Good thursday morning. Welcome to squawk alley. Carl quintanilla with Kayla Tausche at post 9. Our jon fortt live at the Consumer Electronics show in las vegas. A lot to come from jon later on this hour. Joining us at post 9 this morning, elevation partner cofounder Roger Mcnamee and jonathan, barclays head of u. S. Equity strategy research. Good morning to you both. Big story is the Senate Hearing under way this hour on capitol hill, top intelligence officials facing questions primarily centered on russias purported hacking of the u. S. President ial election. Senators john mccain, elizabeth warren, tim kaine among the committee members. Eamon javers has been watching this all morning long. Fascinating headlines. Good morning, eamon. Reporter good morning, carl. There is an enormous elephant in the room here, and that is this classified Intelligence Community report on alleged russian hacking of the u. S. Election. We know that that report has been delivered to president barack obama and hes had an opportunity to review it today. Were also told that the members of the committee, members of congress will get a briefing on that at some point in the coming days, and donald trump himself will be briefed on it tomorrow. The problem here for the Intelligence Community members who are testifying today is that they have not released the report yet, so they are very circumspect about what they can say about whats in it. What we do know is that they say they will ascribe a motive to Vladimir Putin for alleged russian hacking of the United States in this. And theres also been this really interesting moment here between the director of national intelligence, james clapper, and john mccain, who is chairing the committee. John mccain suggested that no one here is saying that russian hacking switched the results of the election. Director clapper appeared to push back a little bit on that by suggesting that thats simply an unknowable thing, despite mccains suggestion that, in fact, it was knowable that it didnt swing the results of the election. Heres clapper part of that exchange. Did not change any vote tallies or anything of that sort yeah, im just talking about we have no way of gauging the impact that certainly, the Intelligence Community cant gauge the impact it had on choices that the electorate made. Theres no way for us to gauge that. Whether or not that constitutes an act of war i think is a very heavy policy call that i dont believe the Intelligence Community should make, but it certainly would carry, in my view, great gravity. Reporter john mccain making it clear what his own feelings on all of this are. Heres what he said to open up the hearing. Every american should be alarmed by russias attacks on our nation. There is no National Security interest more vital to the United States of america than the ability to hold free and Fair Elections without foreign interference. Reporter guys, one of the things that we learned about this classified report is that there will be an unclassified version of it that will be released next week, so all of the citizens of the United States will have an opportunity to gauge whats in this report and decide what to make of it. Back over to you guys. Eamon, thank you for that. Eamon javers on capitol hill. Roger, this is a tough one, because theres so much politics int intertwined with real implications for business huge. That are going to last for decades. Actually, carl, i think its been going on for a decade already. I mean, i think having it focused in the political arena has got everybodys attention on a problem that has been plaguing us in business, and frankly, i think its a huge National Security threat. If you sit there and look at cybercrime, it is now a gigantic busine business, and the internet is not architected to prevent that kind of stuff, and we have not had any National Policy for addressing what has been an increasingly large, increasingly dangerous problem thats now tipped over into our political system. So, hopefully now we will get a national consensus, but one of our problems is that most of the elected officials in our government are not even remote experts, right . I mean, our president elect is talking about effectively using flight couriers to send things around because in theory, thats more secure than email. And im sitting here going, seriously, we need to get some adults in the room and really take this seriously, because you know, we have real challenges to the economy if these vulnerabilities cannot to be exploited at the rate theyve been exploited in the past. Well, it seems somewhat ironic, too, because on the one hand earlier this year you had the government saying apps like telegram and endtoend encryption were like carrying a Swiss Bank Account in your pocket. But now once their information is out there, of course, their supporters and proponents of encryption, of some of these newer technologies to help keep some of that information out of the public eye. And i think the scary part of this is a lot of this crime happens without the victims being aware of it. You know, much as what happened with wells fargo and creating fake bank accounts, that its relatively easy to cover your tracks in this world, and they can drip money out of accounts so people barely notice it. And i just i look at this and go, i think it is such a good thing that were having this conversation now. I dont know how its going to turn out relative to the political side, but its really clear to me that we need to make this a national priority. There is no point in building, you know, new aircraft carriers and new submarines if for 10,000 somebody can bring our electrical grid to its knees. And thats the problem. Its the asymmetry, the fact that it costs very little to do huge harm. All right. I mean, theoretically, you could make a case that there is a hidden liability, a black swan liability, for markets, right . Not just u. S. Equities, global equities, if something were to go terribly wrong, jonathan. I think thats absolutely the case, and its something that everybody should have on their radar. But i would argue its certainly not a priority right now in terms of where the markets are going. I think there are some very important themes and trends driving the equity market right now, cyber policy not being one of them, but earnings absolutely being critically important. We are on the precipice of a real earnings recovery for the s p 500. Were calling for Earnings Growth of at least 7 in 2017, and perhaps as high as 12 , if tax cuts come through, which is going to be some of the best Earnings Growth youve seen in years. And we think that is whats really going to propel stocks higher Going Forward. Contingent on what getting done . And do hearings like this detract from the focus on those things . I dont think so. The 7 eps growth is supported just by the momentum we have currently in the economy. Absent new policy . Absent any policy changes. And thats what weve kept as our base case right now, because we dont know for sure that these policy changes are coming through. So, the way i think you should think about it is you have 7 growth in earnings if nothing happens. If you do get tax policy change, your upside is as high as 12 , and that could drive the market to a significantly higher level over the course of this year. Thats an interesting point, roger, because especially in tech theres been this growth versus value debate going on for some time, and it really depends on how much you believe any Given Company in that space, regardless of whether its a growth stock or a value stock, will benefit from the things that jonathans talking about. Well, and i think the other challenge that everyone faces in this environment is that we have come to see, partly because of the election process, that large corporations are now competing with countries, you know, so that youve got these issues where, you know, exxon is conducting its own foreign policy, sometimes in conflict with the state departments policy. And so, you see in europe antitrust measures being brought to bear against some companies in this. And it seems to me that the fly in the ointment globally is that there are going to be countries that want to assert themselves against large businesses. Chinas been doing it aggressively. We see apple today pulling the New York Times app due to pressure from the chinese government. And i think this conflict between states and Large Enterprises is something were going to see a lot more of in 17, and it may not get in the way of the earnings story, but ill bet you anything it gets in the way of peoples outlook beyond 2017. You mentioned we mentioned apple. The company is confirming a new 1 billion investment with softbanks vision fund, working to develop new strategically important technologies for the future. And then of course, as roger said, that request from chinese authorities apples removing the New York Times app from its app store in china. Authorities there say the app was in violation of local regulations. The times website has been blocked in china since 2012. Are you surprised by that at all . No, but i do think we have to look at the pattern of whats going on here, that countries are less tolerant of Business Practices than they have been for the last ten years, and its not just europe. You know, chinas obviously very active there. The russians are very active there. And apparently, trump is going to be very active there. And i look at that and i go, you know, no matter what the next 12 months will going to be, people are going to be discounting a future beyond that. And to the extent that something that feels like a substitute for antitrust enforcement against Large Enterprises, or at least restrictions on the flexibility of Large Enterprises to do their business, that seems to be a risk that we werent looking at a year ago that looks to me at least, a lot more serious than it did. But companies do seem to be willing to do that in order to operate in china because of the population, because of the economy there. Absolutely. But i think that the problem is, youve got to please china, youve got to please the United States, youve got to please europe, youve got to please russia. And my guess is, if youre a global company, one of those things isnt going to work out for you, and some market may not be as available to you as youd like it to be. Again, i view that as a risk, not as you know, its a hypothesis as opposed to a conclusion. Jonathan, softbank announcing it would create this fund a few weeks ago. It was reported that apple would be contributing to it. I would like to know where that fund is domicile, because apple has some 200 billion in overseas cash and some have said this morning that maybe this is a creative way for apple to invest or put some of that cash to use ahead of any potential tax holiday or repatriation policy. I mean, do you think were going to see companies pursue overseas mergers, pursue more creative investment vehicles, rather than just counting on all that money coming back to this country . I think youre bringing up an important point with all this offshore cash. The way weve thought about it is what does it mean for the potential for buyback activity in the market this year . So, weve had this call that the big growth youve gotten in corporate buybacks has run its course, and thats largely because companies have taken on too much leverage and they need to stop levering up. But the wild card in it is what if you do get a repatriation holiday . And like you mentioned the 200 billion that apple has and the 2 trillion that exists across the s p 500, comes back onshore. Do Companies Take that money and use it to repurchase shares, driving buybacks higher and potentially driving the market higher . I think thats a big wild card this year. Like you mentioned, companies can get creative with that money, but do they get the opportunity to bring it back onshore . And if so, what do they spend it on . I think buybacks are near the top of the list. But you know, i look at that whole issue and i do not understand why if youre a Global Enterprise bringing money back into the United States is that attractive. And you know, if im apple, if im any large american enterprise, at the margin, my bigbusiness opportunities are outside of the United States. So i agree that for political purposes people will cooperate with that to some degree, and theres practically nothing else to do but buy your stock back. But i look at that and i suspect that that is one of those things that were going to talk a lot about, but when the dust settles, its going to turn out to be a smaller deal because the people with the huge pools of capital are mostly Tech Companies who dont have a good reinvestment opportunity in the United States. And so, well see what happens, but ill tell you, in my own sector, their opportunities are not to pile the money into the u. S. Yeah, apple builds a plant here, whoopdedoo. The money theyre putting into the softbank deal is like the change they found in between the cushions of tim cooks couch in his office, right . It just doesnt move the needle. So, it will be fascinating to see, but there surely are a lot of banana republicans who are counting on capital being repatriated to the United States to trigger some kind of positive thing, and im sitting there going, if youre the company, okay, so you bring enough back to please the politicians, but i dont get it. Yeah. Thats a big discussion, not just in tech. I mean, questions were asked about fords longterm innovations, too. And all of this stuff, its nuts whats going on right now, because everybodys doing this kabuki trying to figure out what trump really believes, right . And i think hes shown you, right . Which is, if youre in business with him, he loves you. And if youre not in business with him, well, your choice is either do business with him or get out of the way, right . And i look at that and i go, wow, thats banana republicanism and thats apparently where we are now. Were going to find out beginning in about 15 days. Roger, its always good to see you, thanks. Roger mcnamee, jonathan giliana. We had jackie give us crude inventory numbers. Turned negative briefly after the numbers came out. Well watch that and how it drives the rest of the market day. Kayla . Were continuing to monitor developments on capitol hill, but another story thats above the fold this morning, shares of macys and kohls getting hit hard, both reporting dismal holiday results as ecommerce giants like amazon continue to grow market share. Our Courtney Reagan is on site outside one macys in elmhurst, new york, with more. Courtney, they told us a month ago they were perfectly positioned for the holidays. Reporter i know. That is true. And we only got more gloomy news out of the Department Store sector from macys and kohls, but that doesnt mean the consumers are spending less in general. They just spent less at macys and kohls stores over the holiday season. So, for november and december, both macys and kohls said that their comparable sales fell more than 2 , leading both retailers to lower their fullyear earnings forecast for this year. And macys expects that that samestore sales trend will continue through 2017. The consumer, though, is strong by most economic and financial measures. Shoppers are spending less in stores and more online. Barnes nobles holiday comps fell 9 but online grew 2 . Adobe, in fact, just out with new data saying online sales in total for the holidays grew more than 11 , almost 92 billion. Thats stronger than adobes initial estimate. Macys online sales also up double digits and the ceo reiterated to me that macys has the third highest sales in the categories that it competes in online. Still, macys online sales arent enough to offset the weakness in the stores as a total. And remember, online sales also come at a higher margin. Then if you look at amazon, slice intelligence, which scans email receipts of more than 4 million, says that amazon took 38 of all online sales over the holiday season. That is very impressive and its going to be very, very hard for retailers to compete with Going Forward. Theyre only getting bigger. Back over to you. All right, courtney. Thank you very much, Courtney Reagan. When we come back, well continue to monitor developments of the cyber threat hearing on capitol hill. A lot more from the Armed Services committee. Plus, House Speaker paul ryan delivers his Weekly Press Briefing in about 15 minutes. Well bring that to you live. Later on, a lot more from ces with our own jon fortt. Dow session lows down 76 shortly after those Oil Inventory numbers. Were back in a minute. Ford scrapping plans for a 1. 6 billion plant in mexico just one day after the president elect criticized gm for importing mexicanmade vehicles into the u. S. Joining us now for his take is former gm vice chairman and cnbc contributor bob lutz. Bob, its great to see you. Good to be here. Thanks. So, we have ford appeasing the president elect. Meanwhile, gm pushing back and saying most of its chevy cruze models are actually made in the u. S. Why the difference in approaches . Well, i dont know what prompted this, you know, sort of somewhat inexplicable attack on gm, because the percentage of cruzes that come back out of mexico is like 2 of total cruze production. But i think this whole focus on w