Transcripts For CNBC Squawk On The Street 20240713

Political relief rally banks are in focus this morning. This is bank of america calls citigroup its pick of the decade. The ceo of ulta will join us at post 9 this hour. Well begin with stocks on track to open at record highs. Also adding to positive sentiment, china confirming the vice premier will head to washington next week for the signing of that phase one trade agreement with the United States jim, its going to be busy next week between that and the kickoff of corporate earnings. It sure seems like everybody believes everything is going to be good. A sheer mention of the banks is really underestimated. There are so many people saying buy these. Why does that matter thats who kicks off earnings season already the expectations are pretty high. They better deliver after this run. And thats what these upgrades are mostly all about. I mean specifically on the banks. Goldman getting not one upgrade but two today out of buckingham and b of a, as b of a or it goes from 270 to 245 what needs to be delivered to ratify these calls the 12 punch you have to have a much better than expected from goldman january 29th they break down this new structure the structure is supposed to give you a lot more transparency the structure that goldman has is the structure they had when i worked there 30 years ago. You have to upgrade update what theyre going to do is present some steady streams. Right now its too episodic and cyclical steady streams from the consumer and from the credit card, where i think january 29th theyll tell you how great the apple relationship is going. Thats going to be big. Of course j. P. Morgan kicks it off on tuesday. And thats been the best performer in many ways and trades at the highest multiple typically. Which is why you get bank of america saying positive things about citigroup in the sense that it trades at a 22 discount to its money center peers, jim they talk about the 20s. I still stop yeah, were in the 20s now as a decade of transformation for citigroup like we saw with jpm and other Money Center Banks that prioritize in their consumer business. Do you believe that . No. Citi wants to do the opposite. They want to be able they have got the United States theyre a good consumer presence they can be the Worldwide Bank Michael Corbat has sat there and bought 8 of the stock over and over and over again and said they are doing everything right and the street is wrong. Suddenly the street is recognizing how good he does and hell do great for the next decade david, how do you determine that in 2029 citi is the one to be in you cant i have no idea how you make a call for the decade other than the fact you get us talking about it three minutes into our show. How about the century why not the century . Im going to make a call of the well, which century were already 20 years in. Infinity and beyond i think they limited themselves when they talked about the next ten years. They think more like masa in 300year increments. Or three centuries to be part of alibaba. David, look, the truth is that corbat has been saying weve got domestic under control and all these great revenue streams. The street doesnt understand what were doing were going to buy 8 of the stock back because were at tangible book. When we buy stock, the value of the company goes up. Where were all these people when the stock was at 60 and the only person that liked it was me . Where were they . I dont know. I dont know where they were they were hiding they werent ready to make their calls of the decade yet. They were at jpmorgan they love jamie. Is jamie going to be the ceo of the decade, 2029 my guess is well be in the middle of the decade hes still ceo. I think five more years. When you have a founder, david based on what ive heard. Was he the founder . I dont think so. Theres some point, james morgan of course dont forget, first chicago, chemical, i know some of the others, jpmorgan, chase, theres many others in there, bank one maybe he was the founder of one of those. He had to have been because the staying power he has indicates that he couldnt have just been an appointed ceo it does bring to mind what clareda said this morning, that the economy is in a good place, strong labor markets not putting undue pressure on inflation, claims today 214, which is way down from 252 from the beginning of december. I love this line the consumer in aggregate has never been in a better condition. Thats a strong word from a fed vice chair. I wish he didnt say that that sounds like the top if you go over lennars car, one of the largest home builders, theyre talking about jay powell, when he started cutting rates, he reversed what could have been a very bad time. So jay created a kind of notsogreat market beginning october 4th of 2018 and now hes brought it full circle the rate cuts are working. A lot of the naysayers thought that they wouldnt they turned out to be wrong and now we have a decent market based on the fact people were wrong. Witness tesla. Its three minutes in and we havent mentioned tesla and thats a mistake. Were going to get to the baird downgrade in the case of tesla and of course bob on squawk talking about what the company is finally doing right but at the same time, jim, clareda says repo operations may be extended at least through april now to get us through tax season how much of this is a prop, basically a crutch that the market is leaning on look, i think thats some of it i also think they kind of botched it some of the stuff i want to work on for mad money down here, i think its just one more prop. A lot of props we have to go back to what we said at the beginning which was we were three days ago beginning we were at world war iii the world war iiiers are off the table. As long as theyre off the table, we can have this bountiful rally. Pence on the today show did say or maybe it was fox this morning, that the world would look much different right now if there had been casualties at those two bases. So i mean the old phrase dodged a bullet to a large degree is appropriate here. Without a doubt apparently given the reporting there was a heads up or at least a period of time in which the u. S. Had opportunities to make sure people found safety, which is a good thing as well. Jim, listen, it doesnt mean were over in terms of the tensions from iran far from it. Our goal is to prevent them from getting a Nuclear Weapon they are once again, i believe, on the road to enriching uranium. Its not as though the larger context of what were trying to do has been achieved it hasnt. No. And thats probably one of these things where look, ive got them i followed the president on twitter im down here, but i just want to be sure that the rally can continue because were not talking about iran the discourse will be entirely different. The only thing i think something happened at kohls that makes me think that the people who shop there were more concerned that iran didnt go well i dont know if you want to do retail now or have it for the b. But between kohls, jcp, limited brands, its one of those days where we pay attention, at least in retail, jim, to the losers. Yeah, we have have nots that was a terrible quarter, a terrible holiday season. They dont have a lot of traffic. Womens hurt them. But they are so bullish on themselves its almost like theyre in a parallel universe theyre the worst. But if you read the release, youd think they had a dynamite quarter, dynamite holiday season. Well, we should tell people Comparable Store sales for fiscal november and december 19, what they call the holiday period, were down 2 over the same period last year 0. 2 , excuse me. Macys was good david . And theyre at the low ends of their previously announced guidance of 475 to 495, which excludes 22 cents a share follow other costs recognized in the first nine months of the year. Were not going to hear from them until march 3rd so weve got a while jim, this follows what was not a good last quarter, of course, for kohls when we watched the stock decline as well. David, they did this tieup with amazon where you can return things to amazon. Yeah. It feels like people return things to amazon and ran out of the store. I just am baffled that they do initiative after initiative. Look at this stock they have a good Balance Sheet and the dividend is safe, but kohls is just road kill like yesterday walgreens is road kill were really getting whos road kill and not compare this to costco, 9 increase in one month. Costco is so non they never hype themselves. They just deliver after deliver after deliver. The kirkland brand, a lot of people think its the premium brand, its their house brand. That stock is on a oneway collision with 330. Costco december sales out i see b of a now is cutting kohls to neutral, price target 50. They see something they dont like, huh, carl . The stock was 75 in april, jim. Well and largely blaming womens apparel. Theyre going to have to spend a lot more on promotions and attracting customer traffic. Look, theyre just trying to stay in the game they dont know what to do i mean their strategy is you come into work every day and say anybody got anything you guys got anything . I dont know anything there another company, macys, jeff gannett delivered what he said he was going to deliver. Hes going to talk a better story. Kohls, im speechless im speechless wow, there it is. You really were speechless for i counted at least 0. 06 seconds. How did that happen . Im as quiet as the registers at kohls. Thats cold, man. You mentioned macys, jim atlantic takes it to neutral, ups it to neutral. Says the company can comfortably meet their guidance. We got some of their guidance yesterday. Interesting, we got an upgrade today of last years best name, amd thats what we needed thats what we needed, an upgrade on amd they could have made that upgrade 20 points ago. It is amazing to me that people are still starting to recognize that queens own lisa sue is doing a great job. There are two leaders in this country from queens, right, david . Yes, there are. They do admit they missed the q4 run they go to 55 from 38. In this case, jim, its largely about the server market. They say that the price targets are in the rearview mirror. Intel has some supply issues of their own. Intel cant make these shifts what is going on at intel . They were the premiere manufacturer you know the two premiere manufacturers in this country . Boeing and intel those are the companies that everybody said, you know what, if you want to make something, no one makes it better wow. Isnt it incredible how times have changed i would point out you did this as your mad dash i think on monday we talked about amd. Right if you had a favorite stock in the last decade, this was it. I dont know if its your decade pick for the 20s but it certainly was for the 10s. Lisa laid out the road map actually she read me the riot act. When the stock was at 5, she took me aside and i wont say she called me a moron, because my name is jimmy chill starting in 2020. Basically she said why dont you do some homework it started like that but it turned out she was right. Jimmy chill the guys who didnt like amd, they were in a box for ten hours without a lot of air holes. All right jim, a lot more to get to you as youre on the road today well talk about shares of ulta up more than 180 since mary dillon became ceo. Shell talk about the companys game plan for growth well get cramers mad dash and price target increases for fedex, apple, microsoft, mcdonalds and twitter, in a moment i can. 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Switch now and get a 100 prepaid card when you add comcast business securityedge. Call today. Comcast business. Beyond fast. Lets get to the bond pits a little early this morning. Rick santelli is at the cme in chicago. Good morning, rick. Good morning, carl. You know, we are seeing a parallel shift on the Interest Rates along the Treasury Curve all maturities are basically up one, almost two basis points acting quite firm. These are yeartodate intradays all strung together. Of all the trading days in 2020, you see the 2year note yield there. Not a huge amount of movement. Obviously weve lifted off some of our worst levels based on geopolitical forces. You can see the 10year note lagging a little bit there we have seen the remains of a flattening curve based on the earlier iranian situation, of course, regarding the general. Now, if we look at two weeks of s p 500 on top of 10year note yields, you will see they are tracking nicely. As a matter of fact, most people ideal with in Interest Rates have been bullish stocks for three years. We see Interest Rates are being pulled up by stocks. Upgrades are just Many Companies of course that were underestimated in terms of their stock performance. I think Interest Rates can be included in the notion that as equities continue their big charge, theyre going to be affected, so we want to see how 10year act in the mid190s, how the 2year note acts in the 1. 65 area the dollar continues to depreciate the yuan. Theyre coming and signing that was a good observation based on that relationship finally yeartodate the dollar index continues to do quite well, hovering at some of the best levels in two weeks david and jim, back to you okay, we will take it, rick we get ready for an opening bell to do a mad dash i was trying to think of the corridor here, new york to washington corridor. Usually we go Cross Country but today youre not that far away. No, its amtrak. Yeah, its the amtrak, which is doing very well, by the way, under richard anderson. Its almost on time yeah, yeah. One day theyll even get it going past 50 miles an hour and it will be amazing what have you got for the mad dash a bullet train for you. Ive got Bristol Meyers. This morning jpmorgan talks lovingly about the deal with celgene saying youre going to see numbers about six bucks, about 10 times earnings. Next week is the Jpmorgan Health care conference. I think Bristol Meyers could be one of the stars because of the merger, the numbers go up dramatically. You were positive on it quite some time when there was opposition to the potential transaction. And when shareholders didnt seem particularly excited by it no, there were a lot of chatterheads oh, im sorry, im jimmy chill. There were people who were ill advised in their negativity. And you are positive as well, i guess, at this point for the combination of what it can achieve . If anyone spent 30 seconds with the ceo, they would realize eliquis may be an incredible wonder drug. This is a drug that does its antistroke. Optiva is doing very well. Revlamid is doing very well. That gives them a lot more money to do a lot more buyback which he is addicted to. He likes to return capital to shareholders i like this guy. Hes very good hes from italy, david hes real smart. All right stay right there, jim, well be back to you shortly. As a reminder, you can watch us live on the go on the cnbc app stick around, theres a lot more squawk on the street straight ahead and the opening bell coming up. So following yesterdays intraday high for both the s p and the nasdaq, it looks like the dow may actually join the party today. Needs 128 points to do it. Futures suggest well get there at the open, which happens in about six minutes. Youre watching cnbc squawk on the street. Live from the Financial Capital of the world, the opening bell in about three minutes we have record highs within sight. Meanwhile sales of apples iphone in china for the month of december up more than 18 year on year according to some government data. The Company Shipping roughly 3. 2 million phones up from 2. 7 million a year earlier people watching Chinese New Year coming up later this month, a big giftgiving holiday, and then jeffries today goes from 285 to 350 one more price target with a solid three handle. Almost 50 bucks above where we are its hard to know which numbers to listen to when it comes to china but these sound officially more official. We have to wait for the quarter to be reported by the company itself to sort of see. Jim, that would be a positive no doubt, given how often there have been concerns overall about their market share in that country. 369 days ago, they gave us a forecast that was dramatically lower, 7 billion dollar miss because of a shortfall in china. What a difference a new product makes. We dont talk enough about how what happened, the step from the 10 to 11 people love the camera, people love the battery life. It really resonates. It wasnt just an incremental change those who have the 11 know that theyre wild about it, especially because it takes pictures better than anything ive ever seen its resonating in china whats happened is also theyre not boycotting, theyre buying. They do seem to be, yeah. We dont talk as often about boycotts in fact we should mention reports that the chinese delegation will be on its way here i think early next week, right, carl, to sign phase one of the trade deal. Thats an important moment certainly that were waiting for. It does remain a big question mark the vice premier will come and do a signing on wednesday of next week. Jim, we still dont know what were going to see in the way of text, right . Is this going to be a vague promise . Are we actually going to get a multipage readout of what the two sides are putting their names to what i like is that subtly theyre giving us things remember that American Express being able to have their own unit, paypal has their own unit. If they were to approve the melanox deal for nvidia, that would be very special because they have held that up for months for no particular reason. What i worry about, if i do have worries, its the belief that there will be no phase two if its just this one and then the president says they havent moved fast enough, theyre not doing enough, because i know the president is not particularly happy about what i would describe as intellectual property, theft. Those are not really addressed by this. This is more of a trade deal id like to see where is the 50 billion port, david . Wheres the 50 billion port bought well, thats a key question, of course. As you pointed out so often, they have been crushed over there in terms of their pork supply given the swine flu but a lot of people point to the numbers as being simply unreachable given where they have been previously in terms of the highs and in terms of the additional buying. Well, i just think there would have been a time they would have put an order in for 50 billion for boeing planes. I think boeing remains a central issue in the american economy, whether it be with jobs or exports. Boeing was the way that the chinese often signalled that they were ready to do business now were really limited to these ag deals its not enough. They have to do Something Else id like to see more money spent here you know why id say that . Were going to get a tweet that says wheres the buy the president is going to signal that they better start buying. Its not enough to let us do a little more business where are the buys where are the tractor buys wheres caterpillar . Wheres trucks they have to start buying our stuff. Were going to wait for clarity on that for sure theres the opening bell, by the way. Well talk to the ceo of the Aircraft Leasing company in about half an hour a biopharma focused of treating autoimmune diseases, a Big Health Care conference next week i wurnlonder what youre lookino as we prep for one of the biggest conferences of the year. Its immunotherapy. What dovetails is the numbers for the american cancer society. Im saying look, Justice Ruth Bader ginsburg, how did she become cancerfree how did sorenson from marriott get back to where hes jogging every day. Whats happening is we are doing targeted medicine and i think thats the theme of the conference. Meantime record highs, another hat trick today. Dow, s p, nasdaq. Keep moving higher with the s p up over half a percent right now and in positive territory to the tune of 1. 2 so far year to date jim, you mentioned this at the top of the show. We began this week with a lot of concerns you were amongst those who were concerned perhaps in the belief the market was not discounting enough the possibilities and significant geopolitical tensions here we are a few days later and back to focusing on fundamentals and seemingly that threat has receded. We had a bear market, it just happened at 8 30 at night. We were down 2 . I was really worried about that. We had it. A lot of people sold the futures down magnificently stupidly. I vowed 2020 to be a nice person that was a decline if that had happened during the day you would have seen a vicious selloff and that would have been the moment you didnt get the moment. I didnt think that the bear market would occur at 8 30 at night. S p futures up more than 90 points in two days pretty crazy short interest, jim, and the spy now at a twoyear low. At what point do you start saying ring the register here . Look, i think when we get to earnings, they better be fabulous the setup for the bank stocks is the worst ive ever seen ive never seen a chorus of people who want to buy the bank stocks so when they deliver good numbers, is that enough . I dont know i wish people would shut up and let the Companies Report Goldman Sachs is up 40 points on basically without a resolution in malaysia, without anything that tells us that this new transformation is going to be meaningful citi, we didnt even mention it during this half hour, stock of the decade stock of the decade. I dont like stocks of the decade i dont like that. I regard that as too bullish lets remember, guys, for 2030 just to make sure to look back and call them out on that in case citi was not the stock of the decade, just saying. I will be 45 and im coming back you know, im on a turn back time tour for my body. Honestly, ill be 45 at the end of the decade. Jim, it does lead us to some of the secondary upgrades today. Barclays ups starbucks i know youre watching that as they go to 107 you outsized global fundamental growth. When the stock was at 81, i met with kevin johnson, ceo, out at the air force academy he said whats the stock doing at 81 . Im backing up the truck i warned him when you use the phrase backing up the truck, you better be right. Well, he was that thing was at 99 im sure china sales for nike and starbucks are going to be as good as they are for apple china is buying our stuff, but its, i think, really a case where the party is not going to come down on you if you buy our stuff. Although people still looking at luckin, jim its a nice analog for things were talking about. You want china to buy our stuff but theyre busy growing their own internally grown Companies Like coffee. Luckin doesnt start serving coffee until 9 00 a. M. To me i thought they missed key hours. But i think china has its own strategy for when it drinks coffee. Well, its a tea market, as we all know, right every time theres a starbucks conference call, im always shocked by those per capita Coffee Consumption numbers because they are so incredibly low, which does point to the overall opportunity, which is starbucks will continue to benefit from the growth of coffee overall you do kind of get addicted to it, right . It doesnt mean that luckin wont also succeed its a growing marketplace over there. And Coffee Consumption numbers are so low. Have they even seen the pumpkin latte . Carl referenced some new drinks starbucks has. They sound eccentric but maybe theyre going to catch on in beijing, we dont know for sure. By the way, also suntrust takes mcdonalds to 250, which well watch. Snapchat, jim, jeffries goes to buy. Goes from 17 to 20 based on this Ad Buyer Survey they have got. The title of the report is not disappearing any time soon. Im reminded this was a 6 name roughly in the middle of last year theyre talking about very good revenue growth, theyre talking about advertising coming on, theyre talking about margin expansion, talking about having a great year the stock is inexpensive on the out years. Its any time sales right now. No theres just no resistance to this stock going higher its incredible how Everybody Loves snap at 17 who didnt like it at 10, 11 guys, have you seen facebook going up every day yeah. Did something happen . What happened there . The government no. I mean thats still a threat, but everybody seems to think its a longterm concern, not one thats going to actually bite this year, jim. They do continue to every day theres a story on facebook, carl, you follow it closely too in terms of how theyre changing things todays was the potential to opt out of certain ads in a more significant way, i guess. Kinder, gentler. Theyre clearly not theyre going to be open to political advertising in a barn burner of an advertising year, allowing politicians to say what they want and let voters sort of figure out the truth for themselves it reminds me too, jim, of twitter. I know you were watching yesterday the news that theyre testing the ability to let users block the ability to reply or taylor even the ability to rely from a few select followers. Well see if that makes a difference in engagement. Theres some people who cant take the heat. Twitter ceded that political market to facebook i think that facebook, a lot of people said they would drop targeted ads theyre not doing that if you can imagine youre mayor bloomberg, how are you going to reach people you write a check to Mark Zuckerberg for 100 million. Maybe. You go door to door with your checkbook. That will work for michael bloomberg. Faang, man, faang is still on fire. Faang is so strong. Alphabet is 6. 5 this year. Faang watch that guy is amazing hes a legendary wall street funny man. Yes, in his own mind too. Yeah. All right jim, were going to be a faber report i know you like to watch those very closely i wish you were next to me to make funny faces i wanted to come back on hp xerox. These are not faang stocks, by the way. Both looking for growth wherever they can find it one reason why, perhaps, some of their shareholders would embrace the idea of a combination of the two and synergies and cost that would have been saved as a result of that combination we did get a chance yesterday late yesterday from hps board to the latest offer from xerox they didnt change their offer but they did fully finance it signing up some 24 billion in total potential financing for the offer that they have in mind for hp whats interesting about the response is not that its a no, because thats perhaps not a surprise, but that it was terse. It was not a long letter detailing all the Different Reasons why their offer is no good it really just said very simply your proposal, your letter dated the 6th regarding financing doesnt address a key issue, which is price you undervalue hp, its not a potential for discussion so what now . Well, in many ways you can imagine xerox gets this and looks at it as a positive. Now we know what its about. As i pointed out when we were reporting on the financing that they had secured, there is certainly the possibility, if not the likelihood, that at some point along the way theyre going to raise their offer the question is when they do it, how you do it and how you stage things from here if you are xerox and moving towards what would be a proxy fight the window for nominating directors will close in a few weeks. One would expect very much so that would be the first thing they do, file their slate, indicate their willingness to go and their willingness to fight for control of the board then at some point you also probably institute an Exchange Offer, tender offer of some kind none of this means you increase your price at this point one of the lessons in hostetile is you dont bid against yourself but the sense that the xerox side is getting based on this response is, okay, were in the game and the game is about price at this point although it can have a circular effect remember, they increase the price, they increase the debt on the overall company, so really youre just leveraging the Balance Sheet of hp to help hp shareholders pay themselves, but it may be something theyre interested in. It is the battle for the hearts and minds of shareholders that continues to go on right now it was clear at least based on what i was hearing that they were going to come out and say no valuation is their first order exercise and financing as nice, but it doesnt mean that they have answered the questions at xerox. Still seen as an overall positive i think next will be the proxy and the slate and then after that perhaps an Exchange Offer at some point comes along with that, and then if they get to some sort of sitdown is when you really do say, okay, were willing to increase the price. But, jim, it does appear at this point theyre moving along the right way in terms of their hopes and dreams of actually being able to acquire this thing as unlikely as it seemed at the beginning. One thing i want to keep track of is how well is xerox doing, the actual fundamentals they seem to be doing okay hp doing better, really constrained by intel not having chips. I think if intel had chips, hp would be substantially higher and therefore xerox would have to pay more. I dont know if they could do it yeah. Carl, well keep watching of course as it is one of the long running, interesting battles going on right now. This is a hot one. Its likely going to keep going into the spring. Meantime, guys, well turn to ulta beauty, one of the top ten best performing names over the last decade, rising 1300 in that time. Mary dillon has been the ceo for the majority of that and shes here at post 9 in a cnbc exclusive. I know jim wishes he was here. Good to have you. Its wonderful to be here. Stocks close to a fourmonth high as we get a report card on holiday. Are we starting to answer for those middle of the year, last year concerns about the category, about makeup let me step back and say we are thrilled about the tenyear run that weve had but we think we have so much runway ahead if you go back the last ten years, weve gone from 300 stores to over 1200. Our sales went from a billion to 7 billion were the number one destination for teens so this is all good. Midyear last year we talked about makeup as a category being a little softer than previous years. The beauty of the ulta beauty Business Model is we operate in every category of beauty skin care is on fire, hair care, fragrance. And makeup we know is going to come back. Theres plenty of engagement in makeup were looking for new incremental innovations. Do you think its something structural where millenials, social media has changed the way we think of makeup or is it more of a share gain from a disintegrating store atmosphere. I think theres shifting Consumer Behavior in every consumer category. People are very into makeup. Gen z very into makeup we see new trends, everything from skin care which is starting younger and will stay with our dwef guests forever makeup even with sequins and glitter on your eyes i dont think youve tried that, but trust me, its a thing. If david does, im in. Well, you know, mary, you have talked a number of times recently about the looks and trends that are evolving you know its going to take time to bring newness and innovation, you just said it right there i guess something for shareholders who are not unhappy with you but want to get a better sense when is that new n ness and innovation going to mark an up trending in the category thats been down. Its been down the last year. Beauty in total is up. Let me reiterate, we are gaining market share in every category our Business Model is set for the past 30 years as well as the future 50 years. It will take a little time but were not concerned about it what we see happening is younger consumers getting very engaged in skin care thats a trend theyll keep with them as they get into the makeup business as well so our Brand Partners big and small have all sorts of innovation coming. We cant say exactly when but we feel confident these are cycles cycles happen in businesses all the time. Jim mary, theres something first of all, congratulations on all of your success over the years. A lot of companies, even great retail companies, try to get to have 10, 12, 15 million loyalty people you have more than 10 of the country in your loyalty plan hows that possible . Well, thank you for asking. We have over 33 million beauty enthusiasts passionately in our loyalty program, ultimate rewards, because we think we offer a Great Program that they love our store teams help educate guests and we invest in capabilities to make the offers to our guests more personalized and relevant every day so we surprise and delight them, we encourage them to come and spend with ulta beauty and its showing in the numbers were driving market share gains. Our Brand Awareness is at an incredible high and teens love us and that bodes very well for the future. I love the site, theres great bargains. Thank you. Youve done Something Else that i think is incredible you realized there wasnt a lot of innovation in some part of cosmetics. You were able to pivot to skin care i dont think people recognize how incredible that was. Could you i know im going to brag for you. Most people couldnt make that adjustment in a quarter. You did it how much better the margins in skin care are pretty good, arent they . Well, sure, they are. I give a lot of credit to my team were always out learning about whats hot and whats happening in beauty. Skin care, and febrezio is an expert knowing Global Beauty trends, so weve been participating. We do services in every Ulta Beauty Store from hair care to skin services, makeup and Brow Services weve been adding a tremendous number of new innovative brands. Whats cool about skin care is new rituals are being formed things like masks and serums younger people starting, women my age and older, men in the skin care category so its a really great business to be in. Can you comment directly on holiday, and your inventory strategy going into this year, what does that look like were still in the quarter but holiday is a great time of year for ulta beauty because we can participate in gift giving as well as glamming. The thing i will say about holidays, like many retailers weve seen Consumer Shopping patterns continue to evolve. Retailers set up to have a great instore experience, online experience and omni channel, the ability to buy online and pick up in store. Were set up to do all of that and that was very helpful in the holiday. Is physical presence less important . Such a great question listen, i believe to our core that beauty is an experience that will always be physical and digital and emotional and about really human connection. And so the vast majority of our sales happen in our stores why . Because our guests love to come and try, look at a color, smell a fragrance, have an experience with one of our associates thats cool. But they also need to make sure that we can be conveniently ready for them whenever they need it. We need to play in all places and our stores are doing quite well. That said, im curious how you think with expansion from here over 1200 stores i know the Canadian Market beck ons as well. How should we think about 2020 in terms of store openings. We plan to continue to grow in the u. S our range is 1400 to 1700 stores in the u. S we think we have the potential to be at that level, so more coming we plan to become a Global Beauty retailer. Canada is first up to bat. We cant divulge a lot of details but were in the process of getting ready to launch in canada, which we think is a fantastic market for us. Jim has one more question. Mary, you anticipate a lot of trenlds. One of the things ive found is younger people are going away from the long label cosmetics. You are ready with vegan, ready with crueltyfree. You are addressing basically Environmental Issues how is that working . I think a lot of the younger people are turned off by tradition. Well, youre absolutely right. The trend about clean is here and its here to stay in beauty. I started my career in the Food Industry it took a long time for natural and organic to become mainstream and obviously it is now. In beauty its happening were participating with so many exciting brands. We Just Launched a brand called thrive cosmetics which is vegan and crueltyfree we have many brands we offer to our guests in that place and know thats a trend thats going to continue, whether its skin care, makeup or everything in beauty. Well, congratulations on the decade. Thank you. We cant wait to hear more when the quarter ends. Thank you so much great to be here. Be sure to check out our podcast and listening to the open bell hours, squawk on the street or wherever you listen to pod kaftds the cdow is up 135 and we are a 3267 your golubs. Shipsticks. C om no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. Sending your own clubs ahead with shipsticks. Com makes it fast easy to get to your golf destination. With just a few clicks or a phone call, well pick up and deliver your clubs ontime, guaranteed, for as low as 39. 99. Shipsticks. Com saves you time and money. Make it simple. Make it ship sticks. These opportunities tend to be buying opportunities. Since prush took office weve had three complicated selloffs. Record highs across the board at the open. Dow is up 131 right now led by three names that got positive commentary this morning, namely apple, goldman, and coke at fidelity, you get personalized Wealth Planning and unmatched overall value. Together with a dedicated advisor, youll make a plan that can adjust as your life changes, with access to taxsmart investing strategies that help you keep more of what you earn. And with a new brokerage account, your cash is automatically invested at a great rate thats at least 21 times more than other advisory firms. Personalized advice. Unmatched value. At fidelity, you can have both. More than this at this rounds on me. Eat. Both. Hey, can you spot me . Come on in. Find your place today, with silversneakers. Included in most Medicare Advantage plans. Enroll today by calling the number on your screen or visit getsilversneakers. Com its time for jim. Sometimes you want to take the other side of the trade. Right here bed, bath, and beyond. Mark triton late of target coming in. No chance. Hes there for 60 days he is now ready to work. Im seeing an opportunity. Maybe let it go to 12, 13. Doesnt matter this thing is prematurely being judged i like what hes doing wow thats a nice contrarian call, jim. Have to go that way this guy is the real deal. Balance sheet is real. He can turn it around. Its going to take a long time but he has a lot of good things. He had five great days where he demonstrated a new way to be able to sell right between thanksgiving and cyber monday. Dont give up on this man. He just started. David, be more forgiving okay. I will try, jim. He means in general not on bby. And i am going to make faces. Im jimmy cho but that doesnt mean i cant make faces. Jim, what is on mad tonight . I have the single best way to play china post phase one. If we really get phase one, one of the things im doing some research on, ive got the name to buy youll all want to tune in and you all kind of know it but its not what youre thinking have a good time measuring the curtains at the Federal Reserve while youre down there. Im kidding. Speechless twice. Twice in one hour. Im kidding jim, see you at 6 00 p. M. Mad money. Coming up more on another w u13cketting day for stos. Doisp 2. Good thursday morning. Welcome back to squawk on the street. Im Carl Quintanilla with david faber and morgan record highs across the board at the open of course dow up 130 as we watch iran, watch china a ton of upgrades and some Retail Holiday report cards. Thats exactly where our road map starts today more record highs for wall street getting a boost from cooling tensions between the u. S. And iran with the dow nearing 29,000 Carlos Ghosns great escape what the ousted nissan chairman told cnbc in his first Public Comments in more than a year and an exclusive with the ceo of Virgin Galactic in the meantime the dow, s p, and nasdaq hitting record highs this morning joining us are our guests. Good morning to you both you surprised to see record highs given everything thats been going on in the world in recent days . Morgan, i am not surprised. We have to remember this is all happening with a very accommodative, Monetary Policy backdrop and i think that really has created an upward bias for stocks and enables such an out sized reaction to mildly positive news. How do you see it i would have to agree for the most part. Markets certainly did punch above their weight last year so i wouldnt be surprised to see some sort of pullback here but we remain very constructive on these markets not only an easy fed, which was mentioned previously, but you have sort of decent valuations here, certainly not cheap, but when you throw in low inflation and low rates you actually have stocks that are reasonably priced you have earnings season coming up so perhaps other catalysts Going Forward. So i continue to see markets which will probably grind higher we think single digit returns are probably in the cards this year and so we are advising our clients to sort of remain in equities with a bias toward u. S. Kristina, how about you are u. S. Equities still the best place to be parking your money as an investor or would you be telling clients to look elsewhere . What i would tell clients to do is be well diversified. I would agree with jeff well see single digit returns in the u. S. , but that doesnt mean we have to throw up our hands and accept that. We can look outside the u. S. I would expect significantly higher returns from emerging markets equities, particularly chinese equities in 2020 so, jeff, looking at Global Growth for the year, it looks like you expect the consumer to continue pulling the u. S. Economy or to help the u. S. Economy continue to strengthen here how are you thinking about that balance between the u. S. Versus the rest of the world . So, we do have a neutral weight into equities but are overweight the u. S. Relative to the rest of the world and actually underweight emerging markets, so i guess were making a market right on this show. Emerging markets, to us, theres risk there youre also in a late cycle in the u. S. , and historically u. S. Equities tend to dominate toward the end of its cycle so well have to see if that transpires this time around. We like Growth Stocks over value stocks we like large cap over small as bull markets age and eventually do peter out, they tend to be dominated by past winners and momentum type names. You continue to see, as jim cramer has pointed out, the fang names continue to do incredibly well even this year growth over value by 150 to 100 to 150 basis points year to date even so far we think it is a continuation though we as human beings turn a calendar over on december 31st, markets tend not to do that, so you are seeing a continuation, we think you see a continuation in 2020 of what we saw in 2019 but to a much lesser degree, of course kristina, you mentioned the accommodative fed. Would you expect that type of similarity to continue this year where do you think rates are going . So i would expect that rates stay pat in 2020, but we cant ignore a more important phenomenon at least for emerging markets equities, and thats the fact that Balance Sheet normalization ended in september. Jeff alluded to the trend in 2019, but if we actually look at the trend for the last quarter of 2019, which is after Balance Sheet normalization ended, what we saw was em out perform u. S. And chinese equities out perform em the other key catalyst for chinese equities of course is going to be the signing of the phase one trade deal so i would expect Going Forward that we will see em perform strongly, particularly china in 2020 jeff, what are the biggest risks to your investment thesis this year . Is it geopolitics . Something else i think there are some known unknowns this year markets are pretty good at discounting president ial elections but that i think will remain, may keep investors on edge, especially during super tuesdays or some larger caucuses that come through in 2020. Geopolitical issues, things that cannot be mapped or modeled i think weve already got a taste of that in early 2020. So there is certainly the shock, which can have negative impacts in the oil markets potentially and also to risk assets and multiples. Certainly last year you got a lot of multiple expansion, not a lot of Earnings Growth i think this year were calling that earnings have to lug the water and so anything which puts down pressure on multiples would put downward pressure on price without enough earnings to sort of come through. So to answer your question, the things that cannot be mapped or modeled. We agree that a well diversified portfolio will probably serve investors well in 2020 all right thank you both for joining us today. Jeff and kristina with the dow up 110 points hitting a fresh record intraday high today thank you one day after fugitive and of course ousted nissan chairman Carlos Ghosns press conference for the ages, well, he is facing some fresh problems in his new found home we go to beirut for the story. Michelle reporter hey, david. Yes, carlos ghosn came to lebanon because it is his childhood home he has lebanese citizenship, and also because he knew hed never get extradited back to japan where he was convinced he would never get a fair trial the only thing i want to tell you, that i a lot of people perceive this that i am running from justice, which is really the last thing i want to if i had some reassurance that i would get a fair trial in japan and if my wife could have joined me in japan i would have stayed in japan because this is the place where i would have defended my name and reputation. What if you have to spend the rest of your life in lebanon though are you ready for that well, it is better than spending the rest of my life in japan. Reporter but today he is facing issues that have nothing to do with japan but in fact have everything to do with a very bloody politics of the middle east. He gave an interview to lebanese tv this morning in which he acknowledged that he met with lebanese officials today and was questioned about a formal complaint filed by a group of lebanese lawyers who accuse him of, quote, normalization of ties with israel. This all stems from a visit he made to israel back in 2008, a long time ago, in which we can show you the pictures from that visit he can be seen shaking hands with the then president of israel simon perez and also another individual. Longtime viewers of cnbc will be very familiar with him. Hes been talking about electric cars even before elon musk lawyers for carlos ghosn have told reuters that they are very comfortable with the way that the Legal Proceedings are happening here in lebanon, so it is not clear this is going to be a major issue, but it certainly highlights the situation here in lebanon. This came up twice in the News Conference yesterday from lebanese reporters this visit back to israel, where one of them asked him, how could you shake hands with someone who has lebanese blood on his hands . And, remember, we are just in the wake of this strike that killed soleimani, and soleimani, of iran, the general of iran, who was in charge of the quds force, it was his job to spread, you know, iranian power throughout the region, and they support hezbollah, which is now a member of the parliament here in israel. While carlos ghosn comes here trying to escape the situation in japan, all of the politics that we have been talking about for the last week are all still very vibrant here and he is going to have to deal with those issues and potentially be staying in that country for a very long period of time, as you asked him, which he seems willing to do, not having much choice otherwise, i guess at this point, michelle. Reporter yeah. As he said, hed rather spend it here than being under house arrest in japan and waiting for a very long time for justice there. His passport was taken away from him. We are told that was, you know, standard procedure at this point. But in theory at some point perhaps he could travel to france because he does have french citizenship, french passport, which was taken away as well today. And they do not extradite their citizens as well so in theory, he would be safe there, possibly, but its not clear when and if hell be able to go to france. Michelle, thank you great stuff. Appreciate it. Michelle carusocabrera in beirut still to come this morning new details emerging on the boeing plane crash in iran well fill you in next stocks in the green. Get a check on the Top Performing names on the dow. Apple of course as jeffries takes its target to 350. Goldman two upgrades and then coke upgrady ed bc. S. Today. 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Good to have you. I cant imagine. Lets talk about leasing to begin with after having covered the boeing news. Sure. How its changed really over the past 10, 25 years. Leasing has grown tremendously in fact, it is the fastest form of growth of the way to finance aircraft and has been. Weve experienced tremendous growth and actually the aircraft investment space has actually grown really well. Aircraft proven to be a very good, stable investment over time so attracted additional capital. That is good for our business. We need billions and billions of dollars to buy aircraft over the next several years so the industry has grown. Its prospered it has continued to yield good results for its investors. Have you seen anything like lets take the max have you ever seen anything like it in terms of disrupting . Honestly, no. It is a very difficult situation. Its difficult for all involved. These tragic crashes impact all of us who have aviation in our blood. I do believe, though, that i have a lot of confidence in the regulatory authorities, a lot of confidence in the boeing company. Its just a question of time before the aircraft gets recertified. The Airline Industry needs this aircraft we need this aircraft. We have a number on order. Were big believers in the aircraft were big believers in the industry but it has been a very difficult time for the boeing company, and we hope and actually we have a high degree of confidence that this will be over sooner rather than later more commentary out today suggesting a return to service in i think maybe mid q1 . I mean, having gone through last year, who knows . Yeah. At this point, no one is predicting and i just dont think its right to predict. The regulatory process will take its time the estimated 400 737 max parked around the world right now awaiting that return to service. Yes. Then to be able to be certified and delivered, how long is it going to take for all of those aircraft to be absorbed into fleets like yours we said in our last Earnings Call our opinion, not boeings, but ours was we thought it would take about two years for all the aircraft to finally be reabsorbed a lot of different factors we still think thats about right. Are you in settlement talks with boeing . So boeing is a big supporter of us. Weve had many discussions for many months and were able to work out some settlement issues with them. Primarily oriented at helping our customers because the airline is our end user, the people who pay us our rent, are the most deeply affected boeing has been very helpful with our customers and its helped us getting our lease payments your cost to capital i notice is pretty low. You just sold fiveyear bonds at 2. 3 we did, yes i would assume a low rate environment is extraordinarily helpful over all to your business and a risk of higher rates seemingly the other way. That is true. We are a very capital intensive business lower Interest Rates are always helpful. We have some protections in our businesses and forward leases, adjusted and based upon the existing rates at the time of delivery certainly for a capital intensive business low rates are good i remember the old days where leasing and low cost capital meant kiwis, startup carriers, peoples express, right . All the startups would come in and just torment legacy carriers yes am i crazy . Is that not happening as much as it did say in the 90s well, i think, you know, the huge growth in the Airline Industry has, in fact, been due to low Cost Carriers and ultra low Cost Carriers. It is that affordability of air travel and the increasing frequency payors, flying the smaller and secondary cities which people want. They dont want to make a stop that has been the largest and Fastest Growing segment of the Airline Industry is low Cost Carriers globally. Weve seen people like norwegian trying to go long haul low cost which is a more difficult model, but certainly all across the globe now on all continents the real growth has been in the low cost sector. But in north america and the u. S. Absolutely. You have airlines like spirit and frontier and many others that, you know, specialize in the low cost model and are having huge traction where is the biggest demand for your services coming from right now . Asia. Its about 42 of our business and 16 of that is china the rest is the rest of asia clearly, asia remains the largest Growth Market for us now and in the future. Just to go back to this deadly crash in iran a couple days ago, how closely are you watching that especially given there are some reports that maybe perhaps there could have been a bomb, it could have been missiles yeah. Another tragedy. Look, were watching it very, very closely just really, too early to speculate on what is happening but certainly we didnt need another tragic incident involving any 737 or any aircraft at all. We are watching closely. You know, were in touch with boeing and just trying to find out as much as we possibly can but frankly, i know no more i dont know anything more than any of you do right now. Do you work with the airlines, though we see like geopolitical tensions flaerg tensions flaring in iran and say you know what the aircraft youre leasing from us please dont bring them in and out of that country do those conversations happen . Yes, more than that our leases very specifically indicate at all times the operation of the aircraft has to be compliant with u. S. Law so we do interact with our customers globally when there are situations like this we understand they go through difficult times. But most airlines for example are avoiding iran and iraq now and these things happen. Theyre unfortunate but they do happen we are in touch with our customers to see if there is any way, how can we be helpful do they need another aircraft, do they need to extend leases . Were trying to be helpful but generally speaking were pretty strict upon compliance laws. What a year its been in aviation yes hopefully things calm down a bit in 2020. I hope so john, thanks. Congratulations. Thank you very much appreciate it. Thanks for having me coming up, dont miss the ceo of Virgin Galactic as the companys second spaceship passes a key milestone we have that exclusive interview next welcome back to squawk on the street. Virgin galaxic achieving key milestones in the build and design of its spekd commercial spaceship with structural work and systems now more than half way complete as well joining me now Virgin Galactic ceo and former nasa chief of staff George Whitesides thanks for being here good to see you so you Just Announced this key milestone for your second spaceship. Basically weight on wheels meaning a majority of the work has been done. Youre continuing work on the third. How big is the suite going to get and how important is the development of this suite to profitability in 2021 . The fleet is really important and so our announcement yesterday was like a huge milestone for the team these are people who have been working on the ship for a while. And to get to the point where all of the major structural assemblies are put together and she is resting on her own landing gear was a great moment for the whole team the fact that, you know, were already as you were saying, you know, well along on the next space ship, is a great sign were sort of following through on our plan to build out this fleet of space ships that is important because, you know, just like any sort of business where you need to bring capacity to the market we want to have not just one space ship. Obviously weve got vss unity thats been to space already but we want a few more our plan is to have five space ships by 2023 and were making Good Progress toward that. Certainly i think investors know Virgin Galactic as the first publicly traded Space Tourism company but the fact that you do have this wholly owned sub sid ohary the Space Ship Company doing all of this work on these vehicles in house, why does it make sense to have it that way . We actually didnt start out that way many years ago. What we realized was having the true vertical innovation where we can do everything from design to build to test to post operation support, was really important for making Good Progress quickly and to ensuring that we have, like, full Quality Control over the entire manufacturing staff. So we now have many hundreds of amazing, dedicated people out in mohave, California Building these vehicles and then well bring them down to space port america where theyll be operated in new mexico are you already integrating some of the hypersonic capabilities into these spaceships the fascinating thing is that were going to be flying true hypersonic vehicles, just going straight up. Right . One of the aspirations that we have, as you know, youre very knowledgeable in the sublt, we do aspire to build a next generation vehicle that can go point to point just imagine instead of going along at point eight like we do in air travel if you can go two, three, five, just how much that is going to change the planet. In terms of when you would expect to see that pointtopoint type of travel, its in the coming years five years ten years . I think we could have prototypes within five years or so you know, and then, you know, fully scertificated vehicles behind that. The fact were flying people on these vehicles and will have similar thermal systems and structure systems and those are things that will be able to flow through from spaceship 2 the vehicle we just worked on this week and Going Forward boeing is a key investor in jirj ji Virgin Galactic as well. How much are they working with you in this development and the future hypersonic capabilities wall street is so excited about it they are. Boeing is obviously an amazing company. They made a 20 Million Investment that was sort of quince dent with our Public Offering or closing of our public listing and so they have amazing capabilities in Hypersonic Technology how do you actually build these vehicles, something that can start off on a runway at zero Miles Per Hour and take it all the way up to a 5 vehicle . They have amazing capabilities our teams are doing amazing Work Together as they think about how that will evolve and what vehicles well build you announced the milestone today. Still targeting service, first commercial service mid 2020 . Is that still the plan our plan is to take each step as it comes. We want to be very safe and progress but were making Good Progress obviously our number one priority this year is to fly Richard Branson to space, like a huge moment, you know. Its his 70th birthday and like the 50th anniversary of virgin group. We are really hoping to have a great year okay. What are the key pieces that have to fall into place to get there . The first bid is moving spaceship unity which has already been to space down to space port america well move it down pretty soon well do a series of test flights looking at systems performance, getting the pilots used to flying out of new mexico rather than California Well be testing the cabin, itself, to make sure the Customer Experience is as perfect as we like to be when all of that is done, when we feel really good about it, then well say, richard, lets go and he will fly. And then well see how that goes and at that point, you know, we will be in a position where we can start thinking about commercial service i realize youve already got 600 plus people signed up and there have been thousands more who have expressed interest. What has that interest continued to look like as you know we are sort of in a pause of sales because we have these 600 people and we really want to take good care of them what is exciting and sort of great for the company is that that number of people who expressed id like to fly with you keeps ticking up you know, by a good chunk every month. So, you know, we think thats a good sign that this is a great market, you know, and, yeah. So later on in the year well reopen the sales i realize this is a little further out, perhaps, but i wonder just how you are assessing the competitive landscape, whether its blue urchin when they start offering their service or spacex developing that starship system also potentially in coming years could be doing pointtopoint travel you know what i like to say is i really think the market is going to be big enough for all of us. What the orbital guys are doing, and by that i mean sort of spacex and boeing, boeing has their starliner vehicle that just flew. Yes thats going to be a different kind of thing than were doing. Those seats will be in the tens of millions of dollars which is fantastic but sort of a different thing than something in the hundreds of thousands of dollars. You know, blue will im sure offer something great. We think well have a terrific product. I think the main thing is this is going to be a supply constrained market for the near term because no matter how much we fly, theres going to be way more people that are going to want to fly into space than we can provide seats for. At least for the next several years. Its amazing to hear you say that i never totally wrapped my head around it. Its fascinating we look forward to flying you some day yes yes, please. First journalist in space you know something . That would be amazing George Whitesides, thanks for joining us today ceo of Virgin Galactic david, back over to you. Okay. Thank you very much, morgan. Now an update, first journalist in space i like the sound of that lets get an update from sue herera back at headquarters. She would be great. Thanks, david. At this hour, everyone, Vice President pence speaking out about the tensions between the United States and iran in an interview on the today show he praised President Trumps leadership in dealing with tehran. The iranians always knew we had the ability to use military force, but what they know now, thanks to the president s decisive leadership, is that we have a commanderinchief who has the will to use military force. We hope that has restored deterrence former secretary of state john kerry who helped negotiate the Iran Nuclear Deal telling voters in iowa the developments in iran show that former Vice President biden is much more qualified than President Trump to handle Foreign Policy and national security. He is completely committed to the notion that before you send american troops into harms way, before you ask families to risk the lives of their loved ones, you owe it to everybody in the world to exhaust the capacity of diplomacy. This president has not done that and you are up to date. Thats the news update this hour carl, back downtown to you all right sue, thank you very much lets check the markets this morning. Obviously a nice rally in play, dow up 155 record highs for all three major indices, s p 3270. As a reminder you can always watch us live on the go on the wnoaitod do ld tay squawk on the street is back in a minute. Elp us with achievae steps along the way. So we can spend a bit today, knowing were prepared for tomorrow. Wow dad, do you think you overdid it maybe . I dont think so. What do you think, peanut . Nope honey, do you think we overdid it . Overdid what . See . We dont think so, son. Technically, grandparents cant overdo it. Its impossible. Well planned, well invested, well protected. Voya. Be confident to and through retirement. We believe in education built for all people. , [woman] snhu was the best experience of my life. [man] without snhu, i wouldnt be the leader i am today. [woman] i graduated high school 19 years ago. I still finished. [man] in the military, you feel that sense of accomplishment. Thats what snhu is. You will march from this arena and say to the world. I did it. [woman] you did it. I love you. [graduate] i love you too. Welcome back to squawk on the street as the major indices hit record highs this morning. Crude oil prices in the Energy Sector extend some losses from yesterday. You can see wti below 60 joining us now the Wells Fargo Investment Institute head of real asset strategy. John as we see wti retreat im curious, you think sort of the worst is over in terms of concerns on the geopolitical front . And well kind of hang in the 60 range . Yeah. Good morning, david. I think the market is telling you that, now. We go 48 hours back, and in the after market on tuesday, right after the missiles were launched, brent was at 70. Now were at 63. I think the market is telling you, this is deescalated. Its pretty much done. There are good reasons why its deescalated what we know in the u. S. President trump is in an Election Year and he doesnt want to see higher gas prices or oil prices but, yeah. At this point i believe its deescalated what about the supply demand picture at this point . Is it consistent with the forecast that would say we hang around here as well . You still have a geopolitical premium. If there were no geopolitical issues out there youd probably be at 50 oil. We are well over supplied. Most viewers dont even know that the u. S. Today is producing almost 20 Million Barrels of petroleum a day. That is 20 of the market. If we go back 15 years ago, we are about 10 of the market. So the market is well over supplied at this point and your other two Major Players in russia and saudi arabia, theyre both itching to increase supply if they could. And this whole iran thing was great cover for them to increase supply so right now supply demands that equilibrium if there were no geopolitical issues wed probably be talking 50 oil. John, i realize that theres a lot of talk about the u. S. And energy independence, the fact were the top producer in the world right now when it comes to crude, etcetera, but is there ever going to be a time or scenario in which the u. S. Is not dependent on the middle east for at least some imports . Yeah, well, technically, were independent now. Its just more of a mismatch of assets for us. So we have plenty of natural gas. We have plenty of oil. But at this point we just dont use it the same way. Well be dependent on others for a while. Frankly, its more efficient to be dependent on others back and forth. But if you actually wanted to draw borders around the United States and say, are we independent today, the answer is yes. Stocks of Energy Producers also getting hit as you might expect last year energy broadly speaking under performed as a sector is that your expectation this year given your forecast for prices yeah, and it largely has been for the last six to seven years. There is a very particular reason for that. Oil prices, if you look at them in the last five, six, seven years, theyve really gone nowhere. Theyve kind of trended sideways for a while. And when that happens, wall street does not increase their multiples toward Energy Stocks they basically let that multiple slide. So when Oil Prices Get stuck in ranges like where we are now, this whole 50 to 60, 50 to 60, what you see is multiple compression on your pe from Energy Stocks and if youre in the market at all youre better off just buying Something Else buy a healthcare name. Buy a tech name. Energy stocks generally when Oil Prices Get stuck in a range, they just dont go anywhere and they dont get any love. Yeah. Not getting love today as well john, thanks for your time and insight. Appreciate it. Thanks, david the president and nato secretary general agreeing that nato could contribute more to regional stability and the fight against terrorism during a call yesterday afternoon as the president called on nato to step up its involvement in the middle east process but just what does that process entail for more were joined exclusively this morning by the u. S. Ambassador to nato, Kay Bailey Hutchison madame ambassador, great to talk to you again we carried the president s comments yesterday when he said im going to ask nato to become much more involved in the middle east process what, specifically, does the president want yes, carl, great to be with you, and i think baja the preside i think what the president is looking for is more of our allies working with us in iraq we do have a mission in iraq now to train and advise the Iraqi Armed Forces to try to help them help themselves to defeat isis but we also can do more in that area and that is something that our nato council will have to discuss and decide that we would do more. But it is important that we not walk away from the defeat Isis Coalition that we have put together, because that is whats holding the terrorists where they are, so that they dont come back and attack americans or any of our allies in the Nato Alliance its no surprise obviously the president has had his issues with nato when it comes to various countries and their commitments, but how does the white house balance their request to be able to act unilaterally as the u. S. Sees fit and, yet, also balance that with a consensus forming ability of getting nato to help out . How do we have that both ways . Well, thank you, carl really, that is the value of nato, because we do Different Things when we act unilaterally, and we certainly have the right to do that but when we act with nato, it is with 28 other allies, and we speak with one voice, and it is our unity that is our strength and, of course, nato is in afghanistan, working side by side with america in our two area missions. America does a lot of the work with the afghan army, but, also, so does nato all throughout the provinces in iraq, we train and advise the iraqi forces, but our goal is to stop isis from resurging, because that is a terrorist organization that could be exported to america or any place in europe or canada. So we can do unilaterally, side by side with nato, and then as the president has now asked, he would like for nato to step up even more to work with us in iraq as well as throughout the middle east. Ambassador hutchison, if nato get more involved, what does this actually mean for the longerterm strategy for the u. S. In the region does it make it less or more likely that we actually see some sort of entity socalled endless wars well, i think that we are all committed to countering terrorism. Thats why we came to the middle east in the first place. Its why were in afghanistan of course and why nato stepped up with us. This was the only time nato had invoked article 5, which is if one of us is attacked were all attacked so counterterrorism is one of our major Nato Missions and, of course, it is very important for the safety of the people of america and canada as well as europe so i think that it is something that weve all agreed is a major Common Threat that our nato allies have with us and thats why we Work Together sometimes side by side and sometimes within the same framework. Weve already seen demand for Missile Defense growing in recent years among our allies, presumably the recent strikes are only going to fuel that type of demand. How big is the risk that more allies would consider russias antimissile systems especially given the fact that turkey, a nato member, already purchased that s400 last year well, we are still trying to stop that Russian Missile system from being deployed in turkey. That is going to stop the interoperability of all of our air Defense Systems in nato, and we have said many times to turkey, you just cant do this and weve tried to work with turkey for a way to assure their protection, that they feel their protection by nato, but having that s400 is a nonstarter for america and for nato these are some of the issues that we have to deal with that are very delicate. A nato ally which turkey has been and been a good one, but theyre doing something that is very much against our Common Security needs and we are still working to try to show them that this cant work and we cannot operate our nato systems with a russian Missile Defense system because russia is the main adversary that we are facing right now in addition to counterterrorism madame ambassador, its good to talk to you again its been a while but obviously this is a story well watch closely with your help thank you very much. Kay bailey hutchison, u. S. Ambassador to nato in brussels absolutely. Thank you, carl. As we head to break, a pair of retailers getting rocked this morning. Bed, bath, beyond tumbling after reporting a quarterly loss and withdrawing its fullyear forecast the stock is down 17 wehls also taking a hit on ak holiday sales and fullyear guidance down 9 i can. The two words whispered at the start of every race. Every new job. And attempt to parallel park. electrical current buzzing each new draft of every novel. typing clicks the finishing touch on every masterpiece. newborn cries it is humanitys official twoword war cry. Words that move us all forward. The same two words that Capital Group believes have the power to improve lives. And that, for over 85 years, have inspired us to help people achieve their financial goals. Talk to your advisor or consultant for investment risks and information. Talk to your advisor or consultant. Its almost like a mywchallenge everyday to seeey. How well i can eat and still enjoy myself all day long. I wake up every morning to see how much weight ive lost and how much better i look. Myww join today with the ww triple play one of 2019s biggest head winds could now be this years biggest tail wind. Find out more tradingnation. Cnbc. Com more squawk on the street coming up. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Ousted nissan chairman carlos ghosn defending himself in a twohour press conference yesterday called the Japanese Justice system archaic and manipulative system in an otherwise modern country our next guest says that to some extent he may have a point joining us now a stanford law professor and expert on japanese law. Nice to have you, curtis thank you for having me youre welcome. Why does he have a point when he calls it an archaic and manipulative system . Well, im not sure those terms are necessarily accurate but his basic criticisms of the japanese criminal justice process are accurate suspects in japan are subject to prolonged periods of detention they can be interrogated for long periods of time there is an emphasis on obtaining confessions from defendants mr. Ghosn is certainly not the first person to level those criticisms against the criminal Justice System in japan. The u. N. Human Rights Committee regularly raises those issues with the japanese government and the Japanese Bar Association has made similar comments. I think where mr. Ghosn goes off base is in claiming that he is being politically persecuted or that there was some kind of a rigged system against him. Those charges are rather hyperbolic why do you believe that to be the case well, because there is really no evidence that he was being prosecuted because of his political beliefs or his criticism of the japanese government and there is really no evidence that the japanese judiciary is corrupt. In fact, its an extraordinarily clean judiciary. And prosecutors really pride themselves on what they call precise judgment justice, rather that is, meticulous investigations and only moving forward if they are certain of a conviction but the flip side of that is the emphasis on confessions. And the reason that theyre often certain of conviction is because they have obtained a confession from the defendant. And so there have been cases where confessions have been recanted by defendants and there is a lot of psychological pressure on defendants in the sort of circumstance that mr. Ghosn found himself. So on the one hand, some of the criticisms he has leveled are seem accurate. And he is a sympathetic figure in some ways and one can see why he may have been extremely distraught about his circumstances. But the larger claims of a rigged system, i think, are over blown. After his press conference yesterday, tokyo prosecutors tried to hit back pretty hard. I wonder what kind of odds you would put on extradition currently i would say very low. Lebanon does not have an extradition treaty with japan, and it seems unlikely that mr. Ghosn, at least currently, is going to move to someother country where he would be in jeopardy of being extradited to mrmr. Mr. Ghosn would move to another country. However, im sure the japanese are leveraging and pressuring lebanon to try to get him to return to japan. Theres been a meeting of the japanese ambassador with the president of lebanon to try to secure his extradition but currently, i would put the odds of that rather low unless at some point the lebanese government decides that their relationship with japan is more important than their relationship with mr. G heshhosn there have been some reports that some parts of if population of lebanon are critical of harboring him because they think it adds to the perception of corruption in lebanon and the like well have to see how it plays out. I would put the odds very low. I wonder what you think, given the fact this is a global story, so big, continues to play out, putting so much focus on ya pan right now, the legal system there, whether this is going to put any damper on cross border deals with the Japanese Companieses or the ability of japanese xaem companies to rec xwek tifs to their ranks excellent question. Mr. Ghosn is not the first to receive rough treatment in japan. Micah woodford of olympus blew the whistle on accounting fraud this his company his life was threatened. An olympus subsidiary tried to sue him in the uk. Less spectacularly, Howard Stringer had a tumultuous tenure at sony. If the perception builds that japan is a very unfriendly place for foreign corporate talent and certainly the g heshhosn story d that, it may be difficult for them to recruit highlevel executives, which would be unfortunate because many Japanese Companies are in need of fresh blood, fresh thinking, need to be less hierarchical and wedded to the status quo there is a risk that this episode will feed into that perception you listed a string of examples i wonder if you think well see any kind of reform to the japanese system on the heels of this situation yes i think thats another interesting question and i would say currently im not hopeful of that however, there is of course going to be intense scrutiny placed on the japanese criminal Justice System as i said earlier, these are not new criticisms the ghosn episode has shined a spotlight on these issues. These problems an these issues have been percolating around for a long time now. And so with the intense scrutiny, i think there will be pressure on Japanese Justice Ministry Officials and the prosecutors to at least reexamine their conduct there have been reforms around the edges in japan, so some interrogations now are videotaped, but these reforms have been around the edges and so well have to see as i said, im doubtful there will be largescale reform of the Justice System, but clearly the ghosn episode is going to cause a lot of soul searching in japan with respect to the way it treats criminal defense. Professor, we have to leave it there thanks for joining us. Appreciate it. Thank you lets head over to jon fortt with whats coming up on squawk alley. The u. S. china trade war might be cooling but its still going on other countries are looking to take advantage what i learned about that from the floor of ces with squawk alley in about seven minutes. G. G. Thats why were keeping our tuition the same for all online and campus programs through the year 2021. 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