Transcripts For CNBC Squawk Alley 20170126

Jon fortt and Brian Sullivan is also here for the hour. Good morning to all of you. Carl has the morning off. Joining us, Business Insider ceo Henry Blodgett and Stifel Nicolaus Market Strategist kevin karen. Were going to talk about the markets, talk about the fact that we are not only hitting and opening at dow 20,000 but also rising through that level. President donald trump commenting on the markets record move in an interview yesterday with abcs david muir. Take a listen. Im very proud of that, very proud of that. The Business Community, and the Labor Community you saw that with the labor numbers that came out. One said it was the single greatest meeting ive had with anybody. Its the highlight of my life. And the dow on top of it just hit 20,000, first time in history. Im very proud of that. Now we have to go up, up, up. We dont want it to stay there. You know, its not uncommon, guys, for a president or an elected official to talk about economic indicators, but whats so interesting, kevin, about dow 20,000 is through this lack of enthusiasm i love this quote from laszlo bernie, crossing dow 20,000 is like crossing the state line with kids on a road trip. The joy lasts for two minutes, but then what . Now what . Thats exactly it. Its a milestone. Its one of those big, round numbers that well look back in history and point to the day and say, you know, january 23rd, 2017, there it was, it crossed 20,000. But beyond that, its all about what comes next. So the back part of President Trumps comment is where its all at. So where do we go from here . And weve got some good things, which is an economy that seems to be picking up a little bit of steam, but weve got some headwinds, too. If you look at valuations, they seem rich. And when you think about where profits are, Profit Margins are, as wages start to pick up here, maybe that sucks something out of the profit equations for companies, too. So we might be confronted with a good economy. Thats a positive. But also we have the headwinds of rich valuations and margins that are going to be tough to sustain at these very high levels. Right. And henry, there are questions about how much levers the economy still has to pull because it traveled so far under the previous administration. Granted it started in a financial crisis, but the dow on president obamas inauguration day, 7,949. Incredible. And when you see it from that perspective, 20,000 is incredibly meaningful. But i think to the point, valuations are very high, Profit Margins are high. Obviously, there is excitement in the Business Community about what President Trump is going to do, relaxing regulation, taxes. Maybe that does accelerate things, but even so, if you are looking at normalized valuations over time, its tough to see a lot of return from here long term. You know whats interesting, you hear a lot of dow 20,000 doesnt matter, its just a round number. I get that but im going to push back on that a little bit and say it does matter. Ill tell you why. For example, the new york boat show is going on right now. How do we know these increased returns arent going to send people out, the wealth effect will take a hold and go, you know what, our savings are up a little bit, were more secure for retirement, maybe we go out and get that new car or that item that we wanted. So i think that while the number doesnt matter, i believe the psychology of 20,000 may be stronger than we think because its got everybody talking about it, so i push back. It does matter. Yeah, but the question, brian, is whether that boat purchase looks smart or really dumb in 2018. Does it make you happy . Would a boat make youd look great on a yacht, jon. I think that depends on how the market and your returns are looking a year later, you know. If you were, you know, too elated, or if, hey, it was a great time to buy a boat and now, you know, i can afford champagne. But kevin they go together. There are a few questions about the composition of the index and what that means, because there has been this outsize impact from Goldman Sachs more so than even apple, which is six times the market cap of Goldman Sachs. So what should we really make of these moves in the dow . Yeah, i dont know that you make too much of it. I think you really just have to think where youre going to go from here. And as far as the whole wealth Effect Concept goes, that is true. It is true that if youre feeling more confident about your future, if you look at the labor market, if you look at wages, theyre picking up. People feel wealthier. Theyre far better than where they were, where henry was talking about a few years ago when the dow was much lower. So, thats all good, but everything about the market is forwardlooking. And i remember 1999 there were all these same kind of thoughts, you know. We were wealthy, the nasdaq was hitting new highs, all those kind of things. And it really wasnt the kind of thing you wanted to hang your hat on as it relates to returns in the next 15 years. So the wealth effect is good, but we really need to see topline growth. And so, the important things that trump is talking about, if youre talking about lower regulation, less tax burden, all of those things, those are the positive things that have helped to drive the market and things like Goldman Sachs over the last couple months. Well, well see whether the president mentions any of those policies when he speaks at noon. Well be monitoring the gop retreat leading up to that. But i know we have other news, too, brian. Yeah, we certainly do. New developments in the reported talks between verizon and charter communications. David faber is back with us here on post 9 with more reporting on the deal, or the talk of a deal, david, which has everybody talking because it may lead to just more consolidation in an already consolidating industry. Yeah, this could be a very interesting year for very large deals in telecom, perhaps media as well, brian, but perhaps this may be one of them or maybe not. This morning the wall street journal reporting that verizon ceo Lowell Mcadam had made an overture, at least, a preliminary approach is the way they put it, to charter communications, involving the possible purchase of that company. Now, in some ways, those of us who traffic in these kinds of potential stories not necessarily unexpected, but at the same time, when you actually go down the road of really considering whether or not this deal makes sense, it certainly has its share of road blocks. And i want to add as well that we do see this kind of reporting these days where preliminary approaches are reported on, but there are no significant talks going on at this point, at least according to people who would be aware of those talks, were they actually taking place. I can tell you its not as though teams of advisers are meeting to try to devise a deal structure and anything of that nature. Yes, a preliminary approach may have been made, and perhaps it will lead to significant talks down the road, but let me give you a few thoughts here in terms of why at least it may be that it goes nowhere. One, of course, is whether you can get to the value of the charter and its Significant Shareholder Liberty Media would want, and that may be a key consideration, because my understanding is that liberty is very happy with its current ownership of, roughly, lets call it 27 of the equity or so in charter, which of course includes Time Warner Cable and the brighthouse networks, deals, by the way, that had only closed not that long ago to become one of the larger players in the socalled cable industry in our country. For example, tom ruthers, the companys ceo, options strikes at 563 a share. It gives you some sense, at least, to his expectations of what he can accomplish with an independent charter over time, getting margins up to as much as perhaps 41 is the idea, or at least the target for them. So theres a lot of road to go. And liberty has been a constructive shareholder, and perhaps believes as well there is a lot to go that would create value far above whatever verizon could pay. By the way, when it comes to what verizon can pay, you have to consider dilution, which might be significant in any deal. Yes, there might be synergies, yes, there might be job losses, and in the current administration, job losses may be something people are not particularly happy about seeing in a consolidating industry of this type, but we will see. Whether or not anything really comes to bear, because 5g and the idea of that coming years from now is something that is motivating verizon to look around and figure out what its strategy would be. And when it does that, it can look at comcast, the Parent Company of this network, it could look at charter, it could look at dish, which has a significant amount of spectrum that could be helpful as they roll out 5g many years from now, but it doesnt necessarily mean anything is in the offing near term, guys, and so well see. This is going to be an interesting year overall for potential consolidation. We have pine saying forget net neutrality. Thats likely gone. We have a doj that will be seen as very permissive, perhaps. And we have the possibility of linkups, whether its tmobile and sprint, whether its verizon potentially looking to do something big, or our own Parent Company also. But you have the agencies responding to the whims of a president that is somewhat unpredictable, especially in the case of at t time warner. I wonder if you think verizon will be waiting to see how that plays out before making such a big deal of its own. Im not sure they will, because it will be quite some time until we see that deal close. And of course, it is perhaps the dislike of cnn thats motivated some tweets on his part. Many people, kayla, believe that deal will go through. It is vertical integration. It should not be stopped by the doj. These kinds of deals certainly will raise some regulatory questions, as would a tieup of tmobile and sprint, which is one weve been talking about a lot as a possibility. No talks that im aware of taking place there either. Two quick points here is that, number one, speaking to the chairman of an m a practice of a big law firm last weekend. He said more deals in the pipeline than hes ever seen before, could be a massive youll be busy, david, you always are, but could be a huge year. Another thing, we talk about dow 20,000, it doesnt matter. It may matter with dealmaking because companies have a higher currency now, they may have to pay up. But as stock prices go up, we may see corporate spending, would we not . David to what degree might this be a trial balloon everyone can look at just to see how the new Administration Responds to it . I mean, as you mentioned, at t time warner there might be some cnn issues there, but President Trump, when he was president elect, said that he didnt like this consolidation of power. Is it important to watch just the General Administration rumblings around it . Im sure it is, and well see whether we get any. Its not clear to me well hear anything, although who knows whether its something hell feel he wants to weigh in on, but it is a trial balloon as well for verizon shareholders and for charter shareholders, who by the way, would want significantly more than 335 bucks a share, i can tell you that. And so, i think theres any number of different road blocks you could see to why this deal wont happen. It doesnt mean its not something verizons thinking about, in part because they are under pressure in their own business, as you guys well know. Absolutely. They reported lousy numbers the other day, subscription additions have not been what they had hoped for. Average revenue per user is coming down. Theres just a lot of competition in the wireless arena right now, so they are looking. And a different approach than randall stephensons embraced at at t, where hes focused on content, the directv deal as well, but content with time warner. We do expect verizons looking towards infrastructure. And so, the universe of what you can buy is small. Its comcast, its dish. Its size. Its charter. Each of them, by the way, have their own big issues. Then you get to smaller stuff that may not move the needle. To your point, likely to see a lot more consolidation around this with at t going after time warner. This is about the future of television and content delivery. Verizon has the mobile assets. Theyve already bought aol, they want to buy yahoo so see a lot more of this, most likely. Its going to be a very interesting year to brians point, no doubt about it. Verizon charter was a 32 stock seven years ago. You wonder if the charter board is sitting around going, hey, this is great, where were they ten years ago . They could have gotten us for onetenth the price. It certainly flies in the face of the idea that verizons thesis was bitesized, it was at t, yahoo they were said to be taking a completely different approach, but this, david, would be far greater. Oh, my god, it would be an enormous deal. They have been taking that bitesized approach on content assets. That seems to be the strategy as far as content, going for 90 or whatever it might be. But when it comes to the big infrastructure, if you want to call it that, play, theyve got to go big. I know youll be working the phones, david. Come back when you have something new. Appreciate it. Im not sure if there will be Much Movement on this story today. David faber, thank you. Henry blodget. When we come back, we are debating the dow all day here on cnbc. Up next, apple, plus three big tech names reporting after the close today. What to expect from microsoft, alphabet and intel, when squawk alley returns. And later, disney on fire in a big way after setting a Box Office Record in 2016. A closer look is coming up. Tiki barber running hambone a barber shop . T hut yes surprising. Yes whats not surprising . How much money david saved by switching to geico. Fifteen minutes could save you fifteen percent or more. Whos next . We are debating the dow all day here on cnbc, just one day after breaking through that 20,000 barrier for the First Time Ever. One Company Likely to have an impact Going Forward is apple, up more than 340 since 2009 when the dow crossed 10,000 for the first time. But of course, apple itself wasnt added to the dow until march of 2015 when the stock was trading actually a little higher than it is right now. Lets bring in robert cheera, analyst with guggenheim, and mike olson, analyst with piper jaffray. Good morning to you both. You take a look at the tech stocks in the dow, not a lot that you would necessarily expect explosive growth from, but weve been wrong about these things before. What do you expect from apple as we look at whether the dow can continue pushing higher . How important is that particular stock . Well, its clearly important because of its size. I think its size probably keeps it from being a source of explosive growth. Its really hard to grow at 220 billion top line. But i mean, i think apple can keep growing low single digits, and youre not paying much of a multiple for it. The one thing id point out is, i mean, their r d spending has tripled over the last four years, so youre kind of getting that optionality for free. And mike, as you look at apples growth prospects, theyve been talking a lot, of course, about china for years, lately about india as well. How do those areas as Growth Markets look in this new Trump Administration . Well, its definitely important for the company, and i think a lot of large numbers has caught up to apple to some degree, but these are some areas which they could potentially find increased growth. And i think india, its clear that theyre working with the government there to try to get local manufacturing. I think the government looks like they want to work with apple in that way. And i think in general, theres a lot of different categories of potential growth, the biggest of which is probably the huge potential upgrade cycle this year, but certainly, india and china are areas as well. And so, i mean, you mentioned local manufacturers. Everybody, including the u. S. , now seems to especially be focused on local manufacturing. Given that apples growth right now is outside the u. S. , does that bode well in this particular environment . Well, yeah, i think theres a lot of potential for continued changes in the manufacturing landscape, and i think in general the Trump Administration is going to do what they can to try to get as much local manufacturing, which could increase potentially for the u. S. Sales. It could increase cost, which could impact margins Going Forward. So that is a concern and something we have built into our model Going Forward and one of the reasons that despite the services revenue, which is a great highmargin business growing nicely, we dont have margins expanding because we do think there could be an incre e increased expense related to local manufacturing in the u. S. Robert, part of the thesis in investing in apple for the past several years, even if you didnt believe in Revenue Growth, was the idea that you were going to be getting a fat dividend handed back to you and that the company was going to be buying back even more of its stock. If we get tax reform that forces or allows companies to repatriate some of that cash, i mean, should you expect apple to channel that back into a special dividend or some other type of Financial Engineering that the company has become known for in the recent past . I would assume so. I mean, apple has 150 billion in net cash. They have 200 billion offshore. So i mean, they would be probably the single biggest beneficiary of tax reform on that. I mean, theyve been buying back a lot of stock. They are paying a dividend. Theyre also, as i said, spending a lot of money on r d. So i think if they had access to that cash, they would absolutely use it. All right. Robert, mike, good insights, important stock. Well continue to watch. Thanks for being with us. Thanks very much. Thank you. Still to come on squawk alley, big tech earnings on tap after the close today. A closer look at what to expect from microsoft and alphabet. And as we trade well above dow 20,000, take a look at three stocks that are leading the way dupont, boeing, Goldman Sachs. Of course, Goldman Sachs has been the leader since the election, which is interesting considering this idea of deregulation. Right now youre looking at a live picture at joint base andrews just outside washington, d. C. Youre taking a look at the helicopter that will be carrying President Trump to that gop retreat in philadelphia. You know, we think of retreats, brian, as trust falls and ropes courses, but theres going to be some real policy thats going to have to be debated. Pencils on paper as these lawmakers figure out how to implement a lot of Trumps Campaign issues. Im sure its interesting on marine one and there we go, the president stepping off marine one at joint base andrews, presumably to board another aircraft to go to philadelphia. I can say this, having spoken with some gop folks in the last couple of days on the phone, emails, et cetera, the policy plans for the gop and the president are not always in sync. Lets just put it that way. Theres a lot of things that we think of because he ran on the republican ticket that they may be aligned with that i can assure you many on capitol hill are nervous about, even on the gop side. When we were discussing with david faber this idea that the time warner at t deal would sail through because of the republican makeup at these agencies, traditionally you do think of republican administrations as businessfriendly, as waving a white flag for some of these things to happen, but this is not going to be a traditional republican administration. I think that may be the understatement so far of 2017, kayla. I think it will be especially interesting to watch. First, people in the markets were worried about having a congress that wasnt divided, because oh, my goodness, division is good when youve got equal numbers or close to equal on the Republican Democratic side. Perhaps having a president whos not completely in line with his party on some of these issues could be good for the market. Yeah, and can i just put in something totally non sequitur. This is not some trump thing. Do you really have to Fly Air Force one, a 747, about 60 miles up 95 to philadelphia . Right. Its 11 22 a. M. We will be hearing from him at noon from that retreat. Safe to say it is a very short flight, but there you have it im sure the commuters appreciate it, brian. Well, hes still going to have to get to the hotel where they are meeting, so in the air with a couple missiles, the same thing. Seems like a lot of money. Well tell you more of what to expect when the president makes his speech at noon eastern time. For now, the president has just boarded air force one. Well take a quick break. Well be right back. Only at t offers you all your live channels and dvr on your devices, datafree. Its entertainment. Your way. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. That ride share . You actually rode here on the cloud. Did not feel like a cloud. That driverless car . I have seen it all. Intels driving. The future traffic lights, street lamps. Business runs on the cloud. And the cloud runs on intel. I wonder what the other 2 runs on. car horn news alert. It is not just the dow and the s p 500 hitting record highs, the nasdaq also hitting a new high this morning. One big tech mover reporting today might push it even higher. Josh lipton is at one market in San Francisco with more on the zune maker, microsoft. In addition to the zune selling, investors will focus on microsofts cloud business. Ceo sachin nadeadella who celebrates three years on the job next year, is applauded for pivoting the company into the new era of cloud computing. Today investors will want more color on not just the growth of that business but also its profitability. In miuras fred gharib tells me he thinks cloud revenue commercially jumps to a 14 billion annualized run rate with a gross margin of 50 . The work rate shows office 365 adoption maintains its momentum. Hes looking for azure enjoying Revenue Growth north of 100 . As for the top and bottom line, the street is looking for q2 eps of 79 cents on revenue of 25. 3 billion. Microsofts stock is in the green so far this year. Its now up some 12 in just the past six months, touching a new alltime high. This morning, open questions for investors here will steadying pc unit sales lift that business . Pc shifted into decline about 2 in q4, continuing that recent trend of stabilization. Any more color and commentary we can get on that 26 billion link in acquisition expected to close in the second quarter. Were going to find out more from microsoft executive Vice President Judson Altoff in our interview with him on squawk alley tomorrow morning. Back to you. Were looking forward to that as well, josh. We know youll have the numbers when they come out. Next, tom mcclellan, as the dow surges above 20,000. But first, take a look at shares of moneygram, an unlikely acquirer, the alibaba unit ant financial nearing a deal to acquire the company. Shares of mg of i scoring nearly 10 . Well be right back. Introducing conduent. One of the largest business process companies in the world. Whether its in health care, customer care, technology, transportation or government. We touch millions of lives every day. Conduent. Advancing the everyday. 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. Good morning, everyone. Im sue herera. Heres your cnbc news update this hour. The final death toll from italys devastating avalanche stands at 29 after the last bodies were pulled out of the rubble of a hotel crushed by the snow. Nine people were pulled out alive in the first few days of the rescue last week. Seven green peace protesters are facing charges after climbing a 270tall construction crane just blocks from the white house. They unfurled a massive banner that said resist. The protesters were arrested after climbing down about 10 00 p. M. Last night. Oprah winfrey is teaming up with kraft heinz to launch a new line of packaged foods. The joint venture is called mealtime stories, and it aims to make nutritious food more accessible to everyone. 10 of the profits will go to charities working to end hunger. And fritolay is launching a new partysafe bag of tostitos chips that doubles as a breathalyzer. The bag is meant to discourage drinking and driving on super bowl sunday and also will provide a 10 uber discount. It says the goal is to remove 25,000 drunk drivers from the road on the day of the game. Thats the news update this hour. Back downtown to squawk alley. Brian, back to you. All right, sue. Thank you very much. You breathe into the bag. Theres a little hole there, you breathe into the bag and it tells you whether you should drive or not. Yeah, well, if you have a drink, just dont drive at all. There you go. There you go. Sue, thanks very much. All right, the moment weve been waiting for has arrived. European markets are closing. Seema mody is joining us down here. Brian, youre far too kind. European stocks remaining near oneyear highs. We saw the strong session in asia overnight, banks the big winners in europe right now, one being the royal bank of scotland, which is 72 owned by the uk government, announcing that its settled 3. 8 billion covering litigation by the doj involving the sale of risky mortgages. Sales are up 2. 5 , but youre seeing a nice recovery here, up 25 nearly over the past six months. Of course, a nice recovery weve seen overall in the european banking sector. And a lot of this is predicated on higher yields, a story that were not just seeing here but in europe as well. The german bund trading at a sixweek high here. Last time, of course, this time last year we were talking about negative yields. Interesting to see how quickly the story can change. Lets talk about stocks. The gainer of the day is an acquisition of j j, actelion. The biotech up almost 90 over the past three months. A very different story for unilever, though. The consumer giant known for dove soap, lipton tea, posting weakerthanexpected fourthquarter sales on thursday. Interesting to say its an International Story hurting them, hurt by the demonetization act in india and economic slowdown in brazil, stock down about 5 . Lastly, on to politics. Uk Prime Minister theresa may heading to the u. S. , where shell address lawmakers at a retreat in philadelphia later this afternoon, which comes ahead of her visit with President Trump tomorrow at the white house. Political strategists say the Prime Minister will likely try to strike a deal with trump over trade. Yet guys, its still unclear whether the Trump Administration will be open to her suggestions. We know that trump has had nigel tlaj in the past as a close adviser. Now whether the involvement of the Uk Parliament will complicate that in terms of brexlt, seema. Thank you. We will see. Record highs for the markets yet again, the dow sprinting past 20,000, but wait, because is a correction possibly coming . This ominous prediction coming from the man who correctly prikted the president ial race based on the dows movements. Hes tom mcclellan, editor of the mcclellan market report. He joins us now. Tom, a lot of people are referencing the comments from the president in september at the debate stage, where he said we are in a big, fat, ugly bubble and joking, is this the bubble trump was warning about . What do you think . Well, ever since the election, people have been calling this the trump rally because they have to call it something, and so thats what we call it. I had expected a rally irrespective of who won the election. And in fact, i changed from bearish to bullish in my newsletter the friday before the election, expecting a big rally. What the election did is it had everybody on hold and just frozen like deer in the headlights, unable to move because they didnt know what the outcome was and people were afraid of the unknown. But once they got it to be a known quantity, then they could be real even and put their money back to work again. Well, its interesting to see so much money coming into the market and being put to work. But i was speaking to an investor yesterday who said we might be overstating how much homework people are actually doing about this and whether or not they are judiciously investing or if they are just putting money into etfs and broad indices because they think that a rising tide will lift all boats. What do you think . Well, there is a great amount of liquidity out there. We see that in terms of the advanced decline line pushing ahead to higher highs even before the dow was pushing ahead to higher highs. And when the two of them disagree, you ought to bet on the advanced decline line being right. When the advanced decline line is being higher highs, that says that theres lots of liquidity. Even the most undeserving stocks can find some money to bid them higher, and that usually means that the liquiditys going to last for a while and keep lifting up stocks. But that doesnt mean we cant have hey, tom an ordinary correction. Brian sullivan here. Sorry to jump in, tight on time. When does this end . It doesnt end until 2018, but it will take a break in february and march. Were overdue for a little bit of a correction. You can have an ordinary gardenvariety correction, even with advanced decline line at alltime highs, and i expect one in february and march. But the key is that the drawdown potential is minimized when theres a lot of liquidity out there. Tom, why are you so down on emerging markets . Ive heard some people say theyve been beaten down enough and its actually their time to shine this year. I like following the u. S. Market because you know what youre getting, you can trust the bookkeeping a whole lot more in the u. S. Than you can in some foreign country where you dont know what Accounting Practices theyre using and you dont know what assets they really are involved with. Emerging markets are also much more subject to liquidity just as small caps are. So when you see the advanced decline line making new highs, that says theres liquidity enough to go around. I dont dispute the fact that emerging markets can go up. I just dont have good ways to analyze them in a trustworthy way. So, tom, what should we be looking for as a leading indicator . What will be driving the market . Will it be Interest Rates as the fed continues to tighten . Is it going to be crude as we watch the Energy Complex and supply issues . Or is it going to be something that were not paying attention to currently . Well, the fed should tighten. Theyre a half a point behind the power curb. I like to watch the twoyear note yield as a guideline of where the fed funds target should be, and theyre a half point below that. So theres still a lot of room that they can tighten before they even go too far. But the key point is that theres still money coming into the market and it should be coming in all the way until 2008. One of the leading indicators ive uncovered is that the Dow Jones Industrial average tends to follow the movements of crude oil prices from ten years ago. And ive prepared a chart for you. I dont know if you can pull it up. But this has only been working for the entire history of the dow since the 1890s. That may not be enough to satisfy some people that its a valid leading indication, but its good enough for me. It says that we should be seeing the rally up to the echo of the 2008 oil bubble top in 2018 for the dow. And so, were not at that point yet. Were heading up that way. This is a rally not to be missed. When we get to 2018, we can worry about a crash then, but now is too early to worry about that. So, weve got a little time. But tom, some people are already starting to wonder whether they should be participating in buying new bond issues because there is so few choices in the bond market where you can be compensated for the risk youre taking. I mean, ccc credits are currently only paying you 6 interest in some cases. I mean, at what point would you say im going to sit this one out . Oh, youre talking about the conundrum of return on calaverasus return of capital. You can lose money in the bond market. Im seeing the market in an up trend. Im seeing an opportunity for a correction in february and march where well be able to buy in at a cheaper point and i see much more up trend to go. I wouldnt be trying to chase the exotic bonds just because you can get your tookus handed to you in so many different ways in that market. All right. Well have to have you back on february 9th to come back and talk to us about it, because thats when tom is predicting this current rally ends. Tom mcclellan from the mcclellan market report, thanks as always. On deck, disney absolutely crushing it at movies last year, setting new records, but what is next for the house of mouse . And now hans solo. Were going to dig in. But first, Rick Santelli, what are you watching today . You know, my next guest may think that 20,000s interesting, but what were really going to discuss is 19 trillion. Well talk about it after the break. Coming up today on the halftime report, a potentially marketmoving speech as President Trump releases his plans to house and senate republicans. Well have that live. Plus, the only wall street analyst calling for investors to sell alphabet. Well also debate whether you should sell the dows biggest winner over the last year and buy the biggest loser. All starts top of the hour, noon eastern. Jon, see you in about 15. All right, scott, sounds good. Now Rick Santelli at the cme group. Santelli exchange. What have you got for us, rick . Well, today, jon, we have peter schiff, and he will be here eventually, but what i want to talk about, when he arrives, is the debt clock versus what ah, peter, there you are welcome hey, rick, how are you . All right. Listen, peter, you and i both have many things in common. One thing we have in common is we dont Like National debt at 19,9 19,965,000,000. We just hit 20,000 in the Dow Jones Industrial average, so my question to you is simple, okay . Is there any way that any president is going to avoid a debt bomb . No. The debt bomb is going to explode. But what weve been doing with the debt bomb to defuse it is the Federal Reserve has kept Interest Rates at practically zero, so at least we can afford to service the debt. Repaying it is completely impossible, but at least we can service it when Interest Rates are at rock bottom, but thats already changing. Interest rates are going up, inflation is going up, and so creditors are going to demand a higher premium to hold our paper, and we are headed off the edge of a cliff. And i think that the fed is going to try to inflate its way out of this problem, but its going to inflate its way into a bigger one. All right. Now, lets take things one step at a time, okay . There was a time where infrastructure under previous administrations was a tough one, okay . So, have the republicans, are they going to give the new president an issue . Is there a difference between Infrastructure Spending with this administration versus others, or is it all pretty much the same in your mind . Well, its the same. And plus, Infrastructure Spending is not going to help the economy. You dont help the economy by spending money. To the extent that we need to repair our infrastructure, thats a cost that we have to bear wait, wait, wait, hold the ranch listen, i agree with you on a lot of things, peter, but i just put a roof on my house, okay . And i dont look at that as unnecessary Infrastructure Spending. It was leaking. We have a lot of quote unquote leaky roofs out there. Right. But, so, really, its not stimulus. Its more like repairs. Now, im not saying that getting the moneys going to be easy, but sometimes there is a difference. Yeah, but it would have been better if your roof didnt leak and you didnt have to repair it because you could have used the money for something else. So, the fact that we have infrastructure that is in need of repair is a negative, it is a burden, it is a sacrifice if we have to spend money building up our infrastructure. The fact that it creates jobs, thats not a good thing because were diverting resources that we might otherwise have been able to use more productively to make necessary repairs to our infrastructure. But the other problem is were broke. We cant afford to repair our infrastructure. That is the problem. And if were going to divert resources to building our structu structure, what are we not going to do, right . What are americans going to stop spending money on so we can free up the resources to make these repairs . Well, sometimes, peter, dont you have to step out of the box a little bit, though . Ill give you a notion. We have trillions of dollars overseas that this president said hes going to allow businesses to repatriate. You ever hear of build america bonds . So why doesnt he say, listen, you can repatriate it, but in order to do that, you have to play this little game of bond covenan covenants. You have to participate in a build bond america scenario or they give you Interest Rates and for that, you will be allowed to bring this money back at a very low or maybe negligible tax rate . Your final comment. Can we get creative . Is there no answer here . Well, i hate to micromanage it. And of course, they dont have to bring the money back. They can leave it where it is and pay no taxes on it. And so, if we try to be too funny about all these requirements, they dont have to bring the money back at all, right . Because theyve got a zero tax rate where they are right now. But the bottom line is you talked about at the beginning all of this debt. Everybody is ignoring this. People are talking about, oh, were going to get all this fiscal stimulus. The reason we havent had it before is because were broke and weve been relying on this phony monetary stimulus. But if we actually try to increase already enormous annual budget deficits with tax cuts and more spending, then unfortunately, the Federal Reserve is going to go back to the well. Were going to do more quantitative easing. And were going to end up destroying the value of our currency. And right now, sure, the dollars at a 14, 15year high, but its a long way down. Were out of time here, peter. I have to stop here, but i am going to bring you back to see if all of these clouds are still there. Thank you for taking the time. And jon fortt, boy, he didnt cheer me up much. Back to you. Oh, well. Yeah, thanks, rick. Straight ahead, with the dow surging past that 20k mark, were taking a closer look at dow component disney, coming off a recordbreaking year, and a lot more ahead for 2017 with the last jedi and more. Details are next. Plus, watching shares of intel ahead of earnings reporting after the close today. Investors eyes are going to be on the companys data center operations, its most profitable segment, and the one expected to grow quarter over quarter. Also watching margins and any hints about the outlook for 2017 ahead of its analyst day next month. Squawk alley will be right back. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley 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. As we look at the dows road to 20,000 and past it, one stock that certainly helped drive the index higher was its media component, disney. Julia boorstin joining us now from los angeles with a closer look. Julia. Hey, brian. Well, since dow 10k, disney has far outperformed the index, shares growing more than 280 since october 2009. Thats despite the fact that disney shares tumbled from alltime highs in 2015 after bob iker discussed weakness at espn, raising questions about the health of disneys Media Networks division. In the past seven and a half years, iger has transformed the company with major deals. Two 4 billion acquisitions, marvel and lucas film, marvel sending the studio to new highs while star wars created a behemoth. Disney turned around, delivering recordbreaking frozen in 2013. At the parks, disney phased out discounts and implemented technology to manage crowds. Moves that increased visitor spending. Plus the new park in shanghai is on track to draw 10 million visitors in its first year. Despite disneys big run, analysts are overwhelmingly bullish with 19 buy ratings in two underperform or sell ratings. Last week, Goldman Sachs upgraded disney to a buy, citing strong film slate, decreasing concern about espn and benefits from Corporate Tax reform. But concerns about espn do remain for some capital downgraded the stock to underperform on that espn risk. Under that pressure, since dow 10k, disney has underperformed Media Companies comcast and cbs. Disney reports earnings on february 7th. Guys . All right, thanks so much, julia boorstin. Watching disney for us today. We want to go to john harwood in philadelphia at the gop retreat with some news. John . Well, were waiting for President Trump to arrive here, and address house and senate republicans, who are having a retreat to talk about the way forward on obamacare, and also tax reform. But weve gotten some developments this morning. First of all, we have the news that the mexican president , pena nieto, is not coming to the united states. This is after an exchange between the two of them, President Trump insisting in interviews that they are going to pay for the border wall. The mexican officials saying theyre absolutely not going to. The there was a question about whether the mexican president would come, and then donald trump tweeted this morning that he shouldnt come if theyre refusing to pay. So that visit is now off. That was going to take place mexican officials were going to come next week. In addition to that, we have learned that there will be a press Conference Tomorrow between british Prime Minister theresa may and President Trump. That is the first foreign leader visit to the white house to see President Trump. Theresa may is also coming here to this retreat. There is some hope that in the wake of the withdrawl from the transpacific partnership, the United Kingdom can be struck. So we expect that to happen. And overall, republicans are waiting for some direction from the president on precisely what kind of obamacare replacement he wants and how quickly, and also the contours of tax reform. He proposed a plan during the campaign, House Republicans have a different plan. Senate republicans have aspects of that plan that they do not like. This is the beginning of a process where they hope they can come together on content and also on time line, guys. John, interestingly, though, the president did tweet this morning about nafta, saying the u. S. Has a 60 billion trade deficit with mexico. He called it a onesided deal from the beginning. And i wonder if you think that this sparring over the meeting, over the building of the wall, and who will pay for it will further complicate any effort to renegotiate nafta, which is one of the Top Priorities for the administration. I think thats going to be a difficult renegotiation. Not just from the mexican viewpoint but also the standpoint of Prime Minister trudeau of canada. Yes, that process is going to get under way. But obviously, this is a rocky situation. All three leaders are going to have intense political pressures from different sides on that renegotiation. We dont know how thats going to go. Also, wanted to mention one other thing, by the way, which is that we expect President Trump soon to sign an executive order commencing an investigation of voter fraud. Remember, he has said without evidence and disbelief by almost every expert who has ever looked at this, that there is widespread fraud in the 2016 elections. He says 3 to 5 million votes cast for Hillary Clinton that should have been illegal, which would have cost him the popular vote since lost the popular vote while winning the electoral college. He has now set in motion the process of exploring that issue. Dont know where thats going to lead. This is a distraction that republicans dont want. Nevertheless, hes going ahead. John, do you expect to hear talk there about the u. S. Relationship with mexico overall . I mean, you mentioned this border wall thing. He made that a big trip during the campaign to mexico. Didnt talk about the wall. And now the wall issue is breaking up this meeting. There are all kinds of reasons why the u. S. Wants friendly relationship with mexico. Sharing that huge border. You know, antiterrorism concerns. Of course. Fighting drug cartels. Is this going to be a topic now, more front and center at this gop meeting . Well, well see what President Trump says. I think what the members here want to hear about are two things. The two things that they have put before Everything Else on their agenda, and thats repeal and replace obamacare. With something. They dont know what yet. And a tax reform plan. And whether that turns out to be Corporate Tax reform plus individual tax reform, cutting those top rates, or not, is something that still hasnt been concluded. House republicans want a more ambitious approach. Senate republicans may need democratic votes to get a tax reform bill passed and dont know what the components of that are going to be. Yeah, and john, we are looking at a live picture of air force one, making the long voyage from Andrews Air Force base to philadelphia. Coming in, where we are awaiting the president s arrival at that gop retreat. I know weve got this shot up, guys. If there is time, if you could put up the eww, that is the biggest mexico stock etf you would buy in the united states. And it is i dont want to say crashing, but if you look at an intraminute tick of the e. W. W. , the headlines about the mexican president not making the trip, it fell 3 immediately. So look at the e. W. W. , which rose yesterday, and now it is giving back all of the gains and more. Working noting, brian, steve schwarzman, chairman and ceo of blackstone, also leading the president s Strategic Policy forum, called this morning, there is a good deal of anxiety, both inside and outside the country. Around potential changes in u. S. Policy, major changes under way, though, are designed to create significantly higher gdp growth in the country. He says its not unreasonable to think there would be a lot of fundamental pro business reform. If we still have john harwood, though, a lot of the official activity from the administration has come in the form of executive orders and memoranda, not unlike previous administrations. But its up to lawmakers and federal agencies to implement them. How much will that play into the conversation today in philly . Oh, thats the dominant part of the conversation. Look, anything you do, whether its building a wall and financing that wall, whether it is passing tax reform, replacing obamacare, you cant do it by executive order. All right, john harwood, well have you on standby as the president is landing in philly. That does it for us on squawk alley. Well pass the baton over to scott and the half. All right, guys, thanks so much. Welcome to the halftime report. We begin with breaking news this hour. The president of the united states, donald trump, expected to speak this hour at a republican congressional retreat in philadelphia. Air force one just touching down a few moments ago. Mr. Trump is expected to address his agenda, parts of which have helped the dow cross 20,000 for the First Time Ever this week. We will go live to philadelphia when the president starts speaking. Well obviously take him some time to get from the airport to the location where Congressional Republicans are meeting about