♪ live from new york where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin, along with joe kernen and michelle caruso-cabrera. a look at u.s. equity futures this hour, the dow looks like it would open up higher, only marginally higher, two, three points. nasdaq, though, on the other side looking to open higher which is helpful because they struggled along the way. the s&p 500 virtually unchanged. marginally in the green. hang seng is up, nikkei is up. shanghai composite slightly down. european equities, which we all have been focused on, given what's taken place in italy, things looking up this morning. italy looking up over 1% this

morning. spain same story. finally, a quick look at crude. you're looking at 51.41 wti. >> other big stories, james bullard is warning that the incoming trump administration should not spend as though the economy is in crisis. there's concern among some policy members that overly aggressive fiscal tax and other changes could become inflationary. bullard says trump's policies could boost the u.s. economy if they improve productivity. the fed president suggests policies that improve infrastructure, modify regulations and overhaul the tax code could spark medium term growth. which they've been begging for years. we don't want to be the only game in town. we need some help from congress. then -- or fiscal help from the -- then it might be coming. wait a minute, we won't be as important? we won't be -- we won't be the only game in town? now they don't want fiscal -- >> i agree with everything you're saying.

it sounds rich. but remember there are two-ways to drive the economy. we talk about it all the time, spending money like crazy or deregulate. >> or there's both. >> sure. absolutely. people always say, oh, over in italy, draghi has been begging them to spend money. no, he's been asking them to reform the economy. >> these guys just love to talk. now they're worried about the other side. we do want you to do something, don't do too much. stop wringing your hands about everything. stop talking. get out of our lives. let us get back to not talking about every one of the -- how many are there? >> too many. >> i can't keep track. they leave -- >> were you here that day when we ran the calendar there were three of them talking every single day? >> every day. >> sometimes steve will say i have an interview with blah, blah, blah. okay. i never heard of that one. someone came in, now we have to hang on every word that they

utter. one of these days we'll be -- >> we'll get rid of them? >> didn't used to be this. grown green alan greenspan we would watch because he was imhe possible to understand, drone on and own. >> usually i like transparency. >> did you know when alan greenspan was the fed chief, did you know all 13 of the other ones? cue na could you name one? sorry. >> are stories when volcker was in power, the president said when are you going to cut rates? i did. nobody knew. >> that's when it was a regular economy. now i'm worried about the grocers. worried about the checkout people, already there are places you have to do it yourself. i can't find the thing. have you tried that? >> women -- >> we'll show you some video.

>> this is how you order food, isn't it? over at trump tower or wherever the hell you are. >> joe. in other political -- >> you're not at trump tower? >> no. >> vice president joe biden is leaving the door open for a presidential run in 2020. >> oh good. good. 77. he'll be 77. >> it's the new 77. >> they made fun of reagan leaving when he was 78. he will be 78 when he starts. >> you know what he's thinking? darn it, i should have ran. i could have beaten this guy. >> he's yanking our chain now. he's kidding. he's got to be kidding. >> he can be funny. >> not even a problem with his age. it's a problem with -- i don't think joe biden -- >> small group of reporters pushed him on the comment, asking the tough questions, asking if he was joking. the vice president said he is not committing himself to anything saying fate has a strange way of intervening. youtube, facebook, twitter and microsoft are teaming up to

remove extremist content from their sites. they'll have a database of videos and photos that can be removed from the companies platforms. the database will be operational by early next year. we he learned more about president-elect trump's negotiating tactics last night. greg hayes appeared on mad money and spoke to jim cramer about the deal with the incoming administration to keep that carrier factory open in indiana instead of moving it to mexico. >> it's no secret, i got a call from president-elect trump a couple weeks ago. >> right before thanksgiving. >> about a week before thanksgiving. he simply said look, greg, i need to you relook at the decision to close the indianapolis factory of carrier. he said we'll do a lot of things in this country that will make it more conducive to manufacturing, take the tax rate down, reduce this burdensome regulation. when all that happens you'll be printing money, but i need you to relook at your decision to close the factory in indiana. there was no quid pro quo for

him to say i'm going to tax you if you don't do this. he said take a hard look at it. we worked with governor pence and i think came up with a relatively good solution for everyone. we keep the plant open, keep 1,100 people employed in indianapolis. we still get to do the preponderance of the restructuring which we were going to do anyway. so i would say no deal but at the end of the day a good deal for utc. >> he said it's more expensive to keep the plant in indiana but automation at the factory would help drive down operating costs. it was the opinion section of the "washington post" where i saw this piece. it wasn't like the normal "washington post." the headline was so unbelievable this morning from the "washington post." i had to -- i had to tweet it out almost. i have to read this to you quickly. >> that's not good. >> this is not good.

>> he's not reading it to me. >> "washington post." >> i'm sitting down. >> "washington post," donald trump's carrier deal. >> yeah. >> could make american capital -- >> by he steve pearlstein. >> a fantastic piece. >> what? >> very well done. >> you are kidding me? >> very well done. >> i like pearlsteen. >> part of the charm of this show is that we disagree on things. >> this morning it will be a little less charming. this is a great piece. >> my point is, it's in the "washington post." it almost -- is that possible? >> pearlstein is their -- >> he's a terrific reporter. >> doesn't it border on positive coverage of trump? >> more than borders. >> that's my -- >> for the "post" a counter intuitive piece suggesting that -- >> but pearlstein is the guy -- >> he's been writing a business column for decades. >> exactly.

>> spectacular. very smart. >> he's clearly to the right of center compared to the rest of the paper. >> michelle, the point is that obsessed ceos with shareholder value tied to their compensation, this could show them -- the end all be all is not maximizing shareholder value. >> the reason why steve likes this -- he could headline donald trump, the democrat -- that's the other piece of this. >> maybe that's it. >> historically he's been far more business oriented. we've interviewed him a number of times. >> the headline in the "washington post" was shocking to me. maybe trump will not have to just tweet all the time. maybe there will be press coverage that he doesn't have to go around some day. sorry. >> now to the fallout following italy's referendum. italy's president has asked matteo renzi to delay stepping down until parliament passes a budget for 2017 later this month. he will then call early

elections or seek the formation of a caretaker government. the bigger issue is shares of banca monte dei paschi -- >> oh. that was beautiful. that was really -- >> it actually wasn't. >> you messed it up? >> didn't it sound good to you, sorkin? >> any time she rolls the r. >> rrrrrr. >> okay. >> banca monte dei paschi slipping as the fate of the world's oldest bank hangs in the balance. private sector cash infusion would have saved the bank from becoming nationalized by the state. now the italian lender has to prepare for a state bailout. they were hoping for a billion euros from the qataris, looks like that is not coming. that's what the ft is reporting. without that anchor investment of the first 5 billion they need, it will be state -- now we

have big drama in europe. earlier we heard what it means for italian banks. >> capital increase is clearly difficult but we have a positive view from the consortium, the potential anchor investors have said we want to see the next prime minister, then we will take our final decision. i think it's positive because it is being said that the idea is still open. >> you saw the -- you saw the photograph making the rounds in the last few days, the five world leaders. five or six. there was obama, hollande, renzi, cameron, then in the center merkel. it was like -- last man standing. >> i'm not convinced she'll be standing. >> that's what i mean. it would be five for five.

done. >> she's been in power for so long. i have this issue with why would you be there for that long? it's anti-democratic. new blood. >> impossible to give up power. >> yeah. >> even people that agreed to do something, they were even saying that about renzi before we knew what was going to happen. when you're faced with the -- >> giving it up. >> you look around. well, maybe i'll -- another record setting session yesterday for the dow. which is now up nearly 5% since the election. for more on the markets, let's bring in darrell kronk, president of the wells fargo investment institute. are you in competition with paulson? how do you guys -- >> no. we work together. >> let's say someone thinks the market is going up, the other one things it's going down. who gets to go out and be wells fargo? >> the businesses serve

different clientele. jim works an area working with our wells capital management. >> who has the well-healed clients? who do they give the important clients to? >> to both actually, joe. >> can you come up with one view, he can come up with another view? >> we coordinate on a regular basis to make sure we are not conflicting each other, we're trying to say the same thing. >> one is long, one is short. they say, we have darrell kronk here. if it's the other way, paulson was all over. steven whiting, global chief investment strategist at city private bank. it's just you. they trust you. >> i have a big team. >> this guy has a million guys at citi. all right. why don't you like infrastructure stocks? what's your problem? >> i think the certainty around infrastructure is not as clear as cuts. >> really? >> the likelihood that congress

passes tax cuts, sizable tax cuts, is different from the idea that they'll give a blank check to massive amounts of spending. there's been a lot of big performance in infrastructure names. a lot of hope about wall building. so i don't think that is as certain of an idea that we will get a big stimulus. >> we need an i.t. infrastructure upgrade. i was watching yesterday. the president was talking about, i think, either the irs or something still on kobal. >> some of this is private money. some of this is public money. our understanding is that republicans may not be inclined to repeat everything that happened in the obama administration in terms of shovel-ready projects. these things take ten years. >> they only take ten years because of regulations. some things take eight years to get a permit to do. we have one of these guys coming on that knows about getting rid of regulations today. >> right. >> do you get rid of regulations

in the first week and then do the shovel-ready project? >> i think that the -- what has been underrated in this is the likelihood that there will be substantial corporate tax cuts, income tax cuts, the immediate impact and the size of these measures is larger than the flow of money that will go into infrastructure spending over time. >> a lot of people think the sacred cows in the tax code will be impossible to get rid of. >> sort of what we think and what we really know, there's a great deal of uncertainty. >> are we ahead of ourselves? >> i don't think the market is ahead of itself, but certain areas may be. small cap moving 16%, 17% in the last three, four weeks, when you look at next year, the market today on consensus is pricing in 30% earnings growth for small cap in a sector of the market that's trading at 28 times forward earnings. some of those areas we think may have gotten overextended.

interest rate backup slowed down a bit, too. we are stuck around this 240 for a while until we base out. i know, we think rates don't just go to infinity from here. we stabilize in this area. >> like 3 or 4? >> no. >> that's infinity right now. >> on a rate basis. we think most of 2017, the rate structure on the ten-year treasury stays where it is. >> the euro is 1.08, 1.07. >> the italian referendum was going to change everything. >> italian shares fell 20% ahead of the vote. there's apprehension about these things. you have to think that bounce will be the trend for the entirety of 2017. i'm not going to make up my mind on that chart late in the year. >> yesterday we had paulson on, he does not forecast a continuous strengthening of the

dollar over the next year or so. he thinks it could get weaker. he also messaged me afterwards and took offense to me calling him a socialist. said i'm a communist. i think he was kidding. he goes communists get upset. >> why i can't tell the divisions. >> i would rather be a socialist than a communist. >> they both think the government should be in charge of dividing resources. >> don't communists torture people and -- >> jim is right. we think the dollar bulls have gotten ahead of themselves. we don't think -- >> nice old man. >> would you rather be a socialist rather than a communist? >> i never thought that one out. 1981 -- >> i'll hold you to this. when i come back next time i'll tell you. 1981, reagan comes in with similar policies, but the dollar was at a generation low. here we have had the u.s. dollar rally for five years. 1981, inflation is 14% and

collapsing, the dollar can surge. it's he not clear that we'll be able to make the kind of move up in the u.s. dollar from these levels that we would -- >> i agree with steven. >> well, all these things -- you know, the whole interest rate thing. i still think that all these global factors, you know, they probably say we'll be in a low interest rate environment for a while. >> i wonder why you're giving him a hard time on infrastructure, we had the woman on yesterday who analyzes caterpillar, she said it's already there. >> infrastructure is not my answer. i'm the tax cut deregulation -- >> i agree. >> by the way, we may not get the infrastructure. >> i'm not convinced of it either. >> but then the question is how much does the market move on the infrastructure piece of this puzzle. >> for a month, a lot. >> yes. >> okay. thank you.

thank you citi group and wells fargo. i got that right. coming up, financial regulatory body, the cftc declining to enact a midnight rule before president obama's term ends t would have limited speculation on commodities like oil and gold. timothy massad will talk regulatory changes under the trump administration.

welcome back. president-elect trump promised a roll back of financial regulations on the campaign trail. joining us now to talk about the future of market regulation, let's bring in timothy massad chairman of the cffc, served as administration trader of t.a.r.p. at the treasury department. you'll be speaking at the economic club. >> i am. >> what will you tell the folks there? >> i'll review where we are with derivatives regulation. this is one area where there's a wide consensus that the reforms made sense. you think back to where we were at the time of the crisis. we had an opaque swaps market that caused aig practically to collap collapse. if the government had not come

in with $182 billion of support, now we bring reforms that bring light to that market, central clearing, margin capital, it's working. >> given what we know he about the administration's plans, do you think they're at odds with that? >> they have not said anything specifically about these reforms. a lot of people across the spectrum endorsed the forms. i'm hoping we won't see a wholesale change. there's always fine tuning. >> what are you expecting to see? >> i don't know. we'll have to wait and see. my responsibility is the derivative s market. on that, hopefully the basics stay in place. >> you have not spoken with the president-elect yet? >> i have not. >> he has not brought you in like he did with pa rereet bhar? >> no. >> like aig, uncovered calls all

over the place with nothing to support. everybody learned their lesson. mnuchin if anybody knows margin capital. >> when you look back at the crisis, the futures market which had all this regulation worked well, central clearing worked well. we have done a lot to enhance the resilience of clearing houses. these reforms are good and make sense. >> but in terms of the other pieces, to the extent you think these pieces don't get touched, what pieces do get touched? what do you want to happen? what worries you? >> i'll leave that to others. i expect they'll make changes maybe on things like the effect of dodd-frank on smaller banks that weren't the cause of the crisis or the effect on dodd-frank of nonfinal companies. we'll have to wait and see. what about the issue of sifis, systemically important financial institutions. there's been chatter they may roll back that designation. >> i think that would be a

mistake. we have a good process. it's been used very judiciously. >> what is the process? the criticism is there isn't -- it's arbitrary that a sifi -- >> not at all. it was an extensive process when it made designations. it only made four. one of those was nonbanks. one of those has been -- we changed it. it's no longer designated. >> after it thawed. >> no, after general electric made a lot of changes to make itself less systemically he risky. it's a very extensive process that involves a lot of dialogue with the company. a lot of review. >> what do you make of the influx of people from wall street who appear to be part of the administration, meaning you're seeing people like steve mnuchin join, hearing chatter

about whether gary cohn from goldman sachs will join us. there was a view if hillary clinton had won, if elizabeth warren was in charge, nobody from wall street who had any experience would be a part of this. this seems to be the other end of it. >> i'll leave it to the president-elect to decide who is on his team, how to balance that. you need people with experience but you have to make sure you have balanced representation. i'm more concerned about what they actually do. >> what is the balance representation mean? what would that look like? >> again, i'm not going to comment on who he -- >> i'm trying. >> who he picks for his team. that's not my job. >> you think the insurers, like metlife, should be a sifi? >> we designated them, yes. >> they're fighting it, right? >> yes. >> that's where the argument comes, there's not a process that's quite understandable or that the metrics are not clear. >> it's a long process.

standards are in the law. you have to read the law and regulations. >> what about regulatory change, is that could happen without changing the law? there's a lot of stuff that happens at the regulatory level. a regulator can look at a particular item on a balance sheet at a bank or security and say, you know, we used to think -- the previous regulator thought this was liquid, now it's not. >> there's an administrative procedure act, you have to follow that you can't willy-nilly go around changing things. you have to get public comment. there's a lot of process involved. >> chairman, thank you for joining us. >> appreciate it. coming up, new data finds latinos creating new businesses. we'll talk to sol trujillo and dr. jeffrey eisenach. tomorrow, "squawk box" goes to washington.

we have a huge lineup from the business roundtable, including the ceos of sysco, u.p.s., caterpillar and more. they'll tell us how they're preparing for the trump administration and special guesthouse speaker paul ryan. it's a lineup you can't afford to miss. it all starts tomorrow at 6:00 a.m. eastern on cnbc. markets and gold markets.il okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you. why pause a spontaneous moment? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex.

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right here on cnbc.

look at u.s. equity futures. we've been sort of hanging around, but the dow now looks like it's inching up about 9 points up. s&p 500 looking to open up about a point and a half up. the nasdaq up almost 7 points right now. >> crazy. >> crazy. >> you expect a pullback. or at least one -- >> we knew it would do something. >> it's rare to be one day. stocks to watch. shakes of actelion are at a record high today on reports that sanofi is looking into a takeover bid. last month johnson & johnson was said to buy this firm, largest biotech firm valued at 20 billion. sanofi made its interesting known but has not decided whether it will move forward. that's europe's biggest biotech firm. kind of sad it's not a household

name. but that's -- >> that's a good point. >> that tells you about europe and -- >> and their business creation environment. for pharmaceuticals and biotech. >> why would anyone get in that business -- >> when you don't get return on r&d. mechanics at united airlines have approved a new six-year contract covering 9,000 workers. that deal worth $1.7 billion more in pay and benefits than the current contract. a new report by the royal bank of canada and the latino donor collaborative highlighting one of the fastest groups in the united states, the latino con sewe consumer, here to tell us about it is sol trujillo, and dr. jeffrey eisenach. tell me about latinos creating businesses. i didn't realize it was faster

than the average american. >> dramatically faster. a very quick picture. 60% plus of our population growth is tied to latinos. 29% of the real income growth has been driven by latinos in the united states. you look at entrepreneurship, almost everything here, latinos are dramatically leading our domestic growth in our economy. >> from 2007 to 2012, latino-owned businesses grew by 46% compared with the decline of more than 2% in non-latino businesses. why do you think that is? >> they're very entrepreneurial. there's about -- let's call it 55 million latinos in the country. divide by three to create a number of households, 18 million or so. you look at about 4.5 million businesses that are latino owned. you'll see that almost 1 in 4 family households are entrepreneurs. they create businesses.

the good news is that they're the lowest participants on any of the welfare subsidy kinds of systems. so it's all good. >> you had this group since 2010. i want to point that out to people, had is not a result of the election that you wanted to do this. you're with the trump transition team. when i look at the numbers, people were startled to see that 29% of latinos voted for donald trump. i wonder if it's because of instead of looking at people through race, culture and heritage you need to look at them through a business lens, an economic opportunity lens and maybe that explains why you had a larger vote from latinos for donald trump than most people expected because he had an commission message rather than a race-based message. >> i'm not a politician, i can't speak for the trump campaign or the transition. when you look at what's happening with la tetinos, we s

more people likely to be employed than the rest of the population, not less, and very rapidly growing in affluence. there are 370 hispanic latino households in the u.s. with incomes over 250,000. a lot are in the rust belt states where things ended up going well for trump. what we found with the latino population, it's a group that looks a lot like america, younger, faster growing and very ent pra entrepreneurial. >> at the end of the day, economic growth drives a lot of things. society is growing, economies

are growing, people are prospering and they think they have opportunity. you have happy, positive societies. >> just two quick points. one is that this notion of lowering taxes, notion of lowering regulation, it's good for all businesses. what we tend to talk about is the upper end of the market. the big corporates. the small businesses, as we need to remind ourselves, create 60% to 70% of the jobs. >> we think about them more because as far as regulations we know they're the ones who don't have the 200 people ready to -- >> ready to go. >> and banks. that's where all the small -- all the jobs come from. we think about small business a lot. >> i'm not talking about this show in particular, just the -- when you listen to the president, et cetera. the point is -- or the president-elect, i should say. the point is that this is really important. you see the growth. you see the dramatic growth rates. so now when we think about the

election, you know the people that voted, we shouldn't overthink the trump vote in the sense that it's less than bush, less than mccain, less than others, and, yes, it was a bit better than romney, but, you know, there's a lot more upside here with the right kind of environment. >> jeff, while we have you here. you don't need to talk about the specific trump transition things, one of your quotes -- fcc transition, you describe net neutrality as an effort by one set of private interests to enrich itself by using the power of the state to obtain free services from another. >> right. >> did -- who got to wheeler? who convinced him that -- and when the president of the left talk about -- it is political.

when they talk about net neutrality, i think it's right after do unto others as you -- what is the good neighbor? >> the golden rule? >> right below the golden rule. they make it seem like net neutrality is a sacred right. the way you make it sound it sounds like the worst kind of crony capitalism. >> politics is politics, if you can get a good bumper sticker and you have people send lerts to the ftc -- >> obama didn't get to wheeler? >> he did. >> what happened to him? >> will it get done? . >> looks at the two republican commissioners who will be on the federal communications commission on inauguration day, one will be designate the chairm chairman, read the net neutrality orders -- >> i thought it with you going to be hard to reverse something

that's -- >> it's still in the courts. there's an appeals court decision expected any day now which will likely uphold the fcc's order, that goes to the supremes, then there's a number of things the commission can do. people are looking at all of those. >> people who read the "wall street journal" editorial page would have seen your name in the paper yesterday having worked on deregulation under reagan. can it happen again? >> absolutely. if you look at what -- if you look at what president reagan did, it was simply cutting out the things we were talking about. george stigler, some famous economists, the fact that the power of the state, there's a market for that. people spend money in order to use the power of the state to make money themselves and invest in it. if you take that power away from the state, people go off and invest their resources in entrepreneurship and other things. >> one more fcc question, how do you think the fcc in january

will look at this at&t/time warner transaction? >> no comment. >> regulation, so there's all this debate about how much it can add to productivity. that's the key to gdp growth. what is your assessment of what a deregulation could do for productivity? >> if you look at the obama administration across the board, at their record, it's been the most regulatory administration in history. everything from labor markets, what the department of labor is doing -- >> you are not sol trujillo, you are jeffrey -- >> we have the wrong one. >> i would be delighted to be sol trujillo. >> it's been the most regulatory -- >> if you look across the board. we're talking about labor in small business, huge impact, financial regulation. telecom regulation, on and on. if you started pulling that stuff back, absolutely what happened under president reagan could happen under president

trump. >> but productivity can grow how much? 3% as a result of deregulation? >> absolutely productivity growth can return to 3%. >> that could get us to 4% growth gdp. >> the economy desperately wants to grow. it's not growing because we had terrible policies for eight years. >> you can come back any time. >> i was thinking guest host. >> you have things to do later today? >> thank you, guys. much appreciate it. >> thank you. coming up, a new report says apple -- who would wear one of these is beyond me, the apple watch sales plummeted in the last quarter. michelle has hers on. >> i love it. >> big, ugly, blank. >> it tells me so much stuff in a nanosecond. >> plastic band. >> this is leather. >> tim cook says not so fast. tomorrow on "squawk box," andrew and i will be in washington. i was thinking about this,

andrew. >> yeah? >> i think it's cool we get to go down and interview -- >> the land of the bureaucrats? >> me and you. how did we get here? >> i don't know. >> someone's insane to let us do that. the ceos of caterpillar, dow chemical, american airlines, u.p.s. and more will join us, an extended interview with house speaker paul ryan.

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. talking about your watch. she'll be sitting here, every once in a while she'll stand up. time for the executive edge. tim cook says sales of the apple watch hit a record during the first week of holiday shopping. the current quarter said to be the best ever for the device. responding to an e-mail from reuters, the apple ceo says the watch's sell-through rate has reached a new high that measures how many units have been sold versus those on shelves. but cook is not giving specific sales numbers.

his comments follow a report which estimated sales of the apple watch fell 71% in the third quarter. >> tells you when to stand up. >> if i'm overseas, i can see the current time, time in new york city. >> anybody can do that. >> it's harder than you may think. >> you can't talk into your watch. >> i can talk into my watch. >> have you ever? >> oh, yeah. >> you do that. >> absolutely. i'm in a different part of the apartment, i say hello, hold on. let me get my phone. it knows. >> if there was anything to this, there would be one on his wrist. >> he's got one that begins with an "r." >> i know. mine is getting a new face put on. >> also an "r"? >> a different color face. >> yeah. you can change the faces. >> going to get a darker. >> because you -- >> when that's ready for prime time -- >> i don't buy the first model of the car, you wait until the kinks get out. >> i haven't find my --

>> you'll see. then you'll wear it on the other wrist. >> i love that this is leather and magnetic. >> why is that better for women? >> because we carry our phones in our purses. when it rings -- >> that won't be a problem. he has a man bag. >> you don't have to pull your phone out, you can look. >> you are not getting rid of the sub mariner ever. >> no, no. i would. >> you would? >> put it on your other wrist. >> because that would look a little silly, don't you think. >> when has that -- >> when has that stopped me? >> exactly. >> let's talk about another tech story. amazon unveiling its first convenience style store yesterday. it is called amazon go. take a look at this. the store eliminates the checkout lines and cash registering entirely. not just doing it yourself, this is better than yourself. you scan your phone on a kiosk when you walk in. amazon then automatically

determines what items you take from the shelves, and charges your account when you leave. it employs the same type of artificial intelligence using self-driving cars to identify items, it uses cameras, sensors, all sorts of things all over the store. nobody has talked about this, the capital cost -- how capital intensive it must be to have this technology inside the store. can't be nothing. it has to be very expensive to get it right. >> but the offset is you don't have to employ people. >> you don't have to employ people. >> as many people. >> in this day and age we talk about what will happen to jobs. >> is it slippage or shrinkage. >> that's stealing. >> yeah. >> yeah. >> i wonder if others will look at this, like walmart, and say we have to do this too. the economics of these

businesses are different in terms of what drives the technology. >> scale and size. >> exactly. coming up, tech picks for your portfolio, mark maheney will join us, his top recommendations coming up after the break. mary buys a little lamb. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of at&t, and security that senses and mitigates cyber threats, their critical data is safer than ever. giving them the agility to be open & secure. because no one knows & like at&t.

shars of pandora are rising this morning as the company considers a merger deal with sirius xm. but should other candidates make a play for pandora? joining us with his perspective on that is mark mahaney, lead tech analyst at rbc capital markets. will there be somebody else that -- where it would make a lot of sense? >> there's maybe three other potential suitors. apple, amazon, and google. but the one that makes the most strategic sense is sirius. streaming in the automobile and subscription streaming in the automobile and a hedge against that, buy a company that has advertise supported streaming. both in the automobile and at home. it seems there have been synergies here that have been clear for awhile. it just takes the two parties a time to come to a deal.

>> with apple it would be getting rid of a competitor, wouldn't it? for them if they don't do it, some day i may not -- i use sirius xm now, but maybe i'd learn how to listen in a different way. it's brainless to go between sirius channels. right? so they need to prepare for the future. >> i think people will continue to use them for a time in the future. it's an ad-supported model. and in the future we're probably going to have both. you can see the rise in spotify. 40 million paying subscribers worldwide. pandora's trying to do this themselves. they're launching db they've just launching -- they're launching today, actually, a streaming service and an unveiling here in new york city to launch a service in the first quarter but a subscription service about $10 a month. whether they get any traction with that given apple and spotify is uncertain. >> how successful is apple music then? >> it's a distant, distant

second to spotify. maybe 10 million to 15 million paid subscribers. >> is that disappointing, on target for you? >> it's mildly disappointing. you would have thought the numbers would have escalated much faster than they have. >> i have apple music. why would i switch to pandora or spotify? >> i think what happens is once you get used to a service, i think it's hard to switch. you'd have to have something that's dramatically better. the challenge that pandora has is offering the pandora premium product today is you have a product that's 25% to 50% better in functionality as the next service out there. that's what you have to get somebody to switch. if you don't have it, people aren't going to switch. >> why is it better than what i do now? >> better selection, something you can personalize the play list better which is hard to do. so i think it's -- i'm in the skeptics camp. i don't think somebody can come in now and offer a service 50%

better than what is out there now. >> can i ask you about amazon since you're here? grocery stores. what do you think about them going into a business that has truly razor thin margins? >> it's bezos' shareholder letter. he threw a few flags out there people needed to pay attention to. one of which the statement was once you reach a certain level of scale, you have greater ability to experiment than in the past. secondly amazon is a company that believes in doing these untruncated runs. these thousand to one home run shots. >> what do you think of the cost is going to be? oh, we've got to run. >> they're already in groceries. more is coming. you shouldn't be surprised. >> all right. thanks, mark. coming up, we're going to talk jobs and manufacturing in america with our guest host. he's she chairman of johnson controls. don't move.

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showdown with china. donald trump firing the first with company over trade. we hear from giant johnson controls as they get ready to open a new headquarters in shanghai. plus john taylor on the future of the fed. his name has been thrown around as a possible candidate to lead the fomc under donald trump. he is our special guest. greg hayes speaks about keeping carrier workers working in america. >> there was no quid pro quo for him to say i'm not going to tax you if you don't do this. he simply said take a hard look at it. >> more of that interview and the implications the deal could have for other companies leaving the country straight ahead. as the second hour of "squawk box" begins right now.

live from the beating heart of business, new york city, this is "squawk box." welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and michelle caruso-cabrera. the futures this morning are searching for which way to open. they're green right now a little bit. up seven now on the dow. just up over one on the s&p. the nasdaq called up six. we should point out that the dow hit another high yesterday. another all-time high. and the nasdaq was up 1%. the real winner? the russell 2000 up more than 0.25% yesterday. the best daily performance since november 11th. i think last month it was up 10% already. if we annualize that, compound it, it should be up 250% over the next 12 months. which would be pretty good. maybe that won't happen. check out the price of oil.

it's down 54 cents now at $51.23. let's show you what's happening in europe at this hour. we had a mixed session earlier and right now we still continue to see -- do we -- shares of monte dei paschi following the referendum this past weekend. private sector cash would have saved from being nationalized. now they're going to have to prepare for a state bailout likely this weekend. italian interior minister speaking after a conversation with leader renzi sees new elections likely in february. that was a big question that we were all asking. what's going to happen there. that's according to the newspaper. which means that we could see potentially the rise of yet another what a lot of people like to call populist movement. but this five-star movement,

they are your skeptics. where there's only 53% support for the euro compared to what else is happening. and we saw the italian 10-year climb as a result of that. we'll tell you also what is making headlines this hour. economic data revised third quarter productivity figures today at 8:30 eastern time. they're expected to show a slightly improved reading. the october trade deficit will be out at the same time. we're also watching shares of luxury home builder toll brothers. thanks to selling more homes and at higher prices. and then there's this news for those of us in new york city. the mayor bill de blasio asking the federal government for $35 million in reimbursed expenses. that's the cost so far for the police securing trump tower from election day through inauguration day. no word on whether the request

will be approved. in st. louis fed president james bullard is warning that the incoming trump administration shouldn't spend as though the economy is in crisis. there's concern among some policy members that overly aggressive fiscal -- i can't even read this with a straight face -- fiscal tax and other changes could become inflationary. and certainly he must implied is that the fed shouldn't stay in emergency mode if it's not a crisis. i don't know whether that occurred to him. we've been at emergency mode for the past eight years. even though we haven't been in an emergency for seven of those eight. but we're still at zero. thank god we're not qe'ing anymore. although we might be. bullard said trump could boost the economy if they improve productivity. do what i say, in fact saying do what i say and not what i do. policies that improve and

overhaul the tax code would wark to spark medium term growth. oh, good. i'm sure he'll have some choice things to say. more on the fed and president trump in a minute with stanford professor and former council of economics advisers john taylor. his name has been mentioned as a possible candidate for the next fed chair under trump. >> that would make you happy, wouldn't it? him you like to hear from. >> i would. he actually thinks we should write some things down that would determine instead of just flying by -- constantly flying by the seat of 17 people's pants or pantsuits as the case may be. what? how many are there? we need to know exactly. i don't know. there's a lot of them. >> some vote. some don't vote. it changes every year. >> they may not vote, but they're allowed to talk. utx ceo greg hayes spoke to jim cramer last night about the deal we the incoming deal to

keep carrier open in indiana instead of moving it to mexico. >> well, it's no secret. i got a call from president-elect trump about a week before thanksgiving. and he simply said look, greg, i need you to relook at the decision to close the indianapolis factory of carrier. he said we're going to do a lot of things in this country to make it more conducive to manufacturing. we're going to take the tax rate down. we're going to reduce this burdensome regulation. when all that happens, you're going to be printing money. but i need you to relook at your decision to close the factory in indiana. there was no quid pro quo for him to say i'm not going to tax you if you don't do this. free l

to the growth of this country. this country was founded on two principles, right? immigration and free trade. and that is what made america great over time. because we had the ability to develop and innovate in the u.s. and take those pruks and sell them around the world. >> joining us now to talk about all of this, stephen roach at yale university and our guest host, alex molinaroli.

ceo of johnson controls. the company planning to open second global headquarters in shanghai next year. good to have you both here and have you here for the hour. >> great to be here. >> i want to talk about china in a second. i was just in monterrey, mexico. drove by a building that says john controls. you're all there. how do you feel about what president-elect trump did to carrier? >> i don't know he did -- if i look at the whole situation and think about that phone call, i watched the interview last night. he did a good job last night of handling the interview. but i'm not sure he had much choice. if you look at where you are, you get a phone call like that and you've got choices to make, you've got to make the best choice in your circumstances and, you know, i'm glad i didn't call. >> yeah. but i mean -- >> oh, you're not answering your phone from here on out? you may get a call. >> well, i'm not moving to mexico. >> you're moving to shanghai. >> but we would do business in

shanghai. we're not in shanghai to do business in the united states. we're in shanghai to do business in china. >> but the issue is there are lower costs in monterrey, mexico. i mean, what would you say to the president-elect if he called to say this is what you need to fix so that way that cost differential disappears or reduces enough? >> well, you can't fix that. it just is. and i think over a period of time in johnson controls, united technology, been the business for over a hundred years. and you have to deal with the circumstances that you have in front of you. but if you just look at over time you have to deal with the economics. because in the end people are going to buy an air conditioner because it had the lowest cost best quality product. $7 million of incentives may or may not offset what the costs are. >> in -- in trending toward -- maybe not. i don't want to speak for you. but i started thinking that the government can spend money any way it wants to. but what if it spends a little

bit greasing the skids for our workers here instead of people on disability or food stamps or some type of government assistance? in other words to maintain the job, you spend your money there, maybe profits aren't -- maybe margins are slightly less than they would be if you move to monterrey, but the government gets involved to make it quite as bad and we have this vibrant middle class. is there any way that can work or is it a slippery slope that violates free market economics and it comes back to hurt you? >> no. because you're going to get incentives in mexico too. you have to have an environment where people want you to stay. >> so you do the carrot, not the stick. but still that might not be enough to offset the labor costs. >> but there's a difference between moving to mexico and staying in mexico. and i think if you do the cost benefit analysis say is it worth the aggravation to move and all the -- >> what do you think the job -- >> the what? >> on the negative side to have

the president of the united states call a company out -- >> that's a different story. if you're going to call me, that's a different thing. i think calling someone and calling them out is totally different than having a policy in place or policies or at least have a regulatory environment to encourage you to stay. >> i think he wants to do both. but he wants to create a policy framework for that. >> he might tweet about alex molinari. >> he's in a powerful perch. and he plans to use it in a way that i think presidents at least over the past several decades have not. >> so this is a euphemism of what will come. fine. i'm okay with that. i wouldn't want to be singled out. >> if you're sitting in the board room today about to make one of these decisions, how do you square it up knowing that you either may get a phone call or more likely get a tweet suggesting that your company is doing something -- >> i promise you people are talking about it in the board room today. >> andrew, we had -- you know

the last eight years bully pulpit being used, don't go to las vegas, don't to this, don't do that. insurance companies, the banksters. >> but for the most part it's always been general. right? don't go to vegas. >> don't go into private sector. private sector don't create jobs. >> but it's not specific companies saying you guys are the devil. >> so it means you get past that. i know greg. i just wouldn't want the phone call. but if you just look past that and say is this going to be an environment where people want you to be, i think it's a good thing. it's not a bad thing. >> stephen roach, now we get to china. good to have you here. >> finally. thanks, michelle. >> what do you think about this tweet storm related to china with president-elect? >> i was more concerned about the tweets than the call. the call could have let it go to voice mail, that would have been nicer. but the post-call tweet iing is

reactive, defensive and plays into the thin skinned president-elect that can't take any criticism. and to come back with this idea that china's manipulating its currency just doesn't dove tail -- >> let's remind everybody. did china ask if it was okay to devalue their currency making it hard for our companies to compete, heavily tax -- >> the point is factually incorrect. >> the math of military buildup in the south china sea is true. >> correct. there are certain things that are correct. and certain things that are not correct. the car insurancety manipulation charge is a bogus charge. and to the extent they're intelligent people which is debatable should know that. >> wow. >> although we have had a rush to the bottom of people devaluing all over the place. and people do it. people say we do it here and we don't want to admit it.

>> the chinese yuan, the numbers are clear. it was up 36% in the decade starting 2005 to -- >> really low -- >> 36%. now it's come down. it's still up about 20% relative to -- >> up 36% from zero too. >> no, no. >> go ahead. >> leadership in china today. meaning initially the comments we heard, they said don't worry we don't think it will be premeditated. are they thinking something different? >> look. this is their hot button. it is a nerve in sort of chinese perception of their vision of the unification issue. >> what's it mean in terms of our relationship? >> it is a two-way relationship.

they're dependent on us. we're dependent on them. if they drive us nuts, they are likely to retaliate. >> how much leverage do we have though? >> we have leverage in terms of restricting their access to our markets. >> i would think we have more leverage than they do. >> not necessarily. they own $1.3 billion -- trillion in u.s. treasury. and another $500 billion in other dollar based assets. >> how do we address the fact that behind closed doors they can never say it on television because they fear retribution switch part of the problem. that intellectual property isn't treated well there. that state subsidized ripoff know-how. that there's so many things that u.s. companies find frustrating. facebook can't even get in there, for example, how do we make changes on that front so there is a level playing field.

>> michelle, one of the things we did that was so important was in 2001 we brought china into the world trade organization. i think we have since filed -- the numbers are 19 various disputes to go after china for the types of unfair trading practices that you precisely identified. and in 19 of those disputes, over half of them found on our behalf and put on china to make them comply and they have complied in the disputes they've lost. and there are others that, you know, you've correctly identified that we can go through channels. we believe in the system that we set up and the world trade organization or we don't. but the idea that china is not accountable to a western based rules system is factual incorrect. we can do it. go after them. >> you sound like dan aykroyd selling a bag of glass to kids. yeah, it's great. these are super. they love playing with them. they can't get hurt from this.

they're going to be fine. >> i've been accused of a lot of things but never dan aykroyd. >> if you do business in china you accept the rules are a little different. i can just tell you it's not as if we don't do business in china, we haven't done business in china. you accept that certain things are going to happen and they've taken certain risks. and if the playing field over time can get more level or allow you to compete, i don't know that it's a bad thing. you know, the political part about, you know, taiwan to me it could be another euphemism. it could be another way to be able to -- >> you do business, alex, in china because it's a huge market with great potential. and so my idea for the president-elect is there is this bilateral investment treaty that's just been hanging there for eight years. that if he pushes ahead on that and he's supposed to be a great deal maker, open up the chinese market to american multi-nationals. we need new sources of growth. let's not talk about building

walls. let's talk about opening up what potentially could be the biggest market in the world. >> that wall is already built. you have an apple watch on? >> yeah. great. >> uh-huh. that explains a lot. that explains a lot. nothing wrong with that. >> thanks for coming in. >> thank you. >> mr. molinaroli -- alex is staying with us for the hour. coming up -- i'm half italian. i should be able to do it like that. president-elect trump's tour continues in north carolina where we expect the nomination of his secretary of defense. nbc political director and moderator of "meet the press" chuck todd is going to join us after the break to tell us more. hour are the futures at this hour. slightly positive open. "squawk box" will be right back.

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welcome back to "squawk box." looking at a live shot of the white house right there where president-elect donald trump is going to be very soon next month continuing to build out his cabinet. right now for more let's bring in chuck todd. nbc news political director and moderator of "meet the press." good morning. >> good morning, guys.

>> secretary of state, this has played out like "the apprentice" on television here. what do you think is going to happen? >> i think this is -- look. if you look at the transition and i've talked to somebody who says it's pretty easy to figure out, you have the position that trump is taking a very personal touch with. and you have the ones that he's not. the ones he's not, pence is working on it, they're getting filled quickly. the ones he's taking a personal position on, the ones taking longer is because it is his personal comfort level. it's about him and who he gets along with personally. >> you heard the new name rex tillerson from yesterday. from exxon. >> i'm curious what you think about this. there's a theory why he's enjoying all of these interviews with ceos. these are people that wouldn't give him the time of day a year ago. he's enjoying the idea they're all having to come -- >> can you tell me you're not enjoying the secretary of state

thing? >> of course. there's no doubt i enjoy it as a political -- >> andrew, suspense builds over secretary of state watch. when have you ever in the heard suspense builds over secretary of state -- i mean, this is classic. >> the rex tillerson on one hand, there's no doubt. any oil company executive has to learn -- know a lot about the middle east. >> and russia. >> but if you name him, you are acquiring oil company baggage that is just asking for political problems down the road. >> maybe he doesn't see that as baggage. you have to change the way you see the world. >> i'm saying -- does he want to produce more world oil or is it about oil here in the united states? >> i just think you acquire that. that is handing political opponents something to beat up on.

>> what do you think of the idea of the ceo of an oil company becoming secretary of state? do you think that skill set is transferable? >> i think if you run exxonmobil, global company, done it a long time, he probably knows as much about what's happening in the world as anyone. is that a politically smart decision, that's above my pay grade. >> below your pay. >> who knows. >> trust me. >> how is washington thinking about and on the republican side and democratic side has the number of business and people people from wall street that seem to be entering the ranks -- the media's made a lot of it. had hillary clinton won, none of these people would have roles. >> there are republicans that are ecstatic and enthusiastic. and there are democrats who don't like it for obvious reasons. i think it's more pro-business than they expected.

let's see what happens when he starts governing. there's always been the concern about trump. he ain't a republican and he's not really a democrat. he's something in between. >> where are the faultlines within the republican party right now. >> i think you just saw it with the tariff announcement. that drew it right there. i was curious to see -- i think the carrier deal in particular i was curious who would be comfortable criticizing it for what it would have been criticized with. and he immediately said, boy, this is a non-starter in our caucus. that's where you're going to see i think the number one faultline. but we knew that six months ago. that trade in general was going to be the fault line. >> the republicans ran the greatest republican ever in mitt romney. he was perfect. look at him.

look at him. >> perfect on trade. >> perfect. pure. >> he didn't win. >> no. and the working class people didn't think he gave a crap about them. he isn't one or the other, but he's president-elect though. >> donald trump's one of the few republicans that wants to get criticized by the business community because it helps him with his base. that doesn't -- that isn't normally the case. you know, that's what a democrat from ohio would want. he doesn't -- you know, and this is where it's going to be interesting. >> do you ever expect the republicans to regain the -- you know, not the 1% to appeal to much to the working class? they've tried -- i thought they were going to have it forever, the democrats. george bush said i wonder if a republican could ever get elected again. >> dull churl they've been doing it for awhile. i thought it was surprising now on economics they're not buying

into the economics. they're buying into donald trump on economics. i think that's where -- it's the mistake democrats made with barack obama. hillary clinton assumed that barack obama people were democrats. they're not necessarily attaching themselves to a party. they're attaching themselves to a person. >> can we talk taiwan for half a second? mike pence suggested it was a courtesy. trump also suggested it was a courtesy. now we understand from the reporting it may be more premeditated than that. >> i have a feeling that it's conveniently now premeditated. >> so you don't think -- >> look, i'm going by logic. if it was premeditated why wouldn't they say so on sunday morning. i'm sorry. i talked to a lot of republicans who said i hope it's premeditated. >> i thought they identified the person that set it up a month ago or something. isn't that out there though? >> why wouldn't mike pence say that on sunday morning? >> anne kellyanne didn't say it either. >> look, i just deal with --

>> initially the easiest thing to say was it was a phone call, relax. i mean, we talk to dictators. this is a democracy. >> but getting in a fight with china, that's good politics. that's good domestic politics. >> on purpose or not, it's brilliant. >> is that is the donald trump candidacy of 2016? >> thank you, chuck. >> you got it. sun trust coming live from the services conference. john taylor's going to join us. then fred hochberg. "squawk" returns in a moment. e? a basketball costs $14. what's team spiritorth?(cheer what's it wort ta to ur m?

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among the stories front and center. aetna may seek a full blown trial to try to help with humana. to delay the resolution until the trump administration is in place and that trump's justice department might be more willing to strike a settlement deal. medical lab operator theranos predicted revenue of $2 billion and a profit of $505

million for 2016 when it was pitching investors back in 2014. and 2015. that's according to "the wall street journal." the s.e.c. and the u.s. attorneys office are trying to determine if theranos misled investors and regulators. theranos says it is cooperating. autoparts retailer autozone out with retail earnings this morning. 5 cents above estimates. revenue was in line with profit margins improving. same store sales were up 1.6%. all right. let's get to wilfred frost who's at the goldman sachs conference and joins us with a special guest. >> thank you. i'm joined by bill rogers the ceo of suntrust. great to have you with us. unsurprisingly positive mood here this morning. the stocks across the sector rallied.

up about 14%. is that justified? is trump really that good for the banking sector? >> i think what's reflected is a couple things. one, it's pro-growth anticipation. whether it's here or not but pro-growth anticipation. obviously banks of fuel for growth. i think that's an accurate reflection. if we have higher growth banks are going to participate in that. i think it's also reflection on interest rates. both the absolute level and the slope of the yield curve. i think there are a couple things in play. >> hopes of deregulation, you didn't mention it. is the optimism about that a little overdone? >> i think that's a longer play and a longer poll. and the financial impact takes longer to realize. >> now, we mentioned the sector performance of rates. the other way is smaller mid-caps. they've soared ahead of the bigger cap stocks. you've got a big exposure to that area. >> referee: i think they are more optimistic. and i think as you reflect on small caps, let's translate that

to market companies. i think they've lagged in this but i think that's coming. if i look at the last year, employment and middle market has been up almost 5%. they're starting to see some of that rally. they're showing more optimism. a third now want to do some sort of m&a. last year that was about 12%. i think they're leaning in on this as well. >> when we consider all this optimism in the market base at the moment, how do you then weigh that up against the sort of threats veiled or otherwise donald trump towards companies that he might intervene in the marketplace? >> yeah, i think overall i mean, those are small instances. i think overall the pro-growth strategy is going to be the overwhelming part of the recovery. >> the sector itself if we continue to see this steeper yield curve, interest rates rising, possibly the deregulation down the line, do you think that can spark a wave in the banking space and something that suntrust would

want to take part in? >> i think almost the opposite. i think gives more capacity in their own company. we feel great about investments we've made, the places we are. and what this gives us is opportunity to realize on those investments. i think it might have the opposite impact. >> and in terms of where we are in the current cycle, when you look at your sort of commercial loan growth rates, where do you think you are? a lot of fears that people say we're close to the end. >> i think some of the loan growth when you look overall third quarter was down a little bit for the industry. it's been more incident related. those type of things. if it comes more in the form of capital investment, so let's say infrastructure and those things, i think we have a chance for some real low growth, sustainable low growth that's capital based. >> great stuff. we're going to have to leave it there. bill rogers, the ceo of suntrust. back to you. >> thank you for that. when we come back, john taylor on the future of the fed. plus much more from our guest host the ceo of johnson controls. "squawk box" returns in just a moment. [engine revvin

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president-elect donald trump heavily criticized janet yellen in a news conference saying in his words, in my opinion janet

yellen is highly political and she's not raising rates for a very specific reason because obama told her not to. now that he's won the white house he has his chance to put his stamp on the makeup of the fed. joining us now john taylor professor of economics at stanford university and fellow at the hoover institution. if there was a method to the madness, john, and welcome, i'd actually -- that would be -- the fed in my eyes would actually go up a little bit if i thought they had a decent reason like getting obama re-elected. i just think that they were too feckless or too worried about too many different things. it's not a dual mandate. they got to worry about currencies fluctuations on the island of cypress in their world in terms of when they're able to move higher. do you think it was political or just incompetence for being so far behind the curve? >> they were behind the curve. originally they moved last

december. it was anticipated they would move several times this year. i think there are considerations that are not a factor. it's hard to move off a low rate. and i think that's what you're seeing now. i think it's changed. probability of a rate increase coming up. the next week or so. it's very high. people are talking about higher rates later. i think you're seeing some changes in the financial markets. i think your longer term rates are reflecting this change. anticipated change in fed policy. and markets are doing pretty well by that. >> to do it now markets are -- they've got virtually no risk at this point. but it also doesn't show any ability to anticipate economic conditions in the future versus just reacting to where we are. >> you always have to react to where you are but forecasting is really hard. economics, it's hard for the

fed, hard for everybody. they could still have a predictable account of policy meaning they could be raises rates now. i think reflects some of those changes. >> do you think that there -- that the negative consequences are large or minor in terms of not having moved in the past? one says if you move gradually, if you started awhile ago, it doesn't have to be nearly as steep where things get dicey if you have to move much quicker. >> i'd prefer it if they start early and we'd be getting close to normal. close to normalize to get back to the policy that works well in the '80s and '90s before the last few years. i think the economy would work better. it's a sounder policy, more predictable.

>> seeing either bernanke or yellen, it's called courageous. is it courageous to stay at zero? courageous to keep -- isn't it courageous when you actually start doing things that people aren't going to like and rates start going up because you need to do that? >> absolutely. i think you have to take the punch bowl away sometimes. i think people are anticipating more of that now for various reasons. markets are responding pretty well. >> do you know that janet yellen won't get another term? >> i don't know. >> do you think she should if you were trump? >> i don't know. he's going to make the decision. i think what's important for me is do you have a monetary policy that works well? and we worked on that a lot about what central bankers should do.

also an international aspect of this. you've got the bank of japan and the european central bank having unusual policies. i'd like to see who could get back to a normal international policy. and the fed is an important part of that. i think the economy will do better. we haven't had a great recovery so far. so there's some really opportunities here as part of a broader reform, by the way. ang lot of things going on right now. >> if you were successful in getting your rules-based system to be used by the fed, have you gone back and checked where would we be in rates right now if it wasn't just left up to the discretion of the person in charge? where would we be? would we have gotten a couple more increases? >> oh, yeah. maybe 1.25%, 1.5%. but we would have gone there earlier. you don't want to go there overnight. had we gone there earlier, i think it would have been better. the record of the unusual policy, unconventional policy is not good.

so my studies, that's why we're having a conference here today weighing in. and as sort of a common theme here the fed would be better off if it got to a more rules based policy work like in the '80s and '90s. >> well, if it wasn't you that replaced her, is it -- who would your favorite two or three people be? >> rather than personnel, right now i think about the policy. we're learning more and more about what works and what doesn't in other countries. what i'm working on is you get a monetary policy that works. i always say like the '80s and '90s. but there are other countries that worked well. you learn from that. try to use that policy. by the way, the congress has a role here in terms of oversight. and there's some legislation. which i would say encourages the

fed. >> you think it'd be better if it was rick santelli or steve leisman for the next fed chief? >> some of my good friends, yeah. >> they're diametrically opposed. take a choice. leisman or santelli? >> i like them both. you know what i like both about them? you know, they ask tough questions. >> they do. okay, good answer. i didn't really think he'd answer. anyway, thanks, professor, i appreciate it. coming up, it's been one year since the xm bank was reauthorized. we will discuss the trump transition and the bank's future. and a programming note, tomorrow on "squawk box," check it out. caterpillar ceo will be among the special guest tss at the business round table conference. ceos of cisco, american

airlines, floor and more. all the way to the guy in the center you might recognize. peeker paul ryan. tomorrow "squawk" will be in d.c. we'll be right back.

caught in the political kros hairs. the bank was subsidize

opposition in selecting more members until they filled the board seats. the bank cannot back deals more than $10 million. joins us right now is fred hockberg. we welcome him to the show. good morning to you, fred. >> good morning. good to be here. >> help us with this. we've been talking all morning about the carrier deal. this is the headline from "the wall street journal" last week. donald trump's carrier deal highlights potential double standard on xim bank. and then you have a quote here, tweet rather from lindsey graham saying president-elect trump can save thousands of jobs by getting xim bank. >> when companies face foreign competition. so we're all about jobs. last year about 52,000 jobs alone that we haven't seen in probably over two dozen years because we did not have full

authority. >> and so but as you see the new administration, where do you think this bank is going to land? >> mr. trump, president-elect trump is focused on keeping jobs in america. that's what we're about. i would rather have manufacturing done here rather than done overseas. we level the playing field and do exactly what president-elect is talking about. more u.s. jobs. not shipping jobs overseas. >> you asked chuck todd earlier about the fault line and this is one of them. i hear what you're saying mr. hockberg, but the krit ims of the eximba bank will say it wouldn't happen in private industry. >> well, let's understand a couple of things. one, we support u.s. jobs. we collect fees from our customers, overseas buyers. we actually send a profit to the

treasury, and we keep reserves in the billions of dollars far in excess of our writeoffs. we send our writeoff report to congress every 90 days. it's running about 0.25%. so in fact, we are protecting the taxpayers. also we're protecting the job base in this country. we have actually sent a profit to the treasury since president obama was elected. about $3.8 billion on top of 1.5 million jobs supported. >> you're a traditional bank, right? what's your leverage ratio? how much do you maintain for loss prevention reserves? >> well, we have reserves that are audited by an outside auditor. we've got a clean bill of health from our outside auditors for over 25 years. and each year we work with our orders to make sure they're sufficient reserves based on the risk of the portfolio. >> and what's the leverage ratio? >> we don't have a capital base because we're owned by the u.s. government. >> fred, you were part of the obama administration's transition team. what do you make of this transition?

>> well, this transition team has come in, we have prepared a document for the transition team. over 140 pages of key issues facing ex-im bank, facing small businesses that want to support jobs. i wish i had such a good book when i came in. >> fair enough, fred. great to see you. thank you. >> thanks for having me. coming up, final thoughts from johnson controls ceo alex molinaroli. "squawk box" will be right back. make healtare morepersonal with patient-centric, digital innovaons; fromelmoring devices that can interpret pernal data and enable targeted care, to cloud platforms that invite providers to collarate with the patientshey serve. that's wver 90% heop 25 global pharmaceutics are turning to cognizant. our domain experts, technologists, digital d data specialists clinicia and scientists

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let's get back to our guest host. alex molinaroli ceo of johnson controls. so johnson controls we think of it -- used to think of it as autoparts. that's gone. it turned into $17 billion out of $40 billion or -- >> adion. and what's left is a $30 billion auto company. so it was $17 billion out, $10 billion in. >> so now your main business is not home automation. it's like commercial -- >> commercial buildings. largest fire alarm provider. >> half here, half abroad. what would help a lot? lower corporate tax rate help you or less regulation help you? or would a different -- >> part of our deal was we

became -- as a matter of tax policy, half our earnings are here in the united states. still a lower tax rate would help. less regulation would be helpful for everyone. you can't -- that's what this whole conversation has been about. >> you can see it flipping around or no? >> what? >> you. >> i don't know about us flipping around. i just think that this conversation, it'd be nice if it happened two years ago. >> i appreciate that but is there a way to bring you back to the united states in a meaningful way? >> we're in the united states in a meaningful way. as far as our domicile, that's hard for me to get our head wrapped around, how that would work. i wouldn't do it just to do it. >> no. if the tax rates meaningfully came down, repatriation system -- >> there'd be no reason to leave. territorial system -- >> do you think it would bring companies that have gone abroad back? >> it would certainly stop them from going. and i think you could find a mechanism that could happen. >> you weren't surprised by the amazon story. you work on the zbuts of a

building to make it smarter. what amazon's trying to do with no cashiers. >> there's all sorts of tentacles to that. but if you think about what's happening with amazon, what they're talking about. i think it's a long ways out. a great opportunity to talk about what we do in buildings. now all of a sudden the technology is working for the building owner. >> appreciate having you today. coming up, tech under president trump. the sector's been lagging. the broader market since the election. talk about the future of silicon valley with the founder of hyperloop one.

global market alert. the future of italy in question and the world's oldest bank hangs in the balance. latest developments straight ahead. the trump economy. jobs, trade, taxes, and regulatory reform. what should be at the top of the agenda? we will ask a top adviser. cofounder of a company trying to make elon musk's hyperloop a reality. joining us live we're moving from point "a" to point "b" and doing it in no time as the final hour of "squawk box" begins right now. ♪

live from the most powerful city in the world, new york, this is "squawk box." >> welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and michelle caruso-cabrera. our guest this hour, director of sherpa capital. and we'ahead of the data, futur have been marginally higher all day. we've gotten to double digits now on the dow. no small feat given how many days out of the last four, five weeks it seems like it goes up every day. 12 on the dow. up under three on the s&p. just under ten on the nasdaq. treasury yields have actually -- well, they're back -- 2.40% is sort of where we've been for

awhile. just under 2.4% right now. let's tell you about other headlines making news at this hour. italians minister saying elections likely to come in february. that coming after the minister had a conversation with outgoing prime minister renzi. shares of bank monte d dei pachi holding in the balance. to shore up capital following news of renzi's resignation. private sector cash infusion would have saved the bank from becoming nationalized. now the italian lender will have to support a state bailout. amazon its first convenience style store. it is called amazon go. the stores eliminate the checkout lines and cash registers completely. here's how it works. you scan your phone on a kiosk when you walk in. amazon determines what items you take from the shelves and

charges your accounts when it leaves. to identify items in different sensors and cameras. and i'm surprised you even have to bar code your phone. i would assume it would know you're there soon enough. >> you know what this means just as we talk about everything becoming software, used to be able to steal before you had to be good at being surreptitious. now you want to be a good programmer if you want to foo l. we're learning more about president-elect trump's tactics. utx ceo was on with jim cramer last night to talk about carrier staying in indiana instead of moving to mexico. >> it's no secret. i got a call from president-elect trump a few weeks ago. a week before thanksgiving. he simply said, look, greg i need you to look at the decision to close indianapolis carrier. we're going to do a lot of

things that's going to make it more conducive to manufacturing. we're going to take the tax rate down, reduce burdensome regulation. when all that happens, you're going to be printing money. but i need you to relook at your decision to close the factory in indiana. there was no quid pro quo for him to say, look, i'm not going to tax you if you don't do this. he simply said take a hard look at it. we worked with governor pence and i think came up with a relatively good solution for everybody. we keep the plant open. we keep 1,100 people employed. so it's -- i would say no deal but at the end of the day a good deal. >> hayes said it's more expensive to keep the plant in indiana but a $16 million capital investment in automation at the factory would help drive down operating costs. earlier this morning vice president-elect mike pence talked on "morning joe." >> less than a week after

putting together a cabinet, a legitimative agenda, assembling a national security team, our president-elect picked up the phone and called the chairman of the parent company and one american to the other said i want you to know we're going to cut taxes on businesses and individuals. we're going to roll back the excessive regulations driving your company out of this country. we're going to renegotiate nafta and we're going to put american jobs for americans first. would be be willing to reconsider this decision? and now more than a thousand hoosiers have jobs because of it. >> think of this as carrot and stick. those are a lot of carrots that the president promised and the stick is of course what he does on twitter, et cetera. >> all right, thanks. now back to the markets. the dow is now up more than 5% since election day. joining us right now is richard bernstein. he is ceo of richard bernstein advisers. the same one? i mean, that's your company

then. >> that would be my company. >> see, we wouldn't know whether it was yours since there's no middle initial to be able to distinguish -- >> we thought about calling it jim smith advisers. >> you know him. >> it's richard bernstein company and you are the richard bernstein. you're also a credit canbc advi. >> contributor. >> contributor. >> you could advise us as well. >> you've been pretty bullish, you have. and the election was -- had to get through that and all. >> it's okay. >> all right. good. coloring book and all. but now where we are, do you expect this to continue? we're up about 5%. >> i don't think you need a ph.d. in economics. i know you're going to talk to a ph.d. in economics later in the show. i don't think you need a ph.d. to figure out what's going on here. we have promises of a monster fiscal stimulus package. won't use the word keynesian

because you'll start twitching. >> what do you call tax cuts and deregulation? >> normally you get a program like that when you're in a recession. we're not in a recession. we can argue how strong the economy is, but we're clearly not in a recession. >> do you see tax cuts as keynesian? >> of course they are. >> i always thought the whole idea was to get more -- >> what if you cut taxes and didn't spend? is that keynesian? >> it depends. i will tell you it depends. >> because depending which side of the aisle you're on, spending all the money or it's about regulation. >> it's about injecting more into the economy one way or the other. and it's the question of who's doing it. >> i don't think private sector spending is very keynesian, do you? >> c and i are private sectors. c and i plus g. >> it's good in cases. >> there's nothing -- i have nothing wrong with -- >> by the way, animal spirits is

a keynes phrase. >> we're not in a recession. so why is the market responding well? why are rating backing up? because we are basically putting accelerant onto a small fire already. it's not we're in a small recession. i think the reaction is normal. >> implicit in what you're talking about is that 2% or 1.75% is an economic -- i mean, i guess -- >> it's okay. >> it's not really. >> from investor point of view it's quite good. from a political point of view, it's blah. >> it's about 75% wrong direction. in terms of what people thought. that's why -- look at the makeup of -- if things were flush and people were feeling great, you don't throw all the bums out. i mean all the bums.

everything. >> but wait. let's forget -- as i once asked a senator on this show -- >> doing better than everyone else. why'd it happen here? >> i once asked a senator on this show if things are so horrible in the household sector why is consumer confidence near a cycle? >> why was it able to jump another ten points since the election? >> i'm just saying how horrible can it be? i'm not saying people aren't suffering. it could always be better. i'm not disputing that. >> 92 million people are sitting at home. >> but we are not in recession. that's the only point i'm trying to make. that's the only point i'm trying to make. you're getting a promise of a huge fiscal stimulus package. do whatever you want, but it's all supposed to be stimulus. when we're not in a recession. >> we haven't grown at 3% in eight years. that's the first time that's happened in a eight-year period. >> i don't care. >> other people do care. >> you asked me why is the stock market up. will it continue.

my answer is yes. >> okay. so you're not saying we shouldn't get a massive -- >> no. that's not my issue. remember, i run a money management firm. i don't understand why people would be surprised by this given the economic backdrop that we -- >> they could be surprised because of the people that think we're blowing out the deficit and it's going to haunt us. >> i think there's a lot of risk if you're in treasuries, i think there's a lot of risk moving forward. >> just buy everything right now? >> no, i would not buy everything. i would bring those most sensitive to corporate profits. those would be called cyclical stocks. things like industrials. i mean fwb you look at small industrial companies, they're going wild right now. they're the biggest beneficiaries of what's going on with what's being promised. small industrial companies are going to be huge beneficiaries potentially of these type of programs. >> and you don't worry that some of the promises that have been

made, if you will, may not come true to the same extent in that for example on the tax rate, for example, talk about 15%. now closer to 25%. i imagine people will start talking about 22%. >> all it takes is for one person in washington -- one republican in washington to start questioning what's going on. and the market volatility will go up. i'm not very good at timing that. i'm not going to make any claims that i can. but i think the question is six months from now, ten months from now, will you have more or less stimulus? will the backdrop be better for cyclical companies or worse for cyclical companies. i think regardless of the next two months, three months, it's going to be better for cyclical companies. >> all right. so you've met richard bernstein? >> he's not a bad guy. >> yeah. >> he's not a bad guy. >> speak for yourself. >> how many employees? >> 18 employees.

$3.3 billion. >> no way. >> yeah. and most importantly although i have to be careful how to say this, management outperforming benchmarks. i'll leave it at that. >> can't put a number on it. and when -- how long is the -- how long you been doing this? where'd you leave? >> i was at merrill until may of 2009. we started the firm in october of 2009. >> which was probably not -- >> pretty good time to do it. >> it was a good time. >> we got cheap rent and the market started going up. >> hard to come up with the name? >> we almost called it jim smith. >> thank you. coming up, the hyperloop. our guest host is the cofounder of a company trying to make elon musk's high speed transportation system a reality. the full story in a moment. then tomorrow you don't want to miss this. on "squawk box" we are headed to washington. a huge lineup of business leaders. ceos of caterpillar, cisco, american airline, gps, and much

more. then an extended interview with house speaker paul ryan. all starts tomorrow at 6:00 a.m. eastern. back in a moment. generosity is its own form of power.

you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. welcome back to "squawk

box." futuristic transportation start of hyperloop one says in 20 years the whole world will be connected by hyperloop technology and that system will be be in new cities. joining us to talk about this -- also tell you that brent kalikinikos hyperloop one's chief financial adviser and former cfo is joining us. good morning to you. >> good morning. >> so this was originally the elon musk idea. >> right. >> but he's not working with you on this? >> elon wanted to contribute it to the world, open source it, let other people do it. it's kind of an experiment in the idea can you scale your brain. do you have to do every idea yourself or can you contribute it to the world and let a legion of other entrepreneurs try to bring that idea to life? and when i spoke to him years ago, we took a trip to cuba together. he said that, you know, he's a little busy with spacex and

tesla and solar city. and wanted to kind of open source it. >> this is true -- not to suggest that other things haven't been jetsons-like, this truly is. >> i just came from las vegas at our test site for hyperloop one. we bought all the land there. then construction is happening now. the tubes are being constructed. and we're shooting for the first full scale hyperloop test happening in q1, q2 of 2017. >> full scale? >> full scale is going to be -- we'll have cargo in there. it'll be cargo. >> from where to where? >> almost a kilometer. >> what's the cost of the test? >> it's -- i mean, we've raised $160 million. we're 200 people full-time. we have a two to three acre campus. you can kind of figure out

that's enough to do all of the things. >> how soon before you put a human in the test? >> i might be sitting in there. i don't know. might surprise you guys and just sit in. >> map out -- how much will it cost -- we're going to take -- he may take an amtrak train. i'm taking one tomorrow from new york to d.c. to actually put this into service in a meaningful way, what's the true cost of putting this together? >> it depends on each project. but it'll be much cheaper than current high speed rail projects around the world. and we've been signing deals and feasibility studies. we just came from dubai and abu dhabi. a if we did sf to l.a., it would be 35 minutes. so it would change the whole concept of where -- >> brent, just in terms of the feasibility of this, how many people can actually go on this

at one time? it's a small tube, right? >> sure. when you're talking about moving people, yeah it's a small tube there. it's on demand. you could -- yeah, we'd need to make financial model work and the technology will certainly work for one. it will certainly work for a couple of dozen people in a tube as you put it. >> but in terms of the economics when you think about it, do you think more about moving people or more about moving cargo? >> it's certainly both. you know, they're -- we're working on both concurrently in our current portfolio of projects moving around the world. there's cargo and there's people. cargo will be first. >> eventually it's more than 12 people, right? there's got to be -- >> sure. no, we're talking about individual parts. >> okay. >> and how many pods can run then in one shot? >> you can shoot pods 30 seconds after the other. you can think of it was one continuous train.

even if they're not connected. 30 seconds after the other. >> what does it feel like? the torque? >> like taking off on an airplane or train. >> physics doesn't change. you're not going to -- what's the maximum speed? >> i mean, our goal is to get to 700 miles per hour. >> wouldn't it be good to get there in two seconds. you might be squished. >> right. >> but i was thinking you could make stops, i guess. you're not going the speed of light. it doesn't take six months to accelerate to 800 miles an hour. you can do it in how long? like 30 seconds? how long to accelerate to 700 miles an hour? >> first five miles of the route. >> you wouldn't feel g forces. >> no. >> but you wouldn't do new york to philadelphia or would you? >> yeah. >> you could? >> absolutely. >> that would be fast. >> our goal once we have cargo working and people working is really to start replacing the

existing infrastructure for trains with hyperloop. >> brent, one of the other questions i had is how protected or defensible this business to the extent it ultimately could be. obviously the capital issue is an issue. if you can get the capital to produce the hyperloops. it's an open source idea. elon has said anyone can go do this. do you imagine you'll have competition? >> sure. there will be competition. always good to have competition. keeps you on your toes so to speak. we're the industry leader in the space. we've got over 200 people. we have a significant portfolio project that is moving towards commercialization. we're building now a global platform for cargo and for people. it's obviously contingent on us to keep innovating like it is for any tech company. >> all right. and one last question, private investors now but how much is this ultimately going to require the government to support this

in a big, big way, right? >> so you're touching on a few things. there's some unique aspects to hyperloop. not just the technology but in terms of the fund raising. the company itself is actually pretty asset light. so we don't need to raise that much for the company. where the more significant fund raising is going to happen is on themselves. where investors get to invest in the company. there'll be opportunities to invest locally in projects or globally in projects. and certainly you're tapping into more typical project financing models that are public private partnerships. >> right. and then finally before we go, i assume you're going to have to take over -- this has to go straight. this isn't like -- part of amtrak's problem on the east coast is that it has to circle around, you know -- you have to have a straight shot otherwise this doesn't work. >> it can handle some curvature, but as straight as you can. this is also when we're looking

at projects most of the first projects are going to happen abroad where some of the regulatory pressures are a little easier to deal with. >> it will be under the speed of sound? do you have to keep it there? >> no. >> there would be sonic booms coming from -- >> well, there's no air inside the tubes. >> outside would you hear it? >> no. >> people wouldn't -- >> no. there's no air. basically it's a vacuum. >> so weird. >> thank you for joining us. >> thank you. >> i want to talk about snapchat. he's brought glasses right here. coming up, "squawk box" goes behind the wheel. technology from aww dee. president of audi joins us with an announcement next. y you recomc over cedar? is this really any bettethan the one you got last year? if we consolidate suppliers what's the savings there? so should we gwith ors a 423 enou?wer? good question. you ask a lot of good questions...

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phil lebeau joins us now from chicago with a special guest. >> thank you. let's bring in scott keogh from audi. good morning, scott. explain to me what we're going to be seeing or what people in certain audis will be seeing in las vegas with this vehicle to infrastructure communication. >> good morning, phil. look, i think this is the firsty there are connected cars.

they're connected to your phone. connected to google maps. but this is the first time you're going to have a car that's actually connected to the infrastructure. this is where the world is heading. and basically what we've done in las vegas and this is the first market that we're doing, we have now worked with the government and over a thousand traffic lights in las vegas linked to either the q-7, the a-4 that you're driving. you will in essence know when that light is going to turn green. you'll see it in the instrument cluster in your vehicle. the amount of seconds counting down. and this is going to reduce the stress, the tedium, reduce the unknown. so we think it's cool. first-time vehicle to infrastructure. >> yes, it's cool. nobody would deny it'd be cool to be at a light saying it's going to change in 12 seconds. beyond that, what are the applications of this technology as you move beyond las vegas into other cities and allow these vehicles not only to communicate with stoplights but

eventually with other vehicles? >> you've got the exact point there. this is the start. so i think the primary benefit right now obviously is to the person driving the audi. where it's going to lead to, is the information can go from the car back to the infrastructure. what's that going to be if we're honest? we have good information about traffic flow and highways. but we really don't have good information on track and flow in inner cities. now you're going to know at this light, there are 50 cars. the opposing light has one car. why not keep that light green? so you can dynamically handle traffic, infrastructure inside the cities. then what's going to happen is it's going to be on more cars. once more cars are connecting to the infrastructure, the level of data, the level of intelligence will really be powerful. that's what we're working towards. >> quickly within you're starting in las vegas. what other areas will see this technology and how soon will you expand this program? >> as soon as possible. i don't want to make any announcements, but we are

actively working with a host of cities right now. look, this works if you can expand it and get the scale. that's what we intend to do. but i have to give credit to the city of las vegas. that was a place that handed us an autonomous license. that's where we drove 600 miles. and they are the first to step up and link their infrastructure to the vehicle. so credit to them. obviously we'll be expanding this as soon as possible. >> scott keogh president of audi of america on a day, yes, vehicles talking to spotlights and spotlights finding out where vehicles are at. this is the beginning of the connected automobile we've been talking about for some time. >> i can't wait. >> he's going to do it. >> i can't wait. >> all right, phil lebeau. thank you. breaking economic data. the trade deficit, productivity, and labor costs. the futures right now are indicated now at the best levels i've seen of the session up about 23. up almost five on the s&p and up

13.5 on the nasdaq. rick santelli standing by at the cme in chicago. rick, did it get back to you i asked john taylor who would be a better fed than you or least man and he said hands down santelli? >> he did not. >> taylor rules. taylor rules. >> you hear what you want to hear. >> the numbers? >> and they say what they want to say. we are 42.6 billion in the red for the trade balance. which makes it a trade deficit. darn close to expectations. and it follows what was a much smaller deficit at $36.2 billion. let's look at third quarter final productivity, shall we? we're looking for 3.3%, 3.4%. we have the handle right. 3.1%. that's follows our last look at 3.1%. and unit labor cost 0.7%. productivity is an interesting one. if i look at the last time we had a better than 3.1%, that's

actually not as easy as you would think. because it's been so paltry. we'd have to go back to third quarter, september 2014. third quarter at 4.2%. but we've had one, two, three -- three negative numbers since then. so i guess you take what you can get. we see yields moving back up. this is a well worn shoe in the high to mid-2.30%. dollar index has amassed a bit of a rally. instead of looking like we're going to jump over 1.08 we're still 1.07 handle on the euro as it gets its land legs over the vote. >> thank you. steve leisman is here to talk about productivity which has become the big -- >> huge. >> there's always a data point that matters at certain times. now it's productivity because the question is can less regulation under president-elect trump mean higher productivity.

>> you explained yesterday why this matters. the formula is simple. the question being -- i mean, i could tell you what hours worked proxy of that is population growth more or less. that's pretty much dialed in. the productivity number is the "x" factor. how guys can innovate and get in there. i thought for you we'd take a trip dough productivity memory lane. here we go. talking about 3% in the 6:00 hour. that was at 1947 to 1973 period. the automobile, the post-war period, electricity starts to get going. air travel. that was the hay day. those were the best days of productivity. robert gordon -- hated robert gordon according to joe kernen told us those were the best innovations we had. downturn in 1979. starts to pick back up.

then the next surge 2000 when computers start to come online. then you see the slowdown. where was the productivity you wanted to know? >> 2007 to 2015 only 1.3%. a big explanation to why gdp has been so paltry. >> if you don't have productivity, you can't get the growth. i'll show you where the productivity was. it was interesting. you think it was all tech? no. it showed up in manufacturing. look at that 4.7% surge in manufacturing productivity in the 2000 to 2007 year. robots, automation, replacing workers. greater efficiencies. so here are the reasons why. here's the discussion, here's the debate. here's what we're talking about why productivity. low capital spending in the post-recession period. and of course there's the over-regulation argument. these are two areas where perhaps the president-elect might be spurring productivity growth rb reduce regulation.

marty feldstein suggests it's mismeasured because more of the economy is a service economy. we do not pressure service productivity. we have slower innovation. we can talk about that with the guest host if you like. my personal theory is this. we've hired a lot of folks that come into the office not as productive. we're also losing older folks. i'm not going to say who, but the older folks tend to be more productive. >> because they know what they're doing. >> which means there is some productivity in the future to come as we train the younger workers on the new technologies that are out there. that's the debate. give me 3%, i'll give you 4% growth on productivity. >> if i didn't have to drive anymore, i'd be so much more productive. you're going to make that happen, right? >> right. >> joe wants to drive. >> we'll continue that conversation with him after the break. >> talk about why i think robert gordon is like a modern day -- someone who wants to shut down the patent office in the 19th century because everything had been invented. >> can i defend robert gordon a

little bit? >> no. we've got to go. >> he's done the good job explaining productivity growth in the past. >> great discoveries, they're coming even quicker in the past. they're not coming further apart. toam helping people everyere do whathey do. better. i work wartupske alpha mod to predict marke fivetimes t amelping tv tworks use socialata toredict what peop want to wah.

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donald trump's tough talk on trade during the presidential campaign earned him support across the country. joining us now harvard university economics professor greg. i guess, greg, the one thing that you want to highlight is the notion of a trade imbalance as being something that's negative and it's more nuanced that just money going out than money coming in. there's good reasons that a successful country has a trade imbalance like that. >> that's right. i think president-elect trump is right to want to promote economic growth. but i worry that certain parts of the incoming administration are focussed too much on the trade deficit. written that he thinks it's a big drag in economic growth. i think that's just not the

place to focus if we want to increase growth. >> whenever i think about arguing with wilbur, i think money niece at everything, but he's been pretty successful. and he's very smart. why isn't he -- couldn't you just tell him the way it is with the trade deficit and then he'd say okay you're right? or would he have some responses to -- you're kind of dogmatic about it. trade deficit is actually a good thing. it's a reflection of good things. right? explain that. >> there's a flip side to a trade deficit. where importing more than we're exporting. but the money the founders are getting for those are coming back to the u.s. economy in the form of capital flows. ask me why is capital flowing into the united states? well, we're a vibrant economy compared to those in the developed world. we're also a relatively safe place. there's a lot of reasons why

foreign investors want to bring their money here and if they want to bring their money here, then a trade deficit is going to natural result from that. >> but if you were to export a lot more? then the capital would still come back and you might -- then the actual deficit itself might lessen a little from exporting more and you'd be bringing more capital in. it seems like it's not something you want to exacerbate and build up a bigger and bigger deficit. you'd rather export more, wouldn't you? >> i don't think we should -- exporting more is fine. i'm not objecting to exports. but if foreigners want to bring money here, they have to find a way to get the money. >> that's fine. >> if we have balanced trade, they can't bring their money here. they don't have the money to bring here. the capital flows has to go hand in hand with a trade deficit. >> let's say -- greg, let's say imports stay where they are.

then we exports three times as much. wouldn't the trade deficit shrink? >> by definition that would shrink. >> that would be a good thing though, right? >> what i'm worried -- i'm not worried about promoting exports. what i am worried about is focusing on exports and tariffs which i think would be really adverse to the economy. i think there are good ideas floating around the trump administration. tax reform, regulatory relief, but i think the trade deficit is a distraction. indeed, if donald trump gets a better tax policy, if he gets a better regulatory policy, that's going to make our economy grow more. that's going to attract more capital to the united states. that's going to make the dollar stronger and lead to larger trade deficits. so some of the things he's talking about are good policies. but they're not necessarily going to move the trade balance toward zero. >> greg, it's michelle here. ongoing discussion over the last

couple days. deregulation, how much can it add to productivity, do you think? >> i think it can. i don't have a specific number. a lot of it depends on the details. you have to look regulation by regulation. there's no sort of one lever to pull. it has to be done at a detailed level. i think focusing on that is one of the positive things. >> realistically if half of the things trump is talking about doing happen, what could the growth rate in this country be? >> i don't think it's going to be up to the historic norms for a couple of reasons. one is we have slower product in the labor force. we're going to have slower growth in the number of people working. there's probably some truth to the robert gordon. some truth. i'm not saying he's completely right. there's some truth to it. >> what if baby boomers never tire? what about that? >> as a baby boomer i'd be happy with immortality. but i'm not predicting it.

>> you are s.o.l., greg. >> bob gordon's basic point is the stuff we're inventing is not as live changing -- >> did you hear about the hyperloop? were you watching? >> i did watch that. i think we're inventing some cool stuff. >> immortality might change things a little. right? anyway, how about these sex robots? >> thank you, greg. i'm going to save you right here. >> you see that? check out drudge. >> health care start-up looking to challenge drugstores like cvs and walgreens. an investor in pill pack, the company's ceo will join us after the break. good. how was your commute

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welcome back. health care start-up pillpack is taking on pharmacy giants like cvs and walgreens simplifying the process. joining us right now with more on the experience, the future of health care and much more, t.j. parker. he is the cofounder and founder of pill-pak. good morning to both of you. for those uninitiated, tell us about what pill-pak actually is. >> sure. so pill-pak is a full service pharmacy that makes it simple and these are folks managing multiple medications. we presort and package into individual pill packs based when

they take them and deliver them to the door automatically. we have pharmacists. it's just a much better solution for those managing multiple medications. >> and in terms of the cost? >> so cost to consumer actually exactly the same what they would pay today. they pay the copays for their medications and they get all the addition service and product in kind. there's no additional fee. >> i've got to go through a prescription benefits manager at this point. how do i get to you if my interface is through something that is determined by my employer? >> sure. so about 85% of prescriptions today are filled at a brick and mortar retail pharmacy. for those, it's no different. you sign up for pillpack online. tell us what you're currently taking. we take care of all the logistics of getting the medications to you. for you you don't have to do anything different than what you would do to a traditional retail pharmacy. we'd take care of everything. >> how defensible is this? it's a novel idea, but at the

same time i imagine walgreens, cvs, and everybody else if they were clever enough could try to replicate it. >> yeah, so we obviously differentiate it in a better experience. you have to totally rethink everything that goes on in a pharmacy and move it from a very reactive system, a system that doesn't sell into one that a proactive. that includes rebuilding the entire set of tools inside the facility. so it is really a radical departure from what we hope to do. >> you hope to sell to one of these guys? >> i think t.j. is one of the greatest entrepreneurs that -- >> is that a yes or no? is that a yes or no? >> we're excited about a long-term future for him in pillpack. i'll explain at sherpa capital how we look at things. we cop up with a thesis, this is how we found t.j. and pillpack. we thought in the pharmacy space there's going to be a lot of

disruption. and that someone who could vertically integrate that space could built an interesting mo i. we met him at a bar over a weekend and put out a sheet. we're big believers -- >> before we let you go, any impact if obamacare gets repealed? >> i think the current theme is we need to move from a system that pays for quantity of care to one that pays for quality of care. probably not the expert to talk to about whether it gets repealed or not. if it does i think that's here to stay. the only way to sustain in the u.s. is how to move the payment models to pay for quality. i think that's here to stay. >> okay. t.j., great to see you. fantastic. >> thanks, t.j. >> good luck with it. >> thanks for having me. all right. coming up next -- loved him in "hangover" -- jim cramer joins us from the new york stock exchange. we'll get his takes on the top stories. when we return. my business was built th passion...

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it's especially so when it's a customer that's doing such good and important work for the environment. together, we're building a better california. let's get down to cramer on the new york stock exchange. where was that interview with the big jet engine behind you? >> that was at the big pratt and whitney facility where they're making the gear turbo fan which is the most environmentally

friendly and hottest selling, frankly. i was glad to look at the thing because it's where you need engineers. it's the kind of jobs you and i want in this country. those are the ones that we cannot afford to lose. >> we had alex molinroli on. it was greg hayes that was unfortunate enough to get the first call. he goes i'm glad it wasn't me. who wants to get the first call from the president-elect about keeping jobs here? i felt bad for him. he handled it pretty well. off camera did he say anything like, god, here i am, i picked up the -- it's like greg hay'es no, he's not here, mr. president. >> no, it was actually the opposite. this is a guy who's calm, he's tough, he's liked, he took the call. he said, listen, you've got to be man about this stuff. i mean we did it on tape at one point say, hey listen, if there wasn't a youtube video, hey,

luck of the draw. so i mean i think he's kind of like a regular guy. obviously you don't want to get a call right before thanksgiving, but hey, listen, it was fine. we got the call, we talked, it was good. >> i don't want to think too much. i don't want to think about unintended consequences, i'm just glad for those -- they profiled some of the people that keep their jobs. i'm just going to be happy for a while, jim. we can be happy, can't we? >> you know what, i'm there. i'm there. the wife, no. me, yes. >> thanks, jim. we will see you at the top of the hour. tomorrow on "squawk box" live from washington, a huge lineup of business leaders, plus an extended interview. i have a special guest, house speaker paul ryan. it all starts tomorrow at 6:00 a.m. eastern.

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president-elect trump tweeting just minutes ago saying that the cost of the new 747 air force one is, in his words, out of control and suggesting that the order should be cancelled. cancel order! shares of boeing have recovered a little bit but at one point the stock was actually down 1.5% after that.

>> it's an amazing thing. there's a whole page on boeing's website dedicated to air force one. >> the problem is that the current planes have so many problems that it requires like daily heroics to get that thing in the air just to keep all the things going. >> why doesn't he use his own plane? >> i'm all for that but they probably won't let him because it doesn't have all the communication software. >> the security stuff in there. >> our guest host has been the co-founder and managing director of sherpa capital. we haven't talked about snapchat. joe asked what they are. put them on. they're on, right? >> it would be taking video and snaps. >> you're taking video of us? >> i'm not doing it right now but i should be, but i'm not. >> and you think snapchat, you're telling me off the air, in terms of the value of snapchat -- >> i predicted facebook would be worth over $200 billion over five years ago. with snapchat, we're looking at

a cultural phenomenon. i think it's definitely threatening facebook and other companies. >> put a number on it. >> my prediction is that snapchat will be worth at least $100 billion within five years. >> because what? what happens? >> if you look at -- if you look at the youth demographic, which is the most important one, they are living and breathing on snapchat every day. it's part of their daily behavior. they're not using facebook anymore. >> does that mean you'd be short facebook on the other end of this? >> well, that would be probably a smart play. >> where does google land in this world? >> google has been pretty behind. compared to what evan did with this launch to google glass, you see the difference. i think evan has the potential to be kind of as close to steve jobs of his generation as we've seen. this shows amazing sense and sensibility of how to launch consumer products.

>> we're talking about the watch real quick. where do you land on apple these days? >> i don't think the watch is the future of computing. >> is apple the future of technology? >> i think -- i think there's going to be a lot of companies, including snapchat, who can take over many of these types of consumer products. >> thank you. thank you for being here. a lot of fun to see you. >> it's great. >> make sure you join us tomorrow for ouring about d.c. show. "squawk on the street" is next. ♪ good tuesday morning and welcome to "squawk on the street." premarket study this morning as the dow comes off its tenth record close since election day, busy morning of earnings and macro data. european stocks mostly in the black as renzi now says he will stay until a budget is passed. oil is lower, don't forget some