Transcripts For CNBC Squawk On The Street 20170127

A News Conference is scheduled, a standoff with mexico looming. Plus, its a busy day for earnings. We have alphabet, microsoft, intel, all moving in the premarket. And as weve mentioned starbucks Howard Schultz joins us this hour with his companys earnings and a lot more. First up though, another busy day on tap for the president one week after his inauguration. Trade will be among the big issues on the table when he meets with uk Prime Minister may at the white house. Their joint News Conference slated for 1 00 p. M. Eastern time. Still a lot of buzz surrounding the mexican president canceling that meeting with President Trump scheduled for next week insisting that mexico would not pay for a border wall. Within the last hour the president tweeting, mexicos taken advantage of the u. S. For long enough. Massive trade deficits, little help on the very weak border, must change now. Former mexican president fox on with the guys with squawk this morning saying we dont worry about trade. Weve got china to trade with. Yeah, cicente fox, this was kind of a i think that this is the most serious break obviously with mexican relations since well, we can go very far back. And i think that this is the first time ive said to myself, well, well be a Republican Senate i mean, this is something this is almost like the dennis green. Remember i even got the quote about, you know, maybe you should realize that trump is exactly who he said he is with the wall because its, well, why dont we just go to the quote . I think one of the things this one is one thats different. I think this is very different. I think this is the one where the republicans who will break rice. Mccains already said hes troubled over rolling back nafta. I think this particular spat has a different coloration to it. Its not there are a lot of people who want to adjust nafta. There are a lot of people who absolutely want to adjust the currency because the currency is really the issue. A lot of us trade guys really think the issue is currency, not the wall. But have gotten very sidetracked because trump is sticking by exactly what he said when he was running for president. I just feel like that whats happened is this one took my breath away. Because i just didnt see this one coming. I thought there would be do you think im wrong that this isnt a much more Political Risk . Youre referring to the wall and the tax that made the associated the 20 tax, the idea that this is not about jobs as much as it is just a spat between two countries that have had very good relations. The spat should be about nafta. The spat should be about the way that we set up trade with the mexicans. I dont think the spat should be about not talking to each other, which is what vicente fox was saying. I thought it was meaningful. You also have that tweet, i believe from Lindsey Graham, about the price of margaritas going up. Analysts out today on the impact of chipotle lock. Were putting in a 20 increase all we do is serve modelo and corona and youre going to put the 20 increase through now . No, im not going to do that. I would lose a lot of customers. If they make my suppliers pay 20 , i have to pay 20 . Now, as my wife said, are you kidding me, jim . Do you think this is our biggest problem . Im embarrassed that you asked. No, no i think one of the key points certainly for investors focused on tax reform so much and what the timeline will be is does this erupt into some sort of political difficulty for the president. Thank you. With Lindsey Graham and john mccain who are such key parts of any votes theyre going to need in the senate when it comes to repealing and replacing the aca, which by the way is first out of the box supposedly. But maybe difficult has to be done under reconciliation, but not the replacement. And then of course tax reform itself and the idea of this border tax and where are the senators from, oh, arkansas, where do they come town on this . Given walmart is their right. Thats my issue. This becomes more of the question. Its not a bloc after this. I think it the bloc may be more suspect. The Political Risk got higher because of this particular spat. Heres the journal oped today, mr. Trump is a Foreign Affairs neophyte, but hes already learning that nations cant be bullied like gop candidates or ceos. They have their own nationalist political dynamics. When attacked, they push back. Well, i just think that they pushback, look, whether you think mexico is fair trade or free trade, whether its right or whether its wrong, im talking about the bloc of senators needed to be able to get the agenda through. I do not believe i believe mexico has some friends in the senate. And that this is a reason to break with the president. And im surprised that this is where, well, we said we are who we are. Its dennis green. Its dennis green. Yeah, let me just give you a quote of who you thought trump was, well, here we go. Its nfl like. Dennis green is exactly like this. Im asking my executive producer to play this. The bears are who we thought they were. Thats why we took the damn field. Now, if you want to crown them, then crown their ass. But they are who we thought they were. And we let them off the hook trump said he was going to build a wall, he said mexico was going to pay for it. Why is that a shocker . Its just when push came to shove, it was a little like green in he really meant it. Maybe what he meant was hes going to build a wall and the American Consumers going to pay for it through a tax. Well, yeah. We know from this is not look, im a little startled by this because all i know is as david has said endlessly if the agenda of lower corporate taxes and repatriation is whats on the table, its a lot of the reason why we need it to go higher. So suddenly i say to myself, okay, does he still have 50 senators after this . Well, well see. Listen, border tax adjustment is an important component and perhaps the most important component in terms of revenue raising in tax reform based on the blueprint we have from house ways and means. The paper on the wall. We have no idea where were going to end up when you get to the senate. But anything that has the potential to delay the timeline for this so that were sitting here three months from now still talking about the same things and saying, okay, its probably 18s business its going to impact the stock market. Thank you. Youre better than i am. You said it more dispassionately than i did. I am not better. Or smarter. The idea that deregulation moves to the front of the line because thats what the market is excited about. Deregulation is a problem. All the pipelines, do you know theres only two guys on firk. You need three in order to be able to speed up pipeline dereg. But they dont even have a core. How about they hold up the additional person for firk, you cant move the pipeline agenda. Im saying there are ways to clog the machinery here and the standoff with mexico i dont think is necessarily going to make it as easy with the agenda. So when you put this week one into perspective, jim, all the meetings with ceos, nafta, tpp, the wall all those executive orders. Dont forget those. Inauguration crowds, bannon in the times today. What is the net effect on the market, do you think . I think the net effect on the market is we got to go back to the fundamentals and not think that were necessarily going to have a fast track to much other than some deregulation. Pipelines. But pipelines need ferk, you have to have ferk agree and ferk cant have a. I had on last night they still have to decommission. I know the president called coal what he called it beautiful. The head of the largest Power Transmission company in the country does not regard coal as beautiful. So, i mean, its very hard. Theres i guess the whole because the agenda is necessary to get profits up and make the stock market go higher than 2017. Yes. Speaking of which lets get to some big tech earnings this morning. Microsoft posting better than expected Quarterly Results helped by cloud, intel driven in part by demand for the companys data services. Alphabet missed on bottom line but top line does exceed forecasts. Jim, you were tweetding this morning about why it should be higher. Oh, yeah sorry. Im sorry. Im sorry. Thats exactly how you tweeted too. Yes. Okay. So im doing mad money while the alphabet call is on. Im thinking this must be some call with ruth porat saying, im sorry, this is bad, this is bad, this is bad. No, so i go to the quiet of my home where i told the wife to stay away because i got to focus, i read that Conference Call and then listen to the Conference Call and said, oh, y my this stock should have been up 20, not down 20. Plus, by the way, you see the cash reserve . Did you see the cash . I did. I did. Whatd you think . They got a lot of cash. They have a lot of cash. Im still looking for that mysterious 320 million equipment charge. What was that . Boy, you focus boy, you really are a small thinker. I am . Yes. 320 million is a lot of money in the neighborhood i come from, my friend. Okay. Well, yeah. Im talking about the billions they have overseas. I understand what youre saying. And its a very large number. I think that your equipment there was a lot of onetime issues that mystified me including that one. Yeah. I mean even analysts are calling it mysterious. Even analysts, the lap dog analysts. Yeah. I cant believe they are a trump stock, trump stock, trump stock. So you do like the quarter . Yes. Comes to alphabet people say whats the multiple . 19 times. The bottom line was not particularly strong even though top line was. Will you ever see the multiple go up . Yes, if they diversify away from search. This is like this is like tim cook. If he decided to go into another business line initially it doesnt turn out to be great. But the fact is, david, we are not going to be talking about alphabet as a search company. Were going to be talking about diversified data play. Okay. That includes search. And a. I. Machine learning, david, artificial intelligence, this is google, amazon, wow. David, the Machine Learning thats going on. Ruth porat talked about Machine Learning over she did. I thought the quarter was remarkable. I thought people selling it didnt bother to listen to the call. Really . Remarkable. Yes. I will say two things, one is they are going to include stock based compensation in nonbase calculations. Thats a big deal. They use g. A. P. Yes. Microsoft does that. Good for them. Good for google. Yeah. Thats going to be a little dislocation there nongap suddenly going to include and then this interesting thing they didnt buy back any stock in the quarter. They said, quote, we were unable to do a buyback in the Fourth Quarter due to trading restrictions, but we do hope to get back into that. Well, but theyre spending a lot. Now, some people dont like spending why would you not buy back stock . Maybe because you were talking to somebody about buying them. I dont know the answer to that question. Im telling you. I know 22 growth is good. I know hardware is good. I thought the actual revenue what i care about, revenue growing three times profit, Youtube Content is going to be monetized, hardware, search, video, you have 19 p e, 52 billion overseas, 61 of their cash. l e86 billion overall in cash. I can see your notes over the shoulder. You said take notes, thats one thing i do. One writes in says you invented a new language. Sometimes you get plus i got the wife 20 price increase on the modelo here. Yeah, were watching constellation this morning. Well get to that. Well get to starbucks ceo Howard Schultz, a week into the Trump Presidency take another look at the premarket. Despite all the 20k hoopla, the dow has much less of a gain for the month than the other major averages. Half of the gain in december. Were back in a minute. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. I was born in a city they call the windy city lets get to the windy city, check in on the bond pits. Rick santelli at the cme. Good morning, rick. Good morning, carl. You know, the real reason they call it the windy city is because all the flap in the politicians over the decades. Thats the real reason. Anyway, lets get to the markets. We definitely had soft gdp. You could argue soft durables, but i will talk about this later today. If you take the durables and you dont look for the seasonal adjustment process and look at the raw data, it was actually pretty strong. And thats for later today well cover that. Intraday ten you can see how rates came down when the data started to hit. Look at oneweek of tens, not a bad week. Were basically hovering about four basis points higher than we settled last year. One week of bunds eerily similar, wouldnt you think . Except theyre under and were under 2. 50. Open the chart up to december 2015, that was the High Water Mark going back to 14, significant level. Keep the same date for all the rest of the charts. Look at bunds, hey, theyre going in the right direction now, a lot of room. But heres the money ball trade if youre looking at euro to impact rates and Foreign Exchange, look at the same date with our twoyear, now lets look at the euro twoyear, currently m ll lly minus 64. Thats the chart to Pay Attention to. If that starts to turn up more and mario draghi starts to cave a little bit, i think market inflation will force that, when that chart reverses youre going to see one thing for sure, a much stronger euro currency. Carl, david, jim, back to the gang. All right. Thanks so much, rick. Starbucks down in the premarket, the coffee chain posting Quarterly Earnings in line 52 cents a share. Revenues and comps came in below consensus. Also trimming their full year revenue guidance. Well have exclusive with Howard Schultz later this hour. Jim, this revenue guide eight to ten versus prior double digit, what does it mean . Look, this is something that unfortunatelys become a bit of a pattern in that we keep expecting an acceleration, a lot of this is domestic. The company has a twoyear whats known as stack thats still very impressive. The companys still got the fly wheel of many good things going, but ill ask howard about what i regard as a high quality problem which is mobile pay is kaudsing a throughput issue which i believe is causing genuine comp decline. Now, its a decline in other words, its a slowing of an increase. Its not an actual decline. Second derivative. Exactly. Chinas a great story. The reserve will be a great story. I can give you lots of great stories, but travel trust owns the stock. I am concerned about how if you budget to trend, socalled budget to trend, meaning if you just look at the trend of whats happening, then the second half turn they are predicting, i need more evidence. I need more evidence just to be able to say im not concerned. Just cant do it. I cant just say im not concerned. Fair to say your elasticity, meaning you stuck with starbucks through thick and thin. Since howard came back. Yeah. It would take a lot to shake you off of that tree, im assuming. Yes. But i am concerned that there are secular issues to the way people go out in this country. I also what does that mean . Well, i mean, look, ill give you a good example. If you just go to theres a Company Called breaker, this is chi chilis, that reported a disappointing number, this is a quote, we believe largely driven by the shift in retail traffic to online is starting to impact Holiday Shopping patterns play out. Stay at home. Is stay at home cannibalizing . This is the dominos theory. People are not going to the mall, theyre not leaving the house because they can do all their shopping at home. The traffic is down of people going outside. Now, look, i go to starbucks. And ive got to tell you my starbucks are jammed. But theyre jammed the wrong way. Theyre jammed at the pickup. Theyre jammed at the pickup. It reminds me of reminds me very much of panera. When mr. Recognized. Im mosh pitted at my starbucks. And i dont like to be mosh pitted because i feel like, wait a second, thats my third place. But as ron said because i love panera too, it doesnt have a great feel at the pick up. Well get cramers mad dash in just a moment. Dont go away. 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And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound i wont. Is it because so many go after it the same way . Chasing after short term returns. Instead if getting caught up with the crowd, the Investment Managers at pgim take a long term view, teaming specialized active investing with riskmanagement rigor, to seek out global opportunities. We manage over a trillion dollars this way, attracting many of the worlds leading investors. Partner with pgim. The Global Investment management businesses of prudential thats the sound it makes when its time for a mad dash. We got about three and a half minutes to the opening bell. Well do it seated. We havent talked to any microsoft yet, really. We only spent time on alphabet. Its very difficult for huge cap stock like this to move like i would have expected it to. But this was the Conference Call i told you i like the alphabet call, i know im an outlier on that. People are going to try to short it. Ive got to tell you the microsoft quarter was a thing of beauty. Cloud is great, but david, you know what else is great . Windows 10. Can you imagine . The pc is great. Gaming is great. It was a great, great call. Linkedin could be great. This was the cloud evolution, s Satya Nadella theyve also been guiding toward compressed margins for a period of time which seems to be ending now, jim, at least according to a couple people i spoke to this morning who own the stock. Youre dead right. And ive got to tell you that linkedin, operating expenses declined 2 . Thats a good number. I just feel like it was just an excellent quarter. There were no flies in this quarter. They were very matter of fact about it. They delivered. And the stock can creep higher over time. It does have a real multiple now. Remember it had such a bad multiple before . But i like the call. They are matter of factually changing the company into a Cloud Company thats going to be a real competitor to amazon. I think thats fair to note youll be able to pit them against amazon. And its real. Cognitive services is real. Satya nadellas changed the company in a rather remarkable fashion in a short period of time. Im thinking thats a nice way to put ballmer, a guy you know well. Ill see at my 40th reunion in october. I expect to see him. Speaking of pcs at least, intel gets the upgrade at morgan stanley, jim. No longer selling intel. By the way, theyre spending, which is a nice increase in cap x. Means theyre growing. I didnt like the data center as much as i would have, but ive got to tell you personal computer was good. Theyve tried that before, thats a mistake, but their move, their shift to other areas, to internet of things is starting to pay off. And intel is a cheap stock. It was a good call. They put cold water at certain times on real growth. But i like the quarter. I like the fact that they are doing much more than just pcs, but pcs are good. I also felt there was good readthrough to amd. I thought you could buy amd off this call. Last night i had lam research, makes a lot of semiconductor equipment, a lot of Companies Want to be more bullish but you cant even get all the machines you need to be able to grow. So its a strong industry with supply constraint. Inventorys not a problem, i like intel. A big reason the nasdaq is on track for the best month since july, way out pacing the dow this month. Speaking of tech, today is the anniversary of steve jobs unveiling the original ipad back in 2010. Unbelievable. Said were going to make an iphone with a really big screen. [ bell ringing ] talk about spats. Thats a vicious one. Look, i think that one of the nasdaq names people ought to focus on, steve nguyn was an excellent his Conference Calls are always exciting. The communist partys come back to the idea of letting the high rollers come back, which is why wynns numbers are up. Excellent number. Rev group, manufacturer and distributor of ambulances and buses. Well talk to the ceo as soon as that stock opens today. At the nasdaq chinese consulate general in new york celebrating Chinese New Year tomorrow. The year of the rooster. Tim cook tweeting to all the people in china last night happy new year. Talking about how thats always been a great, great weekend this weekend the Chinese New Year, i dont think wynn is done going up. Honeywell, looking at nice of aerial components. The organic number is fine. What worried me commercial helicopter bad. I still continue to dislike as part of lockheed martin. Doesnt jibe at all with boeing. But that said, great quarter. Great quarter. Continued great quarter. There are certain divisions you might quarrel with. Id like to go back to 3m, i liked them because synergistic in terms of pastiche of businesses. And if we take up honeywell, we should take up 3m. Emerson, maybe its coming back. Theres a pulse. Theres a pulse. Been awhile. Thats true. As far as gdp goes, we havent asked you the headline numbers are weaker than expected on a surge in imports, but consumption and investment actually not bad. No, but i think trump could use this one very easily to say net exports took off 1 of growth. Yeah. You could say this is what im talking about. This is our problem all these trading agreements are bad for us. I think you could easily may hay with that. Biggest drag since 2010. That would be a good tweet if hes like tweeting that would be a high end tweet to go with that tweet. Although senator jeff flake today saying when nafta began u. S. Exports to mexico 68 billion, today 235 billion. So that twitter debate as you call it is happening within elected officials. Im telling you the next one is canada. Transcanada, they applied for keystone. By the way keystone not economic here, they do have the cushing in mexico, but its not economic a lot because some of the other enbridges done a lot of work around keystone because they figured out obama was going to reject it. Yes, our trading partners are up in the air. Up in the air. Chevron was a miss but youre not too concerned as big oil earning season begins. Production was good. They conserved a lot of capital. Theyve done great. I mean their Balance Sheet is really good. Yes, it is a headline miss. And i totally understand there must be a computer that says headline missell because thats the way it was with alphabet. But if you look through what i wanted to see was production growth. I was happy with production growth. I think chevron is doing remarkably well at this point in the cycle. Theyre Still Producing a lot, theyre finding a lot of oil. I think chevrons fine. I would not sell chevron off this quarter. I know people are going to because its been a nice run, but chevron not that bad. Want to do a faber report talk about a lot went on yesterday in sort of a follow through, of course that story reported by the journal in terms of at least some interest in verizon and charter. Charter was up 7. 5 yesterday. What it has done is focused a lot of people on the potential for consolidation amongst many of the providers of both video and Telecom Services in this country. But as for verizon and charter, what i can tell you right now is theres really nothing going on. What . I read the journal every day, its a done deal. Theres nothing going on. There may have been an overture. And if you made one, you probably would want to go to the person at liberty, maybe its maffae because they have a 25 vote and theyre a key and they might be willing to sell and if they were willing to sell at a certain price they could get other shareholders to follow along, but theres no real talks going on. Numerous sources indicate that. These are people who would be in a position to know. The dilution continues to be the issue in part for verizon and what it would face in trying to get to a price that would be acceptable liberty, forget even to chart er. Its got to be above 400, could it approach 450 . If you get into those kinds of numbers, youre talking about significant dilution here. Tax reform plays a role by the way. Think about deductibility of interest that may go away. Yes. But right now its really going nowhere. That doesnt mean we arent going to see a lot of Different Things happen this year. Final point by the way on price, tom rutledge, i pointed this out yesterday, the ceo of charter, his options package, its last price 563 a share. That gives you a sense as to how hes thinking about the Long Term Plan here, which is to get 41 ebitda margins which seems quite attainable when you look at sudden links margins these days owned by altice. By the way, our Parent Company always somewhat uncomfortable to talk about, but hey, were right in the mix. For example, given what may be less onerous doj rules or overseeing of this industry as possible comcast could buy charter. Why not . Why wouldnt comcast have an interest . The journal is not going to write you just said that. Im not saying theres anything going on. This is all pure speculation of people who are looking at what may happen in terms of consolidation. The expectation well get one if not two big deals in the course of this year. By the way, as we pointed out a koul p weeks back that auction of spectrum which is ending which has basically muzzled a number of companies being involved to talk to each other because of the anticollusion rules, talk midmarch where they can start to talk again. Would comcast and verizon everconsider trying to do something . You could imagine a scenario where verizon spins fios and wireless separately and merges wireless into comcast. Its at least something you got to think about given, again, a regulatory approach we think from washington that is going to be decidedly different although may have that populous tone to it, you never know, but decidedly different than what weve seen in the past. Finally, we always come back to tmo and sprint, certainly in the mix. And or wireless and then you throw dish in. Not the last time were going to be talking about this. But when it comes to verizon and charter, dont get ahead of yourselves here. Okay, thank you. I read the article wrong. Thank you, david. Youre welcome. Were going to switch directions. Were going to go to starbucks. Theyre out with earnings. It was the lowest samestore sales growth in over five years domestically. Joining us now exclusively starbucks founder and ceo Howard Schultz. Good to see you. I got to go right to it because i know the stock is down. Theres the flywheel in effect, overseas terrific, china amazing, people are focused on the domestic not being able to come back as quickly as we thought since the analyst meeting. I wonder whether you dont have the highest quality of problems, which is that youve got mobile pay working too well. And how do you keep that from becoming an actual problem and customers not being happy . Well, jim, thank you. Thanks for having us on. Let me try to explain the situation in a wholistic fashion in regard to the 3 comp number. Clearly we were significantly impacted by a good problem, a problem that we will solve, and that is the congestion and the runaway success at peak of mobile order and pay. We didnt anticipate how successful it would be and has created a bottleneck for us and that impacted comps and traffic during the quarter. But if you look at the rielevany of the company and the success of holiday, youve got to put into the factors we had 2 billion loaded on peoples phones and cards that are sitting on our Balance Sheet. And we could not, as you know, record those sales until they are validated. And well see that in the quarters to come. The last thing is, if you look at comps, and i understand the focus everybody has on it, but if you isolate new stores, our new stores are continuing to perform the best they have in years. So this is a problem that people are focused on in terms of comps we will fix. Its not a problem that is beyond our ability to understand whats going on. And it will be fine. Im not really worried. I know the market has overreacted to it, but were going to be fine. And then you look at china. Were opening more than a store a day. And the success of the company there. So this is, again, if we go back to the long term, the fiveyear plan that we have committed to, mid single digit comps, 10 Revenue Growth and 15 and 20 eps growth over the next five years, i wouldnt get too concerned about this quarter. Weve said all along there will be ups and downs, but here we are a company thats been public for 25 years. And weve proven over and over again the sustainability, the relevancy and the growth and development of starbucks. And at the same time the impact that we want to have as a company that is highly socially responsible. Howard, the other thing im concerned about, you were the first person to see the downturn in the mall. You knew it. You knew it was a secular trend. Yeah. We know mr. Nordstrom, i know you know those guys, the worst mall traffic since 72. We know from chilchilis recent see the stay at home factor becoming more of a secular trend. Do you think the idea that people are staying at home, doing more things at home is hurting traffic of starbucks . No. I dont think starbucks is deeply affected by the seismic change in consumer behavior. Now, we called this three years ago. And clearly you can see it in every mall in america. But, no, and the reason is that we are a destination. And i think those retailers and those merchants that understand we have to provide an experience, we have to provide an emotional connection, unlike a department store, unlike the apparel business, starbucks is not going to be affected by the downturn in traffic. Which will be significant and have an adverse effect on the overall retail sector. But if you compare our results even though it was lower than our usual standards, it is best of class within restaurant and retail sector. And over time its going to get better. Weve said publicly on the call yesterday at the second half of the year will be stronger in terms of comps. Well fix the problem, and well be off to the races once again. Now, my travel trust is a shareholder, i am a huge drinker, my starbucks in new jersey are precisely the things im worried about. We spoke about ron who had to fix panera that theres a bit of a mosh pit where i pick up. Ive got to tell you, howard, its a little longer and its a struggle for me. Not necessarily to go to dunkin donuts, but say, wow, i dont want to be involved in whatevers going on right there with mobile pay. You say thats going to be fixed in the second half. I know you have adam on it. You know i think the world of him, but whats going to happen this quarter . Dont you have to rearrange things in the stores . Add more people . Because its not as comfortable third place as it used to be. No, i think jim, i think thats a fair point. And i think we were very up front yesterday in talking about the problem. We recognize it. And we understand that very clearly wooe in our stores every day and certainly in high volume stores like new york city and the east coast in the morning day part we are facing this congestion problem. And the anxiety of the customer, but it is a problem we will solve. It wont take us that long. Weve been on it now for 30 days. And in the quarters that follow we will get back to the experience that you have come to expect and love at starbucks. You know, i will say we serve more customers in our stores than any other time in history during the Christmas Holiday season. Its not as if people are not coming to starbucks. Its just at the morning peak as a result of mobile order and pay, which is a runaway success and a great problem to have, did cause us some problems. And, jim, we recognize it. Were humbled by it. And we will fix it. Howard, the whole nations talking about trade. Its unbelievable. Of course its a topic thats been close to the Coffee Business for years. You got china giving speeches in davos. What do you make of the rhetoric between trump and pena nieto . Or at least the rhetoric to come between trump and xi jinping . Well, you know, ive said before that the market in chinas very important to starbucks. I probably have traveled there over the last ten years as much or more than any other ceo in america. Im there almost every quarter. Weve got 2,600 stores, were under construction in a major roa roasterie there. We can only control the relationship with our customers and relationship with our people and the strong relationship that starbucks has built with government officials over many years. And i think the reason that were insulated from some of those issues is because soft way we have treated our people, the compensation, the benefits and the fact that the people in china view starbucks as a friend there. And weve demonstrated that were the kind of company that is building the business the right way. So, again, i think any business in america thats looking at whats going on is sensitive to the issues. But we cant control what the governments going to do. We can only control those things in front of us, thats our customers and our people. You know, howard, its david faber. But im curious given your experience in china you just mentioned and your knowledge of how things work there, which does take quite some time to figure out on the part of executives like yourself, what are your expectations for some of the responses that we may get from china at this point given this very different tone that theyre hearing from this new administration . Well, david, i certainly cant speak for the chinese government, but i think i would hope that both governments recognize its not in our collective interest to have a trade war that would have such an adverse effect on both economies and citizens from both countries. So again, i cant predict whats going to happen. I am confident that starbucks is going to be able to navigate through any storm thats going to happen. And i hope that on both sides we recognize the need for civility and degree of understanding that we must live in harmony together. Howard, just want to go back to the concept of the newer stores because i know youre going to be opening one in china. Its going to be very big. The newer stores i felt got short shrift by you on the Conference Call. Okay. There are many different levers of the flywheel that i think can move the needle in 2018 when i hear the number of reserve, when i hear roasterie, can you give us a sense of what well be talking about a year from now and a different mosaic than were talking right now . I think it will be quite different because, jim, you and i have talked many times im very fond of the state motto of missouri, the show me state. We got to show the market and show our customers the success of the reserve stores, the reserve bar and the roasteries around the world. A year from now a 30,000 square foot facility in shanghai will open. In new york on the corner of 19th and then tokyo and hundreds of reserve bars and reserve stores open over the next couple of years that will create this ultrapremium experience. Shine a halo on the starbucks brand. Be a growth vehicle for the company. I think all the issues were talking about in terms of a quarter in which comps were not as strong as they have been in the past will be we have some issues that we have to fix. But as an operator and as a merchant these are things well in our control. And we will fix them. And starbucks once again will demonstrate best of Class Performance in terms of retail and Consumer Brand in america. All right. Now, i know youre speaking today and not kevin johnson. I have to believe that if you were really concerned that the samestore sales were going to be in a continual decline you would budgeted the trend that perhaps you might even delay your move up to chairman. Is there any chance no. Youve had any misgivings at all . No, no, theres no chance of that whatsoever. Were not looking at the next 30 or 60 days. Were looking at the next five and ten years. Kevin johnson will assume his responsibility as chief executive officer the first week in april. Hes a world class ceo. Im going to be his partner. Im going to help him as much as i can, but he will be the ceo of the company. And hes well prepared for everything thats going to come his way. And hes going to be a great leader for the company and build long term value for shareholders. Howard, as were talking the white house has put out the president s list of Business Leaders on their Manufacturing Jobs Initiative. Mark fields, gors ki, elon musk, liveris and the like, would you accept an invitation to serve on a council like that . Well, certainly i would do anything i could to ensure the fact that the progress of the administration and President Trump is successful. You know, people know that i supported hillary clinton, but President Trump is the president of america. Im an american. And i want america to succeed. I want the president to succeed. Fair enough. I got to go back again to your initial comments three years ago about the mall. Howard, do you have stores that you should close . We see all these closures of very fine retailers because we know there are some malls that you just shouldnt be in. Are there places where you say we got to redeploy because these malls are dead . We dont have many Starbucks Stores in malls that are under pressure. We have some Teavana Stores in malls that are under pressure. I think well look at that over time, but were not going to make any shortterm decision. Jim, this is something ive been talking about the last three years. We think were insulated from it. One thing we havent talked about with regard to that is people, yes, people are going theres going to be less people shopping, but people are going to be longing for human connection, longing for experiences, longing for community. And that is a strong suit of starbucks not only domestically and around the world. And if you would see what is happening with starbucks in all of these countries, the universal acceptance of the brand, the experience, the coffee and social agenda of the company, youd see why we feel so strongly that we are still in the early days of the growth and development of starbucks despite the fact that it was not our best quarter in terms of comps. This is a shortterm issue that over time will be a memory in the past. All right. Now, you have spoken many times on mad money and with me both publicly and off the side about the notion, you know ive said that starbucks is a Great American ambassador. If starbucks had been open during another period of turmoil in our country, early 60s, perhaps we could have avoided confli conflict. Are we in a situation where you find some of your people when they go overseas are getting a kind of blowback from the president of the United States . Maybe some resistance to think, you know what, America First, well, im not going to an american first store, im not going to starbucks . No. We have not experienced that, jim. Let me tell you why. Starbucks is an employer of choice in every market that were in, the 75 countries. The values in the company in giving back to the communities, the benefits we pay to our people and the relationships that we have built with local governments almost in every country that weve been in. We also have very interesting license in j. B. Partners that give us local opportunities to really understand consumer preferences. Honestly, we have not experienced anything along those lines. And i think starbucks is a Great American company and people view us very positively. Well, howard, i want to thank you very much okay. Okay. Thank you. I do feel less concerned. I shobtuldnt take it so personally but recommending the stock since the day you came back when mr. Donald left and im not used to seeing decline but i think the decline is caused by something that is technical and therefore will be solved by you. Thank you so much, Howard Schultz. Great to see you again, sir. Thank you. Thank you, jim. Good interview. Good insight, jim. Well get stop trading with jim in a moment. Markets pretty flat. Squawk on the street will be right back. 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 they all. Want. To. How charge me. Xes going . Have you tried credit karma . Does credit karma do taxes now . Yeah, and theyre totally free, so theyll never take any of your refund. File your taxes for free with credit karma tax. Wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong insurance company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. And if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Time for cramer and stop trading. I went through the caterpillar call. Im doing a Facebook Live today at 2 00 talking about these earnings reports. I went through the caterpillar call and i absolutely loved it. I felt like i was alone until wells fargo upgraded it today. That analyst does not upgrade easily. Hes calling cyclical bottom. I agree with that. I felt much of the tone of the caterpillar call was mining is okay. How much oil . Oil up here, did you see harold hamm, hes going to double i did. Ive heard him say 20 million barrels. Hes crazy saying that number. But hes putting money he is. Hes done it. Im not believe me, i know. Father of fracking, i get it. You need cat for infrastructure. You need cat if youre going to have a cyclical rebound. Caterpillar is done going down, i think, and i think the wells piece is good. And people just slaged it because they said, you know, this or that. 70 gain in a year is the beginning, halfway through . A little late. A little late. Im just saying there are a lot of people wanting to short cat. Its a Big Hedge Fund short. You know, like they love to short stuff . Which is fine. But i think caterpillar is. Whats on mad tonight . A company defied all expectations, carnival cruise. Unbelievable. Arnold donald has delivered, delivered, delivered. I know, you can say, listen, royals good too, but this company has done Amazing Things for travel and for people who want to have a vacation and a reasonable price. Hes done it, also Great Technology guy. I cannot wait to talk to him and congratulations to him for really turning that company around. Yeah, absolutely. Great man. Jim, strong week. Yeah. And im getting started. Im going to set the alarm at 4 00 tomorrow. All right told the wife. 4 00. Because the honeywell call and its saturday. Big deal. Take a rest. A rest. Oh, please. I am who i say i am. Jim, well see you tonight. Mad money. When we come back, jim stewart of the New York Times on the budding bromance between trump and elon musk. Dont go away. Opportunities arent always obvious. Sometimes they just drop in. 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Plan your never tiring retiring retired tires retirement with e trade. Im in vests and as a vested investor in vests i invest with e trade, where investors can investigate and invest in vests. Or not in vests. Sign up at etrade. Com and get up to six hundred dollars. Good friday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen, david faber at the new york stock exchange. A lot going on today as President Trump meets with uk Prime Minister theresa may this afternoon. Gdps out. Durables for the time being not much amplitude in the markets. Dows down three points. And oil down a full percent. We have some Economic Data crossing the wires. Lets get to rick santelli. Carl, anybody out there watching has a heart condition, take a breath because ill tell you what, if Consumer Confidence is as important as some think, this is a powerful number. 98. 5, 98. 5 is our final read for january of University Michigan sentiment. This takes the 98. 1 mid month and tosses it out. Why is 98. 5 so strong . Because prior to this we had a 98. 2 read, the last read of last year after the election. That was the best since january of 04. January of 04 read was 103. 8. So this of course comps to that. But it really is quite a strong number. Another thing to hit on is the university of michigan has two inflation reads. On the oneyear its 2. 56. Keep in mind on the oneyear 2. 6 is a High Water Mark now going back to and its the same as the mid look april of 2016 when it was at 2. 8. And if you look at the 2. 6, you have to go back on the five to tenyear read to march of 16 to find a higher number. So even though those arent long comps on inflation, theyre definitely in the upper end and we want to pay close attention to those. Sara, back to you. All right, rick, thank you. So better Consumer Confidence, but a miss for Fourth Quarter gdp. The final read for president obamas term, our senior economics reporter Steve Liesman has been digging through those numbers and fascinating impact of trade here on those numbers as well, steve. Soybeans, sara. Were going to talk about soybeans in a minute. But i want to start out where sara pointed, president obamas term ends with the Number Center of controversy for his eightyear presidency. 1. 9 growth for the Fourth Quarter, thats a bit below the 2. 2 expectation but right in line with the 1. 8 that prevailed during his presidency. His economists, many economists argue thats the new growth rate, the potential of the economy has stepped down and obama did well to hit it and grow faster than other developed countries. President trump argues that he can do better with better policies. Lets look at details for the Fourth Quarter, total gdp 1. 9, consumer spending, 2. 5, thats a step down from the 3 in the Third Quarter. Business investment that is stronger in the Third Quarter up 2. 4 . And exports plunging in part because we had a surge in soybean exports in the Third Quarter and now they rolled off. But you also had an increase in imports. Are we seeing the effect of a somewhat stronger dollar in that data . Take a look at one more screen here. You can see that we had a very lackluster first half, then you have the surge in the Third Quarter and now come back down to right around what the trend is and what the trend has been. Since the election of President Trump theres been a one more look at data here which is the Capital Spending number. We had that thank you, guys. And you can see thats come back as well in the Fourth Quarter in december there getting positive on the year over year basis for the first time in a while. One thing thats depressed that number is the decline in investment in the oil and energy space. And now maybe thats come back a little bit along with perhaps a little more confidence in there. But since the election of President Trump theres been a surge in confidence both among consumers and ceos. And that can translate into some additional spending and growth right now. But the effects are the real stuff, tax cuts, deregulation and infrastructure, if theyre going to boost growth, it wont be felt i think for several quarters after they become law. And that could mean, carl, some time next year. We still got to get Baker Hughes Rig count this afternoon. There you go. A lot going on. Thanks so much. Thanks. Steve liesman. Tensions heating up of course between the u. S. And mexico. President tweeting this morning mexicos taken advantage of the u. S. For long enough. Massive trade deficits and little help on the very weak border. Must change now. Our Michelle Carusocabrera is in washington this morning. Knows this story backwards and forwards, good morning, michelle. Good morning, carl. Yeah, that border war of words only getting more intense. Thats what President Trump said this morning via twitter. But he backed up or he said once again his repeated his threats against American Companies that would move jobs to south of the border. Heres what he said in an interview last night. They understand that if they build a plant outside of the United States, fire all their employees, when that product, whether its a car or an air conditioner or a washing machine, when that comes through the border, its going to be heavily taxed. Weve seen how entrenched American Manufacturing is south of the border, particularly in monterray. Ryder, Johnson Controls now known as jci manufacturing, lots of auto parts as phil lebeau has highlighted to us many times, carrier, a lot of hvac is done down there. Ive spoken with mexican Business Leaders in monterrey, theyre very, very unhappy. Thar angry about whats happened between President Trump and the president of mexico. Theyre glad Enrique Pena Nieto canceled his trip. And the former president of mexico vicente fox reiterated that this morning on squawk on the street. We get this ceo trump coming in to sit in the president ial chair and keep acting as a child, as a ceo of his corporations making deals, he says, but he in reality is making mad everybody, like happened with mexico. Fortunately president pena stood up, faced him and canceled the visit. Another prominent mexican voice thats going to weigh in today, carlos slim, one of the richest men in the world, telecom billionaire from mexico. Hes decided hes going to hold a News Conference today, decided late last night. I spoke with his office earlier in the week, they said he had no desire to address anything. But now hes going to do a rare News Conference suddenly deciding in the last 24 hours. So certainly the events of the last couple of days have affected him and driven him to speak out. That ironically enough or maybe on purpose is going to happen about the same time that british Prime Minister theresa may and u. S. President donald trump are going to hold a News Conference, guys. Were going to see what happens there for sure, michelle. A lot still to come headed our way this afternoon. Michelle carusocabrera in washington. And focus this morning as well the meeting with uk Prime Minister theresa may at the white house. Joining us this morning on the phone is jim oneill, former commercial secretary to the uk treasury. Jim, its good to have you back. Good morning. Nice to speak with you. Hope you can hear me clearly on the phone. In addition to what michelle just said, we got comments out of the German Foreign Ministry Today that transatlantic ties are going to remain the core of german policy, they say. To what degree are these alliances truly fraying, do you think . Well, i think we need longer time than you want to give me to discuss this in all its aspects. But, you know, its so hard to fathom out where your new president is really trying to go. I mean, just listening to your previous discussion on Global Economy and trade perspective to be trying to provoke such confrontation with someone as important trade wise to the u. S. As mexico and yet being so remarkably welcoming to our Prime Minister sounds very kind of strange to me. Doesnt make a lot of economic sense. But, you know, im sure im not the first person thats said Something Like that. The very idea that trump seems to be pushing so much about use ing tariffs to cut the u. S. Trade deficit is extremely dubious too. Its all very interesting and fascinating that the markets seem to be so relaxed. But im not entirely sure a lot of it makes a lot of sense, to be honest with you. Do you think, jim, at least that this America First kind of policy can succeed in bringing back American Manufacturing jobs, which have been lost over the last few decades whether its naftas fault or not . Yeah, but as most economists will try to say often i like to think of myself as not entirely conventional economist, but, you know, the u. S. Deficit also not more directly is a consequence of how little the u. S. Saves relative to its investment needs. So its not status quo. The u. S. Has to attract a lot of foreign capital from the rest of the world. And by definition that means often the u. S. Having a deficit on current account of which trade balance is the biggest part. So if your desired policy solutions to that is to deliberately constrain imports, all it will do is either or raise imported inflation significantly through higher tariffs will just cause the deficit to appear to other countries that youre not having such aggressive policies such as mexico. Obviously the u. S. Should try to improve its trade balance, but you cant really do it in a progressive way for u. S. Citizens without doing something about International Savings rate. Jim, you mentioned inflation. And im just curious to get your point of view at this point, some people believe that we are at the end of that incredible bull run in bonds that weve had for, i dont know, 25 years. Are you one of them . Do you see inflation both here as a possibility as a result of some of these policies we just discussed . And even in the eu right now where things do seem to be picking up . And if so, what is your outlook . Yeah, i have some empathy with that. I think the only other time ive been on with you guys was quite some time it was actually the day after the election. And it was my hunch and its grown a little bit that we are indeed at the beginning of the end of this 25, 30year period of growing deflation. I think you have a whole series of things happening at the same time. Theres obviously a turnaround in commodity prices, but of more substance were beginning to get a shift in policies arguably from a social perspective justifiable to almost deliberately boost lower income earners wages here in the uk thats happening, its happening a bit around europe. Its obviously an aspect of the policies of trump to deal with. You have a whole shift in fiscal policy to less restraint. And then on top of it these kind of trade policies trump appears to be following would give perhaps more emphasis to it. So, yeah, i think its a reasonable thing to think about. And its not surprising in that regard that the bond markets have started to seemingly turn the corner. It makes a lot of sense to me. Jim, we had vicente fox on the show earlier this morning. He said were not worried about trade. We can always trade with china. And there are those who believe somehow were handing the global free trade ball to that country. Are you there . Or do you believe that were going to just fix the problems weve had with them cheating and work our way back . I have some sympathy with that as well. I think another crucial judgment the trump team seems to be making is that the u. S. Dominance of the world trade agenda is the same as it was 30 years ago, and i think with the evidence it clearly is not. China today we all think of china as an export and obviously trump obsessed about that, but china is actually the number one import partner for at least 70 countries and already more than a third of the world. Before this decade is over they will be a bigger importer than the eu. And one of the most interesting things in this regard was president xi appearing at davos last week, the first time a chinese president has ever been there. And i think the u. S. Is giving china a chance to set more of the criteria for not just more deals with people directly with china, but for china to be having a bigger influence on some of the global trade rules going forward. And im surprised that there isnt a greater balance of thought coming from the u. S. In that regard. Finally, jim, we need a market call. I know your first love, like mine, is Foreign Exchange. So what does a trade war mean for the u. S. Dollar ultimately . Oh, god, you know, the dollars going to go up and down. And if it doesnt go up and down, its going to go down and up. Who knows . Thats not an answer. Ive spent more than 30 years of my life trying to guess that, and i think i learned more than most, but it wasnt much. You know, the only thing i would say is i am surprised how optimistic so many people are about the dollar. I think there are a lot of obvious reasons why that is not a very sound argument. I can see some cyclical reasons, but it seems to me from a policy perspective presiding over socalled strong dollar is certainly not going to be attractive to this administration. And from what i did learn it is not nominal Interest Rates that typically drive currencies, its usually what you might call socalled real interest rate. And if the fed is only going to move slowly after inflation has started to rise, which is currently the case, i dont see why thats so bullish for the dollar at all myself. So a weak dollar call. Jim, its good to talk to you. A lot to talk about. Well see. Up and down. Hope youll come back soon. Jim oneill. All right. Thanks for having me on. When we come back, big tech earnings are in focus today moving stocks. Well bring you the numbers and the analysis straight ahead. Plus, the president announcing his Manufacturing Jobs Initiative early this morning. U. S. Manufacturer rev group going public here at the new york stock exchange. Well speak to the ceo about the economics of manufacturing in the u. S. When we come back. Seeing is believing, and thats why were opening more Xfinity Stores closer to you. Visit us today and learn how to get the most out of all your services, like xfinity x1. Well put the power in your hands, so you can see how x1 is changing the way you experience tv with features like voice remote, making it easier and more fun than ever. Theres more in store than you imagine. Visit an xfinity store today and see for yourself. Xfinity, the future of awesome. Tech giants google and microsoft reporting pretty strong earnings after the bell yesterday. Microsoft growing its cloud business, in particular showing its not necessarily your fathers old tech company anymore. While googles parent alphabet doubles down on artificial intelligence, reviewing these nasdaq heavyweights today weve got gene munster, managing partner at luke ventures and keith weiss tech analyst at morgan stanley. Gentlemen, good to see you both. First, gene, broadly speaking tech stocks have joined the party. And the nasdaq is trading near alltime high. Anything in these earnings dramatically that makes you question or disrupt that rally . No, just in terms of google it was right where it needed to be. The underlying search growth continued to be healthy at 20 , which is where its been for the last several quarters. So paypal is a little bit of a different story, but thats competitive related. I think google as you mention is a great bellwether and the hemt of google right now is strong. So youre with cramer that the stock should be up 22 Revenue Growth, 36 growth in terms of users clicking on ads. Is that the big tickaway . Yeah, the big takeaway nearterm is everything is going really well with their search business. And that just continues quarter on quarter to turn out this 20 plus growth. The other piece as you mentioned is this theme of a. I. Theyve been hinting towards that over the last couple quarters. But their ceo last night emphasized that theyre going to shift from a mobile First Company to an a. I. First company. And that is significant. Not over the next several quarters, but eventually the ten blue links are going to go away, and thats going to be a major change in terms of how we interact with google. So i think investors should take note that two, three, four years down the road googles probably going to go through another transition similar to the transition they went through to desktop to mobile. I want to hit microsoft Strong Quarter as well, keith. Satya nadella continues to deliver for investors. The stock is rewarded. How do you think about the valuation now that microsoft is in growth mode . Definitely. Thank you for having us. So microsofts a Strong Quarter on the back of not just the cloud business, which has been really pushing up the multiple for this stock, but really earnings came through on the other side as well. If you look through the fx noise, if you look through the linkedin acquisition, you saw microsoft core earnings growing 15 . That comes from Gross Margins starting to turn. Youre starting to see opexcontinuing to be load. Thats really what drives the stock from here on out is the Earnings Growth side of the equation which really came onboard last night. Gene, lets hit some of the big political topics, certainly Foreign Exchange was harmful to paypal last night, has big remittance business. What are some of the trump policies . Jn they got a lot of questions on border taxes, potential repatriation of foreign earnings, what do they mean for paypal and some of the other companies you follow . Well, the biggest is just this pool of money just like a lot of companies that they have offshore. And google is a company that has a large part call 25 of their cash is offshore right now. So theres an opportunity for them to bring some of that back. I think more thematically in terms of how trump has talked about technology we all know it hasnt been very supportive of some of that. But i dont think that changes some of the momentum that Companies Like google and apple and facebook and amazon can still do in terms of innovation. And so when we think about the Trump Presidency and think about these companies, the biggest is tax repatriation and then separately for companies that arent selling products or at least hardware products the impact is more just around the thematic in terms of how theyre supporting investing in tech. Gene, real quick on alphabet itself. A couple of quick questions from me. One, they didnt buy back stock during the quarter. Some people wonder were they trying to negotiate some sort of a deal. I wonder if you have any insight on that because they did say it was specific to being prevented from doing so. And second, whats the impact on nongap of them now expensing stock compensation . So there probably was some sort of a transaction that caused them to basically the window for them to buy back stock to be closed during the quarter. So something as you mentioned was going on behind the scenes. Hard to say what that would have been. People speculate that things like twitter could have been behind the scenes. I dont know necessarily believe that, but yeah, i dont know. Maybe snapchat. Who knows. Maybe snapchat. And separately as far as the stock based comp is this is something that Warren Buffett has been supportive of for a long time. And so i applaud google for actually just saying were going to give you one number and not break this out. At the end of the day is the stock based comp is part of expenses. Its surprising to me that its taken this long for companies to make the step. I would expect other companies to start to take that same step and just have it as one reporting as one line. Right. Which microsoft already does, of course. And, keith, well end with you and let you sort of comment on some of the trump policies. Genes watching repatriation of overseas cash. Clearly thats a big issue for tech companies. Who benefits the most, who gets hurt by potential protectionist moves . Sure. When you think about repatriation, in software definitely have guys with big offshore cash pal lances microsoft being one of them with over 100 billion in offshore cash. Really all large caps have a significant percentage of cash in offshore that could benefit those guys bringing back the cash being able to do more m a, able to do more stock repurchases. On the flip side of the equation is the guys who are actually going to be bought, the small mid cap names in our group. Who we think are trading at pretty attractive valuations. They could benefit from a freer set of capital out there from repatriation as well. Well leave it there. Gentlemen, thank you so much for joining us. Thank you. Thank you. Gene munster, keith weiss on tech stocks. When we come back look at shares of rev group just started trading at the nyse. Well talk to the ceo tim sullivan after a short break. [pony neighing] what . Hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. U. S. Manufacturer rev group debuting for trade here at the nyse today. Ticker symbol revg up about 13 in the initial trade. Joining us first on cnbc is the ceo tim sullivan here who joins us at post nine who tells us hes on cramers wall of fame. Having done his show a few times. Congratulations on that. And congratulations on this. Thank you. Thank you. Interesting time to come public when theres so much focus on manufacturing in america and all your facilities are domestic. Yeah, were domestic centric. Even better we are really looking for some of the infrastructure spend coming. Thats a direct reflection on a lot of things we do. All of our buses are aostensibl funded. Fire and emergency local funding through municipalities but all those tax revenue bases are improving. Fed money is there was kicked up in 2016. So a lot of good tailwinds for what were doing. Contrast that with the way its been in the past few years. Its been tough. Municipal budgets and things like that. Its been tough. After the collapse of 2008 the entire tax base was eroded. Theres a pent up demand for fire and emergency apparatus, these are critically important vehicles for the communities but theyve struggled to get the tax money to pay for those. Theyre not inexpensive. With the improvement now with the tax revenues were starting to see a nice pick up. Our fire backlog is out 12 months, first time in the two years ive been here that its that long. Really good tailwinds were looking at right now. How do you make the manufacturing in this country work, from an economics and math standpoint . And do you have an opinion over whether the big automakers can profitably manufacture a small car in this country . Absolutely can. We have 16 plants now, we just opened a 16th right here at the end of the year. Manufacturing in the United States is not complicated. I mean, its really about, you know, doing your job and really getting your operation set up properly. Working with the labor. Laborers in this country are looking for good paying jobs and the Manufacturing Sector has the highest paying jobs out there. So its just a matter of really getting the word out, kind of community communicating is a great profession. I think we lost that. Youre talking assembly, i assume. Yes. 85 of what we source is United States. Is it . 85 , again, it can work, but you got to work it. Youve got to put some effort into it. Work with your suppliers and you can make it work. Are school buses in this country new . It feels like theyre old and theyre in need of a refresh. I know you make a lot of these school buses. How much are you selling . The school buses right now we have about 42 market share. Its over 4,000 buses a year. We build the small ones, type as, which are very popular. Popular is growing in type as. School buses look similar to when we rode them. We probably need to innovate more and we are looking at that. Like what . Well, its interesting, everything is wifi and things like that today people are looking for something a little bit more modern and modern looking. So were looking at ways we can actually, you know, kind of get those types of Technology Aspects into their indoor products. Has Fire Suppression changed from a technology standpoint . Not a lot. Really . Not a lot. Again, i think if you look at the last eight, nine years there hasnt been a lot of ability to innovate. And because the industries have been down. But nows the time. Now is the time to really kind of lead with new ideas and new designs. What are you going to do with the capital you raise today . Well, if you noticed, weve kind of grown a portfolio through m a. Its been over a dozen mergers and acquisitions that weve done here in the last ten years. Just been a tenyear run. Were going to do more of that. Weve got a lot of really good organic growth because weve got a very good diverse large portfolio. Theres a lot more to do in specialty vehicles. We like where were at in specialty vehicles. Theres a lot more consolidation that needs to be done. We plan to do a lot more of that consolidation. You have a currency to deal with now too. We have a lot of currency. Not just cash. Were very pleased about that. Its good to have you, tim. Congratulations once again. Thank you. Thank you very much. Tim sullivan, watch revg, yes. Lets get to Courtney Reagan now for a cnbc news update at this half hour. Courtney. Good morning to you, sara. Heres whats happening at this hour. British Prime Minister theresa meleeing a wreath at arlington Memorial Ceremony this morning. Shes scheduled to meet with President Trump later today. It will be the president s first meeting with a foreign leader since taking office. Prosecutors in germany say they have sufficient evidence to indicate that former volkswagen Ceo Martin Winterkorn may have known his companys Emissions Cheating Software earlier than he claims. They say they have increased the number of suspects in their investigation from 21 to 37. Israeli police arriving at Prime Minister Benjamin Netanyahus residence to question him about corruption allegations. Netanyahu has repeatedly denied wrongdoing portraying the accusations as a witch hunt against him and his family by hostile media. Well, the Star Attraction at the pro bowl skills competition, the drone drop. Drones carrying footballs to dizzying heights before dropping them to waiting nfl wide receivers. The winner, Odell Beckham jr. Ezekiel elliott i understand was excited about his dodge ball team win. Thats our cnbc news update, david, back to you. Thanks, kourtney. When we cam bak dodge balls a great sport. New york times columnist jim stewart with us, why he says theres a budding bromance between President Trump and one tech ceo, what that means straight ahead. Is happening before our eyes. Shift in Human History 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. A republican controlled white house and congress should be bad news for environment tally focused companies and stocks, right . Well, then why is tesla up over 30 , that being the stock, since Donald Trumps election . Our next guest says its because of the bromance that seems to be budding between President Trump and elon musk. Joining us here at post nine Pulitzer Prize winning New York Times columnist jim stewart. Yeah, you think they like each other . Well, they seem to be getting along and who would have guessed . Elon musk didnt support trump. He was here on cnbc saying he was the wrong person for the job just a few days before the election. His whole agenda is green, hightech, all electric cars, antifossil fuel. I mean where is the Common Ground . And now suddenly he gets invited to trump tower. He gets invited to the white house. Hes on this special group of industry people that trump has put together to advise him. Hes talking to advisors. I mean, trump is listening, and they seem to have bonded. Yeah, well, i mean, a lot of manufacturing jobs in this country. Now, grant it his plants are extraordinarily automated, but still its domestic and they are producing cars only here and solar panels and things of that nature. Its fascinating to me when you really start to bore in here how much of the two agendas do overlap despite the superficial differences here. I mean, starting with jobs, they employ 25,000 people in the u. S. Right now. There are estimates it could be double that within a few years when they ramp up production in this big battery factory. That has a huge multiplier. In fact those are good jobs, high paying jobs. Even more impressive if you look at solar power generally the latest Energy Department figures they employ over 300,000 jobs in Energy Electricity production alone compared to coal which is only about 80,000. So when you look at jobs, green and environmentally friendly solar power has streaked way ahead of the old fossil fuel areas. So do you expect the president s discussion of clean energy to coal that ratio to change . Given those job numbers. Youre already hearing some changes. Again, i think investors in tesla and solar stocks have taken heart by the fact in these confirmation hearings like tillerson, you know, some of these other nominees have kind of softened their whole language about global warming. I mean, its like no ones calling it a hoax. And i think one of the analysts i talked to at morgan stanley, i think people have misunderstood. Its not a zero sum game. You dont have to be antienvironmental or antielectric power or antisolar to be pro fossil fuels. There is room for both of those in the current economy. I wonder to your point about the stock price going up. Investors do seem to be putting a premium on stocks whose ceos have had that photo op with President Trump. Look at the automakers, they were there, they had a powwow, even though bringing back manufacturing for autos is best for their business. I wonder how investors are weighing that pro and con with the new administration. The pipeline to trump seems to be a big business plus right now. And i think that has been a big factor in tesla. Of course, like all these things it could be wishful thinking. I mean, we still have to see what actually happens with how about the subsidies . Well, the subsidies are a big question. Are he and the Republican Congress going to just cut those subsidies . I think its worth bearing in mind the subsidies are going to die anyway. They are on a phase out schedule in a deal when they extended subsidies it was bipartisan Republican Democratic agreement. Theyre phasing them out anyway. So you can make a case like dont touch these right now because they have worked. They have gotten the Solar Industry on its feet and its very close to being selfsustaining without the subsidies. Musk says tesla doesnt really care, he doesnt need the subsidies. It will soon be at a level of production where subsidies go away anyhow. In some sense subsidies are a red herring. If they decide to slash and get rid for symbolism that would be a blow to solar. There many who believe the president s soninlaw, jared kushner, is his single most important advisor and if not the single most influential person in the white house. Any sense to the relationship between kushner and musk . Kushners younger brother is a venture capitalist, certainly there is at least some exposure there to technology and new tech and things of that nature. You know, i havent actually heard ive heard of other people in the administration that have reached out to musk and talked to him. I havent heard the kushner name in there, but i think it is consistent with his, you know, somewhat shall i say more youthful view of the world that is, i think, more willing to embrace some of these environmental concerns. Have wu heard anything from musk at all . Has he said anything so far about his relationship with the president . No. He didnt comment he wouldnt make a comment for my column. I thought it was interesting this week he did come out and endorse tillerson and said he thought he could be a great secretary of state. Now, thats, you know, theyre about as far apart, exxonmobil and fossil fuels, elon musk and tesla, that is a meeting of strange bedfellows, but i thought that was significant indication that, you know, theyre both finding ways to compromise to get along. In terms of automation, i mean, musk has talked about the lights out factory where you dont need lights because there are literally no people on the line. Theres no people there. That hasnt been addressed yet. No. But there are, you know, lets say, i dont think the tesla factory is going to be a huge its not going to be a huge employer of the Blue Collar Workers being displaced in appalachian. But he has raised the idea of upgrading the electric grid in this country, which we do need and that could be a huge project. That could actually employ a lot of displaced workers from other industries. I mean that is not all hightech stuff. Theres a lot of basic construction work that needs to be done on that. Infrastructure spending, perhaps another column in the future, jim. Yeah, i like to say Infrastructure Investment because you get a return on this. I want to keep reminding the deficit hawks this is an investment that yields a return. Right. Youve actually done that column already, i think, if i recall. Jim, as always, thank you. Sure. Jim stewart. Taking a look at stocks this hour. Dow within a very tight range down about nine points right now. Were back in just a minute. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. And the wolf huffed like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. 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The stock markets certainly been on a tear, but could bonds be better pick now . That case made at tradingnation. Cnbc. Com. More squawk on the street coming up its not just a car. Its your daily retreat. Go ahead, spoil yourself. The es and es hybrid. This is the pursuit of perfection. Dows down about eight points. Lets get to the cme group. Rick santelli with the santelli exchange. Happy friday, rick. Thank you, sara. Doug, thanks for taking time with me this week. Thanks for having me, rick. Lets have a philosophical trade discussion. Trades a big deal right now. Theres a group of people in this country that believes that you can have a Political Freedom of individuals in this country was built on versus a collectivism in a board like world run by tech removed from voters is a better way to go. Im not necessarily arguing that, im arguing that like milk doesnt cause addiction even though most addicts started out as babies drinking milk, does the notion of individualism and nationalism always lead to tyranny . I mean thats what i read, your thoughts. I think the notion of freedom is the foundation not just of our political system, its the foundation of our economic success. Economic freedom has characterized the United States since its founding. And the freedom to trade across state lines, you and i are voluntarily trading right now, freedom to trade allows me im an economist, allows me to actually get food and eat and survive. Those freedoms are everything in terms of economic success. Tradings the foundation. You know, listen, im not saying that the current president s going to do it right, but i think there is something here to discuss that having bilateral agreements, whether its with mexico or canada versus including everybody and have so many more voices isnt necessarily a bad thing, even though it might be a little messy in the beginning. Your thoughts. I think this is a really interesting question. You know when i listen to what the president says, he says for example, i want china to abide by its International Obligations and not cheat. Thats been something every administration has said for a long time. What hes saying is i have a different set of tactics to get us there. As far as im concerned, its an open question whether that will work. Go ahead and try, lets see what the results are. It hasnt worked the other way, so we need to try something new. Exactly. You know, i have this problem, it seems like all governments are in this all or none business. When it comes to regulations, big is better than less, doesnt matter about quality. And if you say less, its like, oh, no, its all or none, education, no choice, all or none. Immigration, all or none. When it comes to trade and nationalism, it becomes this all or none. Theres always a middle of the road here. On your final comment, what do you think this president should do to try to push back some of the notions that we cant have our individual freedoms and trade with foreign neighbors . Well, i will say this, rick, in economics the right answer is never zero or 100 . Its always in the middle somewhere. And as far as pursuing our ability to get good trade agreements, i think the president needs to negotiate, negotiate quickly, say for example with england. See what that looks like and have it be a model for what comes afterwards. That would be a good strategy. I agree. And take it further is a great oped about this in the wall street journal today, Angela Merkel and the European Union in brussels ought to pay close attention because i think that trump and may could make history and change the dynamic about the eurozone pressures on the uk. Thank you for taking the time today, doug. Really appreciate it. David, back to you. My your time. David, back to you. My pleasure, rick. Thank you very much, rick. Lets send it over to jon fortt, look at whats coming up on squawk alley. Jon . Well, david, weve got quite a show. Vmwares ceo is joining us on their earnings home run, the stock flirting with twoyear highs. Well dig into whats next for the enterprise. Also, weve got microsofts new evp of commercial. Going to talk cloud, going to talk global perspective. And oh, a couple of other little Companies Like intel and alphabet had earnings, too. What does it mean for investors . Were going to find out next on squawk alley. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Starbucks reporting earnings this morning, matching profit estimates, but that revenue side of the pie missed as samestore sales weighed on the stock today. The company partially blaming the success of mobile ordering thats created somewhat of a bottleneck in the stores. Heres how ceo Howard Schultz characterized it earlier on squawk on the street. We were significantly impacted by a good problem, a problem that we will solve, and that is the congestion and the runaway success at peak of mobile order and pay. And we didnt anticipate how successful mobile order and pay would be, and it has created a bottleneck for us, and that impacted comps and traffic during the quarter. Cramer called it a mosh pit at the counter of starbucks but says theyll recover because this is something they can fix. Hes still a full believer in the leadership of that man, who is going to be moving up to chairman soon. Yeah, something that makes investors still i think a little queasy, right . Taking a look also at shares of colgate, a mover on earnings under some sharp selling pressure, down almost 7 after Quarterly Sales fell more than expected. Thats despite the fact that the bottomline earnings matched street estimates and rival p g had a pretty good quarter. Stay with us here on squawk on the street. Dows down about 14 points. This car is traveling over 200 miles per hour. To win, every millisecond matters. Both on the track and thousands of miles away. 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Theyre getting a brandnew civic center faster and cheaper by outsourcing building and operations. Its going to pay the builder a rent, if you will, which is pretty much equal to what its paying to run the old city hall. This Publicprivate Partnership for p3 has no public tax incentives, but the president is suggesting those to spur more projects like this. Moodys, in fact, says the United States could become the number one market in the world. Pwc said there were nine deals worth billions of dollars which closed in the first three months of last year. Now, more on the way. Thez projects carry risk, but publicprivate Pension Funds are drawn to the slow, steady returns. Many of the projects are accelerated by in some cases a decade or more, one, because we are able to put the capital up front where the city would spend many years trying to figure out where they would get the funds. The great thing about this project also is we have a local hiring component, so were bringing in local veterans, local workers who also work on the building. So its pretty much a winwin all the way around. Reporter now, north of here at l. A. X. , theyre taking bids on private partners to modernize l. A. X. , much like they have done at laguardia. There is no city in america thats moving more aggressively on its infrastructure, and were funding our part. We want the private sector and the feds to be there along the way. So far its been very successful. Reporter well, there is a potential hitch. Los angeles is a sanctuary city. Long beach is in sort of a sanctuary grayed area, and well have to see if the president tries to withhold deals for projects in cities like that. Guys, im going to toss it back to you. But quickly, look over here. Its just fascinating watching how fast these guys work. They are pouring concrete here, and they have to do it in a specific way. Its sort of a choreography, because that stuff sets quickly, and youve got to make sure you have a path out when youre done. Back to you. All right, thank you for showing us. Great live shot, jane wells, as always, with a hard hat. The race is on for those companies to get in on Publicprivate Partnerships for infrastructure building. Just a quick look at the markets here before we let you go. The dows down about 24 points, broadly holding on to some of the recent gains. S p down 0. 2 . Miss on firstquarter gdp, which showed 1. 6 growth for all of 2016, worst its been in years. That could be having an impact here. That does it here for us on squawk on the street. Have a great weekend. Over to you, carl, for squawk alley. Same to you, sara. Thanks so much. Good morning. It is 8 00 a. M. At microsoft headquarters in redmond, washington, 11 00 a. M. On wall street, and squawk alley is live