not cleollegial at all between those two. More like Oakland Raiders in the old days sf. Speaking of hate, and i dont want to use that word here, but tensions between mexico and the u. S. Boiling. Are boiling. And it is worth noting at this point at the end of squawk box there, we got the president tweeting again. And things dont seem to be going particularly well in terms of that potential meeting next week. U. S. Has a 60 billion trade deficit with mexico. Been a onesided deal. If mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting. Hes speaking specifically about an upcoming meeting that was expected with president Enrique Pena Nieto that does not appear at this point likely to happen. I mention it because of the wall, because of caterpillar, because its an Important News story thats developing right now. Many of the American Business people i speak to say its far more complicated than this, that they make some stuff of materials in mexico. Basically that mexico and the United States have been the same since nafta, you make your car engine here, maybe carburetor there, body here, all interchangeable parts very hard to unwind. This would force an unwind because what would happen is this is the beginning of undoing nafta. Its not about the wall. I mean the walls a campaign promise. Right. And theres 400 miles the Border Control people tell me theres 400 miles of which you could put a 12 to 13 foot wall and it would be meaningful. Okay. Whats more important is the peso. Because, yes, labor is 2. 50 an hour versus 22. 50 for the auto worker. Remember they give you free health care. And its quite good health care, the mexican government. Thats a big positive, but david, what really matters is the peso differential which has gotten worse since trumps been bashing mexico. So theres a little bit of a vicious circle going down there, but yes, nafta has to be readjusted. It just has to. And youve been saying that for a long time. It made a lot of sense 41. I dont think either party would have approved nafta at 21. On the peso. And the peso by the way wiped out the gains against the dollar. Greg hayes did tell me it cost two cents not to move those jobs. Two cents a share to earnings. Right. But what you have to understand is it would have made a nice bump, you would have seen it if youd moved a lot of these that are very mechanical jobs that are going to be that we automated. But i have to point out people understand currency is the issue all over the globe. Its what we have not dealt with correctly as a country. All right. Before we get to j j, quickly, jim, back to the broader market. Yes. To the dow. Yeah. The s p is the broader market. The dow is only 30 stocks. And as ive pointed out so many times its historically means absolutely nothing. But people like to still focus on it. Journal today runs a big story about, well, its not clear theres so much supporting evidence that the market that things are that great. I mean, we have trade wars in the offing, we have tensions rising. But we have earnings. I think that one theres a lot of shorthand work thats done that i think thats actually lacking in rigor. You have to read the calls. Lets take a 3m. They had one division that wasnt so good and it was not clear whether it was at the retail level or consumer business that they have. They were making the wrong stuff. Retail level the channel was retail had to sell more scotch tape, lets use a real short here. 3m stock goes down. Stock is not expensive. J. P. Morgan, not expensive. Ibm, not expensive. Proctor gamble, not expensive. Many of these companies that were dealing with historically not expensive. Now, this is the dow. I have a whole list of companies that we could say are very expensive including service now, which is on tonight. Youll see that stock up very big. But the dow stocks almost uniquely have very low multiples. So i can pick on a lot of stocks in the s p. But i dont want to pick on the dow stocks because theyre just not expensive. Historically. And thats what matters. I mean, its very easy to naval gaze, but when you sit there and read the Conference Call you realize its not an expensive stock, j. P. Morgan perhaps being the cheapest stock in the dow. Whats the multiple on j. P. Morgan now . 13. 5. And historically compares to well, you could go back in time. I know. How far do you want to go back . I think you have to go back before the carnage. And before the carnage i think you could see pretty much near market multiple. Will probably never revisit in terms of bank assets. I disagree. Come on. I think its going to get a premium im talking more about the bubble ishs nature thats never going to happen. I think it deserves i mean, you had Financial Services contributing enormous part of overall s p earnings. David, the consolidation that was allowed that the Founding Fathers would have been very unhappy about during the period of the great grab of banks has made j. P. Morgan into a juggernaut that no one would have ever thought could be. That is true. When you raise rates david, the deposit base were talking about trillions of dollars in deposits. I know we are. I started 30 years ago covering banking. When i think about all the banks i covered that are now part of j. P. Morgan i hope theyve integrated. Jamie dimon can do nothing and they raise rates and he can look like a genius. Of course everyone thinks he looks like a genius anyway. I want to get to another dow component and thats j j, jim, because it did agree finally to acquire that Swiss Technology actelion, adds treatments for high Blood Pressure in the lungs to j js portfolio of drugs. Their portfolio at actelion growing quickly, a 20 plus grower. And this is a story that we have seen really . Charter. I know verizon needs to do something. Theres some news coming out from dow jones on verizon. I was just going to talk about j j. Let me finish j j i think it was good and quarter was good. How about verizon . Theyre exploring a conversation with charter. This is something ive been exploring as a possibility for some time. If you recall Lowell Mcadam a couple months ago in answer to a question sort of indicated there was some industrial logic to this possibility. I really want to see more on this because its very much unclear to me that there have been actual talks between these two companies. And sometimes we can see stories in which one company is thinking about doing something but hasnt necessarily moved to do something on it. I dont know. This is something ive been working on a bit but certainly was not verizon has had the worst quarter of any of the dow stocks. John legere was right, verizon was dumber. At ts call wasnt as bad. Verizon had a poor quarter. The question is do they have an overburden product, unfortunately . Can they go to unlimited data plan the way some of their competitors have. They were asked about and said we have one do they have enough spectrum to do it. Thats one reason why average user per revenue was down. That was a decline for the stock the other day. Well certainly be following this a bit today. As you might imagine, jim, i have been. Oftentimes flst not enough for me to feel like theres actually something worth reporting. So you think this may just be kind of ki mer kal. I dont know. I have talked about this, verizon potential in a position to do a large deal this year, charters name has come up. Some key terms in terms of delusion for verizon, it would be very large. Youre talking multiple disparity there. That would be large. How much cash could they use . Charter is a large shareholder in john malones liberty. And then the advent of 5g. Many say in fact charter would offer an opportunity for them because they have some of the plant that you need, the capillarity they call it, imagine capillaries but closer to the home, but at the same time those homes are on charter already. Right. Interesting components to this. One thing i will tell you is as opposed to at t which has been pursuing a strategy as we know, directv and now time warner of expanding in content and content offerings, verizon has been expected to focus much more on expanding its footprint in terms of infrastructure. Fios we see these very incremental little numbers for fios. This would change that. I see charter trading up dramatically. I dont want to short i feel like were short tripping the j j. You might want to spin charter i mean fios and the water line business and merge with charter. David, that would give me a higher multiple, but i dont know if id get that big dividend. I know. Jim, the one thing i will say as we enter this year and we see ajai theres potential for so many deals here in this area, whether it is sprint and tmobile, whether our Parent Company and comcast which reported earnings which looked to be pretty good. But now the stock is down. Now the stock is down. A good return in capital shareholders of comcast is involved. There are going to be some big potential things happening this year. This might be one of them. Its not clear to me. Right. Its been around for a little bit. But i wouldnt necessarily bank on it. Well see. Its going to be major focus because of how bad we thought verizon was. What is charter going to want . In terms of a price i mean, come on, man. I would say by the way just to go back for a second on j j, a lot of people felt j js quarter was weak. I completely dispute that. They tried to find a line, give me a break. Quarter was good problem is they couldnt give guidance because they hadnt announced this acquisition. The acquisition is additive. Lets hope that this drug that they have can expand for hypertension is an area where theyre all patent. 600,000 people have died needle needlessly, so maybe j j has Something Interesting to head off the plaque dispur pursbursa throughout your body so makes sure you have hypertension translates immediately into death or very big weakness. I like the acquisition. I dont like how much they paid. They paid a big number. But theres not that Many Companies out there to buy. And people also trying to figure out what is that stub, that r d company that will be left spun to shareholders that j j will own 16 of with an option to buy another 16 , whats that worth . Man, we got a lot this morning. That came at us really i was really bummed. I really thought look, i talk to john legere hes back and forth with me on twitter every day. Its very rare johns a tad outspoken. Yeah. This time he was a little too bullish on verizon coming in. I know. I will tell you based on the reporting ive done on this possibility, its got to be very, very early days. We got no comment from charter. Ill make some more phone calls. You want to get off the desk and ill handle the show . No, ill stay right here with you. Ive forgotten more than most of them know about this stuff. Holy cow, that is certain bragging statement. When we come back, ceo Andrew Liveris as his Company Looks to complete merger with dow component dupont. I wonder what he has to say. Dow chemical reporting better than expected earnings this very morning. A few moments ago david faber and i had a chance to speak exclusively with dow ceo Andrew Liveris who also met at the White House Monday with President Trump. Asked him a couple questions about his conversations about the dowdupont merger versus keeping American Manufacturing competitive. Heres what he told me. Whats good for dow and manufacturing in this country is good, i hope, for the country. Thats what President Trump feels and believes. And obviously this unique opportunity that dow has and i have as do the other companies to be around the table to tackle the topic of competitiveness across the pillars of competitiveness, tax, regulatory, trade, skilled workforce, this is a very unique opportunity for dow. You know, when you look at our results for the quarter and the year, records, we are portfolio for all seasons, weve worked hard for this moment, jim. We are at a point after 17 straight quarters of Earnings Growth 18 per year growth for the last four years, were entering 17 with momentum. And if the u. S. Economy keeps picking up momentum through the promise of Structural Reforms that the president is promising, and in fact already starting to enact with his executive orders, this has to be good for our company. And frankly with twothirds of our r d and manufacturing presence here in this country as a major exporter, i love the opportunity to sit elbowtoelbow with the president and my colleagues and say heres the things were worrying about, here are the things we have to do to be competitive, heres how to do fair trade. All the topics that weve had already. I think its an exciting moment for dow and for frankly the country. Okay. Now, andrew, youre in a very unique position. You are taking advantage of americas bountiful natural gas. Actually, youre probably the biggest advantage taker of the natural gas because youve been building factories, youve been making it so that you recognize how great it is to be a Natural Resource strong country. At the same time youre doing a deal with ed breen from dupont. If you look at his numbers for dupont, hes been able to grow revenues but also cut costs. Including people. What do you do in a situation where you are buying american, but because of the merger you may not be hiring american. You may have to layoff american. Well, look, the deal and were confident the deal will close in the first half like ed said on his call, were working with the regulatorregulators, t whole thesis around innovation that the european regulators are very, very much focused in on. Why are they focused in on that . Theyre focused in on that because they want to see growth. They dont want to see just the cost cutting of why a deal comes together in the first place. So for sure when you put two Big Companies like this together that have been around 300 years between them, the front end of this will result in back office and, you know, nonessential production, r d, marketing cost cutting. But the promise of it, and frankly the excitement of it is the ag company will grow ag and grow jobs, grow as an innovator. The Materials Company will grow jobs in the materials sector in packaging, infrastructure, transportation. This is a growth story. Finally, i know you for years. This has taken on a negative tone, but youre a globalist, somebody in favor of free trade. Do you worry were headed down a protectionist road . So as you know i wrote a book, david, called making it in america, one of those chapters was dedicated to the topic of fair trade. Not free trade. I dont believe in unbalanced trade. And we will always be for movement of goods on a large basis as exporter in this country but well invest in other countries as they grow their markets. I was in saudi arabia this week, were completing our 20 billion investment in saudi arabia to enable goods to flow from there into asia and parts nearby. So we Global Companies are of course for trade. But fair trade. And i believe we have an opportunity with President Trump to put in place the rules that level the playing field, not just on tariffs which is the obvious one and everyone hones in on that. But nontariff Tariff Barriers and Investment Policies. We have unlevel playing fields in our Investment Policies around the field where u. S. Companies cannot invest the same as local companies. That for me is a promise. Andrew, were running short on time. You said it, you expect the deal to close with dupont by the first half of this year . Around the first half, correct . Yes. Were confident of that. Were working very hard realtime. All right, andrew, well, as always, we certainly appreciate youre taking a bit of time for us right here on squawk on the street. Thank you. Thank you very much, david. And thank you, jim. Andrew liveris of course chairman and ceo of dow. Up next its cramers mad dash, count you down to the opening bell. Were back after this. Only at t offers you all your live channels and dvr on your devices, datafree. Its entertainment. Your way. To err is human. To anticipate. Is lexus. The lexus rx with advanced safety standard. I cant wait for her to have that College Experience that i had. The classes, the friends, the independence. And since we planned for it, that student debt is the one experience, im glad shell miss when you have the right financial advisor, life can be brilliant. Ameriprise we got about five minutes or so before we get to the opening bell. Lets get to a mad dash. Well go right straight into that opening bell as well, jim. So many things we havent covered given that verizon story from dow jones that came up. Well have more on that. Yeah, its important if you follow my twitter feed youll see john legere explaining that he wasnt as bullish on verizon as i thought he was. Hes just saying he was being appreciative of them for offering so many of their customers. So hes praising their donorship. When it came out all headlines i liked. Earnings per share up 10. 2 . Terrific add of 258,000 customer relationships. This high speed customer net addition 385,000, stock immediately popped. And then david, its been slowly working its way down. So im a little mystified about oh, now its aggressively working its way down why this isnt a buy right here, yes, i work for them. Yeah, you do. As we pointed out incredibly well positioned for tax reform on so many important things. Mentioned ajit pai new incoming fcc chair, Net Neutrality likely going to be out the door very qui quickly. Thats beneficial to the likes of comcast, charters and others, at t also with their zero base thing. They wont get heat on that. Theyre a big taxpayer, comcast, that will go down, right . Capital investment written off year one, big capital investor. That will be beneficial. The only thing they do is export, they dont really import. But stocks had a hell of a run. Okay, look, people have been saying, jim, have i missed something . Have i missed something . Is it too late . Now you can say im tooting my own horn here because i work for comcast, but this is the kind of thing when it comes down i have to tell you there are absolutely no flies on this. This is much better than expected. But it has moved up a lot. And when things have moved up a lot, they tend to come in. But thats when you pounce, as j. P. Morgan came in you had to pounce. Goldman sachs. Im saying comcast the numbers are very good. If it comes down, its a place to go. Not unlike western digital. Numbers were unbelievable, but the stocks coming in because it has moved too much. A place to go. So dont give up the ship. Dont say its too late. Look for these corrections. And those of the great stocks and buy them. On verizon and charter, which is sure to dominate at least some peoples thinking today as a possibility, toii want to go k to this the wall street journal story and they say its very preliminary in terms of the approach i can tell you not much has been going on here. Its not as though we got a deal coming any day now. That is not the case. At all. So guy at charter is not huddled with person from verizon right now . No. But this has been in the wind. Remember, it was idle chatter a few weeks or months back when at a conference Lowell Mcadam was asked and sort of indicated there was some industrial logic with this combination. If you talk with charter shareholders, as i have, this is something ive been talking to people about the possibility of, they say, yeah, wed want 400. 400 . Yeah. 400. Theyre stuck at 333. By the way, lets assume its 400. Lets just assume thats the number that john mallone of liberty would want, maybe thats the number they roll into the new entity, but youre talking about dilution, jim, that is as much on epm, how do you get 12 on 18 numbers, you ready to take that as a verizon shareholder . Maybe. We havent heard any of the Strategic Logic for a potential deal or why verizon is thinking about this. Does it have to do with 5g . Would it make its entrance into that easier and cheaper . Still the enormous cap x needed for 5g would still be there. But you have some things seems like a win from last its not. But the idea of enormous deals this year in telecom is something we have to keep in mind. At the same time we have to keep in mind that verizon yield doesnt look so good if we get three rate hikes. No. Last quarter was not a good one. There it is. The opening bell this morning. [ bell ringing ] take a look at the realtime exchange at hq. See how we do thank you, day after dow 20,000. Here at the big board by the way ringing that bell way too long burk family services. Over at the nasdaq celebrating ipo today obseva, Biopharma Company focused on womens reproductive. Yes . Well, we havent talked about some of the things that arent covered in the market like terrible number from mattel where they lost some key lines and said the Holiday Season was abysmal for them. That should be on our radar screen as something that really, really went wrong last night. Okay. We should mention qualcomm which had a very disappointing quarter. Again, their largest customer clearly hates them, apple. And i think that is playing into the role of qualcomm and really being a very visible decline today. I think mention what i regard as profit taking their largest cur e customer hates them. Its true. Their largest customer hates them. Thats a negative. Give us a chance here. Wait until we get into discovery. This is a commercial dispute being taken to the courts. By the way theyre now also involved in china. I dont know how you litigate in china, but apparently apple is working on that front also. Right. Kind of building on this momentum against qualcomm given the ftc action, the action by the socalled ftc in korea, that fine. But they say, come on, we havent had a chance to prove ourselves. But david this is nothing more than a commercial dispute because theyre upset that, you know but in its totality can you recall a company other than microsoft that was piled on . Where everybody just said, listen, this is monopolistic and then apple i mean, apple, your largest customer is fed up with you. Thats a suboptimal situation, david. Yeah. Yeah. It is. Lets keep that in mind because the semiconductors have been a place to go. And i think that i still think they are, but i think kwaqualcomm qualcomms negativity is overwhelming the group this morning. We also have transports which have been looking so good because southwest air reported great numbers. But Norfolk Southern is getting hit. What a quarter they had. So im just saying there are cross currents right now that are making it so that dow 20,000 we might have to do a special on dow 19,930. Ford also reported numbers. Who . Ford, right . Yeah, well, you know. Net 4. 6 billion down 2. 8 billion a year ago due to pretax pension remeasurement. Overall the stocks down a little bit. Interesting, see this press release . I like the press release. Do you like that . Mark fields on the front of their press release. I think ford does a great press release. What is with these new press releases . Oh, give mark a break. Its for you to be able to have the facts at hand. Ive never seen that before. Seen enough of him at the white house. Now hes on the press release. You know, i think youre a little too critical. Okay. And to actually deal with the facts, gms doing better than ford. Gms got that Chinese Market. Yeah. Now obviously the Chinese Market becomes less of a factor if the trade war heats up. Yeah. Other names that we havent gotten to. Biog biogen. Is fine. Actually up. No tweet today. Total revenue 2. 87 billion. No tweet from the president is what youre referring to. People think it could be a takeover target after what happened with Johnson Johnson. They did revenue guidance between 11. 4 and 11. 4 billion for 2017. I keep hearing takeover there, david. I keep hearing it. On biogen . They just put in a new ceo. Thats unlikely. Typically you do your extensive market and m a opportunity prior to hiring somebody saying, hey i agree. The group i think is most exciting is southwest air leading the airlines because we need the transports to continue to do well. Southwest air gary kelly delivered amazing quarter like the old days. That whole reign of terror against the airlines started again is over. Because 2017 theyve really gotten disciplined. By the way, the boeing call yesterday. Yeah. It was magnificent. Really . It wasnt just good. It was magnificent. Does it rank anywhere near some of the facebook calls youve gushed over in the past . No, i dont want to put it in that category. Basically refuting negatives about the dreamliner talking about what was a story ive been waiting for, that defense is going to go up. Defense spending is going to go up. Okay. As a percentage of the federal dollar defense spending not big enough. Even as its bigger than than seven nations combined. Next seven nations combined our defense spending, about 600 billion a year. That doesnt take into account other spending thats associated with defense. Thats pure defense. You know, we havent talked enough about apple. When tim cook came on mad money when the stock was at 93 and tony you love tony, saying the worst is ahead and the best is done, it just seemed quizzical how much everyone hated apple. Well, david, here it is at 122. Those of us who said own it, dont trade it feel a degree vindicated. I understand i dont think the quarter is going to be anything to write home about, but that has been a leader in this market. Right. Not just f. A. N. G. , its more like faaang, you know . Do that again . Thats a horrible sound. Not a great singing voice. Oh, my lord. There are stocks that are going. This is a misdirection this is a market today that feels more like the falcons versus the patriots. Theres real conflict. Who do you like . Im not going to against the patriots. Lifes too short. Celgene is a big name worth mentioning here, Company Reported 2. 98 billion in Fourth Quarter revenues, up 17 year over year. I worry about celgene, why . They have a lot of growth through price increases and i dont think mr. Price dr. Price at hhs is going to like that. I think celgene is one you must be very, very careful. J j four paragraphs in its call about how its going to be responsible in pricing. You look at Sherwin Williams, valspar deal hasnt been made yet, may have to do some offloading, but Sherwin Williams dovetails correctly with ppg which told me on mad money paint is good. We need to see the housing thesis hold up because thats a trumpfree zone. Thats all domestic. Im looking at Sherwin Williams and if they can get that disposal of some of valspar. Ace is not the place. Ace is not happy with that deal. Theyre not . No. Truvalue yeah, yeah, theres something to think about. David, facebook we dont talk enough about it because it goes up and goes up and goes up and no one talks about it. Well, youre talking about it right now. I think snapchat is going to be a big ipo. Its 14 this year, facebook. There was a lot of talk facebook that they didnt want to ruin the experience therefore wont have big ad load. In the meantime im getting more and more feel that facebook their video is going to be monetized. This is the year of monetization of facebook video. Still marvel at that company with what 4,000 or so employees. I mean revenue per profit per content is all driven by you. Yes. They dont pay a thing for any content. What an incredible model that is. How many pictures of dogs does your wife put up every day . Shes not putting up pictures of the puppy. We dont share. My wife puts dog pictures, people go crazy for them. Except when hes for sale well put some pictures up. Keep in mind facebook has greatest Gross Margins in the world because people like my wife take a picture of bug and everest and people look at it and that is a business. Versus cbs, lets move has to produce content. Best content. Its the number one network, number one comedy, number one, number one, number one by the way, speaking of employees and not a large you know actelion only had about 121 employees, its selling for 30 billion. Wow. Thats a good business. 600 or 700 of those employees will be going with new co. Any other morning wed be talking about j j to finally acquire that deal of actelion and you get the spin co that is going to comprise very interestingly the r d assets, phase one, phase two of actelion, going to be run by its ceo so demerger will take place in june. New listing perspective filed at the same time. They are saying its additive for 2 growth. So i wouldnt look, if you want oh, j j is saying that. Yeah. You want to dump Johnson Johnson dump because maybe tomorrow is tweet day for pharma. Im getting more on the verizon charter deal . You are. Yes, i am. From john legere, sounds like charter discussion is toupee to cover verizon bald spot. Hopeless. Theres a guy weighs in as we talk. It is an interesting idea. Again, dow jones doing a story preliminary not even talks sort of overture. And this is something thats been out there for a number of weeks as a possibility, certainly something ive talked to many people about at least the idea of it. Stock is up a little over 6 . Could it be deflection given how the verizon call was such a downer . The verizon stock, what a poor week its had given the earnings. Real competition. I mean, missing that much for an well, its not an well a wireless to miss appreciably better than the other guys but see advertising for sprint, and the fella does advertising for sprint looks remarkable about the fella he was the can you hear me now guy. By the way, worth noting that shares of dish are down about 4 plus, why . Well, its always been thought that verizon might be interested in dish given that companys sizable spectrum portfolio. Right. Now, dish is at the higher end, but theres still been a thought that would be interest and Overall Company would be remember at t bought directv. So why wouldnt verizon consider at least buying dish . That stock is down on this news. That was a delayed reaction. Comcast parent by the way back up that makes sense. No flies on that thing. And when we talk about consolidation broadly speaking in the Telecom Cable arena, we certainly have to also come back to your friend, mr. Legere, and sprint chrks we know has been this concerted effort by masa son, his visit to trump tower, his promise of jobs to try to get that deal to the finish line yet again with the hopes of under a department of justice Trump Department of justice theyll have better luck than they did previously in going from four to three. I still think it could be an issue. But, jim, many people believe the synergies and efficiencies, although there would be job losses. Job losses. Thats why we asked dow would be significant. As i reported the germans would be potentially open to at least the idea of such a combination if their guy legere was able to run it, it would allow them to deconsolidate perhaps the earnings, which is not necessarily a bad thing from their perspective. But give them a sizable still economic stake in the wireless business here because they have benefitted enormously from it. Given both the currency but also the ebitda growth weve seen at tmobile. Do you think theres a readthrough from verizon and att that could justify the Movement Today in sprint and tmobile with our takeover . Yeah. At t was fine. I thought att was fine and they have directv which was a smart acquisition. But tmobile is levitating and has been for some time. There was talk this Parent Company comcast might be interested in tmobile. Jim, i dont think you can dismiss any possibility. Now, i havent heard, brian roberts, chairman and ceo of comcast, typically gets asked on the call and i havent seen about wireless and their strategy at comcast, which has been in the form of these mvnos. Youre going to have to explain that. Virtual Network Operating agreements where you basically partner with verizon to sell their spectrum and you benefit from it. But is it enough . Would comcast really enter the fray if it saw the opportunity as a way to sort of bridge the gap from here to 5g. With 5g when its really up and running in a robust way, jim, why we talk about it so often is because it will bring broadband to the home wirelessly, right . Download a movie in seconds. In seconds. You dont need the wires anymore. That could be a competitive threat, one day. But that days a long way away and going to require tens of billions of hundreds of billions of investment. Right. I went back to my 5g enthusiast and said am i getting too ahead of the story with a 20182020, and everyone assured me, yes, im ahead of the story. Thank you. A lot of broadcoms move is 5g. Right. Youll see tests up and running. But it is but youre not going to see a broad oh, yeah, it will. Its going to happen. Its probably close tore seven to ten years. Oh, dont say that. I want to be able to download a movie. Five. The key is going to be autonomous driving, by the way. Thats where 5g will really play a role because everything from the cars will be getting uploaded to the cloud. Right. And the cloud will be then figuring out whats working, whats not, all that data. Right. And that will be a very important component of it. And watch the stock talked all about that. A company i feel you could own on takeover, own on fundamentals just because theres been so many deals. Xilinx was up a couple, but a lot of semiconductor taking a woe is me qualcomm benefitted enormously from the nxpi deal which hasnt closed yet. Yeah, they need that deal to close. 110. I know. But that stock did nothing but go up in the days leading up to that deal and after it was announced. Theres a very big breakup fee if that deal doesnt get announced. Nxpi, i would say my travel trust owns it, would be higher than qualcomm, would be up with avago and skyworks. Nxpi, i think if that deal broke down, which i think qualcomm cant afford, nxpi would be above. They sold out too cheap in retrospect. Interesting, huh . It is. All right. Weve covered a lot here but theres always more say again . United rentals up 11. Up 11. Good for mike diehl. Only 6 of the business but turned out to be really big. Lets get to dom chu now been working hard the last couple days. Hes on the floor with more telling us whats moving. Overall were taking a bit of a pause so far, but if you look at major indices, yes, floating right around gains and losses. If you look at the sector picture overall, it has been at least a move higher for some of the more cyclical economic sensitive sectors. If you look at some of the other sectors out there, it is the defensives that are probably in play right now as well as dividend payers with tenyear yields at 2. 52, 2. 53 . Check out those sectors as well. One other part we want to look at, jim mentioned United Rentals, we want to talk about caterpillar dow component that could be assuming leadership or lagging in the year ahead. We took a look at some of the average analyst target prices with regard to dow components to see where the leadership in the dow could come from. According to those average analyst target prices pfizer, nike, visa, United Health and merck are the ones that could have the most potential upside if Analyst Consensus target prices are correct. As for the ones that could lag, i bring up the caterpillar, visa, United Rentals thing for a reason because if you look at where the analysts think the least amount of gains or losses could come from, its ibm, caterpillar and boeing because theyve had such staggering runs over the course of the past year or so. Caterpillar of course one of the big runs here in the dow ever since we saw those prices last year. Factoring in in some way to that infrastructure story behind United Rentals. As we talk about this idea where the gains come come from, check out some of those names at least those are the ones analysts think could be the leaders and laggards. Back to you. Thank you very much, dom. Dom chu on the floor. Lets head to the bond pits and join Rick Santelli at the cme group in chicago. Rick. Good morning, david. You know, if you look up at the dollar Index Trading around 100. 5, 100. 43ish. If you look at a threeyear chart, breakout over 100 that occurred right around mid november havent closed below it. Thats the key. Because yesterday was another day, weve had several in a row with intraday violations, but by a whisker literally we closed above it. Thats a big area to Pay Attention to, corresponds to 107ish on the euro versus dollar. Every maturity moving up, twos through 30s basically cloesed a high yields basically since the very end of december of last year. If we look at a yeartodate of bunds, its basically at oneyear highs. If you look at yeartodate of jgbs might only be nine basis points but also closed at oneyear highs. A lot of focus by friends of cnbc like Peter Boockvar focusing on longer maturities like the 40year. If we consider that everything is about calibration, the current president s talking about trade, talking about tariffs, im not saying if theyre right or wrong, but theyre calibration instruments in many ways. How do we know that . Lets look at the markets. Lets look at the mexican tenyear hovering around 7. 60ish, this is from march of 2010, basically highest yield since then. We know the currency has been going down. How do you help get currency up . Keep rates up. Lets look at the peso from that same timeframe even though theyre historic moves, you see whats going on. But maybe the most important thing of all, lets look at the stock market from that same timeframe of Interest Rates spring of 2010. Not doing too badly, but its all about calibration. If your stock market looks good but your currencys depreciated, what does that mean . And rates, how do they figure . Thats why you want to watch rising rates in europe. David faber, back to you. All right, thank you very much, Rick Santelli. Im so here too but i know i can be invisible, my wife often says that hard to imagine you would ever be invisible to anybody. Usually make your presence known. Good movie. Western digital coming back here, a lot of stocks that have gotten hit its almost like there was something wrong are coming back with alacrity. Keep that in mind. Thats been a power of this earnings season. They get hit and find buyers. Its almost intraday said, oh, i found somebody to buy. Got it. Still to come, someone who has reasons to smile about dow 20,000, home depots cofounder arthur blank. By the way, also yeah, owner of Atlanta Falcons. Come on, man, stay focused. They get ready for super bowl li. Were going to speak with him in a bit. Squawk on the street will be right back. Okay, so whats our latest data say . Our customer is a 21yearold female. Heavily into basketball. Wait. Data just changed. Now shes into disc sports. Ah, no shes not. Since when . Since now. Shes into tai chi. She found disc sports too stressful. Hold on. Let me ask you this. Whats she gonna like six months from now . Who do we have on aerial karate . Steve. Steve. Steve. And alexis. Uh, no. Just steve. Just steve. Just steve. Live business, powered by sap. When you run live, you run simple. Its a performance machine. Of engineering. With this degree of intelligence. Its a supercomputer. With this grade of protection. Its a fortress. And with this standard of luxury. Its an oasis. The 2017 eclass. Its everything you need it to be. And more. Lease the e300 for 549 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. The s p 500 hit 2,300 for the very first time. Now theres an index that actually is relevant. Certainly if you follow the broader market. Up next, stop trading with jim. I know youre my financial advisor, but are you gonna bring up that stock again . Well you need to think about selling some of it. My dad gave me those shares, you know . He ran that company. I get it. But you know i think you own too much. Gotta manage your risk. And youve gotta switch to decaf. An honest opinion, even if you disagree. With 14,000 Financial Advisors its how edward jones makes sense of investing. 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. Time now for cramer and stop trading. Youre going to do a name that im glad youre going to hit because sometimes its overlooked these days. Do you know what the second most used shopping site was after amazon for the Holiday Season . Well, i do, it was ebay. Yeah. A lot of this is because ebay is using technology, have a catalog format and using more artificial intelligence. If you like so and so, then youll like such and such. Congratulations to devon, i dont know him, but theyve become far more sophisticated. I always found the site to be kind of a backwater site. No easier to use than the sears catalog. Sears, had to mention that. And now i look at ebay and i think im going to go back there and start buying things again because its not so its just not so time consuming. So congratulations on really getting that situation together. It is clearly not done. It looks like both ebay and paypal spinoff created a lot of bang. Yeah. Glad you mentioned it. I have lam research, put up a number thats just extraordinary. I have frank slootman, you may not know him, this is the Fastest Growing Technology Company on earth. 50 growth. And then nick akins, isnt it time we talk to a Power Company that has coal plants and natural gas to find out what it means to have a man who hates the epa in gary pruitt become the head of the epa . Or is it very simple just becomes the Energy Protection agency and everybody is just highfiving who is in the fossil fuel business. Yeah, well, lets hope our air stays clean. Jim, thank you for being here today. Will you be here tomorrow . Im not sure what i would have done without you. Yeah, im going to be here. All right. Ill come to work because youre here. All right. Coming up, home depots cofounder arthur blank. Hi, this cindy at reverse Mortgage Funding, how can i help you . Im considering a home equity line of credit, but since im over 62 years old, a friend thought i should first look into a reverse mortgage line of credit first. Can you explain the difference between the two . Sure, well, when you take out a home equity line of credit youre required to make minimum loan payments every month. For a while, that payment may be interest only. But after a set period of time, youll have to start paying back the principal as well, which means your Monthly Payment may be substantially higher. A reverse mortgage line of credit also allows you to borrow against the equity in your home. But, it has a flexible Monthly Payment feature giving you the freedom to pay as much. Or as little. As you wish. You even have the option to make no monthly loan payments at all so if i wanted to pay, say, 500 a month, i can do that . Yup if i wanted to pay as little as 50 a month, thats ok . No problem or if i wanted to make no payment at all, i can do that . Absolutely since there are no required monthly principal or Interest Payments while you live in the home, a reverse mortgage line of credit gives you the flexibility to control and manage your loan. That sounds great. Nearly one million savvy americans have taken advantage of the significant benefits of a reverse mortgage, and that number continues to grow. So nows the time to discover how a reverse mortgage from reverse Mortgage Funding can help you take control of your finances. With the flexible payment feature, you have the option to pay as little or as much as you like each month, for as long as you live in your home. If youd like to pay down the principal and interest of your reverse mortgage early, feel free to make Monthly Payments of any amount youd like. With no prepayment penalties. Or, use the benefit of a reverse mortgage line of credit and choose to make no Monthly Payments at all. So if youre 62 years or older, contact reverse Mortgage Funding today to receive a free information kit about reverse mortgages and the flexible payment feature. Just call the number on your screen or go online and visit flexreverse. Com isnt it time to take control of your finances . Call now or go online at flexreverse. Com and request your free reverse mortgage information kit today. Good morning, welcome to squawk on the street. Im sara eisen, here with mike santoli, carl has the day off. We are debating the dows next move. Look closer at walmart, home depot, j. P. Morgan and Goldman Sachs within the hour, but first, lets take a look at markets. The rally continues. Strong here, dows up about 30 points. S p 500 is flat. Nasdaq just barely positive. Whats helping, energy wti crude is up 2 . David. Thank you, sara. Well, weve got Economic Data crossing the tape. Lets get to Rick Santelli giving us the numbers. Rick. Yeah, some of the final reads of the year. These are all december reads on new home sales down a bit over 10 . We were expecting close to 5. 90. 536,000 would settle upward revision to november. How does 536 stack up . Its the third lowest of the year. And the High Water Mark for the year came in july at 622,000 seasonally adjusted annualized units. Quickly, leading indicators up 0. 5, exactly as expected. That ties for the high read of the year also with july you have to go back all the way to june of last year 2015 excuse me, to see a number higher at 0. 6. When it comes to housing, i think diana olick, so lets head east and see if she can give us some granular detail on the december read for new home sales. Diana. Well, rick, it was a big disappoint, 536,000. The street was looking for a 583,000. And heres why the miss. Remember, these numbers are based on contracts signed. That is people out shopping in december signing contracts, not closings, which is what the existing sales number is based on. What happened in december . Mortgage rates shot up after the president ial election, so this is the first real read on how were getting higher Mortgage Rates affecting home sales. And obviously its not doing so well. Also, we saw the median price of a newly built home go up 7. 9 year over year to 322,500. Take that jump in the price, add that higher Mortgage Rate and youre going to get people who are turning away from these homes saying i just cant afford it. Now, we still have 5. 8 month supply on newly built homes. We have very low supply on existing homes, so the new homes should be benefitting from that, but theyre not. Again, why not . Affordability. Its right there in those numbers. Higher Mortgage Rates are turning into lower sales. Back to you guys. Youve been warning us about it, diana, and now were seeing it. Thank you. President trump addressing the dows jump past 20,000 in an exclusive interview with abc news. Have a listen. Im very proud of that. Very proud of that. The Business Community and the labor community, you saw with the labor leaders came out one of them said it was the single greatest meeting ive ever had with anybody, its the highlight of my life. And the dow on top of it just hit 20,000, first time in history. Im very proud of that. Now we have to go up, up, up. We doept want it to stay there. So can the dow keep up the momentum . Perhaps even breach 30,000 some time soon . Debating the dow at post nine weve got tony krenz, and chief u. S. Economist at morgan stanley. Tony, i know fixed income is your thing, but youre watching the market broadly. Can the dow continue to go up, up, up as President Trump would like . Well, its appropriate for the equity market for investors in the United States to be optimistic about the future. And theyre doing what i would say are following the three golden rules of trading trump, which is for one to follow and focus on the policies rather than the unorthodox president. Secondly, look at the power of a president and power of the office. Dont look so much at the man behind the curtain. Focus on his power. And of course focus on the people within the administration, the cabinet, committee leaders, republican establishment. Markets are right to not be distracted by some of the unorthodox communication. So its right to be optimistic about the short term, but the trump bump were likely to see in the economy there is fiscal stimulus on the way next year, more than likely. But the bond market is a bit skeptical. The bond markets priced for a 2 policy rate in the year 2020, this is well below the 5. 25 at the peak in 2006. 6. 5 in 2000. And 6 in 1995. So the bond markets saying wait a minute, be optimistic about the short term but medium to longer term were not so sure growth will stay strong. What about you, ellen . Does the Economic Outlook justify this move weve seen in stocks . Well, i think its interesting you hear President Trump saying lets see the stock market go up, up, up. But guess what has to happen for the stock market to go up, up, up . He has to deliver on fiscal policy promises. And the fed has to keep policy Monetary Policy very accommodative. If the fed is hiking Interest Rates and hiking Interest Rates more quickly, that makes it more difficult to have an environment where the stock market continues to go up, up, up. So i think President Trump will have to reconcile how he feels about Interest Rates and how he feels about the stock market. I would add to that though except if janet yellen and the fed act a little more aggressively than the bond market expects and stock market expects. May protect the markets view on the path. Pimco believes there will be as many as three rate hikes, market is priced for two. Two or three doesnt matter much to markets. What matters is rates will be way out into the future. The 2 rate that i said to focus on. If the fed were to be lax about policy, if it were to let Inflation Expectations run up, and of course let financial asset prices run up, then the view about the path would change. And that could be detrimental to the equity market. Dont focus too much the reason youre bringing up the fed and focus on it so much is becausening ultimately that is what will spoil this par city party . We dont believe will increase significantly in this rate hike cycle. We call the idea for neutral rate policy globally quite low. Japan i mentioned previously will likely keep policy rate near zero through 2020. Same for the European Central bank. So policy rates globally are likely to stay low and not be a detriment to equities or to risk assets more generally. I think when im meeting with policymakers theres this undercurrent of discomfort, right . Theyre positive, theyve become more upbeat on the outlook, but they know a lot of it hinges on fiscal policy, that fiscal stimulus coming through. And theyre uncertain how much Market Sentiment may be built on a house of cards. If congress does not deliver in a way or in a timely fashion that the markets are expecting, some of those that Risk Appetite can unwind. And the fed knows it can unwind in a disorderly way. Did we not come out of 2016 with a little bit of momentum even without these policy additions that we just dont know what theyre going to be . Yeah, i think the underlying fundamental domestic economy is still around a 2 growth rate. Thats not bad. Fed should maintain a tightening bias even if fiscal policy was never delivered. But we have borrowed some activity from the future. We can see consumers already front running assumed tax cuts. If you dont deliver on those, theres a payback coming. And as a policymaker you have to be wary of that. Nothing has happened in congress yet for Monetary Policymakers to really sink their teeth into. Thats going to keep them back footed, i think, on rate rises this year. Were expecting two. And we expect them to come later in the year. Really quick, you bring up a really good point. It is fourth golden rule of trading trump is focus on the economy and how its in its own right jobless rate 4. 7 , wages up 2. 9 year over year, there are a variety of statistics to point to show the economy is fairing well in its own right. Yes, there could be delays in fiscal stimulus highly probable theyll be delivered and the economy in its own right probably would fair well this year. Well see what happens, guys, thank you for joining us. Tony, ellen, with dupont and boeing leading the dow. Familiar names there. Taking a look now at actually a few other dow components for you this morning starting with walmart. Shares of the retail giant up almost 33 since the dows first post crisis close above 10,000. That was back in late 2009. However, that does trail the performance of the dow itself, which has of course a little more than doubled from 10,000 to 20,000 and change right now. A Retail Leader in this rally though home depot. Companys been on a tear since the dow crossed 10,000 that time in 2009 up over 400 . One of the best performers in the dow over that period. Well debate these two dow components with the cofounder of home depot, arthur blank, in a bit. When we come back, were going to be debating the dow. Well get the bull and bear take on the big banks, Goldman Sachs, j. P. Morgan in the spotlight. Thats straight ahead. And as we head to a quick break, take a look at shares of charter. They are up on news from dow jones that verizon has made a preliminary approach to officials close to charter and is working with advisors to study a potential purchase. Ill have a lot more on that after the break. Weve done well in life, with help from our advisor, we made it through many market swings. Sure we could travel, take it easy. But weve never been the type to just sit back. Not when weve got so much more to give when you have the right financial advisor, life can be brilliant. Ameriprise welcome back. Shares of Charter Communications up about 5 this morning. About an hour or so ago dow jones the wall street journal reporting that verizon ceo Lowell Mcadam had made a preliminary approach to officials close to charter and that verizon was working with advisors to study a potential transaction that would involve buying charter. Now, this idea at least no stranger to some of us whove been working on the possibility of it as we head into a year in which theres a great expectation for general consolidation amongst some of the big players in telecom video services. Whether or not that will actually show itself in the form of verizon trying to buy charter remains very much unclear. And in the last few weeks ive been unable to really unearth anything going on between the two companies of great substance. That said, the idea itself was actually at least given some credence by Lowell Mcadam a number of weeks bag at a conference in which when asked at least gave credence to the Strategic Logic of a potential transaction in which verizon would buy charter. By the way, it would be one of the larger deals weve seen. Serply charters market cap right now some 88, 89 billion. Remember it only recently concluded the acquisition of Time Warner Cable and Brighthouse Networks to become the second largest player in at least cable providing of that service. But there are plenty of issues you can imagine with a potential deal including enormous potential dilution to verizon which trades at a lower multiple than charter. Not to mention expectations in charter shareholders chief amongst them john mallone at Liberty Media for a very large price. Some say this will help verizon get into the 5g world by sort of bridging that gap and giving it some of what we call the capillarity, namely the Network Already in place by charter that would help it get into the home wirelessly. But believe me, many questions here. The bigger issue though, mike, certainly and one that were going to continue to think about as we go along is consolidation overall. Whether it involves our parent come comcast doing something, dish, verizon, charter, i said a few weeks ago, put them all in something, shake it up and see how we are at the end of the year. Yeah, big players on the board and clearly verizon and at t feel they have to do something, some kind of urgency. Growth slowed dramatically. Worst performing sector on the s p today. There you go. Were also debating the dow and stocks within it today as bank stocks leads the way in this rally lets focus on j. P. Morgan and Goldman Sachs. Joining us on the phone is Chris Wheeler, u. S. Banking analyst for atlantic equities. Thanks for calling in, chris. I dont want to necessarily put too fine a point on the j. P. Morgan versus Goldman Sachs thing and call it the tortoise and the hare, but its kind of like that. More maybe diversified j. P. Morgan and then Goldman Sachs really closed gap recently with huge performance in the last several months. I notice also they trade around same pricetobook value right now. Which would be your preference . How are you viewing these two stocks right now . Well, i think you make some really good points there. By the way, good morning. And i think that the key thing here is that if we look at Goldman Sachs, obviously its a focus Capital Markets bank. We know one of the things thats positive as a result of this rally, as a result of the news after the election has been stronger Capital Markets both fixed income and equities. And clearly you can get the benefit of that in your earnings pretty quickly. With j. P. Morgan of course you get the same thing. But in addition to that of course it has a big retail commercial bank which will get more benefit from the rising rates. So in a way at the moment j. P. Morgan will have benefit of both Capital Markets now and, you know, rising rates going through the rest of this year and into next year. So to some degree, i guess, you know, looking at where valuations are at the moment, goldmans already played catchup. J. P. Morgan has probably some way to go still before it gets to fair value. And in terms of j. P. Morgan and how the stock is valued right now, what is priced in, do you think, in the way of that Interest Rate benefit that you say they would be able to reap down the road . Well, look, i think most analysts have probably put in a couple of rate rises this year in the middle of the year if you want, possibly one at the end, another couple next year. But i think also whats in these share prices which i looked at in the last note i published is clearly people looking at what the impact of lower Corporate Tax rates are by the time we get to 2018. And i think thats another factor which is helping drive these bank stocks. Whats also moving, i know were debating the big dow stocks, but how about the big banks, the bulge bracket versus regional banks right now . Theres a debate whether they could be the bigger beneficiaries especially if we start to see some rollbacks on financial regulation. Which do you like better, regionals or the big ones . I think at the moment i prefer the bigger players who are in the Capital Markets as i touched on earlier. In terms of debt issuance a lot of activity, two of the biggest days in the last 30 years so far this year. All of that will show through much more rapidly into the big banks p l than it will into the regionals. Start to play some more catchup. I think theres a lot to go for in the big banks at the moment. All right. Chris wheeler, wow, some of the biggest fixed income trading days in the past 30 years. Wasnt aware of that. Appreciate your time this morning, Chris Wheeler from atlantic equities. Were seeing all sorts of new highs on some of those regionals and big banks as well. When we come back, house and Senate Republicans are hosting a retreat in philadelphia today. On the top of the agenda, taxes. Well speak with the father of the border adjustment tax about what this really could mean next. bell chimes nice work brother dominic. Now we just need 500 more. Translated into 35 languages, personalized oh and shared across the 7 continents. other languages spoken look abbot, i got it. Its a miracle. 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. Republicans in the house and Senate Continue their meeting today in philadelphia. One issue high on the agenda, tax reform. Were joined now by the father of much of the tax reform plan that is being put forward by House Republicans certainly from the house ways and means, including that border adjustment tax, which of course weve spent a good deal of time on and will continue to. Alan economist at the university of california berkeley. Professor, its nice to have you. I was reading through your december 2010 report for by the way the center for American Progress where you introduced a number of these ideas including the border tax adjustment. The president says its too complicated, wants a tariff instead. What do you say in support of why it should continue to be the key part of tax reform . There are many reasons. And thank you for having me. First of all, the complexity i think is in understanding the proposal and making a transition from the current very damaged tax system to this new one. The system itself is really very simple, much simpler than the current tax system. And thats one of the reasons why its worth undertaking. But there are many reasons. First of all, it completely changes the game in terms of Corporate Tax avoidance, all the multinationals that go through complicated transactions to move their profits to other countries will no longer be able or have an incentive to do so. And countries that companies that choose to locate their production operations in low Tax Jurisdictions in order to move their profits there will again no longer have an incentive to move them away from the United States. So i think its a simpler tax system. Its one that gets rid of all the problems we have now with multinational tax avoidance and it encourages companies to locate production in the United States. Right. For all these reasons i think its a big improvement. Yeah. And of course you say the Corporate Tax would be assessed based on where a corporations products are used rather than where the corporation is located or where goods are produced. Thats a key part of your thinking here. Another key part of it though seems to me that it would raise a good amount of revenue. How important does that become to this overall debate given if we dont go that way the possibility of increasing the deficit would seem to be increased . Thats critical. The border adjustment which is what makes the tax into one rather than where production occurs has been estimated to raise over 1 trillion over the tenyear budget window. Thats a very large amount of tax revenue. If for some reason the border adjustment is dropped from the proposal, it is hard to imagine getting rates down as much as the Congress Wants to do without coming up with much less popular ways of raising revenue. Something else that you also introduced back in this 2010 report was the idea of expensing investment immediately. Not depreciating it over time. That also was a part of the house ways and means blueprint. Why is that of importance . It has two advantages. First of all, again, it makes the tax system much simpler because companies no longer keep have to keep track of their assets and depreciate them over time. They simply write them off when they buy them and thats the end of it. But perhaps more importantly it gives businesses a very strong incentive to invest in plant and equipment in the United States where these provisions apply. What do you think the chances are that your ideas are actually going to see fruition in the form of legislation . Im a better economist than i am a political handicapper. But it obviously has a lot of momentum behind it. I dont take the president s comments as really being that damaging because hes said a number of things. And i think as he comes to understand it better hell realize that its consistent with his desire to bring production to the United States. Im just going to say its a big change. So obviously any big change has a lot of things that can stop it along the way. Its an enormous change. I would also note, you wrote this for the center for American Progress that was run by john podesta, i think. Are you from the left looking at tax reform for corporations . I personally like to think of myself as in the middle. But youre right, the center for American Progress is definitely associated more with the left. I think the fact that theres interest in an approach like this from both sides of the political spectrum tells us something about how much our current tax system needs reform. Because i think given how bad a system we currently have, there should be a lot of room for agreement about directions for improvement. Well, mr. Aurbach, as always were short on time and this is potentially a long conversation. I hope at some point you will be able to join us again. We appreciate you joining us this morning. Thank you very much. Youre welcome. Scares the hell out of retailers though. Yes, it does. When we come back, republicans in the house and senate hosting a retreat today in philadelphia. Well take you there live. Plus, the Worlds Largest distilled Drinks Company reporting a better than expected rise in sales thanks in part to stronger sales in north america. Much more ahead on squawk on the street. Alpha seems more elusive today. Is it because so many go after it the same way . Chasing after short term returns. 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It follows the high courts ruling that it must place the matter before parliament. Six people were shot at a memorial for victim of chicago gun violence last night. At least two victims were taken to local hospitals in serious condition. President trump has warned mayor emanuel that he will send in the feds to chicago if gun violence is not reduced. And the bulletin of atomic scientists have moved the Doomsday Clock 30 seconds closer to midnight, two and a half minutes. This of course is amid increasingly tense relations between world powers. The closest the clock has been two minutes to midnight back in 1953 when the Hydrogen Bomb was first tested. Midnight represents the end of humanity, according to that group. Well, thats not a very light note to leave it on, but that is the news update this hour. Lets send it over to Jackie Deangelis with the eia inventory report. Hi, jackie. Good morning to you, sue. We are watching Natural Gas Prices spiking 4 . The department of energy out with its weekly storage report. A drawdown of 119 bcf. Thats right in line with expectations. And actually it happens to be less than the drawdown that we saw last year, less than the five average as well. So why are we seeing the price spike you ask, protrump policies im told by analysts and traders are concerning this trade right now. If we see more fracking and we see more supply coming out of the ground, we see more pipelines and export terminals as part of this infrastructure buildout you will see natural gas exports start to rise. And as that ramps up, you will see these prices go up. Its not a great thing for the American Consumer per se. Now, remember weve been relatively low for awhile, but really holding over 3 here for quite some time now. So watch this trade very closely and think about how the politics are impacting some of these commodity trades. Back over to you, david. All right, jackie, ill take it. Thank you. House and Senate Republicans holding a joint retreat in philadelphia today. President trump and british Prime Minister theresa may are expected to attend the event ahead of their big meeting at the white house tomorrow. Our john harwood is there and joins us with the latest. So what can we expect here from the discussions, john . Sara, for all the controversies swirling around and stoked by our new president over things like inaugural crowd sizes and voter fraud, house and Senate Republicans are working very hard to maintain a sense of momentum and convey the idea that theyre working as a team. That was precisely the message this morning at a press conference from Senate Leader Mitch Mcconnell and House Speaker paul ryan. We are on the same page with the white house. And we are going to be hearing from the president today. Weve been working with the administration on a daily basis to map out and plan a very bold and aggressive agenda to make good on our Campaign Promises and to fix these problems to repeal and replace and repair our broken health care system, to reform our tax code to get jobs and Economic Growth torks clear out the regulatory underbrush so we can get Economic Growth going. So we are on the same page of the administration. But within those core issues facing the republicans there are republican question marks between the white house and congress. Let me just run through them. First of all, question of the obamacare replacement plan. No consensus on that yet. And no consensus on the pacing of it. President trump says simultaneously, republicans are now leaning toward a plan that would involve a slow motion replacement in pieces, things Like Health Savings accounts first. Second question is on tax reform, what is achievable . Can they have comprehensive tax reform of both the individual code and the corporate code . House is more ambitious, the senate of course where its more difficult to get things done, some republican senators are thinking they may only be able to do Corporate Tax reform this year. And finally, the question of what happens to the budget deficit . Its over 500 billion now. Is it going to be bigger as a result of this legislation . That appears to be likely, but we dont know the degree. Donald trumps tax plan for example had a substantial increase in the deficit, smaller one in the ryan brady tax plan in the house, but no clue as to whether or not theyre going to be able to make all of this deficit neutral. One small sign of that today when there was discussion of the border wall, which is going to cost 10 billion or more, ryan and mcconnell were repeatedly asked, are you going to offset that with spending cuts elsewhere . No answer. That has not been decided. You have a lot of deficit hawks in the House Republican congress who are going to question any plan that increases the deficit. Others are less concerned, guys. Thank you, john harwood in philadelphia. Diageo, the Worlds Largest Liquor Company reporting better than expected sales today for the second half of 2016 thanks in large part to an improving u. S. Market. Short time ago i spoke with the ceo about the companys growth and impact expected from the trump administrations border tax proposals for a company that does a lot of trade and brings a lot of alcohol into this country. Heres what he told me. In terms of the trade arrangements between mexico and the u. S. , for us it does impact our tequila business. Its something were watching. And to see how it would evolve. We participate at the high end of tequila with dom julio, which is doing extremely well in the u. S. And we will watch and adjust as the trade arrangements unfold with the trump administration. So does that mean if we do see some type of border tax which hes repeatedly said we will see, we can expect to pay higher prices on alcohol . Its too early to speculate because theres, i think, a lot to happen in terms of how the actual arrangements will be laid out. But all i will say is it doesnt diminish for us the importance and the attractiveness of the u. S. Opportunity for us. Ivan menendez, the ceo there of diageo. Mike, obviously a big trader around the world of global alcohol and spirits. Theyre a british company, so theyre actually doing quite well now because theyre benefitting off of that weaker british pound. Sure. They saw 20 growth in mexico. Its amazing. The currency piece is fascinating because really if you look at the other big, big competitors, right, globally United Spirits i think is in india, you have japan, really theres not another one that has that benefit. Doesnt mean market share shifts happen that fast, but interesting trade, frictions, thats the head. Not just in my house but apparently everywhere. When we come back, cofounder of home depot arthur blank is with us. Get his take on the company he founded, President Trump and super bowl bound Atlanta Falcons. Hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. We only do it for everyone gary. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. Get help on options trading with thinkorswim, only at td ameritrade. Its a performance machine. Of engineering. With this degree of intelligence. Its a supercomputer. With this grade of protection. Its a fortress. And with this standard of luxury. Its an oasis. The 2017 eclass. Its everything you need it to be. And more. Lease the e300 for 549 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Strategist tony dwire known as a big market bull, but he says right now stocks are overbought. Why . We ask him on tradingnation. Cnbc. Com. More squawk on the street coming up. The rally continues on wall street. Take a look at the major averages. The dows up about 50 points here, building on that historic day yesterday where it closed above 20,000 for the first time ever. If these gains continue and the dow and s p, that will be the first threeday winning streak of 2017. Not all groups are higher though, mike, we were looking at telecom at the bottom of the list as far as the strength. We see it in familiar names like boeing, materials and industrials are the best performing s p group. Yeah. Still the cyclical sectors are the ones in the lead. The s p 500 by the way traded as high as 2301, its a lesser round number milestone but significant i think to the professionals who watch the tape a lot. And i will say that the s p had struggled to get past 2100. It spent about a year and a half with that cap in the market. Doesnt seem like were in a similar position right now, but the fact that youre holding on to the gains is interesting even though this is not a real forceful rally. Interesting too, sara, the treasury yields higher. They came back flat line after we got a slightly weaker than expected weekly jobless claims. And then the 10 00 a. M. Data leading indicators maybe stronger, yields higher, stocks falling. After that bell it will be earnings. Theyve been Strong Enough to keep this rally going and they could be the strongest earnings season in several years. Yeah, the beat rate is pretty much on target with what youd expect close to 70 . The stocks arent always reacting in tune, but i think theyre good enough for what was expected to come out of the Fourth Quarter in keeping the view intact for pretty sharp rebounds year over year into the second quarter. Also point out the mexican peso has reversed an earlier gain. Of course we had those comments from trump, more tweets on mexico and the major trade deficit. Clearly thats going to continue to be a target. Well be right back. Were going to continue to cover the markets here on squawk on the street. Davids going to get us an update potentially on deal news and check in with Rick Santelli in chicago when we come right back. 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 the Atlanta Falcons are headed to houston for their second ever super bowl. The nfc champions are hoping the momentum continues as they attempt to bring home their firstever Vince Lombardi trophy. And joining us now is arthur blank, hes the owner and chairman of the Atlanta Falcons and cofounder of home depot. Arthur, thanks for joining us. And congratulations on being nfc champions. Well, thank you, sara. I really appreciate that. And we look forward to an opportunity to play a week from sunday. So whats different about this team . Its taken i think 18 years since your last super bowl. Yeah, yeah. Well, i think its a building process. I give a lot of credit to coach quinn whos in the second year with us now. Our general manager. Weve put together a lot of talent on the team on both sides of the ball. And theres a unity, theres a brotherhood, theres a bonding, theres an understanding of the systems, the coaches have responded beautifully, players have as well. And got great support from our fans, fans have been terrific for a number of years. But particularly this year seeing the team come together the way they have an opportunity to compete for championships is great. I understand youre paying for all your employees at the falcons to attend the game in houston. Right. How much is that going to cost . What was your ticket price there . Well, its not a matter of cost. Its a matter of, you know, recognition and investment and the most Important Group of people we have which is really all of our associates which includes obviously coaches, players, but includes all of our folks that are involved in supporting our businesses. They make it workday in and day out for our team. And that includes all of our family of businesses. So were inviting people from our shared services group, were inviting people from our guest ranch mountain sky in montana, were inviting people to our superstore business, inviting folks from our foundation. All of the people that help build our businesses together as a family of businesses and support our teams were inviting. As well as atlanta united, our new soccer franchise, which is now training. I wanted to ask you about ratings which have been a big story this season. I mean, obviously beyond the super bowl its been a curiosity to see the ratings slip. Plenty of explanations. How do you look at it . What do you think is driving that decline . Well, i think the only one thats i mean, the most significant was the election. There was a lot of debate before the election as to what the cause was. I would say that if you look through week nine of our season, our ratings were down close to 14 , post week nine, 10 through 17 our ratings were down only by 1 . So that clearly was a major factor. Having said that, i think the league understands that there are changes in our demographics taking place. Theres a lot of competition to make sure that the ingame experience, the stadium experience is exciting, bringing fans together in a sense of unity. We offer amenities to fans theyre looking for, the sense of corroboration and joining together in a family event, if you will, when they come to our stadium. So all of those things are factors, but i think the biggest factor this last fall was the election. But we continue to stay in touch with our fans and understand what theyre looking for and respond to them as we are in our new stadium, Mercedes Benz stadium, which opened in july. Arthur, you mentioned the support of your own fans this year helping you out, although im sure you heard one of the immediate reactions when you guys won the championship game as well, atlantas not one of the teams with one of the bigger national fan followings. Whats your response to that . Whats your sense of whether your fans are really going to travel down to the super bowl this year . Well, a, i think they will travel. I say, too, theyve been great fans since ive acquired theyv great fans since ive acquired the team in 2002. I think weve had three, maybe four games that have not been sold out. I think our record has been significantly better since ive acquired the team. Weve had five consecutive winning seasons. Weve played in a number of playoff games. And now with coach quinn and the Coaching Staff and players in place, i think were in a really good place from the national standpoint. I think the ability to become a national brand, a national team, part of that is winning on a consistent basis, and part of that, i think, frankly, is this new stadium, mercedesbenz stadium is going to be so unique as a Sports Entertainment complex in the United States, if not the world. That will attract the National Attention as well. The National Events that were bringing to the stadium, whether it be the College National championship in 2018, super bowl in 2019, the ncaa final four in 2020, and a variety of other events that are both part of the legacy of atlanta or new events i think will help create that brand that were looking for on a national basis. Arthur, we want to ask you about your other baby, home depot. All right. Of course, as the dow passes the historic milestone of 20,000, home depot has played a role. If you had bought it when it crossed 10 thousa,000 the first youd be up 400 , not too shabby. Big comeback from the housing prices. Some are wondering whether this trend on spending on Home Improvement can continue to be a hotspot when it comes to the overall recovery. Whats your view . Yeah, my view is not changed really on that since 1979 when we opened up our first stores, and obviously went through several recessions during the period of time that i was president and later ceo. I left after 23 years and been involved in these other businesses i mentioned earlier. I think when you look at what people, what they care about in their lives, its primarily, you know, their families and very close friends, and where the families are going through their life cycles, which is their homes. So i think that people continue to invest in their homes, because generally thats been a great investment, a great asset for them over a long period of time. Its where their family lives, where they go through life cycle events together, where they go through Joyous Events together. And so, i think people will continue to invest in their homes because that is the place of their contentments, its the place of their peace, its the place they bring their family and friends together. And so, i think long term, as been since 1979, as i said, our first two stores in atlanta, first four stores in atlanta, i think it will continue to be a great investment. And i love the Management Team there now. Theyre doing a wonderful job. Do you share investors enthusiasm and optimism in general about some of trumps economic policies . I dont know that i share that, you know, that enthusiasm. What i share the enthusiasm for is taking a fresh look, a fresh approach. I think the gap between the haves and the havenots over both republican and democratic administrations for probably the last 20 years or so has gotten too wide, and i think that one of the great strengths of this country is the diversity and is the inclusion, the way the country has grown, the way the country really has been great in the past and will be great in the future is by tapping into all the cultures, all the strengths, all the folks that have joined us from around the world for a very long period of time. I think that ability and supporting that and giving an opportunity for everybody i think will be very, very important. So those are the kind of policies that will be important to me personally and ones that we want to support in our businesses and support actually through our Family Foundation as well. You know, we love the video of you dancing in the locker room after that nfc win. Yeah. We have the video of it. I think theres only one question oh, no. Which is what kind of dance moves do you have planned if you end up winning the super bowl . Well, if i if were fortunate enough to get the kind of positive result that we would like to see a week from sunday, ill be dancing for a very long period of time. A lot of that dancing characteristics come from my mother, whos not with us now, but she was a great dancer. And all the women in my family are great dancers, so i continue to try to keep up with them. There we go. But when i look at it, it looks like my arms are flapping all over the place, so, but its fun. Well be watching, arthur blank. Thanks so much. Good luck next sunday. Thank you, sara. Thank you. I appreciate it. Thank you very much. Thank you. Lets get you right out to the cme group. Rick santelli has the s sahe s exchange. You know, i like obviously, mr. Blanks a pretty cool guy, but he brought up something i thinks really important if you trade markets. I saw his celebration. We were all watching. It really wasnt dancing. It was celebrating. There is a difference. Theres also a difference between stalled and flatlining versus consolidation, and many have described the equity markets for most of december as stalled or flatline iine inflat. When i think flatlining, i think of somebody on a table with no pulse, when i think of stall, i think of a satellite falling out of the sky. Thats not really what it means. Ill tell you why its important. Okay, remember the t. A. R. P. Vote . I use this all the time. The t. A. R. P. Vote gave you a very handson view of how markets and whats behind markets and drives markets is so important in a very quick moment, okay . So, if its a half fullhalf empty if you call it distribution or consolidation versus stalled. Well, half empty, if everybody reporting on the markets sort of being half empty, but yet, the market doesnt go down, thats your antithesis of what happened with the t. A. R. P. Vote, and i think the way its been happening is somewhat proof of that. Quickly, the dollar index at 100 lets show some charts as im talking and well expand with regard to history. This may be an exhaustiontype move in the dollar, unlike equities. To me, distributions usually less volatility think vix smaller ranges think about the ranges in the s p and the dow for much of december. The dollar index more volatile and choppy. And as you can see, 100 is super key. Yesterday we closed just above it. Closing basis, watch any violations. Sara, back to you. All right. Rick santelli, thanks very much. Dows up 27 points. Much more squat on the street after this break. R 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. Welcome back to squawk on the street. Watching the dow here up 23 points. Thats 20,000, almost 100. I know youre also watching that key 2,300 level on the s p. Were a few below that, we got to 2,301 on the s p 500. Holding the gains is fine. Yesterday was an impressive rally where you vaulted a little past 20,000, but it wasnt a huge rush of money in there. The dow was up about the same percentage. Its totally fine. I just dont think it necessarily means blastoff from here. Similar culprits Goldman Sachs adding 17 points to the dow, 10 points from boeing. Theres an earnings story and theres a trump story. Earnings, trump and cyclicals, global cyclicals. Thats been the story in the first five weeks after the election. Its sort of resumed a little bit this week. Were also watching treasury yields, as you pointed out. They are higher. Were going to get the first look at fourthquarter gdp tomorrow. Yes. Thats important, of course, to see if the economic momentum that we saw in the Third Quarter can continue and if some of the confidence rebates that have gone up after the election can translate translate into actual numbers. Of course, we had firstquarter slowdowns a few years in a row. Trying to avoid that this time. And well watch guidance after the earnings on that. Big tech names after the bell. With that, to you, jon, for squawk alley. Thank you, sara. Good morning. Its 8 00 a. M. At apple headquarters in cupertino, california, and 11 00 a. M. Here on wall street. Squawk alley is live. Good thursday morning. Welcome to squawk all