♪ live from new york where business never sleeps, this is "squawk box." good morning. welcome to "squawk box" here on cnbc. i'm andrew ross sorkin, with joe kernen, kelly evans hanging out with us. the march to dow 20,000 continued yesterday. the dow gained 65 points closing at a record high again. led by goldman sachs and disney. the s&p 500, nasdaq, russell 2000 and transports all logged new highs. at this hour, we're looking at another up day. at the moment, the dow would open up higher by 53 points. the s&p 500, 4 points, and the nasdaq 12 points. >> overnight in asia, japanese stocks hit a one-year high. the nikkei rose 1.2%.

shanghai stocks rose bay hay a percent. the hang seng fell by a half percent. the ecb, pay attention what's happening over here, you guys over. there we'll lead you out of the doldrums. crude prices extending gains, up nicely, 51.28. wti rose more than 2% yesterday. the treasury yields, i was thinking 2.38 is where we would be for a while, i saw 2.44, isn't that a near-term high? i will be looking over at tara once in a while here, just to confirm certain -- certain second cal thin technical things. great to have you as a guest

host. >> good morning. >> thank you. >> whopner can squawk all he wants. if you want to come on here -- >> there's no reason why we can't share brilliance and talent. >> 100%. >> he comes on here. >> it felt easier to get up this morning. there's something in the air the last month. it feels -- you jump out of bed. >> let me see if i can describe it. do you feel great in the morning? it's almost like you feel great again. >> i feel enthusiastic. enthusiastic. >> like feeling great again in the morning is also -- >> what time did you get up? when i got up, i'm not sure i would say i was feeling great. >> when you think about the prospects of the united states, it doesn't put a bounce in your step? >> what's exciting is not knowing what's going to happen. >> oh. >> i'm just saying. when it's in the fours -- >> as a money manager, that's good you have uncertainty. >> the transports, they -- for all the people -- you are not looking necessarily for a top.

you wrote a piece yesterday it was the trump meltdown. when we write a headline, you give it to someone. >> yep. >> her trump meltup continues turned into trump rally could have problems in january. because the house is not burning doesn't sell. >> it's not like that wasn't also in the article. the point that everybody is trying to wrap their heads around is why is this so powerful? >> the thrust -- the thrust of every article and every question is this is too far too fast. he's not even in office yesterday. no fundamentals back this up. built on fluff. >> this has been true since 2009. there's nothing written about the markets since 2009. it's the most hated market. >> the transports -- one last thing. transports don't hit new highs right before something's over typically. >> here's what i don't understand as a money manager. institutional flows of capital. where are they allocated? so if you think back for a

second, you basically had three hours to react and position yourself for a 4% s&p rally the evening of the election. you had no chance to do it. i think if you want to call this a trump rally, okay. fine. andrew, if you think about what this is, there's been a massive move in 2016 to passive investing. everyone is a closet indexer. everyone hugs the benchmark. think for a second how underinvested everyone was and unprepared they were for the outcome. think about the exposure to financial institutions. nobody owned financial institutions going into the election. >> if you're saying everyone was passively invested, hugging the s&p 500, they are thanking god right now because they've participated in the move we've seen since the election? >> the money manager is protecting his job, and there was disparity between the

performance of the s&p and how those active managers were managed. >> yes. this is a classic class for performance. i will tell you i believe -- i think the three of you might disagree -- i think this is the crescendo for passive investing. i think we're about to pop that bubble of passive investing. i think in 2017, you're going to see much higher dispersion. you had very low dispersion in the marketplace the last couple of years. a skilled money manager can get some -- >> it's surprising, you would think with the market on the tear it's on, the correlation has dropped. it's at year to date lows. you could argue it's a great environment for passive s&p 500 index funds and for stock pickers. >> might not be the trump rally, it might be the end of the obama presidency rally. even if it was hillary clinton, they would have given her -- even though people thought it would be an extension of obama, i don't think anyone would have thought it would have been as

bad. >> i will say the economic numbers towards the end of the summer began to improve before the election. >> it's like murphies law. this guy comes in. >> obama got it, too. >> it will be like -- >> manufacturing -- >> like that $50 billion invest front softbank. he will take credit for all these things. fshlgt fshl >> we made this argument before. >> when things like that happen, doesn't it seem like a higher power is behind it? >> the only question is right now -- >> the dark forces -- >> it's hard to suggested that what's happening in the stock market is based on fund theals. at some point it will be a show-me economy. >> good chance for tax reform, deregulation -- >> all of those things have to happen in total. >> but it refutes the idea that the old growth initiatives were

passe. remember the debate -- >> it only refutes the narrative in the context that the market is betting on something to happen. it doesn't refute the narrative yet because we haven't seen it happen. >> the market will be right. >> the market is always right? >> the market will probably be right about this. let's bring in the head of investment strategy at pro shares advisers, from the look on his face, i'm not sure whether you agree with this or not? >> i'm not sure i'm supposed to agree with. >> i can tell you if you want to know. >> there is -- taking politics aside, there is a fundamental basis for this rally. we seem to have ended the earnings recession. yes, this happened just before the election. q3 earnings was the first time in seven, eight quarters that s&p 500 earnings increased by 3%. now there is a show-me aspect to this. the rest of this rally, the sustained rally of equities has to come from earnings growth. consensus has double digits for

the next two years. >> that's -- you're completely discounting the effect of animal spirits. i can show you another chart if you want. i know earnings slowly turned as the negatives from currency headwinds and from tough comparisons in the energy group, so we went marginally positive on earnings growth that doesn't explain a market that goes like this. we've had a lot of these guys come in and say, no, no, it's not the election. things were already -- look at it. it's a blast off on november 9th. that's like saying brexit was -- no, it happened, it had nothing to do with it. >> it's the sensitivity, even while rates are still on the low side -- >> were you predicting a clinton win and that the market would sell off if trump won? >> i don't predict politics. >> that's not predicting politics. were you predicting that the

markets would sell off if trump won? >> whether you were on the left or right, you want fiscal stimulus. >> i guess you were. a lot of people are still clinging to their pre-election stances that you have to move on at some point. >> it is absolutely true that earnings growth projections have gone up. >> there are some good prospects. would you like lower business taxes? >> that's where the increase in earnings forecast is coming from the increase in earnings forecast are coming from the hopes of less regulation, the hopes of deficit spending. >> you said they already turned. they had already turned. >> they did start to turn, of course they're taken off substantially since the election. what about the possibilities for repatriation of capital? it will not be the same as 2004 with the tax holiday. what do you think the impact is? do you think companies will buy back shares or an increase in

m&a? >> we are starting to have capacity constraints. the economy at a low rate has grown since the recession. they have to start spending capex. >> just to -- i don't know if you missed our "squawk box" two days ago in d.c., we were with chuck robbins, ceo of cisco. $62 billion abroad. are you going to bring it back? what you are going to do with it? the answer was i will spend half on buybacks and half on m&a. that should be good for the markets. there will be questions invariably he about whether tabs good for -- >> great for the shareholder. >> if you're a pensioner and own cisco, you're a closet index, you have cisco, it's good for you. because i think there's going to be -- i think this repatriation thing becomes a larger political issue. i give him credit for answering the question candidly and

honestly. a lot of others said i would spend it left of center -- >> isn't it better than doing nothing? >> no, it may very well be. >> we came to the conclusions these things that we're talking about will stimulate gdp growth to where demand picks up, suddenly workers are -- there's a shortage for workers, to where rages start rising organically. all these things play he into it. >> the question is can you create a one, two, three, four -- four-year boom? sure. the question is can you create sustainable boom by doing these things? >> we did it before. >> the point of dispersion isn't right. when you see these things happen, some companies, as an example, some will do buybacks, because this is a one-time event for them. some will increase dividends because they see it sustainable and part of a greater economic expansion. that's where i agree with

earnings growth, dispersions increasing. >> anything is better than just leaving it over there. then we have to make sure we change it so these people don't do it damait again, and do anot one-time repatriation. the way it's working, you probably will want a few democrats on board here. part of that will probably go with trump, maybe with a hard core conservative, it wouldn't go to infrastructure, but i bet some of this gets earmarked for priva private -- public private infrastructure. >> i don't think it's unfair to ask questions about whether this is all very sustainable given that the market has rocketed and nothing in actual -- underlying it has happened. >> questions are fine. but if again and again and again those questions were proven wrong over the last few years, it's good to ask questions. but you can start thinking, wow, i think maybe this other thing actually is going to happen. i should start thinking that

way. questions are great. they are. questions about existential questions, who are we. why are we here? i understand that. you see what i'm saying? about brexit, about the market going down 1,000 on a trump win? >> we will see long-term where this all ends. >> did the market really want hillary so -- >> you remember when the taj mahal was built in atlantic city? it was beautiful. the greatest thing you've seen. have you been to the taj mahal casino recently? that's what you don't want this all to look like 5, 10 years from now. >> i do agree with andrew, the biggest risk for capital markets is that the incoming administration attempts to tackle healthcare, immigration, tax reform all at once. >> dodd-frank. >> regulation. can't tackle it all at once. the biggest challenge for president-elect trump is to fight off the government boredom. it can't be a deal a day.

there has to be concern for the capital markets if we come in and we try and do everything all at once. i don't think we're going to. >> a lot of these guys have been in congress for a long time and they haven't done anything. they're champing at the bit to get something done. there will probably be some productive things done. >> better for the market if we drag it out over the course of four years. >> you're near to this gridlock and do nothing -- you were around for -- >> absolutely. >> were you 50 -- you're not 50? >> i turned 50 in october. you didn't wish me happy birthday. >> happy birthday. >> i also followed you on twitter. you didn't follow me book. >> probably blocked you. >> i don't follow anyone. i follow breitbart news busters. where were you in 1981? you were like 10? >> that would make me 15. just entering the work force. so you have some idea. >> newspaper route. >> thank you.

joe, stick around. >> he experienced the great df spend i defense spending. it's a joke. only sort of. president-elect trump adding another "squawk box" regular to his cabinet. cke restaurant ceo, puzder. john harwood joins us. >> president-elect trump continues to fill out his cabinet. he did so yesterday with andy puzder of cke restaurants. this is a long-time republican. he backed mitt romney in 2012. he is somebody who has signaled -- on "squawk box" earlier this year, he signaled that he is quite ready to get going with president-elect trump on reducing regulation. take a listen. >> number one, you stop the executive orders, put a moratorium on them, repeal the ones that were oppressive. number two you go back through

and look for business regulations that are oppressive, eliminate those. number three, he will tell everyone agency head to list those that are important and least important and eliminate those that are least important. >> reporter: the overtime rule pushed by the obama administration, this is something that andy puzder has expressed opposition to. you have minimum wage efforts. puzder said he is opposed to minimum wage efforts that go too far. specifically he mentioned the $10 an hour that president obama pushed for. and embraces the prospect of automation to bring down labor costs for american businesses. the questions that both of those things raise is first of all what does president-elect trump, who was elected as a upon list to help american workers what does he intend to do for them? what will the laws of economics

allow him to do. guys? >> we've had -- he's made those same points many times on the show, john. >> yep. it's amazing watching what's happening. we're learning something about -- donald trump sees everybody. i think he met with leah. he meets with gore, appoints scott pruitt. >> kind of enjoyed that, didn't you? >> oh, my god. i'm having trouble right now with -- >> i'm sure you're having trouble containing your enthusiasm. >> exactly. same with puzder. he's a very smart guy. i think understands the private sector really well. should be good given what labor and the nlrb has done over the past eight years, this should be -- you add all these things up, it explains some of what we're seeing. >> just brace yourself, joe.

>> for january? she told me already. i'm bracing for january. >> just like andrew, you're going to have some people in the senate raising questions about not only andy puzder but some other nominees. yesterday a democratic senate leadership aide indicated that he thought puzder would be confirmed. >> if you take every single one of those names, will they be able to mount opposition to every single one of them? >> no. no they'll take their shots. >> they totally flooded the zone. who do you think has the biggest target on their back with -- >> that was the question that i asked yesterday. i think tom price at hhs has the biggest target on his back. >> yeah. why would you want a doctor in charge of health and human services. >> i think from a democratic perspective, it's more somebody who wants to change in a substantial way medicare and

medicaid. >> right. yeah. >> that's not something that was a big part of trump's campaign. >> no. >> exactly right. and that's a big question underlying that pick. is that a -- is that a pick meant to assure conservative republicans that he is sympathetic with them or is he actually going to change what he said in the campaign? remember, this campaign donald trump said i'm not touching medicare or medicaid. we don't know exactly which way he'll go. >> john, i was hoping you would just wear the trench coat indoors. the mcgruff trench coat indoors. >> i got a new trench coat now. >> will you -- why would -- we wouldn't -- you're inside. you can still wear it. just to look sort of -- >> you know, you never know. mary duffy may want mre e to we that trench coat indoors. coming up, the government wants to know are you in favor

of allowing cell phone calls on commercial flights? details after the break.

welcome back to "squawk box." we are in the chairs. back in the chairs. haven't been in the chairs in quite some time. we have a new proposal from the department of transportation that would permit in-flight phone calls on commercial airlines. each airline would decide whether to allow calls during flights. if accepted passengers would use the on-board wifi system to place and receive calls. during the consideration period, the d.o.t. will analyze the public's reaction. a final decision could be years away. i have two comments before we start. one, you know babies screaming in planes are very difficult for me to begin with.

once you put them on a headset t makes it harder. the second thing is think about how terrible gogo wifi service is to begin with. if you're going to pipe you wile pipes -- >> you don't know yourself. >> i don't. >> but you do. you will want to make phone calls on planes. you'll want to do that. you won't want anyone else to. >> i know. >> you'll want a special edict that only you as an important reporter can do this. you, on a four-hour flight, if you could make phone calls -- >> years ago. >> they used to have a phone in the seat in front of you. >> when enron was filing for bankruptcy. i was on a plane, working for the "new york times," i spent $600 on a phone bill, ended up buying the people around me drinks because i had to be on the phone and hook up my

computer to a mow democrat dem something. it was terrible. i was buying everybody drinks on the plane. >> who paid? you paid? >> i expensed it. >> andrew -- on this acela, i did make one phone call. i had the -- >> you were whispering? >> not that bad. but it could be bad. people that want to hear -- that want you to hear what they're talking about. >> on the subway, they're starting to get cell service. every now an then you have people on the phone and it's always people on the phone who don't need to be who are the ones on the phone bothering everyone else. it happens in the subway even. >> i can't believe it. maybe you guys were serious about changing your ways a bit. i'm reading this. let me read this. >> what a paper. >> during the last -- during the last eight years, president obama showed what happens when

the world's great effort power tries to avoid giving fright. he began his presidency with lofty views. tended up in him getting the nobel peace prize. in the real world of geopolitics the results have been catastrophic. >> who wrote that? >> who wrote that? >> did someone put some insert into this thing? >> who wrote it? >> oh, that's it. it's just an outside guy writing an op-ed piece. but they let it in there. >> yes. >> they let it in there. >> yes. of course they did. >> goes on to say he in the last sentences, the world's most power. country, the only way to safeguard the world is if people respect you. we haven't been respected for eight years. it's been an eight-year drought, now america's enemies are right to be alarmed. >> look. >> what a paper! >> i'm happy to -- i'm not happy to say it, but it's possible to say this election was an

indictment. >> this letter would have never slipped through we have a new public editor, liz spade. >> i hope so. wow. we might even start -- any way, coming up, markets are in rally mode. the dow -- >> great publication. >> i keep checking. >> the stock on the new york times is up. >> on trump. >> i know. >> dow 20,000 is on. blue chips have gained 7% since donald trump won the election. i like the "new york times." is ♪ ♪ get upo $2500 ster cash on lect 2012017 models for estes. see yourexus dealer. this is myeauarters.this isd manage my portfolio.

since i tures, i'm pluggeinto equities-ilis isd mas angold markets.okay.o. trade confirmed- and i ve gbal acss 24/7. ang i can do what i nd to do, then i can focus o what i want to do. sito see what adngdacom futures can do f you. ideas come into this they are the natur born enemof the way things are. yes, ideas are scary, and messy and fragil but undethe oper care, they become mething beautifu

. >> welcome back to "squawk box" on cnbc. u.s. equity futures, do we need to check? they're going to be up. they're itup 58 points on the d. if you start talking like that, it still is a bit surprising. like to come in here every morning and see this up five now on the s&p 500. nasdaq up about 13. one thing you did point out. it has been a hated rally. for two years we didn't go anywhere. we just churned. should we be surprised we have a bit of -- maybe some fundamentals did catch up? >> see, what i don't understand -- i don't believe in making predictions or forecasts where the s&p 500 is going and rates are going. i think that's a fool's game. you could have a series of

expectations surrounding a series of select asset classes. i don't understand why we're having daily conversation about is this the top? >> that's what news organizations do. >> we're dealing with a deeply liquid market. if there is a correction, that's the point where you have to say to yourself, okay, on the correction, what am i doing? there's ultimately going to be a correction in the marketplace that will be dissimilar to what we had in the past couple of years. you need the evidence at that point to suggest that will happen. >> one thing -- i tell people, if it was 780, in 1981, the dow, and then all of a sunddden, it' 10,000, that's 12 times. when we go from 18,200 to 19,500, that's not like going from 800 to 10,000. we can't wrap our head around a 25,000, 30,000 -- they sound like ridiculous fools

predictions. some day the dow will hit 36,000. >> the interesting thing is no one is talking about the fact that we're coming out of an earnings recession. >> the two-year doldrums in the market. we've gone nowhere until recently. >> manufacturing. >> you throw in the whole show into flux. we have all these great headlines written. >> let's do them. >> too late. >> the dow taking another step towards the $20,000 level. let's find out what is driving the trump rally of late. dom chu joins us. >> anybody who looks at the nikkei quotes gets an idea of what it's like to talk about tens of thousands in numbers for an index. i guess if you're watching the nikkei, dow 20,000, 25,000 doesn't look so terrible. if you look at the dow, it's been amazing. about 13 different record highs just since the election. you can see here, 12.5% gain.

19,615 we'll call it. 1.7% away from the 20,000 mark. as for what's kind of moving things around within the overall markets, specifically the dow, you look, it's not the only one that's out there at record highs. the s&p 500 up 10% so far, just year to date record highs. the nasdaq composite up 8%. russell 2000, up 22%. some people say that's encouraging to see small cap stocks, mid cap stocks and dow transportation stocks all up by 20% or more. as for the individual components within the broader s&p 500 that are moving around. we have a total of 112 new 52-week highs, at least 52-week highs. 46 of them are financials. the bank stocks are still the ones leading the way higher for the overall market. watch goldman sachs, jpmorgan. industrials and technology stocks, 24 industrial, 16 technology stocks. if you look at this, the vast majority of new highs are all in

the cyclical sectors, the ones that are more economically sensitive. if the bulls out there are looking for a reason to get more optimistic, you have the dow theory confirmation, you have the cyclical sectors doing really, really well in this market. that's the reason why, guys, a lot of folks think this market may still have legs. i don't know if we can call tops or not or if joe wants to weigh in on whether or not there could be, overall, there's a bullish case right now. we'll see if it maintains the momentum. >> thank you, dom. it's interesting to way the watch the way this changed, all the financials leading the rally. then the transports jumped in. the nasdaq doing okay a bit lately with that tech. >> transports, the rails have been strong throughout the year. clearly a lot of the economic activity that you're seeing now bode well for them. this is an economy based on

convenience and time, look at amazon and who delivers those products, fedex and u.p.s., they continue to move higher. i don't see why you should be suspicious that will end. on the financials, again, this is -- you're turning a battleship that was moving in one direction for five years. that direction was to be underweight because of the liquidity trap on the balance sheets, because of regulation. the premise that sifi could be taken the threshold from 50 billion to 150 or 250, that's going to unlock some animal spirits for the regional banks and hopefully some m&a and certainly growth. i think it's -- there's validation in the price activity right now for financials. i think that continues. >> to sum it up, if you look at the market now able to actually -- it's not multiples. multiples can't expand if interest rates are going up. something else we've been waiting for for eight years, the handoff from the fed to the underlying economy.

the market was overvalued supposedly. was it overvalued at 18,000? not if earnings will grow like this. not if you have a gdp get back close to 3%. everything that we wanted to happen is happening. higher stock prices as interest rates are rising. can you believe it? >> what's funny about that, for years the federal reserve has said monetary policy can't do it alone. we need fiscal policy initiatives. now the market suspects they'll get those fiscal policy initiatives. you're correct, with those initiatives we can be excited towards what's going to happen for asset classes. you can make a compelling argument now for each and every asset class. the one that might struggle is emerging markets. wapner's show is like an hour. he always has this guy. he doesn't have to do anything. brings up a couple points, and then he goes off like he just did. then it's 12:20. then they come back from break,

say a couple of things. so, joe what about this? then it's 12:25. >> we have to do options with pete. >> wapner is coasting through these things. >> smart man. >> he is. >> scott is a smart man, that's for sure. >> he might be watching now. >> i hope he is. >> quick little weather update. much more of the northern half of the united states bracing now for a blast of old weather, forecast models showing similarities between next week's system and the polar vortex that developed back in january of 2014. that system brought windchill temperatures as low as 60 degrees fahrenheit below conditions. i the worst of the system is expected to hit tuesday and wednesday. if you're traveling watch out, folks. coming up what distinguishes the world's best performers and billionaire investors from everyone else?

best-selling author tim farril will join us and tell us about daily habits and how to break them down from his new book "tools of titans." back in a moment. you can't predict the market. but through good times and bad... ...at t. rowe price... ...we've helped our investors stay confident for over 75 years. call us or your advisor. t. rowe price. invest with confidence.

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welcome back to "squawk box." it's time for our executive edge. our next guest interviewed hundreds of billionaires and world class performers. in a new book out he breaks down habits and daily routines he says pit these people a cut above. let's bring in tim farris, author of "tools of tigtans." for our body is a whole separate issue, we should be going to the gym, what we should be eating. >> kettle bells for another time. >> i hate those. >> if i hear kettle bell one more time. >> there's a podcast you have that surpassed -- how many people downloaded it? >> 100 million. this is the future of media. you interviewed now all sorts of people, top performers, billionaires and others. is there any sort of life lesson that you think cuts through all of them?

>> the most common is, i would say, asking seemingly absurd questions. if you look at peter teel, he has quite a collection of them. he's been in the news a lot. he would ask himself and other people why can't you accomplish your ten-year plan in the next six months? and then contemplate that and use it to question assumptions. >> what do you think drives these people? >> well, i think some people hate to lose. i think some people love to win. and i think others are just scratching their own itch. a lot of people who have done the best financially are scratching an itch and need they have and had a problem they are trying to solve. >> scratching their own itch. i misunderstood. i thought you said scratching your own ass. i did. you swallowed the word. >> probably some of that going on, too. >> i do that. >> possibly unfair question. of all the people you interviewed, was there one that was the most impressive? >> one who was really

unexpectedly impactful was was a p paliative care doctor named b.j. miller. >> what did he say? >> pointing out the beauty of something that is pointless or meaningless. so he will give a lot of his patients painting books to ponder why that could be serendipitous and beautiful. so they don't get hung up on that existential questions and get hung up on end of life questions. >> it happens once or twice for you if you're in the room. these people go, like my mom, then someone else. someone after that. the next day. it's heart wrenching to watch, but beautiful at the same time. but these guys, they do it, it's a calling. it really is. i think that they feel good at

night probably. >> for sure. mark andressin was fun. >> i thought you were going to say fun. how about jamie foxx? >> you just let jamie go, good life lessons also. >> what have you changed about yourself and your own processes? you are a true-life hacker. always doing weird stuff. >> >> i have dedicated at least half of my think being my routine and habits to cultivating gratitude and present tense awareness. the people who are most su successful -- >> people say that and it --. sounds woo-woo. >> a similar approach to journalling. out of ten people who have done it that have been recommended to do it, you have 9 out of 10 with

hit tv shows, hit movies, successful books. so there's a practical benefit to all of this stuff. >> mark's advice was raise prices. can you elaborate? >> i'm involved in silicon valley, he feels like many start-ups are at a race to the bottom, the way to capture market share is to lower prices. i think he calls it too hungry to eat, where you need money but your prices are so low you can't require the sales force required. he would want to raise prices on 101 or 280. >> i have been around people where they say raise your prices, you don't want to compete against everyone in the world competing on prices. >> when you look at how uber started, i've been involved with uber since the first round of financing, they started off premium, you have a lot of wiggle room and can experiment

when do you that that's good advice for founders and entrepreneurs to pongder. >> tim ferriss, thank you. financial stocks have been surging. the we'll tell you which stocks are most likely to have changes under the trump administration next. and up next, the winners and losers. >> that was wonderful. >> that was good. >> that wasn't bad. >> parts of it weren't good. >> that could have been better. >> i didn't really like it. >> was bad. >> that was terrible. >> get them away. mary buys a little lamb. one of millions of orders on thisompa serve. accessssle by thousands of suppliend employeesglobally. but with cyber threats on the rise, mary's data uld be under attack.

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welcome back. financials is a group riding the trump rally much better than anybody else. the s&p financials are up 18% since the day after the election and other well-performing sectors like energy and industrials are up only half that. joining us on what's driving the financials higher and what's ahead for banks, welcome to you. >> thanks for having me. >> have we run ahead of the valuations of the banks or to quote yesterday, are people not

raising their estimates fast enough to account for the better earnings power ahead now? >> there are probably some estimate raises still to come. but generally speaking we are starting to run out of value in the space. largely because so much has been discounted against the regulatory environment which i think is going to be very slow to change. >> so we've had bank of america has doubled from its february lows. since jamie dimon, shares are up 60%. these are incredible moves but they were so cheap at the time in terms of their value. where have we gotten now? how rich are the banks? >> still at the low end of the valuation range. but remember the r.o.e.s are going to look different from the level. their equity of course is higher. relative to that standard, they're looking fair. >> there's the banks, also the insurance companies, and there's kind of a little bit different calculus going on there. but a lot of them have been trading quite well lately. i know your coverage area is

still specific. but there's the regionals. we kind of are lumping all the financials together, but there's a lot of things to pick from. who would you be picking in this environment now? >> well, the names we like are the ones that benefit from any improvement in the macro environment, but also have earnings stories that can take them higher irrespective. >> like the wells fargo sales incentives? >> not so much that one. >> will the -- there's at least a narrative the big banks can pay for it, got staffs. guys that are really not keeping up are medium and small size banks. will have that more to move? will that do better than the big banks? are they doing okay with all this regulation? >> of course they're trading at a three or four multiple point premium. >> so they moved too.

>> i would argue they're the group that would get targeted regulatory relief over the next few years. >> eric at the beginning of the year, there's a lot of information about energy exposure. you can look at names like cullen and frost, independent, texas capital. do you believe in the recovery there and need to be revisions higher for the banks with high energy loan exposure? >> well, if you look at where the commodity price is right now, i think what it suggests is that there won't be broad based recovery in that sector, but it will prevent new default from occurring, so institutions that are already in trouble, they're going to continue their path. new ones won't necessarily go bad. >> i'm just thinking about -- there's like a litany of reasons why people have hated these things. now it's turned and been on this run, do you keep throwing stuff in there that's going to keep working or are they kind of at the end of this run now?

>> i think fundamentally they're starting to look pretty fair. the question is how long does the rotation into this space which has so underowned by the mutual concept continue? >> where is it now and what should it be? >> so, at the lows of course which was coming out of the price to book was very depressed. >> like a half or something? so for the last five, six years where has it been? it's been under book hasn't it? >> right around book. >> at the euphoria, does it ever go to two times book? >> yeah. >> it does? where are we now? >> right now we're a little over one. 1.2 or so. and r.o.e.'s are probably to a low level. >> awesome. >> thank you for joining us this morning. programming note, senator pat toomey will be joining us in

just under an hour. 7:40 a.m. eastern. >> you're leaving. >> i'm leaving. >> that was fast. >> it was fast. >> you're smart. you said you want eed to do the 6:00. 6:00 is when people leave. >> you jump out of bed, no traffic, you get in earlier. >> right. that's the hour you should pick. >> good to see you, sir. >> thank you. up next, results from cnbc's all america economic survey -- no, that's all american right? what is this? why do we use that? >> the leisman special. >> it's not all americans then. why did they use that name? >> it's all about america. >> okay. i think it was taken already. showing optimism surging to the highest levels since barack obama was elected president. how funny. as the trump rally rolls on, the numbers and analysis straight ahead. ports help companies make benefits simple and accessible... from anywhere.

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markets roaring to all-time highs and the latest cnbc all america survey shows confidence is building. we bring you the survey results and talk about where you should be putting your money to work as the trump rally rolls on. one sector investors may want to study, education stocks. why names like devry are ready to fly. and rolling back dodd/frank. senator pat toomey is leading the charge to fast track some changes to bank regulation. he joins us to talk about those changes under president trump 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" right here on cnbc. i'm andrew ross sorkin along with joe kernen and kelly evans. the march to dow 20,000 continues. the dow gained 65 points closing at a record high. the dow now on pace for its fifth positive week in a row. the s&p 500, nasdaq, russell dow all logged new highs. here's president-elect donald trump last night in iowa. >> and we had a lot of good people in nebraska, good wealthy people in nebraska fighting us. that didn't work. but those wealthy people aren't so unhappy now because the stock market's gone up so much because of us that those wealthier people just got wealthier. >> think that might have been a reference to wb. the u.s. equity futures at this hour. dow looks like it would open up 66 points higher.

s&p 500 up about six points. nasdaq up about 15 points. here's what's happening at this hour. the second largest ipo of 2016 is set to debut today. annuity provider athene -- the largest this year was xto express. at&t vice chairman is retiring after 42 years with the company. he was responsible for the deal that made at&t the exclusive provider of apple's iphone when it first debuted nearly a decade ago. people forget you could only get it at at&t back in the day. and variety reports trump will remain credited as executive producer on nbc's "celebrity apprentice" when it returns after its absence. and it will be hosted by arnold schwarzenegger. >> i thought it was -- oh.

>> it is an nbc thing. >> don't bring it to your conflict thing again. i think that here on -- i think maybe we might get some reruns. >> we may. >> which anything -- suddenly anything -- there's ratings involv involved. >> you may get a royalty out of this. >> there were some wackos on there. joan rivers was still alive. >> did you fire anybody? >> i was recommending people be fired. there was one guy on -- weird guy. anyway, herschel was there. this was jessie something or other. he was like a motorcycle dude. jessie james. >> i remember jesse james. not the jesse james. he was unavailable. the results of the latest cnbc all america economic survey are

out. right, steve? >> right, joe. >> and this time around it shows that the election of donald trump has brought with it a surge in the economy as everyone predicted. steve, the results? >> nobody predicted this. >> i was wrong on that? >> they were wrong on that. it was a stunning change. we've done this survey almost nine years now and have not seen since, i guess, the election of president obama in 2008 a move like this. >> it does measure things maybe. >> it absolutely does measure things. it doesn't get everything right all the time. >> how big a jump was it? >> no, that's -- i'm going to bury the lead for one second to raise the anticipation. >> all right. >> get on the edge of your seat here. what we have here, folks, 800 americans polled all around the nation. that's why we call hit all america. not necessarily all star linebackers. it is a poll conducted by the same people at "the wall street journal." i want to show the rise of

people's assessment. that's something of the better economy coming through there. that has been flattened out. but you had across all demographics, a raise. now watch what happens when we ask people will things get better in the next year and it's coming, it's coming, there it is. and it's a huge surge if we would go to the next -- maybe we can't do that. there it is. that is a 17-point jump to 42% of the public. and what has happened and you'll see this in the next screen, we've talked about this forever which is how people see the economy through the political lens. right there on your left is the change in republicans' attitudes towards will things get better. 15% in our prior survey before the election thought the economy wouldn't get better. independents have moved with republicans, that's how you get

to the better number. democrats who by the way who were not so terrifically optimistic beforehand are less optimistic. they've gone from 39% to 16% believing the economy will improve. so that's a major party reversal right there. and now, one of the reasons underpinning it is people believe their wages will go up more than they had before. people believe their housing prices will go up more than they had before. and of course wages are rising -- seen rising 5.2% home values are at a nine-year high. seen rising 4%. and one other thing which is stock market optimism has surged. i'm talking about this more in "squawk on the street" later today. but it's at a two-year high. reversing now a ten-point advantage. 40% of the public now believe this is a good time to invest in stocks. so i think what may be happening is a widening or broadening of the base. >> your survey showed there's more enthusiasm for stocks? >> yes. >> you need a survey for --

>> well, yes you do. >> we detected that. i want to ask you something else. >> i want to answer that i think it's important. >> no, no. the one i want you to answer is some of this isn't just a reflection of what's happened. some is self-fulfilling isn't it? >> absolutely. the concept of animal spirits is one that's engrained in economics. there's no formula. we can do all formulas about tax cuts and deficits and about growth and the relationship of jobs and unemployment, all this stuff. but you can't do it -- when things click -- >> might feel like going out to app applebee's. >> is that putting on the ritz for you and your family? >> yeah. have you seen the portions? >> they're big. >> yeah. >> in my family it was a matter of quantity, what they valued. i want to answer your other question because it's important. the market can moved based on institution investors.

we're trying to gauge whether or not the mom and pop investor which is believed to have sat out the entire prior eight years. this suggests to me there may be a retail component to this when you have 40% believing now is a good time to invest in stocks. so institutions can do it on their own. not necessarily emblematic. >> there has been a pickup of flows -- >> who are you? you haven't been introduced. joining us now -- you're like the -- what was it like in the old days it would be someone would just -- >> the utility. >> someone would just talk off -- that wasn't on stage. it was like the not necessarily the peanut gallery. that goes back to -- >> to what? >> bless you. joining us now head of merrill lynch wealth management

portfolio investments. and our guest host for the morning peter boockvar. all right, mary anne, you're getting bullish. you got the massive move from the end of the year and the s&p to 2300. that would be 2% more if it was to 2300. that'd be a whopping 6% more if it goes to 2400. that's not much of a limb. is that all we're good for? >> at least that's what we're going out with for 2017 until we can really see what the trump administration really does implement. i mean, the potential tax cuts coming through can be quite substantial to corporate profits. but there could be some offsets with interest deductibility and whether or not that will be allowed. we have to kind of wait and see. but i think what's really important is the tone of the market is very positive. the economic outlook is very pos tuff. some of the concerns that we have is that inflation, steve,

is starting to creep up towards the fed target. the fed in general is starting to reach its target also of full employment. if the economy really starts growing and inflation starts taking hold, does the fed then have to begin to start raising rates a little bit more aggressively. those are the risks we see going into 2017. so we want to see a little bit more data. but i don't think it's too late to get into the markets. >> what do you think in terms of the numbers of hikes? we might have one in just a couple of days. we know what happened last january. the market did horribly. came back from that, roared back from that. how many rate hikes do you think we're going to have? >> janet yellen, her nature is to go very slow. we expect her to speed it up in 2017, but is it two or three? but the point is if she goes too slow, the bond market's going to do it for her. and 10-year yields are going much higher. if she gets more aggressive, then maybe she can contain a rise in longer term interest rates. either way, they will continue

to go higher in 2017. >> do you think the pension demand is going to contain like the 30-year interest rate? and maybe issuing 50. >> they will welcome it to give a chance to invest. but i think that -- i said this before and i think it's becoming more clear that the bond bull market is over. rates are going higher. it's just a matter of to what degree and what speed interest rates rise. we saw obviously a short rise over the past month. and i think it's really a -- it's on the fed's shoulders on whether they can get control of the pond market or they're going to lose control of the bond market. >> for years and years you sort of made a living with talking about the fed and how there's going to be a day of reckoning and everything else. i mean, maybe it's -- you may need to soften the potential negative effects of everything that you were worried about if you really do have an economy that's much better that allows you to -- the fed to hand it off to the real economy.

and it allows you to get out of this horrible box. in spite of themselves, they might be okay with this. >> let's hope. one of the things that -- >> are you feeling better? you still have losing sleep? >> hugely optimistic about growth. >> okay. >> i don't know who was the president that said the business of america is business and we're going to get that. i'm still worried about the bond market sort of containing a lot of the enthusiasm in that interest rates have been so compressed for so long that this rubber band is going to snap back the other way. and what happens if the 10-year yield which historically has traded around where nominal gdp growth is. let's just say nominal gdp growth accelerates to 5%, 10% and the 10-year goes to that level. we have a world that has never been this levered before. so you take huge leverage and rising interest rates. i can't ignore that combination. as bullish as i am about the policies of trump. >> calvin coolidge.

>> yes. >> and it's just a matter of who can google faster. it's not intelligence. but i want to ask you a question. >> we weren't there. >> no. at least i wasn't. you the that coming to you. >> it was obvious. i mean, i would -- >> we should do this off set. it's not really fair. peter, i want to ask you, i talked to a fixed income guys last night. carnage in november. looking, kicking tired interested again in december. it picks up on kelly's point. at these lels, 3%, i heard of not aaa's but at 4%. and people were like, whoa. i haven't seen a 4 handle in a long time. dhauz attenuate or otherwise ease some of the troubles we could get? >> maybe it slows the rate of

increase, but the 10-year yield at 2.45% if we're going to get this 3% type real gdp growth next year and a 4%, 5% nominal, the 10-year is going much higher. >> everybody asked me that same question. >> let me ask this. kelly wrote an article on this. does the market run its election seasonal course meaning the markets rally into the inauguration and then correct? because that's one of your fears. >> the line now is by the election, sell the inauguration. >> and there is data to support that. if you look at new elected presidents coming in, the markets rally into year end, into january. slightly after the inauguration the markets peak, and then have a selloff. but the markets generally have a seasonal selloff in mid-first quarter. so it's certainly possible that we get a pullback. i don't think you get a pullback between now and year end. >> but i'm also not sure why

everyone is so obsessed about the pullback. fine. >> let's say you're right. say it will continue to happen. still going to be 17, 18 times? >> if you can grow those earnings, you can sustain an 18, 19% multiple. you can even go to 20%. even with rising rates. rates are a good sign if the economy is growing. as long as you can grow corporate profits, you can expand your pe multiple. it's when you're expanding your pe multiple and earnings are going down. >> we said over 20 and rates were always 5%, 6%. >> but with 3% gdp growth. >> who's voting on 20k before the end of the year? you're in? >> i want hats. >> it's probably going to be the fastest one ever? >> i don't want to be part of

the consensus. >> i thought you want to sell hats. >> i do. but i don't want to be part of the consensus. make the dow great again? >> making the dow great again. >> thank you, mary ann. more from peter throughout the show. and more from andrew, too, right now. >> coming up when we return, the trump trade. for profit education stocks have been on fire since the election. so should you be studying these stocks to help perfect your portfolio in 2017? we'll look at the names in that sector. and later senator pat toomey is going to join us. he's leading the march on dodd/frank. "squawk" returns in a bit.

welcome back to "squawk box." another big winner of the election, perhaps surprising. for profit education. shares of education companies like grand canyon all getting a, quote, trump bump. more than 30% since election day. investors are banking on a rollback of regulations imposed on the industry by the obama administration. joining us to break it all down is an analyst at bmo capital markets. what's the thinking here? >> well, like you said, it's roll back in regulation. you turn back the clock eight years ago when we had a democratic president, democrats controlling both houses of congress and the department of education. probably the worst thing that ever happened to the for-profit college sector.

a lot of regulations came on board, slowed down growth. we're turning it 180 degrees. the theory is maybe the regulations get rolled back. i'm not so sure that will happen, but the fact is we're not paying as much attention to the group. that will help. >> can i make the flip side argument which is that donald trump doesn't like government waste. he doesn't like the idea that taxpayer money is going for the wrong things. and part of the argument that spurred so much of the for-profit piece of the business was the scams that were taking place. the view that pell grants and other things that were being provided by taxpayers, being used inappropriately. >> sure. >> why are we so convinced we're going to go all in now? >> i agree with you to some extent. over the past eight years, we have seen a lot of benefits from the regulations in terms of the quote, enquote bad actors out of the business. a lot are focusing on the things that matter. so i think the industry has changed for the better.

>> can it come back from this? eni mean, so much damage has been done to the institution. is this something you can reverse and turn the clock back. >> no. a lot of the companies have changed. they're not really pushing the programs. you've already seen growth that have started to grow before trump has taken over. >> what does this mean for the student loan situation which has grown over the last eight years. >> so i don't cover the lenders but i'll tell you one of the aspects, benefits, going on in the for-profit sector is you see tuition increases slow a little bit. so the cost to the student has gone down. >> break it down -- go ahead. >> just wondering. in a perfect world that we want in terms of trying to train this new breed of workers that we

need because of the world changing so quickly, are there legitimate ways to do it this way? and should it be part of what we do? i mean, is it legitimate? >> i think it is. the schools that focus on the vocational or skilled trades area, that traditionally universities don't necessarily do. and i think that's a real big benefit of the for-profit sector. >> when you start getting successful, do you just sort of lose your way and become a bad actor? we do have a bad sort of view of a lot of this. it should be something really that's a positive. it shouldn't have that aura. >> i agree. the fact is there were probably a few schools, you know, maybe pushing the envelope and trying to enroll students that shouldn't have been enrolled. >> more profit. >> jeff, we got to go, but just break it down. is there one stock you think is going to out perform -- we talked about an entire sector. but there are different companies within that sector. >> within education our firm our

favorite is a company called to you. >> thank you. great to see you. when we return, americans plan on spending 4% more this year when it comes to holiday shopping. but where are they going to spend it? the results of the all america survey straight ahead. meantime, check out futures as we head to a break. you're looking at some green arrows across the board. we're back in a moment. no, this is a full blown move in to the basement, you're gonna be out of work without that money from... lac! you might miss your rent. aww i justoved out. bummer man. hei used to have my own ace. yeah?

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rolling back dodd/frank. senator pat toomey joins us. that's coming up in just a bit. as we head to break, a look at yesterday's big dow gainers. "squawk box" will be right back.

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good morning. welcome back to "squawk box." among the stories front and center today, we'll get the latest reading on consumer sentiment at 10:00 eastern. university of michigan's preliminary december meeting expected to come in at -- a new report by the world anti-doping agency says russia engaged in systemic doping of athletes from 2011 to 2014. more than a thousand athletes and 30 different sports. and wells fargo has chosen four members of its board to conduct an investigation into its recent sales practices after that scandal. this is according to reuters which says all our independent directors. and the results of cnbc's

quarterly all america survey are officially in. now we have the holiday edition. courtney reagan is here to tell us about consumers and how they're shopping this season. >> hi, andrew. good morning. santa might be trading in his reindeers for bulls this morning. i don't know. we'll see. americans planning to spend an average of $702. that's 4.4% more than last year. that's also above the growth rate for the forecast for the year. retailers can thank the men, middle class, and the middle aged for spending more. if you dig into the details, men say they'll spend 15% more than this year. than what they told us last year. but they're also fulfilling that stereotype of waiting. 37% of men say they haven't even started shopping yet. compare that to just over a quarter of women. then american with incomes between $50,000 and $75,000 plan on spending 28% more than last year.

now, when it comes to where they're spending, we asked for their top two places to shop out of eight different types of stores. online, number one destination at 40%. not so surprising. but that is the highest in our survey history. slight uptick from the last two years where it was moving up higher. big box stores like walmart, best buy, target, stay firmly at number two for a third of americans. it's been a third for the last two years plus this year. but department stores fell to the number four spot. that actually reaches a new low. edging out of the number three spot, locally owned, non-chain stores. >> it's all about online. online is number one. it's the whole game, right? >> online is number one. what's interesting is the nrf said on the big holiday weekend, eight out of the top ten e-commerce sites were those of traditional retailers. they didn't name names, but you could think potentially a macy's is in there. but they also have a website

that does decently well in the categories. >> we shouldn't just read it as amazon's winning. >> we know amazon really dominates. later in the survey which we're going to have on "squawk alley," we show how dominant amazon is for most americans. >> we're sitting here surrounded by guys, when you shop for christmas how much starts and ends on amazon? >> it's just so easy to go right there. was there any statistic on millennials since they're such a huge demographic? >> yeah, so, actually millennials a little cheap at least this year when we asked how much they were going to be spending. it was double digits less than what they told us they would spend last year. so either they're deal seekers which could be part of the reason. or they just plan to spend less for whatever reason. which i thought was quite interesting. i thought, gosh, kind of cheapening out on us. >> what do you think that's a function of? >> that's a good question. i think we talk a lot about the experience driving retail. and many millennials live in bigger cities and they don't

necessarily need a lot of stuff. >> or want a lot of stuff. >> exactly. so that could be part of it. but that also doesn't make a ton of sense either if you look t a spending on things like concert tickets which could also be considered as a gift. >> the oldest is like 34ish now. they've got kids probably very young. do you think those demographic factors are feeding into it at this point. we're not talking about 18-year-olds. >> mastercard just gave us data that purchasing is up about 3%. we know a number of millennials are aging into that frame of time where they want to build a home and aging out things like couches and durable goods. i don't really own anything like that. >> what did we used to talk about before millennials? >> the boomers. >> but there's always been 22 to 30. they've always been around. >> have they? >> but they've never been this weird and different. >> hey. watch out who you're calling weird. fellow ohioan, i'm a millennial.

>> so explain what's wrong with you. >> see, but we talk about it all the time. i don't think we're that different. i really don't. >> we're always talking about like millennials and everybody know what is you're talking about. it's the iphone. it's the ipad and the iphone. they're pickled. their brains are pickled or something. it's too much being with yourself looking at something. i think. isn't it? >> i don't know. the millennials are all about experience spending. that's a little bit more than we've seen from the boomers. >> i was once 20 to 30 -- >> you were. and then you had a family and you -- >> and that's wla we're seeing now with the millennials. >> i don't think we're that different. i think young people are often similar to the young people of the generation before. how different could we be? >> i know we're safe because they're not watching because they aren't planning for their future, saving their money or putting anything away. >> you've got two millennials sitting here. >> i don't even have a netflix

account. >> you're -- your dorkiness preempts your millennialness. >> i think there's something to the idea that they're getting -- the millennials are getting older now. there's stuff changing in their lives. >> there are other people coming into the 20s, what are they? what are they? what are the new 20 -- are they different? are they going to have a different name? >> there's not a lot of apartments left when i write the addresses for christmas cards. now they have a house. true story. so i've got to take off that column in my excel spread sheet. >> that's interesting, though, that you're doing physical holiday cards. >> yeah, i know. i like physical holiday cards. >> you're a token one. >> my friends and folks do it as well. you do digital. >> you're online? >> he does digital cards. >> yeah. and now i'm thinking about the -- what's it? paperless post. i don't know. >> you know what else? i hang them all up in the kitchen and keep them there for like two months. >> that's why i think it's worth it. do you do christmas cards?

i should call them holiday cards. we got to go. >> yes. and quickly check out retail winners and loses as well. let's talk about it with matt boss, in fact. courtney, stay right there as we bring in the analyst as we talk about the names -- you're sitting right here -- that you like in this space. >> thanks for having me on. a lot of the work we've been doing supports a lot of what courtney was just talking about. we're seeing a shift away from brick and mortar traffic towards online, towards e-commerce. in fact, we just put a piece out using satellite traffic data on foot traffic which pointed to three years ago over the holiday period you saw positive low single digit foot traffic. which this holiday season we've seen negative mid-single digits. now, they are coming out for the big holidays. they like the value, they like the deal. over black friday weekend, we think it was a big push. we think that you actually saw positive traffic over black

friday weekend. and i think you'll see a nice push here into the final push into christmas. so there's reasons for optimism. there's two extra shopping days. and the weather's getting colder. >> can you name some names? >> yeah. so we're looking at i think value and convenience. that's what's winning out there. on the convenience side, that's where the amazon, the online retailers fit in. on the value side, it's the off pricers. tj maxx, burlington. we like lululemon hitting on that service and that innovation. so there are winners out there. and i would say the tone out there across retailers is optimism here into the second half of this holiday season. >> what about the idea that foot traffic may be lower but conversion is up? because a lot of shoppers are doing preshopping on their devices so they know exactly what they want when they go into macys. >> so the statistic is almost 80% of shopping starts on the mobile diverse, starts on

e-commerce and ends in the store. so the store is still very important. the store is the highest profitable sale for retailers. so you need that brick and mortar component. the idea is how many of those locations do you need? macy's closing a hundred stores which is a lot of people think may be the tip of the iceberg in terms of brick and mortar consolidation. the question is how important. >> who aren't you a buyer of? everybody's pretty excited this holiday season. >> i mean, multiyear and longer term, it's the areas of retail where there's a lot of areas of competition and they have a tremendous amount of this exposure. so, you know, names like the gap, abercrombie, you know, a lot of brick and mortar competition, a lot of brick and mortar exposure as well as a lot of competition in a space like that. dillards and the department stores. again, i think it's going to be a strong holiday season. there's probably a trade here. but i do think into next year and beyond you have to really

parse out who are going to be the winners and losers. it's this omni-channel. it's those that are spending the money today. that's going to be the way to figure it out. >> i was hoping that would go away. thank you for joining us. appreciate it much. >> thanks. >> some millennials watch. i'm just trying to get you -- i love you. they're just saying, you know, don't drive them away. i don't want to do that. just talk to your friends. talk some sense into some of them. when we return, president-elect trump vowing to roll back regulation against banks. now senator pat toomey is trying to fast track that idea. he joins us after the break. here are the futures at this hour. up about 55 on the dow. up 5 on the s&p, 14 on the nasdaq.

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markets continuing to climb and financials you've seen them continuing to outperform. been talking about it all morning. hitting their highest levels since 2007 and on pace for five straight weeks of gains. goldman sachs, morgan stanley up

sharply yesterday. the sector sitting at a 52-week high right now. earlier in the show, we spoke to guggenheim's eric wasserstrom about the move. >> my historical standards are above the range but going forward they're going to look different from the historical level because the earnings power of the companies are different now. relative to that standard, i think they're looking increasingly fair. >> and president-elect donald trump has repeatedly said he wants to scale back financial regulation. and senate republicans are looking to fast track that process using a procedure called reconciliation. it would only require 52 votes to scrap parts of dodd/frank instead of the standard 60 for a majority. senator pat toomey from pennsylvania is leading the charge at 52. you need 52? >> you can do it with 51, joe. >> why that was in there, i don't know. >> simple majority. >> kind of just gives me a -- gives my temples a headache.

i said it but i didn't know why i said it but it was there. senator, before we get into some of this stuff, you got re-elected. >> i did. i did. >> i was -- in the darkest days you were down double digits, weren't you? >> i don't think we were ever down double digits, but we were behind. >> we don't know what you were. those polls were crazy. now, you had -- for awhile you were distancing yourself from the top of the ticket. right? didn't really -- then you walked a fine line. you didn't distance yourself too much. he helped you get elected, right? >> we had different paths to our victory. donald trump did extremely well in western and rural parts of pennsylvania. i did well in suburban parts of pennsylvania. we both ran our own campaigns and we both found a way to win. very narrowly but we did. and i'm delighted. >> any regret there? you probably benefitted from it. >> no, listen --

>> no regret, really? >> i was candid about the reservations i had about some of the things that donald trump had said and done. i also acknowledged that if he's president, there's a lot we can get done. and that's what i'm looking forward to now. >> all right. there were some that -- i think some of them didn't even vote -- voted for maybe not for hillary but not -- did you vote for trump in the end? >> i did vote for donald trump and i said so to all my constituents. >> okay. so now, what do you think -- there are parts of dodd/frank that stay, parts that leave. the financials look like they're expecting you guys to do something. >> well, we need to do something, joe. that's the bottom line. dodd/frank is a disaster. a very ill conceived response to a financial crisis that frankly the government did more to cause than anybody else. and it's just not acceptable to do nothing. we've got the white house, the house, and the senate. and we have democratic colleagues in the senate saying they will refuse to provide any votes or at least the votes they

would need to get to the 60 vote threshold for legislation to reform dodd/frank. i hope that ends up not being true. i hope we can do this with democrat support. if they refuse to work with us, we can't let them have veto power over some really, really needed repeals and reforms. so fortunate we have a device, we have a tool and that is the reconciliation instructions from a budget resolution, allow you to pass legislation if it reduces the size of the deficit with a simple majority vote. and so i think that's exactly what we should prepare to do and be -- and actually do if the democrats don't join us in this effort. >> what is -- would your wish list be for what goes and what stays? >> it's a long list. but i'll give you some examples of things that i think -- and the hurdle is going to be to make sure that the proposals that we put forward do, in fact, qualify according to our

parliamentary procedures. so one example is the orderly liquidation fund. this is the bailout fund. we designate a bunch of institutions that are deemed to be explicitly too big to fail. then we create a fund so the taxpayers can bail them out in the future. we should resolve through bankruptcy. and i've got legislation that reforms the bankruptcy codes that we can do that. what i'd like to do is repeal this fund so taxpayers never have to bail out a failed financial institution. that would save $20 billion over ten years according to the congressional budget office. i think that would qualify for this reconciliation treatment for this simple majority threshold. the cfpb. cfpb is complete ll lly duplici.

it's also exceeding its authority. it's completely unaccountable and it costs $6 billion over the ten-year budget window. that's a huge opportunity to reduce our deficit. i think that would qualify. the research, a redundant team of economists doing research. like we don't have any in financial institutions. that's ridiculous. that's over a billion. there's a long list. >> what happened to the volcker rule? >> i think the volcker rule is a huge mistake. it has been a profit center. if you want to make sure the financial institutions are stronger, let them keep profitable activity. and by the way as you know, proprietary training adds liquidity in our markets. the volcker rule is this impossible attempt to forbid prop trading but still allow market making. so you have inevitably these thousands of pages of ruling that nobody can understand and it's caused a retreat from

market participants and reduction in liquidity. i'm not sure whether or not repeal or significant reform of the volcker rule would qualify for this treatment. that's one of the things we'll be looking at. but i do know that these big budget items, these big reforms that would reduce our deficits, those should qualify. >> so right now if we were to do all these things, that makes more or less likely to have to be, you know, taken care of again or bailed out. >> so joe, the real way to diminish the risk of bank failures, i think, is to have the market impose the discipline. it's unsecured creditors who impose the discipline. and if they know they're going to go through a bankruptcy and they're going to get wiped out, then they'll impose the discipline. so i want to make the reforms to the bankruptcy code so that that is a realistic option. and then i think the market will impose the discipline that we

need. and we eliminate the risk of contagi contagion. it starts with as long as the government takes complete control and we micromanage everything that every financial institution does, will prevent them from what causes their failure. how did that work in 2008? there were thousands of regulators crawling all over these banks. >> we had someone earlier saying they try to do too much, you're not going to get anything done burden of proof should this come in terms of, you know, where does it rank with obamacare and other -- >> you know, if you look at this rally, joe. it's always a little dangerous to try to understand exactly what's causing it. but i'm convinced a big part of this rally is the expectation that we're going to diminish the regulatory avalanche that has been holding back economic growth. dodd/fra dodd/frank's a big important part of that. >> senator pat toomey. pennsylvania. pennsylvania? that was always the -- that was

the, like a dream for republicans. it was never going to happen. >> we won it. with el, it happened. >> thank you, senator. good to see you. >> thanks for having me, guys. >> glad you're back for six years. see you. coming up, stocks you need to watch at the opening bell of wall street. then the top of the hour, how you should be playing this market surge. bill nygren tells us why it's not too late to get into this rally. "squawk" returns in just a moment.

♪ is that the market dance? >> we've never had this dance with the animal orchestra. watching somewhere are sending a little -- >> i just love her. she is my favorite. >> the graphic -- >> how long is the longest gift? >> what do you mean? >> like 45 second gif? >> yeah. it becomes a long file. just an animated picture. >> all right. i want to send something to quintanilla. i want to send him the animal orchestra. drives him nuts.

officials there say they're not planning to cut in half the amount of money the chinese gamblers would be allowed to withdraw from atm machine. that's what they were going to do? >> amazing yesterday. these stocks were down like 15%. yeah. >> that's like a sick story. isn't it? >> the question is why. is it because they're desperate because of capital flight? >> because in days gone by, i've been to an atm in las vegas taking money out and i wish someone -- >> with the $6 premium. >> i wish someone would have said no. you're not going to make it back. restoration hardware shares did beat stumts. but the company gave weak current quarter guidance due to extensive promotional activity. >> shares down 18%. coming up, bill nygren will join us with his top picks and strategy to play the trump ra y

rally. now a look at yesterday's top nasdaq performers. we'll be right back.

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we're going to tell you why the rally might just be getting started and which sectors you should be watching straight ahead. the first 100 days from tax reform to trade to dodd/frank, we'll talk to former cea chair fred lazear. >> plus the competitive edge. top executives and lawmakers gathering in washington today tackling policies that will keep america in the lead. the cofounder of the senate competitive caucus joins us 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 kelly evans. our guest host is peter boockvar. larry lindsey was on yesterday. is he your boss?

>> he is. >> did you watch him? >> i did, i did. >> got to watch the boss. >> he doesn't have to watch you though. >> no. >> the nasdaq, the russell 2000, dow transports all logged new highed y yesterday's session. let's get a check on the futures right now. you can see we're indicated now up 63 points. it was 300 two days ago. no pullback or consolidation after that. we added on another, i don't know 60 or so yesterday. up 16 now in the nasdaq. and the s&p also indicated up. europe is green but barely. except in italy which did trade already got some gains after what wasn't a surprise vote. it was sort of in the news. i'm surprised that europe hasn't followed us. what's europe up since november 9th? nothing, right? the average? up a little, but not up 8%. not up 7%. >> and they're still well -- the

dax is still a thousand points off its highs of last year even with all the qe in europe. >> right. qe doesn't -- qe is like scatter shot. it's not that effective. there's nothing like the prospects for real growth. >> absolutely. let's get you caught up on the headlines. second largest ipo of 2016 is going to be debuted today. annuity provider athene holdings pricing its offering at $40 per share. that was in the middle of the expected range. the biggest this year was china based logistics company xto express. spotify has now abandoned its bid to take over sound cloud after months of talks. that's according to a new report from tech crunch saying it ended because spot fi feared the deal would have a negative impact. sound cloud is considered the best streaming service for emerging artist deejay sessions and song remixes. joe is a big music guy. you hang out on sound cloud?

>> sound cloud. >> podcasters are on sound cloud. >> really? can't get enough podcasting. but my thousand channels aren't enough on xfinity. is there more on podcast you have to find out about it. you can't like scroll through. >> hard to search. >> i think podcast may be the next emerging business because they're going to be in your car soon. it'll be built into the radio. >> oh, listening to things. oh, god. >> a pair of economic reports to tell you about on the agenda today. the first read on consumer sentiment out at 10:00 eastern time. along with october wholesale inventory. stocks to watch. 13 cents wider than anticipated. revenue also came in below estimates. however, the resort raised its 2017 outlook saying the season past sales during the quarter were up 16% over a year ago. and at&t vice chairman is

retiring after 42 years with the company. he was responsible for the deal that made at&t the exclusive provider of apple's iphone when it first debuted nearly a decade ago. wish we had a picture of ralph. whenever i saw him i always kidded him. he looked just like the guy on m magnum p.i., huggy. you remember that guy? >> marginally. i remember magnum p.i. tom selleck, the mustache. who was the little guy? >> that was him. >> i know who you're talking about. >> now you know what the guy at at&t looks like. >> i don't know if that's really true. will he be happy about that comparison? >> yeah. why not? why not? it's just the beard. president-elect trump continuing his thank you tour last night in iowa. here's what he said about convincing companies to keep jobs in the united states. >> i actually love calling these

companies. i said give me a list of ten companies that are leaving. and i actually love calling these companies and saying, hi, and i get the president of this company. and i say hi, how you doing. oh, hello mr. president-elect, congratulations. yeah, congratulations. by the way, while we're on the phone, please don't leave. please. and we've had great success. you'll be seeing a lot more success. >> trump also took a victory lap on the run-up in stocks we have seen since election day. >> and we had a lot of people in nebraska, a lot of good wealthy people fighting us. right? that didn't work. but those wealthy people aren't so unhappy now because the stock market's gone up so much because of us that those wealthy people just got wealthier, right? >> sticking with the markets, is it too late for investors to get in on this trump rally? joining us now is bill nygren. he has approximately $22 billion in assets under management.

and also still with us peter boockvar. bill, good to see you this morning. many people are asking this question especially if they have losses in bonds are or are worried about what might happen there. am i supposed to jump in at record highs? >> thanks for having me, kelly. i think it's really hard to time the stock market. and our advice to look at the target allocations and rebalance. if somebody was smart enough after brexit when the market was down a lot lower to have rebalanced and gotten to their target -- then they probably should be trimming. but that's not the situation most investors are in. most investors haven't gotten back to the levels that they would have had in the early 2000s. so i don't think it's too late for most investors to get in. >> i'm glad you put it that way, but it raises a related question which is what is the right mix. i know that's specific for every single person, but there's a lot

of people, you know, if you think of the baby boomer generation who has been pushed into bonds. are they supposed to keep the asset allocation? are they supposed to make drastic changes? >> well, i think they're -- a generation ago they would say somebody approaching retirement should be 60% inequities, 40% in bonds. life expectancies are so much longer today than they were then. that advice is probably out of date and equities should be a bigger part of that person's portfolio. >> and so if people start to do this and think to themselves, okay, this advice is old. i'm worried about what's happening on the fixed income side. so are you telling -- so if they're going to increase their al vags by 10, 20, 30 percentage points, that's a huge move into stocks right now. you're not timing the market. you're not getting in at record highs. you're just making the right kind of mix, moving to the right kind of mix here even if it means a big move into stocks?

>> well, as i said, timing the market i think is impossible. if you ask almost any investment professional, do you think stocks over the next ten years will make more than the 2.5% you can make in bonds? the answer to that question is going to be yes. >> what do you think about the best parts of the market right now, bill? >> well, the best parts of the market right now are the parts that were the worst parts earlier. and the fund all year, we've been heavy in financials, industrials, energy stocks. and that led to a lousy first quarter for us. the market was down. we were down a lot more. but the rebound we've seen in financials, industrials, even the energy names, i think is the expectation that we'll be seeing pro-growth policies enacted. and that will increase gdp growth rates, probably increase inflation back to normal levels. increase interest rates. that'll be good for the financial services companies. increasing demand for

commodities of course would be good for the energy names. >> you're willing to bet on all that? because the main question people have is wait a minute, everything that you're outlining sounds great, but how do we know it's going to happen? it sounds like it's not holding you back from making selections. >> we thought these stocks were cheap before we thought pro-growth policies would be enacted. what we're normally doing in the oakmark funds is trying to investment for a long-term normal environment. we've been through eight years of subnormal economic growth. not just in the u.s. but worldwide. so we've been anticipating higher growth. and it looks like we're finally headed there. decreasing marginal tax rates, that would obviously be -- that would add fuel to the fire. >> are you seeing any opportunities overseas? >> well, our international funds run by david, they're the ones that look for the overseas opportunities. and yes, they are seeing tremendous opportunities. they tend to be aligned with the

same sectors that we're seeing cheap in the united states. >> what about technology, bill? what about health care? some of the places that have been certainly on the health care front left behind on this rally. are they starting to look interesting to you? >> we're looking more at health care names now than we have been in the past. we've been underweighted there for quite a while. still a little skeptical of the pharmaceutical area where lots of drugs doubling or tripling of prices over the last five years that we would have never anticipated and frankly think will be likely to get rolled back some. but in the technology area, some of those names that have come down post-election i think are really attractive. one of our largest holdings is alphabet. while it doesn't look cheap on the surface pe, you've got a lot of assets there that aren't currently earning money including about $120 a share in cash, youtube, all of the venture capital investments they've been making in

autonomous driving. when you stripe them out, you're paying less on google. >> bill nygren, appreciate it. >> thanks. coming up, ceo call in sessions. stryker chief is going to join us. and then later trumponomics 101. ed lazear is going to join us. kansas is that right jerry moran is going to join us. "squawk" returns in just a moment.

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oh. i thought it was on you. did you ask them to do that? why? kelly is permanently on the monitor here. god, you're vain. >> i'm constantly under scrutiny. >> president-elect -- no, put her back, please. president-elect trump's recent comments on lowering drug prices may have taken a toll on biotech stocks, but it could be good news for the medical tech sector. joining us now kevin lobo chairman of the stryker institute. we've had a long line of the stryker institutes coming in here. normally they bring these cool

things. next time, i don't care what it is. i like the saw. what did i say -- it goes through plesh but doesn't go through bone? >> an ultrasonic device that takes out tumors in the brain. one of our newest technologies is robotic assisted surgery. it'd be difficult to bring a robot into the studio. >> i don't know whether it was a robot. i don't know. when they take out a gallbladder, they do that don't they? >> that's soft tissue robotics which is intuitive surgical. for hard tissue bone, we provide it. >> it's like opening a door with a coat hanger. >> it's less invasive. >> you're young. you've never had anything. so what type of reform do you still need? i know the medical tax, that drove you guys nuts. who came up with that? >> it was very significant. it has been suspended.

>> how was it suspended? >> basically the tax is a job killer, innovation killer. >> what did congress do? >> they decided to suspend -- >> did obama sign it? >> yep. it had bipartisan support just for suspension for a two-year period. we look forward to the new administration with a full repeal which has been talked about. >> what determines -- you would think that the things you make would be totally inelastic. someone needs a knee, they get a knee. it's not. it's the opposite. good times, people get things done. bad times, maybe they don't think they can afford it. does it have to do with reimburseme reimbursement? >> most of our procedures, they need it. trauma product, they need the product. if they have a car accident, they need repaired. knee replacements can sometimes be deferred. if you stay off your knee, it doesn't hurt. hip replacements don't. if you're lying in bed and it still hurts, you need it

replaced. we didn't see a bump in volumes. regardless of what happens with the new administration, we're not expecting -- our growth, we've had 14 quarters in a row growing higher than 5%. unlike pharmaceuticals, our medical device products prices have been declining every year since 2008. our price decrease each year is about 1.5% to 2%. >> so you innovate. that's what happens for you. your competitors, who are they? >> that's part of johnson & johnson. we're in orthopedics and medical surgical products. >> five years ago were you in neu neu neuro? >> neuro is new. we can either pack an aneurysm for stroke in the brain or we can take a stent retriever and pull the clot out of the brain. >> wow. what's for the knee now or joint

replacement? what material? have you developed something? >> so the materials used are either titanium or cobalt chrome. can't go through airports? >> for certain products, yeah. >> for certain products. exactly. so you're saying -- so it doesn't have to -- you don't care about medicare reimburse pmt? you do, don't you? >> a lot of medicare patients receive our products. but we operate in all different types of health care systems around the world. single payer systems in france or in canada, two tier systems in the uk. we're able to grow our business around the world. as long as our products are innovative, they add value, we're going to continue to grow. >> do you see people trying to -- do doctors try to prescribe things that people don't need with your products? is there medicare fraud? >> we're in the acute center and we've not seen that activity. that's more on the front end in other areas. >> all right. so you don't need anything from this new congress or this new

president? >> what we'd like are the pro growth policies we're hearing about. because of where our businesses play, macrokpik policies would be fabulous. >> what's your effective tax rate? >> 20%. but what we really like is having an ability to pull back our ous cash. >> what do you do with us? >> we've been very inquisitive. we've done 40 deals in the last four years. but brings that cash back gives us a lot of flexibility to do more acquisitions and provide more investment. but it puts us on an playing field with the competitors. it just gives me more flexibility. today i have a borrow every time even to pay a dividend i have to borrow money. then i don't have to do it any more if there's a territorial tax system. >> what'd you get out of and into in the last three years? >> mostly getting into things. we stayed in our core.

neuro, orthopedics. we bought a low cost bed in turkey. a low height bed which is safe for patients in case they fall off the bed. don't get injured. we have in the extremity area. so strengthened our business. we just bought a company that's in sudden cardiac arrest, defibrillator. >> you got into that? >> yeah. >> why? >> if you open the back of the ambulance, you see stryker cots. >> you're talking about external defibrillator. >> yes. >> can i go back to the repatriation question again? >> sure. >> one of the larger both philosophical and policy questions is if all this money gets repatriated, where does the money land? meaning, does it ultimately create middle class jobs? or does it land in the pockets of the investor class in the form of dividends and buybacks and perhaps some form of m&a? >> god forbid. >> for us our capital acquisition is flexibility to do

all three. >> do something with it. do something with it. please, do something with it. god forbid it's used for shareholders or buybacks. >> the entire trump campaign -- >> bring it back. bring it back. >> -- was about creating jobs for the middle class. >> that isn't -- it's better than leaving it over there. >> i'm not saying it isn't. i'm just saying -- >> let them do what they want to do with it. >> when you think about how you're ultimately going to get the money in the right hands. otherwise the economy won't work. >> it creates a better capital efficiency. >> we'll get next time -- you haven't seen "airplane." you've got to watch it. they say stryker, stryker, stryker. >> thank you. >> thank you very much. coming up, the ceo of fedex is speaking out about trump's trade plan. what he had to say about it when we come back.

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welcome back to "squawk box." there's new gigs for a couple of frequent "squawk box" guests. apollo gary parr is going to be joining as senior managing director and co-chairman of management operations committee. he has been with jpmorgan and

blackstone on mergers. he's be with us many times. we'll be seeing him soon. separately, piper jaffray analyst gene munster leaving to cofound a vc firm focused on artificial intelligence. munster often appeared on this show to cover apple, google, yahoo. we wish them luck in their next new ventures. fedex ceo fred smith is challenging trump on trade. he'll be giving a speech at the competitive forum today. according to prepared remarks. smith plans to say that trade has made america great and failure to expand it would be an e mor nous mistake with consequences for america and the world. fedex ceo fred smith will be on "squawk on the street" at 10:30 a.m. today to elaborate. >> did we say that he's challenging trump or did he just want to talk about trade? >> you know as much as i do. >> right. i think everybody -- it's like people -- anyone doesn't want to

do trade, you want to do -- >> after what's his name -- the comments from boeing, the boeing ceo were picked up and he had said we sold one out of there -- >> thex thing you know, they're canceling. >> are we going to get a tweet that has to do with fedex? >> wow. u.p.s. really delivered my packages quickly. the entire government should use u.p.s. coming up, we'll talk to ed lazear about what president-elect trump should do in his first 100 days. that's right after this. by making every dollar count. th's why i have the spark cash ca from capital one. with it, i earn unlimited 2% cash back all ofy purchasing. d that unlimited 2% cash back from srk means thousands of dollars each year going ck into myusiness... which adds fuel to my bottom line. what's in your wallet?

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i we worked with pg&eof to save energy because wenie. wanted to help the school. they would put these signs on the door to let the teacher know you didn't cut off the light. the teachers, they would call us the energy patrol. so they would be like, here they come, turn off your lights! those three young ladies were teaching the whole school about energy efficiency. we actually saved $50,000. and that's just one school, two semesters, three girls. together, we're building a better california.

♪ welcome back to "squawk box." here's what's making headlines at this hour. futures continue to point to an extension of the rally on wall street and some more record highs today would be the sixth straight something that has not happened since june of 2014. also the national football league is apparently happy with the success of regular season games in london. the league says it's going to be scheduling four more games in london in 2017. the same number as this year. the league had held three game

there is in each of the prior two years. 3m selling its identity management business. the company gimalto is going to be paying $850 million for that business which provided i.d. solutions for law enforcement. the deal expected to close in the first half of 2017. why do you think that is, exactly? an i.d. business? like the laminated i.d.s? >> eye scanner, maybe? >> like that? interesting. >> i don't know. >> if it's sold to law enforcement and now we're selling it to an international company, does that matter? >> i don't know. maybe some good stuff up about that. >> i'm thinking security. you know. >> or you do -- >> i don't know enough. we're speaking out of school here. >> if you want to make i.d.s really difficult to make.

>> now talking about fake i.d.s. >> right. bourne identity, he's got like six of them. they're all perfect. >> do people still do that? >> yes. it's a huge business. >> i'm assuming so, but what was when people were 19 years old and wanted to be 21. >> they can sort of change it if -- anyway. next month, president-elect trump is going to be taking the oath of office. joining us now former presidents council of economic adviser under president george w. bush ed lazear. he's a hoover institution foal low right now -- senior fellow. and ed, it's the executive branch. and the house and the senate. so if you could go in there and decide what to do, tell us the three most important in what you do, first, second, and third. >> all right. well, first is tax policy. for sure when you're thinking about economic growth and trying

to create a successful economy over the future. the main instrument that you have is tax policy. it's primarily taxes on capital. not personal income taxes. although i think all of us would like to see our personal income taxes fall. the main instrument that you have is lowering taxes on capital. in the short run, the best thing to do is to allow full expensing of capital, investments. to encourage rapid growth and investment. over the longer haul, lower rates is a good thing as well. but those -- that's the first thing. second thing you need to do is you need to focus on the regulation side. and of course there's been a lot of talk about that. where primarily i would say that we're probably thinking about the financial sector. dodd/frank is an obvious one to look at. then the third thing right now is we have an immediate issue with affordable care act, obamacare. we've got to get on that even if mrs. clinton had been elected,

she would have had to deal with that. you have adverse selection. so there needs to be a fix on that. those are the three primary things i'd focus on in the short run. >> you worked for w., i know, but i never think of you as hyperpartisan. you're at out stanford, but read some of -- >> appreciate that. >> what about spending -- someone asked you what about spending a trillion dollars on infrastructure. >> yeah. >> forget it. forget it for stimulus. might be a good thing in the long run but not a job creator. there are now certain people that now that they have to admit trump is president, they'll fall back on -- there's a whole group of people that's all they want to do. they don't want to do deregulation or obamacare or anything. they're hanging their hat on infrastructure. that's almost like what obama wanted to do for eight years. >> that's right. and i think you said it exactly right. look, it may be good to spend on infrastructure. there are lots of investments

that developments make that are actually positive in terms of growing the economy. and infrastructure may be one of them. but you don't want to think of infrastructure as a stimulus move. the reason is it simply takes too long. i remember studying this when i was in the white house. we looked at -- if we gave a dollar to the department of transportation, how much of that would get out in the first year. it'd be about 25 cents. the point is it doesn't work very quickly. that said in the long run there may be good reasons, you know, to build, you know, interstate highway systems. something like that, it was obviously a great thing for the economy and the company as a whole. but you're right. think about it as a long run. the main thing, though, that i think you kind of raise there is you have to think about, you know, what are regoing to give up? you can't just start spending money like crazy and not pay for it. so are we thinking about less defense? less education? less entitlements, homeland security. you name it. there are a lot of things you have to trade off and the question is what's the best way

to spend the money in the near future? >> dodd/frank, most people -- you know, most people find things to like there. they see three or four things they like. you say little would be lost by scrapping it entirely. >> yeah. i'll tell you why. i think that dodd/frank didn't do a very good job at dealing with what we thought of as a past financial crisis and fab future financial crises. that is they forgot about the systemic part of it. they dealt with things -- the consumer finance protection bureau. those are essentially ad hoc fixes. you kind of say, gee, there are a couple of companies out there, couple of practices out there that are not good. and let's fix those and then everything will be well. that's a misreading of what happens during a financial crisis. not just ours but financial crises in general. usually what you have is a systemic problem and in order to fix that and to deal with it,

you have to deal with it systemically. i would focus primarily on things like capital environments, equity, things people have been talking about for a number of years now. that would be much more effective than trying to deal with it on an ad hoc basis. >> you also said -- it just makes me think. it's not personal that we need to do as far as taxes. what do we need to do for small businesses? if a lot of them are pass throughs and it is, like, personal, how do we do that if we're not going to do personal if we're just going to do corporate? how do you help people -- the job creators that need lower taxes there? >> yeah. that's a very good point. i think, again, the way i would still do it would be to allow full expensing of capital. even for small businesses, it's a question of what you call income. even if you're a small business, you're passing it through. but what you're passing through is income and the question is

what's defined as income. and so income can be defined as net of investment. and i think if you did that, you'd get 90% of the way there. so that's how i would deal with it. it's a much more consistent way of thinking about the tax structure. i think it would be better for the economy. >> and you think we can get to what? 20% corporate? or what about getting rid of deductions, is that doable with both houses of congress? >> you know, look. this is always a problem. i spent a year working on tax reform before i was actually in the white house. and there are so many sacred cows that whenever you propose a tax reform plan, you just run into opposition all over the place. the way to do it, i think, is to do it quickly, to do it in a way that most people see as being pro-growth, and also pro-labor in the sense that additional investment and capital is going to raise worker productivity and

raise wages. you have to bite the bullet and do it. i hope with speaker of the house and the senate majority leader coupled with the presidency all thinking relatively similarly in terms of the way they want to reform the tax plan, we could actually get something done right now. >> okay. ed lazear, thanks. appreciate it. that's a nice shot. is that live behind you? no? >> i'm not saying. >> okay. >> no. >> it is early. >> but it is early. it's the night shot at least. they have a daytime shot too. >> yeah, we do. but that is what it looks like out here. that's accurate. >> yeah. >> all right. thank you. >> i don't know how they get work done at stanford. it's so nice. coming up, the competitive edge ceos and policy makers in

washington today. senator jerry moran will join us live from that conference next. is it becausso many go after it the same way? chasing after short term returns. inead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming specialized active investing thwith rk-management rorat pgim take a long term view, to sk out obal opportunities. we manage over a trillion dollars this w, attracting manof the worls leading investors. rtner with pgim. the global investment management businesses of prudential we're drowning in information. where,n all of thi is the stuff that matters? the stakes are so high, is the styour finances,rs? uruture. is thhodo you sve t ts?rs? you don't. you rtner with a firm that advisegovements

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welcome back to "squawk box." ceos and policy makers are gathering this morning in washington at the national competitiveness forum to focus on jobs, manufacturing, and the u.s. economy. joins now is senator jerry moran, cochair of the

partnership with the u.s. council on competitiveness, the host of today's forum. good morning. >> good morning. >> i'll just throw it out there. what are you planning to tell these folks today? >> well, i think the topic obviously is competitiveness. and we all -- most of us grew up in america wanting to be competitive. but the reason that we need to be competitive today, we need to be competitive in our economy, is because the word jobs and what competitiveness is about is keeping jobs in the united states, growing the number of jobs available to americans, getting better jobs for americans, good job security, higher paying jobs, and creating an opportunity for us to live the american dream. so competitiveness sounds like something we all are for, but the reason we're for it is we're pursuing the american dream. >> let me ask you about tax reform under a president trump. one thing they're talking about is lowering our rate but also about repatriating capital to

the united states. that has long been seen as a potential to create more jobs in this country. but one of the questions we've asked over the last couple of days of ceos who joined us is if you can repatriate all this cash, what would you do with it? we talked to the ceo of stryker this morning, the coo of cisco two days ago. most of them do not talk about hiring more people, creating r&d centers, things like that. they talk about buybacks, dividends, and perhaps some mergers and acquisitions. how do you think about that then? >> well, i mean, you have to take the longer view which is that if our companies are in the right form, the format, the structure, it means they can better compete in a global economy and therefore create new jobs. my view is that job creation follows. but of course, what you really do want to see is in the investment by businesses in increasing their technology, their hiring to invest in this

country. and i think that's the goal here. >> you wouldn't just pad the ranks? add 400, 500 people and hope they've got something to do? >> we can't do that. >> why not! do that. you hire. you don't bring it back. hire maybe a thousand people and hope there's some demand or else you're going to have to fire them like next month. >> this is not a short-term issue. this is long-term issue. we want to help people accomplish that but in the long-term this job is -- to accommodate those jobs. >> work on the demand. >> what do you think the corporate tax rate is going to be? donald trump has proposed 15%. others have suggested closer to 20%, 25%. where do you think the number really lands? >> i don't know what that number's going to be, but your point about a republican in the white house, a republican control of the house and senate, i would correct your word. we have a majority of republicans in the senate.

it's difficult to say that's control. it will be a legitimative process, but i do think so-called tax reform, modification of the rates, elimination of some of the complications is certainly front and center. and i hope that repatriation is not just a one shot thing. that it's a component of tax reform. so this isn't just bring the money home at the moment and have a tax code that discourages that have happening in the future. >> how quickly do you think in 2017 we can get this legislation passed? >> i predicted tax reform as one of the things that a different congress in the past would be able to accomplish. i was wrong. it hasn't happened to date. i think it's slowly. >> i have to apologize for a moment. we have breaking news to bring you from coca-cola. this is quite big news this morning. muhtar kent is going to be stepping down as chief executive office next may. just announcing that. he's going to be succeeded by quincy. quincy has been with coca-cola now for 20 years. served his current job since

august of 2015 and prior to becoming president and coo, he was president of the company's europe group. muhtar kent who i believe is either 63 or 64 years old has been ceo now for eight years. the company's release now containing a number of statements of praise for kent including one from major shareholder warren buffett. here's what he says. he says that kent has been, quote, an excellent steward of coca-cola's business. and he's thank for for the leadership he has provided. he said i like him and believe the company has made a smart investment in its future with his selection. we'll have exclusive comments from both muhtar kent and james quincy coming up on "squawk on the street." howard buffett had just stepped down from the board yesterday. don't know if that is related in this particular instance. now, we should say quincy had been expected to -- i mean, this

was part of the succession plan. he got that number two plan just about a year ago. there were a number of stories and speculation that this might happen. >> but how much pressure is muhtar kent under for the performance of coca-cola? >> well, that's the million-dollar or much more than that maybe several billion-dollar question if you look at coca-cola's stock recently. it's been a bit of a tough ride. >> challenge of sugary drinks. >> and aspartame drinks, too. there's a challenge there. >> diet sodas, yeah. >> pepsi tried to get rid of the aspartame and had to reverse because consumers liked it. >> a tough act to follow even though it's been 30 years or something almost. right? ever since then and his untimely death, each guy has never seemed to -- he's a tough one to come in for. who's been the best one -- >> it's been interesting because there was a period where pepsico

was under scrutiny. and now the conversation has turned. pepsi made a big investment in trying to shift its sort of portfolio, if you will, to do other things that were less involved with sugar. >> and they bought quaker oats. same opportunity. >> coke's done a bunch of acquisitions. i don't know if they've done one of the coconut water companies, but all of these kinds of things that by the way are also a little sweet. but the people will say -- >> diversifying away from soda. >> yeah. so okay. before muhtar was that neville? >> yeah. absolutely. >> was it ivestar before? >> i'm going to get you the list right now as we're going here. >> it's funny. who you talk to first. like the real boss. you know what i mean? >> buffett? >> yeah.

>> supposedly it was buffett that decided not to buy quaker oats. he was the influence there. >> yeah. so he's always been -- that's like -- who wants to be a ceo with him looking down -- over your should per. >> what's interesting is does this change things? buffett was there on behalf of berkshire hathaway. does that change now? >> you remember when, you know, you say he wasn't looking over the shoulder. remember the compensation thing. i don't even know if he knew. >> what he did was he abstained. he abstained which was displaying his displeasure. >> but not that displeased if -- if you were a boss, you wouldn't really know with, you know -- not always that clear how he

feels about it. let's get over to jim cramer. who was before ivester? how do you replace gozetta? >> he was fabulous. there was talk he was going to buy quaker oats. he said that's not going to not. i just spoke with james, spoke with muhtar. this is going to be a very smooth transition. it's going to be one of those things where i think it's going to be continuation of what i call the technological coca-cola, making it more of a software company. making it -- look, they're in 207 countries. they have been a remarkable company. over the long term coca-cola's done well over the short term, obviously pepsico has percentages, pepsico has frito lay, coca-cola much more liquids and beverages. i think what muhtar did by changing the marketing program, i think that he gave james a good hand. going to be a pretty good run. >> jim, you know, people were

speculating about an anheuser-busch and coke recently, so with a leadership change like this does that leave the company vulnerable to anything like that? >> no. just take it off the table. not going to happen. and i just think that what muhtar did that i think was not reflected by anything other than the fact that people sold off these stocks is really made it much more effective gross margin, much more effective marketing campaign, took a huge amount of costs out of the thing. doesn't have the organic growth that pepsico has, but again, snacks have better organic growth than carbonated. by the way, the price war in this country is over. i think coca-cola is good to buy. no one ever got hurt recommending coca-cola. obviously this is a market that likes first national bank of trump -- i mean, likes bank of america much more than coca-cola. but it is what it is. >> you talked about the snacks, jim. so if you're the executive at coca-cola now, do you look at some of the snack brands, the companies, you know, people in the consumer staples might be out there say we've got to e

emulate the pepsi strategy. >> i've always wanted him to do that. muhtar has done a good job. i'veve pushed general mills fro time to time, kellogg's, but they like to go it alone. they don't have any interest in doing that. but if they did rgs i think it could supercharge the growth. they're committed to a strategy not yet reflected in the stock but paying dividends in the earnings. if we ever came back to wanting to own the soft good stocks, i think coca-cola would be a natural for anybody. >> what do you think the verdict's going to be on how muhtar kent did during the period? >> look, this is a secular trend against what they sold. and i think that that has to be acknowledged. i think he's done a remarkable job at making it so that coca-cola does fantastic business everywhere. i think he set up james. i don't think you've really seen how much this model has changed over the last two years because they've just completed the transformation. muhtar is a great guy. he gave james an unbelievable hand. and i think it's going to be played well. and i think it's a stock, again,

for someone who wants some income, who doesn't really -- is not trying to keep up with the hottest growth stocks, i think coca-cola will do fine. my charitable trust owns pepsico. i think i think indra nooyi's model, the snacks she's putting out, fantastic growth business. >> 51 years old, could be there forever, you know? >> well, look, i've gotten to know the company over the years and it's one of those things where it's just one of those companies that just kind of does well over time, raises the dividend over time. and when you meet with people who have owned the stock forever, they just say, thank you for coca-cola. and i think it will be continued under james. >> already been there quite a while i think, too. >> yeah. oh, yeah, they've worked together for the last 17 months they've been together pretty closely. they've done a lot of stuff together. i just think that i like the transformation that people have not yet seen in terms of the asset light model, in terms of the software model. i think it will be good. salesforce has done some good

things with them in europe. s.a.p. in this country. i think it's going to be a smooth transition, no problem. >> they've got, you know, the stuff from coca-cola, there are things if you just look at face value you wouldn't necessarily see in terms of the business model, jim, and moving to growing revenue ahead of volume. >> right. >> obviously when it's, you know, increasingly the global businesses is important, although it matters what happens here still, doesn't it? >> oh, it does. but look, muhtar had the foresight to hedge out the euro and the yen, which is really kind of great. hasn't gotten credit for that yet. but i think people don't want to own these stocks. and they also see soda taxes everywhere and they just think this whole notion of carbonated ever being healthy is wrong. but i heard what you said, they diversified in some other drinks, but profit margins aren't necessarily there. look, it's just a good steady stock. it's not going to shoot the lights out. >> what was the p/e in 1999? it was 50, wasn't it? >> oh, geez, that's when merck

and coca-cola they were, well, actually from '85 to 2000 and then the fall of the berlin wall, the middle classization of the whole world, those things established. pepsico sold off, ever since trump people just don't want these stocks. >> pretty iconic. all us remember, you know, long before it was pc. i mean starbucks did the people holding hands this year. do you remember buying the world a coke, jim? >> oh, geez, the last "mad men." he says we're a global company, 207 countries, we make everything local. it's not the company necessarily get the wrath. any company can get the wrath say the wrong thing, which i totally get. but they are uniquely international company indeed based in atlanta. >> yeah. if you could make like coke claz classic where i wouldn't get

fat, because soda makes you fat, i would drink that all -- i really would. i love it. >> until the end of 2014 i had two diet cokes every single day and then my doctor said, listen, i don't want you to drink these drinks. >> kidney stones. >> i just absolutely love diet coke. >> someone told me kidney stones. i don't know if that's an old woo wife's tale or not. >> if you go to dr. ben lewis, he'll cut these things out. cuts out everything that's good. says you can't have anything good. old plan. >> finally sort of got on where i can stand the taste of diet coke, but i crave the coke classic. i'll spend 300 calories somewhere else. >> as mentioned, they'll have kent and quincey coming up on "squawk on the street." we'll have more reaction to this morning's breaking news that muhtar kent is stepping down as chief executive officer of coca-cola on may 1st. shares of coca-cola up about 1% premarket right now. we'll be right back. american express open cards can help you take on a new job,

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welcome back. check out shares of coca-cola. muhtar kent stepping down as chief executive officer of the company. that's going to happen on may 1st. big news for coca-cola. and you're going to be able to hear from them in just a little bit on the next show coming up,

"squawk on the street," along with the new ceo as well. >> what do you think of the fact that the shares are higher? >> that's an interesting commentary. >> what is it 46 to 41. >> up 1%. make sure you join us on monday. have a great weekend, everybody. peter boockvar, thank you. >> thank you. >> and kelly. >> and kelly. >> "squawk on the street" begins right now. ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla, jim cramer, david faber at the new york stock exchange. big morning not just with those record closes for the major indices, but we're watching coca-cola. muhtar kent stepping down effective may 1. europe's in the green. the dax is looking at a 6% climb for the week. oil's back above 51 and we will get michigan confidence in an hour. changes at