>> is there going to be a bourne 6 no. >> i don't know. we left it open. there could be or may not be. i think we'll wait to see if a great story came along. i think we'd definitely jump on it. >> gentlemen, thank you. >> appreciate it. >> working for you, if we can, in any way. thanks. that's it. we'll be here again tomorrow. make sure you join us tomorrow. "squawk on the street" is next. >> thank you, guys. >> thank you, sir. >> appreciate it. ♪ so it begins, the countdown ♪ think of a reason why it's in the downtown ♪ ♪ met you in the middle of the center ♪ >> good tuesday morning. welcome to "squawk on the street." what a morning on this inauguration week. markets off the loulows. vladimir putin, theresa may on a hard brexit. pounds of more than 2%. ten-year yield, the lowest since

november. the road map begins with the trump effect. gm, walmart and now hyundai announcing big investments in u.s. jobs. but with four days until inauguration, could the president-elect and gop be at odds over the fade of corporate tax reform? plus, in a deal creating the world's largest publicly traded tobacco business, british american tobacco buys what it doesn't more oalready own. we'll be joined by reynolds executive later. the chinese president drawing a line on trade with donald trump. we'll go live to the economic forum where squawk has been in davos. first up, the president-elect telling the "wall street journal" a border adjustment measure in the house gop corporate tax plan is too complicated. the republicans pitched their plan plan. more companies reacting to the president-elect's push for more jobs in the u.s. walmart adding more jobs this

year. gm planning 1 million $1 billio investment. hyundai the same with $3 billion. it points to what the markets have been thinking this post-election season. >> i read the interview and said to myself, the retailers have been down, down, down. some is because of amazon but some is because, are they the guys that will be hurt the most? i think i've tried very hard to understand the border tax adjustment. gone to really good people. there's a lot of different -- to say it is complicated is to make it so that it is something that can never get passed in a year because it is a difficult bill to write. >> it is. you don't think it could get passed, did you say in a year? >> no, it is too hard. >> i don't know about that. i don't know about that. >> well -- >> i mean, you're right to keep people thinking about later rather than sooner, but to say that somehow tax reform won't get passed in the next year -- >> no, i mean a border tax is

more difficult to write. >> it may be. >> many more lobbyists at stake trying to fight it than there would be a lowering of corporate tax. >> true. but it is a key portion of the house blueprint from ways and means. again, i think it is important for us to both say, how important tax reform will be to so many different businesses, hence why we're focused on it, because it conceivably will change the way a lot of businesses choose to operate. >> right. >> also, important to note, we have a long way to go. a very long way to go, to your point. >> right. >> we are in the early innings. spring training is still aways aw -- a ways away. we're most likely not going to get there until august, september, october. and the fight you're talking about, where trump seems to perhaps not like the language he got in the house blueprint from ways and means could be an important milestone in terms of where the battle shapes. >> i'm saying this isn't 2018 issue, is what i'm saying, versus, deregulation, which is

2017. versus repatriation, which could easily be 2017. >> well, that means you think they're going to do them separately? >> yes. >> i don't think that is the case. >> we disagree. >> okay. and we have nothing necessarily to go on. >> no. >> you're suggesting corporate and personal get co-mingled? >> or repatriation is separate from corporate? >> it is possible repatriation could be separate. >> that would be a failure of them to really reach an agreement. >> i think it would be back to what happened with george w. bush. everyone kind of -- that was an easier issue. look, i'm just saying that the -- when you read through what trump is saying, he's saying, we're going to get something done. i just look at what's easiest to get done versus what is not. the border tax, every ceo i've dealt with said, what issue do you have with border tax? >> listen, i know. >> i would throw it on third down and, you know, hope the guy

catches it and they get the field goal. honest to god -- >> interesting. others would argue that congress has a very strong secondary, and it is not easy to bulldoze into capitol hill with simple stuff. >> that is -- look, i think -- >> not to mention -- excuse me for cutting you off and coming at you from both sides here -- his plan could potentially add a lot to the deficit, whereas this thing at least, according to non-partisan sources, would add as much as $100 billion in revenue, which would offset the loss in revenue from cutting taxes so dramatically. >> you're attacking a defenseless receiver here, but i do believe it would make sense to play out. and we have seen trump start with something, which is this may be his opening bid, which is that i don't want border taxes too complicated. then they come back with something simp iler. that's been his way. >> that's a key part of the

plan, the border adjustment tax on consumption to try and move it back here in terms of manufacturing to a certain extent and not having exports taxed at all. that's a key part of this blueprint. you're right, it is so early. >> very early. i don't want to be someone who says, look -- >> and maybe it is less likely now. >> 2018 numbers versus 2017 numbers. there is an upgrade for disney today. we'll get it. one of the mentions is corporate tax rate coming in. when is it coming down? talking about a 2018 plan. >> could be retroactive to '17 though. >> yes. >> to your point, if we come out of this year with only repatriation, that will be viewed as a failure. >> yes. i think even you would go along with that. >> i would go along with that. i want more than that. deregulation, obviously, on the morgan stanley call right now, there's many questions involved about what the different regulators will do in terms of transparency. but, yeah, i would be -- it would be like, wow, is that all

you got? now, the business, jpmorgan, bank of america conference call, since we've seen each other last, all of us are saying, fourth quarter, really strong. could mean december. it's not like we're coming in flat. i think that you can make it so that -- let's say if something happens where we get conversations going, i think the analysts will be happy and they'll say, look, this is okay. provided that the dollar -- we're going to be worried about the dollar. >> we'll get to the currencies in a minute. as we're talking, gm is out with this release that was expected this morning, saying they're going to invest an additional $1 billion in u.s. manufacturing. follows $2.9 billion last year. $21 million, they say, they've invested since '09. 5,000 new jobs in the u.s. over the next few years. this, of course, is along with what carrier, ford, amazon walm saying 10,000 jobs. >> i don't know how many of

these were in the cards versus what we heard this weekend about the incredible plans that bmw and mercedes-benz have to go to mexico and build lots of cars in mexico. that's not in the cards. that's the 35% border tax. but the plant is a gigantic plant. the other plants people are talking -- the germans are talking about would be plants that i think he would like to see in the united states, be built. i would argue are a lot of jobs. >> before we get to sarah, of course, who loves the dollar, we should mention the dollar. trump seeming to think still the chinese are working their currency lower when they're doing the opposite. they've added -- i mean, $1 trillion they've thrown against the currency to try to keep it somewhere. but the dollar is a key portion, again, back to tax reform, of offsetting the cost to consumers from imports. the argument being the dollar will strengthen a great deal.

>> right. >> the only thing that's strengthening against today is the pound. >> yeah. the pound looks good. one thing -- what we've forgotten, what it is like to have a president negotiate the congress. there have been no negotiations. remember boehner, fed up? maybe this is just a president saying -- president-elect, we're going to negotiate. which we forgot what that is like. maybe they actually sit down and come up with a plan. that would be different from what we're used to in the last few years. >> right. we have the same party in control of all three bodies. >> right. they start from a different place. they start from respect to some degree. >> you'd call it coming in hot, i think. coming in during the inauguration week saying that t nato is obsolete, dollar is too strong, insurance for everybody. we're four days away from his first day on the job. >> yeah, well, it is difficult when you have a three-day weekend to try to factor in all

the thins that are happening. >> don't forget, "saturday night live" is still just -- >> well, i couldn't stay up. too busy watching youtube. >> you may want to check it out. it's good. >> all right. >> let's get to sarah. the world economic forum kicking off in davos. news from an unprecedented appearance by chinese president xi jinping. sarah joins us from davos with the latest. >> good morning, carl, jim and david. for the first time in more than 40 years, in the history of davos, the president of china is here. xi jinping delivering a strong defense of globalization this morning, taking the other side of the global economic issue that president-elect donald trump has firmly been against in his campaign and as president-elect. here's a snipit. president xi saying protectionism is like locking yourself in a darkroom which would seem to block wind and rain but also blocks out the sunshine. no one is a winner in a trade

war. unlikely defender of global cooperation, a communist country who is often criticized for not playing fair on free trade. trump, on the other hand, whose inauguration comes just as davos draws to a close, has threatened to withdraw from the transpacific trade partnership. the trade deal, ex china, promised a confrontational approach in trade with cshina. it is a showdown between the world's economic powers. that's what everyone is talking about. whether the rising protectionism will hurt the economy and why markets don't seem to be concerned with that fact. i'll head inside here now to host a panel with major health care kpaktiexecutives. get their first chance to react to trump's latest delve into that industry. saying the u.s. will have to bid competitively to lower drug prices. saying the companies are getting away with murder.

should be an interesting one. i'll bring you highlights on "squawk alley." >> so much to keep track of. you're going to be busy today. of course, jack lew later on. >> it's cold. >> sarah, thanks a lot. >> what do you think about the chinese president school us on trade? >> one of the things that trump believes firmly is that we have been in a war with china over trade for many years. we just have not fought. so what you're hearing is literally the beginning of what is a fight on the u.s. side and he is responding to that. i think that he's not used to being -- to have the country, our country, roll over and play dead. because the president has had a policy for years and years on not commenting on the currency. you have a new president coming in and all he does is he thinks the currency is important in mexico and europe, important in china. so the debate is, well, who is the president, to say something about the currency?

i would tell you, trump is the president who says, i'm going to go after them or currency hard. it is just odd at this very moment. >> in particular, because we need a stronger dollar, in part, to offset these provisions he seems to not necessarily agree with, in the only blueprint we have on potential tax reform. >> i think we have to recognize that there is a very big split between how this administration views china and how all previous administrations viewed it. this administration thinks china abused us endlessly. previous administrations said, yes, it is entirely possible but we're not going to do anything because it is a sleeping tiger. and i think that trump says, huh-uh, it is a tiger that's been eating us for years. and we're done with that. >> i love the powerful silence afterwards. >> come on, that was a great statement. go to commercial. >> i let it sit there and hang.

>> it sat there like a pick. >> it was so filled with drama. >> dun, dun, dun. >> like a field goal, then give him 30 seconds more, give rodgers time. >> unbelievable. >> a lot like that. >> flicks his wrist. >> i'm a cowboys fan. >> this motion, 40 yards. steve's interview with jack lew. we'll hear what he says about the trump administration and more. reynolds executive chairman, susan cameron, taking full control of the company in the $49 billion deal. we'll look at the premarket and the pound. uk inflation, the highest in three years. "squawk on the street," in just a moment.

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a deal to create the world's largest publicly traded to back co company based on revenue. they agree to pay $49 billion in cash and stock to take full control of reynolds american. the combination puts brands such as newport, dunhill and paul maul under one roof. we'll speak with susan cameron, the seller in the deal, but not the seller right away. if you recall, of course, it was a few months ago that bat came with its first offer to acquire reynolds. there was an argument to be made, at least, about whether or not the company deserved a control premium or a minority squeeze out. and whether or not what was

being offered then was more reminiscent of squeeze out rather than premium. this went longer than they anticipated. b.a.t. thought they'd wrap this up last year. they didn't. perhaps they had to part with a bit more value than anticipated. they're also talking about synergies that are significant, cost savings that are fairly large. jim, they get it done with more cash in terms of the component going from 60/40 stock cash to 50/50. reynolds shareholders will own about 19% of this combination. 29.44 in cash. we're talking about a third quarter close, most likely, because you'll need a new security listed from b.a.t. >> any chance any of the regulators will say there's too much consciencentration in a business? this is a lot of concentration. >> there is the chance.

but there is the belief, given the ownership stake already, this is not going to play here in concern with any trust. another question, does this get philip morris international talking? >> we're spending a lot of time on that. it is important. >> they're not at this point but it has been around ever since this initial deal was announced as a possibility. >> the old beer and tobacco companies in decline get together in order to be able to have some scale, but there is no price raises. no one has been able to put in a price increase. >> it is about the next generation products. >> yes. >> all the different technology now for how you can smoke and not do so with the effects on your health, or less, at least. >> i think you've been reporting on this the whole way. when i saw it today, i said this incredible deal involving glasses. these are gigantic deals.

>> one that doesn't hit our radar as much because it is too far but it is an enormous deal. >> without a doubt. >> this ends up in a multiple in excess of anything paid previously. certainly when reynolds moved. b.a.t., by the way, interestingly, you wouldn't think a beneficiary of the weak pound. of course, it helps its sales. >> right. if you own -- >> even though they're buying -- right. >> a lot of people say, jim, how can we not recommend diagio because they do well with joh y johnny walker so cheap. >> shareholders said, wait a second, the tax rate for this entity is going to dramatically drop and, tlefherefore, we want see the benefit paid in the

preet y premium. it's in may before we know where tax reform ends up. >> the european deals, where have they been? >> i know. >> they're doing them now. 27% market share for these eyeglass guys. the lenses. >> incredible. >> wow. >> when you go to -- you know what? some businesses, they america and people say, there are a lot of guys that need glasses. don't worry about it. >> when we come back, we'll get cramer's mad dash and count down to the opening bell. later, ginni rometty. we haven't gotten to the start of earning season. a lot more still ahead. don't go away.

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♪ time for a mad dash on this tuesday. we did one deal, but we have another one that's important in your area that you love to focus on. >> $2.7 billion deal. you'll see clayton williams, which is cwei, up a lot this morning. why? nbl making a deal to move into the permian. this is, again, exxon today, $5 billion deal. why is everyone focused on the permian? you can make money here right now in the 50s. if you buy permian, you'll be

able to boost your production growth, which is what people care about. i urge people to recognize that anybody that has bought in the permian has seen their stock go higher. people are saying, take profits in noble. i don't think so. this is a very, very important deal. strategically to get cheaper assets. >> you've been talking about the permian for quite some time because it is productive and the cost is lower than it is in some of the other shale areas. >> one of the reasons they're low is the fantastic infrastructure. second, when you use this, the new drilling, fracking, you get all of this oil that used to be thought to be unavailable. this is the biggest field in the world. at one point. obviously, the saudis came through. when i see this kind of thing, i say, don't give up on these stocks. don't think they're done just because oil stalled in the '550. these deals are additive and people will like them and they'll like noble.

>> the performance of the stock this year -- >> well. >> they're going out of business. >> people thought they were going under like so many of the oil companies. >> 50%. >> no, no. i like noble very much. >> we have a lot of other things to cover here. of course, with the opening bell a few minutes ago, exclusive exit interview with treasury secretary jack lew.

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you are watching cnbc "squawk on the street." opening bell on this tuesday morning. holiday shortened week. 60 seconds, a lot going on. we talked about the president-elect. >> huge. >> some earnings. as far as the pound goes, theresa may gives this speech in which she basically is calling for a hard brexit. inflation in the uk, up 1/6th is the biggest jump since 2014. >> they've had a remarkable bit of business, some of the companies doing so, so well. always expected to be a foulout when t -- fallout when the brexit is completed. i find overseas, again, is on the radar screen.

jpmorgan said it was stronger. that's one of the take aways. >> this level is the biggest one-day jump of the pound since '98. top three, top two in the past 20, 30 years. there's the opening bell. look at the s&p at the bottom of your screen. the financial security and services company celebrating its new combination diebold nixdorf. >> they do a lot of things. make it so you don't need checkers now. we want checkers to have jobs. this is part of something we're talking about today. technology initially takes away jobs and then says, creates new ones. >> they don't always align perfectly in timing. you could lose a lot of jobs over a ten-year period while you have a leap in technology and takes the next 30 to fill them in, or more. >> totally agree. >> at the nasdaq, it is tax tile systems, technology, a medical

device company. we haven't done morgan stanley yet. >> no. one of the things i think morgan stanley suffered from is that jpmorgan, wells fargo and bank of america had great quarters. something i talked about on game plan on friday for "mad money." i think morgan stanley is doing many things right. it was a better than expected quarter. i think if there is transparency that we would get in some of the federal -- this is the deregulation, morgan stanley would be a great buy. they're not going to go back to prenumbers. they don't want to do those businesses. when you look at morgan stanley at $40 billion in capital when gorman took office and now $68 billion. do they need all that capital? they have to be allowed to return it to shareholders. i would not be a seller of morgan stanley today, even though i know the banks are weaker. >> the stock has run up dramatically, of course. >> yes. >> it is not taking anything away from what were strong

earnings. >> thank you. >> in fact, it would be hard to imagine a scenario where it could have out performed where the stock has gone, in part after what you've mentioned. whether it is highest interest rates, though we're not seeing that today, deregulation, lower corporate tax rate, all the benefits that seemingly would accrue financial services companies. sales and trading, net revenues, up from $2.3 billion a year ago. they had a strong quarter in sales and trading. >> i think people have to understand, when you see a stock down like this, it is not a reflection on gorman and the quarter. it is a reflection of, well, sell the news. i would urge people with a little longer term recognition that gorman, i think, has done a terrific job at navigating these difficult waters and this is an interesting play. i don't know if anyone saw the 401(k) story this weekend, how baby boomers -- >> 70.5, you have to take money out. that's a big demographic shift. it has to come out of 401(k)s. >> morgan stanley developed this

incredible advisory group. >> wealth management is important. >> yeah. >> the delta comes down to fixed income for them. >> yes. >> some quarters, they botch it. other quarters like this one, fixed income sales and trading, $1.5 billion up from $550 million a year ago. very good quarter. >> let this come in if you want, but understand that i feel this is a very good situation. there's a lot of quick takes coming out right now. what i would tell you is there are a lot of people who liked it to begin with. if they can return capital, 4% of your declining share cap. if they could start returning capital, you'd say, holy cow, look at this situation. maybe this is the best of the return capital. although bank of america had a couple trillion dollars. go through the conference calls on friday and you'll feel fabulous about america. >> as we're talking, the president-elect tweeting and

responds to -- >> oh, no. >> -- this gm announcement. with all the jobs i'm bringing back to the u.s., even before taking office, with all of the new auto plants coming back into our -- waiting for the second part of that. clearly, taking a victory lap of sorts. earlier this morning, tweeted about the approval ratings, which show him as the least popular incoming president in modern history. saying even those like the campaign polls were rigged, like before. >> schwarzenegger had a good lead on the "apprentice." nothing yet. >> nothing on the ratings machine, which is the terminator, yes. >> he got a lot of -- >> tweets are free. they cost nothing. >> that's great. credit costs nothing. you can credit someone. david, you've done a great job on b.a.t. did that cost anything to say? >> no. president-elect would be a great activist investor, too. >> wouldn't he? >> man, if he wanted to go in a different direction -- >> i mean, carl has done

essentially what he does. >> they are similar in that way and both effective. carl ichan has been. as have our friends at elliott. >> interesting on nrg. >> led by mr. singer. they show up again. they have been busy, whether it is samsung or cognisant. the latest nrg -- >> marathon pete. >> elliott. they actually team up with something called blue scape. run by a guy who used to run txu. >> oh, that's a good combo. nrg has been running into the ground. >> they combined a 6.9% stake in the company. don't say much though. this is not your typical elliott situation, where they come out with their 30-page paper and tell you all the things. they simply believe the securities are deeply undervalued and there exists numerous opportunities to significantly increase shareholder value, including operational and financial improvements, as well as strategic initiatives. they believe charles john wilder jr., the man i mentioned, who ran txu, and his team have

directly relevant experience in those kinds of improvements. they want to talk, have a dialogue and they'll take it from there. you see nrg is up a bit. >> we looked at this on "mad money" and says the stock deserves to be higher but the management couldn't unlock the value. a lot was unlocked by crane, who had a grand vision not unlike musk for solar. the solar, well, turned out to be not that great for any of these guys. long term issue. >> you joked about downgrading twitter. ubs did it today to neutral, along with calls on netflix. goldman ups disney to buy. the war on businessdisney -- do to sales and upgrades to buys. >> disney was interesting. listen, even if espn is down 2% in perpetuity, priced in, i thought it was interesting. on netflix, we're coming in up

34% but we think international is going to be very good. the ubs twitter is really interesting. i know the twitter people will get angry i even aenmention it. but advertising revenue is not coming through. that's why they have to lower their valuation. now, the squawk team pressed on the idea of how do you come back? not talking about twitter but lowering revenue for advertising says, how is it possible that you have a president-elect that uses it and, yet, they can't seem to monetize it? it is a great conundrum. >> it is. it figures in the national dialogue every single day. >> every day. >> in a significant way. >> incredible. >> doesn't that -- yeah. >> look, i think one of the things people should recognize is companies that try to -- people who tweet to try to sell product on twitter, people, have had very little luck. >> yes. >> that's important. >> yeah. >> they tried to make it,

basically, an ecommerce site before. >> not working. >> didn't take. speaking of tweeting, donald trump with the second half of the tweet. beginning, again, with all the jobs i'm bringing back to the u.s., even before taking off with all the new auto plants coming back into our country, and with the massive cost reductions i've gauche e negoti military purchases and more, i believe the people are seeing, quote, big stuff. >> wow, okay. all right. >> lockheed martin says it could be good numbers. >> i would assume he's referring in some way to the f-35 when he talked about military purchases. this has been a lot of talk there. >> next thing is drugs. i think he's going to call in some of the drug companies and say, hey, wait a second. a deal said january h has taken stake in bristol-myers. that is one of those companies that has been kpchallenged by

murk. >> a viewer reminds me of morgan stanley, made apple a pick for the year. trim surface 2017 numbers. >> don't worry, this is in part because of the super cycle. this is literally apple planning wisely for the eight so don't take negative action on it. notice, here is a great tell for people who want to do trading. she says flash pricing is hurting their margins. please, western digital, micron, two of my favorite stocks, buy them on this. this is the -- this is really the tightness in flash. particularly micron digital. i typically don't say, buy something. i've been adamant digital is one of the cheapest out there. mi

micron has flash. it is a boom/bust business but we're in boom time. >> something you mentioned during the mad dash, you threw in the exxon deal. >> i tossed that? >> it is worth coming back to, larger than the noble deal. $5.6 billion. >> it happened while we were -- >> owned by the bass family. 275,000 akechracres, 250,000 in permian. looks like they don't have financials on it. looks like a good deal though. at least, i'm reading, from one note here, jim. the analyst says, in terms of at least versus what they were paying in the second half of '16 for permian deal costs. the acreage, not in the absolute core of the core, as nobles deal was yesterday. >> right. i will say this, this is a needle mover. we've been waiting for exxon to get off the dime. tillerson, not there. >> interesting. new ceo and immediately does a fairly large deal, $5.6 billion

purchase. >> a lot of us have been saying, we need to see exxon do something. remarkable reversal in united health. i'm not on the conference call. i have said united health is the long-term way to play. so much is happening. i know there are people who said their optum addivision wasn't strong. i remain committed to the country as a way to play the deal. >> texxon has great balance. great for the bass family. >> interesting. i guess the reynolds deal is obviously far larger but maybe was counted last year because that's when the offer was made. >> i point out, again, this permian is a way to raise numbers. people have to understand, halep burton found ways to drill there. if you go down there, we can get the stuff out. some people say $15 or $20 a barrel. look at that. for the core of the core.

>> core of the core. >> i have to remember that line, core of the core. >> i like that. >> dow is down 52. bob is on the floor. good morning. >> morning, guys. bond yields down, the dollar is down, stocks are down. things improved when theresa may started talking, maybe a little more clarity on what she's -- her goals are helped out overall. energy helping out a little bit. remember, that's been a big laggard throughout the year. consumer staples. technology is flat. health care has been a market leader but nothing today. nothing from the banks. energy and banks are the sectors down this year. morgan stanley's numbers were excellent overall. you see it is down. remember something, this has been huge moves up in morgan stanley. it was at an eight-year high on friday. all of these have had big moves up and struggled as we came into the new year. one thing i think is interesting about morgan stanley, i don't want to belabor this, but the bottom of the earnings report,

they pointed out they were a big buyer of their shares in 2016. they bought 117 million shares back, over $2 billion. that's a lot, folks. that's about 6% of the shares that are outstanding. remember, they had about a 12% earnings boost. a significant reason of the 12% boost in earnings was because they bought back so much shares. when you see companies that become buyback monsters, like ibm, morgan stanley, significant, how they impact their overall earnings here. let's look at tiffany, down 5% preopen here. important thing is, they talked about holiday sales in the u.s. down 4%. they specifically said traffic disruptions at their flagship fifth avenue store. i think they're right about that. asia pacific was weak. you'll notice the pan was strong. retail in japan, they went out of the way to talk about it. tiffany, understandably, down in the pre-open. you can see down about 2% here. they didn't change their 2016

guidance. they talked about a down mid-single digits. they said they do not anticipate a significant improvement in economic conditions this year. that's the overall statement. you see other retailers that started down at the open, are doing a little better in the luxury space. remember now, we're entering the heart of earning season for the fourth quarter. overall, it is important to note, 2016, not a good year for earnings. total earnings, an estimate now from thompson routers, only up 0.9%. energy is the primary reason, the collapse in energy we saw, down 77%. that is not a typo. rarely will you ever see an entire sector down 77% for the year. that happened to energy. they're expecting a rebound in 2017. 12.5% for the s and p. some people think we can get to 12% to 20%. they're expecting 300 -- again,

not a typo -- 360% increase in energy. exxonmobil, several times i noted, expected to double earnings. that's a lot from one of the biggest stocks in the world. materials and technology and financials. tech and financials, the biggest sectors in the s&p, expecting 12% increases. this is an awful lot to expect from the overall market. there are some people who think we could not just do 12% but 20% increase in overall earnings. you combine, for example, a stimulus program with an expanding economy, rarely you get a stimulus program with an expanding economy. whatever the wisdom of that, it'll boost earnings. get the lower corporate tax rate, global deflation ending and you got a global economy improving. some people -- i was with rich be berns bern bernstein -- and the stock market isn't overvalued as people feel. it is simply going to move to

fair value as we get the corporate tax cut. whatever happened to lower for longer? whatever happened to the old phrases? we're not using them much anymore. that shows you how much things have changed. the dow down 58 points. >> thanks, bob. let's get to the bond pits and check in with rick santelli in chicago. >> good morning, carl. whether it is a change in possession of football or every half inning, change in basketbabaseball, we'll get a new president and new administration friday. the markets are getting nervous about some details. eventually, the details will come. it's taking a toll today. 24 hour of tens, we can see rates dropped eight basis points. if you open the chart up toward mid november, you can clearly see this is a significant area. low 230s all the way down to 227. if we look at a 24-hour bund, it

dropped less than our ten year. look at the gilts. this is a drift. this is astonishing, considering the december cpi read month over month that carl talked about was up 0.5%. biggest increase since valentine's day 2014. it was up on core. that is the biggest core jump year-over-year since the summer of 2014. august, to be specific. doesn't that normally, when rates should move up more and you also should see the currency move up? indeed, the currency did move up. look at the pound versus dollar for one week. you can pull out the spike. the total on the dollar, it started when we weren't trading yesterday. look at the euro verse dollar on the one week chart. moving higher. many are considering the fact that we didn't violate that important level under the market

around 104, technically significant. which brings us back to the dollar index. it is down 7/8th of a cent. it was around the first week of november we first shot through the 100. going back to kiss that technical area isn't abnormal. it is a little volatile at this po point, considering how long it's been. back to you. >> thanks, rick santelli, with the presidential baton. about to be handed to donald trump. you'll want to hear from outgoing treasury secretary jack lew. we have that exit interview coming up. dow is down 70 points to start a shortened week. back after a break. the bottom line is, for your goals, this is a strategy i'd recommend. this actually makes sense.

now on the next page you'll see a breakdown of costs. what? it's just... we were going to ask about it but we weren't sure when. so thanks. yeah, that's great. being clear and upfront. multiplied by 14,000 financial advisors, it's a big deal. and it's how edward jones makes sense of investing.

i feel confident the deep gets done. the senate hearings, it just highlighted what jeff buckus and i have been saying from the beginning. this is a vertical merger. the telecommunications doesn't change the deal after this deal

closes. the entertainment business doesn't change. the concentrations are the same. nothing is different. >> right. >> as a result, as long as the laws apply, this is a deal -- >> at&t chairman and ceo on "squawk" this morning from davos, talking about what he thinks are fading concerns about the proposed merger with time warn warner. he added a spin off of cnn makes no sense. he is informed by his meeting with trump last week. >> where they said, apparently, they did not discuss it specifically. people unaffiliated with either side but are well-acquainted with anti-trust issues tell me they agree. vertical deal, vertical integration. it should not warrant a blocking position from the department of justice. the big question mark here continues to be the comments we get from the president-elect regarding his antipathy for cnn, and whether or not that be in any way have influence over

woman ever it whomever it is that runs the doj and how they approach the deal. if this deal is blocked in some way, it will send a chilling message to news organizations that are owned by larger corporations. which, by the way, are lots of them. >> you have a good point there, partner. >> dow is down 67. so far, one of the worst losses for the year today. short time span. stop trading with jim in a moment. don't go away. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.

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time for cramer and stop trading. >> a lot of companies going nuts. the upside off the border tax confusion, whether the president-elect says it is too difficult, i'd point out walmart, down from premarket trading, is really soaring. pvh, which said this is much better than expected, but everybody knows they don't make it here. had been hit on the pre-announcement. people know their business is good. i would say be careful because this is a fluid situation. there were a lot of shorts in retail because of the border tax. all i can say is you're a traitor if you're playing these game games. boy, you're a traitor. i think day to day, tweet to

tweet, and be careful pharma, because that's next. a tweet by this week is my prediction. >> what's on mad tonight? >> we have a private company. robots for crime. i think it is an interesting, hot area, given the fact we know that a lot of people are concerned about brutality and issues like that. keep it front and center. i'm also going to announce a takeover tonight. >> excuse me? >> a takeover. >> all right. >> good to be back. i thought yesterday was a great day. martin luther king. the more you read, the more you realize, what a genius. i wish i'd known it when he was alive. >> that would be amazing. >> jim, see you tonight. "mad money," 6:00 p.m. eastern. when when he come back, exclusive with jack lew. dow is down 51. don't go away.

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good tuesday morning. welcome back to "squawk on the street." we're at the new york stock exchange. sarah is at the world economic forum in davos, hosting a panel about rebuilding trust in the health care industry. talk to her in a bit. in the meantime, dow is down 59 points. s&p down almost eight. oil hanging in there though. up more than 1%. >> let's get to the road map this morning. it starts with the inauguration countdown. three days away from a president trump. taxes coming into focus, of course, as the president-elect takes a gab at a piece of the house gop's plan. plus, auto makers responding to criticism. hyundai and gm announcing big investments in u.s. jobs. reynolds bought for $49 billion from what they don't already own. we'll speak with reynolds executive chairman susan

cameron. >> moments from now, an exclusive interview with the treasury secretary jack lew. investors waiting for the highly anticipated inauguration. one eye on the global markets as the president-elect's comments move the dollar. our companies can't compete with them, china, because our currency is too strong and it's killing us. we have tobias, chief global strategist. >> how are you, david? >> good. of course, the comments on the dollar weren't the only thing. he talked about nato, talked about the future of the eu. how much of this general news feed can the markets reasonably absorb right now? >> look, i think the markets can be focusing on issues like earnings, forward guidance, business activity. we're going to get, clearly, this is the more unusual candidate or president-elect than we're used to having, in terms of twitter storms and things like that. i think at some point, we'll get a bit numb to it as opposed to acting to every tweet that comes

out. having said that, you know, issues around the front page of the "wall street journal" today are on border taxes, going to have impact. particularly stocks jim and carl were talking about earlier. >> tobias, if you say most investors will be focusing on things like earnings which, of course, we're about to hear a lot about soon, do you think that means the markets are not really pricing in specific policy, outcomes or hopes, anything like that? do you think the fundamental is explained where we are in the markets right now? >> for the most part, yes, mike. if you think what's going on in the earnings trends and the opt mitch sh -- optimism showing up, we look at the capital spending plans, turned more positive. primarily because emp will be up in 2017 versus the low numbers

in 2016. you're seeing this animal spirit aspect occurring. there is concern there might be some lull between now and the time of implementation of policy, particularly on the tax side. you know, some of the stuff we watch, things like the federal reserve board survey, commercial and industrial bone lones, business loan, they're indicating we'll have a stronger first half, important for the earnings story. you have the positive dynamics there because things are in the pipeline. having said that, one last point, are we going to get swung around by some news event day to day? sure. our view is kind of taking advantage of the dips and buy the market. earnings look like they'll be up high single digits this year. >> tobias, we could be living in a year in which we're not going to really see the meat of tax reform and what it may be until the end of the year. >> right. >> so the deduct lkctibility of interest going away, the border tax adjustment we're seeing debate about, repatriation, lower rates, all of these

incredibly important things, we'll have the whole year to spend figuring out which one it'll be in, which is not, what the impact is going to be. doesn't that sort of make for a lot of volatility? >> you know, we expectati volumetivety. one of the themes for 2017 included an increase ed volatil environment. it is not making a political judgment or geopolitical judgment but the shape of the yield curve seems to be a good indicator. there is a two-year lag in entering a period of volatility. to protect themselves from that, investors can look at biotech and pharmaceuticals. that group sends to do better in a volatile environment. if you're worried about that, we're not over weight for this group right now. if you're worried about that, pharma biotech isn't a bad place to hang out. >> which sector are you

overweight right now and is it changing? >> we upped the cap haital good was because we see ism as a leader. not aerospace defense but more traditional industrials. my old stomping grounds as an analyst years ago. but we also upped consumer services. joining media in the consumer discretionary sector. and we took software and services to an underweight. though we think it spending will be there, the stocks are reflecting news, particularly on the evaluation tide. >> tobias, who was a great capital goods analyst long ago, i can attest to that. >> and you were a good reporter covering that area. >> tobias, thanks a lot. good to see you. >> take care, guys. when we come back, treasury secretary jack lew will be with us live. it is his final few days in office. plus, tech in the age of donald trump. we're going to speak with ibm's

ceo ginni rometty. we have a huge show ahead on "squawk on the street."

hi. let's send it over to our senior economics reporter, who is in our nation's capital with u.s. treasury secretary, jack lew. >> i'm here for a live exit interview with treasury secretary jack lew. thanks for joining us. >> great to be with you, steve.

>> as usual, we've done this a number of times. i start with the news over the weekend. the president-elect said that the european union breaking apart would not be a problem for the united states. is it an issue for the united states? is it benefit to the u.s. economically? is there a position on that? >> if you look at the history of the last 70 years, a europe that has been increasingly united, both economically and geopolitically has been a source of stability, both in terms of there being peace in europe and most of europe and in terms of economic stability. i think that's in the interest of the united states. for multiple reasons. first of all, the history of the 20th scentury was a very different one. you know, geopolitically avoiding conflict is very important. europe is also our largest trading partner. having a prosperous europe is in our economic interest.

you know, we have, for a long time, really since the end of world war ii, been the indispensable outsider in european conversations. ultimately, european conversations have to be european conversations. and there are stresses now. legitimate questions as to whether some of the bure i don't care -- bureaucracy of europe needs to be re-evaluated. the last 70 years have seen a kind of stability, as i said, both gee politically and in terms of economy that is not always known to europe. that's important. >> we got some information from prime minister may about the exit of -- or the planned exit of britain from the european union. is this the worst case than what you expected or pretty much what you expected? >> steve, from the very beginning, we have said, and i believe that the ultimate outcome that would be best for the uk and for europe and for the united states will be to maximize, to have as much

connection between the uk and europe and between the uk and the united states. that will be something that we won't know until the end of the negotiations. >> we talked about a clean break though. >> i think if you look at ultimately where they're going, the question will be, are they continuing to keep the lines of commerce open? are they finding ways to -- both with the united states and europe, have the uk be highly integrated? in terms of geopolitical issues, are they, as i'm sure they will be, remain an active member in nato. uk is an important partner of the united states. it is an important partner of europe, either from within or outside of the eu. and, you know, i'm going to personally withhold judgment until we get to the end. >> over the weekend, the president-elect said the dollar was too strong. do you agree? >> as you know, steve, i avoid

commenting on statements like that. i think that what we've seen over the last couple of years is a u.s. economy that has been on a relative basis stronger than other economies around the world. that has naturally led to a stronger dollar. i think a strong u.s. economy is in our national interest. we've done everything we can to promote a strong u.s. economy. i don't think i need to remind you where the economy was just eight years ago. when we took office, we were losing jobs at almost 200,000 a month. we're leaving -- almost 700,000 a month. we're leaving, creating jobs at roughly 200,000 a month. 180,000, average. that's a swing of 1 million jobs a month. overall, it means we have over 15 million more americans working in the private sector. that's the kind of strong economy that we need to build on and make stronger and stronger. i think the challenge around the world, and i've said this as we go through national meetings, is for other economies to get jump

started. use the tools they need to. i would focus on what other economies need to do while we tend to keep a strong u.s. economy. >> when you look at the results of this recent presidential election, which many have ascribed to severe economic anxiety on the part of many in this country, do you feel like your policies fail to address those issues, or that you might have done more to address the kindnxiety that led to this election result? >> there is no question there is a lot of anxiety both in the united states and around the world. i think it is coming from multiple sources. the rate of technological change is the fasted in history. globalization on top of that creates challenges through competition. but the answer always has to be, how do we grow more and how do we make sure we're distributing the benefits of growth better? we've done a lot in the last eight years on both scores. you look at the measures of

personal income. they're up. the last current -- >> over the last year. >> well, we were -- >> flat for a lot of years. >> steve, we were in the deepest recession since the great depression. we had to dig out of a hole that was even deeper than we all thought eight years ago. once we started coming out, we focused on trying to get benefits to middle class workers. whether it is through things like the earned income tax credit or by helping to create jobs but small businesses. i think the challenge going forward is going to be, do the policies actually help to solve the problem? >> i know your focus has never been political, but when you look at democratic states like pennsylvania, michigan, going towards the republican candidate, do you look at the policies and say, you know what, we should have addressed that more? >> i think the perception is actually much worse than the reality. but i can actually understand why. you look at the news stories that are fairly frequent about

companies that avoid paying taxes by moving overseas. very wealthy individuals that avoid paying taxes by tax planning that's legal. you're a person working at a modest salary, middle class or less, you're paying social security and medicare on every dollar yoirn. you' -- you earn. you say, i don't get the benefit of the policies. talking about tax reform, this is in the united states and internationally. will we make policies that actually help working people, middle class people, or will we actually increase the inequality? we've had proposals that would have done quite a lot, even beyond what we've done. we haven't gotten the political consensus behind them. you know, proposals that we put forward, which are not popular with people who have a great deal of wealth, but things like making it harder to pass along enormous wealth from generation to generation without taxation could pay for things like child

care and training and infrastructure. >> one of the policies talked about by the incoming administration to address these issues are tariffs on those who ship jobs overseas. is that a good policy? >> so i haven't seen any specific proposals. i'm always reluctant to address specific proposals. i think free trade is a very important thing for us to protect. we have benefitted from free trade, both in terms of the u.s. economy growing and in terms of having a world that has more growth and is a more peaceful world. it has to be fair trade. it has to be fair trade. and we -- as we've pursued trade negotiations, insisted on high labor standards, high environmental standards, good business practices. that's the way to approach trade. not by just erecting barriers, either tariff or non-tariff barriers. if we were to see around the world a proliferation of more barriers, we'd see a slowing of

global growth. that doesn't answer the question, how do we make sure that working people feel they have a benefit in the shared growth? i think the problem we have is not convincing people that trade expands growth, but convincing them they'll get the benefit of it. they think the system is not level. >> one of the ideas out there, almost apart from this idea of import tariffs, is a 45% tariff on china. how delicate, fragile, solid is the relationship with china now, and what would be the fallout from a 45% tariff on chinese goods? >> we have worked very hard on the u.s.-china relationship. it is the most important bilateral relationship economically we have in the world. in terms of being two superpowers, it is geopolitically a very important relationship. i've been to china probably a dozen times. i've met with my chinese counterparts here many times. we've pushed them very hard. we've pushed them to open their markets. we've pushed them to have more competitive influences in their markets. we've pushed them to refrain from doing anything on their

currency that would lead people to think they were manipulating it. i think we made a lot of progress. they've moved their currency to the point where they're now actually intervening to protect their currency, not to drive it down. because a rapid decline in their currency would actually both violate agreements and be bad for them. they're opening their markets, though not as quickly as we -- >> 45% tariff tear us under in. >> i think one has to engage with china across the broad spectrum of issues that we deal with china on. and push very hard to make progress. also, recognize when they move in a positive direction. that's what we've tried to do. >> secretary, thanks for joining us. i'm hoping you'll be joining us over the years when you leave office. thanks very much. >> pleasure to be with you, steve. thank you. >> carl, back to you. >> steve, thanks to you, as well. when we come back, the age of technology under a president trump. we'll talk with ibm's ceo ginni.

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let's go back to the world economic forum in davos, switzerland. becky quick is there with i ibm ceo ginni remmetty. >> i want to talk about davos and artificial intelligence. before that, i want to talk about wall street. you're in a quiet peer yorioper. earnings coming out in a couple days. the last several quarters, when ibm reported after the bell, the stock has dropped in the after hours. i'm trying to figure out what you think wall street is misisig on this. what you see that they don't. >> we've talked about it many times on the show, what we're continuing to do is transform the company. parts of the business are growing and parts of the business, while they're good businesses to be in, they might not be in growth markets. they're watching as we make the transition and watch the balance

between those two things. so as you know, as we've done through the first three quarters of the year, those are the strategic imperatives, which are almost 40% of i bm and have had great growth. they get to the topic we're going to talk about here. a large part is around data and artificial intelligence, what we call cognitive. it is a big reason i came to davos this year. we were one of the first members of the very first davos meeting and haven't been back in a long time until now. this is squarely on the agenda. in a formative time. that's one of the big components of our growth. >> artificial intelligence is what you're talking about. >> yes. >> we had several guests speaking ability artificial intelligence. a lot of different ceos focusing on this. one of the first things people think of is watson. been on the scene a long time. >> yes. >> where do you stand with watson? >> i am pleased with the work we're doing with watson and the scaling. work we're doing with honeywell.

i think the reason it's come up in every conversation here, everyone views data as a competitive advantage but you can't get anything out of it without artificial intelligence. it leads you to watson. with us being the de facto ai platform for business because we'll touch 1 billion clients. you see what's important to them. it has to have a domain of an industry. it has to know an industry. it's got to work with humans, augment them. the most important thing if you're a business, you've got to have a system that says to a client, hey, this has been built in a way that i'll use your data, by the way, decades of accumulative data you have, but the insights belong to you. that's not true with some of the systems. >> it is your proprietary information. >> i can protect that for them. where are we on it? we talked about watson in health

care first, of which our health cloud, we're scaling across china, india, thailand, finland, netherlands, italy and going here. by the end of this year, 80%, we'll cover 80% of cancers by the end of this year. clinical trial matching. any breast cancer goes through our match to see if there is a match for it. then you get to what we recently announced, precision medicine, which is watson is doing the decoding. the genome sequencing is done. quest diagnostics. to particularly, for late stage cancers, find the right kind of treatment for them. health care and most recently, regulatory. all my colleagues here in financial services spend $270 billion a year on compliance activities. just last year alone, 20,000 new obligations, not just regulations, obligations. we've been training watson in

compliance management. that's why we bought promentory, an acquisitioacquisition, about training the system. health care, education, compliance, call centers with the banks, i'm now seeing watson branch out in many ways. >> it is amazing when you hear of some of the real things that watson can do. what the street wants to know though is when are you at the turning point, where you have really transitioned the company? you've been talking about it for a long time. talking how watson is growing and the cloud is growing. >> i feel quite good. you can see that we have transitioned to being a cog any -- cognitive solutions and cloud platform company. if you look at the cloud business, one of the largest clouds out there, key clients, whether american airlines and the like, and then the cognitive, two sides of the coin. when people talk about transition, i think of it as, what are you becoming, right? we have become, when i say

strategic imperatives through third quarter, close to 40% of the ibm company. what we do as well is run the big systems of the world. the banks, the airlines. i've been through that. that's just as important. >> i think david has a question, too. >> thank you, becky. beg the trump administration, the president-elect, of course, taking office on friday spent a great deal of time already talking about jobs. you're on the policy and issues committee, advising the incoming administration. when i hear you talking about artificial intelligence, and i understand watson created a lot in health care potentially, i still think about job losses. i'm curious as to why you believe it'll add more jobs. even the legal profession alone, i speak to law firms, they have young lawyers who just read documents. ai will be able to do that for them. those are jobs that will go away. why is it not a job killer as to opposed what you believe, i know, is it will be additive?

>> yeah. david, this is perhaps the single most important reason i came to davos. because i think these fears are not positioned properly. in many cases, are unfounded on this topic. yes, you'll create new jobs. but most important, you're going to find where most professions will work with the systems. it is a partnership between man and machine. if i want to put it that way. in fact, i read a study the other day that said the number of complete jobs replaced is a very small percentage. like every technology in the past, you're right, there will be some. think more about activities changing with the technologies. so when you do your job, there will be things that take you a lot of time to research and do. yes, they'll be done faster. then you have the time to do what i think we all as humans do best. a really key point is that this is about augmenting. that's why we've said, it is not artificial intelligence, it is augmenting intelligence.

it is an era. with every era, we've seen it in the past, whether when people came off of doing farming, they had to learn to read. the industrial area, it was mechanical skills. this evera, it is again going t be about building different sell sets of skills. what i feel strongly about is where our focus needs to be is on building skills. we have 5 million jobs open in the u.s. there are millions open in europe. 80% of japanese companies can't get the people they need. plenty of these jobs can be done without a four-year degree that are out there. if we would change the basis and align what is taught in school with what is needed with business. that's where i came up with this idea of new collar. not blue collar or white collar. we've already made progress. 100 schools, not just in the united states. whether it is south africa, china, india, i mean, they're growing, canada, australia. this is just about saying, here's what a business will have. the schools teach it. >> you made the reference to

history. over time, the jobs are replaced. but there are gaps. >> yes. >> significant gaps. >> yes. >> i wonder how long you think it will be. those kinds of dislocations can be quite unsettling for many societies. >> yeah. you're precisely on the issue. the gap and the time point. when i think about this, i think there are three things we should do. one is this new education, that's people coming out. fine, pathway to technology. the second one though is about re-training. i view those of us who have been around, we have an obligation around this topic. a responsibility. a lot of retraining. the third is, i don't want you to overlook, these technologies can be used to help people do their job. a bank, a call center, people who would otherwise not be trained, they use watson to do 59 complex products to help them answer questions. so i view there is a public/private partnership that is a solution to close the gap. that is the source of unrest. not just the united states, in many other countries around the

world. >> i want to thank you very much for your time today. we hope to have you back to talk about more of the issues, especially as we get further down the road with it, too. >> thank you. >> carl, back to you. >> thanks so much. good stuff today. quick news alert for you. facebook ceo mark zuckerberg arriving at a dallas federal court a short time ago. he is testifying in a two-year-old suit against facebook, which claims oculus was based on stolen technology. a game maker is seeking $2 billion in damages, the amount of facebook paid for oculus, claiming they stole the trade secrets. zuckerberg said, quote, i'm aware of the claims and here because i think they are false and it is important to testify to that. when we come back, a deal creating the world's largest publicly traded tobacco business. british american buying the rest of reynolds american. we'll be joined by susan cameron. dow is down 23 off the lows.

back in a minute.

good monday morning, everyone. i'm sue herera. tereheresa may charting tow a clean great with the european union after four decades of integration with the continent. >> dlclock back to the days whe europe was less secure and less able to trade freely. it was a vote to restore, as we see it, parliamentary democracy, determination and become even more global and internationalist in action and in spirit. turkish authorities captured the gunman who killed 39 people at a nightclub on new year's day. he's identified as a uzbekistan

national. he was caught on the european side of is t istanbul. freezing rain, coating of ice on trees and power lines and pretty much everything else in western kansas. it was a mess. that's the cnbc news update this hour. i'll send it downtown to you, carl. >> sue, thanks so much. let's get to dominic this morning for a market flash. good morning, dom. >> good morning, carl. watching chairs of jcpenney, higher on news the struggling retailer is teaming up with nike. the sneaker giant plans to open shops in over 600 jcpenney stores, anchored by the swoosh sign. the face will be dedicated to nike in prominent locations within the men's departments at jcpenn jcpenney. shares of jcpenney has highs around 4.5% on the news. the stock is about 3% higher

now. of course, the shares are down about 1/3 of their value since the first week of december. back to you guys. >> thanks very much. good day for retailers. gm, hyundai and walmart announcing investments in u.s. jobs today. the president-elect speaking out on the house gop's corporate tax plan meanwhile with three days until inauguration. john heaarwood joins us from washington. >> president-elect trump is t trying to build up momentum heading into friday's inauguration. yao had the announcements you mentioned. look at these, gm, hyundai and walmart. all trying to get ahead of potential donald trump tweets. every company now knows that if they get on the wrong side of the president-elect, they could get a tweet that drives their stock down. in response, donald trump tweeted out this morning that all these jobs announcements reflect the fact that he is achieving results. he said, voters are seeing the big stuff, even before he's inaugurated. however, the president-elect also was engaged in two different feuds today.

one of which is particularly problematic for the republican agenda. in an interview with the "wall street journal," he criticized the house republican tax plan for its reliance on border adjustme adjustment. that is to say, taxing imports but not exports as a way to raise money to lower corporate rates and also encourage united states investment and jobs in the united states. donald trump said that that is a recipe for having the adjustment be made to our detriment. he likes it simpler tax proposal. he'll have to work that out with republicans. it is complicated because his alternative of a 35% punitive tax on u.s. corporations that ship back into the united states doesn't raise as much money. it makes it more difficult in tax reform to lower the corporate rate. finally, inexplicably, the president-elect revived his martin luther king day weekend feud with john lewis, the civil rights hero who represents atlanta in the congress.

john lewis said in an interview with our colleague chuck todd on "meet the press" that he did not regard donald trump as a legitimate president. trump ndonald trump hit back ov weekend, saying he ought to focus on crime and jobs in his neighborhood, in the destructise represents. he also then this morning tweeted out that john lewis had falsely claimed that this was the first inauguration that he skipped. sawing donald trump said that john lewis had skipped george w. bush's inauguration, as well. he can't help himself, getting into the spats. don't know if he profits from doing that. house republicans have to decide how to handle it on the border adjustment. this is what we're going to see from this president-elect. he is not slowing down on twitter. >> speaking of house republicans, should we be on the lookout for a response from kevin brady, house ways and means, anybody else who had a hand in writing this original plan? >> i would expect not.

i think kevin brady is a low-key lawmaker who, i think, is not going to get into a tit for tat with donald trump. he's much more inclined, and i think paul ryan will be, too, to say, let's sit down and talk about this. let us explain the merits of our approach. they will be practical in the end. i think they're looking to avoid a high-profile skirmish with the president-elect. >> a lot of this might go down to exactly how important it is for house republicans to have something on paper that seems deficit neutral, right? this was a revenue piece of the corporate tax overhaul. what's your thinking or how do you handicap the likelihood they're willing to cut corporate taxes and accept the deficit effects? >> well, i think the house republicans are looking for ways to finance deep corporate tax cuts. even if you're in the deficit neutral, you have to offset some of the cost. if you're going from 35% to 20%, which is what the house republicans have in their plan, you're going to have to raise

revenue. that's what their border adjustment tax does. i think they also regard the punitive tax that donald trump is talking about as something that could be counterproductive, could end up spurring a trade war. they're looking for a more elega elegant, systemic solution to the problem. the question is going to be, can they get that done, and will he sign it? >> certainly, and how much patience does the market have as it gets written. thanks very much, john. busy week ahead. john harwood in washington. as we go to break, check out shares of nrg energy, the target of blue scape energy partners. took stakes in the power producer. watching the dow try to work back to the flat line. down 18. don't go away.

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this is the pursuit of perfection. british american tobacco paying $49 billion in cash ask and stock to take control of reynolds american. 26.4% premium to reynolds share price, the day before b.a.t. made the initial proposal to acquire what it made known in october. susan cameron joins us now. nice to have you here, ms. cameron. thank you for being with us. >> thank you. >> you did well. 7% premium to their original proposal. 9.5% premium to your all-time high. i mentioned the other premium, as well as the multiples being high based on previous transactions. there are always shareholders who say, come on, you could have done better. we want more. what do you tell them? >> i think, you know, as you can

see from the timetable, this was a hard negotiated sweet spot between the sets of shareholders if you think about that. $29.44, which was a significant increase in the cash piece, complemented by the 0.526 piece of equity gives shareholders almost a 50/50 component between cash and ek wiquity to particip in the future value of the group and participate in the strong growth of emerging markets of the larger group. we feel like we hit the sweet spot. it is a win-win for both sets of shareholders. british american tobacco has been a great shareholder of ours. they've held 42.2% since the inception of reynolds american in 2004. we have return eed over 1100% shareholder return in that period. this is a great next evolution as we combine to build the

world's largest global tobacco company and a pipeline of next generation products. >> shareholders were thinking about the coming possibility of tax reform and the fact your rate may go down a lot. and wanted some value delivered for b.a.t., based on that potential assumption. why didn't you get that? >> i think when you go to construct these deals, you don't construct them on speculation or gaming timing or otherwise. this is really a strategic combination. our transaction committee and the full board certainly thought about the talk about corporate tax rate changes. we certainly talked about brexit and interest rates and consumer staple multiples. there is a range of things you look at. we came down on this valuation with the equity and cash. the equity component enables our shareholders to participate in

any changes in those macro -- in that macro environment, as share owners of the new combined enterpri enterprise. >> you're talking about at leigh $400 million of cost synergies realized over the first three years of the combination. where does that come from? >> a big part of that is in things like procurement. because, of course, with the scale of the larger group, we believe that there is a lot of opportunity for synergies in that area. when we think about this transaction though, british american tobacco does not have any other operations in the united states. so the great majority of jobs here, and certainly all of our facilities, will remain in operating for the u.s. business. what we are also excited about is looking at the potential for reynolds to play a larger role in group activities and looking for the potential of new jobs. so we feel very good about

getting those synergies and bringing them into the combined company. of course, this is very early days. the integration planning process hasn't begun. we will certainly keep people posted as we move toward the close. >> interesting, you mentioned that key word in this day and age, jobs. certainly something our incoming president focuses a lot on. are you saying this will be additive to jobs, not as is typical of mergers of this type, reduction in employment? >> well, as i said, i think, you know, there are -- there is no overlap in operations is key. and we see the opportunity for reynolds to play a larger role in the b.a.t. group, which has the potential to increase jobs. >> just a point here, curious to get your thoughts. you had separate press releases, separate calls, separate decks. you're coming on. they didn't come on. i mean, sometimes, that can already sort of send a message that, hey, we're not operating

together here. you're talking about synergies that you have to actually get to in terms of costs, which require cooperation. should shareholders be concerned? >> absolutely not. we have been partners in the context ofnot. we're partners in the context of shareholders since 2004. we have a very strong relationship. i think if you think about the description that you just had, the time change really does contribute to this sprat announcement time table, you will certainly see as we move through communications we will appear together. >> number one menthol cigarette brand, number two cigarette brand, palmall. you have done through recently, should there be concern here

when everyone takes another look at this thing? >> we're not concerned about those regulatory approvals. there really is no overlap, again, in this u.s. market. one of the benefits of the transaction is that the global ownership comes together in this transaction. there may be opportunities for newport outside of the u.s. and for kent inside of the u.s. certainly not something contemplated in the transaction but it is certainly a opportunity. >> you have not mentioned much about new technology yet. we hear about vaping, and other ways to enter the smoking category, will that combine with the company? >> both companies have a very robust type line. and that has additional

opportunities for us here in the united states and opportunities for the reynolds technology to be used in many markets around the world. so we will be best in class in next generation products and that doesn'ts our continuing of the industry by offering adult consumers products that has the potential to reduce harm. >> thank you for coming on this morning. air force one the topic of discussion at trump tower again today. the president-elect blasted the company on twitter for alleged cost overruns and called on the government to cancel the pending contract. we will be watching and listening for results of that meeting today. let's send it over to john fort.

>> we're going to continue to dig into trump and business. he is twisting arms, but is he getting results? apple indeed going into orlanigl content. all of that and more coming up on "squawk alley." now we just need 500 more... translated into 35 languages, personalized oh and shared across the 7 continents. (other languages spoken) look abbot, i got it. it's a miracle. ♪

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after a meeting this morning, the trump administration says that bayer has committed to $8 million in new research and development spending and will keep all of their workforce in place and add more high-tech jobs. bayer a deal to acquire monsanto. these are the kinds of transactions we can expect to see from the upcoming administration. when it includes the potential for job losses. in this case, the ceo's committed to maintaining the work force and adding to it. that should help the sentiment

around the field. we'll have a lot more ahead, stay with us.

welcome back, the dow and

the s&p grinding their way higher on the s&p. treasury yields down, consumer staples are up, so it is a little bit of a reversal. that does it for us a on "squawk on the street." let's go to carl to kick off "squawk alley." >> good morning, 11:00 a.m. here on wall street and "squawk alley" is live. ♪ good tuesday morning, welcome to