Transcripts For CNBC Squawk Box 20161214

Off of 11week highs in europe. Lets look at the action in the crude markets. Opec members have agreed to cut production. Wti down today 1. 2 . Brent down 1 . Taking a breather. Its been a torrid run in the oil market. U. S. Federal reserve will announce the latest Interest Rate decision. The fed expected to raise rates for the second time in ten years. Also expecting an updated economic and Interest Rate forecast. You can watch all of this, the full coverage of the fed announcement and Janet Yellens News Conference on cnbc. There are a few other key reports to watch today. Heres whats happening. 8 30 a. M. Eastern time, the Producer Price index and retail sales come out. At 9 15 a. M. , Industrial Production and business inventories for october. Thats at 10 00 a. M. Eastern time. Now lets talk a bit of politics. President elect trump will be holding a roundtable summit with Tech Industry leaders today. Among those expected to attend, the man who put this together, peter thiel, bet on trump early and was one of the few in Silicon Valley. Cheryl sandberg will join the group. Elon musk, larry page and eric schmit, one notable absence, jack dorsey, the man who invented twitter, trumps most used social platform has not been invited this comes one day after dorsey did a q a session with whistleblower eric snowden. You have to wonder if theyre related . Im putting it unrelated in terms of snowden, but is it about the business . He is the ceo of a Payments Company and twitter. Its also very possible that maybe peter thiel maybe theres backchannel talks. Maybe dorsey suggested he was not i dont know. Dorsey was probably one of the most outspoken on trump during the campaign on the other end of it. Meaning he had made enough inferences if not had gone further. I dont know. So had jeff bezos and others. And trump took direct fire on cheryl sandberg, a lot of these guys meeting with him today. Its a kiss and make up session. My anxiety i dont know if its anxiety, my anxiety if i was one of these ceos, youll walk in there and it will be remember the media meeting with all the media heads . It was known as the firing line . Yelled at everybody. Wonder if it will be a Good Cop Bad Cop situation going on. Ahead of the tech summit, Ginni Rometty announcing her company will hire 25,000. The job also come over the span of four years including 6,000 positions added in 2017. The company will reinvest on training, focusing on vocational education. She will attend the meeting today. She has been on this for quite some time. Shes on the advisory council. The second trump won, she was off to the races on blue car worke e. Doll collar workers. I would want her to be off to the races to, beginning some edge with the incoming administration. On the twitter issue, our good friend nick dunn, managing editor here at the company, cnbc, remember that thiel criticized twitter as being run by pot smokers when he was on squawk box. Given that he was handing out the invitations. No invitations to pot smokers. President elect trump chose ryan zinke to be his interior secretary. He is the first gop congressman from montana. A top transition source confirming that pick to nbc. The news was a surprise. Last week an aide said kathy mcmore rick rogers would be the pick for that post. Goldman sachs will promote David Salomon and Harvey Schwartz to replace david cohn. This is a structure thats been in place for quite some time having a dual cohead at that juncture. David faber talked about solomon being one of those people. A new report in the china daily newspaper says chinas government will soon slap a penalty on an unnamed u. S. Automaker for monopolistic behavior. Corporate news, federal regulators dealing a blow to wells fargo. They determined the bank has not done enough to come up with an adequate living will plan for avoiding a taxpayer bailout. If it were to face bankruptcy as a result, the fed and fdic are placing new restrictions on the lender barring it from setting up new International Banking businesses and buying nonbank subsidia subsidiaries. This is the first tiis could ca two year s force wells fargo to divest itself of assets. This seems to be one bank that cant get itself together after the scandal of the past several months. This is the one bank that was supposed to be the classic Traditional Bank that had its act together, perhaps better than the others. Now all of it seems to be upsidedown. Tim sloan should thank trump. Yes. Ever since the election, its not been an issue. The stock off to the races. In Global Financial news, monte dei paschi confirming the ecb rejected its request to get more time to raise capital. The ecb told the bank a delay could cause a further deterioration in its liquidity threatening its survival. Monte dei paschis board is meeting today to decide whether to launch a lastditch privately funded attempt to raise cash as soon as tomorrow. The real deadline is december 31st. President elect trump announcing his intention to nominate former Texas Governor rick perry as secretary of energy this had been reported yesterday, expected, but made official moments ago. Little bit of deal news. So much news this morning. Johnson johnson is dropping its pursuit of swiss drugmaker actelion. Reports say that Johnson Johnson was unwilling to pay the price needed to seal the deal. Sanofi is now reportedly back in talks to buy the largest biotech firm. Sad news this morning to bring you. Actor alan thicke is dead after suffering a heart attack during a pickup hockey game in california. The actor was best known for playing the dad on the hit s sitcom growing pains. The c he is survived by three sons, including singer robin thicke. He was 69 years old. Turning back to the markets, the dow, s p 500, nasdaq logging new alltime highs with the dow loading at a record for the 16th straight time. The dow is less than 100 points away from the 20,000 mark. For some perspective on why this is psychologically important for investors, were joined by jack caffrey, and covering the fixed income angle as we await the fed income decision, bill irving, Portfolio Manager over at fidelity investments. Jack, ill start off with you. Are you still aggressively overweight . How do you feel about the market now . I think the market can continue to rally into yearend and rally into the First Quarter. Right now we have i think we have two major supporters, the psychology, the dow closing in on a new record. We love round numbers and those milestones. That feeds the exuberance, exuberance is supported. Economics have turned higher. Can i ask how much higher it can do . You said rally into, but what are we talking about from here on out . Whats your time frame . You know do you think the First Quarter . Yeah. At point or two . Percentage point or two . Could be a percent to three 1 to 3 over the next two months. It could be a nice pulling forward of the returns next year. At some point well have the reality set in and not everything we want will be happening. We saw that earlier this week with mcconnell saying i want tax reform but neutral. Is this a buy the rumor or sell the news event where come january 20th well look at pressure on the markets. Not necessarily the 20th, its you start going to congress and this is are what i would like. People have to step back from i want i want to what can i get. Bill, important to the Market Outlook is the trajectory of rate hikes. What do you think the fed will signal . Theres been solid payroll gains and inflation trending towards 2 . So in that context the market widely expects the fed to raise 25 basis points. Thats what well get. Thats the easy part. The bigger challenge is communicating to the market the likely path of Interest Rates in the months and years to come. There it will be interesting to see whether they stick with their guidance theyve given so far. What do you think . We know this is a tricky tightrope to walk. Market expectations are high for gdp growth next year. Theres a gap between what people think will happen and what is actually happening now. Where do you fall within that . I think 20 17 could prove to be the mirror image of what we got in 2016. Heading into this year, expectation was four Interest Rate hikes, up to today weve gotten zero. Plans have been derailed by china concerns in the winter, brexit in the summer. Maybe the new administration is generate spending tax and more so youre more skeptical on the results of fiscal stimulus and the ability of the administration actually to enact that to impact the economy next year. Thats what it sounds like. No what im saying is that if they do deliver that fiscal stimulus, the fed may be forced to push back with more Interest Rate hikes than is currently priced into the market. To balance things out. Effectively you would add that every central bank has been asking for fiscal stimulus for years. Theyre saying monetary spending has reached its limits, we would like some help. There will be a balancing act between weve been asking for this, now we get it. Will we take the bunch bowl away completely . Do they say they get it today or when it happens . The markets are acting as if we have it today. The equity market is acting like it will happen imminently. At 17 plus earnings, you expect it sooner. The idea of Shovel Ready Projects is much talked about but not really a reality. Bill, your concern . The fed is worried about pouring too much fiscal stimulus already near full recovery. For now theyll keep their head low and not comment much on what policies we nigmight get from t Trump Administration. I imagine your clients who do have cash, youre telling them to go all in . To capture this 1 to 3 upside . The other question is what are you dumping into . The 1 to 3 makes sense for the largely invested client. I imagine you do have clients who missed this. We have clients who have been underinvested and keep saying i want the pullback. The challenge is with every pullback theres been a reason for the pullback. Some scary story has gotten us there. With that theres been a resignation, and thats why people have been frustrated. Are you also advising people not to sell this year . Take gains next year . I think if you get the prospect of tax reform next year and lower rates, it would make sense to hold things. Seasonally you have things not sell now. Institutional selling largely ended in october. Thats why you have the season the strength in november, december, january. The flip side, bill, people were in bond funds, feeling losses. Could that be added selling pressure . I think the selloff could have some momentum. But the calls that this is the end of the three decade bull market in bonds, that may be premature. I say that for a couple reasons. Since the great recession, i cant count the number of times ive heard people say were in a rising rate environment and this is the end for bonds. Its been wrong time and time again. The factors that have kept Interest Rates low is still in place. Aging demographics, low productive growth. Do we revisit the lows on the tenyear yield . I dont think we do over the next six months. Over the next couple of years we could. All right. Well leave it there. When we return, president elect trump set to meet with top tech leaders today, including the ceos of apple, amazon, microsoft, tesla. We well tell you what to expect after the break. This is where i trade andrs. Manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. Generosity is its oyou can handle being a mom for half an hour. Im in all the way. Is that understood . I dont know what shes up to, but its not good. Cant the world be my noodles and butter . Get your mind out of the gutter. Mornings are for coffee and contemplation. That was a really profound observation. You got a mean case of the detox blues. Dont start a war you know youre going to lose. Finally you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Welcome back to squawk box. Stocks to watch today, Pershing Square cutting its stake in valeant pharmaceuticals. Pershings investment in valeant has lost 2 billion in value this year. We said he did it to help create a tax loss . He did it on purpose. He wanted to take the tax loss this year. I understand he wanted to take the tax loss, as opposed to holding nobody goes into it to create it. Exactly. He tolled is in order to tasold tax loss. Hertz is cut in cutting and replacing its ceo. At the same time the rental car company said it will reduce the size of its board. The kids clothes at zara, great. Yes. Very, very true. President elect trump getting ready to meet tech leaders today, later today. Jobs will be on the agenda he made his pick for Energy Secretary, john perry. John harwood joins us from outside the trump tower. Not far from zara. Good morning to you. Reporter good morning. First of all, cant let it go unnoticed, he will be meeting with elon musk today. Are you happy now . Im thrilled. Very happy. Did your column make that happen . Dont know. It may have helped. Peter thiels people reached out to elon musk. They worked together at pay pal, longtime friends. Yep. So many interesting subplots, aside from the sorkin column in this Tech Industry meeting with president elect trump. Trump went after the Tech Industry during the campaign, criticized apple for making products overseas, criticized bezos of amazon saying he was using the Washington Post to attack trump and preserve his tax position in washington. The Tech Industry was very much antitrump. They didnt like his crude populism, they didnt like some of the stances he took on social issues. So this is a potential meeting with all sorts of potential for conflict. I would expect it to be respectful. Yesterday bill gates sat down with becky and sort of outlined in a preview form how the two sides might be able to reach common ground. I think whether its education or stopping epidemics, other health breaks through, finishing polio, and in this energy space there can be a very upbeat message that his administration is going to organize things, get rid of barriers and have American Leadership through innovation be one of the things that he gets behind. So, innovation is the idea that bill gates pointed to. Potential place for them to come together. Donald trump has already talked about tariffs, ripping up trade deals that have existed. And were just going to have to wait and see when those Tech Industry leaders come out of that meeting with the president elect, exactly what the tone was, whether there was defiance, tough talk, or whether it was entirely a peacemaking session. All right. How do you think trump could, to the extent he can jawbone the creation of these types of jobs, he had this type of conversation before, at least a conversation of sorts with tim cook, that i think both of them might have talked about publicly, bringing back jobs to the United States. Do you think youll get commitments today from them about this type of thing . We talked about Ginni Rometty talking about a plan for blue collar jobs. How do you think this will go . I will be surprised if Tech Industry leaders come out of a meeting with donald trump and issue a commitment to him to doppler things that they were not already going to do. The softbank executive came out of the meeting with donald trump and said he would invest 50 billion in the United States, create 50,000 jobs, a lot of that was already in train. I dont think Tech Industry leaders would come out and give the impression that they have been brought to heel by donald trump. I think theyll explore areas where they have things in common. See if this president strikes a tone that they think is friendlier to the kind of work that they do. The emphases that donald trump made, he was talking about ill bring back steel jobs or coal jobs. Thats a message and constituency that he was talking to that is much, much different to what Silicon Valley is talking about. Some on his team are looking, including his choice for attorney general, have been looking to tamp down the use of h 1 b visas which many in Silicon Valley are happy using. I dont know if you saw this piece in politico this morning, Elizabeth Warren preparing an assault on mnuchin, also on tillerson by the democrats and perhaps some republicans. What do you think the chances are that both of them get confirmed . I think the chances that mnuchin gets confirmed are quite good. I think tillerson is going to be a tougher fight because youve got the overlay of fossil fuel executives being appointed, the relationship with russia, hacking allegations, the commitment to a bipartisan investigation, all of that makes the environment for tillerson more difficult. You have had rubio, mccain, Lindsey Graham express concern. Theres a risk there for tillerson. Less so for mnuchin. Where you will see more of a traditional left right split. John harwood, thank you very much. Business leaders are making it clear president elect trump needs to make good on tax reform. Thats according to the results of the latest cnbc global cfo council survey. The group manages more than 4 trillion in market capitalization. 67 said Corporate Tax reform should be the top priority, followed by the tie between infrastructure, overseas cash repatriation and withdrawal from tpp. Accomplishing one of those might put the council at ease. For the second quarter, consumer demand was the biggest risk. 41 said the Political Movement has had a negative impact on demand this year. For the full results, head over to cfocouncil. Cnbc. Com. President elect trump has promised an overhaul of the healthcare system. A closer look at the Health Stocks that could see a big move one way or the other when trump takes office. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Im going to start breaking out the christmas sweaters. Do you have christmas sweaters . Oh, yes, do you not watch the show during the holidays . Maybe i mentally block the memory out. We even have a sweater graphic that we can run. Absolutely. Can you start wearing them next week . Will you be here . Ill be here. Done. Welcome back to squawk box. U. S. Equity futures. They are taking a minor breather here on the rally. The dow jones looking about 15 points. Lets look at crude. Wti taking its own breather now at 52. 14. President elect trump promising to bring drug prices down during his time person of the year interview. What can he do . Which company is most at risk . Meg tirrell joins us from washington. Good morning. Reporter good morning. Were here at the fda cms summit. One sector that has been taking a major breather in healthcare since the election is the drug industry. Biotech had rallied after the election on the expectation there may be some alleviation of pressure on drug prices. Donald trump in his Time Magazine person of the year interview saying i dont like whats happening with drug prices. Im going to bring drug prices down. Everybody is trying to figure out what could donald trump do. The biggest thing is work with congress to give medicare the power to negotiate on drug price. This is a popular idea among the public but has not gained traction in the government. That is something that is constantly coming up. We talked with merck, they said no fda commissioner has certified those drugs as safe. The most likely is political and public pressure on drug companies, which weve more seen from people like Hillary Clinton and bernie sanders. Which companies would be targets of donald trump . Some folks say perhaps the drugs the government spends the most money on. Looking at Medicare Part d, covering drugs that people take at home. You can see the biggest drugs there covered by Medicare Part d in 2015, nobody will be surprised to see harvoni at the top. Medicare spent about 7 billion on that. Lantus for diabetes, crestor also seeing big spending. But we have not seen giant price increases and were seeing more competition in diabetes and cholesterol. So analysts are saying were seeing pressure in insulin. Where we may see that next is in multiple sclerosis and rheumatoid arthritis. Andrew, back to you. Thanks, meg. I like the elevator music that is the soundtrack for her report. And the tree. Enjoying it. Thank you for that, meg. For more on the impact of the Health Stocks from the Trump Administration, lets bring in les fontleiter from he Square Capital management and author of healthcare investing profiting from the new world of pharma, biotech and healthcare services. Good morning what is your take here. You saw that list. Yep. Would you put them in that order in terms of who is at risk . On that, id actually maybe look at the Medicare Part b drugs, Like Companies drugs, buy lodg bio logics. But rheumatoid arthritis, there is not pricing pressure there, lots of drug dogs the same thing. Your expectation in terms of the pressure that will come to bear on these companies that will be in the form of jawboning, meaning donald trump using his bullipulpet . I think its more naming and shaming. Thats a cool bank shot. He would have to thats a policy they could do. I dont know. Nobody said it. I dont think it will happen. Weve seen some effort by the industry to selfpolice. Brett sanders enacted the social contract which vows to sort of keep prices in check. Also provide it to certain people who make x times the the level above poverty. At the same time when you look at that list and you look at gilead, which had two drugs on that list that meg gave, harvoni in the hep c complex, those drugs were expected to increase anywhere, right . Gilead is in its own orbit. Most of wall street things well find an acquisition for them. Im not convinced. They have the ingredients for the drug. As a pane they need to get moving. Thats only part of healthcare. We have insurance companies, which might be doing better. Hospitals, if they repeal obama care may be at risk. Its a 3 trillion industry. Walk us through your play book what you go long in this environment, what you sit out and perhaps in the interest of shorting something, what you do there. We dont do a lot. Theres a new president. I have to be honest. The underlying demographics, innovation, will not change no matter who is president. That said, trump seems to at least at the moment seems to be working on a more market based versus obama more market based. Things Like Health Savings account. That would be united, health equity, those are longs. We are generally short the biotech, mid cap biotech index because of lack of catalyst. The Interest Rate environment is unfavorable for them. Pricing is you said mid cap . Small and mid. Small and mid. Doing that mostly through indexes. Short the xbi, short the ibb. There will always be winners. Some will have great cures, theyll do well. If youre short the ibb, youre shorting the Biggest Biotech Companies as well. Predominantly xbi to be fair. The larger caps are have a lot of cash. Theyre probably at least in our view dead money. I dont see a lot of excitement there, until we get to the middle of the year, then trumps policies will come through. I think youre better off in the Services Like the hmos. Maybe some of the major pharmas, because they have so much cash, they can do buybacks. I was going to ask about the repatriation. Theres a theme, monies will be repatriated, theyll go on this wild m a spree. They have money now. So they really havent done a lot of deals. I think next year will be a better deal year than this year. Thats not saying much. I dont see this sort of wave of consolidation. Okay. Thank you for coming in. Thank you. Coming up, new york apartment prices skyrocketing to a high, but the numbers may be skewed. Home is where i want to be home we love being green. So the nest learning thermostat connects to your phone, and learns what you like, to help you save energy. And thats something everyone can appreciate. Well, if you want to sing out, sing out and if you want to be free, be free cause theres a million things to be you know that there are and if you want to be me, be me and if you want to be you, be you cause theres a million things to do you know that there are the red sweater. I need the red sweater. Welcome back to squawk box. Some stocks to watch this morning. General motors is asking the u. S. Supreme court to overturn an Appeals Court which ruled a ruling which said the automakers 2009 bankruptcy does not shield it from lawsuits over faulty ignition switches linked to 124 deaths and 275 injuries. Gm is seeking to block hundreds of customer lawsuits. And hyatt is launching a new 250 million stock buyback program. And fortune brand is raising its dividend by 13 to 18 cents a share. In october the maker of home fixture hardware and Security Products reported Third Quarter profit rose 15 . Time for the executive edge. The average sales price of a manhattan apartment is expected to top 2 million this year for the first time. Thats according to city reality. Prices were driven higher bay jump in sales of kocondos value over 10 million and more. Researchers predict prices will level off in 2017 after nearly doubling over the past decade. Star wars fans lining up at the famous tlc chinese theater in l. A. Ahead of the thursday night premiere of star warstar w wars film. They will also raise money for the star light foundation. The latest movie expected to bring in 300 million just this weekend alone. Did you see this review . The review in the New York Times was just blistering. In a not so nice way. I almost didnt want to read it. I didnt want to know. They didnt give anything away. But it was i didnt want to be tainted. Was nasty. It could still be a bad movie and rake in 300 million which would be great for disney. Coming up, our special guest at the top of the hour, lazards peter orzag will join us. We will talk about the trump transition and todays fed meeting. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. With the fed wrapping up its final meeting of the year today, a fed rate hike is widely expected but are many more on the way for 2017 . Joining us is john bellows, western asset portfolio management. Nearly 450 billion in assets under management. Good to see you. Good to see you. Jeffrey gundlach said if bond yields hit 3 , its the end of the bull market in bonds. Do you see it that over the la weeks the markets clearly have become more optimistic on growth, on risk. You cut Corporate Taxes, thats obviously playing out. Led to higher bond yields. The story is less straightforward. We havent really addressed the issues of longterm demographics, longterm productivity. The longterm oversupply of supply chains around the world. To keep downward pressure. I think in contrast to mr. Gunlock, we can be optimistic for the next new years. That means the yield curve flattens. You see it happening . Thats terrible for banks. You dont rally on a steep yield curve. What banks really care about is the fivepoint yield curve. Banks dont lend a lot of 30year money. Theyre lending money at the fiveyear point and borrowing overnight. What you have is that but what im talking about is those 30year bonds relative to fives. You can see, again, you can see an optimistic scenario for the next two or three years. Faster growth as a result of more spending, tax cuts. That should be higher bond yields in the front end. But that longer term story where youre talking about demographics, productivity, whats going on around the world, i dont see the case there that you would see bond yields going meaningfully higher. Do you think the bank stocks are appropriately priced . Its interesting. Were talking with the head of our credit team. There are three things that could be affecting bank stocks. Number one, better growth expectations. Thats good for banks. Number two, some expectations of deregulation. You know, thats obviously on the table. And number three is the steepening of the yield curve. You know, kind of funds to fives. Whats his view on whats going on there. So head of bank credit said its mostly the steepening of yield curves. Yield curves are higher. Thats going to help on profitability. And, you know, thats already in the market. So we can speculate on the growth part, on the deregulation part. The thing thats happened, that we agree can happen is fiveyear yields are higher. Banks are going to have better profitability and i think bank stocks should respond to that. So i think thats kind of appropriate. I think, you know, the issues on deregulation and growth, well see. I think a lot of thats to be determined. We dont really know what hes going to do in terms of fiscal and in terms of deregulation. I wouldnt put too much stock on those, but i would say higher 5year yields and interest margins, thats there. We can all agree on that and that should be bank positive. Is there still a place for bonds in peoples portfolios . People went into the elections probably positioned terribly. I mean, i would imagine most people have been. And they were long bonds way too long and felt the selloff. Theyre going to open up their quarterly statements and theyre not going to see this rally the powerful rally weve seen reflected in their statements because they werent positioned that way. Yeah. Well, so two things. First of all, in positioning wi withing we went in with overweight risks. On the other hand we had risk assets in our portfolio. We had a diversified portfolio. The risk assets have done quite well. So even in an environment where growth looks a little bit better or even in an environment where, you know, people are excited about Corporate Tax cuts, i think you have to have a diversified portfolio. If you do that right, then you could have the Interest Rate risk and be fine. The other thing if i could say real quick, the other thing is, you know, a lot of people talking about center of the distribution here. How big is the tax cut going to be . You also have to admit the tails are much, much fatter than they were before. That could go in a number of ways. Whether that could go Foreign Policy, Foreign Policy missteps, whats happening with trade and immigration. Theres a number of tail risks there that you need to diversify in your portfolio. So you have a diversified portfolio but you did risk your assets going into the election. At this point with those tail risks and with markets where they are right now, dow up 8 since the elections, are you scaling that back . Going more conservative into 2017. Were not. Were keeping the Interest Rate risk again. If we do have a Foreign Policy misstep, for instance, i think those positions are very important. But on the risk side, again, the kind of central story here is that, you know, you have an increase in spending, lower taxes that should be faster growth. So what were trying to do is position for kind of the center of the distribution the next few years. Again, its too early to be confident that any of that is going to happen. Well see. We havent necessarily upgraded our forecasts yet. But we think thats certainly something to be cognizant of. And you have the Interest Rate risk as a diversifier. Thank you. Great to see you. Good. When we come back, peter orszag and then senator bob corker. And wilf is joining us. Hes right off set right now. But hell be with us in just a moment. Coming up, the dow within striking distance of 20,000. Will the trump rally power through the milestone . Or will this afternoons fed announcement spoil the party . What is it . Its a one Year Membership to the jelly of the month club. Thats the gift that keeps on giving the whole year. Well talk strategy of the break. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Today is the day. The most important fed announcement of the year is on the way. Market strategist tom lee and jim paulsen join us. Plus peter orszag is our special guest. Plus trumps pick for Energy Secretary rick perry gets the nod. Weve got reaction from the ceo of hess as the second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning and welcome back to squawk box here on cnbc. Im wilfred frost. Ive joined Andrew Ross Sorkin and melissa lee. Odd im doing the welcome, but thanks for having me. Great having you here. Were glad you made it through the traffic from your other studio. I have, indeed. Not quite as quickly as normal but great to be here. Lets look at the futures. Yesterday we did see gains again across the board. About 0. 6 for the dow taking it 90 points shy, 0. 5 shy of 20k. The s p was up a little more than that and the nasdaq was up about 1 . The rally broadening out. Futures at this hour just flat as you can see. The dow expected to open slightly lower. So 20k may prove elusive. Oil prices slipping a little bit today after a strong monday and a flat tuesday. 52. 30 on wti at this hour. And tstill elevated since the election. Weve got a lot going on including the fed meeting. Heres whats happening. The Federal Reserve widely expected to raise Interest Rates today. This would be the first time in a year the feds decision and policy statements coming out at 2 00 p. M. Eastern time followed by Janet Yellens News Conference 30 minutes later. As investors wait for the fed, no shortage of Economic Data out today. Were going to get november retail sales and the Producer Price index at 8 30 eastern time. Then november industrial utilization happens at 9 15 eastern time. Also big headline this morning, wells fargo has been hit with sanctions by regulators for f l failing the living will test. If it should find itself on the brink of bankruptcy, wells fargo has until march now to come up with a response acceptable to regulators. This is one of those banks everybody thought was supposed to be the best managed i mean, put the scandal, if you will, sort of off to the side. But as a Traditional Bank that was not over, everything was supposed to be organized. Now this. Interesting you say focused on this. Weve been focused on wells fargo but not on this because we didnt expect this. Book in may stumpf said we will have this all sorted. Nothing to worry about. Its a bit of an embarrassment for them. It is a negative surprise. That said the immediate impositions from the fed arent that threatening. So it doesnt immediately have a big impact they were down 0. 5 yesterday, a little bit in the premarket today. Not a big stock mover at the moment but theyve got to sort it out by march. Its a question about the government and whether they sorted things out on time. Well see. I was telling andrew they must be thanking their lucky stars for the election of donald trump. Unquestionably. I think also when we were leading into the height of the scandal, as jim was saying as well, as soon as you get any talk of a rate hike, it will blow this out of the water. Dare i say this goes to basic competence . Its just a competence story. You either do what they ask you to do and get it right or you dont. Then they were the only big bank to fail this time around. Yeah. So to me if im Warren Buffett waking up to that news, im saying whats wrong with these people . After a series of missteps. Yes. To your point over the last week or so theres been one or two other little legal stories coming out again. I think theres been a dearth of antiwells fargo news flow because of the election, the runup to it, the final decision of whos going to win, and the fallout in terms of positivity for banks. Maybe well have more focus on wells moving forward. A couple of cabinet breaking picks to tell you about. Rick perry to serve as secretary of energy. Rick perry created a Business Climate that created millions of new jobs and lower energy prices. He will bring that same approach to our entire country as secretary of energy. John hess joins us later on in the program to discuss the pick and the future of Energy Policy in the United States. Okay. Another selection. Ryan zinke. Hes a proponent of keeping public lands under federal ownership putting him at odds with some of his own party who favor privatization. Today a meeting with tech leaders. There will be one noticeable absence. Jack dorsey, the man who invented twitter, trumps most used social platform of course. He has not been invited. This comes just one day after dorsey did a q a session with edward snowden. All right. Back to the trump rally and the fed. The dows on the cusp of hitting 20,000. Joining us now is tom lee head of research at fundstrat global advisers. Good to have you with us. Were just 89 points away from dow 20,000. Are you looking at 21k already . Which on a percentage basis isnt too far off. Im sure its just a matter of time. Eight years ago dow was 8,000. Now were close to 20,000. Im sure the milestone to think about is dow 30. But when is the question. You have one of my most favorite market stats in one of your most recent research notes. You said whenever inflation begins to rise to historic levels, the market rallies. Considerably. Yeah. And most of the time. Thats right. And thats what were looking at right now . Yes. I think its appropriate to kind of expect higher markets. Because were getting a pickup in inflation. And its great for earnings and companies with low margins. I think theres less regulatory pressure. You know, some optimism there. And i think theres been so much money on the sidelines and higher rates means investors starts to think equities are attractive. For folks who sat this out thus far and missed the train, if you will, over the past month and a half, how much room do you think theres to go in. Everyone is waiting for this pullback to happen. Because some people would argue nothing has fundamentally changed. Obviously the real economys gotten better, but maybe marginally better. This is all a little bit on fumes. At some point theres going to be a break in this because theres going to be is headline that says everything donald trump wants to happen isnt going to get done or happens exactly as planned. That makes sense. I think everyone has to have a different time frame. I wouldnt try if i was an investor in cash, i wouldnt try to time the market to make the best return in the next 12 months. I think youre absolutely right. It wouldnt be a surprise if we have a 10 pullback next year, but every pullback this year had to be bought. There were only eight days where the market was more than 3 off the highs. Lets bring peter orszag into this. We havent properly introduced you. You could appreciate whats realistic or could happen in washington. Does it match up in your mind . Mostly. I mean, look, there will be some Corporate Tax change. That by itself will give some lift to earnings, but i think the big puzzle on the stock market is not that the stock market has run up, but that the vix is so low. Its under 13. North korea, europe, you look around the world and it seems like the market is basically dramatically underpricing the potential for tail risk. That allows the Market Participants to stay long the market and have protection easily. Or allows them to be long the stock. Either way you look at it, theres a silver lining. Thats right. Id say you look at 2017 and reality is maybe the first halfs not going to be as good as the second half. A low vix means you can actually buy hedging in the first half. Really cheap. I mean, you can hedge the first half for 1 . Youd have no draw down and then play the second half. In the shortterm, tom if in the shortterm we did not get a rate hike today, whats the reaction . I dont know. Wouldnt it be horribly negative . I mean, the thinking being the fed must be seeing something that we do not see. Things are much slower we are gone ahead of ourselves in terms of expectations. In the shortterm, its possible to sell off either way. We have to start thinking now about the fed, you know, raising rates next year and that is somewhat, you know, it creates some risks for markets. How many hikes do you expect at the moment next year . If we rewind 12 months, we were expecting the first rate hike in years. We were also expecting three or four this year. Is there room for people to be surprised how quickly the fed might hike next year . Im still in the camp i think the fed would let inflation run a little hotter. I would think that the fed may actually tighten less than consensus expectations. Does any of this make sense to you . Well, again, so whats interesting here is the policy changes are being pitched as a big supply side. Most of it looks like keynesian being delivered by a Republican Administration which is deeply ironic. I appreciate that point, but do you buy true stimulus measures in terms of Infrastructure Spending . Talking about that or just the tax cuts . Both. But not as much as whats currently being advertised. Its always easy to say there will be this huge thing thats going to happen. Walk us through the world according to peter orszag in terms of what is actually going to happen and whats not going to happen. We will have a repeal on obamacare its going to be complicated. I think we will have a rifle shot reduction in the Corporate Tax rate. Not the big tax reform, but some reduction. So what you wont get territorial . I do not think were going to do the big get rid of the tax deductibility of interest expense and impose the Corporate Tax rate on imports. Its possible. You think theres going to be a repatriation holiday and thats it . And some reduction in the corporate steps. Holiday opposed to change repatriation. What we did last time was a holiday. I think this will be deemed repatriation. Pay a tax on the profits accumulated to date 8 to 12 and whether you repatriate or not you say its a oneshot deal. What do you think the rate goes to . Mid20s. Does the fiscal expansion that were talking about deliver the kind of growth that perhaps had done if it comes earlier . Youll get an additional spurt of growth next year because even if the tax cuts are scaled back and even if the infrastructure package is substantially scaled back, there still would be some. I want to get back to tom with the stat. The exact stat is whenever inflation begins to rise since 1950 the market rallies 84 of the time and averages of 15 return over the following 12 months. Yes. Where are we in that right now . Were in that if you did like a little vector, were in sort of the best vector right now. Low levels of inflation and meaningful expectations of it to pick up. I mean, thats usually good signs for stocks. In terms of rally, we were up 6 since the election give or take. Up 8 or 9 since the election . The 15 return over the next 12 months, where are we in that . Thats a great question. I think were going to easily rally into the end of the year. Because theres seasonals and offsides and money to be put to work. But i think theres a good chance people have too optimistic expectations for 2017. Really . So a rally into year end and a pullback next year says the biggest bull on wall street . Its possible. Okay. Tom, thank you. Still to come, the ramifications of the repeal and replace of obamacare. Peter orszag is sticking around to weigh on what will change next year. And we have a look at top s p gainers. A couple of big movers there. Noble energy up 4. 5 . Squawk box will be right back. Generosity is its own form of power. You can handle being a mom for half an hour. Im in all the way. Is that understood . I dont know what shes up to, but its not good. Cant the world be my noodles and butter . Get your mind out of the gutter. Mornings are for coffee and contemplation. That was a really profound observation. You got a mean case of the detox blues. Dont start a war you know youre going to lose. Finally you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Welcome back to squawk box. Trump has promised to repeal and replace obamacare. What are the chances of it getting overturned . Lets ask our guest host this morning peter orszag. A guy who helped create obamacare. I will proudly say i was there during the creation. Are you depressed it will go away or will it go away . The net result in my opinion is five years from now more people will have insurance because the replacement will have to do something. And secondly we are on a different trajectory on costs. We are moving away for fee for service. But the pieces will be different. To the extent its now going to be rebranded trump something were in a new world. Yeah. What do you think it could look like . I think thats going to happen is we will have repeal done early next year to take effect in 2019. What people miss on that is if thats actually going to happen, you need the replace bill done by 2019. 2019 will probably become 2020. Youre going to have obamacare around for awhile. But when the replace does take effect, it will have many similarities. Instead of exchanges, there will be websites to pick your insurance. Instead of premium subsidies. There are certain broad similarities. You have a lot of health care clients. What are you telling them right now . Well, basically that look, there is a lot of noise in the system as the replace piece comes in. If youre in the payer space, thats going to be particular. But in the rest of the Health Sector what matters is this away from fee for service toward value based payment. In terms of the winners and losers thus far, you look at the stock market and say that makes sense to me . Yeah. The impact by the way, the other piece of course is the tax piece that we were talking about before. Because many of these firms also do have significant overseas profits. Are there clear winners in your view given the uncertainty . I mean, its pretty clear who the potential losers could be, theres the hospital operators, ones more exposed to medicare. But are there winners at this point that you can point to . I think one thing thats likely to happen, for example, is Medicare Advantage is currently a third of the market. I think that share will rise significantly. Its long been a key part of the republican orthodoxy to promote Medicare Advantage. Thats one example. The tax piece is another. In terms of how achievable some of these rollbacks are, last week speaker ryan told andrew and joe that hed had his whole team there ready to go with everything they want to deploy. Isnt the republicans as a whole ready to act . Getting through the house is never the difficulty. Almost never. The problem is the senate. So the replace bill will likely require 60 votes. That means you have to pick up eight Democratic Senators. The interesting question is what do they demand . What is on their list of priorities . So as one example, i think the market has completely discounted any further pricing pressure from pharma from the federal government. I dont know what those eight or nine Democratic Senators will demand, but you can imagine an array of things being discounted that they say you want our vote, we need this. Where are going away from health care for a second, just where are the fault lines within the Democratic Party right now and within the Republican Party when it comes to all of the things that trump is going to want to do. And the Political Capital thats going to get used, by the way, on some of his appointments. Whether it be Steve Mnuchin or tillerson, estt cetera. Lets start on that. It is we are way early in this process. We havent seen the vetting done. Dont forget about this time eight years ago, tom daschle who had been the senator coming in. We had one iconic in popularity. If i were on this show eight years ago, i would have said 100 tom daschle gets confirmed. There was a problem in the vetting and it didnt happen. We havent seen that. All of these nominees are coming in with complex backgrounds that have a lot of potential conflicts, et cetera. I think youre going to see more of youre seeing with mr. Tillerson where there are some republican senators who say i have questions here. And you dont need to lose that many. Whos got the toughest task . You dont know yet. Again, until youre through that vetting process, you dont know. Whats interesting about the tillerson appointment is the concern is being voiced and articulated so early in the process. And its just highlighting going back to even getting the legislation done, its one thing to say things. Legislating becomes messy really fast. Even if you control both the house and the senate. Would you say that trump could lose Political Capital over this in such early stages . You have to remember these are the same people. You go to senator x and say i need you for this nomination. Ive done this. It is the new president. You cant fight us on this. We need you. Then when you go back for health care or tax or whatever, they say look, i gave it the office. You twisted my arm. Enough. Now that the democrats are out of power, how do you think they react over the next two years . Big question, unknown answer. There is a split in the Democratic Party that was manifest during the campaign. What the Democrat Party needs to do, though, is speak to working class people and figure out some both policy and messaging that returns the party to its roots that was clearly who do you see in the party as an emerging leader . It is hard to know and what is interesting about the last few president ial cycles is weve been on a declining trend in terms of federal experience. In some sense, the more burdened you are at the federal level, the harder it is to project forward that theres going to be big change happening. So there are a lot of new people on the democratic scene, its just hard to know right now who shakes out. Round off on the Health Care Question we started on. Do you think by the end of the trump presidency, the net effect of both obama and trumps presidency is a significant improvement in the Health Care Provisions across the United States . Is that something that will be part of obamas legacy . Yes. Thats what i was trying to say before. Because even with the changes, the republicans cant afford to have 20 million or more people lose insurance. So the replacement however designed is going to have to minimize that loss of insurance. That means on net more people will have insurance than if we didnt go through this experime experiment. And at the same time the system is changing. There is massive change afoot that everyone who participates in health care is expeeshsing. And that will continue. Okay. Final question real quick. If you were invited to this tech meeting this afternoon. I think its at 2 00. What would you tell the president elect . Stop tweeting about individual companies. You think thats going to i think thats a very harmful way of governing. No one will say that at the meeting, but if i were there, thats what id say. Which is why im not inviting. And the other is whether he tweets about the fed today. Peter orszag, thanks for joining us. When we return, remember wall street was a hit back then. Madonna was the top artist and the top show was cheers on nbc. Jim paulsen echoes of 1987 and says thats returning to the markets. But this time without a crash. Were going to find out why he has taken that view in just a bit. Coming up, jim paulsen of wells capital. And then john hess ceo of gas company hess talks trumps nomination of Energy Secretary. Well be back here on squawk box. Is it because so many go after it the same way . Chasing after short term returns. Instead if getting caught up with the crowd, the Investment Managers at pgim take a long term view, teaming specialized active investing with riskmanagement rigor, to seek out global opportunities. We manage over a trillion dollars this way, attracting many of the worlds leading investors. Partner with pgim. The Global Investment management businesses of prudential why pause a spontaneous moment . Cialis for daily use treats ed and the urinary symptoms of bph. Tell your doctor about your medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis. Tadirectv now. Stream all your entertainment anywhere anytime can we lose the all. Theres no cbs and we dont have a ton of sports. Anywhere, any. Lets lose the anywhere, anytime too. You cant download onthego, theres no dvr, yada yada yada. Stream some stuff somewhere sometimes you totally nailed that buddy. Simple. Dont let directv now limit your entertainment. Only xfinity gives you more to stream to any screen. What year was this song . I dont know. 1987. Among the stories that are front and center at this hour, Mortgage Applications fell 4 last week. Both new purchase applications, refinancing activity declined. Average 30year Mortgage Rates up one basis points to 4. 2 . Thats the highest since october of 2014. Goldman sachs expecting to name David Solomon as top. Saying the move could come as soon as today. David faber previously reported news of solomons impending promotion. Two jobs apparently werent enough for carlos ghosn. You ready for this . Hes already chief executive of nissan. Now hes been appointed as chairman for mitsubishi motors. Nissan took a 34 controlling stake in the japanese automaker back in october. Hes collecting up titles. I wonder how he if i remember, he used to have a flipped business card. Oh, really . Ive never met him personally so ive not known that. I dont know how you do do a third roll . Three commendimensional . A box. Give him a year, maybe hell do it. Merge with another couple. Now to todays economic agenda which of course is dominated by one event. The decision on fed Interest Rates. That will be released 2 00 p. M. Eastern time. Thats followed by Janet Yellens News Conference at 2 30 p. M. Eastern time. Catch all the action here on cnbc. Me and the gang on power lunch will be there to cover that all. There are other key reports to watch today. 8 30 eastern time, Producer Price index and retail sales are out. 9 15 a. M. Industrial production. Then at 10 00, business inventories. The trump rally may be the next chapter in a decadelong recovery thats lacked the confidence of other recoveries. That being said, our next guest says he believes some of these socalled animal spirits are finally awakening and trump is part of the reason why. Jim paulsen, thank you for joining us. Lets start with that. The animal spirits point. Weve taken it from the fact that you say there are similarities from today to 1987 especially because of the awakening of animal spirits. Thats right. In 85, 86, the economy slowed way down and inflation fell. Pessimism sort of increased over that period about the reagan recovery failing. And so we start went into 1987 with quite a bit of pessimism and anxiety. Then the economy picked up, inflation picked up. And animal spirits came out for the first time really in the reagan recovery and you had a rush of the public into the stock market. The dow jones went from 1900 to 2700 in the first nine months. Up 40 . And the long term bond yield rose from 7 to 10 in the first nine months. Huge run. Then of course we had the famous collapse that happened. Were looking at the chart now of 86 to 88. Right. And i dont think were going to see anything of the same magnitude. But i think the character is similar. Coming into the last couple years dealing with very sluggish real growth with negative year on year earnings. Then suddenly having Economic Data recently around the globe. Earnings growth have been revived. Suddenly youre seeing confidence in animal spirits sort of improve. I think thats through the stock market and bond yields. I think some of those trends are going to continue next year and maybe we go higher before the stock market runs out of gas against higher yields. Jim, as you just said there, you said you dont think we have the same magnitude of collapse in terms of the stock market. What type of magnitude is due and what might be the kind of spark for it . Well, i think the spark is kind of started better real gdp growth. United states jumping up to 3. 2 in the Third Quarter. Maybe better in the fourth. The return of earnings has sparked it. I think the fact that the fed is finally normalizing Monetary Policy is actually lifting confidence. I think the side of watching yields lift off from zero around the globe is sparking confidence again. Of less regulations, lower Corporate Tax rates. Maybe continuing to stimulate growth. All of that, i think, is bringing out for the first time a little bit of widespread confidence in the future of this recovery. And thats just going through the Financial Markets and the more cyclical risk. My ges is maybe we go up higher than you think next year. Maybe the s p, you know, rushes ahead at some point to 2450 or something and bond yields back up maybe towards 3. 5 . And maybe theyll be at that point a very good trade opportunity to move from risk on to risk off again. Thats higher from where we are right now, jim. I wonder what could be the catalyst to make people think, you know, after being up if you count the election day 6 from there and then another 8 from here. Up all that and say you know what . Its time for me to take risk off. At a time when the fiscal stick lus might be kicking in. Yeah. I do see that, melissa. Im not suggesting we wont have pullbacks along the way. But my guess thats all it is. After seven or eight years after pessimism about the future, theres a different sense in the country that things might be improving a little bit. And that trend might keep equities going up longer than people currently anticipate. And i kind of think thats going to maybe dominate over the first half of next year. I know youre a longterm thinker, not a shortterm thinker. Theres a lot of people on the sidelines awaiting this moment of potential pullback or not. The one thing id ask is to the extent you think people are holding out to sell stuff in early 2017, do you think thats going to happen . And do you think theres a likely pullback just in the first couple weeks given the tax strategy a lot of investors have right now . Yeah, i mean, that could certainly happen, andrew. There could be some shortterm pause and pullback. And certainly the inaugural address is a nice date because it feels like buying the rumor, selling the news kind of thing. But my point is even if there is a bit of a pause or a pullback, i think it might be short lived and we might snap back and continue to go higher after that hits. And the bigger pullback might come later in the year for higher levels. And i do think there might be an excellent trading opportunity to move back to risk off, maybe even buy bonds again. But i think its going to come from higher levels than we are at today. Whats the Market Reaction if the fed surprises and does not hike rates today . You know, i think if they really didnt hike rates at all, its unlikely they will do that. Probably unlikely the reaction will be in their message and dot plot and forecasts for next year. But i think the fed is getting moved here. The real rate setter here, the economy, is dictating to the fed what they have to do. Theyre already dictating one increase. Multiple rate increases in 2017. What i find interesting is the fact the feds going to raise rates might actually be boosting confidence that were finally at a point of normalization again leading actually juicing animal spirits rather than the other way around. Jim, great stuff. Thanks for joining us this morning. Thanks for having me. Do you remember when chuck prince said when the musics playing tough get up and dance . This is where we are. Whether we like it or not. Just dont know when the musics going to stop. Coming up, ceo of gas company hess will join us to talk why Rex Tillerson and oil is going to drive growth in the Trump Administration. And right now wti down 1. 5 . Squawk box will be right back. Welcome back to squawk box this morning. Big week in the energy markets. Rising on the opec Production Cut hitting a 17month closing high. Of course president elect trump naming exxonmobil ceo Rex Tillerson as secretary of state. John hess of Hess Corporation now with us to discuss. Good to be back. Lets start with Rex Tillerson. You know him well and have done business with him. Rex is an outstanding business leader. He does his homework. Hes very knowledgeable about foreign affairs. You know, obviously hes someone thats extremely well qualified, i think, in foreign issues. What do you think about the complicated relationship we have as a nation with russia and his business relationship . Well, you know, he runs one of the Largest Companies in the world. Meets with World Leaders all the time. That obviously makes him pretty knowledgeable in dealing with foreign leaders and understanding foreign issues. As secretary of state, one has to put the National Interest first. Is he friends with putin personally or just doing deals with him . He deals with putin as a government leader as he would any government leader where he has to do business. Lets talk about rick perry. Sure. What do you make of him being the Energy Secretary . Well, look, its clear that the Trump Administration puts high priority on energy. That oil and gas are engines of Economic Growth Going Forward. Obviously as governor of texas, governor perry knows oil and gas. Right. Where do you land on those who will meet with donald trump today, elon musk and all of the Clean Energy Efforts so far . You had bill gates on yesterday. I think investment in innovation and clean energy is important wi, but were going to need all of the above to have Sustainable Energy for the world. Renewable energy in the next 25 years will grow faster in the energy mix than any other supply source, oil and gas according to the International Energy agency is going to be 50 of the mix in 2040. So were going to need oil and gas for Economic Prosperity and were also going to need growth. Very diplomatic answer. But behind closed doors, ceos of oil and gas companies, are they celebrating . Not only do you have rick perry, youve got Rex Tillerson, and somebody heading the epa thats worked to challenge epa regulations. I mean, this is like a trifecta of Amazing Energy for the sector, gd for our economy. Theyre high paying jobs. Also good for investment. Oil and Gas Investment is very important to Economic Growth. And its also good for national security. So at the end of the day, i think people have to realize that oil and gas are important to our economy. I think an important thing to note two years ago conventional wisdom was when oil prices were down, it was good for the stock market. Actually, if you look at this year, High Oil Prices actually make the stock market higher. So oil and gas are important to future Economic Growth and also the stock market in the country. Lots of wealthy Business Leaders getting jobs in the president elects administration. Of course Rex Tillerson is a great example of that in a role as a political diplomat. One you might of thought needs someone with political experience. What do you make of the criticisms of too many Business Leaders in what is of course political roles . Do you think theyre going to be practical . Will it be Game Changing . The two points there is are they skilled and knowledgeable about the area . A lot of these Business Leaders have to deal with foreign leaders, foreign governments to make agreements that are win wins. And i think that skill is important in diplomacy. Its clear if youre in a position like that for our government, you want to put the National Interest first. Lets talk about opec. Lets talk about the price of oil. Sure. When you go into the board meetings of your own company and sort of map out the possibilities of where oil is going to be the next 12 months, what do you think . You know, i was lucky last year when joe asked me whats the price going to be next year . And the price was 37 that i was pressed. But i said it was going to be 60. It pays to be lucky. But i dont have a crystal ball so i cant go there. What the important takeaway is, oil prices used to be 100. Too much supply. At 50 or 40, not enough supply. So the way we look at it, its probably a rage of 60 to 80. The recent opec agreement was historic and its real. If you think about it, its remarkable they got 13 opec countries and 11 nonopec countries to make a production deal. I think thats remarkable. I was with the secretary general yesterday of opec. You can tell by talking to him and what hes done in diplomacy for three months that they are committed to makes this work. You know, we simply werent investing enough in the business. Global oil and gas industry has gone from 700 billion a year of investment to 380 billion this year. Organization says you have to spend 600 billion a year to keep it level. For two years weve been under that. So you clearly have to have a new chapter of Rising Oil Prices to attract investment, to grow supply, to keep up with growing demand. I think thats important. Another point besides investment is the deficits. The deficits were hemorrhaging public companies. And it was also hemorrhaging opec. So i think, you know, were going through cycles. Weve just been through a low cycle. I think were now in an upward trajectory of prices to make sure we increase investment to make sure we have enough oil to keep prices actually down three and five years from now. How are you feeling going into 2017 . This has been a banner year. Weve seen oil prices double if your price forecast is right for 2017. You got a seat at the table that is arguably a bigger seat, more positioned seat in the Trump Administration, and the sector itself the equities up 27 year to date. Is 2017 going to be even be rt . You also have to talk about that a lot of these equities were down 40 a year earlier. Were making up lost ground. But at the end of the day, melissa, whats most important for the oil and gas supply . The price to attract investment. And its a capital intensive biss. We have to have a price signal to make sure we have enough supply to be affordable, that its going to keep price stability, and its also going to have supply security. Thats something i talked to the secretary general of opec yesterday about. He said were all in the same boat. You know, whats good for opec is good for america and its good for the world. If we have enough supply of oil Going Forward. The fact that were going to have a Regulatory Regime that hopefully is a little more pragmatic is a net plus. But the more important thing for us in the business is to have a high enough price to have so youre feeling good going into 2017 . Yes. Quick demand coming on for oil globally . Particularly the likes of china. Are you concerned this could take a chunk out of this optimism next year . That was a big issue last january. Where we said china was melting down and therefore stock markets were melting down and oil prices were marking down. That was a pretty tough month. What we see Going Forward is oil demand growing about 1 Million Barrels a day. About 40 of that demand growth is from china and from india. Okay. John hess, thank you. Happy holidays. Happy holidays to you. Thank you. Coming up when we return, stocks you need to watch. As we head to a break, heres yesterdays top dow gainers. Squawk returns in just a moment. This is my retirement. Retiring retired tires. And i never get tired of it. Are you entirely prepared to retire . Plan your never tiring retiring retired tires retirement with e trade. Im in vests and as a vested investor in vests i invest with e trade, where investors can investigate and invest in vests. Or not in vests. Sign up at etrade. Com and get up to six hundred dollars. Tadirectv now. Stream all your entertainment anywhere anytime can we lose the all. Theres no cbs and we dont have a ton of sports. Anywhere, any. Lets lose the anywhere, anytime too. You cant download onthego, theres no dvr, yada yada yada. Stream some stuff somewhere sometimes you totally nailed that buddy. Simple. Dont let directv now limit your entertainment. Only xfinity gives you more to stream to any screen. Lets take a look at stocks to watch this morning. Nvidia upgraded to buy. Even after a yearrunup of 181 . The graphics chip maker should continue to benefit from the advancement of Artificial Intelligence related devices. Hertz announced the retirement of ceo and board members. They have named katherine marinelo as new ceo. And qualcomm was downgraded at jpmorgan. Johnson johnson is dropping its pursuit of actelion. You have a better accent. Wilf vould do it. Its a european story. So you should. Im willing to pay the price needed to seal a deal. Sanofi is now in talks to buy the largest biotech firm. Wells fargo has been hit with sanctions by federal regulators for failing the socalled living will tests. That provision of the dodd frank law mandates an adequate plan should it find itself on the brink of the stock just sold off a little bit more in e the last hour. Now over 1 in the premarket. You think generally nobody thinks this is a massive issue. Its fixable. Its very fixable. It was a surprise they failed it, but the current punishment for it is nothing that really affects their business. For example, the man outline of it was you cant buy anything internationally at the moment. Do we know anything on what happened . Well, the living will is a complicated issue. Of course back in may, a lot of the guys felt them. Jpmorgan, bank of america. All of the ceos said were working with them. Its not like where they sit and wait. Its something they permanently work with regulators on. Theyre thought to be miles away from meeting it. Wasnt wells fargo also slapped on the risk by the Community Lending board where some possible infractions or violations. Something to do with their practices. Lots of wells fargo things like this recently. A couple of court cases popping up and some issue with insurance areas as well. Theres been a dearth of ne negative wells fargo news. If this issue is behind them or not. Other the last few days. Still ahead, more on the trump rally in todays big fed meeting. And bob corker will join us to talk about the trump transition. And scott mcneily will join us to talk trump and the titans of they can. Squawk returns in a moment. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Well, if you want to sing out, sing out and if you want to be free, be free cause theres a million things to be you know that there are and if you want to be me, be me and if you want to be you, be you cause theres a million things to do you know that there are will janet yellen fuel the market rally or spoil the party . China threatens to fight back. What officials in beijing are saying about donald trump and what it may mean for u. S. Business. Plus Silicon Valley headed to trump tower. Titans of the Tech Industry will meet with president elect today to talk about jobs and the economy. Scott mcnealy will join us as the final hour of squawk box begins right now. Live from the the busiest city in the world, new york city, this is squawk box. Im Andrew Ross Sorkin and melissa lee and wilfred frost pop take a quick look at the futures. Weve had a little bit, gained on the dow. 20,000 here we come. You had your breather. But we were over. Nasdaq looks like itll open higher about five points higher. Among todays top stories, the fed will wrap up a meeting at 2 00 p. M. Eastern time. Economic projections by fomc members. Watch the News Conference right here of course on cnbc. In political news, it is official president elect donald trump announcing his intention to nominate rick perry as secretary of energy. Goldman sachs will promote David Solomon. The announcement could come today. President elect trump will hold a summit with leaders today. John harwood has the latest. Good morning. Reporter good morning. Today the president elect is going to come facetoface with an industry that didnt like his campaign one bit and the feeling was mutual. Tech leaders felt that his crude populism was something that wasnt with his values. And jeff bezos said using his ownership of the Washington Post to protect the tax status of his companies. He went after apple for producing overseas. And now the tech leaders are hoping that he will moderate some of the trade rhetoric. Heres bill gates yesterday sitting down with our becky quick. Well, i dont think itd be a good deal to have trade relations between china and the u. S. Really fall apart. And so i feel sure even as they try to tune things, they wont want the lose lose you would get if you start to get large falls. The president elect is very sophisticated. I hope hes had adjustment there without that typical sort of tit for tat. Of course theres recent back and forth between the president elect and china over the one china policy. What the implications that might have for u. S. china relations. And were going to have to see what sort of accommodation we get from people like elon musk, sheryl sandberg, tim cook all showing up for this meeting today. How is this being framed . Is this something an example of progress from donald trump . Coming back from some of his Campaign Rhetoric and being accepting of tech leaders . Or is it an afterthought these guys once most of the cabinet have taken shape are getting a brief consultation. But not the kind of access that leaders of finance have got. Reporter well, certainly the orientation of donald trump during his campaign was to older parts of american industry. Right . He talked about bringing back coal jobs. He talked about bringing back steel jobs. He emphasized the rust belt. Clearly he did not campaign in california where Hillary Clinton beat him overwhelmingly. So were just going to have to see whether or not he is able to or wants to monetize some of those positions to please them. Its incumbent upon you to relate to the entire country. So in some ways the meeting is not a surprise. The only questions going to be whether there are policy commitments that come out of it or whether this is simply an icebreaker and we go back to the corners that the two sides were in before the election. John, great stuff. Thank you very much. We look forward to in particular the faces of the tech leaders as they depart the building a the meeting. Ahead of that tech summit, ibms rometty has an oped today. She says new jobs will come over the span of four years including a 6,000 added positions in 2017. The company will invest 1 billion in retraining and developing its u. S. Workers over the same time span focusing specifically on vocational education. Rometty will urge trump to support these retraining efforts so workers are Better Qualified and can fill a growing skills gap. In other political and market news this morning, a new report in the china daily newspaper says chinas government will soon slap a penalty on an unnamed u. S. Automaker for monopolistic behavior. Said the u. S. Company had instructed distributors to fix prices starting back in ford mjm kicking lower since the story broke overnight. Youre looking at gm down about 4 and ford down about 2 . Another recordbreaking session for the dow but still no 20,000 plp today be the day . Joining us now dan suzuki from bank of America Merrill lynch and hans olsman. Dan, you say its a big prediction. Another 20 if the hope becomes reality. Thats a lot of stars aligning, isnt it . Yeah, it is. Thats why its not the base case. But its a rally thats driven by hope. Now, if policy makers can deliver and turn that hope into reality, i think theres as much as 20 upside from here. Now, the good thing for the markets today is that they have two things really going for it. Growth and sentiment. From the growth side, the starting base for the starting point for growth is already really low. We essentially have half of e emerging markets in a recession and were just coming out of this mini industrial and energy recession in the u. S. So i think even without the trump initiatives, youre going to get a pickup in growth. Youve already started to see it show up. If you layer on top of that, deregulation, tax cuts, and Infrastructure Spending, its a recipe for a big pickup in growth. That implies not all of that has been priced into the markets. For instance, the Corporate Tax cut. Is 1 boost to eps on the s p 500 for instance. Saying that theres another 20 even though weve already rallied about 6 implies we havent seen it priced in. So this is sort of the second positive thing for the markets. The leg up from here is not going to be one driven by the fundamental analysis and what the fair market of the market is. Were already pricing it in. But theres a huge long runway for sentiment to improve here. If you look at the one thing thats been missing from this bull market, glaringly missing, its been euphoria. Were just now exiting the skepticism phase. Weve had this massive shift in sentiment over the last month. Biggest flows into equities, you had the biggest pickup in sentiment in this expansion, et cetera. So i think theres a lot of room to run for the markets to get to euphoria. And weve seen a big outflow from bonds. Are you riding the trump rally train . Are you in the first car . Where are you on this . Im certainly on the train. Were enjoying the run, for sure. We exceeded what we expected to get this year. I personally am rooting for you, dan. I want that 20 . But i think the reality is going to be somewhat different than the perception. Right . So i think weve pulled forward a lot of the expectations as to what the new administration will bring. Well get back to sort of more pedestrian earnings. The expectations this year going into 2017 are from the bottom up basis. Thats about a 32 bucks increase. You give that the normal hair cut and yeah youre talking about a forward multiple going from 17 to 18. And if you have any you need margin of error there. You have any disappointment there, you know, you are you hit head winds quickly. The devils going to be in the details and there are a lot of details at this point. The thing to come back to is observing the things we can know. And the things we know is the middle market of the u. S. Where most of the commercial activity happens continues to go along pretty nicely. Right . The data, Small Business optimism really good. Hiring plans are good. Revenue trends, earning trends remain very good there. So i think the backdrop which before the election was good, its continuing and you get a little bit of a bump through lighter regulation. And hopefully we see a 10 return or so in that is domestic focused, that discussion. What about the International Environment . Of course start of 2016 is what derailed markets. Are we a bit blinded to risks because of this euphoria at the moment . The thing from our perspective that kept us away from the like is the notion that as u. S. Economic activity moves into a higher gear or sustains itself and normalizization occurs, the first place thats going to feel the impact of that would be the last place that money ran to. For the most part that was in some degree on developed markets. We expect that to come back. And those markets to hit head winds. Youre positive on the uk. I am. I am. I thought if it brexited it wouldnt be the end of the world. And you got a selloff in the currency, it would be good for the export side and earnings. Thats exactly whats happening. Which sectors do you like the most quickly . We like health care, financials, telecom, and discretionary. Okay. Thank you, guys. Thanks. Happy holidays. Some stocks to watch this morning, the Mining Equipment makers revenues fell short as the commodity price slump continues to impact joy globals customers shares. Very strong year theyve had already. Express scripts is reaffirming its forecast. Related to its position of its medical unit. The pharmacy benefits manager is also revising its methodology for reporting network claims. Up about 0. 5 . Coming up, senator bob corker will lead confirmation hearings for Rex Tillerson next month. But first hell join us next. Plus whats next for russias u. S. Relations. Holman jenkins will be here to talk about his latest column. And later, Silicon Valley is heading to trump tower. Squawk box will be right back. They say the world does not revolve around you. But today, maybe it can. I am helping 1800flowers find the perfect gift out of trillions of combinations. And working with the new York Genome Center to find treatments as personal as dna. And i am helping sesame street make education unique to every child. Hello, my name is watson. Working together, we can outthink anything. Hello, my name is watson. They are the natural borns enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley did yon your prescriptions . To save up to 95 introducing blink health. Blink has negotiated some of the lowest prices so you can get your same medication, at your same pharmacy, for a lower price. Just go to blinkhealth. Com, pay for your prescription, and pick up at your regular pharmacy. Blink is accepted at nearly every pharmacy nationwide. Go to blinkhealth. Com and get 10 off your first purchase, promo code tv. Welcome back to squawk box. Lets have a look at the futures which are broadly flat at this hour. The dow fractionally in negative territory suggesting that 20k may prove elusive for just one more day. We finished yesterday 90 points away or about 0. 5 away. Yesterday although the dow was up, it was the underperformer. The 10year note just slipping back in terms of from the 2. 5 handle. All eyes on the yield curve as when we get the rate decision. And the dollar broadly treading water today. Not much move. Its softer, though, by about 0. 2 . Back to politics, but invariably becoming a business story these days. The trump cabinet takes shape. Our next guest will lead the confirmation hearing for Rex Tillerson. Senator bob corker, chairman of the Senate Foreign relss committee. We welcome him to the program. Good morning. Good to be with you. Thank you, sir. So lets talk about this confirmation battle. The front page of the wall street journal here says confirmation battle looms for tillerson. How much of a battle do you imagine it is going to be given some of the comments not just by democrats but people like marco rubio who says he has serious concerns about this appointment . Well, it is going to be a little different than the ones weve had in the past. The last two secretaries of state were almost pro forma because people understood where they were on issues. Look, coming to this secretary of state position is a very, you know, impressive individual that has done business all over the world, has run a 70,000 person organization. The state department has 75,000 people. Knows many of these leaders up close and personal. So, you know, somebodys going to be coming to the table that certainly understands the world. The questions people are going to have, though, are what are his views. They understand hes going to be carrying out trumps Foreign Policy, not his own if hes going to be successful. But they also know up under the hood, hes going to be giving guidance to the president. People are going to want to understand what that is. My guess is that hes a savvy guy. Hell handle these issues well. My understanding is hes thinking of making home visits right now. You know, were out of session. He may visit people in their towns. Well see what happens. My guess is hell be well prepared. Do you have concerns about his relationship with putin to the extent he has one . Well, look. I dont hold it against someone that they have relationships. I do think youve got a situation here where you have a president coming in who is focused on, quote, prolific deal making. And the norms that have created the alliances that weve had, for instance, in europe over the last 60 or 70 years. Theyre being set to a degree. I think people rightly so want to understand how hes going to coach the president as it relates to issues relative to russia. Look, this you know, whats happening right now in syria and other places, asad as you know has been brutal. Russias been involved in that. What theyve done in Eastern Ukraine, how theyre threatening the baltics. That matters to all of us. And hes got to be in a position to share with us how he will be what his view on those kind of things are. Theres no doubt hes a qualified person. People are going to want to know what are his views on these issues. And others in the middle east and around the world. Earlier on this people peter orszag suggested that so tough some of these approvals will be that it will, in fact, use up a lot of the president elects Political Capital. Such that some of these hopes that are priced in by markets for various policies whether they be on tax cuts, deregulation, or things like obamacare, that he wont get some of those bills passed because getting confirmation through will use up so much of his Political Capital. What do you make of that . Well, i dont think its going to use his capital getting con for magss. At the end of the day its going ton up to the individuals. My guess is i mean, there are a lot of questions. For instance, recollectix tille think hes going to rise to the occasi occasion. You have hadley and cheney and those, i dont think you see people like them who know him well lining up behind someone whos going to have a nontraditional view of russia or the middle east or other places. My guess is, well see. Its up to him. But hell rise to the occasion. He wont be burning any of trumps capital. Nor will the other nominees. Its really up to them. But youre right. I mean, theres a schedule. We all have focused on this, its a lot that has to happen. Just in i think in the state department on the front end. I think there are 36 to 38 confirmations that people may not be aware of forgetting all the ambassadors. But theres a time frame and it takes time to move things across the senate floor. Money of us want to focus on tax reform. Those kind of things that you guys were talking about earlier that are going to stimulate the economy into the future for decades. And so, yes, i mean, the calendar becomes an issue. But not i dont think Political Capital. Senator, front page of the New York Times this morning as exxon head tillerson put Company Needs over u. S. Interests. The story talks about how back in 2011 Rex Tillerson sidestepped baghdad and Washington Signing a deal with the Kurdish Administration in the countrys north and that the move undermined iraqs Central Government strengthened kurdish ambitions and contravened the goals of the United States. How should you think about that in the context of his new role . So, look. I had conversations with mr. Tillerson when we were putting sanctions on russia. As i did, by the way, with many ceos who had concerns. And i understand how people are going to weigh in on those kinds of things. On the kurdistan issue, again, he was representing the shareholders of exxon. I dont think was moving beyond a breaking law or anything like that. But, look. He will be shedding all of his exxon interests. No way hes going to serve as secretary of state and hold those. It will now be his National Interest. But look. The questions you raise are going to be exactly the kinds of questions people are going raise in these hearings. We all are going to have a chance to hear how he answers those. We constantly bump into questions on a weekly and monthly basis where u. S. Policies because of concerns we have about russia or Eastern Ukraine or any other places bump up against what might be in a shareholder interest in a country. They had longterm investments, the kurds have done a great job of making themselves separate and unique in many ways. The kurds are strongly supported by many americans. They were just in my office a week before last. And those are things that will be flushed out during these hearings. While we have you, i want to get your views on fannie and freddie. Steve mnuchin, the potentially incoming treasury secretary, made some comments about privatizing those institutions. Youve been pressing for that for quite some time. I remember back in 2015 at one point you suggested that investors short those companies. The stock has since moved. What do you think is really going to happen at this point . Well, i said that because we knew that people were putting rumors out about the fact they were going to be ipod. I was bringing attention to it. Weve got a duopoly here. One thats backed by taxpayers. And i just think the model of having private gains and public losses is something that needs to end. We have two entities that even before this collapsed were arrogant. And so, you know, we need to create an innovative, competitive environment for Housing Finance reform. Its very complicated. And no doubt they have some Critical Mass that at present has been important. But i really dont know what mnuchins views on these are. As you know, i was able to pass a piece of legislation which keeps this in Congress Hands for at least 12 more months. Meaning that nothing can happen without congressional approval. But look, were beginning to have some discussions with some of these people that own shares and understand what it is they think is an appropriate model and i hope well be able to deal with this. My goal i have no animus toward shareholders or the entities. Just a Housing Finance system that is innovative and that we have a situation that is worthy and treats our taxpayers fairly. The way fannie and freddie have been set up in the past is not that. Let me ask you one final question. Weve been asking a lot of people this question in washington which is, to the extent that theres a view that the Republican Party is one Contiguous Group at this point and also in power obviously both in congress, the senate, and in the white house, where do you see the fault lines as some of the policies that we keep talking about get developed . Yeah, i think one of the look. At the end of the day, the Republican Party doesnt need to lose its head here. Okay . I mean, yeah, this is exciting time, but got almost 20 trillion in debt. I think that is going to end up being a fault line. I mean, you know, im glad everybodys making money. The dow is almost at 20,000. Its unbelievable. And, you know, people want to talk about massive infrastructure investment. But look, these things need to be, quote, paid for. We dont need to lose our head over a victory. And my guess is thats where much of the fault line business is going to take place. And that is making sure that what we do keeps us fiscally sound. So, you know, if some of these reforms, if the growth can show a growth in revenues also, meaning the tax reform, then i think people likely will support it. But if were just out here partying because we won and we want to make business great and not take into account some of these fiscal issues, i think thats where youre going to begin to see some rubs. All right. Senator bob corker, we always appreciate your time. Appreciate seeing you. Which you a happy holidays. Thank you very much. Thank you so much. Just going update on some of the Goldman Sachs news. Its official in the transition of leadership. David solomon and Harvey Schwartz both getting the top nod. But they are now both president s and both cocoos. Martin chavez as expected is becoming chief Financial Officer but not until april 2017. And a few more details on that which we can bring you later. And in other breaking political news, president elect Donald Trumps strategic and policy forum has three new members including more tech ceos. Uber ceo travis kalanick, elon musk, and indra nooyi will be joining the group. Coming up, two economic reports. Were minutes away from retail sales and ppi. Well bring you the numbers next. This is my headquarters. This is where i trade and manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, en i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Enjoy your phone you too. All right, be cool. You got the amazing new iphone 7 on the house by switching to at t. What . . Aand you got unlimited data because you have directv . . laughs to self in disbelief okay, just a few more steps. Door its cool get the iphone 7 on us and unlimited data when you switch to at t and have directv. Were just seconds away from retail sales and ppi. Take a quick look at the futures before we get you those numbers. Have you looking at dow off about 14 points, nasdaq up about 2 points. Lets get to Rick Santelli with the numbers in chicago. We have a litany of data points. Here we go. Retail sales, advance month over month up 0. 1 . Thats a bit shy. Up 0. 2 when you strip out autos. Z can the control up 0. 1 . These are all very light numbers. Especially when considering the control came off of an up 0. 8 . Lets look at ppi, shall we . Everybody talking about break evens moving higher with regard to inflation. We have up 0. 4 . Hot, hot on headline. If we strip out food and energy, still up 0. 4 . Another hot number. By the way, no revisions. And if we look at year over year numbers, up 1. 3 on year over year demand. Lets look at exfood and energy. Up 1. 6 . This takes out 1. 2 and its hotter by 0. 3 by expectations. And if we look at exfood and energy, its up 1. 8 . Also hotter. Lets summarize, shall we . Retail sales light, but positive numbers on the inflation front. At least on the pipelines farthest and on the producer side definitely hot. Whats going on . Rates seem to be paying more attention to retail sales being weak. Giving up a basis point. Dollar index a little light. But what is everybody looking at today . Countdown to 20,000. More data points to come. Back to you. All right. Countdown to the fed. Lets get to Steve Leisman ahead of the fed News Conference. Steve, what do you make of those numbers . I think theyre pretty interesting. Im interested in how its more off of the retail number weakness. And i dont know how much rick got a chance to get into this, but there was a substantial downward revision to october. Im looking here 0. 6 is the new number instead of 0. 8 . Looking at the numbers, still generally positive for november. With a couple big declines up. Minus 0. 5 is the vehicle number. Thats probably a big reason for the miss by economists. We had 17. 9 million units. Thats always unclear how that translates to whats reported for the number of units sold into the retail sales report. Other things are sort of generally positive but on the weak side. Gasoline station sales up. I think looking for more rise in that. So that was was going to be part of it. You have a downward revision. Here youll see a downward revision to overall gdp which was running 2. 1 . Lets get take a look at whats going to happen today which is the Federal Reserve likely to hike. Everybody says why are they going to hike. The first run is in general improved Economic Data. Despite this data this morning. Now youve moved to a 3 gdp number in the Third Quarter. Youre probably looking around 2 right now. You have this election past us. Were also not hearing as much concern about Global Economic weakness. Youve got doves on the Committee Like rosengren. And then you saw this morning inflation is firming as well as wages. Take a look at the next chart. You can see whats happening. Inflation of the cpi moving up towards a 2 year over year number. And then youve got the atlanta fed wage tracker which is much followed by the Federal Reserve and what you see there is that its up going towards 4 right there. That was sort of this very slow gradual rise of wages that seem to begin around 2015 and that has gone along with higher consumer prices. Still just 2 . But up towards the feds goal here. What are we looking for today from the Federal Reserve . Its clear. Everybody wants to know does janet yellen and company jump on the Economic Policy train . In other words, when we see the forecasts, does it boost the rate of growth. Inflation and the outlook. And the key i think is do we get two or three rate hikes forecast for 2017. Right now our fed survey shows 2. 5 is whats looked for. And how does yellen respond . Going to get questions about trump and his policies. My best guess is she says when these policies are proposed and when we can count them and figure it out and model them, then well make changes to the forecast. Andrew . Okay. Thank you, steve. Coming up, the wall street journals Holman Jenkins will tell us why he believes the president elect is on verge of a russian reset. Stay tuned. Welcome back to squawk box. President elect trump selecting exxonmobil exec Rex Tillerson for secretary of state. For more lets bring in wall street Journal Editorial Board member Holman Jenkins. Good morning. Good morning. Title of his column is trumps russian reset. Holman, thanks for joining us. Great article. Want to jump to the end of it, a point you make. Its assumed tillerson is a typical trump appointee because hes a businessman. You point out hes not a similar businessman to trump. Hes nothing like trump as a businessman. Hes a dutiful corporate climber who works for a board who is very determined to honor protocol and the proper way of doing things. Hes not a wild man. But hes also a very smart and disciplined operator. As everybody, he has lots of relationships around the world. Which is handy if youre secretary of state. In the main part of the article, you point out what does this mean for americas relationship with russia in particular. As ceo, tillerson opposed sanctions on russia. Is that purely because he was dutiful to his shareholders . Is that view going to change or will he stick to that tune . I think he opposes sanctions, generally is not useful. Of course hes working for his shareholders. Had a big deal in russia that was put on the skids by those sanctions. But i think, you know, his name was not picked out of a hat by donald trump. I think he was hired for this job because of his relationship with putin. Because hes a person that can talk to putin aeen who putin will listen to. Since putin is potentially the worst diplomatic International Disaster out there if he goes off the rails, i think its an important priority. We havent really focused on his relationship with putin. As an oil man, he has strong relationships across the middle east which is the top of the agenda item for the new administration. I think russias going to be the top of the agenda item. Thats what trump has talked about, all campaign long. Lets be his friend and work with him on things. I dont know how sophisticated his view is of putins own agenda and problems. But he does not want the obama relationship with putin. You think we are spending too much time on russia relative to china . Because clearly the conversation has moved to russia over china. And when you think about the Economic Issues that weve talked about on this show for so long. Its a case of priorities. The baltics are out there looking vulnerable. I think you do want to put that risk back in the box before you worry about other things. Does hacking become an issue that tillerson will have to deal with . Yeah. Were all going to have to deal with that. I think maybe it will subside, the idea this is how a unique episode, because this has been going on all the time. Everybody has been ripping open the u. S. Government and businesses and stealing secrets. There isnt a change for this changing the election, but the possibility is upsetting. All the big powers aring from to come to terms on this. Whats your reaction to president elect trumps reaction to the news from intelligence sources around the potential hacking about russia . It doesnt really matter what he thinks about their hackings findings. He cannot let them control the first days of his administration. Hes already getting pushback from republicans in the senate. He is not going to let the cia buffalo him into hostility with putin until he finds out thats the only relationship puth listen allow. Hes a political ploy by the intelligence Services Like the cia thats what you think is happening here . I dont know. You think its disingenuous . Well, i think theyre pretty sure that russia hacked. I dont think we ever know what the motives are. All through the cold war the thing the cia said was we could never figure out why they were doing what they were doing even when we knew what they were doing. We never understood the why. I think thats true now. Great to see you. Thank you. President elect trump hosting that tech round table today. Who is heading to trump tower and who isnt. Plus weve got Scott Mcnealy joining us next. Squawk runs in just a moment. [engine revving] is it a force of nature . Or a sales event . The season of audi sales event is here. Audi will cover your first months lease payment on select models during the season of audi sales event. Alaska airlines and Virgin America closing their merger. Now to the next to compete with the majors. Phil lebeau joins us with that story. You are now looking at the fifth Largest Airline in the United States. A lot of people are wondering whether or not alaska which has succeeded with this merger can continue to grow while maintaining whats been a very strong presence as a niche airline with Great Customer service. Keep in mind as part of this merger it had to trim its cochair flights with american just a little bit, not a lot. Heres ceo brad tilldon speaking about what this means on the west coast. This really giving us the coast. So together when you combine the strength of alaska with virgin, we will have great strength up and down the west coast. In fact, well have the largest market share of any airline serving the west coast. And theyre hoping to use that as a basis for continuing to grow the airline nationwide. Take a look at the five Largest Airlines in the United States. Number one being american. Then you have delta, united, southwest, and now alaska now that its merged with Virgin America. As i mentioned earlier, the real question for a lot of the faithful alaska fliers, will this airline continue to be able to maintain its status as a niche airline with Great Customer service even as it grows larger . Were going to be working on doing the things weve done well historically. Run a great operation, provide great service, build fantastic loyalty programs. But we are going to be working on our profile, our brand to create a little bit more flare, a little more edge to the brand. And create interest to bring lots of new customers to the company. One thing thats most interesting, take a look at alaska air since 2009. If you look at all of the airline stocks, guys, going back to 2009, the best performance, alaska air with the return of more than 1100 . Quite a run, take a look at that chart there. Back to you. Thank you for that, phil. Meantime, Silicon Valley now heading to trump tower today. Tech executives ranging from jeff bezos to elon musk expected to meet with the president elect today. Among the topics reportedly on the agenda, jobs and how the economy will be impacted by digital keknologies. Ahead of the meeting, tech stocks getting in on the rally. Jumping more than 1 . And joining us right now to talk about this meeting thats been organized by peter thiel, Scott Mcnealy. Good morning to you. Good to be with you. How are you . Good. So heres the question i have for you. Kara swishier has called this the apprentice nerd edition. And she says in an oped tech executives should be ashamed of themselves for lining up like she sheeple after all the numb skull attacks trump has made on what is the countrys future Forward Business sector. Should they be taking the meeting . Absolutely. And i know theyre all going to be bringing their own set of theyve all got Government Relations folks and have issues. Theyre going to bring a big potpourri of issues there. But i dont think those are the some are going to be crony statism request. Some are going to be regulatory and other things they want to impose or things they want to eliminate. That sort of thing. But its theyve got to go do it. Theyve got to get the conversation going. And i think youve got to, you know, be part of the deal making. Do you imagine this is going to be a contentious meeting . There were reports once media executives came to visit with the president elect, he scolded them for a good portion of the meeting. Well, you know, i doubt it. I think he understands that this is innovation. If i were there, i can tell you what i would do. I would be asking for a new department. We dont need more secretaries, but i would have a secretary of deconstruction of downsizing, of scope eliminating for the government. I would put a mitt romney who took the olympics and made it profitable, i would hes bought tons of companies and trimmed the fat and gotten focused and turned them around. We need a turnaround in the federal government. Theres massive regulations, the need to be theres all kinds of executive orders that need to be looked at and streamlining. Weve got a huge deficit. Id have mitt romney bring in folks that are like me or jack welch or other gurus in there and absolutely drain the swamp. And theres going to be a lot of squawking with the swamp monsters, but we got to do that stuff. A big job ahead for the Trump Administration. In terms of the tech ceos about to walk into trump tower later today, scott, i mean, if you were in their shoes what would you be most worried about . Given his stance on preserving jobs here in the United States and, you know, the push towards automation and the possibility that automation will replace a lot of jobs here, would you be worried about that . I mean, ai business, for instance or the automation business . You know, thats been an issue forever. I would imagine the people going horseshoes in the old days were nervous about the automobile industrial. That has been happening. We have to have a more mobile work force. We have to have a better education environment and maybe not have the government do all the educating, because theyre kind of slow and theyre kind of a monopoly and theyre kind of not real effective at it. I mean, it drives me absolutely nuts that were scoring way worse than there are vietnam is blowing us away on all the scores. I tweeted this morning about how theyre just kicking our butts. There are this economy is scale to so many things that drive productivity. Were trying to solve it all from government. If i was in the meeting i would say, butt out. Do the things you should be doing. Defense, justice, state, those keeping us safe and protecting our rights and liberties, not getting into the private sector. Dont get into the loan business, the financial business, managing our life. Let us in the private sector do what we do and keep the monopoly government out of areas where the private sector can do it more effectively. If you were in the meeting, would you be pleading with the president elect to stop tweeting directly about individual companies . You know, i think he needs to get the story out. He creates an enormous amount of conversation. He has been tweeting about the virtual 450 hammer. He has been tweeting about the fact that maybe we dont have the best trade deals out there. Those are all very he is putting an outstanding what i think is a very outstanding cabinet together. And he is creating the chaos, the noise and then he is going to let this team go in and rationally work you have to he is a developer. He takes the wrecking ball first to the issue and breaks the glass a little bit and then has a very, very strong that he is building. Im pretty excited about the opportunity. Scott, you are making a good case in the case for the government to effectively get out of the business world. But when you look at the free market, if you will, as it is, to the extent that we are in this situation Economic Situation in terms of jobs to the extent donald trump was elected in large part its because the market hasnt necessarily worked for the middle class workers that donald trump has talked so much about and in part potentially could you argue the Tech Industry has been so successful both on the productivity side and frankly in moving some of the jobs abroad in terms of manufacturing component of technology that it made it very difficult. What do you think the Tech Community should be doing about that on its own . It depends on what you think the causes are. Minimum wage drives jobs out. Over regulation drives jobs out. The housing sector got just totally messed up by all of the intervention and meddling that you see. I think our education environment needs choice and competition and private sector investment. If you look at whats causing these adhesions in the market and lack of fluidity, its because of government intervention. We are here for the government to help. Thats the scariest thing. I think those are the causes of our economic problems. Always great to see you, scott. Thank you. Thank you for waking up early for us. You can catch complete coverage of the tech summit on cnbc throughout the day. Squawk box will be back in a couple minutes. My business was built with passion. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. With it, i earn unlimited 2 cash back on all of my purchasing. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Which adds fuel to my bottom line. Whats in your wallet . Coming up, todays biggest market movers. Later, we have full coverage of the fed decision on cnbc, that starts at 2 00 p. M. Eastern time. After that, probably the big tech meeting with donald trump. Squawk returns in just a moment. They are the natural borns enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. Why pause a spontaneous moment . Cialis for daily use treats ed and the urinary symptoms of bph. Tell your doctor about your medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis. Final check in on the markets. Can the dow hit 20 k today . Its pointing down by 14 points at the open. Its 91 points away at the close yesterday. Futures anything to go by, were not going to hit 20k today. Future s pointing lower. We will see you later. Join us tomorrow. Squawk on the street begins right now. Good wednesday morning. Welcome to squawk on the street. It all comes down to this. The final fed meeting of the year. Statements at 2 00 eastern time. Premarket is cautious as we watch for president elect trumps meeting with tech ceos. We begin with the march toward dow 20k