now. >> live from new york where business never sleeps, this is "squawk box". good morning. welcome to "squawk box" here on cnbc. i'm michelle caruso can blare b. along with steve liesman who likes to drive. u.s. equity futures at this hour are suggesting a positive open. >> what is wrong with that? >> the dow will open higher by 76 points. so much about the fears of the italian referendum. they voted no as polls indicated. all kinds of concerns what this means for the future of the euro, but everybody this morning is happy, happy. nasdaq up by 18 points. >> did you see something different? >> i heard something this morning, i might have been

listening about the european equities. >> which are also positive right now. >> right. >> i look at it every morning. >> it's called the cnbc app. >> okay. we'll say it's the cnbc app. but you look at that, and see what time it was this morning. they were already sharply up. i saw 92 in the u.s. >> so we are off the highs at this point. >> i don't know. i didn't look at fair value. so you have to check that. but we left at 10:45. this was before 5:00. so at least for the last hour. >> i was listening to the radio at 4:00 a.m. i shouldn't listen to the radio. >> are they experts like we are? >> no. >> so you're getting information from the local -- >> i won't say what radio station i was listening to. >> a lot of times it was wcbs. >> you should have known, it was in the markets. and number two, the counter

factual never happens. good things happen against the establishment thinking. overnight in asia, this is what happened before we show you the european equities sharply higher. >> i heard that and i heard the european thing. >> hang seng, japan, lower as we start the morning. france is lower. and spain is higher by 1%. and the price of crude oil at this hour is back above 50 solidly. $52 p $52.26 relative to the deal announced last week for opec. major currency, 106 on the euro. it dropped to below 106 in the immediate wake of the

announcement about the upcoming referend referendum. >> we were worried at 122. i saw good quote, there was not going to be a brexit. they are just going to step away from the rubble. >> if europe breaks up before if then they're -- we'll say you can call this a referendum on the eu. >> i think so. for sure. >> i'm staying with the eu. number one, they want to parallel -- i don't like the five-star guys. they are so far left. but they want to do a parallel

currency. they don't want to adhere to any of the budget constraints from the eu. they -- >> it's all well and good if they want to do that if they're responsible for things they do themselves. >> i want to go back to italy instead of being with the bureaucra bureaucrats. >> he was out, he was in. he was going to do something. that's good, yeah. he's not a billionaire. so how is the main stream media going to trash him? he's just a loyalist. >> right. >> he's a doctor. doesn't know anything ahabit housing. >> well, you tell me how the main stream media is going to trash him? >> am i representative of msnbc here? does that make you the representative of clear thinking. >> yes. here are the big stories we are watching today, larry summers -- just kidding. that was a joke.

>> leading the headline -- larry summers doesn't like the plan. >> the u.s. army corps of engineers denied a plan to move the pipeline through north dakota. they have protested this pipeline for months saying it violates land considered sacred. president-elect donald trump supports the pipeline and policy experts, but they believe he can reverse the audience. >> since the obama administration denied the waiver for the -- whatever it was. >> right. the new york fed president fiph dudley says they must finish work of wall street reform. the new trump administration,

the president-elect has admitted this. and apple is working on tech not to develop a self-driving car. last year apple wrote to transportation officials saying apple is investing heavily in machine learning and automation and is excited about the automotive systems in many areas including transportation. >> if they put siri in charge, she's so dumb. i try to dictate, i look at the stuff, what i say and what she writes. i'm like, you have to go back to the drawing board and need to start over with -- all of us are going 55. >> think of it that you can read while riding in the car. >> is everybody going to go exactly the speed limit?

nobody is going to pass anyone. can you use the horn? is there anything good about any of the things we like now? >> we'll need -- >> i can't let a driver drive me. i have a jeep. i have a grand cherokee jeep. very excited for that. >> you had a maxima before that. >> i love that you get the great bells and whistles in the jeep. and there's no reason to watch the road. there's so much great stuff going upon -- >> is there a way to override -- >> i hope not. that's the whole point. >> everywhere you go, you leave earlier. >> for as long as there have been automobiles, there are people messing with the internal

controls. right now -- >> especially volkswagen. >> that was just as you put it, but the new guys who go into the things and mess with the chips -- there are engines that are the worst powers of 275 and 250. they are all about the same engine and how the manufacture opener programs it. >> you don't have to worry about people hacking you or pushing you off a limb or the edge. italy's prime minister is stepping down after his reform measures were defeating in yesterday's referendum. julia chatterley is here with more. >> reporter: you said it, defeat

for prime minister renzi. his response this morning is perfectly clear. >> translator: i lost and i say it loud and clear, even if i have a lump in my throat. because we are not robots. i beg you to believe that i did everything possible at this stage. >> reporter: even though the result was expected, there were a few surprises. huge turnout, more than 65% of voters. and this is far higher than we saw in the last election. we also saw the no-vote win by an 18-percentage point margin that basically left prime minister renzi zero room to maneuver. he had to resign. and that is now awaiting for tod today. he's going to hand in his resignation. the president can accept it or reject it. if he rejects it, prime minister

renzi stays in power. the problem is there's so much negative sentiment, i don't think he'll survive it. so the more likely scenario is that the parent will follow the prime minister. here's a look at what the press is saying today. i think this picture literally says it all. you have prime minister renzi with his head in his hands. the constitutional defeat here as you can see. and another paper this morning saying that renzi goes home. guys, it says it all. >> renzi goes home. we have to watch what happens and the banking system there. we want to have good stewardship and conservation of the environment and economic

growth. we have a real economic growth problem in america. we are limping along. wages are flat. and jobs aren't being created near to the extent that they could and should be. so regulatory relief is very important. >> on wednesday "squawk box" will be live in washington, d.c. at a gathering of business leaderers and policymakers from the business world table at 8:30 eastern. >> fantastic. that's exciting. >> it's okay. i like the train. >> you like the train? >> i love the train. >> the taxpayers subsidized, always losing -- >> that route makes money. but we had the guy on. i think he's still there right now. he said, that's the way the guys work. all of am quarter -- amtrak --

he's in charge of amtrak. or he knew what he was saying and didn't -- i can't believe a politician would ever -- if anyone thought it was planned, supposedly it was in the plans for weeks, but he complained about china devaluing the u.s. currency and militarizing the south china sea. he talked about all the things in china. talk about a main stream advertisetizzy. on friday president-elect donald trump accepted a call from taiwan. we'll have much more on china's

reaction in. >> we have given them billions of dollars in defense products every year. >> i just can't believe that anyone would -- they told us not to do that, steve. what is this? what kind of world are we living in? >> i don't know. you tell me. do you feel as if -- >> when i see a new york times headline about how phenomenal it was that opened up dialogue -- when that is celebrate in the media, and this is suddenly, oh, my god! how can we do that? >> did he talk to a democracy? terrible. >> you're outnumbered. just like that show -- why don't

you go. the president-elect sending warnings to companies considering a move overseas. here's what he tweeted, quote, there will be a tax on our soon-to-be strong border of 35% for these companies. and the companies are those that move stuff overseas. joining us now, derek scissors, at the american enterprise institute as a scholar. good morning, derek. thank you for joining us. >> happy to be here. tell us, first of all, if the president can legally put a tariff on a company that moves jobs overseas, what is your understanding of the law here, derek? >> reporter: well, i think the difference is between a single company and a positivecy with broad powers to put on temporary tariffs. if he sees a national emergency,

he could watch the terrorist activity. he can't say i don't like this company and put a tariff on the economy to get an immediate court injunction, but if he wants to put out 35% tariffs for five months, he can. >> how would you structure that? i'm trying to figure it out, would you say if anyone invests overseas. i can't begin to think about how this will work. a serious corporate tax reform, that makes sense.

if he's just putting a 35% tariff on companies heading overseas, that gives foreign companies the advantage to selling goods to the united states. >> or those already overseas doing it, right? >> exactly. >> i want you to know as i tried to report the storm advisers. two did not respond. then i talked to three experts including yourself. we had a conversation yesterday, and your reaction and the reaction of the other two was whether or not to take this seriously or if this was a negotiating position at the president trying to put a -- >> there are three. he's referring to the house plan and we can talk about that if you like. that's a real thing. the other is the casual reference. it wouldn't work. and the one in between which is

the one you just raised, because this is a tariff that will apply to all of us. i'm not sure a warning shot is appropriate here, but it's better than thinking the president-elect is randomly going to put out a 35% tariff to destroy the market. >> derek, it can't -- i tried to also report whether or not this could be referring to the house plan. but the house plan is a border adjustment thing that deals with, as i understand, the interimmediate goods and implication from the tweets is these are finished goods, so they have to be the same. could this be the player i magically follow. >> can we underline the house plan is very specific about not

taxing exports but definitely taxing imports, right? that's the way i see it. the core, doing it baked on sale sales rather than profits. >> that's right. there are a lot of implications for the dollar. people are arguing over whether we are really close to the u.s. trade deficit or not. it's a serious matter. i would love it if that is where the 35% tax on products is, but that cannot just be on those that move overseas during the trump administration. that will what were the markets every job that shifts -- >> the house plan is something like that to reduce the tax labor in the united states

essentially. so it's similar to that proposal as other countries use. again, that's a reasonable away. why don't his advisers know that? hopefully we'll see follow-up today. >> thank you. >> derek, you are kind to get up to help us understand. >> are you going to tweet it? >> i'm going to turn to the camera to make a comment. i need to say this, joe. >> do you know how many conference championships there were on saturday in football? >> sunday morning. >> oh, yesterday morning. >> the tweets came out yesterday morning. i was immediately on the phone until the giant game. >> did you see brady? >> yes. >> donald trump would love to report on the details and simply get it out there, let us know and we'll do the reporting job

we do for a living. that's what i want to say. if we didn't have to spend all sunday on the phone due to policy changes -- >> what you watched last week -- >> you think i should forget about it. >> no, he's president-elect. we're in the transition. like last week, we had chilly conditions on monday. >> i talked to two conservative guys yesterday. when both of them say, i don't know whether to take the president-elect seriously. >> wow, you found republicans that might not be on board, where did you find that? >> no, these were scholars on trade, joe. >> okay. market fallout from the busy geopolitical fallout. >> who should we talk to, joe. >> talk to people who invest money for a living.

>> only them. >> yes. we'll talk strategy after the break. and enjoy your weekends. enjoy the weekends. >> i enjoy reporting. ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? why invest in average?

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political upheaval in italy is the latest example following the brexit vote of donald trump's victory at home. and with change and uncertainty as it does in the markets, joining us now for more on the markets and the economy, ian sh shephardson. he's famous. he goes head-to-head with our chief economist, steve liesman. >> thank you for that label. >> and todd gordon, a founder of tradinganalysis.com. and a cnbc contributor. ian, i'll start with you. is it possible that we don't immediately move back to much higher interest rates and a much stronger dollar? isn't it possible that all these macro forces that put us here in zero for so long, that those last longer. as a result, all the dollar fears are unwanted or are you

warning? >> i'm warning but anything is possible. so what we have is an economy, even before we get any stimulus before a president or congress does anything, it's running kind of hot. 4.6 unemployment rate, wage growth is accelerating, so there's not much resume for maneuver. in terms of stimulus, we don't know how much, we don't know what structure or when, but we're assuming we'll get something quite big piling a lot of pressure on the economy that probably doesn't need it now. >> so we can't dip into the $92 million, the people sitting at home, you know, they're like twiddling their thumbs, we can't dip into those to ease -- are they all old and retired and not ready to come back? >> we don't know. this is a swillion question. >> swillion? >> it's a big number. >> if we can put in 3, 4, 5 million, it would fix pretty

much everything. but there's no certainty that we can. if you ask companies or look what they are saying about the availability label, they are screaming they can't find people. >> they can't find the people they need. >> but in practice, we don't have a mechanism to get them in, trained, working in the sectors that the employees want. so we have a mismatch, even though in theory, we should absorb a lot of people. >> squillion is an extremely large number. >> you know what is going on this morning in the wake of the italian referendum? the euro is trending over 107. explain a to me. so is it priced in? >> yeah. >> so all the questions about the euro due to next year are still out there? >> we still have the french action. that's very alarming.

but this -- these are very separate issues. >> really? >> yeah. >> what do you think if they voted for stay or leave, you don't think it would have been 60/40? 55/45? >> there were specific obligations that were going to give. >> they are chafing under the restrictions from the bureaucrats in belgium that are responsible for no one having a job and everyone living at home. >> that's true. >> italy was one of the weakest places for support of the euro. 50% of the population versus 70% in france. >> five years from now, the euro is a viable -- >> i'm not a massive life-long supporter of the euro. i think it is enormously flawed and wouldn't surprise me if it broke apart at some point. but this is not the media triggered. this is not the thing that will

break us. >> i woke up -- todd -- was that "saturday night live." todd, you already said emily natel this morning. you already referenced "saturday night live." those were the good old days of "saturday night live." so last week every day we said, is the trump rally over or is it ready to sell off? this was on market watch, lead story, the trump rally is now in bubble territory. or is it in bubble territory? >> no. >> we will see this until they final finally -- >> i am still holding the target

of 12% -- >> by when? >> in 2017, who was the latest bank to jump on the bandwagon, goldman just jumped in with a 2400 target by 2017. so that is the consensus that becomes a little concerning, because everybody is looking for the higher market. the way i look at it is we're coming into obviously a seasonally strong area, december santa clause rally. the statistics behind it, since 1990, we have seen the higher market 74% of the time. so that is great. i just love the sector rotation we have seen. it's been amazing as we increase with industrials and financials. it is no longer a fade market. >> consensus to the dollar being strong is so pervasive. but i think it can't be right. >> there's a lot that has to be right for that to go up.

i think it will happen, but -- >> it could double to what? >> well, i will check my fourth one -- >> what is the ten-year doing when they do that? >> it's going up a long way. >> we'll ask the stock market guy. what happens if he ends next year? >> they are not pricing in a 10% chance of that next year. >> yeah. >> it's a very low probability, right? i need the real from me from a technical point of view is where the 60 basis points are. we have another 40 to 60 walls before the --

>> it's a 50% chance, right? >> no, a 50% chance in june is what i'm looking at. he's got a 62 to 875. but the next chance i have not calculated yet. but there are two built in for next year. >> these are dynamic because the expectations are rising. if we see the stimulus coming flu a big way and coming through quicker. and if tun employment rate keeps falling in the meantime, let's say we have a stimulus plan signed by april. the market is priced right for the rest of the year a lot more for sure. >> so your forecast sees the fed funds at 2% by tend of next year? >> just shy of 2%. >> from your lips. let's get back to where we were to or before.

>> thank you. ian is sticking around for the rest of the hour. >> that's great. >> am i supposed to read that? >> up to you. coming up, the survey results on the changes they expect from the new administration. that is next. and heading to break, a look at the s&p 500's winners and losers. the greatest population shift in human history is happening before our eyes. sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion,

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welcome back to "squawk box" on cnbc. u.s. equity futures at this hour are indicated up 85 or so. up 22 on the nasdaq. up 11 on the s&p. i don't know. hold on a second. let's hold off on calling the top again, because we're headed up for the day. it was up last week. this would be the fifth straight week, i think, wouldn't it? it's like out of control. news breaking in the last half hour. president-elect donald trump announcing plans to announce retired neurosurgeon ben carson as the secretary of housing and

urban development. and onset here we have greg decko from oxford economics. first the headlines, they are looking for corporate profits to rise by 4%. gdp just north of 2%. not a big upward -- there are the numbers. 2.2%. that's unchanged. consumer spending down a bit. business investment a touch better than expected. this is relative to the prior survey. and there's the ten-year treasury yield of 2.5%. you know, i don't know, greg, if i should listen to you guys anymore. you all told me the market was going to crash after donald trump was elected. now what is the thinking? >> i think there's a lot of up certainty as to the outcome of the trump presidency. that's a key element of the survey, that indeed we are not sure what the outlook looks like or what policies will be put in place, when they will be put in place or if they will be put in place. that's reflected in the results

of the survey. one of the thing most striking about this survey is the fact that if we are to see an economic stimulus, a fiscal package come through, it's likely to have the greatest impact, not necessarily in early 2017 but late 2017 into 2018. that's really where we are going to start to see an economic growth boost. >> so what will the gdp be doing then? >> we don't have the results of that panel survey, the results for 2017. >> but can we stay north of the 2.2%? >> i would imagine so. >> the market is up now. >> yep. >> on expectations of better growth, but you guys didn't change your growth outlook. is there something dissing it here? to justify where the market is priced right now, don't those growth numbers have to be heading up in terms of the forecast? >> that's what the markets are pricing in. the markets are pricing in the expectation of lower prices, deregulation, stronger infrastructure spending that would boost growth. not so much any trade protectionism measure or uncertainty about the policy

measurement. if we look to 2017, we'll see the boost in growth. and markets are spicing that. now, if that doesn't go through, then you risk having a negative effect from tighter financial control. >> let me clarify, this is not you sitting with your model, you're an economist, this is a survey of all the economists, business economists out there doing their own models coming up with this -- >> it's a preference thing as well as an opinion thing. >> right. so what is the most optimistic response you got? >> the most optimistic response would be growth approaching 4%. so if you get growth stimulated through the end of 2018, then you could get growth approaching 4%. but that assumes you don't have uncertainty on the downside and you have the protectionist measures also put forth. >> you guys have a list here of the responses to the best ways to boost growth. and infrastructure spending comes out at number one. tax reform close number two.

regulatory reform is a little further down there. talk about the infrastructure spending that you think would lead to actual growth or increase in potential growth. >> well, i think there's a big lack of infrastructure investments in the united states. one of the elements where you could see a big boost in terms of gains to the overall economy would be in a lot of the infrastructure that is decaying over time. and if you are to invest in some of these elements like big roads or big transit corridors, say on the east coast, for example, is a good example, you could get a big boost of the u.s. productivity. that's been missing over the last few years. >> and greg's company did another survey just out today, and the survey polled their clients saying donald trump represents the greatest upside risk and the greatest downside risk to the economy. the upside risk to tax reform, the downside risk to trade, is that your assessment as well? >> yeah, the range of possible

outcomes the next two years got a whole lot wider. so we normally start with a narrow range, it could be different than last year maybe, but we start '17 with a range of outcomes enormous. that makes it hard. the markets are pricing in one of the ranges -- >> do you think it's too far, they are so confident that all this stuff is going to happen. >> the pricing is too much of the good stuff and not enough risk. the risk is trade and protection and taxes, especially for exporters and importers. >> okay. ian, thank you very up many. you're sticking around. greg, thank you for coming to talk about the survey this morning. coming up, what is black and white and losing green? newspapers, at least when it comes to advertising. companies like facebook and twitter are gaining ground. we'll bring you the numbers next. and as we head to break, a quick check on what is happening in the european markets. mostly positive across the board. italy could be slightly lower.

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welcome back to "squawk

box." time for the executive edge. social media is gaining ad ground. facebook and twitter is estimated to overtake newspapers in the next four years. according to zenith, social advertising will be worth 50.2 billion by 2019. that's compared to 50.7 billion for newspapers. the firm estimates that ads on social platforms will account for 20% of all internet advertising in 2019 up from 16% this year. and disney, that film we talked about last week, "moana" sailing to number one this week at the office, the box office, for the second consecutive weekend. the animated musical brought in $28.4 million for a two-week total of $119 million. it's one genre that will be a hit is animation. i don't know if you predicted that before pixar 20 years ago.

the film features dewayne "the rock" johnson about a princess' journey. then you get all the products associated with it. >> here's the thing with cartoons, nobody gets older. you can have the same character forever. you don't have to write out the contract deal. >> it's amazing the advancements, though. look at the water splash, that is incredible. they never could have done that before. it looks so real. and i'm wondering if the actual costs continue to go down. because the beneficiaries of the technological advancement, they put them out to make more money. >> check out steam boat will ie. >> then "harry potter" came in second in u.s. and canada. coming up, we'll get a reaction from china from eunice yoon coming up next.

this wednesday "squawk box" goes to washington. joe and andrew will be in our nation's capital talking to policymakers, including house speaker paul ryan. plus, a huge lineup from the business roundtable, including the ceos of cisco, ups, american airlines, caterpillar and a lot more. it all starts wednesday at 6:00 a.m. eastern. this car is traveling over 200 miles per hour. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t.

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president-elect trump taking a hard line on china, breaking diplomatic protocol by speaking to taiwan's leader and then tweeting later about militarizing the south china sea. and eunice yoon joins us. >> donald trump had been taking quite a few swings at china and the whole dispute started when trump had a conversation with the president of taiwan, and china does not consider taiwan to be an independent country, and beijing is sensitive about taipei's dealings with the united states. the call only lasted ten minutes, but beijing lodged a

formal complaint and the foreign minister reiterated the only one policy, and trump shot back essentially tweeting that china does all kinds of things that the u.s. doesn't like, and beijing doesn't ask washington for its permission. the tweets came after trump's deem appeared to dial back some of his more try tkupbt rhetoric on china, and in this case mike pence downplayed the phone call and described it as a courtesy call. it seems the latest twitter rant is another indication he is going to be much tougher on china than the outgoing obama administration. let's get back to our guest host. can we talk about donald trump tweeting about a 35% tax on the

products of companies that move jobs overseas. we don't know the details of what he means, but we do know that the house plan right now, as it stands, does call for taxing imports and no tax on exports. what do you think of that? >> it's part of a bigger tax reform plan. it's not just an isolated shift into taxing imports. it's part of the way financing in the corporate income tax rate, and it's huge and expensive and they have to raise money to cover it. >> you have to -- >> that's very expensive and where are you going to raise the money from? the idea is you would start taxing imports, quite substantially, which is a distorsion of to existing markets and that's why retailers are so upset about that idea, and there's a great lobbying motion to try and talk him out of this, and for the big

retailers, so much of the retail goods are imported and you go to walmart and look around the shelves, how much of what you would buy was made in the u.s., not very much. >> there are clear big winners and losers. border trade policy. what does that mean? >> many things to different people. i guess it's the idea that we should be kind of blind in where we are sourcing stuff from, and the idea is that we want to -- ultimately what we want to get out of this is a means of shifting companies, and nudging their behavior so they are more inclined to buy stuff made in ohio than overseas. >> something that is also very significant about the change is they don't want to tax corporate profits anymore, and they want to tax sales instead. >> yes. >> that's kind of a european

style-vat system. >> which makes me recoil. >> i will tell you -- >> rpblt you an economics major? >> yeah. >> and for a small business, that is that a nightmare. i am speaking from personal experience here, it's the worst thing in the world. >> you have to start to back out the --? >> you have to record every transaction, even if there is no tax involved. it's very complicated. from a micro look, it looks good to paper. but there is a cost, because the cost of compliance is enormous. the level of compliance hassle that is quite high.

>> ian, thank you for joining us. coming up, kevin rudd, he will join us on set after the break, and also we will get his take on the surprise resignation of the new zealand prime minister. "squawk box" will be right back.

the trump rally rolls on. investors are looking at a strong open on wall street this morning. president-elect donald trump tweeting about keeping companies in america and china's stands on its currency. we have guest host, and former

honey well ceo, mr. bossey. a report from rome and what it means for global markets straight ahead. and the trump train playing trump's trillion infrastructure plan, and "squawk box" begins right now. >> announcer: live from the beating heart of business, new york city. this is "squawk box." >> welcome back to "squawk box" here on cnbc. and the futures at this hour, sharply higher, and it's going to be the fifth week, you know, and it's monday, not even 9:30 yet, and indicated up on the dow jones and the s&p 500, and just over 24 points on the nasdaq. here's what is making headlines this morning. crude oil extending last week's

surge. wti crude up this morning. president-elect trump will nominate ben carson as urban development secretary. japanese prime minister, abe, will meet with president obama in honolulu and they will make the first visit to pearl harbor. >> that's a big deal. wow. european markets higher this morning despite news that prime minister is resigning, and standing by in rome is julia chatter. >> reporter: good morning. as you said, the prime minister expected to resign later today and the question is, what then?

the president has two choices here. he can either accept that resignation or he can reskwrebg it. if he rejects it, he will face a confidence vote and it's tough to see him passing that and what is more important is the president accepts his resignation and then the hunt for his replacement. the people we spoke to this morning were hoping for that result, and showing just how united the parties were in trying to get rid of the prime minister repb sea. they were questioning before the vote, and i think the bank index tells a story today, today down just a couple of percentage points, so i think investors waiting in see mode here, and a couple banks trying to raise capital as early as this week in

which case negative news there, investors will be very sensitive. for now, we wait for the resignation. now to politics. president-elect trump taking to twitter talking about his hard line against companies moving. he warns, and i quote, any business that leaves our country for another country fires its employees, and builds a new factory and then think it will sell its products back into the u.s. without a retribution or consequence is wrong, and there will be a 35% tax. >> if it was not for the law of unintended consequences, it

sounds so good, but wow know that it's probably not -- >> well, the other thing, i don't think he can do that. it may not be legal. does that matter to you at all? >> if we didn't lose any of the jobs, and you think about the guys -- i know, i know, it's the guys with the -- >> do you know how we get to 200,000 job growth, joe? >> i understand. >> we lose 5 million, and gain 5.2 million. >> doesn't it sound good? >> it sounds good. >> that's what i am saying. >> it's hysterical, but it's a forerun to the tax rate, and they are having plans to do something about exports and imports, and the imports cost. >> you need no introduction, but you are the former honeywell

ceo. it was symbolically important, because he said he would keep jobs and he did. >> he will job own for a while and then we will get a permanent tax reform and we will go from there. >> he has to learn that we tkoepbd have a managed economy, right? it's a little more pushy. he did say he thought it was symbolically good. >> joining us now, former prime minister of australia and asia policy institute president, and guest, the former honeywell ceo. >> i think after ten years he said i am out of it. >> you did that, didn't you, went back to the family? >> that was lower intended consequences, and somebody else

wanted my job, and in his case, he said i am out of here. >> i think they might like it more that it was just an accident that trump took a call from the taiwanese president, and if it was a foot in mouth mistake, they would like it better, but it was long-coming and they had decided to do it and was to send a mess toeupblg china in the opening days of his -- of his presidency, he's going to take a tougher role? should you structure it that way, there's a new sheriff in town? >> you look at what president trump said in the campaign, and he said it ways from time to time to be unpredictable. the chinese make it living in interesting times and president

trump is perhaps creating equities in future negotiations. bottom line, it's a really important relationship and you can't riddle around with it too many. >> how much weaponry did obama sell to taiwan in the last few years? it's a large amount, right? is it better -- your actions do this and then you pretend, okay, we won't talk to taiwan and add here to that, and then we open up relations with iran and put israel's relationship on the back burner? we don't hear about that? it seems like we neglected some of our friends for the past eight years and embraced enemies and when we tell somebody that we do have differences with, and suddenly you are criticized for it? >> the bottom line, everybody should take a deep breath. >> right now. >> did you? >> there will be a lot of

hyperventilation for the china analysts, and you have the president, president-elect trump out there stating early positions. the chinese response, i think, will be one of strategic patience. >> they didn't ask us about that island, did they? >> about the china sea? >> yeah, they don't ask permission. >> they are pursuing a social security policy, and what we don't know is how does candidate trump transition into president trump, and it's wise for everybody to take a deep breath and see what translates through. china's response has been moderate. >> if you were advising president-elect trump, how does this play out in your mind to the benefit of the united states?

>> the big end game question for me is how do you fix north korea and the nuclear weapons program? that's where china has influence -- >> i don't see how you got from steve's question to your answer, and explain that. >> north korea has an advanced nuclear weapons program, and china has an influence. >> i think what he is talking about is how to get there. >> i still have not heard that, though. >> in terms of real economic leverage on the people, and it's called the people's republic, and if i was advising, the end game is everything else can be

managed with shouting or screaming publicly or private, but the serious problem is the regime in north korea. >> the question is does this help or hurt in our effort to get them to do that? >> i think china is watching very carefully what president-elect trump is saying. >> maybe this -- maybe a hard line gets them -- we didn't get much by being nice. >> what trump has done is throw a whole lot of things up in the air, and interesting after the taiwan move last friday, on sunday you had president putin come out in moscow and said president trump is behaving like a statesman. >> i like the triage -- one of the things that puts pressure on china is the closer we get to

russia, and the idea that he cozied up to russia also makes china nervous as well. >> don't you think it is time to get a little parody in relationship to russia and china? >> isn't the reaction from the chinese actually pretty surprising? it seems they didn't criticize president-elect trump dramatically, instead they criticized the taiwanese leader. they could have responded much more archly than they did, and that's being interpret as a good sign. >> the chinese are smart in playing these things, and they shut up, and they said, yeah, the taiwanese had a play here and let them go with it. to go back to your question about president trump and i am just a guy living in this town, and i'm not an american citizen, but where does all the trade rhetoric land us at the end of

the day, and it's a huge relationship with lots of jobs flowing in both directions, and if we were to find ourselves in a trade war with the chinese, how many jobs does that kill on both sides at the same time? that goes to real economic interests. >> we have to go. isn't the triage the assignment of care depending on -- >> yeah, that was the wrong word. triangulate is what i meant. >> you meant the three together, and it meant nothing about how to treat more importantly. >> people at home think you want to do -- >> if not for your policing of grammar the whole language would be going out. you would make everybody on their toes, and i like it. >> i think people might have

misunderstood trying to figure out which condition to treat first. >> the north koreans -- we will have much more from larry. >> the relationship may need triage. >> yeah, i meant triangulate. >> i got you on the other day. >> yeah, because my language skills before 9:00 a.m. were not that wonderful. >> you were an english major? >> when you go to college, you don't get up before 10:00. and then investors are still digesting the jobs data. we find out if this trump rally has more room to run. that's after the break. let's check out europe after this hour after the italian prime minister resigns. we'll be right back.

do you guys want to keep talking? >> we were talking about the giants. >> i was watching the giants game, too, and took a call during the game. i didn't miss much. paul ryan on the trump transition, and this is what he said about america's economic challenges. >> we want to have good stewartship and economic growth,

and we are limping along and wages are flat and jobs are not being created near to the extent they should be and could be. regulatory relief is very important. >> on wednesday, "squawk box" will be live in washington for the business roundtable. paul ryan will join us live at 8:40 a.m. eastern. and then another positive open, and right now joining us to discuss what happens with the economy, the chief strategist, and do you agree we are not growing fast enough? how much faster can we grow if they implement policy changes? >> this is the weakest cycle for gdp in the postwar period, and i am assuming we could grow a point faster, which would not be

great but better. as i look to next year, the skew is 2 to 5, and if we are able to pull some of the people out of the workforce back in. >> is that priced in, and is that why we are seeing the big market move? >> i think that's part of it, michelle. i think there has been, you know, even before the trump election, we had an uptick in growth here in the united states, and we were growing sub 2%, and in the third quarter we grew three, and then earnings went from negative year on year for several quarters to positive year on year in the third quarter and the fourth quarter looks like it will be stronger. we had a pick up in growth not only here, but globally. >> this has nothing to do with the election? >> i think it has less to do with the election than has been given credit for. it's not that the election

didn't exacerbate some of those trends but a lot of these trends were in place since the summer and into the third quarter long before the election, and i think it reflects more of the fact that we have experienced the first synchronized global stimulus around the globe in the last 18 months, and everyone practicing the economics, ease, ease, ease, and it's working and it's creating a synchronized bounce. i think it's going to continue. >> do you agree with that? it felt like the whole world changed? >> you look at the u.s. economy, and audios been good for two years, and there's lots of evidence, and the weakness was in manufacturing, and business investments began to pick up, and so has the rest of the

world, so a look at 3% gdp in 2017 is a realistic expectation, and did it come about as the result of the election? yeah, i think animal spirits have begun to kick in and there's an optimism, we can do the things to make our country more competitive and that in turn will create jobs and boost the economy. >> what you are suggest something the market would have been this much higher even if the election had gone the other way? >> yeah. i think a lot of this was in the works. >> you have been a socialist as long as i have known you, and this is kind -- that's fine, a sore loser, and it's very difficult on people. why do you think the dollar is not going to be as strong as people think? that's the thing with you, you

compa part mentalize. in that terms of the dollar, why do you think it might not be as horrific as people might think next year? >> first thing, joe, everybody thinks the dollar is going to go higher because the fed is going to raise rates but if you look back to 1970, prior to the recovery, there have been five major rate hikes and every one of them resulted in the lower dollar and not a higher dollar and the reason the dollar comes down when the fed tightens and because the reason we are tightening is we get more concerned about inflation, and that's why we are going to tighten now, inflation expectations embedded in the 10-year tip has gone up almost as much as the 10-year yield, and inflation is one of the most destructive forces for the u.s. dollar. i think the fed is going to

raise multiple times next year. >> there is no reason why they have to be exclusive. the data has been better, and good corporate profits data, and the jobs numbers have been good, and larry's description of the economy is spot-on, and plus you have this potential upside down the road, to me, it should be attributed all to the election, and it's too far out over its skis, and if you say it's some of the election then it makes sense. >> i would say it's mostly the election. that's number one. secondly, i will take the under on jim's 3% for the quarter growth, and my guess is it will be weaker, and i think it's mostly the election.

jim, thank you so much. joe, you, too. coming up the former chief officer of treasury joins us. later, a look into larry's crystal ball, and his predictions and forecast for 2017 are coming up. did you know about this? >> i did. >> of course he did, he has predictions, and he knows what is tkpwagoing to happen in the future. >> do you really have a crystal ball? >> i do. >> that's coming up when we come back. but they demand thst opping experiences. theyyour customers. and by blending physical with digital, theyyour customers. cognizant is helping 8 10argest u.s. reilers meet their demands with more responsive retail dels...

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still to come on "squawk box," former chief restructuring officer, james millstein joins us, and the infrastructure names that could make you money under president-elect trump. and then jeff rosenberg, and then the latest tweets from trump about china. on the way to break, the futures are suggesting a strong open. we'll be right back. my portfol. since i added futures, i have access to the oil markets and gold markets. okay.

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carson, the urban housing and development. and john, i have often wondered what ben carson -- you have seen him say, no, i think i can do more if i am not in the cabinet, i think i can do more to further republican goals, and then he is back and then out and then back, and now he's back in, and do you know any of the behind the story -- >> reporter: i don't know behind the scenes, but i know what he said publicly, and to me it reflected the am bev hrupbs which was being in the public and being on the inside. and he was talking about being prepared to run a government agency, and he has gotten over that, and he and donald trump had a difficult time during the

campaign, and they have gotten over that, and ben carson adds political celebrity among republicans and racial diversity to the cabinet. we still have uncertainty over the secretary of state choice, which initially looked like it was going to come down to rudy guiliani or romney, and now it looked like that search has broadened and petraeus was on nbc this week and talking about how he hopes to overcome the fact that he was charged with mishandling classified information. >> i acknowledged it and paid a heavy price for it and learned from it. folks will have to factor that in and determine if that is disqualifying or not.

>> reporter: that is going to be a challenge for donald trump. if he selects petraeus in figuring out how to weather that campaign that he conducted against hillary clinton. >> i think the term was he paid dearly for it, and that's the difference, and although losing the election could be paying for it, too. and rick stillerson, he was annex exxon ceo. >> i think donald trump has a wide open process and i am sure he is putting names out there that are not especially serious, and if i had to guess, i would say it still would be one of the four that last week we were told were the finalist, and that's petraeus, bob corker, the chair of the foreign relations

committee, rudy guiliani -- donald trump doesn't always do what we expect. >> he's clearly uncomfortable thus far with any of the four, and it's such a long process, and you would not be able to say if you have not choose one yet, you are looking somewhere else. >> that's not true. you can view multiple candidates and get an eye as to who there are, and i don't think there's a frontrunner, to your point, among them. >> reporter: by the way, guys, i think donald trump is doing something very smart when he is talking about the possibility of putting heidi heightcamp and or joe mansion into his administration, and you have people he could be comfortable with ideologically, and that's a

way to take two democrat seats away. >> what does it mean for ben carson to be in charge of the hou house? >> what do we need to do in hud right now? >> what is the thinking of donald trump that needs to be changed inside housing right now? >> reporter: well, ben carson is not somebody who is a big believer in the kind of subsidies for low income ten upbdz that hud provides, and to the extent he does believe in them and he favors an approach that moves towards privatizat n privatization, vouchers, and that sort of solution. section 8 vouchers are a program hud already has and i think you can expect that dr. carson would be advocating a smaller role for hud rather than a larger one.

the question is whether congress, which has become pretty accustomed to what hud has done, whether they would go along, but i think all of the discretionary parts of the budget are going to be under pressure from this administration. >> you look like mcgruff the crime dog. >> reporter: who, me? >> it's the trench coat. >> reporter: i am a bet crime dog. >> that's why people become reporters to be able to wear a trench coat. >> where is the fedora? >> reporter: i am keeping fifth avenue save. >> all right, mcgruff, this might stick.

donald trump's win last month exposing what may be a deeper divide into politics, and today and tomorrow, members of congress and business leaders will gather in washington for the no labels conference looking for what seems to be an increasingly elusive bipartisan center. joining us from the no labels event is jim millstein, and he served as the chief officer at the treasury department from 2009 to 2011. thank you for joining us. >> good morning, steve. how are you? >> good. did you see the tweets over the weekend about the possibility of a 35% tariff on those companies that move overseas and i am wondering what you think about it? >> it's kind of back to the future. in the 19th century, the united states ran high tariffs, low taxes and trying to encourage

domestic production. i think 120 years have passed since we used that as our primary trade policy, but it does seem that the president-elect is kind of looking to that kind of direction to try and enhance domestic production. >> can you see the rational for a new administration to come in and say they have been moving these jobs overseas, and it has to stop and it's devastating parts of the country and economy, and we need to look somehow to our policies and taxation and policies at the border to improve this? >> i think it would be incredibly disruptive to the way american businesses have organized their global production, and i suspect if he were really serious about this instead of doing it as a bully pull pet to encourage insrersment in the united states, and if he were serious,

i think you will see an enormous pushback from the lobbying organizations that represent the commanding heights of american business. the truth is, we fit into a global economy, and we made this global economy. i think we clearly have failed to deal with the consequences of it in the former industrial midwest. but we're beneficiaries of it. and as we have integrated, it's a postwar approach to encouraging the capitalist development. we have -- other than the middle east we have had remarkable periods of peace. >> larry?

>> i was going to ask, you have been a restructuring guy for a number of years and have done important things. if you were asked to restructure the u.s. government with $20 trillion of debt, what would you propose? >> so i think the path is pretty clear. we have to get our fiscal house in order and that means over -- you don't want to do it overnight precipitation u.s. economy is remarkably dynamic, and what we really need to do is try to enhance the growth rate and reduce deficits over the long term and that means some structural reform, and so as to bring spending under control and we're not going to reduce spending, we have an aging population that is going to have greater demand on social security and medicare and the kinds of basic services the government has provided to the elderly for 90 years now, and i think unlikely politically we will make a major move there,

but, but, i think on the revenue side we clearly need corporate tax reform and we need to raise more revenue. no question about it if we are going to bring our deficits under control. >> jim, you told us a lot of what we know, and what would you prescribe for those things. >> what i would prescribe is a -- if you look back in the '50s and '60s, the federal government had a much larger role in infrastructure than it currently plays, and the states remained relatively constant with 2.5% of gdp spending, and the government has come way down to the infrastructure, and if you think back to the highest growth at least in my lifetime in the '50s and '60s, this was the period of the national highway system, and the federal government was leading the private sector, and i think -- i think that's where this -- where

this country will have to go. you have heard the president-elect talk about a massive new infrastructure program, and you heard his opponent talk about a program, and i think that's what this country needs. what we need is leadership in washington for a new public investment program that drives increased productivity and greater jobs over the long haul. >> thank you very much for joining us this morning. >> my pleasure. be sure and catch more of cnbc's exclusive coverage from t there this morning. and then coming up, a look at how policy changes in washington could spur spending and the companies it could benefit, but first check out the futures. you are watching cnbc, and we'll be right back.

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nearly 9% after the election of donald trump, and probably not from the lows that night that lasted four seconds. here to discuss the sectors best pick, she is managing director and machinery analyst at jpmorgan. you knew you picked the right industry to cover. finally -- >> absolutely. when we get an infrastructure bill it will be good for everybody. >> it not always has been, we watched the slow decline long term over a lot of this, and do you expect a move back up to a more -- something we can detect. it will never get back to where it was, will it? >> no, and we looked at the earning cycle last time, about $9, and then $3, and that's $12, and then we get a infrastructure spending, and public spending today is $280 billion, so we

have to see public spending double, and if we go back to 2009, and the federal government doesn't spend the money, it has to allocate it to the state and local governments and then they have to spend it, and what the biggest issue was back in '08 and '09, and once the projects are built, the state and local governments are responsible for maintenance, and they tend to hesitate, can you give me this money and i can build new roads and bridges but who is going to maintain them afterwards? >> i am a caterpillar share owner, and they are up 40% this year, and they tapped down earnings and the stock went up again, and what is going on there? >> because of infrastructure and all the good things that is going to happen -- >> but up next year, too. >> yes, and we issued next cycle best case scenario, they can

earn $8.70, and what are you willing to pay? >> you are saying sell caterpillar? >> i think it's a neutral, if it gets further away from $89. that's your best case. >> the market itself is over its skis -- >> particularly in machinery, we baked it on the upside, and none of the downside, what happens when steel prices go up and that you have no pricing power, and what happens when the dollar strengthens and you are a global competitor, and what happens if anything happens in trade wars and nafta, and i think once we get into 2017 reality will bake itself in, and that's why it will be a perfect neutral, and that's about it. >> i saw a clip on president

obama where he made a joke about shovel ready projects not being as ready as he thought, and maybe we need a new name, and people say shovel ready and people roll their eyes at this point. is it possible that a builder, somebody who has done this type of thing would be better at doing this? can the government really do this right and do it with some private sector involvement and financing? >> the problem around the world, we have learned it's difficult to put private and public partnerships to go that makes sense, and the private wants to make money and the public wants to serve the better good. >> the public wants to blow the money. >> when you get a government contract, you have to pay the wages they stipulate, and that takes you out of the ball game. >> that's the kind of thing -- >> that's what makes it not profitable. that's why you can't do that. >> and you have to use u.s.

steel, so what is going to happen to steel prices? >> what if it's not all government at play, and what if there another aspect where you had a lackluster investment, and you also have business investing and that could be upside for caterpillar and beyond what the government is just doing? >> that's a reasonable expectation. but we are probably three or five years from that, because no ceo is going to invest until they see the end market demand. >> i don't know about that. you turn on animal spirits and all of a sudden you could be building stuff -- >> there's no so much unused capacity out there, and the bidding on this will be tighter than you ever seen before, because nobody has worked for the last five years. >> and if you look at something like caterpillar, they had three jen sets per rig, and you have thousands and thousands of idled

engines sitting out there, and then there's another problem and the industry and construction, for example, has moved to renting. if you are renting you don't need as much equipment, so you are utilizing it better. >> are you scottish? >> irish. >> come on! you didn't know that. >> i have two gingers for kids, and i don't know where it came from. >> west ireland. >> it's an english variation of an old irish name. gingers are the smartest people. >> i agree. >> what were you? >> with the air? that's a hair joke? >> yeah, the hair joke. >> it's the lack of a joke.

look at this. this is unbelievable. whose show -- >> your show. >> business is back and it's okay. it's okay now to be in the private sector. it might actually be good. we will tuck to house speaker --

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our compassion. you're going to need the next generation of leaders to face the challenges the future will bring. and we promise we'll be there when you need us. ♪ let's get back to our guest host, and he has predictions for

2017. number one, 3% gdp. >> yes. i think so. i think the economy is coming back, as i mentioned a moment ago, and i think manufacture something what is missing and the rest of the world is encouraging, china 6%, and western europe a little better, and a tax code overhaul which i think can happen next year, meaning lower corporate rates and better export and import rules that we will see our economy begin to grow. >> let's bring back that graphic. so your other predictions are united congress, 3.25% on the ten-year, and nafta and the affordable care act are amended, and deregulation, i also think, close the mexican border. what does that mean? >> it means i would not get into a big immigration policy next year and i would simply secure the border, and if we have

terminals, illegal immigrants, deport them and let it alone for a while and get the other stuff done first. >> you don't predict tax reform, you put it on your wish list? >> tax reform is hard. everybody's got all the debates, and -- >> sacred cows. >> everybody needs it, so i hope and wish it can happen, but i don't think it's a done deal. >> if we did, like, some half measure, 28% to 26%, would that help? >> yeah, but it's so incontiguous and other things that can happen. >> would we able to re pay treeit. >> they want to put an 8.5% tax on the cash and 3.5% tax on the hard stuff and give them eight years to pay for it, and that

would be great. >> what the idea about the house plan to not tax exports but to tax imports? >> i think that's a big deal. if we were to get that through, that's better than a 35% tariff. in other words, it makes our product ever more competitive. >> put aside the tariff, is it a good policy to tax one but not the other? >> i think what it does is, it levels of playing field. when stuff comes in from mexico, the tax is refundable. it's the shipment making their cost lower and we don't have that. so if this gets through -- >> it's shaking things up, and that's good, and that's what you are saying. >> i am not working sundays anymore. i should have been watching tiger. >> did you give him the okay on the outfit? >> they don't check those with

me. >> we will bring it up and show you again. >> not sure i want to see. jeff rosenberg coming up. and interest rates. this is very interesting, heidi heitkamp, the north dakota senator. we will hear from her in just a bit. "squawk box" will be right back. card from capital one. h with it, i earn unlimited 2% cash back on all of my purchasing. and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... which adds fuel to my bottom line. what's in your wallet?

global markets trading higher after prime minister renzi's referendum defeat. and then weighing in on china, texas and trade, where else? on twitter. plus a big milestone for irrational exuberance. >> how do we know when irrational exuberance has unduly escalated values which then is subject to unexpected and prolonged -- >> we'll look back at allen

greenspan's famous words, as "squawk box" begins right now. >> announcer: live from the most powerful city in the world, new york, this is "squawk box." >> welcome back to "squawk box" here on cnbc, and i am joe koerner along with michelle cabrera and steve liesman. we are up 77 on the dow, and up over 20 on the nasdaq, and yields actually moderated a little bit, at least earlier, the 10-year was at 2.41, which we have gotten used to seeing. six months ago, i would have said, wow, but now it's like, $2.41. some day we could get back to the 4. >> on the ten-year? >> yeah, maybe 3. >> you said if there anybody out there buying a 10-year at 4%,

please e-mail us. >> i said that? it was like yogi berra, nobody goes to that restaurant, it's too crowded. and prime minister renzi said he is going to go, and what is going happen next is the question. european equities shrugging it all off. and everything is in positive territory because of italy because the bank stops there are getting hit hard. here's the all-share bank index. a number of troubled banks there trying to raise capital like today, this week, and in the coming months and there's political uncertainty there. euro sold off below at first and then went to 107 at one point and is still close to that, 106.97. and then the army corp. of

injure engineers and the pipeline. trump supports the pipeline and policy experts believe he could reverse the decision after he takes office. and trump took a hard line against twitter last night, and he talked about militarizing the south china sea. on friday, trump accepted a congratulation call from taiwan, and this was mike pence on "meet the press" yesterday on this issue. >> i think the conversation that happened this week with the president of taiwan was a courtesy call and she reached out from the president-elect and he took the call from the democratically elected leader of taiwan and that's one of more than 50 of the telephone calls president-elect trump has taken from and made to world leaders

in the midst of a historic pace and cabinet appointments and building a legislative agenda, and even traveling the country and saving 1,000 jobs in the state of indiana. >> i got an e-mail yesterday, and they said steve you have to understand the trump administration is going to be trance asactiona transactional, and it's not going to be policy, but negotiation. >> it's a little bit weird -- >> it's weird. >> no, it's weird in terms of the approach to governing, one, there's an academic approach that we have seen maybe a little too much of -- >> a lot. >> and then the businessman private sector. >> if you are a businessman, don't you want policy and not individual transactions? >> not the way you are using it. i don't think you want to be a technocrat. >> a lot of times individual transactions make policy. >> not the other way around. >> the whole thing about a 35%

tariff is a threat and not real, then what do you do with it? >> well, it would call to peoples' attention we need a tax overhaul. >> i agree with that. >> what if the academics ran the world? you have ever thought about that? >> they don't. >> they have for eight years, a law professor, and -- >> they try. >> and the b and c students run the word. >> once you get into harvard, everybody gets a's. here's what was said about america's economic challenges. >> we want to focus on economic growth and the american economy, and look at the coal miners getting out of work, and look at the loggers and timber workers and the paper mills in the west coast, and the farmer in the midwest with the regulations. >> on wednesday, "squawk box"

will be live in washington, d.c. at a gathering of business leaders and policymakers from the business roundtable and house speaker, paul ryan, he is going to join joe and andrew, not me, and -- >> he stipulated that. >> he said no me. >> yeah. a few stocks on the move this morning, both are dow components. mcdonald's upgraded to buy from neutral, which is enthusiastic about upcoming menu additions and extensions of the restaurant chain, and it points out the tough comparable sales to a year ago as we ease into 2017. goldman sachs, a price target of $250 per share, and that's even after a 28% jump in the price of goldman shares over the past month and the stock is currently at $225. let's bring in jeff rosenberger, the chief strategist. should i assume that this trend

that we have seen in various markets, is it just off to the races? are we going to parody with the euro, to 5% on the 10-year. has it moved a lot already? >> it has moved a lot already. and with the election, it's what not what anybody thought, and it's fund mamentally changed pe pulgz' expectations about growth. it's what kind of level of growth are we going to be at? we had a predominant view in the market because we had a predominant economic lookout, which was 2% growth, and if you raise the expect taeugs that we might have three or 4% tkpwragr- >> think about how sure we were about the savings, and about this new sort of era we were in

with interest rates, and if you go long term, 150 years on the 30-year, it was normally 1% or 2%, and maybe that was an aberration, and maybe we stay in an extended period of low rates for global reasons and one guy comes in, donald trump comes in and all bets are off with the low interest rate environment forever? >> it's not changing the low-interest rate environment. all that is still there, and what has changed is you raised the prospects with the change in fiscal policy and a change in monetary policy along with it, which predated the election, and it excaccelerated trends, and me a little more fiscal and long-run structural support. >> bottom line, is there any

fixed income i should buy at this point? it seems like all of it has been a loser thus far since the election? are you comfortable based on anything you are recommending? >> goes back to what joe is asking. >> i am asking you to answer it. >> no, we have done a lot of work already. if you look at how far the interest rates have moved, even though the growth environment for 2017, we saw your predictions earlier, and we may not get there so quickly, and the move in interest rates, look at the municipal bond market right now, it's in a free fall, but that adjustment to higher interest rates make the current rates -- >> is the market firmly out front, and -- >> please say no. >> no. >> we don't have to follow the fed? >> we still have to follow the fed, sorry. >> and so it's other stuff. >> it's not the december increase, it's what the subsequent pace, right?

the subsequent pace is for because we still have to consider the value of the dollar. >> i will argue the other side of it, which is if you look at the two-year, they are already there and they already priced in, three or four hikes already into next year? >> i think that's a little much for the market, it's between two and three, and the pace of the shift, we saw this last year and it's an important story in terms of one of the challenges and the things on the focus for next year, which is what is the pace of the increase in the value of the dollar, and the fed gets the view it needs to accelerate. >> don't you this it's getting ever more difficult to predict now, and we are going into the phase of the economy, and monetary fiscal policy, and there's a infrastructure project and interest rates can move a lot more than most people predict.

>> i think they already did, and nobody predicted 60 basis points -- >> but we are where we are. and if you get that kind of policy in place and it results in significant growth without the offset, and the offset as i am highlighting, is what we dealt with last year, the significant increase in the value of the dollar it tightens conditions for everybody else, and it's harder to predict because the fiscal monetary fix is changing. >> what rate could i get right now? >> what i am suggesting, you are in the middle of an over shoot and it's hard to catch the falling knife right now, but when you look at the new rate that results in from that, don't -- >> don't buy anything. >> if they are -- >> yes. thank you. >> if taxes are going down, right? >> right. thank you. >> and that's the adjustment that they are going through right now, and -- >> they have overdone it, you

think? >> it depends. how much -- >> you can get into a five-year -- >> you don't get as much yield. >> i have heard people say we get two quarters of 3% plus and then we are screwed. in the next four years, how do you handicap a 4% year? what are the chances? >> 4% growth rate or -- >> gdp? we get 4%, what, you think 10%? some people think we are back to the -- >> i don't believe it. >> huh? i think the conventional wisdom you talked about, it wreaked of that, and maybe it's nate silver's fault or the media's fault, i don't know whose fault, but it's so wrong about what you talked about, and who will win the election and what the response would be. why can't we do 4%?

>> i am not saying we can't do 4%. i said the odds are low. they are not 50% -- >> you have no faith. you have no faith. >> jeff has no -- jeff has no premium on knowing the future. all you can do, and all people ever do, joe, is look at what is happening now and essentially project that, and that's the essence of 2%. it doesn't mean it's right. >> hold on one second. the economists are the way you get gdp growth, you add population and productivity, and that's it. >> it's math. >> okay. >> it's not like it's an opinion, it's a fact. >> like climate change. >> that's a fact. >> nobody assumes we can get above -- the population is only growing to 1%, and when is the last time we grew at 2% productivity? right? this is why -- when we get a little growth, everybody is

going to want to do it, and -- >> remember, we don't need reme how to measure productivity anymore. >> the reason you have a low growth environment is because you had such low productivity, and it's a mystery and you can do things to change that, the structural reforms and -- >> less regulation. >> less regulation. >> it takes a long time to play out and the question is within the next four years, and it's not zero and the odds have gone up because you changed the perspective of having meaningful regulations around structural reform, and the likelihood of being implemented. >> i think what i hear from economists, and this is to your point, one percentage point out of all this stuff is a very big deal, and people should be very happy if we can go from two to three, to raise structure productivity -- >> i will be happy. >> i know larry said five, and

maybe that was a negotiating thing and i need to get used to that, but to do one, it's fabulous. so just to get off the bottom line of increasing productivity and possibly increasing the number of hours worked, which is the metric they look at in the equation. >> get these millennials off their stupid electronics and dating, and if it comes on the 50th day, whatever it took, and maybe that will happen. maybe millennials will procreate -- >> i happen to believe millennials are a hard working generation, joe. we need them as viewers, joe, they will go away. >> they love it. >> i love millennials, and i think they are fabulous people and work hard. >> isn't sex something they want to try. >> this is when you go places i am not comfortable going.

your experience at this cable thing, 25 years -- >> larry is not going there, he has nine kids. larry is not going there. >> i have three boys. >> larry, how many grandkids? >> 31. >> we would be at 7% gdp. coming up, trump's tough talk on twitter, president-elect laying out threats for companies planning to send jobs overseas. and later we will talk to heidi heitkamp about her meeting with donald trump last week. plus, we will tell you why the mark market's bull run might not be acting its age. we'll be right back and who knows what joe is going to do. g. you want an experience that feels highly personalized. with watson on the ibm cloud, travel companies like wayblazer can apply cognitive analytics to social data to understand what a destination is really like.

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you guys, i wish we could just televise the whole thing on the net. after making a deal to save hundreds of jobs at carrier, trump is renewing his threat. he tweeted in part there will be a tax on our soon-to-be strong border of 35% for corporations that leave the united states,

but still plan to sell products here. joining us to talk about taxes and trade, the chief u.s. economists at jpmorgan. i have to thank you, the report you did on border adjustment is making its rounds as cnbc and is the principle report of our understanding, but do you understand what donald trump tweeted out over the weekend about 35% tariff. >> it's hard to get a lot from 120 characters, but that's a new policy proposal that we are just hearing about, and -- >> it's not the same as the border adjustment, which is also a 35% tax you wrote about. these are different things? >> presumably right. the border adjustments, that's something in the house gop plan and there's a lot written about that to get a grasp of what is going on there and that has been

something that other economists have proposed in the past, and the house gop plan has taken that onboard, and we don't think that's the same as what trump has been tweeting about over the weekend. >> let's leave that to the side and talk about the border adjustment, which would happen, as i understand it, you would essentially get rid of export taxes and you would now put some form of a tax on imports. how would that work? >> it would exclude exports from a company's tax base, but then in effect what that does is slap a tax on imported products and that's equivalent to the tax corporate rate which is 35%, and in the house it comes down to 20%. it looks a lot like a tariff. the purpose arguably is to put the u.s. tax corporate system on

level footing with the overseas tax rates where they are low, they would face the same corporate tax rate. >> and then this was explained earlier in the show, this issue of compared to what happens in other countries. >> just as he said, when boeing ships an airplane to china they profit on the shipment and it's going to be taxed exempt, and when you ship a part for $70, you will tax the whole 70 bucks. the reason he picked 35%, that's the u.s. corporate tax rate, and -- >> yeah, you get rid of it. >> by virtue of the plan we just mentioned, it may be short to get there. when you buy a product from mexico, for example, all along the mexican production line there's a vat tax, and at the

end of the day that tax when the product is exported is refundable, so the cost of that product is dramatically lower because of the refundability for the producer and that puts it at a disadvantage with american-made products. >> by the way, that's awesome and thank you for that. but do you score this as positive or negative for the u.s. economy? >> i think if they can make it work it would be positive for the u.s. economy, and this is right what is done with the value added taxes, and there are differences and the question is whether that difference would make it through the wto, and one of the complications is whether it's going to be acceptable to our trading partners, and then whether it can be made to work in a world where you have a lot of past remedies, so i think it probably would be a good thing and there's a lot of complications that would have to

get hammered out in congress over the next couple of months. >> you have raised your growth forecast for next year after the election? >> just a little bit. we think there will be a little more fiscal thrust, but only by a quarter. >> thank you for joining us. a big interview on "mad money" tonight. greg hayes, his first interview since trump announced the deal to keep carrier in the u.s. "squawk box" is coming right back. digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care, to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are turning to cognizant. our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way clinical research sites collaborate

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coming up, north dakota senator, heidi heitkamp is rumored to be off for a post in the trump cabinet. this is coming up next. as we head to break, look at the equities. t tired of it. t tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars.

welcome back to "squawk box." just one economic report to today's calendar. the institute of supply management -- it's expected to rise from the october reading. >> yes. >> president-elect donald trump will nominate ben carson for hud secretary. gasoline prices are unchanged over the past two weeks, and that's according to the analyst,

and it's holding steady at $2.20. an hour. new york fed president, bill dudley, out with comments right now, and he favors graduate rate hikes if the economy stays on track, and he noted that his take on it, the markets expect more fiscal policy and faster rate hikes, and he said recent modest tightening is broadly appropriately. he sees fiscal uncertainty about how policy evolves, and it's important for monetary and fiscal policy to work together, guys. roll that teleprompter so it's in the right place for me.

>> would you mind, michelle, one second. i have an interview with bill dudley coming up. >> i stopped reading? >> i thought it was too much. i thought we heard -- >> it was stuck. >> she is stretch a pro. as are you. >> have you ever cut one of your reports short before? >> yes. >> i have never ever seen that before. >> you don't know how much is written. >> well, then, thank you. a big night for science. it was. there's something called the breakthrough foundation handed out more than $25 million in prices to physicist and bringing together athletes like alex r

rodriguez and guys like mark zuckerberg. >> i think we will have to see what policies of the new administration are. there definitely have been lots of rumors here and there and shifting and so forth. i think we will have to see what those policies are. i certainly hope they will be pro science and pro technology, and all of the things that, you know, this world has really benefitted from. >> that's pretty conventional. >> yeah. >> the lieutenant of governor talked about peter thiel supporting trump. >> peter is a big supporter of mine, and i am a big fan of peter's and i think we have the best thing going in terms of the connective tissue to the trump administration and in many ways i think peter will be a figure that we will need to temper the more extreme elements of the trump administration.

>> the event is hosted by facebook ceo mark zuckerberg. and donald trump's cabinet is taking shape. our next guest may be in consideration, and joining us is heidi heitkamp, and she met with donald trump last week. and the friends of "squawk," and the cabinet is taking shape. it was brilliant to be one of the early friends of this show. look where you are going, straight up. >> i ran into your friend, larry kudlow there, so you might have something going on, joe. you might have something going on. >> wow, senator. we pointed out in the past, if you were to join a republican administration, not the first time that you have gone against the grain of some of your colleagues in your caucus,

and -- do i call it a caucus if it's the senate. you have gone against the grain of conventional democratic thinking over the past eight years. >> well, you know, i like to think that the reason why i got into national politics was to bring some common sense and some north dakota values and the ability to get things done, and with your help last year we were able to get oil exports, and we are hearing reports that we are exporting record barrels of oil and that's huge for economy and area and our allies, so we can get things done if we work across the aisle, if we approh things from common sense positions that i think make economic sense for the people, and so you know, we have been doing some good work, i think, and that's being recognized. >> what did you talk about when you did meet? did you talk specific positions in the trump administration?

is it likely you would accept one? >> what we did was spend a lot of time talking about jobs, and the -- my optic focus on how he is going to get american workers back into the workplace and provide more economic security for americans, as we like to say in north dakota, shower at night and don't shower in the morning, and you know, that was completely enjoyable because the span, once you start with the american worker and once you start with the american people it spans into all areas, and we spent a lot of time talking about economic development and energy and regulation and what we need to do there, so it was a really substantive discussion without a lot of details on positions in the cabinet. >> senator, this is larry, and i was hoping what was your position on the dakota access

pipeline, and i was hoping it would be approved and it was stopped yesterday and what was your position on that? >> the dakota pipeline has been in the works for a lot of years, and it has been going through state permitting process and the corp. of engineers has a small role, which is to permit and provide easements across waters or under waters of the united states, and so in the initial stages, the tribe did, in fact, go to court to seek a temporarily court order and a liberal judge from the d.c. circuit went through the record and i would recommend that record and order to anybody that is curious legally where this is, and when you look at it, we know one thing for sure, when the administration changes the easement is going to be approved, and i think president-elect trump said that. in the meantime, i also want you to understand a lot of my career

has been spent working with my friends in the indian country and trying to improve conditions for native american children and indian people and i understand the frustration of the protesters, but i think this fight is not winnable and we need to get down to doing the things that will make a difference in the next generation. >> so are you for or against it? >> i believe the pipeline will be built. >> as a democrat, do you think what i would call somewhat radical activist energy policy climate policy, has it served your party well over the last eight years? did that have anything to do with the devastating losses in the last election? >> i think when you look at it, it's so critically important that we live in the real world and not live in the world of ideology, and i can tell you that of the factions down there, there's a large number of people who are leave it in the ground

and think we should shut off fossil fuel, and people that work in the fossil fuel industry feel that, and i think the alignment with leave it in the ground and not looking at all of the above energy policy has had an affect -- >> why are you a democrat, senator? >> because, joe, i will tell you this, finally, because i believe that at the end of the day, the democratic party stands for investment in people, and that when we invest in people we succeed and that means making sure they get great education and they get a great access to health care that is affordable and making sure that people have the ability to be safe in their own homes, and so i focus on what happens with people, with the idea that that builds the foundation for growth in our country. >> i don't think republicans don't care about people and don't care about investing in people, and i just think the methods to getting to that end are different, and i don't know, sometimes you need to look at

whether the front end motivation or the virtuous feelings on the front end never pan out on what you are trying to accomplish, and we are going to -- the republicans will leave the lights on for you, senator. >> thanks, joe. >> take care. >> you are already there. >> bye-bye. coming up, a monetary milestone. >> how do we know when irration irrational exuberance have become subject to unexpected and prolonged contracttions. >> 20 years after allen greenspan's famous words. we will have that debate next on "squawk box" when we come back.

in another month, the current bull is not acting its age. mike joins us now to explain. >> maybe it's one of the plat taods about you are only as old as you feel. it's going to be 8 years old next march and it will surpass the '90s bull market depending how you measure that one at the end of this month. a lot of early cycle sectors that we have been talking about for a few weeks have been leading the way.

it has a look, the small caps and the win streak, and its auto stocks and bank stocks, the stuff usually works coming out of a bear market. and you usually have hallmarks of a final stage bull market, and it's over excitement in certain investment themes and things like that. doesn't seem like it's about to expire. why? why are we at this point? one argument is we had a stealth bear market in 2016. and the russell 2000 went down, and you had a prolonged economic cycle this time and it has taken a long time for wage growth to come around and right now you have a rotation towards what is working and what is working is you are going to have an acceleration through fiscal policies in the economy, and that has the market acting as if

it's at an earlier phase than it was, and it seems like it makes sense based on what we know right now if you think we had a reset in terms of a stealth downturn eight years ago. >> eight is the new four. >> it's not always a great thing if somebody is old and trying to look a lot younger. >> yeah, we carry those ads on cnbc. >> don't knock that, mike. >> mike, thanks very much. >> younger clothes, like bell-bottoms? >> yeah, short skirts. >> it's about cosmetics and the tie dye. >> the rates and the markets, one against the other -- >> mike, we have gone nowhere in two years. >> yeah, you took a nap for a couple of years. >> if you look at the s&p, when we finally hit a new high --

when did we first get there, how many years ago? it was not just two? >> it was february of 2015, you got to 2100. >> what about the dow? >> the point remains you basically flattened out for a couple years, as earnings did. >> but it's still counted as a bull market. >> that's the thing, if the scorekeeper says that -- >> yeah. with markets hitting the all-time highs and asset prices studly rising, are we heading back to where we were pre d ddo dot.com bubble. >> i am always interested, did you know it was such an important phrase or speech at the time? >> yeah, frankly i did, steve,

and i had written a column in the "wall street journal," and if you were allen greenspan wouldn't you be worried about the market, and i remember the text, and practically falling out of my chair when i saw that sentence. >> i can't think of anything like this and maybe there's an log you can think of, but he makes this phrase, and it's very, very famous, but it's dead wrong, and it's dead wrong for, like, four years. >> right. >> so why does it remain and why has it endured as a phrase? >> it became a symbol of allen greenspan, and there were cartoons in the new yorker which showed him sitting down at a grand piano, and when they sat down to play all irrational exuberance died. on the one hand, stocks are up

150% since he made that speech, so if you held on to them you would be happy, but the second thing is, we already had the 2.0, that was the housing bust, and that taught us we cannot as greenspan said, wait for the bubble to burst and mop things up. >> what is relevant today, you are saying the central bank should have came in earlier and raised rates even more than it raised them at the time? >> i think the housing bubble teaches us you cannot ignore asset prices, and does that mean you should do something different on regulation, the so-called macro controls, so when the market pops you don't lose a lot of banks sore does it mean as a last resort you should raise interest rates. the internet stock bubble bursts and it was not that bad for the economy.

>> david, what if you decided to burst the bubble at 5,000? >> that's all we need are these -- >> you are right. it's really hard to know in advance, and there were a lot of people saying housing prices were too high, and we should not do anything about them, and now i think people would pause if they saw housing prices up. greenspan is worried about the bond market now. >> i don't know what is worse, whether they do it or don't do it? >> it's not clear. your argument, joe, has been for a while, they should have acted earlier in terms of raising rates, right? >> i don't know if anybody knew -- we seem to, but look -- >> allen would argue and i spoke to him about this, he tried to raise rates and he raised the long end of the curve, and he could not get a response in the

long end. >> there's also a view it would not have mattered if he did. there's more to this than just raising rates. you have to have a collection of actions, it seems to me, in order to extend the tide, and they did not do it then it now. >> david, wrap this up. should fed officials be involved in making such comments on the markets? or is the lesson from irrational exuberance to keep your trap shut? >> i think the lesson is they should usually keep their mouths shut, but when they're really worried they should speak more forcefully. if the fed had talked more forcefully about the housing bubble in 2007, 2006, we might have been a lot better off. >> love that bubble before it burst though. >> it was fabulous. felt really good. >> and if it was so obvious we would all be rich. >> you're not rich? >> the hangover was catastrophic. david, thanks for joining us. >> you're welcome. when we return, jim cramer will join us from the new york stock exchange. we'll get his take on today's top stories and don't miss

steve's exclusive interview with fed president bill dudley. catch that live 10:30 a.m. eastern time on cnbc. you're watching "squawk box." don't move.

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the work that we do helps us protect it. public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. we want to keep the power on for our customers. we want to keep our community safe. this is our community, this is where we live. we need to make sure that we have a beautiful place for our children to live. together, we're building a better california.

let's get down to the new york stock exchange, talk to jim cramer. you know, it's hard to make the bengals look good. i was talking to you last week, and you knew. i was saying everything will be fine and you said, no, i don't think so. wow. you've got problems. you're right. >> i would have taken the bengals for fantasy, but that would be bad karma. you can't bet against your own team, but, yeah, it's a rebuilding year for us. you guys look fabulous, what can i say? but everybody's looking fabulous against us lately. >> we actually had a guy on -- steve, did that guy say maybe in the end 35% it could actually be a positive if there were some -- >> yeah, not the tariff part, but the border adjustment. that was different. he doesn't know what he's talking about on the other one, but the one being discussed in the house plan. >> jim, we read something like we read nobody's leaving anymore. when i hear it, that's what i was saying, i like the way it sounds. i wish we could do that. i wish there were no unintended

consequences. i really do. wish we could make everything here and keep our jobs, but we know there are unintended consequences, i guess. >> i think it's currency rather than cheap labor. nafta was created 4-1 on the peso, now it's 21-1. i think they should have an adjustment for the currency. i don't think there's anything wrong with that at all. i think they should do that with china too. and that's the kind of legislation i would like to see is a sliding scale. don't let the currency beat us. that's unfortunate. >> yeah. so do you think if they were planning to do this with taiwan for a month and it was totally planned, was it smart, or does it end up they buy a lot of our debt but that's what they say they've bought so much that we kind of own them, they don't own us maybe. >> i feel like sometimes doing it on twitter is less thoughtful than doing something else. but i think that trump is at odds with the traditional state department. and traditional state department is no longer going to be the traditional state department. listen to those people he's talking to.

>> yeah. >> i just wish it weren't on twitter. that's not a thoughtful medium. it's just not. that's like saying eagles aren't as good as the bengals. >> right. just blocked a couple people again. i like that though. >> you mute or block? >> i block them. >> i mute them. >> i block them outright. even if i don't understand what they're saying. if there's a slightest possibility they're negative, i block them. anyway, don't need to convert these people. there are a lot of people in the world. coming up, trian partners nelson peltz will join us. stay tuned. we'll be right back.

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and a few more comments from larry. what happens with the aca, can we call it that? the obamacare. >> i think a couple things. the new thinking will be you're going to sell insurance across states making it more competitive. there will be incentives to get young people to enroll who didn't and therefore became far more expensive than anticipated. i think there's going to be subsidies for the state risk pools for people in high risk categories. there's a lot of good -- >> preexisting conditions. >> preexisting conditions. and out the 40-hour week. the mandate seems to me the

health care tax and also the device tax. so i think there's a lot of things that can go out and some good things that come in. there's going to be a lot of debate before it's done, but i think he's going to follow through on his promise to amend it. i hope it isn't repealed. they may call it repeal, but it will at least be amended. i think it's in the national interest. >> larry, thank you for being here today. thank you, i don't know who, i'll be here tomorrow. make sure you join us. "squawk on the street" coming up next. ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david faber is live at the no labels conference in washington, an exclusive interview with billionaire investor nelson peltz is coming up. in the meantime dow looks to open at a new high. in italy, euro hits a 21-month low but recovers after failed referendum and oil at a 17-month