Transcripts For CNBC Squawk On The Street 20170927

Dollars at a onemonth high. Road map begins with trumps tax plan and the president and gop moving on from health care set to unveil their framework. The dow looking to stop a foursession skid. Shares of nike are down this after earnings in the wake of the equifax hack Richard Cordray will join us live. The gop slated to release the framework of its tax reform proposal multiple sources saying it is expected to include a cut in the corporate rate from 25 to 20 higher than the 15 favored by the president. The pass through businesses lower to 25. Rates of 12, 25 and 35 the plan would also eliminate the deduction for state and local taxes and nearly double the standard deduction Child Tax Credit would be substantially increased, although in these early days, politico saying, jim, that top individual rate is still the focus of some delate abate and a surcharge for the wealthy. We have to wait and see. Those of us in highstate can calculate what a 35 to 39 drop and it is a bast to 42, 43 if youre in a hightax state, this is terrible for you, for rich people. Well, because of the no longer the deductibility. Now when i say its terrible, its relative. I am not saying rich people i have to say, some states its a wind fall, some states its not. This is the first time i felt directly that where i live is even more important. I mean, we have a lot of Hedge Fund Managers move to florida. This is the type of thing where you just cant look at it and say, wait a second this is a give away. However, what i would tell you is the things they want, particularly the pass through remind me very much of the border tax absolutely impossible to figure out. They want to put it in they think they can explain it memo to them, you cant. You can well waste three months on it maybe 3 1 2 months my birthday is february 10, well get through on february 11, february 15, around valentines day they said, all right, we cant do this. I would like to short circuit that nonsense, but theyre going to play because they dont know how the game works i love them, i love them dearly if they think they can get Something Like this through. But its not going to happen. The reason why they keep coming out with these very brief plans, so to speak. Like a page. A page. Is this two . Maybe this goes to two i dont know really . I assume the strategy keep it as broad as possible and throw in the meaty stuff at the very end where nobody has time to think about it and debate it what weve seen on repeal and replace, dont know if thats going to work. Even, you know, the 24 members of congress from california and new york who were republicans, one would imagine, would put up a unified front against state and local. Yeah. New york, california, new jersey, right there, you do wonder but well see. Well see. Theyre approach, i think youre right theyre not approaching rigorously at all. But they will say they are approaching rigorously matter of fact, probably the best thing the president has is it might double the number of characters in twitter so they can further explain the plan well talk about twitter later on thats what youre going to need he needs more characters obviously, what jack dorsy said, this thing is complicated. Lets double on the characters encouraging from the prospect of his back and forth with gym congres kim jongun. 280 could be helpful when it comes to negotiations with foreign powers i think youre absolutely right. Yeah, i mean, kim has not really gotten on twitter yet. No. I think hes doing direct message with the president you dont see that goldman is out with early thoughts it is all very hazy but this proposal, as we know it, looks to cut revenues 4 trillion over ten years. Where congress has been neutral to down 15 so, their take is this is all going to get scaled back once we Start Talking about pay forward. It has to i know everyone thinks it is so easy to pass tax reform because everybody likes lower taxes. Let me get you real focused here the republicans dont. His own party doesnt. They dont like it if it will bust the budget. They have a lot of guys in there that will bust the budget. Im not sure the new fellow who won in the primary ray moore hes different. Hes different hes not strange no, he was not strange. He was the other guy hes real change is what i call him the strange and real strange part of the country, yes, that is the case down there, not. I look at this thing and i say, now, come on. Goldman is very optimistic talking about something early 2018 what are they thinking about christmas vacation and another repeal and replace, even though they say there isnt another repeal and replace. Fewer than 40 working days in the year 40, right . People come back to 86 and the years that went into getting that deal done 30 years ago. Of course, everybody is saying we do, we do need to update our tax code. But that was years that was large, very bipartisan. Whether it was bob packwood or bill bradley you know, you had, you had a lot of you had a lot of time and effort put on on both sides during that period that did lead to a relative successful outcome. In this case, its very different. There was a year devoted to the concept of recapture and real estate. There was six months devoted into the concept of turning an ordinary income into Capital Gains. 18 months on those rather simple things i know that most of the people at home dont understand the notion of recapture, but a way to get money back. Those things took 18 months. All right. Pass through forget it. 18 people do not. I wrote a lot about tax reform during that period i wrote for harpers, believe it or not i was a leading intellectual at the time we all wonder what happened saturday evening post, as well id look. Look, the magazine, but i do, i remember thinking, i had gotten the recapture because it was the hardest thing in the world to get through. These guys are dreaming. Recapture was difficult. Did you ever read my 2005 piece on recapture i didnt. But ill look for it now you could probably google it. Richard cordray will join us well talk about equifax, wells fargo and a lot more take another look at the premarket. News on nike, micron, delta, twitter, coors and chipotle when we come back in a minute after that massive Equifax Breach affecting millions of americans, both consumers and are looking for answers on what went wrong and how to prevent another breach in the future Richard Cordray joining us always good to have you. Good morning my pleasure big piece in the journal today and they cite sources familiar with the matter that the board wanted to show equifax and its leadership were being held accountable for the breach. Is this resignation working . I think its important for companies to be held accountable in these situations, but i also think its important that we put in place the right framework so theres preventive authority here this is a massive problem. This is 140 million americans. This is far beyond the scope of breaches weve seen at target and home depot previously. It is not enough to have enforcement come after the fact. Were going to have preventive monitoring in place. The company is going to have to change their behavior. They just cant deal with these problems on their own and think its good enough if they retain the public trust and confidence, theyre going to have to be monitoring and known to be monitored and theyre going to have to accept that why dont you petition a federal magistrate or a judge on the board of equifax as a special master i think theres a lot of things we can do, jim, now that wae have this problem at equifax and well be working to put solutions in place were working with the federal trade commission and the new York Department of Financial Services but its also important that we look at the big Credit Reporting Companies. Expeerian and transunion well have to have monitoring in place and a different regime than theyre used to in the past they dealt with these problems on their own. They did the best they could they decided whether it was satisfactory and they decided whether to be sued that is not good enough. That doesnt protect the information of us and all of the americans consumers and its not sufficient to see their Data Security policies in place to date how do you explain to our viewers why there was this asymmetric regulation between Companies Like equifax and the banks we talk about all the time its been a problem for years. Before the Consumer Bureau was created, there was no supervision to these big Credit Reporting Companies at the state or federal levels. It was just a blank hole in the system we can see how important this is i think a lot of the public doesnt appreciate how all this important credit reporting and scoring is in their lives. Congress did a little bit to improve this by giving us Supervisory Authority over consumer facing issues such as data accuracy and being able to resolve this consumer disputes well have to work with congress to put in place a better framework on Data Security there has to be preventive Supervision Authority in place and there has to be more robust standards to be met by these companies. Its going to be a joint project. Its very important project. We can see that. Well, yeah, mr. Cordray, people from the fed are scattered around all our Financial Institutions in this country. Are you suggestingthen that regulations will be in place at the three maimer credit bureaus, as well . That is exactly what i am suggesting has to be the case. And the company should welcome it if they should restore Public Confidence in this marketplace and if theyre going to create the kind of reforms necessary, theyre going to have to recognize the old days of just doing what they want, being subject to lawsuit now and then are over there has to be a scheme of preventive monitoring in place they are going to have to accept that and welcome that and be very forthcoming mr. Cordray, how did you come up with that find for wells fargo . What kind of calculation you using . Jim, as you know in punitive damage cases often courts will look at the compensatory damage at issue and how much penalty and constitutional constraints on that. Often courts will limit penalties to a ratio of three or five or ten to one the ratio in this case was 30 or 50 to one, so it was very high what was very important in the wells fargo case was to get this into the public view what we saw this had been going on for years before the Consumer Bureau ever opened its doors it had been kept private because of arbitration clauses and the confidentiality of those proceedings. We needed to get it out to the public so congress and the American People could see what had happened enforcement action in place with orders so it stopped and changed immediately. Those were very important objectives here. Well, but, there was talk that perhaps there could have been a fine as large as 10 billion, is that just nonsense thats just numbers on a piece of paper in fact, what a court would do in a case like this is they would look at the extent of the actual damage and compare it to the penalty and knock down an enormous penalty that is just a theoretical thing. What we had here was a practical situation where it was important to enforce against wells fargo and blow up into public the scandal that we saw at the company. We did that. We got consumers made whole. We got a new regime in place so theyre not doing this any more. Were looking across all the other banks, jim, to make sure the same problem didnt affect them, as well. We see some isolated incidents of that. But were looking across the whole market to make sure its fixed. Sir, did you read the 110page report about wells fargo . I have read all the reports about wells fargo. If i could go back for a moment okay. If i could go back to a moment to the equifax issue and, jim, i know you get this the breach at equifax is so monumental 140 million americans with their cred information, personal information, Social Security number, birth dates, that will affect the banking system. The banking regulators and the big banks need to be very worried about this they cant control what goes on at the credit Controlling Companies but they will hold the bag at the end for the fraud and abuse of consumers that results from all this information being criminally hacked. We all have an interest in putting the right preventive regime in place so that this could not happen again and that the public can be confident that the right monitoring is in place to make sure Data Security is at the very highest standards and the Credit Reporting Companies just as we work hard to make sure its in place at the banks. Thats incredibly important piece of this. Do you think that the Board Members of equifax or wells fargo should be replaced you know, thats going to be up to the fed to decide some of those things and i know congress is on that issue my issue is not about what scapegoats we make, but getting the right regime in place Going Forward to protect the American Public we have not had it to date and we needed to work with congress to get the right framework in place of olaws and structures and preventive Supervision Authority which is so important here did the not that its part of your purview but did the sec color your hack of what hackers are capable of and what their motivations are Going Forward . I think Government Agencies have been a bit, they have been right to focus on the security of their own data. Weve gotten congressional oversight on that. Thats a very important thing. But we have to be focused on making sure the data of the regulated entities is carefully monitored. For example, we have data at the cfpb and we dont have credit card numbers we dont have birth dates and Social Security numbers. But they have them in these private companies. And the public will need to have the sense that theyre being carefully monitored, that they understand that they have toby at the very highest levels of Data Security. When equifax had the Security Patch and they didnt put it in place immediately, that shows you that the system is broken. They have to be look at the Business Model for these companies. They are taking our information. We didnt consent to them having it but they take our information. They make a lot of money off that information and they have to keep it secure. But you almost seem to be saying and theres a conversation that has been going on as to whether or not theyre given their importance in the Financial System they need to be completely changed in terms of the Business Model. I think they need to be changed in terms of having preventive supervisery monitoring in place day in and day out. Every new change in cybersecurity and its a difficult fight. Cybersecurity. Believe me, we understand there are hackers from all over the world. Always have to try to keep up with the latest development. Its not an easy task. But there has to be preventive monitoring in place to make sure that theyre doing everything that they should do, reasonably do to keep our data secure that, obviously, did not happen to date and just being casual about it and then waiting to see if you get sued is not a sufficient answer. That is a broken system and no longer a system we can tolerate. Right, mr. Cordray, i dont think anyone is being harsh enough or tough enough and im including you, sir, im sorry. Do you know who mark temple is at equifax actually, know the leadership of all these companies and going to be speaking to the ceo later this afternoon. Do you know who Mark Templeton is the Audit Committee of equifax the former ceo of citrix which bills itself as one of the top most cybersecurity in the world. Ceos and boards and directors do how does this man stay on given he was the head of citrix on the Audit Committee and everythings fine because we decided to sacrifice smith . How come the culture doesnt change why is the culture allow to stay at wells fargo why do the shareholders always have to pay . Why does this make any sense at all to anyone . Look, jim, shareholders need to hold their leadership to account. I know youre on that subject frequently and i think youre very effective on that subject it is meaningful that equifaxs ceo has been forced out here but is not sufficient. Having scapegoats is fine and some people are happy with that. I think we need to work to fix the problem and put the right regime in place and that goes beyond the board of equifax. It means having monitoring and oversight that is preventive in nature so that we can be sure that the public trust is being carried out here and i think the Companies Need to welcome this and its going to have to change. Would you be in favor of clawing back some of these exit bonuses that are being reported . I dont have authority over that but it makes sense as a citizen of the United States i would think that would make sense in these situations, absolutely you caught me off in the report we have learned from the banking crisis of the late last decade it is culture. Its not individuals its the culture wells fargo gave me and told me, hey, you read this and youre going to like it i read the report and i said that culture is corrupt. And i dont know how anyone who reads that report could possibly disagree it wasnt me who said it it was sherman and sterling who said it. That report comes out and nothing happens. We just say, wow, that was a long report. 110 pages. I agree with you, jim that report absolutely demonstrated a culture problem at wells fargo what kind of problem was it . People were cheating one another and cheating the system and cheating customers and hurting customers and it was considered all right, as long as they could tout the cross selling numbers and the stock price continued to go up. What we need is a preventive system in place with monitoring. We put out a bulletin that all the banks are now following that says you can do minimal monitoring you almost had to try nto not d this before. Protect where the bonus systems are going off the rails and you have to do that. That is happening. That is part of our horizontal review of all the banks and this is changing. But the culture was rotten youre absolutely right. How could you get to a point where 5,000 or 10,000 employees had to be let go because you let it get out of hand you didnt monitor it carefully and by the time it all came home to roost, finally, richard, people tried to get you to comment whether or not youd fill out your term. You said no comment. Can we get you to change that and, if not, when will you Say Something . I cant speak to that when im in my current position and i will stick with my no comment, thank you. Richard cordray, thank you so much for your time we covered a lot of ground appreciate it. My pleasure. When we come back, well get cramers mad dash and take one more look at the premarket as the we have the doctor allar ane tenyear yielding high whoooo. Youre searching for something. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if. There was a single site. Where you could find the. Right hotel for you at the best price . There is. Because tripadvisor now compares. Prices from over 200 booking. Sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. Thithis is the new new york. E . Think again. We are building new airports all across the state. New roads and bridges. New mass transit. New business friendly environment. New lower taxes. And new University Partnerships to grow the businesses of tomorrow today. Learn more at esd. Ny. Gov still up for the month along with the s p futures look pretty good well get to the opening bell in st ment. Lets get to a mad dash now. Right to the opening bell. Micron and nike in focus one is a Semi Conductor company and they dont have anything to do with each other last night micron, there is no invenoato inv inventory in the system and the prices is going up for all of chair chips. Data center and, by the way, of course, Autonomous Vehicles everyone keeps pumping out new shoes adidas, underarmour, it doesnt matter they have huge inventory in the system and its being all these kind of off price places the brick and mortar model is broken and they are doing everything they can dtc, direct to consumer. But one as tight as a drum and the other wow jordan they tell you that jordans are doing well in china, but i got to tell you, i dont like the way nike looks at a certain point, yes. They will win. They will be the last man standing but chips and sneakers, go with chips. There is the opening bell and the s p at the bottom of your screen speaking of china celebrating its ipo today and Early Education provider in china. At the nasdaq Dunkin Brands and joy and Childhood Foundation helping sick and hungry children you mention nike, jim. Watch that influence on the dow. Were seeing price points we never thought possible at least in north american wholesale which is 70 of the region yeah, it is my father introduced me to the term of football long time ago my late father he was talking about that there is this merchandise that youre supposed to keep the price point for. And then theres merchandise where people throw the price all over the place they football it nike has never been footballed the price for nikes go up and youre supposed to pay it, as you know from your boy thats not happening any more. Nikes not getting the price it wants. Concourse is doing badically i will throw in that china is very strong, but north america is terrible. And it doesnt mandate a lot of stuff about the new styles, but you know what, in the end, adidas has mojo, under armour is not going away and the direct to consumer could be good but not make up for the foot lockers and finish line and the kohls and including across the street at the tgx. David, i could take you there and you wouldnt believe how cheap the merchandise is its a store im aware ive been to that one. Its downstairs i pick up essentials. Nike can mnot maintain its price point. Nike the best manufacturer of consumer goods other than apple. Mark barker is a genius. I think theyll find a way im saying the is a level to buy because mark barker will figure this out right now, too many shoes. Dont wait for the other shoe to drop, there are like 50 million of them. What is going on here in terms of not enough feet not enough feet in other words, too much inventory and not enough buyers. But i think im aware of that im asking why why because, david, i would tell you that the era of the incredibly highpriced sneaker has come and gone no one else is saying that on these calls. No, theyre not but i think thats whats happening. You, too. I dont think you can take a shoe to 180 to 200. People are not material any more david, when you, you dont insta your feet, you insta your face insta a verb now. The gram. Interesting point youre making, though people have been spending 180 i dont want to see your feet i have the same rockports that ive been wearing for years. Im sure they are in great shape. I throw them out every three months 180 bucks is the case they have been spending that for some time. This overall change. That peaked jim coulter talked about it delivering alpha experience versus material goods. You think that is playing out . Yes yes. I think what it is about is the 2 billion people on facebook and what they want to do is show where they are they want to rebrand themselves as mr. Coulter said. They want to rebrand themselves. My daughter went on a cruise why because it looked great. Did i see her feet no its not part that we photograph we care about the face estee lauder and sell, i dont know, i want to short nike, its too great a company. It has to do with the experience and stayathome economy and i just have to tell you, david. The era has peaked and thats what nike is struggling with and also the direct consumer my friend karen got me to buy a friend, i mentioned it on twitter. I had ten guys come out say they bought direct to consumer. Theyre everywhere you cant walk outside without getting hit by a pair of nikes sir isaac told me yesterday that kanye west was adidas secret weapon. Super weapon. What is he rocketman i dont know. Hes going to continue to fuel sales there for them they have to open up to north korean market. By the way, nike is not only the biggest laggard on the s p and followed by under armour, foot locker. And then on the other side, look at micron and look at invidia. Theyre back and bigger than ever, david. Microns story theyre not going to increase. Their prices are did you see their revenues were up 91 the Gross Margins increase from 46 youre spelling it wrong its up from 46. David, this company is on fire now, it is true that the operating cash flow in fiscal year 2016 was negative its a boom bust business. Little concern theyre spending more capital elevated number thats the key thing. And thats why im not sure lamb should be plyiflying here. But i love the call. The call was beautiful call was a home run. It felt great. It was like brady in the last few minutes. You know when he delivers. Yes, he does. It was a brady call brady call. It was a goat call i tried to do greatest stock of all time and it made no sense so i dropped it immediatelily. But i did coin of course, the journal said i allegedly coined it i cant do anything right for the journal. Why is apple not the greatest of all time . By the way, its worth talking a bit about apple which has reasserted itself a little bit it ecnolo technology is after what took place on monday. Raised numbers. A lot of good data about facebook and i saw netflix upgrade. And nothing positive about amazon today what is that all about macys did unveil a Loyalty Program where their top shoppers, shoppers who spend 1,200 a year or more will get 500 back as a credit. I showed it to the wife and she said i bet there are things that they wont let you have a discount on. I told her to go to macys and dont necessarily buy 1,200, space it out amazons credit card, if you use that on amazon you get 5 back, too. Just saying. 5 number. So, youre saying in macys doesnt have gahere you dont want to be a platinum member do you think they have game the dividend deal still has game the ocf is good there you taught me to use that. You do all those things. I do. Operating cash flow you say is good there i stick with abc. Precash flow. But i thought it was important to poin this out and i want to know whether there are any restrictions but right now, hes talking about loyalty is a foundational element of the north star strate strategy remember the north star engine, its dynamite. 300,000 miles i got on the north star president is tweeting about Facebook Facebook was always antitrump the networks always antitrump, hence fake news. New york times apologized and collusion . Who knows whether this will get in the way of the agenda today, which is extensively tax reform. Did he stick with 140 there or go to 280 thats 140 thats a good question. With collusion, did that go over 140 anthony, call me well see. Well just check. You check with nodo right now. Who knows what to make of this, right . How much time does the president have on his hands . The question is about facebook and the stock was under a bit more pressure earlier this week than i think some of its here group and whether or not its going to be faced with more regulation and how that would work. What exactly it would be that you would be even regulating when it comes to facebook given they just sell ads im trying to get really quickly, guys. Goldman is leading the dow for obvious reasons as were watching the tenure. But boeing follows as the department of commerce has this preliminary ruling in which they would tax or give a tariff to jets that was very nice corporate give away. Wasnt it . I mean, when you think about give aways, that was pretty good, wasnt it . Yes so, boeing got the president is starting to take action and really favors didnt the other day he say the nfl players should be grateful about the stock market so, hes got to continue to do this they get boeing. We also had our first action by the doj to send the Trump Administration saying you have to get rid of this jet fuel Filtration Company because youre the only provider there. Now, do you think more tests to come, of course, that doj importantly, if we do get, for example, sprint and tmobile. What do you think durable goods that are so strong that are driving the bonds which, therefore, makes it so you have this beautiful bank stock rally. Yes, you do yellen did say be wary of moving too gradually what is the idea the tax reform takes a baby step maybe . I totally agree with you. Ive been on record to say the economy is Strong Enough to take a september rate hike. And, you know what y may hedge that and say it will get there by Christmas Bay christmas by christmas. So six days early six days early. Get what by christmas jpmorgan is going to go to 100. Youre talking five bucks here not a huge percentage move that youre talking about its like a home game advantage. Like a field goal. 61 feat. 61 yards franchise record i watched it live but i like the action today because its not led by fed, its led by banks. 15 cents from an alltime high lets get to bob and see whats moving on the floor. Hey, bob thats exactly the story, carl happy wednesday, everybody its the bond yields moving the market and i think a lot of this is tax cut driven. Lets take a look at the sectors today. A lot of the banks right near new highs. You heard from carl there. Semis back, again. Retail is doing well and Interest Rate sensitive sectors like utilities are pulling back if you look at the banks, not quite 52week highs on the big names, but we are very close on most of them citi has had an amazing run and look at all of these to the upside this is tax reform related we have been talking about this for eight or nine months and something is finally happening look, this is the way the street looks at it. The effective tax rate for Corporate America is not 35 its about 27 so, the earnings for the s p in 2017 is going to be about 131 were anticipating it will go to about 140 in 2018 that is a growth rate of about 7 that is without tax cuts now, for every 1 cut in the Corporate Tax, you get about 2 in earnings. Theres different numbers. Ive seen 1. 50. If you can go to 23 from 27 . Thats a 4 cut. Thats 8. You would go from 140 to 148. Thats why the market has been holding up so well one of the reasons because they believe tax cuts are there i dont think this is fully priced in because theres been a heavy level of skepticism about it and wae dont know what the final numbers are going to be. But certainly a factor affecting the markets here the question is, are we at peak earnings right now is this the peak of the current cycle or decline from here it doesnt look that way right now. Look how we have been moving up. The Third Quarter of 2017 where we are now estimates in the fourth quarter, a little bit lower and were supposed to go back in and the point is with the economy growing, number one. Thats the most important thing. Number two, with tax cuts providing a little extra oomph in 2018, we are not at peak earnings and thats why the stock market keeps holding up. Not peak earnings yet. Now, who knows what is going to happen a year from now, thats why the whole business has been so well received here. You can see this in the movement of the stock market as weve gotten closer to reality with some of the talk here with the tax cuts the Small Cap Companies would benefit more than the Big Companies from tax cuts. Look at the outperformance this is one month. Russell is the white line. Rustsell is up 4 and the s p is up 1 , 1. 5 . So, lets move on. I think you get the point. Putting some flesh on the bones right now. Its working in their direction. There you see nike to the down side you heard what the guys had to say. The only thing i would point out here is the Revenue Growth has essentially stopped here for nike not only 57 cents. Thats, what, 25 below a year ago. If you look at the revenue numbers, its pretty flat. Youre talking about 9 billion a year ago for the First Quarter for nikes numbers thats been the big challenge and they essentially stopped growing and you saw what happened with finish line and foot locker that depend on nike for their sales. They did announce no longer announce future earnings and another data point analysts who were dependent on. We want more data, not less data that is not great news overall interesting ipo here in the nyse today. This is rb education china is leading Early Childhood Service Provider 7. 8 million 17. 50 above the price range. This is a play on china. This is a play on the abandonment of the onechild policy and simple back door way to play china. Some of the services and Education Companies have done really well. Look at ebdu, bright education they went public back in may and essentially they have doubled in the time that they have been public so, again, back door way to play china overall. Tomorrow we have a big name coming over at the nasdaq and thats roku. Everybody knows them streaming television provider. Well see how they do. Ceo on squawk box in the morning. Thats a big name. Well see what happens there 85 points on the dow and, carl, very, very close to new highs on the s p 500. Well watch for that, bob, thanks yields are a big story today, too lets get to Rick Santelli you have the trifecta yields are up, dollars are up and stocks are up. What i find fascinating is that the globe right now is looking at whats going on with our central bank and i think that is a catalyst, but it is more how many times are Central Banks around the world screened . Monetary policy needs fiscal policy we havent seen a lot of positive comments coming from central bankers about fiscal policy but i dont think its any coincidence that the big rally and the way the markets moved after november and the notion of whats going on. Bob described the montuization and i dont think its hard to connect the dots here. If you look at a june 1st of 2008 to twoyear note yields you can see the big drop that we had. Were now in october of 2008 and if you look at a keep in mind, we settle at 119 or 1474 minus 14 base points, but back into that potentially we haven closed yet 230 to 260 range. Boons jumped six base points no small feat when youre at 30 basis points and considering they are more than double or settle in at 21 at the end of the year heres something i find interesting. Tenyear minus you want to watch this my kind of theory with some of the traders that we always talk to are correct, youre going to see this spread remain rather constant i cant imagine our yields moving up without pressuring all the dynamics that are going to keep everything kind of linked together finally, i really find this chart fascinating. Dollar index since july. I think you really want to Pay Attention to this one. Carl, jim, david, back to you. Rick, thank you very much. When we come back this morning, marriotts Arne Sorenson hurricanes have had an impact on the properties in caribbean. Led largely by financials. Were back in a minute is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Getting some details good morning, carl. A leaked copy of the tax plan and the details we have been reporting are, indeed, correct corporate rate will go down to 20 . Pass throughs will get a rate of 25 . Individual rates, those will be condensed from 7 to 3. 12, 25 and 35. Lawmakers do have a green light to add a fourth light at the top. This framework allows for five years of full expensing. That is less than what House Republicans had been pushing for. The framework also says that companys ability to deduct the cost of borrowing money and that is partially limited but it doesnt say how or how much . Other deductions on the table. Only two get protected in this framework. The rnd tax credit and the one for lowincome housing this plan also calls for moving to a territorial tax system. Two rates for money brought back and does not specify what those rates will be, but it does say that the rate for liquid assets would be rlower than the one for cash state and transfer taxes would go away and the Child Tax Credit would be expanded, though, once again, they do not say by how much youre still digging through this document and bring you more as we have it. Really quick, the locust of uncerta uncertainty. Is it around the pay fors well hear about later or the top individual rate . I think both, actually. We do not know how much this tax plan potentially will add to the deficit. And we deont know what things they might get rid of to help pay for it this plan does call for ending the state and local Tax Deduction. Again, it says all the business deductions are largely on the table, but there is going to be a big lobbying fight around each one of those well see what actually happens once lawmakers sit down to write the text of this bill. Well come back to you later on this morning. Thanks for that. When we come back, dow is up 66 points. Dont go anywhere. 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. Ill have the langoustine lfor you, sir . I. The original call was for langoustine ravioli. A langoustine is a tiny kind of lobster. A slight shellfish allergy rules that out, plus my wife ordered the langoustine. I will have chicken tenders and tater tots. If youre a ref, you way overexplain things. Its what you do. If you want to save fifteen percent or more on Car Insurance you switch to geico. Sir, we dont have tater tots. Its what you do. I will have nachos lets get to cramer and clarify. Unlimited the macys north star rewards okay cintas is a company that i liked. My friend jim oliver Small Business is the backbone of the creation of jobs and cintas its uniforms and it made a great acquisition and its going takeep climbing. Not done business casual i thought it was an insult. I think thats a nice thing to say whats on mad tonight . Lulu lemon on tonight so we can talk about nike and palo alto. Continue some of the conversation that i had with mr. Cordray to spot some of these hacks ahead of time. A lot to watch, jim today is an exciting show a day i got you shopping go to macys with me well use our points bring your camera so we can play that tape later. When wae return, well dig deeper into the tax reform rollout which were ttgeing even as we speak. Dow is up 64 points. [ male announcer ] eligible for medicare . Thats a good thing, but it doesnt cover everything. 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Calling for total sales to come in negative at 5. 44 million that is 0. 2 2016 pace. Originally the forecast was to come up 2. 2 the read today which measures contracts signed in august is the lowest reading since the start of 2016 and its the fifth drop in the last six months. Whats the problem we said it over and over very, very short supply leading to overheated home prices. The market is totally mismatched with buyers and two hurricanes also wont help with sales hitting houston and much of florida, although the realtors say that will be made up at the start of next year the Housing Market has essentially stalled. Regionally sales fell everywhere in august, but the most in the northeast and the south and all those numbers, of course, on cnbc. Com right now carl all right, diana, thank you very much. Good wednesday morning, welcome back to squawk on the street. Im Carl Quintanilla markets up 61 on the dow. We have markets and nike shaving about 15 points off the blue chips. We have the details now on the latest gop tax plan. Lets get to washington where those details. Ylan . David, this tax plan we have got an leaked copy of it and the details we have been reporting are correct. The corporate rate would go down to 20 the rate for pass throughs would be 25 the rates for individuals would be condensed from 7 to 3 12, 25 and 35 are the numbers were looking at also seeing some changes on the front for business deductions and finding that full expensing. That is something that has been sought by house gop leaders. That will now only be allowed for five years other Major Business deductions will be on the table the two that are going to be preserved are the one for the rnd tax credit and also the one for lowincome housing on the individual side, most of those deductions will also go away though the framework says they will maintain and try to preserve the deductions for retirement, education and home buying back over to you guys. The original blue print had nondeductibility of interest and tax that is long gone now. Nothing on interest in this, correct . The immediate expensing of Capital Expenditures is a fiveyear period and then it expires, i guess yes on full expensing this should be allowed for five years and after that lawmakers to phase it out on Interest Deductibility the framework says its partially limited but it doesnt specify how. Remember, this is the broad brush stroke that the white house has agreed to with republican leadership, but it will be up to committees in both the house and the senate to really put the meat on the bones here and make some of these really tough calls just to be clear, the biggest pay for in terms of the off set still looking at state and local income Tax Deductions getting strapped which would raise 1. 2 billion. The state and local Tax Deduction would go away. As we dug through the details here, it does not look like the state and local Tax Deduction is being called out theyre only saying they are going to preserve the mortgage interest and the charitable deductions however, all the others are on the table and one assumes state and local is a part of that. Not that we were expecting it today, but does this tell us anything on how repatriation could be repackaged, if at all calls for a move to a territorial tax system there is some talk in the framework of having a bifurcated rate one rate brought back for cash and one rate that is brought back for liquid assets so, potentially two rates here again, no details on what those numbers will be. All right were going to look through that document which looks to be about nine pages or so big story today. Stocks, meanwhile, hit record highs causing investors to think about what a pull back may look like mike on set and trying to tackle that question of how do we know when a peak is near . Here woere talking about a substantive peak how does the market behave in advance when risks are rising of some kind of significant market top . You cant necessarily know when or why such a peak might happen. But the market tends to follow certain patterns heres four categories we looked at market leadership. The leaders start to lag, especially key Leadership Groups like industrials, like people will consider transports and if for a long period of time they lag while indexes do well. Credit markets probably still going to be an Early Warning signal always have been theyre not disturbed and you would think they start to get anxious if something nasty was on the way volatility, extremely calm but tends to go from not very calm to disaster very quickly volatility gets elevated and before they finally fall in a big way. Sentiment is tricky. The public super excited about stocks one thing we have seen when we get the 2 or 3 dips, people start to get nervous you want to see that you dont want to see the public kind of shrugging off little pull backs all those things together help to model what a peak might look like, guys since tax eform results hav just come out, this big debate about how much is really being price under to the market. At first, a lot of excitement when President Trump got elected and then it feels like it got priced out, especially at the domestic high tax paying companies. Is that trade ramping back up now that were getting more details and this is looking more profitable i think its starting to get back up a little bit i think a sixmonth period where that was set aside as a real market catalyst. You are starting to build it back in. Youre starting to see the kind of stocks that will directly benefit and start to outperform a little bit very recent and not the whole story why the market is acting like it is it is starting to rebuild, i think. Mike, dont go anywhere p pimpcos adviser paul, i dont know if you had a chance to jinest what we learned about the framework but what do you think and how it affects the markets . The 20 is a favorable rate and if Interest Deductibility doesnt go away, that should help especially the large caps and yourself . I think its a good plan, but, lets face it its only a plan only a framework and we need a budget and we need and it will take months and months until this is going through congress yes, it is. Absolutely true. Paul, when you look at yields today. And you look at the dollar, are you sensing a breakout how long lasting do you think this is a couple factors for both of those. Inflation expectations are going to come up a little bit between now and the end of the year. That should help Firm Expectations for a rate hike in december and it should help the dollar. The second thing is that the euro really has gone, we think, a little bit too far and some pull back is in order there. I wouldnt put the two of them together and they certainly should help the dollar here in the median term. Lets say the next couple months if we do see this tax reform package blow a big hole in the deficit, that is not being deficit neutral as some republicans had originally hoped for, does that have implications for the bond market . Does that make treasuries more risky . Yes, clearly. So, if you get, if you get a big fiscal boost, then, you know, clearly that is a risk for bond market i think the bond market is not really pricing that in were probably at the lower end of our new normal, new neutral range in bond yields thats why i think at the moment it makes sense to be slightly to look for some increase in yields also, i think the market is not fully priced for what well see from the fed we are looking for two to three rate hikes between now and the end of next year the market is priced for less than that. And, obviously, if we get a major fiscal year boost, then the fed will have to do even more than that and they may even have to do the full five rate hikes, four rate hikes that they have in their plan between now and the end of next year. So, i think this poses a risk for the bond market. When you talk about the risk for the bond market around a bigger deficit for tax reform, what kind of numbers are you looking at how much would be too tough to swallow . Well, i think if you get a fiscal package of say, 1 to 1. 5 trillion which is something that the senate plan is currently looking for. I think that could be digested by the bond market but if we were to get Something Like 2 trillion to 3 trillion, which would be fairly large, its unlikely. If we were to get that, i think that could lead to a significant rise in bond yields and then also lead to more rate hikes from the fed so, paul, you mentioned that sort of with tax reform there would be beneficiaries in the stock market corporations like retailers, for instance restaurants. They pay the highest tax rate. Who might get the biggest bang of the buck here it depends a lot, of course, on how the final plan works out. But if you manage to preserve some interest and underscoring our underweight to the reciprocals and the financials we think will benefit especially if Interest Rates start to come up and we still Like Health Care i was going to say, i think to your points on repatriation that is one of the more quantifiable factors here if, in fact, a lot of that will come over maybe its not the trillions that people have talked about. Goldman sachs says about 900 billion on untaxed cash overseas but if that gets into the hands of the companies that you will identify that are bringing it back, i think that is something investors will fixate on along with finding ways to support their 2018 earnings estimates just by a lower Corporate Tax rate once you get some clarity. I think the main function is not necessarily it will ramp u. S. Growth so much immediately as it is going to give you an excuse to say, hey, 2018 earnings probably have a better shot of being met as we hope by the way, to the repatriation point in that memo includes rules by taxing at a reduced rate and on a global basis the foreign profits of corporations paul, no where near the specificity were getting on like for instance, the number of brackets thats right. The whole territorial tax idea and how its going to be run is going to be problematic. We dont want to get back to the idea of a border adjustment tax. That would be really catastrophic for a lot of firms that import. So, it seems like theyre trying to dance around that one a little bit until they can get a better consensus you know, the Economic Voice in this conversation, this tax reform nine pager says its competitiveness and growth for all job creators how do you calculate the job creation effect of Something Like this. Lower taxes for Small Businesses, pass throughs and corporations and how many jobs that would create at this point in the cycle where weve already got a very low Unemployment Rate thats a good point, sarah. Look all the evidence shows that tax cuts, tax reform can be very effective, if there is considerable slack in the labor market if unemployment is relatively high if you get a fiscal boost and tax reform this late in the cycle where most of the slack in the market is eroded, youre not going to get a lot of bang for your buck, right there is not much slack and already becoming increasingly difficult for Many Companies, particularly Small Companies to find the workers so, we should not overestimate the growth impact of this kind of tax cuts that were likely to get, if we get them. And also theres a risk because it comes late in the cycle, it will lead to a sharper pickup in inflation and then, again, youll have to see a sharper reaction by the fed. Ironically, if you get a fiscal boost this late in the cycle, it may actually cause the next recession. Some out there who are thinking that way over the next year or so if the market decides if it looks over this framework today and for whatever reason it is a package from months ago, what sectors are most at risk well, clearly the sectors that would have benefited the most would have been the cyclical sectors the ones i mentioned. But still very early as he mentioned we dont have a lot. We have gone from one page of detail and thats still not a complete tax plan. We probably are still coming off a lot of pessimism about the trump planand what can be accomplished this year lets wait and see its still possible that the cyclicals could be disappointed, but we have a lot of room left to go in terms of getting details. Thank you, guys a lot to digest today. When we do come back, nike falling after reporting its slowest Quarterly Sales growth in years we have some details and, of course, an update on analysis and guidance later Arne Sorenson will join us to talk about the impact of the hurricanes and guidance. I count on my dell Small Business advisor for tech advice. With one phone call, i get products that suit my needs and i get back to business. My business was going nowhere. So i built this kickin new website with godaddy. Building a website in under an hour is easy 68 of people. Who have built their website using gocentral, did it in. Under an hour, and you can too. Type in your business or idea. Pick your favourite design. Personalize it with beautiful images. And. Youre done and now business is booming. Harriet, its a double stitch not a cross stitch build a better website in under an hour. Free to try. No credit card required. Gocentral from godaddy. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Shares of nike down this morning. Pretty sharply more than 4 following last nights mixed earnings the company reporting strong sales growth in china, for instance, while revenues in north america declined 3 . Nike posting its lowest Quarterly Sales growth in almost seven years. For more lets bring in randy and matthew mu clintalk. Were going to have a good debate here because, randy, youre on hold for nike. Downgraded about a month ago you still like it as a buy as most sell side analysts are still there right now. Why is this a buy . The stock is down 4 they didnt give any really specific time frame on when north america was going to come back i like it for multiple reasons. We all know retail has been challenging for the last year. Nike anticipated that put in a new strategy called the consumer direct offense which well hear about in october but in addition to that, part of that is doubling innovation and starting to see the benefit of that doubling innovation with the react, as well as other models that they put out there that are selling out the zoom fly 4 shoe has actually sold out this most recent quarter, as more of that innovation ramps up and gets more distribution, we will see better sales at nike and thats what the bulls are looking for are we seeing that kind of innovation almost 200 shoe i bought one because it came in rose gold, which was my favorite color. I wonder if adidas right now is putting out more flashy and more popular styles, especially in the u. S. So, adidas has put out more popular and flashy styles over the past year. Nike did not actually do that at the same time and what we havent seen over the last year, inoovation from nike, real innovation from nike we only started to see that innovation come in. Those shoes are selling. If you talk to foot locker, finish line, anyone in the retail field that are really challenged they call out that those nike models are selling. We need to see more of those allocations getting to those retailers for the retailers that benefit and also for nike to benefit. You have the innovation catalyst and some pretty good growth in places like china. Came in double expectations in terms of consensus europe is doing okay, as well. And they do have this direct to consumer push, which is where the category is growing right now. So, what keeps you on hold look, we downgraded the stock about a month and a half ago because there is a numbers problem here a numbers problem with adidas and a numbers problem with distribution if you look at market share, obviously, market number one share player in the market and theyre 15 billion business in north america. You can see the issue here for nike is they have the ability to seed a lot of share to adidas not over the next one quarter or two quarters but over the next one to two years or more the other issue we see is a distribution problem nike is in 26,000 u. S. Stores of distribution making it ubiquitous in the u. S. Market. They are using this consumer direct offense strategy which is going more direct to the consumer, they have a wholesale problem where they have to reduce expoesher to the wholesale channel of distribution which will create a margin for earnings, revenues. What about the long term . The long term nike should be okay north america is still 47 of revenues north america plus europe is 71 of revenues and we do a lot of data work. We call 200 retailers a month in the United States. We started doing web scrape work both looking at u. S. And europe numbers. And our Market Share Analysis through the data is telling us that nike is losing share to adidas in the United States, but also adidas in europe. Which is also an issue to us. You dont think the market has already figured that out no. I dont think the market has figured it out we lowered our numbers twice in the last month and a half. Below the street with our numbers. The stock still trades at 20 times earnings and the market is trading at 17, 17. 5. We think there is a risk here of multiple compression, earnings risk and the stock can go down further. Do you think were in an era where jim cramer called it the end of the era of the high price sneaker. This generation would rather wear cheap chuck taylor than pay for the latest inovative model i dont think thats true and lets take this to a different company. Lulu lemon launched a 90 sports bra. So, if they can sell a sports bra at 98, that says to me that nike, if they give real innovation and a real product, they can sell that product at a higher price point lets talk about adidas. Adidas has put in real inoovation and theyre selling that for the first time a running shoe at 180 and thats selling out, as well do you know what ezs are going for right now . 2,000. 2,000 thats a lot of money im on it so, end of the day, what that shows us is that if theres a hot product and you give them a reason to buy that product and pay that price point, they will pay that price point what nike has not done backward looking over the last two years is given the consume arreason to pay those high price points. I know its easy talook o look discounting and promotions and say the end of the highprice sneaker is over. When you give inovative product and a reason to pay a higher price, they actually do. How deep are the discounts at nike in our data work, the amount of promotions is nearly double where it was a year ago for nike so, that is an issue in our view and going back to price points, i agree with matt on the era of highprice sneakers is not over. Although the issue i see for nike is the issue, again, of adidas where think about the alpha bounce, the pure boost we are talking about five or six platforms for adidas that are resonating from price points from 80 all the way up to 180 which is really taking nikes launch in the marketplace. The stock is up 1 this year. Clearly underperforming. Adidas and the overall market. Has it been priced in . What is your targ isnt. I dont think it is priced in were below the street and if you look at a forward multiple of nike, the multiple is 20 times earnings this company affords a high multiple because its perceived as a consumer staple type stock which gets high multiples. However, if we were to take to the view that well see market share from nike to adidas over a prolonged period of time then the stock is more cyclical in na nature and get a lower multiple Going Forward. Final word here why you think its going higher. My final word is this all the problems at nike are backward looking forward looking they have a lot of reasons to be optimistic, whether that be new innovation and driving beyond where the street is. Whether thats gross margin. Theyre manufacturing revolution and bringing that back to the United States and localized places thats a gross margin driver all of that is coming at the same time within six to 12 months the same time you get the head wind that has been a massive head wind at nike for the last two years that goes away youll start to see reported numbers be higher than they have been ill remind the audience that growing earnings 20 Constant Currency in this very challenged retail environment glad you ended with the effects tail wind which they mentioned eed on the call with shares off the lows now, Randy Connick and Randy Mcclintock the business of sports ncaa story being rocked by another major scandal. Eric joins us now with the latest good morning, eric. Thats right. The Attorneys Office arrested ten people for bribery related to College Basketball placing athletes at certain colleges and to get them to sign with advisors when they turned pro. At least six schools were implicated including top programs like louisville, usc, arizona and miami. These serious allegations, though, may not come as a surprise to those who closely follow College Sports. There is an evergrowing list of schools facing punishment including michigan, ohio state, usc and syracuse adidas executive jim gatto was also arrested. He is 47 and spent his entire 24year career with adidas and hired by sonny bicaro told cnbc this has been going on for decades. Adidas has said gatto has been put on leave and the company is working with outside counsel on the investigation. The ncaa says it finds these charges deeply disturbing and no tolerance for the alleged behavior the big question is, will the ncaa do anything about it given how much money is at stake it takes in 1 billion a year and it says another 11 billion or more flows through College Sports annually. A lot of that money comes from apparel deals from under armour, nike and adidas. Ninefigure sponsorships with multiple schools so much money at stake and over 350 division i basketball programs it could be extremely hard to stop this kind of behavior back to you guys eric, im sort of interested, obviously, in the adidas piece as someone who has covered that company. It feels like and i dont know what weve heard officially from some of the regulators and the attorney general on this that its not a systemic problem within adidas or any of the other Apparel Companies that they singled out this one guy who is now placed on leave is that the sense youre getting . From an investor point of view if this will influence sales or just be sort of a black eye for the company. So, the charges are, obviously, against this one employee at adidas the rest of the employees are either coaches at other schools or other things. But again as far as the Public Company goes, hes the only one. If you talk to people in the industry that know how these things work like sunny said, this has been going on at places like nike and adidas for a long time in the investigation they said one player is getting 100,000 to go to an adidas school, but another company that was not named. They were offering 150,000 for that kid to go so, its clearly another company at least that was already mentioned, but not named in the investigation. What a story, eric, thank you for that get a quick check on stocks at this hour dow hanging on to a 28point gain as we digest ideas on tax reform and politics and lissen for the president later today. Squawk on the street continues in a minute. The classes, the friends, the independence. And since we planned for it, that student debt is the one experience, im glad shell miss when you have the right financial advisor, life can be brilliant. Ameriprise of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. I enjoy the fresher things in life. O. Fresh towels. Fresh soaps. And of course, tripadvisors freshest, lowest. Prices. So if youre anything like me. Youll want to check tripadvisor. We now instantly compare prices. From over 200 booking sites. To find you the lowest price. On the hotel you want. Go on, try something fresh. Tripadvisor. The latest reviews. The lowest prices. 31 minutes past the hour lets get an update from sue herrera. Heres whats happening at this hour. Five civilians were wounded when several rockets were fired at Kabul International airport. The attack comes as james mattis and nato secretarygeneral are in kabul both men holding a News Conference where mattis called the attack a crime the two pledged continued support for afghanistan and vowed to do Everything Possible so that country does not, again, become a safe haven for International Terrorists through our partnership, we will suffocate any hope that al qaeda or isis the taliban have of winning by killing. I want to reinforce to the taliban that the own oly path to peace and political legitimacy for them is through a negotiated settlement delta announcing free texting from its aircraft through its go go Inflight Internet Service it will enable passengers to stay pullfully connect would th on the ground. Youre up to date. That is the news update this hour over to jackie deangeles the department of Energy Reporting that Oil Inventories drew down 1. 8 Million Barrels in gasoline inventory built 1. 1 this is not what the market was expecting. I imagine what youre seeing here is a lag effect from the hurricanes that that increased demand when refineries got back on line took the crude number down and the gasoline started to build. After labor day, seasonally, thats when the demand starts to drop off but you can see that prices are hanging out just around 52 a barrel not making too much of this number but what was interesting inside that report, the production number, u. S. Production 9. 547 Million Barrels a day. Getting closer to that peak of 9. 6 million. And i think thats probably longer term what is going to concern investors. Sarah, back over to you. Ill take it, jack, thanks. When we come back, the ceo of Marriott Arne orenson is with us how hurricanes have impacted his businesses and taxes and the dow up 16. [vo] quickbooks introduces rodney. He has a new business teaching lessons. Rodney wanted to know how his business was doing. So he got quickbooks. It organizes all his accounts, so he can see his bottom line. Ahhh. Thats a profit. Know where you stand instantly. Visit quickbooksdotcom. Welcome back to squawk on the street. Sitting down with the ceo of marriott Arne Sorenson pleasure to have you on cnbc today. Thank you, nice to see you. Mainvestors are really keen o understand what the financial implications will be its still early to know how long it will recover in puerto rico 16 hotels, thousands of jobs for our associates there all sort of hanging in the balance. Those hotels are essentially closed today now, i say essentially because we had hundreds of guests that were trapped there and are still there, not being able to get out yet. Weve got associates that are trying to figure out how to get assets back up and running and we have some First Responders and relief workers that are already coming and staying with us even though they have been warned there might not be things like air conditioning and other things they typically would find were going to see many months of work before the destination comes back to where it could be. Do you know how long the Recovery Process will take i dont really for sure obviously, one of the big factors is when do you get power and when do you get Reliable Energy back in you know, most of our hotels are equipped with generators so they could run off diesel fuel for a while, but if you cant get diesel fuel to replace what youre burning, then suddenly youre out and if the island is without electrical power, its so hard to do the work that needs to get done to, you know, start to turn the corner sure, of course switching gears here, this morning some more details coming out around the gop tax reform plan reduction potentially in the Corporate Tax rate to 20 . How will that impact marriott and the way you deploy capital nothing dramatic today. We are, obviously, an american company. We make money all around the world. We dont have a lot of money trapped off shore today. Although that risk under the current tax regime is certainly quite right. And i think at some point in time we will find that either we leave money off shore as Many Companies have done, invested off shore and never bring it back or we pay a penalty for bringing money home. Which is disappointing i think, more importantly, though, for the u. S. Economy, right now every Public Company is worth more owned by somebody outside of the United States than owned by the United States. Because of its unique disadvantage and the Corporate Tax rate and i think were seeing that many new start ups with global ambitions are setting their domiciles up outside the u. S. Rather than inside the u. S. Because they dont want that penalty. We have to bring Corporate Tax rates down i think we can also get rid of some Corporate Tax expenditures so the hit to revenue is not so severe we need to go to a territorial system for this mismatch is always going to be in place. One year since the 13. 3 billion acquisition of starwood, which now makes mareia s marrioe Largest Hotel operator in the meantime, you have been trying to sell your core real estate assets and at the same time we have been seeing china, which, for the longest time, has been the biggest player in terms of Hotel Acquisitions in the u. S. But they have been limiting the amount of money they have been putting to work given some government restrictions. Has that changed the broader investment appetite for hotels oh, it has, i suppose, underneath the top level but generally were in a lowInterest Rate environment. An environment with great availability of debt hotel assets are forever assets. Particularly when youre talking about in key destinations. New york, for example, well established resort destination and while the chinese may be less aggressive today, we find interest from buyers in the middle east. We find interest from american buyers we find interest even from latin american buyers for some of these assets generally we think the market is doing quite well the goal for marriott is to sell 1. 5 billion in core assets by 2018. Where are you in reaching that target were making good progress. We sold nearly a billion since we closed the transaction or right before and right after the transaction. We continue to work on this. Obviously, our aim is weve held out that number as a financial target our business is to manage and franchise hotels, not to own them the idea is to essentially own nothing. Reach that goal of being an assetlight model. Were already assetlight the overwhelming majority of our companys economics come to politics you have been very vocal on your, i guess, opinion on the travel ban you have one of the first ceos to write an open letter to the president when he was elected. President trump in november 2016 and how you thought the travel ban was a bad idea since then, many different updates. What are your recent thoughts . Well, we, obviously, got the third option of a travel ban that came out this week, which now is being described a indefinite the first two travel bans were described as being for a short period of time for the administration to do whatever work it needed to assess whether or not more permanent changes should be done the travel bans by themselves are a bit of a sign to the rest of the world that they are not welcome to come to the United States i know thats not the way they are intended but when you listen to voices around the world, what you hear from folks is we see the u. S. As being less inviting to us today than it was before interesting now, having said that, it is perfectly appropriate for this administration and for the u. S. Xwum government to be focused on security in travel and to take care of risks and be focused on immigration policy and making sure the rules work in a way that dont need to unwanted immigration. Thats fine. But those things, i think, can be done while extending the welcome to the overwhelming majority of International Travelers who pose no Security Risk and who are not looking to move here but looking instead to take vacations here and do business here and then go back home the team has a question okay well move on then i want to talk about your Share Buy Back program because the stock right now, marriott, is trading at the most expensive evaluation its traded at in histy. At the same time, a big buyer of its own stock. Does where marriott is trading change your share of buy back strategy not at all. The nominal stock price is higher than its ever been the multiples solid, but its not nose bleed territory our Business Model produces an awful lot of cash. We believe we should invest that cash in our business by buying starwood or doing other things if we can drive economic value from it. But if we dont have enough things to do with that money, we should return to our shareholders and the best way by buying back our stock which i suspect well continue to do well leave the conversation there. Arne, thank you for sitting down with us to get your take on hurricane and that starwood acquisition one year in. Sarah, back over to you downt n downtown. Thanks for bringing us the interview. When we come back, super sizing your tweets twitters character limit plans. The stock is higher today. And take a look at shares of micron moving higher after better than expected results on higher prices for its memory chips. The stock is up more than 8 squawk on the street will be right back a little bit in the market who is placing a huge wager on rising volatility and why . Our experts weigh in more squawk on the street coming up. Pretty nice day. We did get a blue print, lets call it for tax reform theyre calling it a unified framework. Nine pages long. Long awaited of course, it is nine times longer than the one page we got back in the spring main points 35 the top individual rate. The corporate rate would go to 20 . Pass through businesses would be taxed at 25 versus what is currently potentially the highest rate if you get there of 39. 6 youd be able to expense 100 of expenses for the first five years or at least five years double the standard individual deduction. You get rid of the amt and the transfer tax and there are a lot of questions here. Theres no revenue number. No real word on how theyre going to pay for this. The offsets i thought that nothing on state and local or the lack there of, although that is expected to be part of any package. Nothing on obamacare taxes or Capital Gains or dividends no border adjustments as a part of this and, you know, no real overall plan here in terms of to your point of, heres what were cutting. Heres the revenue number and heres how were going to offset the loss of revenue. Some drawing their own numbers. Goldman thought it was 4 trillion over ten years. Committee for responsible federal budget says it looks to be 2 to 2 1 2, which would put it more in the box that congress would find appealing or doable and by the way, ten years is the question would it be permanent . Tax reform might imply permanency as you might say to ten year and then has the sunset, as did the bush tax cuts. Feels like they pull out politically palatable maybe for both sides but certainly for republicans. You mentioned the 35 rate for the high income, david three tax brackets 35, 25 and 12 the families in the existing 10 lower bracket will be better off because there will be a larger standard deduction and a larger Child Tax Credit and tax relief during the Committee Process thats going to be how theyre going to argue this is better for the middle and lower class cutting their tax rates and boosting their incomes and jobs, which is really what it is all about. We say it often, but its true a lot more to come on this lets send it over to john and get a look at what is coming up on whats coming up on squawk alley. The ceo will join us, also talk new numbers about housing and millennials coming up on squawk alley. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. 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We have a real character and real expert all rolled into one, writes news letters, broker, dealer, worked in the private sector, every sector its a pleasure. Its always good to be with you. Lets get to the crux of the matter we saw the german election, not a lot of Market Movement ill go on the record saying could be top of the euro for forces to get the right coalition. Hes probably out. Hes out. Thats going to give draghi room here you get macron saying we need to pull the euros together, get a common bond. What hes really talking about is lets take all the debt from everybody and shove it onto the Balance Sheet of European Central bank and wipe it out it. Hes off camera jumping up and down and agreeing. Is there any way to make negative securities disappear . That means u. S. Will do it. Lets get to the u. S. We get to the next recession, and theres always another recession. Im not calling for one right now, im just saying when it happens. Were going to get more qe you know what, they are going to find out just like japan theres no inflation. I hope they dont get into that cycle i hope we dont get into that cycle. Look who trump is putting on the bore, more keynesian, more people his first real appointment was the guy that spoke in jackson hole last year arguing for negative rates. I have an issue, too. This administration has made it very clear they like low rates my comment to that is i like low rates, medium rates and high rates as long as they are created by price discovery among free traders in a free market. There you go. Thats not whats going to happen were going to get 10, 12 people sitting around the room saying they know more than the markets. They have the Steering Wheel now. We have one minute they have the Steering Wheel i dont want to debate all of that right now lets go to another area i think at least the fact that the raising rates, going to reduce the Balance Sheet is a good thing my question to you is, is there any global dynamic which will tell you other central bank can buck that trend . I think its impossible. I think draghi just got a wakeup call. He woke up and he was jazzed. Central bank in japan is going to be obviously leading into that they are trying to figure out how to. Snap elections. Snap election that is could turn on abe because last night his Opposition Party that was going to get trounced, all right, lets go back to mayor of tokyo and her brandnew party, all of a sudden overnight polls are changing and she could win. The same problem, things have unintended consequences. John mauldin, famous expert. One word from you. One year from today when cow here, rates going to be higher, stocks going to be higher . Youre asking me questions i dont know. Youve got to go on record. I put people on record do you think they will be higher. No, i do not. I do. We have it on record ill bet a cheeseburger. Back to you. Rick santelli, thank you very much when we return, gop overhaul, rrlay kudlow will join us. Dow lost from the open, were down 16. Dont go away. Building a website in under an hour is easy with gocentral. From godaddy in fact, 68 of people who have built their. Website using gocentral, did it in under an hour, and you can too. Build a better website in under an hour. With gocentral from godaddy. Im vern, the orange money retirement rabbit, from voya. Im the money you save for retirement. Whos he . Hes green money, for spending today. Makes it easy to tell you apart. That, and i am better looking. I heard that. When its time to get organized for retirement, its time to get voya. Welcome back to squawk on the street. Financials by a wide margin, sync ronny financial that does it for this hour of squawk on the street. Back downtown for New York Stock Exchange and start of squawk alley. Thank you twitter headquarters in san francisco, 11 00 a. M. On wall street and squawk alley is live