Transcripts For CNBC Squawk Box 20180111

Live from new york where business never sleeps, this is squawk box. Good morning welcome to snark box. And whats new about that andrew is off today sitting in with us for the hour is Peter Boockvar, editor of the boock report very clever. Well done. Boock report yes i like it also a cnbc cribber we have a lot to talk about. Lets start with the u. S. Equity futures. Rattled rattled. Dow was down by 16. The s p was off by 3 nasdaq down by 10. Its the first time the nasdaq and the s p have fallen in 2018 it had a sixday winning streak up to that point well watch things this morning. Right now modest advances with the dow futures indicated up by 20 points. S p up by 4. Nasdaq up by 7 well see. Still early in the session well see as we head towards that opening bell what will happen overnight in asia, stocks in hong kong closing higher for the 13th day in a row, extending the record rining stre inwinning st index. Shanghai up by 3. 2 the dax is the biggest decliners of europe, down by 0. 2 . Green arrows in italy. But the rest of the major averages under pressure. Oil prices this morning at this point, you should know crude Oil Yesterday rallied by 1 . It touched a threeyear high of 63. 57 and it is trading higher once again this morning. Wti at 63. 93 chinas Foreign Exchange regulator is casting doubt on a report that china is considering slowing or halting purchases of u. S. Treasury bonds. The original report sent treasury yields to a tenmonth high but did it really now chinas Foreign Exchange says the news could quote the wrong source of information or it could be fake news. Treasury yields on the dollar reversed some moves following that statement the Commerce Ministry is wrarniwrarn i warning that u. S. Protectionist sentiment is rising. South koreas government says today they plan on banning cryptocurrency trading bitcoin plummeting on that noise. Local Cryptocurrency Exchanges were raided. But this was based on alleged tax evasion. Bitcoin surged 1500 last year still huge demand in the country but sparked worries of gambling addiction. South korea is one of the worlds biggest markets for major cryptocurrencies for five years we have been waiting for treasuries to get back to 3 on the tenyear so many false starts, so many times weve been blown away by another move back down to 2 so many people have shown that weve been waiting forever for it we finally get to 2. 6, immediately there needs to be a reason for it . 4 unemployment . A reason it has to be china . Oil at 63. China has been slowing purchases of u. S. Treasuries for years. This is not a flu stornew story. After the 30 last year or since the election, were up that was the biggest first week weve had in a year. Up 700 points even at the lows yesterday, when we were down 90 points, we need to ascribe that to something 90 points after a 700point gain in six sessions . Thats got to mean something what if china what if that was really true, what kind of pullback would that warrant . So all these people rushing to do this story, they just want to do it because its like tabloidy the chinese, its not in their interest to see a drop in u. S. Treasuries. They own a lot of it still which may be why they come out and issue a release like this or a rebuttal saying it may be fake news and people want to say, see we warned you about trump and his trade stuff what hes been doing with china see . Now theyre not buying our bonds. Now look whats happening. I saw a political angle to that. Look, people have been wondering what will take this market down. Any time you see potential cracks, you will see media run into those cracks and explore if this is the thing that breaks the dam. And rates have been creeping up for other reasons this nafta stuff didnt help either Kayla Tausche is with us i sit there and did someone say like i must have plugged my ear piece in late. Can i use that . You should. Theyre all rushing in and piling on. I love that big guy you see that actor when hes not like that, are you really that guy . Any way. Is this game of thrones yeah. Its why does that show seem more pertinent now we have a metaphor for everything from that show. Winter is coming. Winters here last week. Take it away we want to talk about nafta you saw markets go into a tailspin on reports that canada is convinced that a u. S. Withdrawal from nafta is emin t eminent. It says it has no information indicating that a withdrawal could happen soon. The white house says the president wants a fairer deal and that that has not changed. President trump previously suggested by only withdrawing can the u. S. Get the necessary leverage to negotiate the deal it wants speculation that trump will do it now is based on timing. Such an announcement would trigger a sixmonth exit window. That would put added pressure on the mexican side to reach a deal mexico says it will end the talks if the u. S. Pulls out. Pulling out of nafta would mean wto tariffs apply to the country. Some Agricultural Products would see tariffs of 75 toyota americas ceo told cnbc yesterday that motor vehicles, among the top nafta imports and exports for the u. S. Would get more expensive, too. It will raise the price of vehicles this supply base that all of us have is based on nafta. Its very, very difficult and it takes a long period of time. So, my guess is over the short run prices go up to consumers, and choice is reduced from consumers. Theres also the risk that some makers may pull out of north america. Its not Just Companies and counterparties spooked by the u. S. Pulling out republican lawmakers are, too. A group of representatives led by dave riker plans to attend the next round of talks beginning january 23rd the clock is ticking, there is a fear that theres an increasing chance that withdraw is the outcome that the white house chooses. Yeah. I think we have mccarthy on later. At this point, is it still best to do for republicans people that are staying in the house or is that list smaller than the people leaving how do we describe congress for 2018 more leaving or more staying 435, more are staying why are they turning tail and running . Because so many of them are in n. Sta in states where they will potentially lose any way some of these poll numbers, they see the writing on the wall and the fundraising going in the other direction. They know it will be contested always happens. Always happens theyre adults, arent they . Happens every mid term after the opposite party of the president. This doesnt help when they turn tail and run, does it . No. But they a lot of these members who are announcing their retirement served for decades and just want to throw in the towel. One big question is what happens to the various chairmanships you have seven Committee Chairmen who are going to be stepping down at the end of this term, which really leafs a lves of variables open. You talked about game of thrones earlier among these cordial colleagues theres going to be a lot of rat races to see who gets some of these roles. Rat races made me laugh that the new people coming in wont have the experience wont note ins and the outs of how to do things in recent history thats a benefit. Because the ones with expertise are so effective the ones weve got now they worked the system so well to accomplish things the president certainly feels that in the last 30 days they have been successful they have depends on how far back you look youre right. Kayla, thank you thank you is this it for us today will we see you again . No will you consider appearing again if we beg . If you beg. Okay. All right. Please please please pretty good. Wine and cheese. Well talk trade with bruce h heyman at the bottom of the hour im sure he wont like anything about what the Trump Administration is doing. So, dont miss that. House Majority Leader Kevin Mccarthy will join us at 8 00 a. M. Eastern well find out if he thinks President Trump will pull out of nafta this month thats what canadians are speculating. Warren buffett making the case for stocks yesterday on squawk box. Ive said for a long time that equities were not the place to be. To me its been absurd to see Pension Funds and those people in the early teens of this century saying we ought to have 30 or 40 bonds. To make that as a voluntary choice in the last ten years against owning assets has struck me as absolutely foolish for more on the markets, lets bring in lou breen also on set with us is steve cheveron, Portfolio Manager for federateds Global Allocation Fund and our guest host this hour, Peter Boockvar lou, lets start with you. The stocks have been on a tear the s p at 2748 as of yesterdays close. Still you dont see any resistance between here and 3,047 for that index what happens at 3,047 . Early 2015 to late 2016 then we went above it. Now we have been on this relentless tear. When i first looked at 3047 it seemed so ridiculously far away, now its a hop and a skip. Thats an interesting level. If we act similar to 2138 that troubled the market for a year and a half though 3047 looks high, that may be a midterm top the one thing, the relentlessness of this market and the low volatility of it has, i think, created its own problem. People have invested in a low volatility, lowrisk model if you get volatility, a lot of those positions put on with those slow expectations for volatility could get blown out we have not seen a pull back of 3 , 5 , 8 in forever those are the types of things when theres a slight pullback people rush youre saying if there was something to shake it by 10 , you may see bigger moves to make up for the exit . Right some initiation of volatility could beget more volatility. The interesting thing about how low the market moves have been, in 2017 there were eight days when there was a net change in the s p of 1 . Four of those up four of those down in the last two decades the average for that sort of move daily, that change is 75 wow so, yeah. You know, weve looked at the fix and other things its that assumption i think back when i think of a change in volatility, i think back to 1998, when quickly volatility was introduced to the market and we went down 20 in short order. Recovered quickly as well. But volatility was very important factor not necessarily any change to overall economics at that time and i think the situation now is set up or potentially it keeps going, but the situation with the low volatility sets itself up as, you know, creating its own stumbling block. Steve, lets talk about fundamentals you also think stocks are headed up from here, but your yearend target is 3,000 for the s p . Yeah, were at 3,000. We get to it the oldfashioned way, forecasting earnings. Analysts are behind the curve, and that can happen late cycle theyre asking the same questions, when can this end and however will this go we have a ways to go. Earnings estimates were going up all of last year you have accelerating growth the tax plan helps, we dont subscribe to the idea that the fed will all of a sudden get super aggressive and cut this off. So high Single Digits yeah. Steve, you said multiples expand sure. The fed is extracting 420 billion of liquidity, raise three times, ecb will buy 600 billion less multiples can still expand in thatment. We dont think well have three rate hikes we think well be at two we think march will be off the table. We think powell will be relatively gentle. We dont think inflation will surprise that hard to the upside thats a complete goldilocks scenario it is. Thats not worth more than 8 or 9 . Let me ask you this then to get something useful what is more likely, double that 20 up, or flat to down . More likely surprise to the upside but you just dont want to say that we have a firm view firm view is 3,000 who is the firm your good friend, phil orlando. Hes only modestly bullish . The 3,000 number is a 20 times multiple and 150 in earnings thats a nice multiple its nice Earnings Growth that doesnt mean the cycle cant extend beyond that if that happens, well look forward. I think thats a reasonable estimate given the fundamentals on the ground. Okay. Reasonable what happened to Lindsay Group time for a change and you said, okay, i have a bleak view of the world. I come on and tell joe squawk every time im on that things are bleak. Used to be that way. So you go to bleakly financial you found a firm to describe your world view. Im an optimistic cynic you did Say Something in makeup, you said i got much more bullish when what happened yeah. When trump got elected. You can say it a business perspective, absolutely but still Central Banks screwed this up. And we were talking about evans and kashkari what do they need . 4 unemployment, a rip roaring Global Economy what do they need to think maybe were too low . Kashkari has dissented every time, which implies he thinks the fed funds rate should be at 0. 65 evans, i agree with you on that steve, thanks for coming in. Lou, thank you for joining us lou, lou. Joe i have done it, in a while, lou. Okay thank you. Peter is sticking around coming up, shares of builder lennar and the other one, kb home are on the rise after both Companies Said the lower tax rate would boost future earnings well talk about the tax benefits, also Quarterly Results from the Home Builders after the break. Alerts wouldnt you like one from the market when it might be time to buy or sell . With fidelitys realtime analytics, youll get clear, actionable alerts about potential Investment Opportunities in real time. Fidelity. Open an account today. Last year was a great one for home biuilders. The index was up by more than 25 for 2017, but will the sector continue this rally lets bring in will randow i immediately think, will, that theres the macro environment that Home Builders operate in, which entails the economy and Interest Rates, and then theres what hits the bottom line, which has to do with the new tax bill. So, what is are both of those positives . I would think about it this way from a Corporate Tax rate rer fo perform perspective, if you look at horton dropping an we raised our numbers by 11 simple math would say the multiples are not overly expensive. But on a personal tax reform basis, if you think about new york, connecticut, california, you will get hurt. The housing prices could get hurt 3,000 bucks a hit per average household. In youre in california and a firsttime home buyer with 3. 25 down, youre in trouble. You have to be selective as a company, where youre investing, i guess, and as an investor which stocks you buy exactly thats why we put a sell on kb home a sell. Yeah. Thats mean. Kbs focus . Roughly 40 of revenue comes from california. Half of that is gore e geared t the firsttime home buyer. I would think some homes of 750,000 and north of that would be problem matter because you will no longer get the deductions on state and local taxes. That makes all of those homes less valuable because it makes them all more expensive. I agree hitting california again, even the National Association of realtors is forecasting prices down 10 for california. Going back to the northeast, if you think about t people are buying a home for Different Reasons than are economically feasible theyre buying because they had kids, they want a bigger house, smaller house. Most of the people in the higher income groups are buying a toll house, they can afford the incremental spend, maybe christmas is lighter but they wont get hit. Now the resale also goes down. One thing in housing is this persistent price increase, it is great for the homeowner but challenging for the millennial who has essentially been priced out . Do you see that changing at all . Millennials have children, birth rates are picking up again. You will probably see more Single Family detached houses. Average square feet a day is about 2700 square feet it used to be about 2200 so what im saying is that americans buy as much as they can. You will see mixed decline, so less square feet so you will see that with dr hortons express brand the average price point is 300,000, including california, and absorptions are much higher than overall builders. So that tells you people are buying smaller houses and what they can afford. Can builders deliver a house less than 300 thoprofitably wit Rising Labor Costs and Construction Materials they can. Lumber, lots, labor, an inflation factor of 5 they can do it, its just is the consumer will be to drive. Are they living to live in the middle of nowhere. Its really exciting. So millennials are starting to have children . That could mean theyre going to be just like us that could mean that they suddenly, instead of the eyes facing inwards, theres other things besides themselves out in the world. There might be somebody else to consider when they decide on their experiential whatever it is that theyre doing. They might realize that they need to help the baby out . Thats awesome that would be a huge change in behavior because its such a huge part of the population. Yes an important demographic the next ten years but if they have kids, they might turn into normal people. This is not because im old. Im not bitter not at all. Youth is not wasted on the young. Thank you very much when we come back, markets reacting to nafta rumors well talk about the future of the trade deal with bruce heyman, former u. S. Ambassador to canada. Thats next on squawk box. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Welcome back its time for the squawk planner. Weekly jobless claims are out at 8 30 a. M. Eastern this morning that comes along with december Producer Price index new york fed president bill dudley is speaking this afternoon. Just one Earnings Report today. Thats Delta Air Lines thats out before the bell well tell you about it when those numbers cross. Look out the floodgates are opening u. S. Equity futures at this hour, dow is up by 35 points above fair value s p up by 5. 5. Nasdaq up by 12. Phil lebeau is here, which is good the auto sector sensitive to any twists and turns when it comes to the future of nafta i want to hear about that for sure i dont know if we milked this other story for all its worth the journals front page piece on toyota and mazda. Thats fascinating foreigners will build a whole lot of cars here we did that story the other day. If you look at the raw numbers in terms of Vehicle Production in the United States, foreign brands will be eclipsing domestic brands, maybe not this year, but sometime over the next couple of years in terms of Vehicle Production here in the United States. In terms of vehicles being imported from mexico, we hit a new high last year look at this the reason were woi pointing this out. 211 of vehicles imported into the United States are built at plants in mexico and canada. Toyota with a huge presence in canada yesterday we talked with toyota americas ceo about what impact ripping up nafta would have he said it could be damaging to some brands saying we may not want to be in the u. S. We invested 22 billion in north america. We have a huge dealer body we support a lot of communities across america we are part of the fabric of america. So i doubt very much that we would pull out of the United States but that said, you know, i export 135,000 vehicles a year outside of america that would be very, very difficult for us to do to co compete if my costs move up and that volume would be picked up by a manufacturer out of asia or europe we talked with jim lentz yesterday. This stock as it is surging close to its record high, it is one to watch by the way, toyota imports more than 500,000 trucks and cars from canada lexus has a big manufacturing facility up there. General motors imports more than 800,000 vehicles from canada and mexico combined. Thats why this stock was under pressure late in the day you see that big drop there. Thats because people are saying, wait, you rip up nafta, what will happen with gms presence in canada and mexico. Mary barra said until things change, theyll continue building there important to figure this out. You need some sort of modifications, but you have to make sure you dont kit off your nose to spite your face. I think what youll see is really focused on auto parts and the content that goes into those vehicles thats really where the Trump Administration, i believe, sult matly going to say things have to change. Do we care if a foreign automaker builds all of its cars here and then employs our workers, and then, you know, we buy a lot of it . Do we care its domiciled somewhere else you can buy the stock of the stupid company, cant you . Does it matter you do care tell me why it depends on your perspective. If you have toyota building a vehicle in alabama versus building a vehicle in mexico, its far better for your economy here thats what i mean. Should we care youre not buying a ford is it patriotic to buy a ford or can you just buy the toyota . The argument you will hear from supporters of the big three, you have to buy american, theyre American Companies, ultimately the profits will be kept in the United States by that american economy. On the flip side people say if i like a bmw and i want to they pay our tax rate here. Toyota will pay our tax rate, right . For the cars they sell yes if you look at the Shareholder Base ultimately those profits go over to japan. My guess is more american shareholders in gm and ford than there would be in toyota youre right, you can buy the stock, but if the profits go to shareholders, it could be here its not the same equation it used to be dividends, Everything Else. Maybe just corporate compensation goes over there i doesnt know it has become muddled. Its more than corporate compensation if they redeploy the profits for plants here, thats coming back here, too thats a fair point but theres no guarantee that that all, it will be coming back i get it. I understand buy america but its a hell of a lot better if theyre building them here and employing our guys nobody will argue that. New plants in america are good theres no argument against that i wanted to open your mind, phil you have this red, white, blue, this America First thing you come over here to flyover country. I know it im from there i understand i like America First i dont want to be america sixth. Thats what a lot of globalists like china will be china sixth. Russia, russia sixth everybody else is first for their country, why cant we be that sets us up perfectly for the rest of this conversation for more on this lets bring in bruce heyman former u. S. Ambassador to canada under the Obama Administration thank you very much for joining us today good morning. Good to see you. Good to see you, too. Ambassador, we know things are reaching a critical time there is speculation coming from canadians that President Trump is going to pull out of nafta as early as this month, later this month when those delegations meet what do you think the odds are lets just pause a minute lets recognize that canada is our best friend in the world there is no more important relationship we have, economically, diplomatic, culturally, energy supply. Theres no more important relationship nafta is 25 years old. Its an agreement, yes, that could use updating, improving, et cetera. But to walk away from it and to quit this agreement would be reckless and irresponsible by this administration. It would cause irreparable harm to this relationship we have cherished and nourished for so many decades together. So i have no idea whether the president is going to tear this up and walk away, but he threatened it a number of times. He had done that previously on climate. He did it. He did it before on tpp. He did it. Ive never seen a time where america quits so often in terms of negotiations. And i think that would be a huge mistake. Tom donahue at the chamber of commerce has echoed many of your concerns when it comes to this the canadians have said they think if President Trump walks away, that its really a negotiating tactic maybe we should look at how this plays out, what the asks are from the United States from both canada and from mexico the United States is very interested in trying to the administration is interested in trying to cut the trade deficit. Thats a big problem with mexico, a 59 billion trade deficit with mexico. We have a small trade surplus with canada. Is there a chance the United States would walk away from nafta and then quickly set up a Bilateral Agreement with canada . We dont have as much that we have in terms of what were trying to change with them highrisk move. A lot of big ifs there, a lot of suppositions that you would be able to renegotiate with one country versus another i can tell you from a canadian perspective, more than twothirds of the u. S. States, the number one export market for those states is canada then another, you know, majority of the rest of the states, its number two number one or two export market, millions of jobs created in the United States as a result of our relationship with canada i think were playing russian roulette its one thing do it with your enemy, its another to do it with your best friend. How could we strengthen our hand with mexico without blowing up this entire treaty if the asks so far have been turned down by mexico and canada . We have been involved in negotiations on other trade agreements, tpp is a perfect example. Canada and mexico have both been participants there was a lot of learning that the u. S. Did, and all three of us experienced that in the negotiations i think updating this agreement, especially with regard to technology so much different exist in terms of industries 25 years ago that now exist today that we need to make sure this agreement is strong and enforceable for years to come. But some things the u. S. Is asking for in terms of sunset clauses on this agreement, five years if all the parties dont like it, that you can get up and walk away. Its a nogo position for canada, but more importantly for businesses who will make longterm investments if they think everybody can walk away from the agreement in five years . Thats just one example of some of the negotiating tactics the administration is trying bruce, usually the trade deficit or surplus is more of a symptom of the countrys competitivene competitiveness. Why do you think theres so much focus on whether we have a deficit or surplus with particular countries i think its a mistake in thinking about this in terms of deficit and surplus. Its one thing when its an extreme and you are looking at china. When you look at north america, in terms of total numbers, youre talking about a 1 1. 3 trillion trading pack. Its the largest in the world and broadly and incredibly successf successful a mistake happening now, the administration is using this agreement as a scapegoat i say scapegoat because of jobs lost in the economy today, its more a fact of automation, innovation, creativity, not the old thought of moving plants from one country to another based on labor in fact, lane ser gettibor is gg displaced by technology at a faster rate. This is a political move by the administration because governors, mayors, business leaders, congressmen and congresswomen they know this is an important relationship beyond the economics but also geopolitically ambassador heyman, thank you for your time. Coming up, big moves at berkshire. Check out the wall street journal. They actually had to mention cnbc holy smokes. They couldnt they finally dragged kicking and screaming because they had to cite us. Thank you for that Warren Buffett announcing two new vice chairs on squawk box. We will talk to john rogers and then house Majority Leader Kevin Mccarthy will update us on the progress of a spending bill to avert a Government Shutdown. And well talk stocks by Katie Stockton back by popular demand shes been so right about this bull market. Youre watching squawk box on cnbc tomorrow, its a day filled with promise and new beginnings, challenges and opportunities. At ameriprise financial, we cant predict what tomorrow will bring. But our comprehensive approach to Financial Planning can help make sure youre prepared for whats expected and even whats not. And that kind of Financial Confidence can help you sleep better at night. With the right financial advisor, life can be brilliant. Like you do sometimes, grandpa . And puffed. Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. 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One frustrating problem for many, their phones were locked inside charging towers while they were not charging and they couldnt get at them one user tweeted if you want to see people freaking out, lock their phone slowly dying a few inches away from them with no way of getting it back you know, people would say theres no evidence that there is a god you know what i mean dont you think theres a higher power that says watch this another user writing someone told alexa to turn off the lights intel tweeting this photo with the caption introducing blackout, the biggest thing to hi hit ces since 5g im laughing at people like that but yesterday i was watching the local news, our buddy david. Yeah. Hes great on nbc i said im leaving my phone back here leaving it back there for an hou hour did you do it i cant make it. You cant make an hour . No. I wonder if i got email fomo, fear of missing out you are millennial im resentful now i think were all pickled, our brains thats what did it. When we come back, 2017 was a down year at the box office. Big theater chains are also competing with streaming services and startups like movie pass but we will talk to an analyst still bullish on the cinemas squawk will be right back. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. It made a nice profit. Dad dad can you drive me to jessicas house . Uuughhh this is what our version of Financial Planning looks like. Tomorrow is important, but so is making the most of the house before theyre out of the house. Spend you life living. Find an advisor at northwesternmutual. Com. It can power your apps with Public Services without starting from scratch. It brings your business up to speed, doing more with systems you have in place. It can bring all your apps to life and run them within your data center. It is. The new ibm cloud private. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. Berkshire hathaway has big news two new appointments to the Berkshire Hathaway board is Movie Theater attendance hitting a two decade low as amc and other theaters try to compete with netflix shares down nearly 60 in the last year. Can you say blockbuster . So far, the stock has fallen game stop . Its fallen about 8 joining us now, stan myers, he covers amc at piper. I mean, just philosophically, stan, is there any way to save this or do we need to just accept its going to be a slimmeddown Business Model from now on i mean, do you need an imax to bring someone out . Whats going to do it . Thanks for having me. I think the challenges has been widely exaggerated really . Its down 60 . Well, amc specifically has been hit i think other stocks have been up or modestly down, regal and cinemark but the industry itself, i mean, at the end of the day, the year was down 2. 5 , box office has been down 2. 5 if you look at over the last five to six years, attendance has roughly been around 1. 3 billion in north america average u. S. Consumer goes to the movies about four times a year so that hasnt really changed. Not to say they dont have challenges consumers are spending more time watching content at home its more difficult to reach them as well, thats become not just a problem for scinemas but they have great seats now. Comfortable i can fall asleep the popcorn is a draw. Whats driving attendance, theres a number of things movie pass. How does that even work movie pass is a membership. I think its about 75 month you get unlimited movie tickets, you can see one movie per day. I understand how it works, i just dont know the financials i dont know how theyll survive. Its like an all you can seat one movie a day and movie tickets in new york are about 15, 17. Thats 50 bucks, you bring a family and you get netflix for half a year for that its never going to be competitive again. 70inch screens, hidef . Its tough. Whats interesting is exhibiters compete in the outofhome entertainment. So 99 of the content youll watch at home. Thats natural. We still go its a little better on a but its usually for a big blockbuster thats either movies like that or something you want to see. It could be worse think if they were showing the nfl in Movie Theaters. Its tough to do. Then it would be double then it would be down double digits because of the nfl and then some of them have shown concerts to try to bring in the issue with alternative content in the theaters is you need to market and you have to tell the people that that show or that game is so imax would help . I max hemax helps but the iss the premium price. And recliners have been a huge help and the gap between imax and the recliner theater has shru shrunk. Anyway were going to go in and smell things and get splashed with water. You have 4d, not everyone loves it they have subwoofers in every speak wither and every time someone shoots the seats vibrate. So theres lots of different experiences but again, most consumers tend to go about four times a year it depends on content. 2018 looks solid it will be up 1 , 2 . Thank you. Thanks for being here. Were counting this down. Peter, thank you for being here see you again soon when we return, well talk stocks with p ragi ftosttestrom blackrock and jeffrey. Stick around you cant predict the market, but through good times and bad at t. Rowe price weve helped our investors stay confident for over 80 years. Call us or your advisor. T. Rowe price. Invest with confidence. Earnings alert delta Quarterly Results ready for takeoff. Well bring you the results and reaction straight ahead. The dollar and the tenyear note are on the move this morning. A report china may halt u. S. Treasury purchases might have been fake news didnt really move the markets much anyway. And a live report from at least the stock market, maybe the others were tilted a live report from beijing is straight ahead. And financials in focus. A preview of Big Bank Earnings is on the horizon as the second hour of squawk box begins right now. Money announcer live from the beating heart of business, new york city, this is squawk box. Good morning everybody, and welcome back to squawk box on cnbc we are live from the Nasdaq Market site in times square. Im becky quick along with joe kernan, wilfred frost is here. He just joined us. I love the set, very smart, new chairs as well. And no arms. Im going to start using that because i dont. What . Very smart. In a way that means the way youre dressed or something or the way you look very smart. Well, the way becky and i have dressed. Thats rubbish. It is. Thats rubbish. See, i can talk like you, too. You can play the game, too. I was listening to the end of your netflix discussion saying how bad the rating it would be it was nonnbc nfl what if it was soccer. Soccer is better now. What . Its coming along. This is a new year, 2018. Theres less faking, less faking ow ow faking is kind of fun. It is because two minutes later theyre running so fast. Thats because theyve had the magic spray. Folks, lets look at futures. Yesterday was a slight down day for the market dow was down by about 16 points. This morning you can see futures pushing back from those losses dow futures up by 33 points, the nasdaq up by 12. We have some breaking news. Yes delta earnings just crossing the wires and phil lebeau joins us with the numbers. Delta earned 96 Cents Per Share, eight cents better than estimates. Revenue at 10. 24 billion. Slightly ahead of estimates. Passenger revenue for available seat mile the main metric up 4. 2 . Listen to this, delta for the first time in five years posting positive performance in all five regions around the world so domestic, lat tin america, pacific, europe. Costs went up 5. 6 although they believe theyre on a path for cost this year being up 0 to 2 stheer t here is the news delta is raising its guidance for 2018 earnings versus just a month ago when they gave guidance for 2018 at its analyst day. They now expect to earn between 6. 35 and 6. 70 a share, a onedollar increase in guidance. In december they said we expect 5. 35 to 5. 70, now theyre saying 6. 35 to 6. 70. The reason why the tax reform and what it will mean to the bottom line at delta. Guys, dont be surprised if the stock moves higher the consensus on the streak right now, before they raised guidance was 5. 94 a share they say theyll blow past that and expect to earn 6. 35 to 6. 70 a share. Guys back to you. Phil, thank you for that. Almost 3 move in that kicking off Earnings Seasons very nicely. China responding to reports it could trim its treasury holding. China is denying the report it may be slowing or halting its purchases of fretreasuries there was a suggestion that the report was wrong information and it could be fake news. The regulator bent on to say china manages and invests its foreign currency reserves with a principle of diversification to ensure the overall safety of assets and that its investment in u. S. Treasury bonds is Market Driven occasionally weve seen these reports pop up where people are concerned china will be changing its position on u. S. Treasuries but for the most part its been largely stable china is the Worlds Largest holder of u. S. Government debt and it currently stands at 1. 19 trillion most people who follow this the u. S. Treasury holdings hear have also said that they believe its almost impossible if not outright impossible for china to change its position, thats because china runs a current account surplus, it has a lot of u. S. Dollars, a lot of its International Business is in u. S. Dollars so it needs to keep those dollars liquid and the most practical alternative is to invest a lot in u. S. Treasuries. The Chinese Government doesnt necessarily like this. The Chinese Government has been pushing a diversification strategy for many years at the same time promoting currencies, including its own around the world but it hasnt made a whole lot of progress in that area by promoting te ing thing the renm Chinese Government is stuck with an International Global trading system it doesnt necessarily like because its so reliant on the u. S. Dollar. Guys thank you i always thought thinking about that story yesterday, all right, you dont need to buy our 2. 6 paper, you can buy germanys 40 basis point papers. Or japans 0. 086 . Can you ever make a decision i mean thats not to mention they own so much. Money flows downhill. You cant do political things when youre talking about a market that big. They have all these reserves they do but they could they have taken into account what they think the direction is and the currency as well. But for a tit for tat with tough trade talk coming from the u. S. And saying okay, you do that, well do this, i cant believe youd cut your nose off to spite your face to make a statement. Its a negotiating tactic its also true theres been a perfect storm for fixed income generally. Well, either a perfect storm or central bankers out of control. Well, im talking about in terms of supply versus demand, demand has been as high as you could imagine so its fair to say the demand from china could come off whether thats politically motivated or based on the economics. And cutting off your nose to spite your face is the same thing we were talking about in the trade negotiations with nafta if we were to pull out of that. Right. Lets talk about other stories making headlines key Economic Data ahead this morning. At 8 30 well get the labor departments weekly read of initial jobless claims well also get the december Producer Price index and the claims number is expected to register a slight drop xerox may be about to strike a major deal with japans fujifilm the wall street journal reports the two companies are discussing a number of different deals that may or may not include a fujifilm purchase of xerox. The two are already joint venture partners. A deal that was reportedly in the works yesterday is official this morning. Financial Software Company ss C Technologies is buying dst systems for 84 a share. Dst shares jumped on those reports a deal was in the works. Berkshire hathaway chairman and ceo Warren Buffett explaining to us yesterday why equities not bonds in his view are the best place for investors. Ive said for a long time that equities were the place to be theres been no comparison to me its been absurd to see Pension Funds in those people in the early teens of this century saying we ought to have 30 or 40 bonds. To make that as a voluntary choice in the last ten years against owning assets struck me as absolutely foolish. Joining us now, sean darby, jeffries global ahead of equity strategy and rick reader blackrocks global chief Investment Officer of fixed income rick is so smart that theres no ai or computer that youre youre not looking over your shoulder, are you, rick, like everybody else at blackrock . Youre too damn good. I dont know about too damn good i have a lot to do everyday. I dont see it happening. Lets start with you, sean, we had this weird bill miller comment that a meltup in equities would occur if we got to 3 on the ten year. That makes total sense with yields so low why wouldnt you in stocks. But why buy more stocks when yields became more competitive in the bond market i think theres two things. Someone theres a very large waiting in financials in global markets, particularly in places like europe and that would help spur a lending cycle the second is a lot of people look at the yield curve as a signal for what will happen in the real economy and the flattening has raised concerns about a possible recession imminent over the next 18 months so people have held back investing in stocks on the basis of where the shape of the yield curve is. So for both equities and the huge amount of must be thats now is a change in direction, in other words, that rates go up a little bit but 100 based on where they were but theyre still historically really low. We think of 6 or 7 , at least i do, from just having lived through that so is the 3 or 4 high or is it still low and manageable for equities . Its a very good question. Really . If you convert it into real terms its high. Real rates have gone very negative globally and theyre still moving more lower so the paradox is that Warren Buffett is right equities should be doing very well against what is a low hurdle rate for returns. The difference is if youre somebody who has to have a certain portion in bonds, if youre a pension fund, if youre a college trusty fund or something along those lines. If not he said for a long time put in the stocks and led it right. Rick, in your view, could central bankers still mess this up somehow are they really as great at doing what they do as what we think . They got us out of the financial crisis and now were global synchronous growth and roaring stock markets. Can they mess us up at this point . I think what the fed doing is the right thing. Theyve laid out the plan. I think they were deliberate in terms of getting it going but i think theyre doing the right thing. I think the ecb is having too deliberate the liquidity that keeps going into the market, everybody talks about the fed reducing their balance sheet. Since april theyve reduced 40 billion. Theres been a trillion and a half more liquidity thats come in in dollar equivalents ecb, bank of japan, fx reserves, Central Banks can pull back and i think the bank of japan will start moving later in this year so moving with rates, rick, or not continuing with qe so theyre going to they obviously have more qe to do but i think the ecb will start moving rate maybe later this year but it may wait the bank of japan can move their rate target higher from the zero its at today or bring it in on a curve. I think they should start moving you have an environment where you can do it. Clearly last year Global Growth was a big boost for the u. S. As well as their representative economies when we do see tightening for japan and europe, do you think it will go as well the ran the slitransition will l as weve seen state side i think a lot will depend on the direction of the dollar because a lot of the marginal global gdp growth has come from emerging markets and not only have we had negative real rates but over the last 18 months weve had a weaker dollar so weve had an incredible virtuous circle for global reflation. So not necessarily what will happen in europe or japan but just really that dollar move and provided inflation remains reasonably well contained, equities should do quite well. What do you think for the dollar over 2018 we think it trades sideways again, marginally more tightening coming from the other Central Banks to offset whats happening at the fed. In terms of valuations overall, are you worried in terms of the huge flood of money weve seen into passive products in the way that that might have artificially pushed up big cap stock valuations do you like the bigger names or are you looking elsewhere . Smaller caps and midcaps the money thats come in, weve been in this environment, its been an extraordinary liquidity and theres been very little dispersion in the markets so people want beta and so youve seen this tremendous amount of money going into beta. Youre seeing where youre getting movements across markets in the debt markets. Youre seeing it in high yield and the equities markets 2018, youll see with some pullback from the Central Banks youll see more dispersion and thats where you have passive works. Rick, are you like a kakshkari and evans . Is that the most important part of the dual mandate . I dont know if it should be. Quite frankly i think we are there are reasons why we can grow without as much inflation technology technology. The interest wilt discounting was at the end of the year that will skew that number now youre seeing tangible wage pressure so the door is open youll get wage pressure will push us above 2 inflation but were going through what is a revolutionary dynamic terms of cost reduction. Are we going to see you in davos . Im not going to go this year i have some other commitments from our funds i have that to do. Unfortunately he says i dont know okay. Youll miss it. Yeah, ill miss it this year. Youll be sorry you two guys talk and its like you understand each other, dont you right . You can finish each others sentences . Did you understand a thing he said yes, i did, absolutely. Joe did, too. It does annoy me a little bit i was going to say still to come, its that time of year again flu season is in full swing and Emergency Rooms and pharmacies are being put to the test when it comes to treatment. How bad will this flu season be . Well have a report coming up next also Berkshire Hathaway hathaway and shareholder ceo of aerial investments john rogerwis ll join us to talk about the markets. Squawk box will be right back. Mom and dad got a new car. With the extra third row of seats. They think its theirs. Look at them, they have no idea its not theirs. Its mine. Mine. Mine. Mine. The new lexus rx 350l with three rows for seven passengers. Are you excited about your baby sister coming . Experience space for the unexpected with the rx l, part of the rx family. Experience amazing at your lexus dealer. The markets change. At t. Rowe price. Our disciplined approach remains. Global markets may be uncertain. But you can feel confident in our investment experience around the world. Call us or your advisor. T. Rowe price. Invest with confidence. Welcome back Emergency Rooms are crowded, pharmacies are seeing spot shortages of flu treatments and some states are seeing a higher number of deaths from flu than usual. Meg tirrell has more on that seasons flu drama its shaping up to be a tough time, right, meg thats right, flu is widespread in 46 states and its causing more hospitalizations in previous years the major reason is the strain of the virus circulating its called h3n2 and it rapidly increased in december. Dr. Anthony fauci told us its a more severe strain and the flu vaccine isnt providing as much protection this year. A really good year of protection would be about 60 efficacy we cant tell for sure right now but were estimating its going to be significantly less it will probably be around 30 for the predominant strain here in california, we talked with doctors at Emergency Rooms and clinics who said the flu is putting pressure on the health care system. So last year a busy day in our Emergency Department would have been 200, maybe up to 220 everyday this week weve been seeing 260, 270, and a major component is people with influen influenzalike symptoms. And its not just the patients who are getting sick. Especially this year when the flu vaccine doesnt work as well we all get the flu shots but when half of our staff is out sick with the flu its hard to take care of our patients. And with e. R. S getting overwhelmed by flu patients, doctors at stanford are encouraging the use of telemedicine for those without major complications so patients can get the care they need without risking spreading the flu further. They recommend staying home from work when sick and even though it appears less effective this year, still getting a flu shot guys, back over to you. Mega, i got it was the four strain instead of the threestrain flu shot. How effective is the fourstrain versus the threestrain or this all how do you figure thought that out whats the best thing to do . Well, i believe both the four strain and the three strain contain two of the astrains so i think both of them would be considered along those lines in terms of protectiveness and people say even though its less effective it still has some protection so we should get the flu shot. Why cant they make it even better is it just the flu changes so rapidly its almost impossible to track down . Thats a great question they make the decision in february based on whats circulated in the other hemisphere they only get to about 60 effectiveness at their best guesses so what theyre working on and whats so important is a universal flu vaccine which would work even though the flu changes every year but theyre the ill in the early changes of working on that. Or could they get to the point where they could produce these vaccinations more quickly so they werent making a decision in february, too . Thats another thing. The production is still happening in eggs so, of course, working on newer technologies to try to speed up that production would be extremely helpful. Meg, you know whos here . Wilfred . Who wilfred so how many operations what . How many operations were put off over in the uk nows your turn the flu is defend the entire british system. The flu season is so bad no one can get an operation on their knee for like 12 years or something. Now youve got private insurance socialism struggles against flu more, is that what i dont know. Is it the severity of the flu season this time or a problem with single payer and socialized medicine which is it . I dont know what the premises of this is. The premises is that there are 50,000 operations that people have to delay. The flu picks up because of the cold weather. I cannot believe youre making excuses and cant just say im an american now and i reject the socialized medicine. You have to build up the straw man, make him defend the entire empire. Take a deeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Liberate your spine. Aflac and reach, toes blossoming. Not that great at yoga ya but when i slipped a disc, he paid my claim in just one day. So he had your back . Yup in just one day, we process, approve and pay. One day pay. Only from aflac coming up, Ariel Investments ceo and Berkshire Hathaway shareholder john rogers with reaction to yesterdays moves by Berkshire Hathaway to its board and Warren Buffetts comments on the markets. As we head to break, a look at u. S. Equity futures pointing higher after slight declines yesterday. Were up about a quarter percent as a whole nobodys putting their money into equities. Theyre not investing in commodities or fixed income. 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Then that data runs across our network, and we use it to optimize the timing of lights, so that travel times are shorter. Who knew asphalt could help save the environment . Good morning and a warm welcome back to squawk box on cnbc live from the Nasdaq Market site in times square among the stories front and center, Delta Airline shares are jumping. Delta 96 Cents Per Share beating forecast by eight cents, it raised its four year guidance pointing to the tax benefits of tax reform, its up2. 6 in the premarket were an hour away from two key pieces of Economic Data. At 8 30, well get the weekly report on initial jobless claims as well as december Producer Price index figures. This morning brent crude hitting its highest level since may 2015 while wti has touched its best level since december, 2014, sentiment is being helped by lower inventories and a drop in production, up about a third of a percent today up about a percent yesterday for oil prices, too. Straight up, i wonder whats high i dont know. I think youre right, weve been looking for supply for so long, its demand. Theres some geopolitical technical factors. That hasnt moved in in a long time. If you were talking about Fracking Fracking not being able to get whats the high we had some iran issues. Whats the high whats the high whats the high this time i dont know, weve got a Technical Analyst coming up. Comes to how much you can produce with frack. Maybe back to 80 . We can stay at these levels for a while before we get more capital committed to putting more fracking in you can turn the spigots back on but you havent had massive amounts of money going into additional fracking wells so if it stays above 60 for an exte extended period of time you will see additional capital. But oil has managed to at least if you watch it psychologically, its managed just basically to confound the consensus in recent years, where people thought no way its going below 100 again and it went back down. Then i was convinced it wasnt going to go above 60. Well, no one assumed russia and opec would keep their agreements as well and they have. I dont know if i ever believe in fundamentals. We finally know what they were after we see it move. Concerns about the u. S. Pulling out of nafta and the future of the trade pact sent shock waves through the markets. Dom chu choins us njoins with u naftasensitive stocks, both ones that are hurting and one that benefits. It depends on whether or not we have nafta in place or we get out of that a. But we are going to see the effects in the market. We saw them pronounced in the currency markets so lets look at an example. Dollar mexican peso, you can see the Straight Line up that happened on the headlines that maybe there was new development about pulling out of nafta. Dollar rising against the peso you saw a similar move against the Canadian Dollar as well. In the equity markets, some etfs that track canada and mexico in this case the canada etf on the righthand side of the screen you can see the sharp drop lower so we wanted to look at the sensitive stocks to these nafta headlines. Theyre the companies that get a lot of their sales exposure to places like canada and mexico. Canada first if you look at Companies Like flour, they get 11 of their total sales from canada. Costco gets 15 . Quanta service which is provides infrastructure and support to Power Companies and oil and gas companies, 16 exposure. Marathon oil 21 and molson coors, no surprise there, big beer company, 28 of its sales exposure same thing in mexico as well these stocks have exposure to mexico American Towers 6 of their sales, semipra ener sempra eney then Union Pacific at 11 and Kansas City Southern nearly half of their sales come from the mexico side of things so we saw that move for sure yesterday in Kansas City Southern back over to you. Clearly Something Like Kansas City Southern if its half of sales theres focus on that. Even if the whole of nafta went away, you dont see zero sales across borders, its just a slightly different price with some tariff coming in in the place of free trade before its not to say stocks go to nothing, just that whatever traders are priced in with regard to their financial benefits or anticipated profits have to get readjusted so its not like they lose half their value, they just have to preprice because the assumptions driving the profit projections have to be adjusted down as well. Very similar discussions about which stocks will be affected in europe if theres a nodeal scenario with the brexit negotiations. In the meantime, Warren Buffett announced Berkshire Hathaway is adding greg ahbel and ajit jain to his board. When im not ceo there will be another ceo and how that ceo will organize things will be up to him hell figure out the best way and it wont change very much. It will change a little but not very much. Joining us now is berkshire shareholder john rogers who is chairman, ceo and cio of Ariel Investments. Great to see you. Thanks for being here. John, youve bonn to the berkshire shareholder meetings for 15 years what did you think of this announcement yesterday in terms of Succession Planning i thought it was classic warren to really have a great game plan for the future, realizing that, you know, as he said, ten years from now, 15 years from now there will be change so putting people in place makes sense and making it clear to the world who will be able to be in place and give them a chance to run these businesses and be in charge was a terrific idea. And the way this is rolled out, you see who the potential successors are, their names are very familiar to berkshire shareholders, men who have been involved in the company for decades. Is there anything else you as a shareholder would like to see . I think that i have so much confidence in warren hes the most brilliant investor of all time by far, no one even comes close and so i know hes going to have great judgment in whoever he chooses to put in that Succession Plan and ive had a chance to get to know ajit personally and feel like hes a terrific leader. In terms of the years youve held Berkshire Hathaway as a stock, when there has been a down year of performance, when its underperformed relatively, have you in your thought process of whether you hold or sell ever thought im going to give an extra year of leeway, an extra bit of fluctuation because it has Warren Buffett at the helm with his longterm track record and when if he does go many years from now will you be tighter on the performance does that mean the first few years of performance after he departs will be more crucial for shareholders like you . We are typically longterm investors. Our logo is a turt sle so were very, very patient with warren we never worry he has a down year, down two years, down three years, we believe in him so much were there for the long run and we have really a lot of confidence in the Succession Plan so well still be owning berkshire for the long run were there for the long run i tone stock personally in my personal portfolio i only have two stocks in my personal portfolio outside of the boards i happen to serve on, i put all of my money in my own funds and we own morning starr and berkshire because of my confidence in warren. There was a great moment yesterday in the interview where warren brought out his samsung flip phone and made clear to becky the day he buys an iphone its over because the last person has bought one. In terms of his investment with apple, does it worry you hes not a user of the products does that make it less convincing of an investment in terms of his conviction versus over the years products like coke which we know, of course hes certainly a user of drinker of excuse me. [ laughter ] did you just call him a coke user cocacola [ laughter ] whoo hoo i love to see him at the annual meeting eating his favorite products, too, and continues to be extraordinarily Healthy Eating the way he eats and i love the way he goes to mcdonalds every morning i happen to serve on the board of mcdonalds and its an extraordinary brand. At the end of the day, he has a diversified portfolio, he doesnt have to use the products becky was sitting there with a blackberry he goaes back further than you. I have an iphone, too. But you still have this thing. Its right here. Its a brick or something. I can type on it quickly. You can dictate and siri never gets anything wrong. Siri can understand everything you say and everybody hear s all your conversations. Siri writes stuff that in no universe would anyone say the stuff she comes up with. John i dont know if you short apple but their Voice Recognition has a long, long way to go. Im sure theyll get it right. I love my iphone. John, lets talk about your history. Youve been buying stocks i think your dad started giving them to you for christmas when you were 12 and maybe at first you were a little bit of a reluctant stock owner but you caught on quickly, right i nell love with it and couldnt wait to go to my dads Brokerage Office and watch the old transluxe machine and watch the stocks go by. So youve been doing this a long time, most of your life, and weve had a lot of conversations recently about bitcoin and the cryptocurrencies warren says he thinks that will end badly. He doesnt know what will happen but he thinks it will end badly. Where do you stand on bitcoin and other cryptocurrencies i wouldnt get against warren and at the same time i continue to see everywhere i go everyone is talking about it. College students, business students, everywhere you go, people are interested in this. When everybody is talking about it, it makes me feel like were near the top of a bubble you never know when the top will happen and if we wait five years, well see them go lower. John, were you calling your congressman for or against the Tax Reform Act i wasnt calling my congressman but it has added value. Were you for it or against it were you for it before you were against it which were you did the rationale of it make sense to you in unleashing the private sector or did you have the Schumer Pelosi tax scam view point of it . As a fiduciary and as the Portfolio Manager of ariel fund over 30 years now i knew and believed, as warren said yesterday, it adds to the profitability of many, many domesticallybased companies here in america. It adds value to our portfolio and on behalf of my shareholders i understood tax reform is very, very good for Many Companies in our portfolio. You dont think any people getting Waste Management hourly workers just got a 2,000 bonus . You dont think its helping people that havent participated recently it just helps shareholders its not helping the underlying economy or workers i think if you have more profitability in American Companies because of the lower taxes those companies are worth more, those management teams will use that cash to pay dividends, sometimes theyll use it to buy back stock, sometimes theyll use it to make Strategic Acquisitions and those things will be good for the workers for those companies and in the long run i think thats something that will benefit our economy and stocks will be happy in the ariel fund. John, thank you for joining us today. Thank you. When we return, a preview of the big bank which is report earnings for tomorrow. And devastation in california 17 people are dead and more than a dozen missing as crews search for survivors after mudslides in nda hern california destroyed hured homes and businesses the latest at the top of the hour squawk box will be right back. Were back on air. Were back. Earnings season kicking off for financials j. P. Morgan, wells fargo, blackrock and pnc reporting. Lefts bring in jeffrey hart principal at sandler oneal. Thanks for joining us. Tax write downs will be featured in this quarters earnings but optimistic outlook in terms of the commentary on the tax reform bill Going Forward how does that balance play out in terms of what you are expecting for these stocks it will be a messy quarter. Especially if youre a bank that has dta from prior net operating losses or if you have earnings sitting in a 40 subsidiary. But the consensus number is leaving that out thats the right way to think about it because its not a core item when you move into 2018, 2019, with the tax rate going down, it doesnt take too long to earn those charges back so it will be a messy quarter and hard to interpret but i agree entirely the focus will be all eyes on 2018, whats the real outlook like why were still bullish on largecap banks is the lower tax rate coupled with accelerated gdp growth is a Good Environment for banks. We would expect to see loan growth picking up, Capital Markets being strong and credit, things continue to look good there. Were set up for a good 2018 for banks, i believe. So those are 2018 factors as you say, but trading loan growth in terms of q4s numbers, could those disappoint more than people are expecting i think trading weve marked that down already if you went back six weeks it would have been a disappointing trading quarter but people have factored that in and low growth has been sluggish, at least for the last two quarters but i think the as often is the case, the old saying the simplest explanation is often the best explanation, especially on the commercial side, we had such strong loan growth, i think we had to have a bit of reversion, maybe taxrelated uncertainty was the catalyst but if we get into a stronger gdp growth environment and how do we know the tax roles, i think we could see it picking up on the commercial side in 2018 i see you got a buy on Goldman Sachs, they had a tougher year last year, what are the reasons for the buy . When i look at Goldman Sachs, heres the key, it underperformed it was up 6 , peers were up 25 . But as i look to 2018, in an environment where gdp growth is moving from 2 to 3 , the 21 consensus number looks too low i expect that to work up toward 25 and if that kind of Earnings Growth materializes versus what people are expecting you see multiple expansion and goldman will be a good stock to own. I think theres skeptics out there that they can benefit in a rising gdp growth environment. Theyll put those skeptics to rest. Still a buy on bank of america despite that being the best performer last year thats one that at least on a valuation basis is getting tighter for me which is why im more inclined to push people toward Goldman Sachs but theyre more u. S. Centric than other universal banks. The tax benefit helps them and theyre executing on both the finally getting organic growth and theexpense side so there i still up side to play out and our other large cap buy is citigroup. Jeffrey, thanks very much for joining us jeff ray harte, mainly j. P. Morgan wells fargo kickoff tomorrow. Were ready when we come back, we have a list of stocks you need to open. Then at the top of the hour house Majority Leader Kevin Mccarthy will be our special guest. As we head to break, looks at european markets. The dak is flat, the cac and the ftse slightly higher down to the very server. It keeps your insights from prying eyes, so theyre used by no one else but you. It. Is. The cloud. The ibm cloud. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. We know life can be hectic. Thats why, at xfinity, weve been working hard to simplify your experiences with us. Now, with instant text and email updates, youll always be up to date. You can easily add premium channels, so you dont miss your favorite show. And with just a single word, find all the answers youre looking for because getting what you need should be simple, fast, and easy. Download the xfinity my account app or go online today. Take a look at stocks to watch this morning xerox is in talks about several different deal possibilities with japans fujifilm. According to the wall street journal see, we cite them all the time the paper says that could include a possible buyout of xerox by fujifilm. Dollar tree was rated buy at guggenheim which says the discount retailer qualifies as a turnaround and a growth story. Chevron was upgraded to outperform to market perform they say they will benefit from the ramping up of significant projects and tax reform which i love both john rogers and buffett both have that same answer about good for shareholders. It begs the question. Was john rogers and Warren Buffett both lobbying against helping their shareholders john rogers said he hasnt called any of his congressmen. But do you think he was look their questions come warren was against the tax plan but he was opposed to helping berkshire shareholders. I think their questions come from what happens with the debt you take out both warren and charlie yesterday said any economist who tells you they know what happens in the scenario is not correct. But theyre basically saying when you ask all these good things have happened so far, were you for it or against it, they admit they were against it but they grudgingly concede its helping berkshire shareholders and helping the economy. Didnt you know that beforehand and you were against the interest of your shareholders i dont think he ever publicly came out and said anything. You can read between the lines. But somebody can have a personal opinion of thinking whats going to happen over the long term and what happens with the deficit. I just think it puts them in a position of lobbying against something that would help what they do for a living. It would not be the first time any Corporate Executive or any investor looked at things and thought one thing that didnt help their pocketbook or investors pocketbook. Maybe they have different personal feelings about larger social implications. But theres the crucial factor of the shortterm and longterm effect which is one cant argue we know yet. Although buffett said yesterday that hes not as concerned about deficits as he used to be. And jamie dimon says 4 everybodys got an opinion 4 wouldnt just help berkshire shareholders jamie dimon has been supporting tax reform throughout. Time will tell. Facebook, by the way, wants to make it easier for you to find local news online from vetted sources, recode is reporting facebook is testing a new section inside the companys app called today in. Its made up of entirely local news, events and announcements Facebook Says users may eventually be able to follow news from cities where they dont currently live, maybe things like your hometown. Diet coke is getting a makeover cocacola is now adding four new flavors of diet cocacola. Getting right back up on that coke horse again i see. It has an updated logo. Are you a coke user right back up on it, no fear. I like to drink cocacola the new flavors are ginger lime, twisted mango, zesty blood orange and feisty cherry the company says the new flavors and look are aimed at appealing to millennials. Like you. In hopes of finding a new generation of users. Or drinkers i quite like some of the names of these flavors i like the full fat version, though, so i dont know about the diet flavors. When we come back, house Majority Leader Kevin Mccarthy will join us to talk about the congressional agenda then we will talk technicals with btig chief strategist Katie Stockton in the meantime, check out the futures. Green arrows across the board. Squawk box will be right back. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. We rbut we are not victims. Ack. We are survivors. We are survivors. We are survivors. And now we take brilinta. For people whove been hospitalized for a heart attack. We take brilinta with a baby aspirin. No more than one hundred milligrams. As it affects how well brilinta works. Brilinta helps keep platelets from sticking together and forming a clot. In a Clinical Study brilinta worked better than plavix®. Brilinta reduced the chance of another heart attack. Or dying from one. Dont stop taking brilinta without talking to your doctor,. Since stopping it too soon increases your risk of clots in your stent,. Heart attack, stroke, and even death. Brilinta may cause bruising or bleeding more easily,. Or serious, sometimes fatal bleeding. Dont take brilinta if you have bleeding, like stomach ulcers,. A history of bleeding in the brain, or severe liver problems. Slow heart rhythm has been reported. Tell your doctor about bleeding,. New or unexpected shortness of breath, any planned surgery, and all medicines you take. If you recently had a heart attack, ask your doctor about brilinta. My heart is worth brilinta. If you cant afford your medication, astrazeneca. May be able to help. Earnings central shares of delta flying high after its Quarterly Report as earnings season gets underway. Government shutdown watch. Well check in with house Majority Leader Kevin Mccarthy on the progress of a spending bill. Plus bitcoin invasion. Crypto mining is taking over a small rural town and local utilities are saying whoa. A live report coming up as the final hour of squawk box begins right now announcer live from the most powerful city in the world, new york, this is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square, im joe kernan along with becky quick and wilfred frost. Andrew is off today. The futures indicated up a little bit a bounceback from when they were rattled yesterday. Closed down 16 points. Were up another 41, that would be 741 in the last seven session. Any time theres red arrows we think oh, my goodness. Because were not used to seeing them. We dont even mention hundred point days. Hundred pointsisnt when it used to be. Its not but five in a row is. Breaking news from walmart, Courtney Reagan joins us with the news courtney hey there, joe. The Worlds Largest retailer giving its u. S. Employees a bonus, a wage increase and expanded maternity and parental leave thanks to the new tax reform bill so eligible Hourly Associates could get between 200 and 1,000, depending on your tenure with the Company Thanks to the new tax reform bill that will cost walmart about 400 million in the current fiscal year ending january 31 in february theyre increasing their starting wage to 11 an hour this is in addition to some wage increases already planned. That will be an additional 300 million in labor expenses for the fiscal year and that wasnt part of walmarts guidance fulltime Hourly Associates will be eligible for ten weeks of paid Maternity Leave, six weeks paid parental leave. Thats an increase from the six to eight weeks of Maternity Leave at just 50 to 60 pay currently and 14 days of parental leave beyond that, walmart introducing a new adoption benefit this is for full time and salaried employees, up to 5,000 per child to cover expenses like agency fees and legal costs so the retailer says the combined wage and benefit changes will benefit the one million employees that are Hourly Associates in the u. S. And walmart says this is just the beginning, were still looking into what other benefits that we can offer to both our shareholders, our associates and those involved in the company of walmart based on the tax reform. And well know more on february 20 when walmart releases the full details back over to you guys. This is something it was was it three years ago when they first came out and started announcing wage increases . Exactly, the 9, then the 10. And now up to 11. So bonuses are wage increases are something that are planned typically although this 11 increase was not in the plan which is why were seeing that additional expense occurring so good is john rogers has he left the studio where was he was that in chicago . He was in chicago. I know he said dividends and buybacks and things like that. How many of these do we need before it just ruins the narrative. It ruins it. I hate it when it ruins the narrative that its only lining the pockets of the fat cats. Wage increases are something people have been waiting for and mostly they say that that the consensus is that that would take time. The day it passed you saw comcast theres a difference between onetime bonuses and wage increases. This is an instantaneous wage increase. Bonuses are no good youd rather not have them anybody who pushes back and says this is a one time thing, a wage increase is hard for anybody to argue with. And thats happened as well as with the bonuses. Waste management was 2,000 bonuses for thats a big deal. And its positive its a positive. It kills people that they call it the tax scam kind even find them, schumer and pelosi. More news on the tax front check out shares of delta. Theyre much higher after a bead on the top and bottom line delta raising its full year guidance pointing to the benefits of tax reform this is a big increase this comes after the guidance they recently gave is quite a bit higher than that you can see delta shares are up by 3. 6 . Earnings season kicks into high gear with blackrock, j. P. Morgan and wells fargo among the names reporting and well probably hear more on the tax reform bill in just about every one of these cases. Wells fargo one of the banks that already hiked its minimum wage to 15. Ive asked all of the six for comments others were waiting for earnings so j. P. Morgan would say they hiked their earnings unrelated so we could get bonuses. Will you cover this. I will, of course. Another story we are watching in southern california, the death toll climbing to 17 people overnight as devastating mudslides swept through the region 25 people are injured and at least 50 had to be rescued by helicopters. Officials say more than 500 crew members are engaged in the searchandrescue effort many homes have up to five feet of mud inside living rooms and bedrooms. To politics now. First time weve breeched that subject today. We talk about it nonstop. Certainly do. Congress getting back to work and another possible Government Shutdown joining us to talk about that Majority Leader Kevin Mccarthy lets start with the good stuff, congressman how many guys are leaving . I dont want to talk to you about that i hope youve got i know youve been on some other networks talking about how the republicans will get through this but it had to shake you watching this but did you just hear that about walmart . The news about walmart and how many employees will benefit from these bonuses and wage hikes given the tax bill how many times do do you think that narrative ever dies that its only going to shareholders thats going to ruin the whole other side that calls it a tax scam if it keeps happening they cant say that anymore. Well, republican nancy pelosi said, she said it would be armageddon if this tax bill passes people are going to die. Now you have more than a Million People that have received more than a billion dollars between that just in bonuses and just think starting next month and in march people will be taking more home in their paychecks because withholding tables are coming out but whats more interesting that no one talked about prior we know the freeze going on in Energy Costs Energy company after Energy Company lowering their rates because of the tax benefit and passing that on to their customers so youre seeing it from wages, for Maternity Leave bong longer to now bills being less because of the tax bill this is the start of americas comeback. I wonder whether you can whether this is going to be enough Critical Mass to overcome the Media Coverage and the talking points of the left for november for 18 this is now im getting into the notion that theres a lot of incumbents that are leaving. Maybe they have their own personal reasons but just to a casual observer it looks like theyre worried about their prospects in the upcoming election and theyre just turning tail and running right now. Is that not whats happening no. Think of those who have announced. Many of them have been here two decades. Many of them are Committee Chairs and one thing republicans do is put term limits on Committee Chairs so people like ed royce, bill schuster, theyre still going to be here for another year so from that standpoint i dont see that play i know the democrats want to bring that up but thats not the indication that i see, recruits coming in and the history says off year election its the party in power that has the white house loses seats but remember if that was the case would you want to have nancy pelosi as your speaker again . You would have never gotten these bonuses, you never would have gotten the minimum wage increase or your electrical bills being lowered so i feel good about the prospects in november because in ten months when people are seeing economic growth, remember the growth you had under barack obama and what you have today fundamentally different. Remember your 401 k i was talking to an individual the other night. They dont have the same philosophy as i have but they said i have to give you credit, i looked at my retirement, im doing really well. So that raises everybody in america to be a little stronger. Leader, do you think daca is gone i dont know what happens with the shutdown or any of that stuff . I saw someone appealing to the left to get smart, just give trump something on the wall. Just say youll start it or pretend it might even get started and get Everything Else you want do you think theyll be smart enough to try that will there be a deal you have to have security. Or else everybody keeps coming but whats so ironic a few years back you had a few senators in there with hillary, with biden and others, they all voted for funding to put the wall along the border so this is not new. Its not something they havent voted for before and the only question about a shutdown doesnt come to remembers, that goes to nancy pelosi and what shes trying to do, the only were stuck in a continuing resolution, were trying to get a budget agreement so we can fund our military. Shes holding the military hostage for political gain in regards to dhaka that isnt going to into effect until marge and she has gone to her conference and made them vote no you can watch it on the floor. She wanted america to shut down before christmas remember what weve done weve given the largest pay raise to our military women and men in the last eight years and she tries to hold that back. Thats the worst part. Shes playing games and that has to stop. I thought the president was fantastic when he brought both sides together and let the American People watch it and said lets solve this problem. Yeah that was interesting to watch. Do you still live in california . Do you have to to keep your job where you are . I proudly live in the city of bakersfield. Would you move . No, im born and raised in bakersfield, i love the place. Bakersfield isnt california. Thats not california. Thank god its not like the others but california is going to have a large surplus. They just raised the gas tax to the highest. Why dont they give the californians a tax cut why didnt jerry brown takes the taxpayer money. Then the loss of salt wouldnt be some of them are starting to think that, i think. They have to think that. And are you retiring . Do you have something to tell us i am not retiring its a major honor to serve here. So we can you down. Youve got one going for you. All right, hope to see you again soon thank you, leader mccarthy. I saw the majority leader was very confused by that. Get back to work, leader still to come, are the charts talking about a pullback for the markets. Well check in with Katie Stockton right after this short break. The great emperor penguin migration. Trekking a hundred miles inland to their breeding grounds. Except for these two fellows. This time next year, were gonna be sitting on an egg. I think were getting close make a uturn. Uturn . Recalculating. Man, we are never gonna breed. Just give it a second. You will arrive in 92 days. Nah, nuhuh. Nope, nope, nope. You know who im gonna follow . My instincts. As long as gps can still get you lost, you can count on geico saving folks money. Im breeding, man. Fifteen minutes could save you fifteen percent or more on car insurance. Wave after wave, wave after wave slowly drifting pointing just a little bit higher we had slight declines yesterday but still up a quarter of a percent or so for the week coming in today. Were up 47 points on the dow. European trade for you this morning is sort of mixed yesterday overall was soft but the banks performed well with yields rising today, slight gains for germany and france ten year treasury note pulled back but still higher on the week lets discuss markets a little bit more Katie Stockton joins us from btig lets talk about the move in the ten year what is the key breakout level for you that would make you think it would shoot higher. Its already broken out the 242 level was important and weve seen a decisive move above that now we contend with the highs around 264 and above that youre talking about this multidecade down trend channel being challenged so that would be a major move to see it decisively above the 264. Do you look at international yields many people saying this latest move have been driven by whats been going on in japan or elsewhe elsewhere . The same thing, were seeing relief rallies and yields around the world. Its translated into impressive breakouts just this week in the Financial Sector broadly speaking so its very significant. Well get to equities, but in terms of oil prices, great start to the year after a resoundingly strong q4 ive heard analysts say fundamentals but a lot have said its been supported by the technical side of things is that fair no doubt. Fx and commodities are driven by technicals that are widely followed from a technical basis. So we saw a series of breakouts in Wti Crude Oil last year it signalled a long term bullish move thats years in the making not shortterm in the near term weve seen 70 per barrel from the last breakout and thats reasonable in the intermediate term. On the s p youve been looking at the moving averages whats your take away . Still pointing higher we look at something called a market internal measure and those would be things like sentiment and breath and just the past week or so that we saw with the s p 500, we saw major extremes of sentiment and breath. Upswings. Yes so the percentage of stocks above their 50day moving averages for example within the s p 500 reached the highest since mid2016 so were in the territory with external measures that we have extremes that need to be relieved but not until we see the down tick in momentum. By that we can look at the moving averages. Id like to look at sensitive ones to flatten and thats where you position for a pull back support for the s p 500 is 4 to 5 below so we have to assume that down side risk. We had lou breen on and he is looking at the s p and 3,047 he says thats the next fibonacci level. I can get to a target beyond the near term of about 2900 in my work. The problem with is s p 500 is its just been straight up so we have to look at other indices. The russell 2000 can get 5 or 6 higher. Dont you have a super bullish super cycle s p target for the next couple years . Ive heard a few of those late. I where are they . Its not my game, frankly. Come on, pick a number. Just throw out a round number, right . Its all the round numbers. Health care is your top pick . For now it is thats a near to intermediate term view and i say that because of its relatively oversold conditions so health care has underperformed in recent months and now on an absolute basis youre getting breakouts so they look compelling when you consider it will be fang stocks that drive a pullback because those are the source. Can you give us a range on oil high and low 70 is an intermediate term target we could go higher but ill start a reset. How about the ten year . I think well clear 264 that gets us to a measured move projection of about 333 so it wouldnt be a thisyear scenario based on the nature of the charts but thats how big a deal it would be. It wouldnt be this year . Not on the nature of the measured moves. If i knew we werent going to go above 333, that would be something to me. I can deal with 333. Hopefully the market can, too. Wilf can, too jeff i was about to say thank you to jeff. Jeff is staying. About time. All ive done for you. When we come back, why marriott is apologizing to customers in china we have that story next. And tomorrow on squawk box, dont miss a special event with blackrock ceo larry fink. Thats tomorrow at 6 15 a. M. Eastern time well be right back. Marriott international is apologizing after a questionnaire gaffe in china the Hotel Operator sent an online guest survey to customers in china that listed chineseclaimed regions like tibet and taiwan as separate countries. This lead to many accusing the company of disrespecting chinese sovereignty and others calling for a boycott. Marriott has been ordered by chinese authorities to temporarily shut down its web site and mobile app to chinese residents. Thats a weird story. Somebody stepped in it. Taiwan is part of china according to whom . According to china. I know, but i understand how youd say that. But it was probably not their intention to step into a major diplomatic. But you dont need to toe the line in chinese propaganda, either. But if youre a company doing business in china you should probably be watching so google i dont think anything comes up when you search tiananmen square, so thats okay . Im not saying it is. But if youre a company doing business there, save it for points of principle and not customer questionnaires. When we think our freedom over here is being eroded. Oh, really compared to other places please. Ive got the flag behind me. I know you do at least its behind you think if it was behind andrew. Or you. It would be too much. It would be too much, i dont need it. Id like a little british one on the desk. That would be nice. It would be very tiny now given the empire at this point its more of a never tiny in my eyes. When we come back breaking news about to hit the tape well bring you those numbers. Squawk will be right back. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. We are seconds away from the weekly jobless claims and december ppi weve been watching the market this is morning and yesterday there was the ever so slight pullback, decline of 15 or 16 point for the dow. You can see the green arrows are back and forth dow futures are indicated up 47 points above fair value. The s p 500 would open up by over seven points and the nasdaq over 17. Weve been watching the tenyear so closely because the yields has been pushing higher, too the yield is below 2. 6 . 2. 564 but some of the highest levels weve seen. Oil closed at a three year high yesterday. Rick san kelly is standing by with numbers. Lets start out with our test look at ppi down onetenth thats threetenths away from expectations and a half percent below last months unrevised up fourtenths strip out food and energy, down onetenth one against, were expecting twotenths last look, threetenths on revised. If you look at food and energy trade month of month thats up onetenth. Final demand year over year 2. 6 sounds high, we were expecting 3 coming off of 3. 1 . Food and energy year over year 2. 3 versus 2. 4 these are not hot numbers. Claims, 261,000. Thats about 16,000 more than we were expecting and it follows 250 which means its up 11 theres holidays and maybe the gps isnt quite right here yet continuing claims always a week in arrears, move from 1. 902 to 1. 867. Weve hardly flinched on the long end here which is a bit surprising considering so many thing think that the only thing separating us from higher yield is higher inflation. We didnt get it with this number but we didnt get a lot of buying pushing yields down. We have a dozen billion at auction today the last of supply and contrary to logic threeyear and tenyear options went remarkably wellwell, considerine news the last couple days. Becky, back to you. The tabloid mentality took over, rick i get it, drug, click bait, right . So they started with something that said the worldwide markets were rattled and i looked to see where there was rattling going on and it wasnt in the equity markets because it was a quarter of a percent after being up 700 points in six sessions but they love the story so much that they made the narrative fit with the story they loved and if traders were really going to stop, you would see something in the markets that you did not see yesterday so why do people buy it so quickly . They want a quick bait story i think what it goes to show is theres a new form of arbitrage and it goes in with the narratives we know too well, the fake news, algorithm trade, because if computers are so sensitive the to headlines and headlines are so iffy with so many stories and so few facts, i think arbitraging the fast speed could be a whole profession unto itself because, joe, i tell you, there werent any traders that bought into that the chinese have been slipping back on their purchases for white a while as we see in International Capital flows released and they wont even be honest with us about their gdp calculations i doubt theyll share major financial strategies. And like the bond market needs an excuse to go up to 2. 5 . And thats the irony of it. After all of this, we start out at 18,000 plus on november 7, we close on the 25, 500 and these stories dont make sense if anything treasuries have been like rip van winkle and there are a variety of reasons why but its coming to an end. Up 700 points in six sexes and futures were down 80 points, drudge at 3 00 in the afternoon still had markets rattled. Do you just want a store thanks, rick. And were not even talking bitcoin in south korea. It makes sense for drudge but if you could hang it on trump being too tough on china it was his fault, thats why everyone loved the story, here he is messing up this, now they wont buy our bonds. That was part of it. They wanted another look at this idiot. That played into the narrative, hes going to screw this up with dhoin. Alls i know is this many were looking for many screwups and we can argue about tweets and personality but in the end it seems as though fear is founded large and small that have not come to fruition. Well see with nafta. Thats the latest thing. I guess theres still time. Thats the other bonus story you know, yesterday when that story came out about nafta and theres no new news. Seriously i know in politics theres no correct answer but in the markets there are and im glad were at cnbc because many of these stories dont seem logical on the surface which means when you dig down it gets crazier. Guess whos coming up right now . Im tired, can you live ricks mic on i dont know what steve is going to talk about but im not ready. Keep ricks mike open. Steve liesman is in d. C. This morning. Hi, steve. Its a beautiful introduction, joe, thanks very much. Youre welcome. Appreciate it. Really appreciate it. Well deserved. Im happy to see you. Thanks, becky, appreciate that on the ppi numbers, down 0. 7 a lot of negatives looking down the column of wholesale prices, kind of easing off some of the higher numbers from the prior month and again raising questions about whether inflation in america you know, fed officials dont like what they see when they look to how theyll be able to respond to the next recession. Smart low inflation. Theyre likely going to hit that with the rate at 2 or 3 so the fed wont have the five Percentage Points it has to cut in the face of a recession Larry Summers speaking at a recent conference said the overwhelming likelihood is that when recession comes policy wont have sufficient room to cut rates as much as it would like to within the current frame work some fed officials and economists are thinking about how to get inflation and Interest Rates up so there is ammunition to fight the next downturn currently the fed target is 2 inflation level and that target is mostly missed, almost entirely, since it implemented in 2012 it continues to shoot for that rate while it misses the goal increasingly experts are talking about alternatives like price level targeting. The fed would aim for a level in the price index, keep rates low until it hits that level it could convince markets and consumers of the feds commitment to higher inflation practically any change is a long way off jay powell habsnt been approved by the senate any change could be a year or 18 mpts away. I want to bring it to you because fed officials are talking about it now trying to figure out how to get around this issue of consistently missing inflation target something that has perplexed a lot of markets right now. Earlier i was saying its still yellen and somebody was saying its already powell doesnt matter. I think the senate will get it done. I assume so. But its like, what, three weeks away early february is when hes supposed to take office. Thats what i thought. So if nothing happens, if the senate doesnt approve it, does that mean janet yellen would do the next meeting shes going to do the next meeting anyway, end of january would be her last meeting. Unless they dont approve it. Even if they do approve him she would still chair the last meaning. Okay, so the january one comes up before but if something happens that they dont approve him, is there a february meeting . No, i think its march. But thats when jay powells First Press Conference is supposed to be so thats a big one, missing that would be a big deal. What happens if one Federal Reserve officials ferm is up and the next one hasnt been i think she stays on until that happens, i think theres provisions i dont think well have that problem. I think the senate will get it dobey then the question becomes whether theres a vice chair in place. The white house is looking carefully at that. Names have been bandied about. The idea is theyre looking for a strong macro or monetary economist. Its kind of a shame her final meeting doesnt have a press conference. Steve that is a wheres steve . Thats a beautiful dome. Just take a shot and the Capital Building is behind you. How long were you working on that, joe . I gave you the intro, i had to get the good exit. We could go back and roll tape and the problem is not that your material isnt funny its that its old and you really should get some of these great producers we have, some of these young producers that could give you new material, joe. Steve, everyday were told what we do at 6 00, do it at 7 00 theres new viewers that havent seen so maybe people are constantly checking things out. You have courtney back there, katie, dave evans. Millennials. All these guys are smart funny folks. Are you implying that joe repeats jokes . Ive never heard that . People say when is joe going to get new material . Costco, i was accosted by people the other day. If it works for me maybe its not working, thats the problem. Thats a beautiful dome. I would be happy to respond to new material if you could work on it a new joke, new something, joe. Steve listen to this. When we return, a beach front malibu home is up for sale, it could be yours if you have bitcoin and willing to hand it over speaking of bitcoin, you wont believe where the epicenter of Crypto Mining is. Wenatchee, washington. Caruso cs there. Its mine swromewhere its the epicenter of Bitcoin Mining in the u. S. , wenatchee, Central Washington in this company here they are mining five to seven bitcoins per day. There are a dozen Bitcoin Miners in this area why wenatchee . Wexpinft t bak ela aerhere you might take something for your heart. Or joints. But do you take something for your brain. With an ingredient originally found in jellyfish, prevagen is the number one selling brainhealth supplement in drug stores nationwide. Prevagen. The name to remember. Welcome back to squawk box, everyone weve been watching the price of bitcoin on a daily if not hourly basis. Check this out, the price of bitcoin under some pressure this morning, down by about 8 on one exchange based on what the south korea government said it plans to ban cryptocurrency trading. Will governments not like it when it gets beyond a certain size and not allow it . The cryptocurrency craze has one Real Estate Investor looking to sell as well, looking to unload a 45 million property and hes accepting bitcoin as payment diana olick joins us from malibu, california, with that story. Reporter this is a 9,000 square foot beach front malibu home if it wasnt so dark out you could see the waves crashing just beyond these glass walls. It its architecturally up like any other and the seller is unlike most because he is willing to boyne from the buyer. For this type of house and this type of amount i think well attract more International Buyers than our country. Im not saying its safe, i just want to take the risk for investment just like everybody else. Now, of course, there are not a ton of 45 million buyers but the boom in cryptocurrency wealth created new ones, especially International Buyers. They dont want to be taxed on their gains so buying with unregulated cryptocurrencies helps most fly under the radar for luxury sellers, that opens the pool of potential buyers. Thats our job in marketing property, especially luxury real estate, is never assume where the buyer is going to come from, make sure we get this property out there and say we are open to all currencies, crypto being one of them. Dr. Chen says he doesnt want all of the payment in cryptocurrency, just some of it, he wont say what percentage obviously hedging his bets given how volatile it is we saw what happened this house was about 3,200 bitcoin yesterday. It could be different tomorrow back to you guys. Diana, he just wants a small portion of in the bitcoin and hoes not using to immediately transfer back to dollars just to open himself up, he wants to keep the bitcoin no, he does want to keep the bitcoin and he didnt say what portion, whether it was half or whatever it didnt sound like he wanted just a little. He likes the idea of cryptocurrencies, he believes its the future. He says he will keep some of it if he gets it and invest the rest hes building other properties and he wants to start trading on real estate using all forms of cryptocurrencies. Diana, thank you very much. This epicenter for Bitcoin Mining is in the United States, in the rural town of wenatchee, washington thats where we found our Michelle Caruso cabrera. Shes living at a Bitcoin Mining facility do you feel like if you were sensitive to power being in the air like some of these esp people, would you be freaking out right now . You wouldnt want to be here. Theres a lot of power coursing through that stuff . Like crazy. We are one of the largest Bitcoin Mining operations in the United States. There are bigger ones in china as you probably read about but this is a group thats been around for four years. They are mining roughly five to seven bitcoin per day but they are investing millions to increase the number of servers they have so they can do 50 a day by july. This is one of three locations there are 1800 servers in here you may be used to those big bulky servers, these are much smaller. Two of these are equivalent to one furnace in your home they are doing nothing but calculating those difficult equations that are required in order to mine bitcoin. They dont store memory. They dont have a cpu, they have one specialized chip doing this over and over again. Thats why the owner of this company says consistent and reliable plow work is crucial. We have machines that have been running longer than three years constantly without interruption. Every minute they dont run is money you lose. That is correct theyre not running, were not generating revenue. So the Salcido Group is one of three in wenatchee. Why . The Columbia River they provide cheap hydroelectric power. When i say cheap, two and a half cents to three cents per kilowatt when the average in the United States is higher than six. In some states its 13 cents so steve wright runs the public utility. He says since the rise of the price of bitcoin in december, hes had 75 more inquiries and heres the thing hes had four people come forward and say they want 100 megawatts of power one megawatt is 1500 homes this company is doing seven and a half megawatts at a time so it is an enormous amount of power and its a big load on the system steve wright setz what he focuses on when people come to him about wanting this much power is making sure the utility gets paid. What we dont want is people who come here to make a quick buck off lowcost electricity and then leave town and leave us holding the bag and leave the people of this Community Holding the bag. Reporter so, its a public utility owned by the local consumers. Thats why theyre so concerned, because if they build out infrastructure to help a Bitcoin Miner to lay distribution and a power source, et cetera, for one mile is between 3 million to 5 million. Theyve started demanding cash on the barrel, upfront, before theyll do that, because they dont want somebody whos transient and then leaves and theyre stuck with all this infrastructure they paid for, guys so youre saying that they would ask for cash upfront to even build out the line . Reporter exactly to pay for the actual price of building that, yeah reporter right, exactly, because you need, its so expensive. That makes sense, yeah. Michelle, quick question, did you ask who they get their hardware off what kind of chips they use for that kind of reporter oh, yes so who is it . Reporter its a company in china. The name escapes me right now, wilf, its very early here but that was an interesting discussion there used to be 30 producers of specialized servers, many of them have gone out of business, theres only two or three left if you wanted to buy these, theyre extremely difficult to get, run ten grand a piece, and theres almost no supply hes had a long relationship with the supplier in china, so thats how he gets them. And by the way, he always gets the next generation and then sells the previous generation used on the secondary market if he does six to seven a day, how many bitcoin does he have at this point, total . Will he say . Reporter oh, so he sells them to raise cash to invest in even more servers to make more capacity fascinating reporter hes coming up on power lunch today at 1 30. I wonder what chips are in the hardware in a Zombie Apocalypse ill ask him, 1 30, tune in in a Zombie Apocalypse, any little power you do have youll t ing or refrigeration, youre nogoto be doing bitcoin. Well be back in a couple of minutes with jim cramer. What we do every night is like something out of a strange dream. Except that the next morning. It all makes sense. Fedex powers Global Commerce with vast, farreaching networks. Deep knowledge of industries. And, yes. Maybe a little magic. Lets get down to the new york stock exchange. Jim cramer joins us now. This is episodic, too, jim we had delta today the floodgates start opening tomorrow i know youre excited about earnings but we did see a preview of some stuff with walmart and i was thinking about it, if you give bonuses to your workers and you have a million workers, like, that adds up, i think, doesnt it i mean, this is a pretty big number for the economy in general, when it comes to walmart, doesnt it . Isnt it i reached down to them, telling them how great this is the fact is that this is this is henry ford, 5 a day. Goes way up past where everybody else did and sold a lot of cars to employees and it really god things going for ford. That was a big company then. Walmarts a big company now. These are Amazing Things honestly, theyre amazing. Because you see, joe, they were always supposed to just buy back stock and boost dividends. No one was supposed to get it, other than the stock holders what do we do . I could filter into the economy what is this share the wealth thing . Yeah. And now with earnings coming out, were going to hear a bunch of companies talking about what their outlook is based on this so stay tuned. Should be good and that starts tomorrow weve got to ask wilf wilf is so tight with these guys now, i need to hear. He is, with those bank guys and is nvidia in that warehouse . Im sure youd like to hear that it is, jim. Well like to see. Power lunch will have the answer thanks, jim. Well be right back. Well see you at the top of the hour liup to the challenge. The gigspeed network from comcast business gives you more. With speeds up to 20 times faster than the average. That means powering more devices, more video conferencing, and more downloads in seconds, not minutes. Get fast internet and add phone and tv for only 34. 90 more per month. Comcast is building americas largest gigspeed network to give Small Businesses more. Call 18005016000 today. Yes or no . Gin. Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. 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Since 1990, the Top Performing sectors tend to be consumer discretionary, tech, and energy. tis the season for return, but one shopper apparently really put costcos return policy to the test a california woman returned her Christmas Tree to costco this month for a refund because it was dead this was ten days after december 25th according to page six, the woman apparently managed to get her money back in full cheap cant believe youd bother taking that back amazing for costcos return policies, but pathetic thing to take back. A lot of gall this one is dry it served its purpose did you get one costco has a 90day return policy just makes a mess in the apartment. I love christmas, but you dont need the tree. I was home like eight days before christmas you need a wife and some kids i do. One day. Yeah wilf, thank you for being here theyre all doing it, wilf make sure you join us tomorrow now its time for squawk on the street. Good thursday morning. Welcome to squawk on the street. Im Carl Quintanilla with david faber and jim cramer at the new york stock exchange. Busy morning as walmart, the nations largest employer raises wages, issues bonuses on the back of tax reform yields back to 2. 56 as the chinese push back on reports of a policy shift and the ppi