Transcripts For CNBC Squawk Box 20180102

Weakness in italy and spain. When it comes to the treasury yields, this is what were watching closely, the tenyear is trading at 2. 433 should we be doing a Weather Board . Like a freezing cold Weather Board . I saw this morning that 90 of the United States is freezing or below a third of the continental United States, the lower 48, are actually below zero. As was predicted. Its cold because its warm. Dont do this as a Global Warming thing. No, no, because only weather that proves Global Warming like every brush fire is Global Warming. Every drought. Every flood. Thats all Global Warming. You didnt see the day after tomorrow. It got freezing. If the atmosphere traps more heat, you would think it would not be as cold you know what sorkin, dont act like you studied this i have studied this what i have as it happens, i have. Sorkin, if it was 40 degrees, and it was a very warm winter, would that be indicative of Global Warming or just answer that question. If it was unseasonably warm, would you be saying thats Global Warming i would argue to you right now either way, its Global Warming. Fizz real if its really cold or really hot. Its Global Warming. There are longterm trends. Unless its a hot day in new york city. Its a new year, but no its a new year but nothing has changed. Heres the stories were watching reports say protesters in iran attacked police stations demonstrations continued for a fifth day. As many as 20 people have been killed if protests. The price of crude much more on whats behind the protests in a little bit well talk about the price of crude as well. There you see it, wti trading at 60. 34. So we stayed above the 60 handle for a while. Well see where that heads over the next couple of weeks bitcoin starting the new year in the red. Futures calling for the regulated and cboe, bitcoin future theres as investors think it will continue to fall as the Digital Currency has further to go. Were at 13,850. Cryptocurrency is well off of the highs after plunging more than 20 in december all those folks who jumped in, they jumped in at last and worst moment a year ago, if you had done that with the stock market, it would have worked perfectly. A computer glitch at u. S. Customs creating headaches nationwide fourhour outage continuing to create long lines at immigration checkpoints at airports across the country. All airports are currently back online a spokeswoman said that access to National Security databases was never compromised so passengers could screen completely now you have studied it. Last week, there with wereer number of people who made comments about Global Warming, and the temperature. I saw dave brigs, i saw that expert sportscaster at cnn, he couldnt believe that trump said something so scientifically stupid you have talked to leo about it . Leonardo dicaprio yeah. Maybe he can compare the science background i havent so you believe the science no matter what it is, it proves it. Got to be a better way to start the new year no matter what it is if theres no hurricanes for 12 years that proves it three in one year, it proves it. I was not suggesting this was proving anything i was not. But its cold it is extremely cold. On face value, you would think a warmer atmosphere you would have less of these really, really cold days, as a trend, at least . If theres more heat, eventually it will take over, right my understanding of it is that you are conflating all sorts of oh. Okay i got it all right. Good stocks to watch today. Bp expects a positive impact from future earnings from the u. S. Due to the new tax law. The company says lowering of the Corporate Tax will require a reevaluation of its deferred u. S. Tax assets. If its got losses its carrying forward, it would have offset 35 taxes. When you offset 21 taxes, your losses are not worth as much a lot of companies are talking about this all in all theyll benefit from the lower rate this is a shortterm impact. This is like the stuff that you were able to do, using losses from bad times, and the losses are not worth as much when you have a lower tax rate thats something for everyone to think about, even with deferred comp that will help you with your deferred comp. Smaller than yours. Excuse me smaller than yours. Think about deferred comp, anything you get in the future wont be quite as bad. Except were not corporations right but your overall tax rate at 37 thats true yeah 36. 9 or whatever right youre going to you still have your state and local, so you will be paying more. With the state and local taxes, obviously not necessarily, theres an article in the New York Times about how theyll try to offset it by doing things like making your taxes that you pay to the state a charitable deduction i dont think man, that statement you havent figured anything out with the state and local i dont think it will be successful either. For you, your taxes will go up have your tentacles reached into every area of tax law to figure something out with your situation with your state and local taxes and your agent stuff . Nope, i looked into it. Anything that can be done to try to lessen it is going to help, but it helps the income inequality its something you wanted for a while. This is good overall, right . You dont feel bad because it effects you, right do the news this is news. Deutsche bank i think its good good for corporations, good for income you see the three people on cbs asked whether they would have higher or lower all three lower. Mmhmm. The futures today are a replay of everything we saw last year up a bit what do you think overall, 2018 brings for the markets . I think its going to be higher i would also suggested to you the measure of this whole plan is not about what happens in the next two years you have to to me, youll have to measure this in five or ten years. Then youll know whether it worked or not. Thats the story not whether you get the stock market this is easy this is like handing out money you can hand out money and make the economy go faster. Thats not a hard thing to do. Like the stimulus thats not a hard thing to do what is hard to do is do it and sluggish wages see upticks thats not just the stock market that would be good. Well see if that continues then well measure all of this and measure the debt, and well have a real discussion about it. The debt. At 20 trillion, we do need to worry. Particularly if Interest Rates go up. I know. When it was 8 trillion, it was a lot. Deutsche banks Ceo John Cryan said the company will resume paying normal bonuses for 2017 and some employees will get raises apple says 29 replacement batteries for older iphones are available now. Last week apple said the replacement batteries would no be ready until late january. Apple offered the batteries after apologizing for slowing down the older phones. Thats one thing we may see this year yes or no, trillion dollars . On apple or any company on apple. Potentially thats what barrons went out on a limb and said i think were at 900 868. Its come down a bit i guess with the worries about the x sales, the 10. X, 10 x. 10, i think someone last week said that that apple news had cast appall on the entire sentiment for the market apple is an important part of a lot of the advances. I was looking at apple, alphabet, microsoft, amazon, facebook combined soared 43 for the year, to 3 3. 3 trillion. You have to watch those Technology Names closely President Trump is back in washington this morning and he is kicking off the year with a busy agenda. Eamon javers has more on that. Good morning happy new year good morning. Happy new year to you as well. The president spent christmas break in maralago and returned yesterday to washington, d. C. After spending the new years holiday in florida the president had two major Foreign Policy issues on his mind as he returned the first was on iran, putting out a tweet saying iran is failing on every level despite the terrible deal made with them by the obama administration. The iranian people are hungry for food and freedom, along with human rights the wealth of iran is being looted time for a change. That tweet in response to protests we saw in iran over the weekend in which several people were killed. Those protests began in the middle of the country. The regime struggling now to respond to them. Also on the president s mind is pakistan the president putting out this tweet yesterday as well saying that the United States has foolishly given pakistan more than 33 billion of aid over th past 15 years and they have given us nothing but lies and deset thinking our leaders as fools. They give safe haven to the terrorists we hunt in afghanistan with little help no more. The president returns to washington with two domestic issues on his mind according to aides ive talked to one is welfare reform. The president talked about that. Not clear exactly where the president is going to go on welfare reform aides have told me they think what hes talking about is a broad policy that would encourage people to get back to work job retraining, ending benefits over a period of time. Well see if they can get democrats on board for that. Then well see if they can get republican conservatives on board for a infrastructure plan. The other big agenda item that the Trump Administration comes into the year with theres question about whether fiscal conservatives will be enthusiastic about a massive Spending Program the Trump Administration talked about 2 200 billion in direct federal spending all of this to get americas infrastructure up and running again in 2018. All of that has to be done this year before we get too far into the political calendar because 2018 is a mid termt Midterm Election year. Is this a year trying to look for bipartisan issues, reaching across the aisle, or looking at welfare and just the republicans again. Its going to be tougher because you dont have the same rules in the senate judd gregg will be here talking about how you have to get 60 votes in the senate. Remember, republicans only have 51 votes in the senate now because they lost that senate seat in the election at the end of last year now the question is with that slim of a majority in the senate, what legislation can you get over the finish line 2017 was a difficult year for republicans and for the Trump Administration in terms of getting some keynote things through. The obamacare effort crashed and burned tax reform ultimately made it across the finish line so the question now is do they want to take another run at obamacare . Some in washington would like to do that. But with that narrow majority in the senate does that make any sense at all politically thats a question they have to ask. Without reconciliation, i dont know what you do with that is there any way that there becomes a real serious move by trump to convince the senate to change the rules they talked about it it never seems like its been a serious bully pu push for that you can do the speeches, but ultimately thats up for the Senate Mitch Mcconnell said no. And judd gregg said thats one of the things that makes the Senate Special if youre in the house, you dont have any power at all really you vote with your party you get assigned to a committee. The speaker of the house can take you off that committee if he wants to. Youre in lock step with the larger machine in the senate, youre one of 100 and you have all these powers including the filibuster that gives senators enormous sway you dont get into politics to have no power, you get into politics to have a say to republicans and democrats like they have that leverage politically and that the president , whoever he or she is in a given year has to talk to them and deal with them. I dont see the senate giving that up soon all right thank you. Thank you isnt there a chance that youll be living when your deferred comp you dont get it until after you retire. After separation from the company. Isnt there a chance you wont be living in new york or new jersey good reason to move that youre living in a lower taxed state. You could move. Because when you get older, wouldnt you want to move to a warmer place or you figure new york will have South Carolina weather by then. When are you going to do that well, im saying that i might move to where its warmer, unless it gets warmer here are we counting on that . Its not cooperating all of the arguments you wound them into one. Thats good. The broader markets will begin the first trading it was like across the board the windchill yesterday was like minus 10 i was at a hockey game outside an outdoor winter classic you went to that game i did you know who i saw . Who the mooch did you i did i wanted to have the mooch come on. I said how come you have a q rating higher than george clooney. Does he i think he does he goes on the view, gets record ratings. Should we have him on . Sure. Bring him on. Sure i have no problem with him lets start with the first trading day of the new year. The dow, s p 500 and nasdaq each hit several record milestones in 2017 and closed with the best year in four years for more on what to expect, we are joined by Ryan Dietrich from lpl financial. It sounds like i need to have my lpl levels checked the good ones should be high the bad ones should be low is lpl its not having anything to do with cholesterol what does it stand for well, lisco prime ledger, but its one of the largest independent broker dealers in the country. Happy this morning to be here to talk stocks with you on the economic side, drew mattis from Metlife Investment Management where were you before metlife . I thought you were at Deutsche Bank ubs when did this change . Earlier this last year last year im coming up on a year. Are you helping with the pay income increases that were seeing in the wage sector . Did you get a good deal to go . Im fine, joe youre doing well excellent. Ryan, youre 8 to 10 for the year thats not stepping out on a limb, is it . Its probably not but when you consider the fact that we had 20 gains last year, we think this can continue heres why we have global earnings finally kicking in emerging markets in the u. S. And developed markets. We have two years in a row of growth in all three of those we have not seen anything like that since before the financial crisis look at whats happening under the surface with the base medals copper breaking out. Those are signs that the gloefr all economy overall economy is good. We think theres very little chance for recession this year and we should have a continued bull market. I brought one stat for you dow gained 25 last year since 1950 that happened ten other times. The next year was higher eight times. Six of those times up over 10 or more. The average return was 13 on average. Long story short, because we had a good year last year doesnt mean so much you blindly become bearish, the stats suggest that we could be looking at double digit gains again this year. The economy, drew, its long in the tooth in terms of the recovery is there any reason to think that these die of old age or do we have to do something wrong to cause a recession . Usually have to do something wrong. Do you see anything like that happening . I dont see anything in the economy. This time it could be the tail waging the dog, instead of the dog waging the tail. If theres a problem t will come out of finlt mancial markets and move into the real economy so it could happen either way. There should be a reason why the Financial Markets there can be a reason why they get overinflated and then theres a break people are talking about how expensive everything is, that makes people nervous makes ceos nervous could that cause a break in the markets which would feedback into the economy i think so. If you see a big enough drop in the equity market, you see companies decide, hey, maybe now is not the time to back in the chicken and the egg. What is causing the drop in the markets. Does overevvaluation cause a drp fear could cause a evaluation people are worried that things are expensive, but are they priced appropriate le gily givee outlook. The answer is yes. Theres very little risk of recession but people have a hard time believing that because of how long the recovery has been going on the thing people talk about is we overinflate the tax cuts, that throws fuel on a hot economy, that causes the fed to act more quickly that doesnt create a crisis. Its from such a low level, too. Most people are saying could 4 , 5 cause a recession of longterm rates no, 4 or 5 wont. But its a matter of the uncertainty and the volatility if theres a big enough shock, for whatever reason, it can feed through to the real economy. It seems like you would need a north korea or an iran or an oil shock or Something Like that most of which are not predictable, right so the question is based on what we can predict or what we have a sense we can predict, the economy and the like, are things overpriced now the answer is no theres a reason to be optimistic that this recovery will reach a new record, it will go beyond the tenyear mark into 11 years thats our view. I think theres every reason to believe that will be the case. But it doesnt mean you can close your eyes and assume because i think everything is okay that everything is going to be okay. A lot of people are worried that the market is overdone and people are worried that the economy has gone on too long both of those things can have feedback loops i think we need something actual to do it. Sorkin, have you got tickets to what the olympics is a month away. I mean yes tickets for the plane yes ready to go. Kim jongun yes he wants to talk i have a button that can hit anywhere in the United States, but i wish the olympics well and hes planning on having a conversation about a delegation going to the olympics. Frpts that thats all positive yes is it only a month away february 9th. Five or six weeks. Thats what i mean. You have to started thinking about clothes, Everything Else packing. Warm clothes. Ill have to use the warm clothes i use this week. Not quite as warm if you didnt stay up late last night, we have highlights from the College Football playoffs and why north korea north korea may be participating in the Winter Olympics squawk returns in a moment lets get started. Show of hands. Who wants customizable options chains . Ones that make it fast and easy to analyze and take action . How about some of the lowest options fees . Are you raising your hand . Good then its time for power e trade the platform, price and service that gives you the edge you need. Alright one quick game of rock, paper, scissors. 1, 2, 3, go. E trade. The original place to invest online. Its time for sleep numbers lowest prices of the season on the only bed that adjusts on both sides to your ideal comfort, your sleep number setting. And snoring . Does your bed do that . Its the lowest prices of the season on the queen c4 mattress with adjustable comfort on both sides. Now only 1199, save 400. Ends soon. Visit sleepnumber. Com for a store near you. Welcome back more than 300 hollywood women are launching an initiative to fight Sexual Harassment and gender disparity in all workplaces it advocates change from movie sets, to feels and boardrooms alike. It is being backed by some powerful hollywood women the College Football title game is set after last nights playoffs bummed out . No. Did you see it . No. The georgia game started at 5 00 at 9 30 i was still watching it was Double Overtime im a georgia fan now. Right but it was unbelievable if i had to root for anybody, i would have rooted for oklahoma, having lived there quarterback is kind of cocky. He won the heisman. I know. I like that he walked on. Lets move on alabama took on clemson. This time it was all alabama the crimson tide rolled over clemson beating the tigers 246. At the rose bowl, it went to Double Overtime. This blocked field goal started it off it was 5448 when the guy, michelle, who had dropped lost a ball earlier kind of redeemed himself and scored the touchdown. It was the highest scoring game in rose bowl history the bulldogs will take on alabama next monday, 8 00 at night. The s. E. C. Is so incredibly dominant they are. Now with ohio state and what they did to fc i wonder if they were still in the mix if there would be a chance alabama, people said lemsclemso will be the new alabama. Because they won last year the game is in atlanta, about an hour from athens fans were so excited their team reached the title game that stub husbands website crashed. Have you started watching hoops yet . No. I think villanova got beat by Butler Xavier plays butler tomorrow rutgers was strong. They had a great win. Beat seton hall. I couldnt remember if it was villanova or seton hall. Then they lost the next game badly. When we come back, the political agenda President Trump is back in washington, hes kicking off the new year with new developments in iran and north korea. Well talk to axioss nick jo s johnston about that after the break. Before that, heres a look at last weeks winners and losers my experience with usaa has been excellent. They always refer to me as master sergeant. They really appreciate the military family, and it really shows. Weve got auto insurance, homeowners insurance. Had an accident with a vehicle, i actually called usaa before we called the police. Usaa was there handson very quick very prompt. I feel like were being handled as people that actually have a genuine need. Were the webber family and we are usaa members for life. Usaa, get your insurance quote today. At ally, we offer lowcost trades and highyield savings. But if thats not enough, we offer innovative investing tools to prepare you for the future. Looks like you hooked it. And if thats not enough, well help your kid prepare for the future. Dont hook it kid. And if thats still not enough, well help your kids kid prepare for the future. Looks like he hooked it. Well do anything. Takes after his grandad. Seriously anything, to help you invest for the future. Ally. Do it right. [hawaiian music playing] welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning welcome back to squawk box on cnbc weve been watching the u. S. Equity futures on this first trading day of the new year. Dow futures are indicated up by 28 points. S p futures up by 5 points the nasdaq down just over 1. 5 points south korea offered talks with north korea just a day after kim jongun said he was open to negotiations but the north would push ahead with mass producing Nuclear Warheads one south koreaen minister said they look forward to discussions with north korea if facetoface talks take place, it would be the First Time Since december of 2015. President trump back to work in washington today with a busy agenda for the next month. Joining us is Nick Johnston from axios. A lot to talk about, tweeds and other things that happened over the weekend. In terms of whats on his desk this morning, whats the first thing that is going on were looking at this month as being the most important for President Trumps America First agenda those are two words we didnt hear much about during the tax reform debate. The first is immigration, they need a solution to the dreamers situation, children brought to the country illegally as children that needs to be solved early this year. And the administration wants to tie a lot of things to that like the wall, increased Border Security and a chain migration that could be a big fight. Hovering over this is some reporting over the weekend that looked for trade things coming up the president might go back to his America First thing on trade. They held off on china because of north korea that may come up again and taking a stronger line on north korea. One of the things this week was the president s tweet around amazon and the u. S. Post office what does it say not so much about that particular issue, about who should be paying for the shipping, but what does it say about the president s agenda and his approach towards amazon and Technology Companies in the new year thats been something you guys have talked about, but thus far its just talk right now that amazon tweet is just a tweet. Theres no reporting of regulatory actions that will be taken. More broadly its something to keep an eye on, both on the hill and with companies its in my emails virtually every morning, something about facebook, something about twitter, something about amazon. Besides a couple hearings regarding advertising that took place during the campaign, theres been no real movement. Thats the challenge. What would trigger that we cant figure out where that movements might be. Remember, steve bannon last year used to tell people he would love to break up google and amazon hes not in the administration anymore. The Regulatory Framework for the administration has been less regulation so on the hill were looking for some kind of sense will they crack down on facebook or google on the spread of misinformation. Right now we have coalescing on policy right now its just a tweet rather than a signal in terms of policy coming. Its hard to figure out who well be dealing with in the administration some people are leaving, others are anticipated to be leaving and were not sure who is coming in theres one i want to talk about. Steven miller. Thats a voice that is an ascendant in the white house, and if hes getting more power in the administration, look for a heard line on immigration and trade and ariffs if you believe you have to believe in a lot of conspiracy stuff about cnn, time warner, at t, and that was the reason for all this Washington Post and amazon, you could get some dots there. If you were going to be that thinskinned and, you know, sort of allow your personal feelings to dictate some policy, you could make the case that amazon could be you could if that cnn thing is true. Right thats why from a business side, a lot of people are watching this deal so closely to see if that kind of possible political animosity translates into policy the president has been beating up on some things, but look at what the president does, not what he says theres been nothing done about amazon yet okay. Nick, thank you, sir. Absolutely. Happy new year happy new year to you. Coming up, unrest in iran. Protesters attacking police stations overnight reports of at least nine more dead details ahead. And strategist mark grant has some predictions for the markets and the economy in the new year some of it goes against the consensus, which is not unusual. Stay tuned youre watching squawk box on cnbc in todays executive edge, global unrest, political protests in irancontraed for a sixth day as protesters attack the several police stations overnight. Reports indicate the protests initially started because of the economy. Michelle carusocabrera is here to explain more. How many years ago, the shaw, remember how vilified he was at the end . Now i hear some people saying how great the shah was and theres some chance, pining for the days of preislamic revolution is this the beginning of something or not were seen protests before in iran they come down hard yes, they do. These in particular, at least the initial indications started because of inflation, specifically egg prices had gone up the third week in december by 9 in a single week, or up nearly 54 from a year ago ill run through some data, which shows if you live in iran theres a lot to complain about in terms of the economy. First of all, the double digit inflation. Its gotten better but still bad. Currently running between 10 and 12 , 2014, it was 12. 7 after youve seen massive gains, still running at double digits unemployment, 12. 4 10. 7 for men, 20. 7 if you are female youth unemployment is 29 . For young men, 25 for young women, 44 clearly these protests have morphed into something more than just about the economy freedom of expression and other issues that we heard about when it comes to iran heres the takeaway for a cnbc audience, i think. You watch almost any other network you will hear political analysts and the way they discuss iran there are hardliners, theres moderates, theres some degree to how much of an islamic government do these individuals in particular want right . I dont think thats useful framework. To think about iran, think about an economy that still has a lot of ideas that should have died in the 70s. Such as price controls. Politicized lending. Cronyism that is rampant the revolutionary guard that controlss the pillars of the economy. You would call many of these ideas leftist ideas, holdover socialist ideas, an economy that needs to modernize in many ways. A central bank that is not independent. They are directing lending to banks that have nonperforming loans of 12 a suffocating level. Theres a lot to complain about with the economy here. It leads to a nation that could be a tinderbox because theres so much dissatisfaction. We thought their economy would improve after the sanctions were lifted. What happened . It did improve. Growth has returned for sure, but almost all the growth happened within the oil sector of the economy so 6 growth within the oil sector, less than 1 growth within the nonoil sector. They did get a lot of money. We dont know how much money they got, physical hard cash thats still a meystery that helped with inflation its still running hot so this is not as simple as a society that now has whatsapp and the rest of the world is not living under a theocracy this is about egg prices its always the economy, stupid . Theyre not going to all of a sudden say we want to throw off the shackles of a theocracy i think theres a lot of that. Theres absolutely a lot of that isnt it only a matter of time do you think in 50 years there will be a regime like the Iranian Regime still in 50 years what about north korea . North korea, china. Anywhere it seems like the more social media where you see how everyone else lives, that you want that for yourself yeah. Thats a natural conclusion for sure whats thigh they shut down telegram, which is the whatsapp they had you cant keep putting it down violently and expect it you have to have it seems like from the bottoms up when youre suffering and you cant get groceries, you dont have a job, when you have nothing to lose according to irans own statistical office, the number of women working in iran, 4 million, out of a population of 70 million people. Completely different world it would be if iran wasnt one of the three evil yes evil empires. The axis of evil. It would be totally different. The whole middle east, you wouldnt have this these two sides opposed to one other the saudis versus the iranians all those economies are really messed up i mean, government control, too much influence you took this to an antisocialism they got price control other stuff is bad in iran, but they have price control. Are they nuts in this day and age i know. Venezuela thank you when we come back, Market Trends for the new year. Strategist mark grant will join us to tell us what to expect in 2018 when this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Which is oon an 807 after tax. I dont understand it sounds like its saying two Different Things to me now theyre entering by going back to normal policies by raising rates. Which is it . It was wrong to stay at sfwler for so long or its wrong to raise rates now . I think its wrong to raise rates now, joe, and the point i was trying to make was that the fed has gone off on a minuscule basis in one direction which is raising rates, but the other Central Banks of the world, the Japanese Central bank, the pboc, the ecb are still putting money in the system and the money is going to be even greater by next september than it is now were emerging from it first. Went with in first we went all in first and now were coming out first, and theyll eventually follow us it just sounds like those things are opposites. You should welcome the increase in rates you dont like europe anymore. Just to end on something youre done with europe . Thats against the tide. Going against the tide everyone thinks europe is cheaper than we are. Right well, the Interest Rates in europe are way more expensive, and also, they played funny gan games with their banks in terms of saying that some people didnt have to pay, but the institutions had to take the hit. That just to me is a scam. I dont invest with people that involve in scams happy new year. Great to siee you coming up when we return, the new year is here, but is your portfolio ready . rwee going to talk stock strategy right after the break two big hours of squawk coming up helping keep shoppers safe. This is a financial Transaction Secure from hacks and threats others cant see. This is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. This is not the cloud you know. This is the ibm cloud. The ibm cloud is the cloud for business. Yours. [music playing] good morning happy new year looking at a modest open on wall street, but higher on the first trading day of 2018. What you can expect perhaps this year is straight ahead plus, will the fast Food Industry serve up big profits this year . An outlook for the sector. Names maybe you should keep an eye on back to work President Trump returns to Washington Well tell you what is on his agenda plus, the latest on the antigovernment protests in iran thats the second hour of squawk box that begins right now. Live from gt beating heart of business, new york city. This is squawk box. Good morning. We are live from the Nasdaq Market site in times square. Im becky quick look with joe kernan and Andrew Ross Sorkin. Welcome to 2018. Weve been watching the futures on this first trading day of the year, and right now it looks like everything is in the green. Thats a turn for the nasdaq which had been under pressure until just the last few minutes. Right now it looks like the dow futures are indicated up by about 48 points. S p futures up by six. The nasdaq up by 3. 5 in our headlines at this hour, apple is making 29 replacement batteries available immediately. Thats a month sooner than it had originally planned the newly discounted batteries were offered following news that apples ios software was slowing down older iphones apple apologized to consumers and gtsaid the move was to try prevent the unexpected shutdown. The company that bought cable vision the two sides were unable to agree on a new carriage contract with altice saying that stars refused a shortterm contract extension. Some trouble brewing for International Travellers returning to the United States over the Holiday Weekend the u. S. Customs service experienced an outage of its Processing Systems at various airports that outage lasted for about two hours last night, but systems are back online at this point the Customs Service used alternate methods to try and process passengers and said that there is no indication that the disruption was malicious in nature developing this morning, lots to talk about, but this one is important reports say that protesters in iran attacked police stations. Security forces struggled to contain the challenge to the countrys clerical leadership. Demonstrations continued for a fifth day. As many as 20 people have been reportedly killed in the protest. Also, take a look at the price of crude were now up over 60. Weve actually stayed there now for a couple of days were at 60. 40 wti at this moment well monitor the situation and the impact on oil throughout the day, of course President Trump is back in washington ready to work on his second year agenda the president and Republican Leaders will be meeting at camp david this weekend to talk about the years agenda, which include replacing the Affordable Care act, welfare, reform, immigration, infrastructure and National Security, just to mention a few things that includes Nuclear Threats from north korea and iran. A few stocks to watch this morning. Bp is going to take a onetime charge of 1. 5 billion as a result of the new tax law, but the energy giant expects the changes to have a positive impact on future earnings. This isnt a cash flow charge. Its just kind of an accounting chart based on how they can use their tax laws carried forward with a lower tax rate. And l brands was upbranded to outperform from neutral. They say they believe its turning the corner under new leadership volkswagen is facing more legal issues over its diesel emissions scandal. The swiss Consumer Protection organization has filed damage claims on behalf of about 6,000 consumers who own vw diesel vehicles lets get to the economy and the markets in the new year. Mostly the economy on said covering that angle as rob martin, u. S. Economist at ubs. Just to start out, you think that this tax law boosts it takes effect immediately and will actually boost Fourth Quarter gdp. First quarter i think it says Fourth Quarter here you mean first or fourth i mean First Quarter. I do think it takes effect right away i think one of the things were likely to see almost at the outset is a boost in employment, in employment growth, as employer gear up for the idea that they want to boost production this year i think the place were most likely to see that even this week in the jobs report is in the retail sector. Retail sector has been hammered for a long time by competition from online giants, and so theyve been struggling, but we saw on the november report that we had a nice jump in retail employment if we get that again, that would really boost my confidence that the tax plan could what do you have for Fourth Quarter right now . We have two and a quarter percent for the Fourth Quarter where is everybody at where is the atlanta fed right now . Atlanta fed at 2. 8 , but its an outdated number ive been told where is the new york fed why are you so low numbers are coming out. A lot of the gdp trackers kind of came into the quarter very optimistic. They came in very high we saw a lot of numbers in the 3. 5. A lot of numbers kind of bouncing off those last two good growth quarters that we had, and they kind of tended to come down slowly over time we still are missing a big chunk of the Fourth Quarter data were just a little bit below that the october trade numbers were a little weaker than a lot of people expected you are on record. It wont be 3 ittent who be the Third Quarter in a row i dont think so. I dont think so things happen. I dont think so i think when the pickup comes especially on gdp growth, its as we get farther into next year as firms have a chance to ramp up and the jobs those jobs that will likely be created start leading to higher Consumer Spending even with the hurricane, when it came in at 3. 3, that didnt make you thinkthe underlying economy is you dont think you stayed at that eightyear sort of underlying average too long and maybe youre missing the things that are better now wasnt it a good christmas i wake up every night, every night, and i think what am i missing . Where is that acceleration in growth it was in the second and Third Quarters it was in the second and Third Quarter. Its not going to be in the Fourth Quarter no, no. We havent seen a fundamental change in the trentd growth in the economy yet. When im talking about the acceleration of growth, were talking about. 3 extra growth. Were not talking about a new dawn, a huge acceleration. Just better than weve seen. 2. 5, 2. 75 rather than 2, 2. 25. One thing you worry about as a drag is i guess you figure rates are headed up, so to pay for rates being headed up, you are going to need a little bit more Economic Activity just to cover the debt service you do need that, but this fed this fed under powell will be so cautious and so careful. Theyre not going to get ahead of things, and so they did start raising rates, and its too much, and things start slowing down a little bit, theyll back off a little bit if you start seeing the wage growth, if that comes through and accelerates, then theyre going to go a little bit faster. We saw that in some urban areas, in some big cities, the Unemployment Rate is under 3 . Thats shocking its shocking its good. Its great wages might go up. You dont think productivity goes up either you are still sort of im still no, im still. I just havent seen that fundamental shift. Weve seen this head fake already a couple of times. What do you mean the head fake on the wages, right . The wages of those labor markets leading to higher wage growth. Radio inwere seeing it in places like minneapolis. You are saying the whole thing is not going to work thats basically what he is saying no, no. Im saying its not going to lead to a massive acceleration im saying were going to get a little bit more growth and a little bit more wages and a little bit more inflation, and thats really all you should hope for how come wages havent risen given the incredibly low unemployment numbers thats the puzzle of the day. To be honest with you, you know, i have seen a lot of people on your show and give a lot of different explanations for it, and the truth is we dont know we do not understand why wage growth hasnt picked up more than it has. Thats a puzzle we have to live for. The lesson i have taken from that, right, because i dont have a better answer, is to stop expecting it to suddenly start working again. To stop expecting that phillips curve relationship to reassert itself and lead to rapid wage growth if it happens, ill cam back on and tell you, boy, was i really wrong . I missed the turning point i bet youll come on and say, wow, we were but we were we were so close to being remember, were going to the Fourth Quarter is above 3 you can when the Fourth Quarter is above 3 and we see the acceleration in wages, i will eat crow a lot of people will eat crow if its well cooked it has to taste like chicken gamey ive never had crow have you i probably deserve to to be honest i have i have tried it whats it taste like . Hard leather. Hopefully it wasnt too worn a lot, the shoe. That tastes a little gamey too, i think. Rob, thank you nice to see you. Dealmaking in 2018. Why it can prove to be a breakout year for private equity firms and other industries impacted by a lot of technology improvements. Well discuss that after the break. Later, a preview of this years Midterm Elections and the buzz from washington. Democratic strategist Steve Mcmahon is joined by former republican senator jen gray. Youre watching squawk box on cnbc so i got an offer on the business, and now im thinking. Id like to retire early. Oh, thats great sarah. Lets talk about this when we meet next week. How did edward jones come to manage a trillion dollars in assets under care . Jay. Sarah. So i have a few thoughts on that early retirement. By focusing our mind on whatevers on yours. Its time for sleep numbers lowest prices of the season on the only bed that adjusts on both sides to your ideal comfort, your sleep number setting. And snoring . Does your bed do that . Its the lowest prices of the season on the queen c4 mattress with adjustable comfort on both sides. Now only 1199, save 400. Ends soon. Visit sleepnumber. Com for a store near you. Wifiso if you cant live without it. T it. Why arent you using this guy . It makes your wifi awesomely fast. No. Still nope. Now were talking it gets you wifi here, here, and here. It even lets you take a time out. No no yes yes, indeed. Amazing speed, coverage and control. All with an xfi gateway. Find your awesome, and change the way you wifi. Futures right now are looking like nothing says it could be december or november or october. The dow is up. Now those are the best levels weve seen up almost 50 the nasdaq is now turned positive that was negative earlier. Its up 5. 5. The s p has indicated up about six points or so a lot of times in january you see a little bit of you see people taking losses or, you know, readjusting the portfolio from the Previous Year its the change that we saw with the tax law you wonder what people will be doing. I do remember one year a couple of years ago after a great market remember that . It just sold off hard right at the beginning. What year was it . I dont remember which year it was it was and it so this is this is kind of weird, isnt it it just keeps its likes a beach ball anybody who has been waiting. Remember i kept waiting for my i know. I know lets talk private equity 2017 a breakout year for private equity fundraising we should say with dry powder with u. S. P. E. Firms climbing 570 billion thats about a b dollars. Given the need to put all this capital to work in 2018 may prove to be a dynamic year for deal making. Joining us right now to talk about this with us is andy levine, jones stake. Good morning to you. Good morning. Help us understand this there was enormous fundraising, which oftentimes happens at the, dare i say, tail end of a cycle. A, i want to talk about where you think we are, what the fundraising says about where we are in the cycle, and then we can get to what you think is going to happen with acquisitions this year well, i think a lot of people look at the amount of fund raising, and they get nervous. We say theres so much capital available, and people havent been spending it what does that mean . At the end of the day people are putting capital where they think theyre going to get the best return i think this 2017 fundraising is actually a real sign of confidence for wear deal making it going to go for private equity in the future they have had some challenges putting the money to work for a variety of reasons, including competition with the corporate buyers, but theres a ton of scratch available now for deal maki making, and a lot of factors are coming together. Tell me, am i are we looking at 2006, 2007 because there were some huge fundraises then there was an argument back then that everyone was going to go after txu and all these massive acquisitions and there was more opportunity on the bigger side actually, and there were strategy eenlices running around and strategic buyers running around who could offer this inflated stock if they wanted to whats to say are the 2008 why would you want to put all this money to work right now were not in the mega deal lbo that we were in in the crisis period. The story of peo over the last decade has been a constant churn of midmarket deals. Obviously, midmarket has gotten biggerer on the high end than it used to be 200 million, 500 million a couple of billion dollar deals with rare exceptions i dont think theres any concern about this current period turning into the precrisis period where people were doing those deals basically for Financial Engineering purposes because the debt is so cheap. Its a different world now theyre spending a lot of time theyre being conservative i think thats why theyre able to raise so much money what do you think what is the kind of deal you think is going to happen . If you were to sort of you know the pipeline better than i do you are right there. He still think were in the middle market home there may be smaller take privates theres not you know, none of these pe firms are going to be buying the 80 billion Companies Like were seeing on the nonpe side theyre putting their money to use in creative ways its not just buying a private company. Its theyve gotten so expensive right its hard to compete on that level, and its also hard to compete with the because of the prices its hard to compete with the corporate buyers good time to be taking your Companies Public again, though if they think its a good time to be loading things, is that how the average Retail Investor that were getting towards the end of something, or something that tell us nothing it probably tells you something. Im not sure it tells you that were at the end of something. This sort of is cyclical in nature, and its getting expensive, but at the same time sellers see their valuations going up, and theyre holding on to it more thinking, well, if i hold on a little loaninger real quick, is the change in tax policy that affects you how . Im sure all of your clients have called you and said what is this going to do to our businesses whats the. On balance is the answer is the positive its a huge that benefits private equity, right . All these most of these Portfolio Companies are corporate. In terms of how depreciation works and some of the other things, are there any other little pieces that work differently on private equity land i think the it ones that people are focused on is you can now expense all your Capital Expenditures immediately, which means you theoretically ought to be paying fewer taxes every year the carried interest retention of the carried interest is obviously helpful from the private Equity Perspective then the not just of the returns of the company. Correct it means they dont have to figure out something some other way to deal with that. Right . It takes that off the table. It was a plus for them its a prus in terms of stimulating deal making. Appreciate it happy new year you too you bet. President trump tweeting about iran heres what he says. People of iran are final acting against the brutal and corrupt Iranian Regime all the money president obama so foolishly gave them went into terrorism and into their pockets. The people have little food, big inflation, and no human rights suts is watching we just heard about the interplay between, you know, human rights and just being able to have to put food on the taebl for your family. Or have a job its hard to separate the two. Its i dont know how this does the theres a way that we handle this regime. Does it get more brutal . Is this the beginning of another what we call the iranian supreme, the second revolution in a way i dont know what you call it. When we come back this morning, says though, well be talking about the Political Landscape here in the United States for 2018. And then the fast food sector going through some significant changes last year. Well take a look at which companies could be serving up some serious returns for your portfolio this year. Squawk box wl rhtacilbeig bk. Dad promised he would teach me how to surf on our trip. When you book a flight then add a hotel you can save. 3 waves later, i think it was the other way around. Everything you need to go. Expedia. You or joints. Something for your heart. But do you take something for your brain. With an ingredient originally found in jellyfish, prevagen is the number one selling brainhealth supplement in drug stores nationwide. Prevagen. The name to remember. We could go down what do you think . Ney. Whooo yeah mmmmm. Want some . Its good, its refreshing. This is what our version of Financial Planning looks like. Tomorrow is important, but shes only seven once. Spend your life living. Find an advisor at northwesternmutual. Com. The College Football National Title game is set after the two semifinal games were played last night. Alabama took on clemson at the sugar bowl in a machlup of last years championship. This time, though, it was all alabama. The criminalsson tide rolled ovr clemson beating them 246. I dont think you missed much there, so i dont care that i went to bed. Meanwhile, the earlier game was rocking and rolling. It was something maybe some people liked to see a little more defense. Although they both were trying as hard as they could. It was great the rose bowl. Oklahoma and georgia went to Double Overtime, and then after blocking a field goal, georgia ran it in for it is winning score. They could have just kicked a field goal, but didnt matter. Georgia beats oklahoma 54 out of 48 the highest scoring game in rose bowl history the bulldogs will take on alabama next monday for the national championship. We can only hope that that game rival whaz we saw last night it was highs and lows. So many you see oklahoma score going up by 17 theres six seconds left six seconds left i go ahead i go all the way through halftime, and they start the second half, and its 3117. Not 3114. You missed . You missed what happened with six seconds. I go back to the first half, and they did this stupid little squib kick that georgia recovered and got on, like, the 50 one play, a pass, which went about ten yards, and they still had a 55 yard field goal but they the guy had already missed one. Guy makes it 50 with one second. You cant even miss six seconds. There would have been a 17 point halftime lead. Suddenly the momentum this guy is these nerd glasses on and stuff that the kicker just hit the 55yarder, and that i think that got the whole when you go into halftime with the Momentum Shift like that, thats a huge deal only a two score. Then the second half was just phenomenal it was great to watch. Really fun i tell you what else is fun to watch, stocks well tell you about stocks to watch this morning hyundai and its kia motors afrlat saying they sold seven and a quarter million vehicles globally last year that missed their targets. The korean automaker expects sluggish sales growth of 4 on softer demand in the United States and in china. And the stars and encore channels have gone dark on the altice capable systems in new york altice serve bz 5 million skabl subscrib subscribes disney is dominant at the box ofs again. Comscore says that star wars, the last jedi, was the top film over the new years weekend with an estimated 68. 4 million in ticket sales the movie has made 533 million domestically becoming the top grossing film of 2017. Its also topped a billion dollar world wooitd. Disney had three of the top five grossing films last year quick shoutout. I saw a movie i did too all the money in the world. No. You saw this . Yeah, yeah, yeah. All the money in the world who christopher plummer, who took over the role of kevin spacey really good. Its a story of really good i saw wonder. And i liked it. It was good chipolte, mcdonalds, jack in the box. Which chain stands to serve some rtliins returns in your pofoo 2018 . It can detect a threat using ai, and respond 60 times faster. It lets you know where your data lives, down to the very server. It keeps your insights from prying eyes, so theyre used by no one else but you. It. Is. The cloud. The ibm cloud. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. Squawk box this morning. Among the stories that are front and center, yet another Company Announcing increases in Employee Compensation due to the new tax laws i ions bank corp. Says it will increase salaries for employees and plans 1,000 bonuses for 80 of its workers also, Playboy Enterprises considering dropping the u. S. Print edition of its flagship magazine the wall street journal reporting that the company is focussing on revenue from brand pa wereships and licensing deals following the death of founder hugh hefner. That would be the end of an era. That thing i call it life support. Its been a struggle. The question has always been do you need the magazine to help create the brand meaning if the ultimate if the ultimate business is a licensing business and Everything Else, how much of that how much of that was in hugh hefner himself and the mansion and all of that . He wanted im sure it was his decision to never close that and then it becomes a digital magazine what does that mean . Whats it like well, i dont know. I dont know. Can you imagine in this day and age. Talk about a throwback. All right. But theres things that are on the internet that are even more well, thats what i mean. If you didnt notice any ads from sears or kmart on tv over the past few months, youre not alone. Neither series nor kmart have run any National Tv Ads since late november. That compares to 15 million in spending the prior year by two Sears Holding company chains the company has been focussing on digital marketing, but analysts say it has gone so far in that direction and that its gone too far its them not putting back into the stores for years and years and years. They have been trying to increase their margins by not reinvesting, by not putting people on the floors you can watch these stores you watch the stores implode on themselves because they vbt reinvested year just started, but midterms are already on the minds of both republicans and democrats who are vying for a majority in congress joining us right now is Steve Mcmahon, he is purnlle strategies cofounder and democratic strategist, and judd gregg, who is former governor and threeterm senator from new hampshire, and, gentlemen, welcome to both of you this morning. That by itself auto could change things in washington explain that to us it changes everything because theres no longer onsill yags instructions available to the republicans until next october they can only do one reconciliation instruction per budget cycle this means everything that involves that puts all the cards in Chuck Schumers hands he has to decide whether he wants to be bipartisan and deal with his base, which is very antithe present and doesnt consider the president to be legitimate, and, therefore, doesnt want to cooperate, but on the other hand, if he isnt bipartisan, does he show himself to be a naysayer on all issues they have to decide do they want to do small issues with chuck that are bipartisan or stand up on some big issues and confront the American Public and say, listen, we can improve this nation by doing Something Big on things like welfare reform or maybe even Social Security reform, and they wont do that, but things that really do matter in the long run for how we get our deficit and debt under control and get back to the issues which are which is fiscal republicans there are a lot of items in play here, but the bottom line is that in my opinion Chuck Chuck Schumer basically controls the state of play in the senate, and, therefore, legislatively, and he has to decide in the context of the next election what helps him and for getting the majority everything now is in the context of the next election how do you think fts it democrats reacted . I think that theres an equal counter veiling force on the other side, which is, you know, the Freedom Caucus and the Republican House of representatives which has to also decide whether or not its willing to play ball and let speaker ryan and leadership in the house and Mitch Mcconnell and leadership in the senate on the republican side cut the kinds of deals with Chuck Schumer and the democrats that will bring the conversation more to the middle and will enable zbl to actually get passed you do have, theres no question, a progressive caucus on the left that is holding Chuck Schumers feet to the fire, but you also have a Freedom Caucus on the right, and people like steve king who, you know, dont want to really deal with immigration and some of the problems that the president really needs to deal with. The democrats would like to deal with theyre applying the same kind of pressure on the right its one of the reasons, frankly, that so many of us miss republican senators like senator greg, who were more, you know, reasonable, moderate, and in the middle and werent as impacted by some of the pressures on the right the far right and the far left i will admit when im looking for a tie to wear where i need a purple tie, sometimes i see i think im remember, ive worn something that i am hoping is purple, but its actually blue its because youre colorblind. I am. Thats what i think of you, kind of i think deep down it should be called blue strategy lets talk about your blue on the blue side. Theres two things the democrats are running on one is sort of the Bernie Sanders socialist agenda, and the second is the impeach trump agenda do you think either one of those as a strategist, are those winning strategies, or is there a third strategy that democrats are eventually going to Start Talking about . Do you know . I think theres a lot of energy represented by Bernie Sanders and Elizabeth Warren you know, elections are actually won in the middle, and what happens in most of these states is, you know, you have states like iowa right now, which there was a Washington Post article today about its a warning sign to republicans and donald trump because it was a state that went for donald trump in 2016, and he now has a 35 Approval Rating there, and its considered a purple state there are many others like it. Elections are won in the middle. Primaries are won on the edge, on the right side and on the left side, which is why you see parties going like this in the middle if they dont come to the middle, they wont win this is a threat to donald trump. If the house is lost, there will be do you think, judd, that if they lose the house, that they will absolutely bring some type of impeachment motion forward . No, i dont you dont think no. First, i dont think theyre going to lose the house. He would have a lot of investigations i hadnt seen anything that raises the level of high crimes and misdemeanors i dont believe there is anything its very hard to impeach. I think a lot of people on the left steve, what do you think . Dont you this i that they think that theyre go ahead i said earlier i think the facts are going to dictate where this goes. Now, heres a fact that could be interjected that could actually accelerate the movement that you are talking about, which is if donald trump tries to fire bob mueller, i think the house will flip i think the senate probably will flip i think there will be a lot of pressure, not just from the left, but in the middle to protect the Mueller Investigation and to wait for the results of that investigation and to take the course of action that that investigation suggests unless theyre lying, thats just like a stalking horse thats been put forward by the left do you have reason to think he is thinking about doing that i thought that all they do is try to dispel that, but democrats keep bringing it up like its like that would be on their christmas list. Please fire bob mueller. Please yeah, it would be, but, guess what, donald trump just said last week, im the president , i can do whatever i want he is the one who keeps raising the specter of firing bob mueller and daring the congress to stop him, and i actually think the republicans in congress and democrats in congress would actually when does the conversation around entitlements and the debt thats been created in part by the tax plan become part of the conversation all over again . I think its coming very quickly in my opinion. You are looking at 1 trillion deficits beginning in 2019 most likely. Certainly by 2020. You are going to see our debt to gdp ratios close in on the 100 , which is essentially a greek type debt situation. And its going to come back to the forefront. Whether people want to address it or not, theyre going to have to address it because the question of the value of the dollar is going to be brought in to issue by the fact that we have debt, which we cant repay under the present structure without inflating the dollar i do think its coming i think but is it sno isnt this part of what the tax strategy was . I think its a driver of the longterm debt problem its entirely driven by entitlement spending and specifically the size of the baby boom administration and its demand on medicare and Social Security until we are willing to step up and address that as i culture, were not going to be able to get our debt under control that may well be addressed it was addressed, for example, under simp under simpson bolles i think youll see another effort like that coming forward because youre going to have to do it. Otherwise, youll have a debt thats out of control. I was going to needle you a little and say is it overstating it to say that democrats really only care about the deficit when it comes from tax cuts if its spending, its like lets go crazcrazy, but the min it goes to tax cuts, all of a sudden they dont like deficits. I think the republicans are the ones that added 1. 5 trillion to the debt the reason you dont like it is because it was a tax cut. If you had spent it on something good, you know, where we could fix society, its okay we can accept this everybody who is concerned about the debt and deficits wasnt very concerned when they cast those votes thats my point. All right i had some of your syrup yesterday. It was delicious well get you some more vermonts its better than what i got from vermont, which is nothing absolutely. No question about that i cant believe that. Coming up, could the return of the value menu help profits at mcdonalds . Check out the futures at this hour whoa Getting Better and better. 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Welcome back starting today pizza hut is making it easy for customers to get a better pizza without breaking the bank. 50 off all menu price pizza orders placed online or through the pizza hut mobile app through january 8th. Pizza hut is owned by yum brands, and that stock was pretty significantly stronger over the last few months new value wars are on the menu for fast food stocks. Joining us now Senior Research analyst at kelsey advisor group. Is there a bigger overall story than what this guy at mcdonalds has done im sorry say that again is there a bigger story than what he has done at mcdonalds and fast food . To me i look at that, and its you know, because its sort of a proxy for fast food, and its not you know, with everything its been hit with over the years in terms of calories and not being healthy and lets try yogurt and fruit, and its still big macs and fillet of fishes and frefrm fries, and the stock is at an alltime high. Well, joe, weve talked about this a number of times the job that he has done there, its been nothing short of incredible you know, going back about two to three years now, when he came in initially, i think theres a lot of skepticism. Could he really make the changes to a company as big and as broad, you know, as a mcdonalds system. What will we look for to 18 . This value trend its nice to go in and know at a drivethru its going to be two or three minutes, and its not going to be, you know, 20 minutes. I just you do things fast and fresh i think that was his idea. Just, you know, receipts get all get everything working with the latest technology, working as quickly as you can. Fast, fresh, and in the same as it is every time you go there, its the same. That works well, you know, consumers expect a consistent quality experience mcdonltds had gotten well off that path years ago, and i think, you know, one of the key things that easterbrook is focused on is trying to make the experience consistently farable for the consumer, and then slowly but surely bringing menu evolution within to the story. I think he has done a tremendous job. This kickoff now this week of this one, two, three value menu really raises the bar in my view for the entire industry. Especially its fast food peers who is up to the task of competing . Who do you like besides mcdonalds i think within the exercise we did over the last week i think i violated every dietary new years revolution i could even dream about i think theres a high bar for an individual item for 1, which is a lot of food very good flavor i think very competitive 24 hours a day mcdonalds with the one, two, three value menu, literally has offered 12 different items at three different price points i think it raises the bar against most all of the peers, and i think it makes it very difficult. I think wendys will have success and jack in the box has been for the coming year they havent had a real value menu in the past, and theyre introducing one now, and i think it will for them it will prove to be successful all the new guys that have gone public. In and out. In and out is like a family in and out has been around forever. I know, but theyve never tried to go national go wide go public. Chipolte still has problems too, right i think ultimately theyll have a difficult Fourth Quarter, december quarter, and i think as we enter the new year, theyll get some benefit from the tax cuts that are coming through, but ultimately, joe, the thing that we focus on really is traffic and same store sales trends for these restaurants companies. We can talk about, you know, the benefit of a lower tax rate, but ultimately if customers arent coming into the door to visit your restaurant, youve got a Hollow School districtry so to speak. In that regard i think the important thing to keep focused on is where do customers have a consistent positive experience, and i think, unfortunately, chipolte has had a really tough go maybe they can improve it in 2018 at this point were not bold enough to step out and say that. Thats a big job. Well eat it so you dont have to well drink it so you dont have to. Dont you think we could help with that . You need to help her. Or we do it here on the set, actually absolutely. Joe, i brought some food one time, and you guys, becky, shunned her nose turned her nose up at it what did i turn my nose up at we pretty much eat everything we will what was it remind me. You know, i think i had some jack in the box food i think i had some mcdonalds. You know, new offerings. Was i in . I dont know. He is like a human gashable disposal he will eat anything you should see him with some donu donuts you went to, like, seven how is dunkin doing what its going to do, 2018 zplie thi i think their coffee is the main stay. Thats the real backbone of the business i think theyve had a checkered past with some of their food offerings. I think mcdonalds and its efforts within the space is going to make the food offerings for dunkin difficult in the coming year. Okay. Thanks, bob thanks. When we return, california is lining up for recreational pot. A look at how Cannabis Companies are getting ready for what could be a huge opportunity in the golden state we got that story next then in the next hour the ceo of paychex will join us with the latest on how Small Business is reacting to the tax gene taxes in a hoemt im a Small Business, but i have. Big dreams. And big plans. So how do i make the efforts of 8 employees. Feel like 50 . How can i share new plans virtually . How can i download an efile . Virtual tours . Zipfile . Really big files . In seconds, not minutes. Just like that. Like everything. The answer is simple. Ill do what ive always done. Dream more, dream faster, and above all. Now, ill dream gig. Now more businesses, in more places, can afford to dream gig. Comcast, building americas largest gigspeed network. nadia white the moment a fish is pulled out from the water, its a race against time. And keeping it in the right conditions is the best way to get that fish to your plate safely. dane chauvel sometimes the product arrives, and the cold chain has been interrupted, and we need to be able to identify where in the cold chain that occurred. tom villa we took our world class network, and we developed devices to track environmental conditions. This device allows people to understand whats happening with the location, but also if its too hot, if its too cold, if its been dropped. Its completely unique. dennis woloshuck if you have a sensor that can keep track of your product, it keeps everybody kind of honest that way. Who knew a tiny sensor could help keep the food chain safe . You know whats not awesome . Gigspeed internet. When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids, and these guys, him, ah. Oh hello. That lady, these houses yes, yes and yes. And dont forget about them. Uh huh, sure. Still yes xfinity delivers gig speed to more homes than anyone. Now you can get it, too. Welcome to the party. Adidi roy joins us now from oakland, california, with more i hope youre not going to try that cnn thing with the gas mask bong type have i never had moirn in my life, and i dont plan on air. We are at one of the largest dispensaries in the state. Harbor side. This is start by one of the pioneers of the california cannabis event theyve renovated this space in event. Theyre fully stocked up they have beautiful wood panelling in the brand new space. When it came time for the legalization of recreation l amarijuana, they had an explosion. Approximate00 people were standing in line here. They had a live band on hand they were handing out to the first 100 people online there are a lot of challenges, though remember, companies cant hold their revenue at banks, a lot of cities havent even started handing out licenses and taxes could reach 45 . A lot of people believe that that could embolden the black market still, the owner of this dispensary remains bullish on it he says in the last 12 months theyve made 44 million in revenue. He expects that number to jump 50 . Back to you, guys. Thank you very much by the way, folks, tonight you can tune in to a cnbc special edition of the profit as they dive into the big business of pot. You can dive in at 10 00 eastern and pacific time coming up right here on squawk box, the former ceo of collective brands talks retail trends and what he is expecting this year. And then battling the bulge in your home. Ceo of class pass will join us with a Business Update squawk box will be right back. Nah. Not gonna happen. Thats it. Im calling kohler about their walkin bath. My name is ken. How may i help you . Hi, im calling about kohlers walkin bath. Excellent happy to help. Huh . Hold one moment please. [ finger snaps ] hmm. The kohler walkin bath features an extrawide opening and a low stepin at three inches, which is 25 to 60 lower than some leading competitors. The bath fills and drains quickly, while the heated seat soothes your back, neck and shoulders. Kohler is an expert in bathing, so you can count on a deep soaking experience. Are you seeing this . The kohler walkin bath comes with fully adjustable hydrotherapy jets and our exclusive bubblemassage. Everything is installed in as little as a day by a kohlercertified installer. And its made by kohler americas leading plumbing brand. We need this bath. Yes. Yes you do. A kohler walkin bath provides independence with peace of mind. Call for a free kohler nightlight toilet seat with consultation. Or visit kohlerwalkinbath. Com for more info. Raphael just fourt are brothers who hate bullies, and love this city. Leonardo woo michelangelo whoa haha. Leonardo gear up guys the first trading day of 2018 stocks point to a higher open after a banner year for the dow, the s p, and the nasdaq. Small business in america a key read on hiring on main street as we count down to this weeks big jobs report one startup wants to help you battle the bulge dinl tally. The ceo of class pass will join you with a Business Update the final hour of squawk box begins right now this is squawk box. Good morning. Welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square. Im joe kernan along with becky quick and Andrew Ross Sorkin the futures right now last we looked have been accelerating. They were up about they continued to do so up 85 now. Almost 84 on the dow jones up just under nine on the s p. Up 20 on the nasdaq. Take a look at europe, which was want necessarily responsible for what was happening here. Heres whats happening at this hour. A developing story that were watching the death toll now stands at at least 20 protesters in iran are talking police stations as Security Forces struggle to contain the challenge to the countrys clerical leadership. Irans Supreme Leader offering his first comments since the protest began. He accused what he called enemies of iran of meddling in the countrys affairs. President trump tweeting this morning as well. The people of iran are finally acting against the brutal and corrupt Iranian Regime all of the money that president obama so foolishly gave them went into terrorism and into their pockets. The people have little food, big inflation, and no human rights the u. S. Is watching the athletic retailer will eventually benefit from Corporate Tax cutsputin has an Economic Advisory to putinen said it would be the same ruble, but the circulation would be restricted in a certain way that would allow the kremlin to track it it feels good to be back in the swing of things. Lets talk about the marks overall. In 2017 we did see that leadership from the large cap side of things we wonder if thats going to continue in 2018 the midcap is a 15 to the up side maybe theres rotation, but large caps still the focus for a lot of investors they are the outperformers as for some of the Asset Classes that were talking about, if you look at what to expect in the month of january, market performancewise over the last 120 years, our data partners crunched the numbers, and it looks as though the dow is actually down by 1. 25 the s p down by. 8 and the nasdaq up by half a percent. Some historical guidelines with regards to how january might look one other thing to keep an eye on as well where does january rank in terms of the overall scheme of things . Its actually the third worst performing month on average in that time span over the last 20 years. Down about. 8 for the s p 500 its a coin toss whether or not its going to be positive or negative also, something interesting, becky, as we talk about what we can expect at least, if you look at the s p 500 since 1980, there have been 13 times when the s p 50000 has gained 15 in that cal gar year then 10 out of if people are looking for some semblance of positivity to start the year, its when we see gains this big in one year, they typically follow the next year with those similar types of games if history holds true back to you, guys. The industry experienced transformational change over the last year, and it seems the 2018 will likely be even more des ruptive. The former ceo of collective brands he is also a director of Hudsons Bay Company thats the company that owns luxury retailers lord taylor and saks matt, thank you for being here today. Retail was really so many questions abounding about it there was talk of the border ajustment tax that was going to hurt things. Theres all the talk about whats been happening to the bricks and Mortar Retail getting eaten up by people shopping online. You end up the year, and it looks like things look way better than they did at the beginning. What do you think this brings us in 2018. An even hand here tells you that and you saw it with amazon and what they did with the purchase of whole foods, is that effect tily, the customer likes to shop where they are when they are there, and four wall retail something mean something. Its just something that has lost share and will continue to lose share relative to the broader marketplace. However, those models that are winners are really going to be fine generally speaking, luxury is protected from the amazons of the world, and so when the consumer is back and the stock market is up, you know, luxury is going to perform, and it did this holiday season. What do you consider luxury i see more and more areas that am skblon is making a approach into they work hard to get into fashion, and thats something i think they have a tough time with theyve actually convinced me to buy recently with some of the things that they offer i would like to see what they got you to buy online because theyre offering still not up to your stashed, becky, in general. I would say luxury are things that really are going to give you an average ticket over 150 to 200 in terms of the actual item itself. Youre going to find those items more sec questered and focused with distribution. Thats not going to take it into a ubiqutous scenario also, supply chains are changing those brands and those businesses that are doing that are actually able to compete against amazon you also have to look at sectors where Service Matters. Where Service Matters in retail whether its in lowes, home depots, best buys of the world, says where theyre not just selling a product itself its actually a winner. Luxury are things that are so, 200 and up, and also youll see where 75,000 jewelry this christmas was stwul a big winner in the luktsry sector. You mentioned things like service or luxury price points and i can understand why those would work why do you see macys doing so well neither of those really describes that macys has gotten to know their customers better i still believe thats a slowmoving sector and it its still slow its still a reseller of other products i dont see it overall as a market share gainer i do see it, though, enabling itself to hold its own for the next year. All right matt, want to thank you for joining us today good to see you. Great to speak to you too, becky. Okay. Coming up when we return, the Competitive Edge the cnbc iq index tracks innovation well tell you which companies are in and can ones are out for 2018 stay tuned youre watching squawk box here on cnbc welcome back to squawk box. Analyst upgrades this morning. Wells fargo upgraded lennar to outperform from market perform citing both the tax law changes and prospects for improved profits from itsplanned purchase of cal atlantic r brands upgraded from outperform to neutral at baird the firm says it believes the victoria secrets victorias secret operation is turning the count under new leadership and a new year means some new hope for Companies Bringing the ininnovative products and services to the market here at cnbc weve deployed an index to track the companies driving the greatest strategic advantages from their intellectual property. Here now to tell us if we made the cut in newly rebalanced cnbc iq 100 index, david mark, the ceo of m cal, the company that powers the index good morning to you. Good morning. How are you . Im good. Happy new year help us understand, tell us who is at the top and bottom of the list who has gone in and gone out microsoft is roaring at the top of the list. We are amazed to see how much that Company Continues to perform right across the top of sectors that are really important in the market. Financial services, security data, the accessibility of information, and the access to information. Theyre continuing to be a very strong leader in terms they are at the top of the index this year other themes that are very important this year, weve seen that actually tie into some of your earlier reporting today in the food sfrss space were seeing people who have expertise in storage, refrigerati refrigeration, precise packaging. A bunch of those type of things are coming in. We also see a continuing performance from 3m. 3m is staying at the top of the leaderboard and the index, and a lot of the reason why theyre there is because they continue to see themselves as a critical component supplier to industries that are right across the board. The people who are in are some of our best performers last year as constant performers, and the people who are out are interestingly enough, as we wanted it to do with this index, the kinds of companies that have now gaub gu through m a activity last year. Theyve actually started building their synergies, but the innovation advantage, which is the challenge for an innovative company, is actually the thing that has pushed them out. I notice you have qualcomm in there. Pretty high on the list. Absolutely. You know, theyre in our top five qualcomm continues to actually cut into sectors that are looking at automation controls a number of things that are starting to move into that intelligent internet of things and sensor oriented integrated space. They are playing across a number of fields, and if you watch what theyre doing, theyre starting to move from that mass production into very precise implementation of technologies that are going to be part of an intelligent world. Then you have health care guys alorgan is off your list well, you know, the litigation between valiant and alorgan has finally come to one of the many ends of their dispute just towards the end of the year allergan is a company that we have actually a very strong conviction around. They are actually really a great company, but whats happened is there is a bit of the catchup of the market value where theyre potentially starting to get to the place where the market is fairly pricing innovation, and we see that theres an opportunity around valiant now that theres dispute resolution, and if you look at the sectors, valiant is playing in, particularly in the eye care sector and gastrointestinal, a couple of other places, theyre playing into a market that is really going to see growth in the health care for that baby booming and aging population were seeing a lot of growth in the sectors that they cover. Explain this one. Caterpillar, which is struggling mightily for the past several years and is not necessarily a company that i say people will put in the category of innovation well, thats because people dont understand to run heavy equipment, regardless of what the heavy equipment is requires an enormous amount of Precision Technology if you look at technologies like fuel injection where they play with bosch or technologies like hydraulics and automated systems, when were thag with i anumber of companies in the supply chain Inventory Management longshore other kinds of heavy industry technologies, a lot of where caterpillar has got opportunity in their ini dont he vegas space is to play right across an enormous range if you look at the particular one of the interesting things we like to look at is the way in which the technologies that kept dirt out of fuel lines in the caterpillar equipment is now being used in uavs and other very precise instruments what you are going to see is caterpillar deploying its technology across a broader range. We need to think of them not just as the heavy equipment company. We need to think of them as the industrial Mover Company we see Enormous Growth in that space, and, in fact, we see them coming in ahead of cummins right now. Performance from last year. As you saw this past year, we had throughout the year some wide openings in the outperformance as weed as 600 basis points. We actually came in ahead of the s p again this year, and were delighted to see what were tracking is that variable that allows companies to stay on their Competitive Edge because they have proprietary price controls that keep a market advantage that the market doesnt see. Good to see you, sir. Happy new year great to see you. Thanks happy new year coming up, the money behind marijuana. Marcus lamonis diving into the business of pot. Well showouft t bak y aerhere you always pay your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Welcome back brsh wr. Two upgrades in the media sector on disney the analysts cite distribution leverage and optionalty and concentration of valuable ip, which the analyst says will only grow with the fox acquisition. Then on the netflix side that firm upgraded the streaming giant as part of a broad realignment of their views on media. The analyst says it doesnt refer companies with subscriptions over ad content. Zbliefrmt tom and karens story is the story of pot in hum bolt county right down to the seeds. Where did you go et your first seeds from actually from stuff we smoked over the years then a man went to afghanistan a man you knew. We dropped him off at the airport. Okay. We went to afghanistan. A local guy tsds, hey, give me a ride to the airport ill bring you a seed back from what i hear those seeds and the plants they produced would cement hull bolts place as pot capital of the United States this area called hum bolt county doesnt seem like california it was the mid 1970s. They say people here are different. That they think differently. As that weed grew in reputation, folks here realized they could make some serious money. Dont miss the premier of the profit in marijuana country. Thats tonight at 10 00 p. M. Eastern. Its happening again on friday well tell you what to watch next plus, breaking news on the state of Small Business in america the numbers are coming up right after the break. Here is u. S. Futures now up 88 brsh almost 89 on 2018 on the dow. More upward movement in the equity markets starting off the year well be right back. Its time for sleep numbers lowest prices of the season on the only bed that adjusts on both sides to your ideal comfort, your sleep number setting. And snoring . Does your bed do that . Its the lowest prices of the season on the queen c4 mattress with adjustable comfort on both sides. Now only 1199, save 400. Ends soon. Visit sleepnumber. Com for a store near you. Good morning, everybody. We are live from the Nasdaq Market site in times square. Among the stories that are front and center this morning, apple is making 29 replacement iphone batteries available immediately. Thats about a month sooner than had been originally planned. All of this follows apples apology for slowing down older model iphones in order to try and prevent spontaneous shutdowns because of battery wear its been very controversial youve heard a lot about it. Well see what this new battery does also, a change in the executive suite this morning at rentacenter. The rent it own furniture retailer says the ceo has resigned he will be succeeded by former Company President mitchell fidel. Rentacenter said back in october that it was exploring strategic and financial options. And a big comeback for casinos operating in the chinese territory of mccaughacau gaming revenue was the first annual game in three years however, revenue is still off from the alltime highs that were seen back in 2014. It is a businessy week for economic data. Steve liesman has more on bah we should watch we have a lot of things coming, including the big jobs number on friday we start off tomorrow. Folks, today is tuesday. Its not monday, in case you made that mistake when you woke up we have wednesday ism manufacturing. Auto sales a look at that, that could be up 17. 5 million thats a good number fed minutes on wednesday as well thursday we have the adp employment report and jobless claims ill come back in a second with what numbers were expecting there. Friday, a lot of data is what pay roles, unemployment, International Trade and ism services should set the tone for. The other 70 of the economy here lets take a look at the jobs outlook. Looking for 189 on adp 180 on knob farm payroll thats a big comedown from where we were, but its still a very strong number. 4. 1 Unemployment Rate is expected and a reasonably good gain on average Hourly Earnings on 0. 3 . Lets take a look at where we are where we ended the year for q4 expectations for growth 2. 6 thats a very nice number. Parted me. Thats the victory because if you see there q3 actual was 3. 2 , and not giving back the gains and staying above trend is a very good number there the range is 2. 4 to 3. 9. I want to show you who is where. Pick your favorite economist and figure out which numbers you think is best. That would be tough most of the stimtsz im seeing for all of 2018 are in the 2. 6, 2. 7, 2. 8 range a little bit of a bumpup. Thats a business disparity these are models. This is why we do this this is the who elidea there are multiple different models out there a lot of them are based on a Federal Reserve model. They tweak it and start off with their own estimates. Then what they do, what attracts the forecast is you input the actual data and tweak your estimate where. If you look through the models, like you look at the new york fed versus gold mman is the one or two metrics zblie think most of the variation starts up with where they start they have to put in a gues guesstimate. What if it comes in at 2. 5 you adjust down. Hose are the big changes some of the models also have differences. One thing i know and, you know, yont to use this opportunity to toot my own horn, but i will for the heck of it its a new year because there are different models and none is proven to be better than the others, our methodology of averaging tracking forecasts has given us a better look at the current run of gdp compared to any single model. People focus on the atlanta fed. Weve shown that were a little better than they are over a time period were talking all of the wisdom of the street. Thats why we do this. We also get to see how much individual set of data changes gdp right now. It is a gymnastics ruin teen olympics are coming up thats why i was bringing it up your buddy is andy. He is he is 2. 5ish he is not hoping for he is forecasting recession in june. I mean, theres theres a lot of people june of 2020, i think, or 19. Right before the next election did you hear the kwie earlier saying that a high valuation can cause feedback within the economy, and i dont believe that i didnt quite get that i heard that i didnt quite get joe, i have to say i dont get your whole thing on qe either that qe, which caused high stock market valuations caused a negative feedback to the economy. I like it its generally good right because of the wealth effect i did a story on not too long ago. A bunch of the extra Consumer Spending thats out there is coming from the. It are help everybody it are help the wealthy more, which is a mathematical true inch so when we repatriate the trillions and it goes for buybacks and dividends, youre okay with that no, im not okay with that. I would like to see it directed towards investment. I p there was a cbs thing, and i think its right that a lot of americans do get tax cuts i think thats going to be good. Its going to be helpful in the shortterm in the shortterm it will be. Well see and maybe in the longterm as well if this stuff goes into productive assets. I want to see them give wage increases and bonuses are one time wage hikes are a different matter but what does cnbc, the athletes, the allamericans weighed in the all americans have they weighed in on the s p Earnings Growth for this next year . That seems like 20 . Okay. We dont ask the all american to estimate the stock market. We ask the fed survey. Not stock market. What will s p profits rise this year due to the change in tax . We are seeing overall gdp of. 2 to. 3 were not seeing a huge increase in corporate profits maybe 20 . Maybe 20 . Yes its its multiple it can go up a little. You can get half of that what are you hearing, joe its a onetime shift to multiples, right you get i dont care about multiples. Leave the multiple where it is so the it actually falls at least we consolidate well, look, heres the thing that i did last year best thing i did i came on the show october 26, and i argued that the market was not pricing in Corporate Taxes Corporate Tax cuts because the High Tax Companies were underperforming. After i did that report, the High Tax Companies overperformed, and they continue to perform, and then you had on that guy from txar, and what he is doing is concentrating on the just a windfall with that its just a windfall, and its especially kmdomestic companies does it go back into Capital Spending does it go back into wages that will job growth declining for the month of december. Joining us now paychex president and ceo. Whats the state of what you are seeing what does it mean that it declined. I think what you are employing to see, and on tax reform, you know, as steve was just talking about, we did a paychex poll of Small Businesses under 50 employees about 50 are going to benefit from tax reform, and about 80 are going to invest those savings. Those that benefit, theyre going to invest in about twothirds are going to increase wages is what theyre saying good news. A lot of changes going on we had 18 states to introduce new minimum wages. So if that happens, thats where you start hoping for the a lot of people that get raises may actually spend some of the raises that they get, and then thats where the feedback, the positive feedback, comes from for demand that maybe picks up so that companies then do invest. When you see a poll 50 will benefit and 80 of those are going to invest in technology and improvements and Capital Expenditures, thats very good news, i think, for a stronger sustainable kind of growth model. What in the numbers that you see, marty, what are you seeing that causes economists to think that the Fourth Quarter is going to slow down from the second and Third Quarter in terms of is that what you are seeing too, do you think we slaent seen that much of a slowdown, except in job growth, but its still moderate, and sustained. Theres a story out there that were seeing the highest wage gauge in places with the lowest Unemployment Rates. Are you seeing that, and where are those areas . Is it the urban areas in the bigger cities out there . Well, the biggest the biggest wage changes are actually coming from those minimum wage, you know, jobs in those cities like in arizona and california all the west have the highest minimum wage increases, and thats pushing the wage. Then, of course, theres those wage increases dpor just scarcity of resource, right . I. T. Developers, positions like that in some of the small i. T. Contract companies, theyre pushing wages because of scarcity of the resource and trying to get people in. Or daughter listen to me. Or daughter or daughter what is the most important number this month to tell us how the Fourth Quarter is whether its above or below expectations where is the weakness . Where are people saying you keep saying weakness. Why do you think where will it slow down you are above because you were above trend you are probably not going to do as much in the manufacturing. Theres going to be tax shifting, joe, that you want to be careful about theres two things coming up the first is there was some stuff thats going to be done in the First Quarter that might have been done in the Fourth Quarter to take advantage of certain taxes. The other thing thats going to happen is you have this q1 anomaly thing that were going to have to look out for that weve talked about a lot this extra week were going to have to be careful with that. Go back, look at the last three or four quarters, average them together were running above trend. Thats good. I wouldnt get too excited about this decline from 3. 2 to 2. 6 my number is 1. 8 thats the underlying growth rate of the economy, and what were trying to figure out is have we had an upwards shift to a new potential growth number. Did you become a bills fan . I was when i was in buffalo i was a bit of a bills fan until played the giants in the super bowl that was an amazing afternoon. It was an amazing afternoon to watch that happen. You have nothing to say to me, although its not my team anymore. I gis i should thank you on behalf of the state of new york to the state of ohio but they looked like they had given it was a good it was a good day of football the ravens who would have been in the playoffs it was a crazy, crazy day i know. I know i know thank you, cincinnati coming up next, remember those at homeworkout tapes remember those well, one startup is bringing that back sort of. We get the details from the class pass ceo right after the break. Stay tuned youre watching squawk here on cnbc see thats funny, i thought you traded options. Im not really a wall street guy. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade tcan lead toof plenty of questions. Fortunately, theres a place to get the answers, for them and for you. Find articles, tips and tools from experts and others who have been in your place. The Caregiving Resource Center at aarp. Org caregiving. Welcome back. Squawk bok wrrks the whats App Messaging Service is back online following theglobal outage of about an hour on sunday the cause of the outage was not immediately known. Facebooks own service went down in india a few minutes after the clock struck midnight. The new year had begun india is the largest market for whats app everybody wants to get fit its the new year. They want to lose weight class pass is making new years resolutions a bit more convenient launching Live Streaming classes. The users can take them from home joining us right now is fritz, the ceo of class pass. Good morning to you, fritz good morning. Thanks for having me happy new year. Weve known youve been here before with us, and we know class pass as a service where you effectively buy a subscription and then go off to different places that have access to class pass this is a whole different idea this is effectively like the peloton bike, but for all sorts of different classes in your home thats exactly right. Our main product is a subscription that lets you go to different gyms or Fitness Studios in the network yoga, barre. The netflix for gyms. Thats exactly right. This is now a digital product, so really aligning us with one of the hottest trends and fitness which is to be able to work out from home or at the gym with a digital workout with you. Its high intensity interval training workouts right in your living room, no equipment required, and its really cheap and accessible these classes that you are going to be able to take online, other people, look people have been sending out these dvds and videotapes for as long as i can remember when it comes to gym classes that people take at home. How is this different . Thats right. Yeah, we all remembered the workout dvds from the 1990s the at homeworkout trend has been going on for a long time. As you said. I think whats new is the level of immersiveness that the Technology Allows us to create in a living room environment our classes are livestreamed from a production studio in brooklyn with live instructors and the latency between the stream of your and the we know exactly what your exertion level is okay in realtime an instructor can take you need to pick it up or you are going a little hard tell us how everybody has to wear a you get a heart rate monitor how does it work thats exactly right. Yeah you dont have to wear the heart rate monitor, but obviously we recommend it theres a leaderboard so you can see how youre pushing yourself versus other people. Oh, thats embarrassing and do you need to have weights at home. What kind of up front investment is required . No, no. Its 60 for the kit it includes a heart rate monitor and a Google Chrome cast it is just through your phone do you decide you want to watch it on your phone or on a laptop if you are in a hotel room, business travellers, auto are if in your living room. Peloton does the live, but then they also do the taped. Were doing the same format where you can take the live stream classes or take them i could take this mornings class at night, but still have the live the immersiveness of the leaderboard being able to go a workout with my friends. We can all do the workout the branded classes, meaning you have access to all sorts of classes around the country branded classes. When i say branded classes, slt, or barrys boot camp, all the different ones these are not those. This is different. Correct these are instructors that we are hiring directly. Obviously, we have this tremendous data asset because we get a rating review for every single class that our customers take we know where theres great instructures what was difficult was to figure out who would translate from an offline experience into a great at home live streamed experience weve been able to figure that out. I can understand the cardio side of things, but, linike, i a thinking i need people to shame me into i need to feel that im disappointing someone i can disappoint myself all the time you know, skip a set dont do quite as many reps. I dont need that third or fourth set thats why i need the guy there that will know that im dogging it you know what i mean for cardio, the heart rate will work, but what if i decide with weights to skip the second and third set or to do only two reps or something how do you catch me . Is there a way that you can see . Im not going to get there if im dogging it cheating on myself how do you do weights . Well, we arent starting with weight training. Were starting with high intensity interval training. Its been proven to be its not just cardio, right you do a lot of lunges, squats, punish pushups i can tell you from recently trying to get in shape ahead of new years, its no slouch of a workout. Its literally the most efficient work yacht thout you o do you want to get into the business of whether its weights or other machines, whether its treadmills, rowing machines, all sorts of elyptical stair look, were going to figure it out, right . Were starting with a product thats highly differentiated no one has ever done a live realtime interactive feedback workout in the hiit vertical category were going to start there, and then who knows well see where we can go. All of these different workout partners, arent they going to say to themselves, these guys are now competing with us . Yeah. We really dont think this is competitive. Theres nothing like the offline workout experience. Having the instructor standing over you as you are working out, keeping keeping you accountable and being in a group environment. This is a close second to that we still think thats the best experience but look, were talking to partners and putting videos on there as well and driving awareness and brand engagement for them. So this is sort of like an offline, online situation, is that whats happening here existing customers added for ten bucks a month, remote customers 15 a month. Fritz, happy new year. Happy new year. Im going to try this. Trainers are expensive i like a class it forces you. The class does. About what about at home . In a class, youre embarrassed, thats why i like it. Thats embarrassing, thats why i dont like it. Jim cramer will join us live from the New York Stock Exchange and well get his take on todays top story. Stick around President Trump tweeting companies are giving big bonuses because of the tax cut bill. Really great lets get down to the New York Stock Exchange jim cramer, you looked at the futures this morning and is it really a new year . Very similar and its not always that way in january, is it no, and i candidly dont trust how much were up right now. I think you should be very careful. Let it come in a little. Dont chase. It is true that theres a lot of good data about a year after nice run but i also think when the market is up big its a s suckers game on monday. We went into january rocking and rolling and then we totally reversed in january, a couple of years ago. Do you remember . 16 i think. When oil collapsed. Lets be cool, if you dont own it, let it come in a little. Theres no rush to buy i think friday was down, trying to make up for friday. But theres no hurry to buy anything. Youre talking youre talking real short term too youre not even saying wait for a 5 pullback. Youre seeing dont buy on another update is what youre seeing. There will be profit takers that come in im not anxious. Let them come in and see what the market looks like. Look, it was im not saying it was too good to be true last year im saying that its okay to wait for 1 to 2 pullback. Okay. I was going to whats your s p Profit Growth number what do you think is doable in 2018, jim . You know what, candidly, i have to really see what the tax effect is because i think it could be look, weve got a bunch of numbers today that are better than expected because of taxes. Hard for me to see what the growth will be i have to tell you, i dont think the market discounted it. I didnt see the game but i heard that the eagles did not look like the eagles from earlier this year. No, they have to work on a quarterback. Look, i think they got two weeks to work on it. Great offensive coach, great quarterbacks coach, anything can happen but yeah, we didnt look ourselves but im not getting off the bandwagon. The teams that are the bye teams they make a great final four just to start with, philly, the eagles and vikings and patriots and steelers. I dont care if anyone else its going to be good to watch the other games. Its going to be fabulous to watch, 4 30 on saturday. Those four are strong. I just think its just fun. Its fun for me to be there. Those four are strong. Great to see you guys, happy new year. You think georgia has a chance i do. I wish it would happen what can i say why do we not like alabama . Im not sure thanks, jim. Up next, how a few how much in new zealander, the ban on public drinking and were in the chairs next. You always pay your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. So thats the idea. What do you think . Hate to play devils advocate but. I kind of feel like its a game changer. I wouldnt go that far. Are you there . Hes probably on mute. Yeah. Gary wont like it. Why . Because hes gary. phone ringing what . Keep going yeah. laughs voice on phone its not millennial enough. There are a lot of ways to say no. Thank you so much. Thank you so were doing it. Yes we got a yes start saying yes to your companys best ideas. Let us help with money and knowhow, so you can get business done. American express open. Lets get a final check on the markets. The futures have been climbing through the morning. Dow futures up triple digits but up by 117 points above fair value. S p futures up over nine points and nasdaq up by 18. The 10year weve been watching it around a yield of 2. 43 we will take a very quick look at that again perhaps. Take my word for it. Earlier it was 2. 43 well continue to watch that 2. 425. That does it for us today, make sure you join us tomorrow. Right now its time for squawk on the street. Good morning, welcome to squawk on the street. Im scott wapner with jim cramer cart quintanilla and david faber are off today. Lets look at the first trading day of 2018, s p and dow and nasdaq would all open higher and dow is picking up steam, open higher by 117 points taking a look across the pond,