Related charge but excluding items earnings still beat the street cisco looks to s s to repatria billion in overseas assets ubers ceo plans to expand the Ride Hailing Service beyond cars he says uber is to cars what amazon is to book stores he believes uber could be a marketplace for other forms of transportation, including public buses and bike sharing programs. I was with him in davos, he was sharing this idea that you would take an uber to a train, and then get off the train an then get on a plane an then get on the plane, get in a car, he would do the whole thing thats the idea. Uber eats, the leasing program, were those side shows to this idea that could you plug into the new york city mta Public Transportation system so if youre in an outer borough, the uber gets you, brings you to the subway, the subway takes you, you get off, maybe theres an uber pool that takes you to the office is this before or after flying cars . This would be before flying cars i think this is not completely unreasonable i think a tub of these cities are looking at the data uber has, wants access to the data and whats the trade maybe the trade is open up the system so you can be connected into it. I can already take an ub tore a train. I can figure that out. You look at when the train is, you take the uber. So vintage. But then buses, i dont want to sound elitist, buses are an important part of transportation, but theyre not my favorite way to travel for sure especially not more than but the idea is they could operate the buses potentially themselves you still get those fumes or smaller buses, because everybody would have the app, they would know how many people are waiting at the corner. They could make the system that much more efficient. The idea was if you could 5 gate everybodys travel data, you could move everybody around faster what about the Senior Citizen who may not have a smartphone and still wants to take the bus . Its a generational issue the bike sharing is huge in asia a number of private companies in malaysia and china with bike sharing apps do you think bike sharing will be huge here citi bike in new york has taken off to a certain extent. Bike sharing is popular in d. C. Because the weather is more mild and the train is more unreliable and youre in a tighter area. Smaller area you have to go. Well see. Sorkin is not going on a bike we have we have drivers. Were not going on bikes, are you . Have you been on a citi bike have you ever done that . Ive not. Never all this time. I want to tell you why. You cant ride a bike nope. Because of the helmet issue. You cant carry a helmet with you at all times what scares the heck out of me is seeing all these people riding around on these bikes without helmets. Thats crazy town to me. We didnt have helmets when i rode bikes as a kid. That explains a lot okay. I played football without a helmet were talking about riding these bikes on these city streets. I know. Even with these new bike lanes its not a new concept, by the way. I got to get to liesman i do want to talk to liesman as fun as this conversation is, lets get to Economic Data there is something to watch today. The Producer Price index is going to hit the tape at 8 30 a. M. Eastern especially after some of the glimmers on the inflation front yesterday. Perhaps stronger than expected signaling faster rate hikes. Steve liesman, you dont need me to tell you what they indicated. You tell us. Bhafrnlgts what a weird way it ended the move in the tenyear never reversed no. But the move in the stock market totally reversed. Joe, we had three dramatic minutes yesterday. Right the storyfollowed the predicted script but itbecame good news. This is an unbelievable graphic. It was hotter than expected Inflation Report prompts a violent selloff. The dow jones dropped about 500 points in three minutes, and as joe said, rates spiked it was proof, right . Stocks are scared about inflation, worried about higher rates. Hold on. Because that proof went away within minutes stocks came off the lows, then they rallied rallied more the dow finishes up 253 points suddenly this inflation story fear is in question. Theres more doubt this morning. The yield on the tenyear up as high as 2. 94 where is it now . 2. 93 the highest level since 2014 the dow futures are in solid territory. Chances of fed rate hike probabilities up pretty good this morning 93 chance for the first hike. 65 for the second hike. 57 chance for the third hike. You remember when stocks came off their highs last week, we were down in the 40s for that third hike all this happening with another Inflation Report on the way. The Producer Price index should show strong increases this morning and test the markets mettle once again. Maybe as some argued yesterday, inflation may be on the ride but yesterdays report was exaggerated proof or maybe stocks have decided its not that worried that better earnings from the tax cuts, higher growth will outweigh the down side of inflation or one more thing, maybe we have reached the singularity and its the black boxes that are in charge and they just defy a human narrative, theyre trading on algorithms that even the guys who programmed them cant figure out. Number one, if you if youre jonesing for 2 , and its like all you think about for five years 2 growth 2 inflation. Right and the fed is saying well keep our foot on the gas until we get to 2 then you get there, youre not supposed to freak out yeah. Number two, what was the point that productivity gains in Corporate America from the tax cuts could actually keep down inflationary fears i agree with that the timing is off because you will have this i think the front end of the tax cut is a kansian stimulus, there is a lot of research which shows when you introduce new technology to an organization, productivity falls. You give a guy new software, he doesnt know what to do with it. Ill add another scenario if you have an explanation, go for it. Perhaps the shortlived reaction to the inflation data is because you got retail sales relatively soft. People didnt know what to make of those two reports i just want to take a victory lap, yesterday at 8 30, i said this trade is algorithmic, its probably going to come back has before. Because there is this moment of the machines. Its in the first i dont know what the time period is 5, 10, 12 the machines read the headlines. They make the trade and its not a human driven logical thing. Are we still in the bad news is good news the market sells off, but then we get a crappy retail sales number it wasnt necessarily crepey, but it rose less than expected you want an economy where people are spending. If you think thats going to cause the fed to move too fast, hasten recession if we keep telling ourselves that rate rises to moderate levels, if we keep saying its for a good reason and the market goes down you have to live by what you said. My big concern is that this supply issue, its more of a supply concern than an inflation concern. There is research that shows markets dont care about supply. I think the treasury needs to be more proactive in talking to markets, explaining how or where it will place this paper across the term structure i think we need to see the market digest this paper, rates stabilize, and then see how the market reacts. I think there are challenges yet to come. Clearly the market can live with higher rates and more we have shun shahave someones head our guest host for the hour, noah blacksteen. Steve, noah likes to point out people who come from former communist countries, they appreciate the United States and capitalism you look down from up in canada at what we have here and youre envious at times, are you not . Why wouldnt you be sometimes i think people that dont live here can embrace what we do here more than we do sometimes. Is that i learned to be a capitalist in russia. When i saw how successful communism was. Okay. It destroys all of the inner good in human beings yes okay wow. James, you were ready to say something. Im shocked about the comment there, steve, but you nailed it on the head with the uncertainty in the bond markets. We did not find an equilibrium yesterday. The cpi number was shocking for the bond markets i think theres a big open question about supply and where that new issue of supply will be along the curve. We know there will be rising rates. We know the collar dollar is we thats bad for bonds but the market does not know where the supply will come canada is a great place you love fossil fuels up there i dont flow about healthcare, but some people Love Healthcare in canada, too at least everyone is covered as long as you dont have to use it, its great what about the markets im interested because in terms of the inflation number, the fed doesnt look at cpi. The fed looks at pce, i think, as their preferred measurement of inflation my curiosity is as you look towards rates moving higher, today in the journal we read an article about one pension fund and maybe one Educational Institution that had a short vol trade during this whole collapse you wonder why some of these institutions are messing in that stuff. But so many investors have been driven out of the bond market into this esoteric i dont know a better word than crap that they start heading back not bond market now that they offer higher yields. The stock market can go back to returning award of equity instead of on equity this is normalization, isnt it . I think the equilibrium weve been looking for what not been found yet but these are the yields the bond market has been looking for. My number last year, when they asked me where the tenyear would be i said 3 all i did was add 100 points on top of the twoyear, so to me the story is maybe we didnt get here sooner and you had 70 basis points of tightening between the 2 and the 10 this number relative to the fed makes more logical sense in terms of a term structure of the bond market. Thats a positive ive been running the same fund for the last 20 plus years stocks can go up with yields if its Stronger Economic growth i know weve been in a model since the financial crisis where its been bonds up, stocks down, but if were florm normalizing how long does that pattern last until real rates get to 3. 5 , 4 once you get there, you are getting into a problem you think it could have been machines yesterday morning can you put that chart up again . Did humans take over . Thats what i think happens you have to believe it exacerbates the situation both in the medium term and and the up and down side, meaning meaning that as the market was closing yesterday up, lets say human beings had sent things up, it has to be exacerbated there, too. Has to be. I know a couple things. Ph. D. In mathematics is one of the most sought after professions on wall street these guys are getting top dollar on wall street. The second thing i know is i can give a general idea of how the machines are programmed relative to the data. I dont know how theyre programmed relative to other machines and other trade exactly what are the signals being sent certainly this makes me nervous. What we learned about in 0 w8 a to fear a world where all the Risk Management programs are the same and how they react in sening all cosen sending all correlations to one. There seems to be a certain similarity across the market when it comes to these Risk Management techniques. When you think of what the market is doing at 10 00, then you get up on air to discuss it at 11 00 and the story changed by 400 points, i dont remember that before. It already changed by 400 an instant earlier. I dont remember that world 1. 5 . We had the flash crash. The gold flash crash flash crash, though theyre 1. 5 moves. Not 5 now we have the vix flash crash. Theyre not huge gaps theyre 1. 5 now not 5 we have to remember were at 25,000 i feel like the flash crash was a different one that was a market failure we know there were issues in the market that didnt operate right. Watching these machines do these things scares me about the future you saw the 1,000 on the 1600 when they have a billion times more knowledge than humankind, peoplekind you dont say mankind, but peoplekind when they have a billion times more they can kill you for no reason, right . Let me ask this, with all of this stuff going on with the machines, can you step back from it and still make decisions based on your belief of the Macro Economic environment and still profit from that theres all that oscillation that happens amid a trend either way. I think that as active managers who are still left in the business, it all hasnt gone to index product, for the few of us still around and who were there in the 90s and before the financial crisis, its clear were getting more and more evidence that a lot of this stuff is algorithms and quans trading. The best thing to do is move back you can see the lack of volume on those of these gap downs. The best thing to do is walk away its like that movie war games in the 1980s a nice game of chess once the computer figures out it cant win, it defers eventually one of these computers will figure out maybe i should hang out in omaha and buy and hold for 30 years. But in the interim i will back away when this nonsense happens. This is because more and more money is in index funds or some form of automatic trading. When you go into an etf, you say trade these stocks this way all the time it becomes not human decisionmaking the question is are there other algorithms trying to find those stops. Is elon musks words killing everybody beginning in the Financial Markets where they try to sniff out everybodys stops if they want to send the stock down for no apparent reason, take advantage of it ai is here on wall street before its anywhere else. Im worried about terminator, not war games. Im worried about hunter killers, they wont need us. When we come back, the stocks to watch. Big movers in early trading. Futures pointing to a higher open on wall street. Youre watching squawk box on cnbc you know whats awesome . Gigspeed internet. You know whats not awesome . 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. Ccbss ceo met last week wih the viacom representative to talk about bringing those Companies Back together. Should we talk before the eaabo earnings or about the potential deal on the call there will be some updates on the quarter. Maybe an outlook for the next year or two. The focus will be on viacom. And its unlikely theyll comment anything on the actual deal its the body language, whats the direction of that deal what is your sense of where things stand now on surface the doeal makes sense the its about protecting the current business, the current environment with advertising and affiliate fees, but also protecting the future when you say this deal makes sense, this deal makes sense to me if you are Shari Redstone and you want to control both companies and youre not willing to sell either of them right if you asked me if they made sense together in the grand sort of planetary that are Media Companies you might sell cbs to one company and viacom to another other do something different. If there are offers on the table. But we have not seen anything on the table. Its been a while. One of the reasons theres not offers on the table is because theres an understanding in the media ecosystem that the Redstone Family is not a seller at this moment. Theyre not, but if you look at viacom, theyre trading at a significant discount relative to other assets the question is how much control can les have how much of a price is favorable to both shareholders and really control. If youre les moonves, you had this remarkable run, this great career, this magic gut youre a legend in the business. Do you want to take on what has to be described address a tu d job with viacom . History says no, but the world is evolving. Over the past two years they have launched into the digital platforms. They have cbs alexis, cbs digital, cbs news, a sports platform the next generation is consuming, it v digitally. Does viacom have the assets that can do that they have nickelodeon the paramount library, and effectively the mtv, which is comedy central, all that content. If youre a cbs shareholder, you see this as a dirt cheep stock, do you want to deal with viacom or lions gate . Lions gate is a Higher Quality asset but its a financial deal lions gate is trading 14, 15 times ebita, viacom 7 to 8 so depending on the synergies in place and theres not a lot of synergies with liolions gat. The fact that cbs is entertaining this viacom deal, does that mean they looked at Everything Else they could buy or merge with and decided against it i think theyre always looking. Clearly they have another boss to answer to it limits their optionality. I think again, looking ahead, if this deal goes through, its all about the price. We have to go, thank you. I had more the wheels are turning. I could have gone on for a long time. Were a tv network, too. We have to pay the bills. Thank you coming up, the ceos of iff and hasbro will join us in studio later on, dont miss boeings ceo Dennis Muilenburg. Catch his teinrview on squawk on the street at 9 00 a. M. Eastern time some moments can change everything. You cant always predict them, but you can game plan for them. 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