Transcripts For CNBC Squawk On The Street 20170228

Registering 5. 8 . 2 1 2 year high. The road map begins with President Trump going to congress in his First Official address to the nation. Asking for billions in military spending along with cuts in other programs. Target tumbles after an earnings miss. The retailer sinking more than 13 in the premarket in what would be its biggest decline since it went public in 1972. Could it be lucky number 13 for the dow . The record run for markets continues. The president will address a joint session of congress tonight. The theme will be the renewal of the american spirit, focusing on Public Safety as well as Economic Issues like job training, health care and tax reform. The president expected to call for an increase in military spending by 54 billion. Large cuts in other programs. Heres what he told fox and friends about where that spending money will come from. I think the money is going to come from a revved up economy. I mean, you look at the numbers were doing, we were probably gdp of a little more than 1 . If i can get that up to 3 or maybe more, we have a whole different ball game. It is a whole different ball game. And thats what were looking to do. He goes on to talk about entitlements. In his words, if the economy sails, then im right, he says. In other words, he can afford to not touch them, though some in fact gop says he should. I think he would have a very good situation on his hands if he can get to 3 . Look, i think 3 is somewhat unrealist unrealistic. It would be fabulous if we got there. I do think that this is were in an old style bull market. Because there wasnt anyone who didnt think theyd be boosting the defense budget. They go up every day. I cant seen a mark like this since the 80s. People say, im buying the defense stocks. You say, well, thats smart. How is that possible . How is it possible that a president can be so targeted about wanting to spend more money on defense and the defense stocks go up every day . The answer is because i think in the end, he is going to get it done. I think he is going to get the additional money for defense. Right. But one of the larger questions, of course, will continue to be the debate about 3 plus gdp. So much is reliant on. Tax reform and how you score it under dynamic scoring, if you make the assumptions. And we know theres been a running debate for so many years, decades, about the power of tax cuts to really improve an economy and whether it is the case or really isnt as much as proponents of them would say. Dereg, perhaps, would have a bigger impact. Thank you. 3 , well see. We bring plenty of economists on. Some say, maybe we can get there. Others are adamant, it is not going to happen. It is very hard. I do think youre really helped and we dont talk enough about it if the rest of the world does better. The rest of the world is doing better. That may be the key, although no one ever wants to if youre in washington, you never want to say, look at brazil and india do better and itll help. But if brazil and india do better, it is going to help. Not to mention europe and everything else. Europe is strong. Yet, germany, they did this twoyear last night, this minus 0. 92 . Buffet is right, what are they doing . In terms of selling debt. There are reasons you have to buy their debt. It is state run. But i do think if you get europe is strong, asia is strong, what im seeing, youll get nice growth in our country. Does europe suffer if le pens poll numbers continue to improve and we end up with her in office in france . Great question. I think that whats weird is the british economy is so strong. I know we are waiting for that to pay and when that will be bad. Right now, it looks like nationalism in britain has been good for the economy. Thats a shortterm consideration. I dont want to think longer term because no one pulled out yet. Right. Thats going to happen. Theyre going to pull out. But do you disagree with me . Theyre going to pull out. Excuse me . Theyre going to pull out. Theyre going to keep a presence in the uk but theyll have to go elsewhere, as well. It is shocking that real estate is booming there. And still trying to figure out where the next Financial Capital is going to be. Germany, somewhere else. It is odd. Nobody really wants to leave because they like london, which is terrific. But i do think that europe yes, we have to watch the political, but nationalism has not hurt economies yet. Were waiting for it to hurt. Theoretically, all the classes we took in college say it is going to hurt. A couple weeks ago, greg called it a wet firecracker. Thought it was going to blow up in your hand. I like that. Dont put a hair dryer to it, and were okay. Does the president need to come out tonight and specifically back, once and for all, border adjustment, any of the things hes gone back and forth on, kept the market guessing . I think that there is a the consensus changes every day. Other than nonretailers, everyone says, you keep saying the border adjustment isnt going to happen, youre dead wrong. It is going to happen. But theyre domestic manufacturers. It is split. Carl, it is so split that its become a third rail to talk about. I think hell dodge it. I think hell say hell wash it. Friends say one thing. Friends saying another thing. Ill stick with my friends. Well, yeah, i like that. If youre target, youre hoping there is no border adjustment. Another 10 down. Add insult to injury, as they say. Insult to injury. Target is getting hammered. Retail giant earnings and sales miss. Disappointing holiday quarter. Revenue falls short. In a statement this morning, cornell says, our Fourth Quarter results reflect the rapidly changing Consumer Behavior which drove strong digital growth but unexpected softness in our stores. This is going to be the Third Quarter now with comps down. In this case, 1. 5 . They preannounced bad numbers. What i find most disconcerting is they cant get a handle on how quickly things are going away. It is almost as if, week to week, if you were target, youd be saying, no, it cant be. It cant be. How could it be . Digital, when they talk about 34 growth, theres a flip side to it, but i have to tell you, if youre target right now, heres what youre thinking. What the heck . You know, it is funny, when you read a line like that, rapidly changing Consumer Behavior whats that . Yesterday, john, taking over at service now, i said, whats the thing youve been thinking about . The rate of change and how it is continually increasing. Right. I think we see it in so many different areas, not just in pure tech but even here in terms of rapidly changing Consumer Behaviors, where theyre benefitting from the move to digital but not nearly as much as this company, this other company that does it. Yeah, thats why when i saw amazons news i dont know if you saw amazons news about the new strategy to download games. Holy cow. I mean, you like a game, youre watching another player play, which is something we dont talk about enough paubecause it is ag business, and then you download it. Who wins . Amazon gets a chunk. I think everything if youre in electronics, electronics is very weak at target. Food is very weak. They simply have not figured it out. The answer is, sometimes i mean, my late mom used to say this sometimes you cant figure it out because it cant be figured. You know, jim, when i look at best buy, which not many years ago, we were talking about, in uncertain terms. What they managed to do when it came to electronics, at least in putting the company under a much stronger footing. Go back two, three years. Remember where the stock was in the low teens. Have you been to one . I have, actually. Customer service there. I have. I know it is something you dont mention, but for those of us who buy for our kids or ourselves who are not tech savvy, it is remarkable. They walk you through everything and they have product specialists. Im not hyping best buy. But i wanted to buy a go pro. They walked me through everything. They really know their stuff, and thats where they changed. They said, we cant beat amazon on price. Although they do have good prices. What we can beat them on is knowledge. Actually helping people make a decision. It really helps. It does. I was in the market for a tv and it was helpful. I ended up buying it there. Right. Im not saying it is tiffany and all, but im saying they made a decision. Where is the value added . If you go to target for electronics, where is the value added . Where is the value added in food . I mean, monoehonestly, the valu added in slacks, my father sold slacks at gimabbgimbles. Not a lot of value added. Is the target going to change . No, somebody on twitter was saying, how can they pay the dividend . They can but, no. Look, target had this strategy of doing the small formats. Had the strategy of putting ones near college. Amazon had a strategy to destroy target. Amazon has look, warren buffet yesterday was saying, i dont want to be in walmart because of amazon. Wa walmart has unbelievable buying power. They had good numbers. People reset the bar every day. You need a Business Model like a costco, where you have a card or like a closeout model, where you can go with cash to all the Department Stores that are closing, jcpenney, and say, listen, ill give you cash if you can give me the stuff. Then you can undercut amazon. Theyre the only models that are working. You were a fan of Brian Cornells. Initially, yes. You liked the canadian, move he made there. He took control and closed canada, where they were losing fortunes. But remember the hacking . Yes, i do. I think everyone in the world underestimated how fast amazon could make it so you could order a pizza from dominos while youre playing a video game, or maybe on snap, more likely on instagram stories, a little nudge there, and decide that youre going to order from amazon. They bring it. The rite aid, i will not go across the street because im not going to get the toilet paper. They understand the power of same day or day after. I remember doing aamazon a coup one of the best youve done. They were talking about same day. I was like, come on, the power of that, once you cross the threshold, the consumer knows theyll have something later in the afternoon and or at least tomorrow. I saw amazon deliver same Day Breakfast to 14 wall street yesterday. Same Day Breakfast. Geez. Youd hope to get same Day Breakfast. Hes got a good point there. He did that documentary about amazon so he has the incite. Dont miss an exclusive interview with target Ceo Brian Cornell at 1 10 eastern time. When we come back, snap is getting ready to price at the exchange. Details on that. Also ahead, can overhauling the tax code get us to 3 . The former chairman of the president s council of economic advisers, ed lazear, will weigh in. Jim mentions dominos. Well get to the comps. A new street high target for apple. More when squawk on the street continues. Snap inc. Expecting some investors in its ipo to make a yearlong commitment not to sell their shares. The parent of snapchat is expecting to price its offering tomorrow and trade here on the nyc on thursday. In a filing yesterday, they expect 50 million shares of its class a to be subject to a oneyear lock up period. Jim, im trying to read why you look i think most holders will hold it as long as the snapchat lasts. It goes quick. Im aware of that. Why do my kids use snapchat . So i dont see it. I learned about that. The prices will last of course, youre not getting Voting Rights with the shares, not that that matters for people. Im sure warren buffet will take down 10 of that one. Not. I doubt it. The question is, how many will . We were talking about pricing wednesday night. Tomorrow night, thursday morning, itll be trading right here. It is just going to be i dont want to say. I mean, ive done a lot of work on it. It is not i will say that where im headed on it is it is not an ideal venue for advertisers but they have a lot of advertisers running off that you dont know that may not r p reup. It is a site for being silly. Im reading a note from somebody that is bullish. To them, it is global, scaleable, influential tool. It gets people when theyre young and connects them with advertisers in an effective way. Youre shaking your head. Costs are low. Employee base is light. Yes. Its got all that but i also think that its premature. I think youre going to get a runoff of advertisers because it is not a place where the advertisers are getting a big bang for the buck. Maybe they can do more things but thats the work im doing. It is going to be hot but be careful. Hyperengaged audience. It is more people who want to have fun. It is not people whats wrong with wanting to have fun . Thats what everybody wants to do. We are in a world where maybe escapism has a premium. Yes. I think that versus facebook, facebook is much better venue. Instagram stories, much better venue. Cant they both coexist . Yes, they can coexist. And grow and prosper . Okay. Im sceptical. Is there anything wrong with being sceptical about this deal . Not at all. It is not a great venue for advertisers. I think six months from now, youll say not now, not immediately, because the pricing will be hot im saying that i think in the end, it is afemoral, and i would advertise on a video game as i would on a snapchat. Okay . Im thinking back to the facebook ipo. You were not a fan. No. I wanted to come down. It came down. When i bought the stock. Owned it ever since. Something like that. Thank you. I dont want people to go crazy. But it is the possibility of another way to get younger people, definitely, but i just dont want to go crazy. I dont want people to get hurt. Im in a first, do no harm situation. Hippocratic oath on ipos. Im reading thoughts i have written down. Share it with the class . Im not ready to share it. Between now and friday morning, well be talking a lot of snaps. You have to give it up ive done a lot of work. Im doing a piece tonight about whether you should own snap. Working on it with people and im not as bullish as the people who are very caught up in it. How is that . Well need your level head in the next couple days, i think. Which is going to be on a lazy susan by the time this is done. Level and your head, talk about that too often. Well get cramers mad dash, count down to the opening bell. Take a look at the premarket as investors brace for the president s speech tonight. Not much range overnight. Back in a moment. 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. Why pause a spontaneous moment . Cialis for daily use treats ed and the urinary symptoms of bph. 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Yes, it is. Trying to figure that out. Price line youre the maestro. Which happens to be, by the way, the single best tequila, just for the record. Really . By far. Get this, no fewer than ten firms raised price targets. Some up to 2,100. Why . Because this was a beautiful quarter. A lot of people keep thinking travel is going to stop. This did well during zika, during ebola, during many incidents unfortunately involving terrorism. You know what, david, this is how people want to travel. The growth year is extraordinary. It was blowout. The number of listings, more than 30 growth. A lot felt airbnb would be hurt by these guys. No, no, no. Theres room for both. Remember you were doing a room for both story earlier . Yes. Theres room for these guys. There is. This company is changed the ceo, too. Brilliant. This is one of those calls, it is such a well orchestrated call. It is just everything it is a congratulations, gentlemen, call. I have to tell you that those who bet against this company, once again, had their head hammered. If i recall, europe is very important for them. More important than america. Right. This is the way i think, honestly, thats the problem with americans. They dont know this is how europeans like to travel. This is what they use. I know it because what im involved in. This is everything. I like expedia. But this is killing everybody. By the way, trip adviser is still being hurt because priceline is just it is game, set, match. This is a brilliant company. People dont realize because its shifted from u. S. To europe. Look where the revenues were six years ago, you would have said it is an american company. Now, predominantly europe and the europeans love it. Its the way they travel. Theyre frugal travelers, david. We are not. Im thankful for that. I dont like to travel frugally anymore. Those days are over. Have ywe have so many other to talk about. Valiant and perrigo. Do a report on that. Really . Yeah. Well revisit target, im sure, given the massive decline in the share price. A lot more. The opening bell, of course, a few minutes away. Across new york state, from long island to buffalo, from rochester to the hudson valley, from albany to utica, Creative Business incentives, infrastructure investment, university partnerships, and the lowest taxes in decades are creating a stronger economy and the right environment in new york state for business to thrive. Let us help grow your companys tomorrow today at esd. Ny. Gov 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 youre watching cnbc squawk on the street, live from the Financial Capital of the world. The opening bell in a couple of minutes. Busy day. Even busier night tonight as the president addresses the joint session of congress. Until then, got some macro data. Gdp for the Fourth Quarter revised, unchanged, at 1. 9 . Well get fed speak. Chicago pmi. Target. This fidelity news, cutting their retail fees by almost 40 . Theres a war going on to get retail. Geez, this is part and parcel with what we get, what i feel, is people want to own individual stocks and these guys all want market share. If you raise the rates, theyll make it up on the fed fund rate. This isnt as important as getting your balance. They want your credit balance. I think we need more hikes. Im with Rick Santelli exactly on this. Totally aligned. I think they have to happen now. Dont look at the treasuries. Their treasuries are signaling more about, as will frost has been saying, more about whats going on in europe than our country. To carls point, etrade and ameritrade both down, the stocks, on the fidelity fee cut. I think it is a lost leader at this point. Get the business in. Get the fed funds rate up and make some money. The back end doesnt happen. In the meantime, you get the strong end. The front end means lower numbers. The president expected to address the economy tonight. He tells fox news in this interview broadcast today, and im quoting, i think the money is going to come from a revved up economy. You look at the kind of numbers were doing, if we can get that up to 3 or maybe more meaning gdp we have a whole different ball game. It is a whole different ball game. We havent seen it. If we can get it, youll see it go up a lot, it could be terrific news. Im not fighting that. Dont fight that. That would be great news. The opening bell. S p at the bottom of your screen. Blackrock celebrating the launch of its global opportunity trust. At the nasdaq, focusing on orthopedic medicines, celebrating its 25th anniversary. Well keep our eye on target at the open. Moodys has a report out on the number of companies that it covers, jim, that are stressed. For a number this high, you have to go back to 2008 2009. Really . Thats very important. 14 . We have too many retailers, way too many restaurants. I mean, a company i follow, fiesta restaurant, who just use it as an example, frgi, they were trying to sell themselves. Play took themselves off the market. New ceo. I mean, theyre just the numbers of people who are going out versus staying in is remarkable. Thats why the dominos people said, how did dominos get those incredible numbers . People thought theyd be in double digit 10 and they do 12 . The answer is, again, people arent going out. Theyre ordering in. Theyre playing video games. Theyre on facebook. Give them some snap. Snap, that would help them, if they changed what they are going to be into more of a media company. Then you have the stock go up too much, comes down. But people arent going out. Look at the video game numbers from activision. Why didnt you go into the download video games on amazon . This is the stay at home economy. Dominos comps in 2014, 11, 2015, 11, 2016, almost 13 . Those are video game numbers. We ordered through facebook and i love the no cheese banana peppers. It is a tomato pie, not even fattening. You should get it. Dominos is a changed company, a Technology Company that sells a lot of pizza. Papa johns, by the way, they didnt deliver. You get the idea of the stay at home economy. Couple that with your pet utilization of pets. You dont want to leave your pets at home. Youre with the pets at home. Pets do things when youre not at home. I mean, if you stay away too long, you know what i mean . I wonder what the social impliatiications of that are any it is happening. Why is everybody staying home . Who wants to go out . Let them bring it in. It comes immediately. Who wants to go out . Nobody wants to go out . Well, you have your tv, video games, netflix. Reed hastings is right there. Netflix and chill. Look, this is actually happening. I talk about it every night on mad money. It is just happening. Target doesnt fit. Target does not fit. They have an online, but all that happens is you go there and order the cheapest. You dont buy the food there, dont buy the slacks, the electronics. You dont shop so you dont know. Not really. U. S. Concrete had a good number, by the way. I dont know. Im just saying that the world is a changed place. Target was a place that was look, we used to go to target because it was entertaining. Yes. It is not entertaining. Yeah. It is not. You dont go there and, like, have a great time anymore. What . What are you looking at all the time . I dont believe it at all. It is completely wrong. Thats totally wrong. I agree. Totally wrong. You want to share it . No, im not going to share it. Okay. Some research to get to, guys. Cohen on steel today. They take their target on x to 60. This was the stock doubled since election day already. People just know this is a the ultimate trump train. Very funny because it was actually obama put through remember him . Obama put through a lot of tariffs to be able to make it so you couldnt dump. We had unbelievable we had dan on squawk. Why should we lose all our jobs to people in china, dumping steel there because they could do it, or korea . U. S. Steel makes a lot of oil country, too, and mexico can undercut us in that. I dont know. Can they . They did. But now they cant because the president took action. So watch the materials. On infrastructure, boeing, another alltime high. They do a lot of defense. U. S. Steel isnt going to get the wall contract but they blew away the numbers. Northeastern one. Theyre going to get the wall contract because they have the texas business. Right. Martin marietta materials, making sure. Not the defense guy, yes. But this is mlm. The stock is coming in big, great presentation, up 20 points now from when the president was elected. Did they give an estimate on what the wall actually costs . They said it is not in the numbers. All that is in the numbers is current highway build. If they get that would be a windfall if they do an infrastructure build. If you get the wall, it is going to go to them. Theyve got the concrete. Theyve got the cement. Id like that story. The stock should be higher. They dropped the materials, by the way. You cant have if mexico is going to pay for the wall, maybe theyd choose the the wrong vendors. I dont think theyre going to pay for the wall. Really . Some people think mexico is the wall. Again, some people think more people are coming the other way right now. Talk about the wall, a hot button issue. I dont care about the hot button issue as much as i say Martin Marietta is a good stock here. They have a giant buyback. And they own texas. North carolina coming back, South Carolina coming back. Great business in colorado. I think you should look at that story. Okay. Ill look into it. Priceline is worth a look today. Such a monster. People cant i mean, it is almost unbelievable. You say the stock was 50 in 08. 1,700. Thats when the model switched to european, frugal travelers. Over there, thats what they use. I use expedia. Do you like expedia . Every time i look at it he never uses anything. Do you use anything . I use some things. Like a toothbrush and deodorant. Every day, im happy to say. I sit next to you so i dont want you disturbed by my hygiene. People go to the sites. Hotel bookings, future hotel bookings, huge. Future value is over 80 billion. This is a behemoth. Europe is important, as you said earlier. Things are happening. This is another internet disrupter, is what im saying. It is an internet disrupter that people dont use here as much as they do in europe. It is a juggernaut. The quarter was fantastic and the Conference Call was better. I got home last night, poured myself a drink, and read the priceline quarter. Thats heaven. Thats heaven for you, isnt it . The workday quarter wasnt as bad as the stock indicates. Lets talk about it. I watched some of yesterdays show. The stock ran up. I heard them talking about getting some customers back after oracle loses them after buying it. They have been winning head to head against oracle and sap. They didnt give you the operating cash flow number you wanted. I am confident that, you know, it is a good stock to own. Were dealing with stocks like service now and workday, they are expensive. Workday moved up very big after the quarter. Look at splunk. Expensive stock. It went down and came back up. I dont want to lose faith in workday. Theyre doing a great job. Oracle has been a good stock of late. A lot of winners. There are so many companies. Interesting point. He has his building coming up. If you go to san francisco, two cranes on the building, the largest building in san francisco. Thats not always a good sign, new headquarter buildings. No . No. Not . No. Okay. I dont have the definitive research on it but this is not naming all right. Stadiums. I remember, like, when diller finished the building on the Far West Side have you seen the stock . Its great. But right after, it wasnt good. The stock has been red hot. Apples new headquarters. Keep an eye out when it opens. I dont buy the, like, Sports Illustrated gigs that you have a building, it is big. There is more to it. Target is the worst performer on the s p. Dow is down about 21. Dragged down by walmart. Lets get to bob. Overall group, 21 declining to advancing stocks. Thats an issue though the dow is 22 down. Lets look at the major sectors. Tenyear yields down, meaning bank stocks are on the downside. Materials on the even side. Energy, flat. Industrials doing a little. The railroads have been strong. Deutsche bank got positive comments this morning. For mr. Trumps speech tonight, they want more specifics on taxes and infrastructure. Theyre probably not going to get it. The consensus is it is going to reiterate the taxes, infrastructure, health care. Not specifics. Most traders are shifting the narrative. The belief that it is important to see what congress is doing more than what the president is doing. That is a change in sentiment the last few days. I dont see weakness in the broad stock market. Yields are a little lower the last few weeks but even the bank stocks are not that weak on that news. Last day of the month, the s p up 4 . Great month overall. This is traditionally a weak month. I dont see broad weakness. Oil and gas had a problem. We talked about exxon. They dont believe the prices will go to the 60s. Thats not a problem with trump but where they thought the fundamentals on oil would be. Retail, banks, semis, theyre holding up fairly well despite the weakness today in the retailers. On brokerage, we talked about etrade, Td Ameritrade, charles schwab. Fidelity cut price, down 5 . We saw cuts in commissions earlier in february from charles schwab. Stocks dropped on that in early february. Now theyre down again today here. If you look whats been going on here, heres where the condition costs are. Fidelity is 4. 95 from 7. 95. Race to the bottom, lets call it. It is not just on commission fees. Just costs for mutual funds and etfs have been dropping. Vanguard charges five bases points. Theyre talking about a 50 cents difference. It gets headlines. There is a race to the bottom. Of course, the consumer is the winner. Heres whats going on with the brokerage firms. Theyre going, essentially, a lost leader on these things. Theyll make money by capturing scale. Theyre going to get more money under management and it lowers the cost. Sell more services, cash management, margin lending, Debt Management services and higher Interest Rates. Remember, Companies Like schwab have a bank. Higher rates means more money for them. Theyre hoping to make money in other ways than commission fees. Lets talk about the retailers. You see, of course, target is down dramatically, kohls and macys. Lets sum this up with target. It is shocking, 25 . They lowered their full year guidance below the consensus, the current consensus, 5. 32. They lowered it. It is down to 4 in the midpoint. The consumer on the Conference Call, talking about the consumer moving online a lot faster than they thought. There was talk about accelerating a smaller store format. It is not going to be clear if itll make the difference. This is the most important question, how do you compete with amazon without the ancillary benefit . You hear about people going on radio saying, i use amazon because it is convenient. How do you compete against that . If they can answer that question, theyll figure out a way to up the reduced earnings numbers. Back to you. You see it there. Brian cornell coming on this afternoon. 1 00. Bob, thank you. Want to talk perrigo and valeant this morning. As promised, after jim did the mad cash, perrigo shares down 10 and getting pummelled. We wanted to call this papa dont preach. I dont know if were going to. Interesting morning for joe papa. He ran perrigo many years successfully and defended against that bid for the company that was 75. Theres the stock at 75. 2. 3 shares of myelin. It was worth over 2 200. Turned down by shareholders in part because of the targets that perrigo put out in terms of saying that myelins offer was undervaluing the company. He moved on. He run s valeant. But for perrigo, the Company Comes out with numbers. And also unaudited valucalendarr financial results. None of it looks good. They separately sell the royalty stream. Remember the drug for ms . They get 18 up to a certain amount. Between 2. 2 and 2. 85 billion in proceeds from the sale. That had been pushed by the actives investors at star bird, 6. 7 of the company, remember. That had been one of the things they were pushing per dprigo to. It comes back to expectations. Look, the end of 15, they were talking about 16 numbers being between 9. 50 and 9. 80 a share. Q4 2016, in terms of 2017 numbers, expects 6. 30 to 6. 65. Includes the money they get from the royalty stream which is going away. Lets take it down by a decent amount. Repay debts so the interests come down. Maybe earnings of 5. When you take it out. It is not looking good for perrigo. You have to remember, myelin wanted to pay 75 a share and 2. 3 shares of myelin for that company. Papa successfully defended it and moved on to valeant. Valeant this morning also not particularly strong. Take a look at some of the numbers there in terms of revenues. They were down 13 . Eps also down dramatically. Most importantly, when youre valeant investor, you want to look at adjusted because thats where so much of the story is. When you look, this is a company that was doing about 5. 3 billion in adjustment in 2015. Now pointing to 3. 6, lets call it. Mid range. 3. 5 to 3. 7 billion for 2017. Put a multiple on that. Remember, theres 29 plus billion in debt. Theyve been trying to sell more assets. Assume it is 29 billion in debt. 3. 6 billion in adjust, multiple, over eight times just on the debt. Enterprise value is more, of course. Although the market cap is now only 5 billion. There are people who wonder whether the equity will be worth anything, given the Sales Numbers are running in the wrong direction. The cash flow is down. Impact of foreign currency. Apparently had trouble with the egyptian pound. You saw that . I did. Even boush and lombe, sales down. Very bad. 8. 92 versus 1. 02 billion. When i look at the how much the borrowing, 449 million from higher borrowing played a big role, i agree, it is very, very ill advised situation right now. Yeah. Well be watching. The perrigo was terrible. There are two papas. Papa johns, the big loser in the war against dominos. And joe papa. This is not papas day. No. Okay . No. This is not your papas market. Im all over this. The papas. Papa was a rolling stone. Papa dont preach. We went through all the papas. Lets head to the bond pits for our big papa, Rick Santelli at the cme group in chicago. Take it away. While you were giving us all the good information, we did see the february read on chicago pmi. 57. 4. That happens to be the best level since january of 2015. Lets round it out, call it two years. Of course, theres going to be a lot of strength in the rest of the day today. I expect Consumer Confidence for february to be rocking and rolling, as well. Lets go to the charts, shall we . Lets look at three charts of tens. One day, looks like were going nowhere fast. Thats virtually the truth. Kind of in a range. The lower end of the 2017 range. If you look at a twoday, looks like the market is improving and it is a bit. If you look at a oneyeek, lo k looks, like the market is deteriorating. Theres always multiple answers sometimes in the market. Tens minus twos, yield curve trade is flattening. Many would say it is because the market is thinking the fed is actually going to deliver on what is needed tightening, so the short maturities are stubbornly high. Thats one answer. The next chart, narrowly avoided triple digit minus close at minus 100. Not close. Now it is about ten basis points higher, only minus 90 basis points now. Well, that brings in some buyers. Would you rather have negative yielding investments in japan or europe or ours . I know thats overs simplicatio but simplification. Finally, with the negative rates in europe, youd think the euro would be toast. Here, the chart shows it firmly in the middle of the range. Jim, carl, david, back to you. Rick, good stuff. As we go to break, look at shares of target. Crunched after the sales and earnings miss. Dont miss an exclusive today with Brian Cornell, ceo, 1 10 eastern time. Dow is down 17. More squawk on the street continues after a break. Uh, yeah. Its over, larry. What is . The whole wheelie thing. What do you mean . I just got this baby to get around the plant floor. Right, but now Ge Technology monitors every machine. Yeah, it brings massive amounts of information right to you. So you dont need that. Well, it makes me look young and uh. With it. Time to move on. Oh ill move on. Right into the future. Backwards. Youre going backwards. The futures all around us not just on your little tablet, my friend. Know you have a dedicated advisor and team who understand where you come from know you can craft an Investment Plan as strong as your values know that together, you can establish a meaningful legacy with the guidance and support of your dedicated pnc wealth management® team. Some widespread weakness in retail. The dow down 18 points. Well get stop trading with jim in a moment. Only at t offers you all your live channels and dvr on your devices. Datafree. Entertainment. Your way. Only from at t. 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 stop trading with jim. You know what, csx is defiing gravity and Deutsche Bank says, look, it is worth 56. What i find amazing is there was a guy who ran csx for years. None of the analysts said he was bad. They loved him, thought he was getting the operation ratio down, doing a good job. He leaves and it is worth far more . I dont know. I think csx, and i like the rails very much, but at a certain point, its still a railroad. Yeah. Up 100 . It is a railroad. You dont get railroads railroads do not become service now. They dont suddenly sell at eight times the revenue. Id be careful. Enough may be enough. Burlingtons letter over the weekend, said the longterm freight trends. Boy, is he burlington turned itself around. It was impressive. Whats tonight . Sales force is in a group that was not challenged until today. Well find out. You may have seen, sofi, interesting student debt loans. Student debt loan, by the way, we dont talk about that enough. Talk about something thats really hobbling our country and you cant get out of it. Student debt loan is amazing. Wow. My daughter goes to the oregon system, where they dont charge an arm and a leg. I dont think this market is nearly as bad as valeant and target would indicate. Well see you tonight. Thanks. 6 00 p. M. Back, ahead of the president s address tonight, former minnesota governor tim pawlenty will join us. Dow is down 20. Is it because so many go after it the same way . Chasing after short te returns. Instead if getting caught up with the crowd, the vestment managers at pm take a long term view, teaming specialized active iesting 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 good tuesday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sarah eisen and david faber at the new york stock exchange. The president s address to congress tonight, were watching all the moves in between now and then. Got a lot of macro drata to watch. Road map for the hour begins with trumps talk. The president is set to address a joint session of congress tonight. The former chairman of the president s economic chairman of advisers will join us later to tell us what to expect. Target reporting results that missed on revenues, sales and same store growth. Well bring you the latest from the retailer as they brace for a potential border tax. Finally, the trump rally continues. Sort of. The dow had only three down days this month as it looks for its 13th consecutive record close. Maybe well get et today. Market experts will explain the surge and whether it can continue. Lets get Conference Board from rick. Yeah, heres a big twofer. Lets start with Richmond Fed Manufacturing index for the month of february. Comes in at 17, the best level since christmas of 2010. For the big number, 114. 8. 114. 8 for the Conference Boards Consumer Confidence for the month of february. This is the best read going all the way back to july of 2001. Last month was the best, even though it was revised, since august of 2001. So we continue to go back, way back, in the way back machine, for some of these really lofty comps. Of course, the fed doesnt take any of this into consideration regarding policy. David, back to you. All right. Thank you, Rick Santelli. President trump is set to address a joint session of congress this evening. A lot to watch on obamacare, tax reform, among other issues. Eamon javers is at the white house. Obamacare, some questions about whether the president is going to come down in terms of his decision about how to approach the idea of repeal and replace. Also, on tax reform, the markets going to be looking on specifics for when the president will roll out his plan and what it will look like. Specifically whether itll have the border adjustmeability tax. The budget, we saw it yesterday, headline numbers but a wholistic approach to the budget is what folks around town want answers to. A Senior Administration official at the white house last night briefing reporters gave a couple of indications of what to expect tonight. Including the theme tonight is the renewal of the american spirit. Were looking for an optimistic address tonight from this white house. And the president could cite jobs created at ford, gm, boeing and other companies as a result of his leadership so far. It is definitely going to include some surprises, were told, and the president was still working on this speech last night. I can tell you, talking to a white house official here in the building today, one of the things that we are told is that the speech will include take aways from his meetings with the ceo round tables hes had over the past month or so. This official telling me not necessarily guaranteed that make the speech but some ideas the president has been talking about include the idea of Harley Davidson being a successful model for manufacturing in the United States. Some ideas on Infrastructure Spending that the president has gotten from those ceo meetings. And also pharmaceutical innovation from Drug Companies is another point that the president has been talking about publicly. Watch for that idea, also, to be dropped into this speech earlier tonight. A whole lot of questions about what the president is going to say but we know when hell say it. 9 00 tonight in the capitol. So many sectors and individual stocks to watch out of this tomorrow. Thank you. You bet. Lets talk more about what to preside to expect from the president s speech. Were joined by American Action foreign president. Welcome. Doug, im glad to have you here because were really starting to hear about the president s budget priorities. The 54 billion increase in military spending. Not to mention the infrastructure package, reform of the Health Care Plan. Whats going to happen to the deficit in this presidency . Well, i think thats an open question. What we heard is hell put out a mini budget but it may not include what he is going to do on health care. Those are big omissions. We wont see the full package until may. Congress may have already moved. Theyre planning for budget resolutions in late march, early april. Im not sure we know, to be honest. What im looking for tonight is less detail on Obamacare Repeal and replace, tax reform, and some sense of what are his priorities . Tax reform, repeal and replace, infrastructure, border security, trade, raising military spending, funding the government are all equal priorities. At some point, they have to pick what goes to the front of the line. Im interested to see what that is. Terry, didnt we learn a little bit about what the president thinks there . He has to do obamacare first because they have to figure out how much it is going to cost to repeal and replace. Then work on tax reform. What do you make of what were going to hear in terms of priorities tonight . Well, i think what youre going to hear is twofold. Lets remember first that, i mean, the speech may be to congress but, of course, it is to the american people. This will be the first time that trump says, look, i understand what ive been hired to do. Ive been hired to jump start the economy, fix the health care system, improve national security. Youre going to get that. Thats consistent what was reported earlier, the renewal of the american spirit. What we thought all along is if investors are looking, as they seem to have been, for an expression of resolve, desire to get those things done, theyll be satisfied with the speech. But as everyone knows, and as doug just pointed out, the specifics on and the points on a lot of this stuff arent going to come for a couple weeks, whether it be the budget, specifics on tax reform, whether it be specifics on the aca. Doug, the president , i think this morning, made a reference to 3 or more gdp growth as sort of a way to, my words, bail out any deficit additions that would occur as a result of this increased spending on defense and other areas. Is that something you buy . I mean, a lot of people, economists, would say, listen, over time, gdp growth simply the sum of employment growth and productivity growth and not about tax cuts. Yeah. I think the important thing to remember is that he inherited a budget situation that is simply unsustainable. Left on auto pilot, the federal budget goes to trillion dollar deficits inside of eight years. Two terms for President Trump. Thats something thats simply not going to be fixed by faster Economic Growth. If you take policy decisions, big tax cuts, big increases in spending that make that worse, it is less likely growth will bail you out. I think growth is imperative. I think it is important the president is focusing on it. The economy weve seen for the past six years has been unacceptable. But it is not going to solve the tough choices they have to make on the budget. On taxes, terry, wonder if you can do the math to get to what the president wants on tax reform. Cuts for the middle class, cuts for business, without doing a border adjustment tax, and whether well learn how the president actually feels about that tonight. Well, i think that youre not going to learn specifics on that tonight, frankly. As i say, itll come in a couple of weeks. But i think what you will learn is his resolve to actually get that done as quickly as possible. Both he and congressionals know that from today, they have a year, year and a half to make that happen, at the absolute outside, and itll be a 2017 item. We think it is quite likely. In terms of doing this without increasing the deficit, our base case remains that there will probably end up being some deficit increase. We think an increase of 1 in the structural deficit. 1 of gdp. Terry . Yes . Lets go to the house and listen to gop leaders raising the curtain on the president s appearance tonight. So the democrats made it very clear with us that they dont have any interest in repealing obamacare. The democrats want to go down with the sinking ship. Obamacare is a collapsing law. The law is not viable or sustainable. The insurers are pulling out left and right. The system is collapsing. The deductibles are skyrocketing, premiums are skyrocketing and people are left with little or no choices in instances. We have an obligation to step in front of this collapse and replace it with a better system. Thats what we are about doing. Our whole purpose is to improve access to Affordable Health Care Coverage regardless of whether you have a preexisting condition or not. That is what we ran on last year. Thats what were working on this year. That is our objective. Is to give people more choices. To give people access to more Affordable Health care choices, not less Affordable Health care choices or no choices at all, which is the case with obamacare. Allen . [ inaudible question ]. Look, i think youre going to have a lot of churning on a legislative product. This is a plan were working on together. The house, senate and white house. There are not rivals here. Were working with the administration. We started this process not a few months ago. We started the process over a year ago. House republicans assembled a Health Care Task force, with all the committees of jurisdiction. Any House Republican who wanted to participate in that. Out of that came a consensus plan we all ran on together. It looked a lot like the price plan. The price plan was considered the conservative Gold Standard at the time last year. Many conservatives cosponsored the plan. That plan looks a lot like what were working on right now. You have to remember when it comes to tax credits, people who do not get Health Insurance from their job are discriminated against right now in the tax code. Ill say it again. The current tax code discriminates against people who dont get health care at work. We want to end the discrimination in the tax code against people who dont get Health Care People at work and equ equalize the treatment of health care. So everybody, regardless of whether you get health care at work or dont, have an opportunity to get a Health Care Plan that is affordable for you. That is what weve always been working on. Thats the plan weve always been looking at. That is what were working on with the administration. I feel at the end of the day, when we get everything done and right, were going to be unified on this. Are you 100 confident there are no contacts at all between the Trump Campaign and russian officials during the president ial election . Look, we have an ongoing investigation. Im not going to get ahead of the investigation. We have seen no evidence so far based upon the investigations that have already been conducted. Remember, there was an Intelligence Community investigation last year. The House Republicans have been doing an investigation for quite a while or russia itself through the intelligence committee. We have a bipartisan investigation through the house intelligence committee. I think last night, they finished the oversight plan to go forward. Im not going to get ahead of the investigation occurring right now. Just so you know, this has been investigated. Weve been investigating it, and were going to continue to investigate, just to make sure no stone is unturned. Mr. Speaker, entitlement reform, are you giving up the dream . I never give up a dream, casey. Im a green bay packer fan. By the way, two entitlements are being reformed with repealing and replacing obamacare. Two entitlements there were reforming just this spring. So we are well on our way to reforming entitlements by repealing and replacing obamacare. It is a good start. Thank you very much. Appreciate it. Speaker ryan addressing, interestingly, tying entitlement reform to obamacare, which helps, for now, avoid a discussion about whether or not he and the president are on a collision course regarding that. The president , of course, says if the economy sails, in his words, it allows him an out of sorts, out of eentitlement reform. The argument from the House Speaker is it addresses medicare and medicaid and dealing with the pryioritiepriorities. Something he squarely focused on as House Speaker. Says hes been working on it for a year and played down the concerns they dont have this replacement option on the table. With us still, think we have our guests. Doug from the American Action forum. And terry hanes, the head of political analysis. Doug, youve written about this extensively. Does it sound like the republicans are making progress when it comes to that repeal part excuse me replace part of the repeal and replacement of obamacare, and i wonder about this idea that republicans, fiscal hawks longtime wanted entitlement reform, including the House Speaker, and President Trump says, were not looking to reform entitlements. I think speaker ryan is correct about two things. Repeal and replace of the Affordable Care act is the largest entitlement reform ever taken. Republicans are close in the house, i think. They have had about eight replacement plans under consideration over the past couple of years. All have contained very common elements. He mentioned the price plan. Theres the better way plan. Theyre closing in on that. I fully expect that were going to see that bill go forward in the next couple of weeks and certainly be out of the house by the easter recess. So i think thats a big lift for them and quite an accomplishment. It will include reforms to the medicaid program, and thats one of the big three. Medicaid, medicare and social security, that are pressing the federal deficit ever higher. I think for something thats two months into the Trump Administration, it is quite a success. Reasonable answer from the House Speaker. Doug, thank you for your comment on that news. And terry, our thanks to you, as well. When when he come back, back to target. Disappointing results. Sales declining for the sixth consecutive quarter. Well dive into their troubles. Stocks down double digits. Later on, the former chairman of the president s council for advisers, ed lazear. Dow is down two points. Back in a moment. Fees . What did you have in mind . I dont know. 6. 95 per trade . Uhhh and i was wondering if your brokerage offers some sort of guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 6. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Companies across the state are york sgrowing the economy,otion. With the help of the lowest taxes in decades, a talented workforce, and worldclass innovations. Like in plattsburgh, where the most advanced transportation is already en route. And in corning, where the future is materializing. Let us help grow your companys tomorrow today at esd. Ny. Gov target is the worst performing stock in the s p this morning with results that missed estimates on the top and the bottom line. Kourtney reagan has more ahead of her interview with Brian Cornell later today. Good morning to you, carl. Thats right, target executives at the Financial Community meeting wrapping up their prepared remarks and taking questions from analysts. They have a lot to answer to after todays disappointing Earnings Report and guidance that sent the shares tumbling 13 . Among some of the new strategy announcements we have heard, target is going to take a 1 billion investment in operating more gin margin to lower prices and invest in ecommerce. It is not Closing Stores but opening 100 Small Format Stores and remodeling 600 of its existing stores over the next several years. There will be 12 new brands, and that should be worth about 10 billion in sales, according to targ e target. Itll spend 2 billion in Capital Investments as planned, this year. 7 billion over the next three years. Targets coo, mulligan, said frankly, we have too much inventory and we are too slow. Ceo Brian Cornell started off the presentations by saying, were dealing with a consumer that is more interested in experiencing than owning. Thats certainly troublesome for a retailer thats built its business on selling physical goods. Target said that the investments and changes it is making are going to be multiyear, multiphase. As a result, it wont provide guidance past 2017 as in the past. This morning, the full year 2017 guidance fell short of analysts expectations and targets own projections. The holiday sales fell short of expectations and comps down 1. 5 . If you take a look at targets comparable sales trends, this is online and in store combined, compared to the same metric for walmart u. S. , you will see a divergence. That is troublesome, especially to the analysts that cover both and see a consumer that may be shopping at one over the other in this case right now. Yes, targets online sales grew 34 , but the retailer also said that was worth only 3. 4 billion last year. Thats under 5 of total sales. We have a lot to ask Ceo Brian Cornell when we sit down with him exclus i haively at 1 00 p. Power lunch. Thank you. Walmart, the biggest loser in the dow right now. A lot of the retailers down in sympathy. Looking at the broader market, looks like were in the red barely on the last trading day of the month. It has been a strong month for stocks trying to rally back after historic 12day run. A gain today will be the dows 13th Straight Record close. Something it hasnt done since back in 1987. Joining us now is Jeff Rosenberg, chief income strategist and blackrock, and the strategist from jpmorgan. David, a set up for the president s speech today before two sessions of congress. Yes. So what does the market need to take it higher . What does it need to hear from the president . Zo y do you look at tonight as a buying or selling opportunity . In general, were focusing in on the economic signals and block out the political noise. Well be watching tonight. Were interested in what President Trump has to say and viewing it as an opportunity to get a little bit more clarity as to the time line of the policies. We know whats on the trump agenda, or think we have a good idea of whats on the trump agenda. We need to put more stakes in the ground. What they did, saying we want a tax reform bill by the Time Congress takes its recess in august, thats a stake in the ground. The more points we have ahead of us, the better received by the market. Ive heard two arguments. One, the market needs details and specifics. There is another school of thought, which is the hope out there, of these big, progrowth policies without the details, keeps the hope alive and could keep the rally going. Which is it . Keeping the hope alive is a big part of it. I dont think the market necessarily needs to see kind of heres our exact time line of the way things are going to happen but they want to know the policies are still being discussed and theyre still on the table. To me, one of the things thats been supporting this market as of late is investors are still fearful of missing out on additional upside. Dynamic, markets have support. It is when the sentiment shifts and they become concerned about losing money i think well see markets come under pressure. Maintaining the optimism is key. How do you view the resilien resilience, from your context, in what weve seen in the bond market and the dollar, not keeping up with the enthusiastienthusiasm we saw after the election. There is a disconnect between what youre seeing in the equity markets for the trump rally versus what youre seeing for the dollar and Interest Rate markets. When investors are looking at the macro factors, there is more going on that is driving the markets than just tonights speech. In particular, that we have going on in europe right now, Interest Rates, weve had a big rally in the bund, the german Interest Rate on some of the concerns around french elections. Later this week, the bond markets are going to be focused on what yellen has to say and the expectations around march. For tonight, we wouldnt expect a huge amount of details. I think what matters is the tone. What david just said in terms of, you know, trying to keep up the momentum around expectations for successful fiscal policy reform is going to be the overall take away. I think if youre looking for specific details, youre not going to get much. But anything around revenue neutrality, anything around border tax adjustments, those are going to be important. As important as your cut away to paul ryan a few minutes ago is really the timing and the timelines around the Health Care Reform. Because the Health Care Reform debate has really slowed down the process of fundamental tax reform. The slower that fundamental tax reform gets, the lower the likelihood of it actually happening. So i think the comments around the health care piece will also be very important. We talked for a long time the past few years about retail money. Where was it . Why was there no interest in the most hated bullish rally . Now we have fidelity cutting rates on trade. 5 to trade. Yup. Obviously, 13 record highs in a row is making news. Yes. Are we in that period now, where the American Public rediscover stocks and are they the marginal buyer . I think were getting close to that juncture. Im not sure we can necessarily put a finger on exactly when the retail money is going to come back in. Look, some of the retail money isnt going to come back in. People who were 55 to 60 during the financial crisis probably arent going to get reinvested in equities. I think when you hear more progrowth policies out of washington, when you hear people talk about Corporate Tax reform, and on the side, you see Companies Generating earnings again on their own, i think that paints a pretty optimistic picture. If we see a little wage growth this year, perhaps that gives people more confidence and allows them to deploy the capital. The stars may be aligning for the retail investor. Jeff, finally, you mentioned tax reform, of course, and the calendar in terms of dealing with obamacare. First, how much do you think a prix y premium is in the market and we get meaningful tax reform or at least a lower rate . I think the market is heavily discounting it. As you saw the outlook for the dollar, as you saw the increase in Interest Rates at the beginning of the year, people took their probabilities down of significant fiscal policy reform, significant tax reform. There is a realization that fundamental tax reform is hard to do, which raises the upside for both the market, Interest Rates, for the dollar. The probabilities are low right now, i think, in the market. That also sets up tonights speech. If it comes off positive, momentum shift, you may see a Market Reaction as people pull up the probabilities which have been pushed down. David, want to talk about the banks. Theyve been one of the biggest beneficiaries since the election. Up 20 , 25 . Yes. What do you need to hear here, especially with the bond selloff petering out, so you dont have the steeper yield curve support anymore . I think the Financial Investors are going to be focused on the prospect of deregulation. We think there is a fundamental argument for owning financials right now and that is rates are going to creep higher over the next 12 months and it should support net income margins at institutions. I think the other information we need is were at least moving away from this highly regulatory environment. Not necessarily to where we were precrisis, but into a space that allows banks to have a bit more flexibility. All the things we talk about every single day. Exactly. Listen for them tonight. Thank you for helping us preview that. David from jpmorgan and Jeff Rosenberg from blackrock. Snapchat expected to go public at the nyc this week. Will investors believe in the platform, its Media Partners and that man, of course, the founder and ceo . Were going to have more after the break. Hey gary, whatd you got here . This bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Ly at Td Ameritrade so what else is new . Humm. Shes doing good. She needs more care though. She wants to stay in her house. I dont know even where to start with that. First, lets take a look at your Financial Plan and see what we can do. Ok, so weve got. Well listen. Well talk. Well plan. Baird. Integrity and the ability. We take you to the white house. The Vice President swearing in wilber ross for commerce. Joined by his wife today, hila hilary. You can give her a round of applause. [ applause ] we appreciate the commitment of Public Service as a commitment of families. And we are grateful to both of you for your dedication to the United States today. Also, pleased to be joined by many friends and associates, as well as the future deputy secretary of commerce, todd ricketts. Thank you, all, for being here today. President trump used to say on the campaign trail he had a threepart agenda for the American Economy. Jobs, jobs and jobs. And with wilber ross as our new secretary of commerce, the president and i are confident that the department of commerce is going to take its right and leading role in fostering the growth that will create good paying jobs for every american. And wilbur, youre well suited for this task. You established yourself as a leading american businessman in a career that spans over 40 years. Incredible number of fields and industries. You understand the American Economy because you participated in so many different parts of it with such great success. From steel to textiles, from energy to manufacturing, you have firsthand experience with the Building Blocks of the American Economy. Youve also seen for yourself the struggles that American Workers can face in difficult times. In your stewardship of companies, one after another, have time and again saved thousands of jobs and put those companies and firms in a position to survive and thrive in the years ahead. It is a credit to your ability and to your dedication to the american worker. Now, President Trump is calling you to serve your country as secretary of commerce. Given your decades of experience, your record of leadership, your integrity and your commitment to protecting americas economic future, President Trump and i have full confidence that you will succeed. When you succeed as secretary of commerce, you will help america succeed to a more prosperous future. Now, on behalf of President Trump, it is my great privilege to administer to you the oath of office. Please place your left hand on the bible. Raise your right hand and repeat after me. I, wilbur lewis ross jr. Do solemnly swear. I solemnly swear. That i will support and defend the constitution of the United States. I will support and defend the constitution of the United States. Against all enemies foreign and domestic. Against all enemies foreign and domestic. That i will bear true faith and allegiance. I will bear true faith and allegianc allegiance. I take this obligation freely. I take this obligation freely. Without any mental ret reservations or purpose of evasion. Without any mental reservations or purpose of evasion. That i will well and faithfully discharge the duties. I will well and faithfully discharge the duties. Of the office upon which im about to enter. Of the office on which im about to enter. So help me god. So help me god. Congratulations. [ applause ] congratulations, sir. Thank you. Ladies and gentlemen, the secretary of commerce, wilbur ross. [ applause ] thank you, mr. Vice president. Thanks to all of you, friends and supporters and people from the department, for coming here today. Im very gratified at the confidence that the president and the Vice President have shown in me and in the department. I promise ill live up to every word that i just said. I was also very gratified last night with the vote being 7229 because that suggests that perhaps, finally, building america up again may become a bipartisan thing rather than a [ applause ] and i hope that spirit will carry over as people deal with the results of the state of the Union Message tonight. So i thank you very much. Now, lets get to work. [ applause ] that is wilbur ross, the new commerce secretary. 79 years old. An alum of yale and harvard, a multibillionaire, expert in distressed assets, bankruptcy restructuring. Interestingly, the Mission Statement of the Commerce Department is to create conditions for Economic Growth and prosperity and opportunity. Serves as the voice of u. S. Business within the cabinet. And we know at the very least, he will become an important voice on trade. Which is interesting, carl, because as you just heard, the Vice President said that perhaps now the Commerce Department will return to its role as creating jobs. Interestingly, the agency, 44,000 employees, 9 billion budget, the majority of which goes toward running the countrys oceans and weather policy and also running the census. He will be the leading voice inside the administration on trade. Hes already been attending a slew of meetings at the white house. Last thursday with manufacturing ceos. Earlier in february with congressional leaders who will be writing whatever new trade deals come forth. Interestingly, well find out where he lays idealogically. He was a democratic donor until 2011. At the age of 73. He has said that he believes the tariffs are the last thing, not the first thing, that an administration should pursue. He said that on cnbc in november. We will see how his policies and what he decides to pursue at the Commerce Department aligns with that, what weve heard from the president thus far. Yeah, and i know theyve gotten flak because hes estimated to be worth about 2. 5 billion. Thats the forbes list. The last commerce secretary was also worth, i think, almost 2. 5 billion. Seems like theyre going to approach the role differently. She was an advocate for trade. Always came on this network to talk about opening up our borders, free trade and getting companies to export more abroad. Well, and it is not unusual, sarah, for this particular role in the cabinet, as it has in the past, to go to someone who is seen as a leader in fundraising, as sort of a plum job for someone who raised a lot of money for the president. Thats not where secretary ross has come from. But he will be taking a more outside and public role in commerce than some of the secretaries have in the past. Itll be interesting to see how the role and how the department is shaped under his leadership. Thank you if for that. Well watch his first few days in office and look ahead to the president s speech tonight. Main focus is going to be Economic Growth and this hope to hit 3 of gdp. Our next guest says trump needs to overhaul the tax code, encourage investment and put americans back to work. Then pray for luck. Ed lazear, the former chairman of the council of economic advisers. Always good to see you. Good morning. Great to be with you. Thanks. We mention td line about luck. Your point is 3 is am i phrasing this right it is more of an anomaly than not . 3 is the norm. If you look at the 30year average up to the recession, so before 2007, we grew at 3. 1 per year on average. So thats kind of what were used to. What has happened in the recession and in the weak recovery is that productivity growth has fallen and fallen dramatically. Thats a big problem for the future. So the question really becomes whether we can revert to previous levels of productivity growth and at the same time, offset some of the demographic challenges we have in the future. And thats really the question. So you really have to have a few things going your way, but the point of the article that i wrote this morning in the wall street journal was that you dont have to make things up to get there. You just have to have everything kind of break in the right direction. Thats not impossible. How do you do that . How do you tackle productively slowdown . Yeah, well, i would say the most important way to tackle the productivity slowdown is to have a proinvestment tax policy. A tax policy that doesnt impede technological change. Thats the key to having any kind of growth, high growth rates in the short run, short run here being ten years. But thats really what you need to do. The question is how do you do that . And this is pretty much a bipartisan view on it, in terms of if you look at economists on both sides of the political spectrum, essentially, everybody believes what you need to do is lower the taxation on capital. There are a number of ways to do it. The most efficient way to do it in the short run is to bring in full expensing. That is to allow firms to depreciate immediately and Carry Forward any investments they make. What that does is stimulate investment, tends to increase not only productivity of labor directly but it also increases r d activity. That is going to be a key for the future. So that, by the way, was in candidate Trumps Campaign outline. Question will be whether he talks about that tonight and focuses on that as an important component of growth. One thing you really are hitting hard is the ability for companies to deduct their investment expenditures from their taxes. Do you think we get that tonight . I doubt it. You know, again, it is kind of a won i cann wonky point, to be honest with you, but it is an important point. The reason is this, people usually talk about reducing taxation on capital by lowering the Corporate Tax rate and variety of other measures. Those things work but they work in the long run. The reason is, if you lower the Corporate Tax rate, what youre essentially doing is giving tax cuts to all existing capital as well as new capital. It just doesnt have the bang for the buck that you get from expensing which, you know, sometimes it is called an investment tax credit. This is a permanent investment tax credit. Again, it is kind of as you say, it is granular. I doubt the president will get into that tonight. It is a bit too technical, the kind of stuff guys like me get excited about. Doesnt mean real people get excited about it. We do. I doubt hell go there. No, but it gets back to your point. We need a greater focus on encouraging productive investment to get back to the levels of productivity youre talking about. Back to that, you mentioned demographics. They seem to be going against us if you combine productivity with employment growth. Right. Absolutely. Yeah, so the big challenge and the reason you see forecasts that are 2 or some sub 2 is that were not going to have a working age population, prime working age population, between 25 and 54 years old, growing over the next decade or so. And what that means, of course, is that youve already chopped off about 1 of gdp growth every year. So youve got to make up for that. The question is how do you do that . Well, there are a couple of ways to make up for it. One is to get back to previous levels of productivity. That wont do it by itself. You actually have to exceed productivity growth from what weve had in the past. And the other thing you can do is try to encourage more work among the growing population. Thats the aging population. So we have a growing proportion of our labor force that is 55 and older. With increasing life expectan expectancies, no reason for people to be retiring at 65. There are policies to encourage people to stay in the work force longer, that would be good not only in terms of gdp growth but also in terms of fiscal situations. I hope that the president looks to that, maybe not in the first 100 days or so, but at least thinks about that as we move forward. Ed, im wondering, id love to get your take on this dynamic were hearing more and more about, which is, let the economy run hot enough to either fore shall stall or not worry about entitlement issues. Is that a dangerous conversation or not . You know, i must say, i think you should always worry about deficits. Certainly, given the history that weve had over the past eight years with the debt, the gdp ratio doubling, and with forecasts not only, you know, from the Trump Administration but also from the Obama Administration itself looking forward, saying, gee, you know, if we dont get this under control, were going to be seeing deficits of 10 of gdp per year within a decade or two. Thats a serious problem. While the new president hasriet like tax cuts, which are good, Infrastructure Spending, most of the things go in the opposite directi direction. It is very important to keep the budget picture right in front of you. It is an important issue. It may be the most important longrun issue. We dont want to get into a situation like the one that japan faced for the past couple of decades where theyve had very high debt and very low growth rates. I think that could happen to us. We need to prevent that from happening by getting control of our budget. Easier said than done, obviously. But it is something that we cant lose focus of. Yeah. Were all for avoiding correlations with japan in this country to a large degree. Hope to get your reflections on the speech after tonight. Thanks for your time, as always, ed lazear. Pleasure to be with you. When we come back, former minnesota governor, president of the Financial Services roundtable, tim pawlenty will join us with his thoughts on the speech tonight. Dow is down ten. Back in a moment. Where does the Top Rated International mutual fund manager see value right now . He reveals his picks at trading nation. C nbc. Com. More squawk on the street coming up. Lets get to Rick Santelli for the santelli exchange. Rick . Thank you, david. I like to welcome my guest, richard farr. Like i always like to do, lets pick up on the last discussion. Ed lazear, one of my favorites, carl talking about japan, trying to end their multidecade kind of blah scenario. My question to you is simple. Its just about ten years for us. I dont know. Were trying tous. Were trying to apply the same medicine that japan has. Many were not quite there, but it certainly seems like thats the direction youre aiming. Tell me why im wrong. Well, here is the reason were not japan. One, were not an island with limited Natural Resources and a declining population. Were growing a little less than 1 a year. So at least we have half of the equation right where japan does not right now, but i hear you that i like your answer. Let me ask you, you brought something up thats great. They have to import everything. Under the last administration, the epa pretty much made us an island, trying to separate us from our resources, so the new administration isnt. We had good numbers, richmond fed, chicago, Consumer Confidence, the best of basically 16 years, and you have the feds ignoring all of that, your thoughts . I think the fed will have to face headline cpi coming close to 3 in a few more months, and it is time to hike and get us off of this state that were usually on. April is close to that french election, and i think they will be afraid in aprili inor may fo that matter. The number that was not stellar was an unrevised look. You need a lot of luck to get to 3 . Your thoughts . How much luck do we really need to get to 3 in these confidence numbers . Are they just fairy dust, do they mean anything . Can they help propel us there . I dont think it is luck so much, but definitely policy changes if you brought up trade, can you imagine if we export energy and how much that adds to gdp. Thats number one, here is number two, government contributed 0. 1 exact last year. There is little government stimulus. So maybe a little fairy dust and you have better economic data. You can get to 3 , its not that unreasonable at all. I think we have to stop there, dont we . Thank you for being my guest today, sarah, back to you. Keeping an eye on target shares here. The worst performer in the s p 500. Joining us now is mkm partners, he covers the stock, i get that retailing is hard right now. There is food deflation, there is traffic declines, tourism numbers coming down, but is this a target specific problem at this point they cant forecast their own numbers . Good question, sarah. No, not entirely. It is certainly part of the environment, they are not alone in seeing weak store traffic. The target store, same store sales, are 3. 5 . It is a lift from digital channel sales. That is fairly consistent with what were seeing in the Department Store pace. Some of the kirchs here, say between walmart and target, and mal mart has had positive traffic now. Is that walmart really invested heavily in food, in fresh food in particular. And target has not done that, and food has been a decent traffic driver to the stores of late, as so much business has migrated online. You cant do food as well online. And it is interesting, that is ryan cornells background, what do they have to say today. What sort of message do you need to hear from him to get confidence back up. The stock is now down 12. 3 . Well, you know i think they need to do more in food. In the prepared comments, there was not much discussion of food. It came up in the q and a. Graft beers, wines, and adult pef rajs. But they didnt have a big Game Changing strategy. Theyre not a destination for food, they dont have enough floor space. So it looks to me like it is more of a tweaking of food, and i think you need a wholesale change there to change the traffic dynamic. Thats one thing that well look for this afternoon. Thank you for jumping on the line. The stock, target down 19 . I know you have a hold at 70 per share. As we go to break here, lets get a check of where we stand in the broader market. The dow is around the flatline right now. The s p 500 down 2. The nasdaq down 17 a pretty unchanged market ahead of the speech tonight. Anal his of lawmaker analysis. Welcome back to as snap gears up for the ipo, they are increasingly a destination for shortform content for a range of media companies. For many tv series with 3 00 episodes. They share add reven revenue wie partners. And now they have many partners including buzz feed, vice, and discovery. Vice tells us since becoming a launch partner for snapchat discovery in the u. S. And fran much, we have been reaching millions of young views. They start to share video ad revenue with its partners. Snap needs to make sure they pay enough to draw the best content. The content section continues to grow some say it could be a stand alone app. Thank you julia. Good morning, 8 00 a. M. In coopertino, california. Squawk alley is live. Good