"squawk box." good morning. welcome to "squawk box" on cnbc live from the nasdaq market site in times square. i'm kelly evans along with scott wapner and steve liesman. becky, joe and andrew are dusting off the snow of the alps and heading to capitol hill. we'll check in with john harwood on that topic in just a couple of minutes. first let's check in on the markets. u.s. equity markets coming off of a six out of seven-day losing streak. four points off the s&p 500 there. seven off the nasdaq. let's look at how we were trading overnight in asia and europe. a lot of news coming out of davos. japan's nikkei up 1% overnight. the shanghai composite down a

third. hang seng down 0.2. european equities, here's a look across the board. seeing red, that is bleeding over into our markets. the ftse 100 the worst performer, down three quarters of a percent. the german dax, relative outperformer, down 0.1% there. as we keep an eye on the trading in that session. crude, obviously continuing to be important for the market. kind of hovering around these levels here. 51.52. wti, brent both up a bit. nat gas making a move as well. it has been whipsawed around the last couple of weeks. ecb holding its first policy meeting of the year. president mario draghi will hold his normal news conference at 8:30 a.m. eastern. last month they decided to extend the bond buying program

until late 2017. look at the euro. we are trading 1.06 versus the dollar, the yen, 114, and against the pound, 1.23. in the u.s. today, fed chair janet yellen will deliver another speech. this time in stanford, she will take questions from the audience. in remarks yesterday, a hawkish yellen gave a strong signal that the central bank is close to raising rates again. >> as of last month i and most of my colleagues, the other members of the fed board in washington and the presidents of the 12 regional federal reserve banks were expecting to increase our federal funds rate target a few times a year until by the end of 2019 it is close to the estimate of 3%. >> that's a slow climb up

towards that 3%. yellen warned any delay in tightening policy could have disastrous consequences for the u.s. economy. >> today's top corporate story. netflix shares rising after the latest results topped wall street estimates. they added 7.1 million new subscribers globally during the quarter. a third more than expected. canadian pacific ceo hunter harrison is stepping down five months earlier than expected. he may be taking an activist stake in csx. check out shares of csx there, up more than 12%.

>> we just had michael ward on a couple days ago. 12.5% higher on this. >> it's my understanding that hallel when he was at pershing, hallel was the architect of that investment and instrumental in bringing harrison in. the stock went up four, five fold. he left pershing square, starts his own fund, raises a billion dollars for a single investment with a five-year lock up. five-year lock up money. >> sticking to his area of competen competence. >> can i ask you a question? i've been in washington the last couple of days -- >> you were, too. >> i didn't see you. i didn't see you. listen -- >> were you locked in the basement of the treasury department?

>> the stuff happens in the basement. here's my question. i'll be able to say what i think i learned. what is the considered opinion of the guys around the table and the ladies around the table of half time about why we had this swoon, six, seven times? what's the general conventional consensus on that? >> maybe taking a pause, catching its breath. because of the big run up we've had. as you get closer to the inauguration, maybe trepidation about what lies ahead. look, dalio said to the guys in davos yesterday that the market has discounted what he called the obvious. now it's time to see what trump administration will be like. are they thoughtful, off the cuff? is there going to be a trade war? the border issue still lies out there. so the market has done all of the easy lifting. the heavy lifting now starts

onnion i january 21st. >> we can compare notes later, if i was in the basement you were on the top floor or the penthouse of some hotel. >> thank you. >> i come away that there's going to be a tax cut, a meaningful tax cut. >> how soon? >> it's going to happen. i think they're behind the curve in terms of getting people in place. there's this ryan plan, i don't know how they insert the name trump into that plan. that's an issue. >> do they fund it with something like a border tax? >> i think the border tax happening. we can talk about that as the -- >> does the market know that? >> that's the question. you're saying that they already factored this in. show me something new. >> people smarter in the markets than me said we have already

done the easy discounting, deregulation, corporate tax cut, personal tax cut along with it. >> i think that package coming out of the house weighs and means has a decent chance of passing fairly intact. i don't know how many friends ryan and brady have in the senate. that's an issue to be discussed. i don't know who the team will be for the trump administration, what stamp they'll put on it. >> it seems like trump and ryan are together on this. they were saying that ryan called trump to say this ethics vote shouldn't happen. even though they had this back and forth in the papers, it feels like they're on the same thing. >> former treasury secretary tim geithner had a saying, plan beats no plan. ryan has the plan. from what i can tell, there's no secret plan inside the trump administration that's different from the ryan plan. that's the one that will be the blueprint for tax cuts.

chb >> the comments from jamie dimon out in davos, saying the times have had this run since the election, that the gapes are not in those stocks. the full extent of those gains are not in those stocks. >> some financial analysts have said that, too. >> people looked at what the market has done and said it has gone so far, it needs a pause. dimon saying if you get these things, interest rates rising, regulatory things rolling back, no, it's not represented in the stocks yet. >> that's what i'm wondering about. >> kelly you should read the prompter, the other guys never blow through that stuff. they always listen to the producers. >> we are talking about washington. so we are watching cabinet confirmations on the hill today. among the key ones, president-elect president trump's pick for energy secretary, rick perry, and steve ma mnuchin. mnuchin is expected to come

under fire from members because of his one west bank. >> let's get to john harwood for more on the big day, inauguration day tomorrow. >> countdown tile, kelly. 24 hours from now, donald trump is going to be preparing to take that podium and give his inaugural address. he tweeted a picture of himself working on that address the other day at the mar-a-lago. we have the filling of the last cabinet post that remained untilled, that's agricultural secretary. sonny perdue is the choice for that job. and we have the two hearings, one for rick perry, ran against donald trump, once called him a cancer on conservativism, will have a confirmation hearing for

energy secretary. a department he once favored abolishing. he will be going on before senators at the same time that steve mnuchin is going to be subject to his confirmation hearing as treasury secretary. i expect both of these men will be confirmed. steve mnuchin is the one for the reasons that you were just discussing with steve that tax cut, which is very likely to move its way through the congress, he is going to be questioned on that he will be questioned on his ties to the financial industry, on one west, the old mortgage foreclosure issue that followed in the wake of the financial crisis. he'll have a bumpy ride but he'll come out on the other side. in 24 hours, donald trump may not have much of his cabinet confirmed, but he has everyone selected. we'll hear from him on what his plans are. >> john, look forward to it. the markets will officially

enter the trump era in just over 24 hours. jamie dimon talking to the squawk gang in davos yesterday about expectations for real change on capitol hill. >> i think the market is smarter than that. they know the sausage will be made in taxes. it will take 9 months, 12 months. the detailed work has to get done. i'm hoping we have real reform. at a minimum we'll have some lower tax rates, repatriation, something to help infrastructure. but there are things to be done right away. around regulatory things, getting people to invest more. >> joining us now, steven parkeparker and our guest host for the hour today, phil orlando, chief equity strad gist frtegist. phil, beginning with the theme jamie hit on almost echos what dalio said yesterday. market knows the obvious stuff,

that's why it has gotten to where it has. now the actual agenda is going to take time to pass. what does that mean for the market if he's right? >> that's why the market is drifting sideways. it's sort of buy the election, sell the inauguration deal. we had this 10% move in the s&p 500 off the election, based upon the prospect of the good stuff that jamie was talking about. now the questions sink in. are we going to get the legislative initiatives? are we going to get repatriation? >> we think we are. the question is how long does that take. >> in terms of the process, best-case scenario, our view is that we don't get approval until congress goes on recess break in august. if we're wrong and that drifts into '18, there's legislative risk in that. so we have a seven, eight-month waiting period. >> we trade sideways then?

peaks and valleys through that period? >> you will see some ups and downs. when looking at the markets now and the opportunity over the next 12 months, you have to look at these policies as nice to have. looking at what the corporate sector is doing in terms of delivering earnings growth, that is driving markets higher. >> don't we need to have corporate tax reform? >> we need to but if you're talking about what the market can generate if terms of returns over the next year, look, just the fact that the economy is getting better, the fact that energy prices are much higher than a year ago. interest rates are higher, that's good for banks. our base case with basic policy reform is is mid to high single digit earnings growth and equity market returns. if you get come prehence ef tax reform, repatriation, these are in terms of needing a lot to to

be invested. >> i hear people talking about the prospects of a 4%, 5%, 7% correction in stock. do you see that happening? would you be a buyer of the dip if that did occur? >> we certainly would be. we're a bit more modest if we get something in the 3%, 4% neighborhood, we think that's about as much as we'll get. the issue from a timing standpoint, we're talking about '17. where do we get things approved? by '18 we ought to have whatever will happen in place. we think that gdp growth in '18 will approximate a trend line 3% level compared to where we have been the last several years in the 2% area. >> how granular does the analysis get? is there a possible that the poor popularity numbers from the president-elect have reduced the market's probabilities of some of this stuff happening? and then the whole debate around border adjustment, that that was

seen as complicated initially criticized by the president-elect, then maybe embraced in a more luke warm way. would that reduce the market odds or chances of any of this stuff happening? >> we have to expect a lot of this policy debate will have fits and starts. if you look back to last year, what's important to recognize is as it relates to politics, markets seem willing to look past some of the near-term noise, whether it was brexit, whether it was the result of the election, and if you can get this better outlook in terms of the economy, better growth, better inflation, i think a lot of the volatility surrounding some of the policy questions, we'll look back and say that was more noise than major driver of the markets. >> what do you make of the move in bonds? the fact that yields after looking like they would go on this steady stream of rising, then went down. what is the message? >> so you have gone from 1.75 to

2.65 on the tens, based on the prospect of stronger economic growth. over the last month or so, treasuries have pulled back to 2.30 or so. what's happening there is policy uncertainty. is the stuff we think will happen going to actually happen? we had a meeting on this yesterday. as we look out over the course of the year, we expect treasury yields will grind up to 3%. it will happen. this will happen in fits and starts. this is one of those fits and starts. >> that's good for stocks ultimately? jt absolutely. you'll have a rotation into risk equity assets. that will be good for stocks. >> you see that as well? >> i think so people point to the fact we saw inflows into the fourth quarter and equities, for the year net flows were negative for equities. if you look back to 2006, we have seen a trillion and a half

dollars going into bond funds, the net flows into equities over that time period, zero. we could be in the early stages of a rotation. >> good to see you. >> good to be here. >> steven parker, and phil orlando is with us for the rest of the hour. much more "squawk box" ahead, including a review of netflix and programming that is driving subscriptions. is the stock a buy now? we'll get into that. as we head to break, check out this day in history. ove sge

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welcome back to "squawk box." let's check on the markets this morning. looking at the futures. let's see, the s&p implied open down 2 points. dow jones down 10. nasdaq down 2 points. you said this would be the sixth or seventh day we would be down? >> maybe seven out of eight already. >> if it's today. >> don't take my word for it. >> there's the ten-year.

it moved from the 160s to the 2.65, it's now off 20 basis points which has gone along with the decline in the markets. a rethink about the extent to which we've gone, not the fact we've gone. >> right. we keep drifting higher now. shares of netflix are on the move after an earnings beat. the streaming jin ining giant p their biggest ever earnings growth. so the international number was big. what to you is most significant about this release? >> what's interesting about netflix now, they hit this cycle where they invest in new content, that attracts new subscribers, which affords them a larger budget for new content, in turn new subscribers. now they're at a point where they're approaching 100 million subscribers, the largest pay tv network in the world, which gives them the largest content budget. netflix went from a side show to

the big tent. they went from being we'll call netflix if they'll pick up our content, to getting the first call when producers are pitching new ideas, like "house of cards" to now "the crown." >> we have a fan of "the crown" over here. mr. liesman. >> the second thing that happened is that margins inflic. the international business masks the overall earnings. when you enter a country, you have to fill content for the entire country. that creates this negative drag on earnings. if you took their international business and put it at the operating margins they had domestically, edibita would be

three times higher. they've been in the u.s. for 15 years, in the u.s. streaming for eight years. they've hit profitability in canada, getting there in latin america, so it's just, you know, content investment. if you go through the cash flow statements, you can see it. the third thing that's happened, which is the problem, is that five years ago when i was on the sell side, no one liked the stock. i had dinner with the cfo, couldn't give away seats. we were at four seasons, nobody wanted to come. >> you invited the wrong people. >> liesman would have been there. >> right. now every single major bank has a buy on the stock. it's a top pick. stock is trading at after market earnings numbers 60 times ebita. for us, we're not pure value, but we're valuation sensitive. it's too rich for me here. i would be waiting for a pull

back. >> so you love the company. you don't love the stock. >> can't buy the stock here. on the flip side, that's been a bad call this year. the stock has done -- >> or in most of its history. >> no, there's been big periods. if you go back to when i started covering the stock 15 years ago, they missed a quarter, the stock went down 75%. five years ago they did that qwikster thing, stock went down 75%. they had some blow-ups. you get your opportunity. our strategy on companies we like is be patient and wait. last year we did that with apple and alibaba, had some great opportunities in the first quarter. netflix has not given us that opportunity any time recently. if you want to play the move to online video, youtube is an unde underappreciated asset. theyenues that are close to --

>> can you put it in context? in the top ten, where does it rank and how much more upside is there? >> for -- >> for subscribers for netflix? >> that's a good question. in the u.s., 47 million, 48 million subscribers. 110 million households. so the head room is getting there. a few years ago everyone said the top was where hbo was. 30 million subs, you can't get th past that, no one has, no one will. they're at 48. they will soon have 100 million subscribers, so there's more room abroad than here. but we're sort of hitting that froth head room in the u.s., which is why they are having to invest so much abroad. >> thanks, dan. >> thank you. >> coming up, what could be coming down tracks for the railroad sector. could we see a management shakeup at csx?

morgan brennan has that story next. as we head to break a look at yesterday's s&p 500 winners and losers.

♪ welcome back. you're watching "squawk box"

live from the nasdaq market site in times square. it is a good morning when that music is playing. welcome back. the data floodgates open in about two hours from now. we will get numbers on weekly jobless claims, december housing starts, and mario draghi will begin his news conference. alibaba has announced an agreement with the international olympic committee. they will become a worldwide olympic partner with a new pact running through 2028. the wide ranging agreement makes alibaba an e-commerce services platform customer. >> could the rail industry have

a shake up coming down the tracks? >> just when the red hot railroad trade was cooling down, we have hunter harrison and paul hilal spurring an after hours rally in railroad stocks. harrison is stepping down almost immediately from his ceo role at canadian pacific. he is leaving $89 million on the table to pursue other opportunities with class one railroads. ender csx, who harrison is teaming up with hilal to target. hilal initiated pershing square's proxy fight for canadian pacific. he left last year to get his own fund, mantle ridge. hilal drove down operating costs dramatically. the reason the stock is double

2012 levels. this could be a very different situation. now there would not be the same regulatory hurdles, and current ceo michael ward said he wants to retire by 2019. csx may be much more amenable to bringing harrison into its management ranks. that sent shares of csx soaring in after hours trade. it is up about 12.5%. it's a stark reversal from the post earnings selloff yesterday during regular trading hours. also pushing up norfolk southern and union pacific which reports its own earnings this morning. the news also overshadowing cps own results, which missed estimates. if you look at shares of cp, those are down. it's also worth noting that keith kreel is taking the helm over. there he's a close meantee of har ress harrison. >> do you have a sense of the antitrust issues that this could raise? >> if you were to see harrison come into a management role at

csx, it will be a different situation. one railroad trying to merge with another in a consolidated industry. if he were to come on and take the ceo, drive down operating costs there and send that stock soaring, it will be a different equation. part of the reason investors are jumping into the stock right now because it's not going to be going through those same regulatory hurdles. as you guys know, when we were following the rails, the potential for consolidation, there were cross-border issues, now if it's no, no, you pick a rail and go in there and increase its efficiency, can they pull it off again? >> morgan, you've been doing grade reporting on kansas city southern, a railway affected by the potential for changes in trade with mexico. >> yes. >> to what extent are either of these players in this scenario effected by potential changes in trade?

>> meaning csx? >> yeah. >> csx doesn't have the same type of exposure to cross border trade between the u.s. and mexico the way a kansas city southern does. kansas city southern has about half of its business coming from mexico. autos is a growth area. csx is in the eastern part of the u.s. it's much more exposed to coal, to the port activity and the containers that come in off of ships through the east coast ports, grain, other types of commodities. so it's not -- that's the reason you have not seen shares of that stock sell off in the way you have seen kansas southern. canadian pacific and canadian national have been selling off on the headlines around nafta. but a company like csx is considered a much safer bet within the rail system right now. >> morgan, thank you.

morgan brennan there this morning. we are less than a day away from the inauguration of donald trump as the 45th president of the united states. yesterday goldman sachs chief lloyd blankfein spoke to the squawk gang in davos about the election's impact on the economy and markets. >> one reason why the election had such a dramatic effect, it was drawing people in the direction it was already heading. the markets were improving. the fed focused on the likelihood of them raising rates. the growth was in it. we were getting at or near full employment. >> but -- >> president-elect trump's platform is so simulative. >> joining us now with what to expect in the first 100 days, tax policy, the future of the fed is kevin hastert, and our guest host, phil orlando.

kevin, phil earlier in this half hour ruined my summer, which is probably the most important issue. he said tax cuts and the packages are done around august. i think it gets done earlier. what is your take? . i think they'll do it through reconciliation probably. maybe they'll work out a bipartisan deal. you'll have a good glimpse of what will happen by april. but you will see the final bills probably august. some of this stuff will be complicated to work out. >> i'm canceling the whole fishing vacation. let's talk about what gets passed. from i can understand from my travels in washington, the ryan plan -- are we calling it the

ryan-brady plan? >> the blueprint. >> you're not putting names on it. that's the basis for the tax cut. is that plus or minus what you expect to happen? >> looking at what mr. trump said the last several days, having been a washington tax policy geek for more than 20 years, i think it means you'll have a classic tax bill where the house passes something, the senate passes something, they'll be a bit different, maybe a lot didn't, then there's the conference where they get together and they negotiate along with the white house and figure out what it will do. so i think it will be a year where people will change their minds along the way about what will happen. the odds of a corporate tax cut and individual tax rate cuts happening this year are close to 100%. it's going to happen, but exactly what it looks like, there are going to be times, like probably the house will keep it in there, the senate might not. they'll all work it out. that's the way it will go. >> what was interesting is you have the conservatives that i met with, they're 100%.

even the liberals and democrats who i met with, it was almost like this is the just dessert of the victor. he ran on this platform, he will get this corporate tax cut. it raises the question about the border adjustment tax, which we don't want to but could spend the next 2 1/2 hours discussing and explaining. is it going to happen? >> i think in terms of explaining, michelle has written some great pieces on this. >> michelle caruso-cabrera. >> yes. she has done the best job in media explaining this. you should read it because it's too complicated right now, but it could happen. the reason they included it in the house plan is since we have a trade deficit, if we border adjust, which means we charge tax on imports, refund the tax on exports, if you have a trade deficit you get revenue. it's probably 1.2 trillion. >> but the retailers are up in arms over it.

the koch brothers are opposed to it. >> it's not a sure thing. >> and my about friend larry kudlow surprised me by being against it. >> i saw larry speak emotionally about it. on the income tax side, the blueprint plan and the trump plan are almost identical. the rateds are the same. if you look at what president-elect trump ran on -- >> there is no border adjustment. >> no, the individual side, not the corporate tax. >> what we heard in recent days is despite the fact that ryan and the house wants the border adjustment, trump's people reached out to some folks in industry like the retail industry and said we don't particularly like it. it's too complicated. it will hurt us. maybe you should sort of rethink that. what you heard behind the scenes, is that factoring into the trump administration's thought process? >> you know, i don't know what is going on behind the scenes of the trump team. i do know those conversations

are -- they're happening with everybody in washington. people love it, industry sectors that love it, don't like it, and this is what happens when you do taxes. that's why they call it sausage making. people are upset. if you look at house plan, one thing it does is call for the elimination of the interest deduction. but immediately you think of lots of people who will be upset about that. but one of the things that then happens is people think how will we eliminate the interest deduction? do we do it all at once? phase it out gradually? at what rate do we phase it out? that's stuff people will be talking about. to get a seat at table, influence adjustment rules, you have have to start whining now. >> we don't have a lot of time, but let's talk about the fed. how does president-elect trump populate the fed? what kinds of folks does he go after? hard money folks or folks like every other president wanted, people who want low interest

rates? >> i think there are going to be a lot to of openings, he will have to make a decision about yellen for next year. i would guess he's going to have three, four people by next year that he has placed on there. what i would do is look to people like john taylor, glenn hubbard, larry lindsay, my good friend and colleague, that people who are sound v a l, ha t of experience no those areas. >> is there a chance he would consider keeping yellen? >> that's happened over and o r over. so whether there's a chance or not, i can't say. i couldn't redistrict. it has happened. >> if the economy is doing well, if interest rates are not excess xcessive -- >> if he keeps yellen and replaces a lot of the fed with

more hard money people, how does she run that consensus? as a yellen consensus? does she kind of meet them and shift the ground in their favor? >> i was at the fed for a chunk of time. one thing you see is they're pretty good at working out differences. there's been times when people have been in there with different opinions. right now everyone kind of has a similar opinion. >> one more question. my reporting finds that when it comes to fixing healthcare, there is neither a secret plan nor magic sauce. that the problems or the issues confronting the republicans on fixing this, you either raise the premiums, you reduce the coverage, reduce access. there are no magic pickmagic pi fixes here. >> there's been a lot of promises made that weren't kept. >> from the obama

administration. >> like your insurance, you get to keep it. what will happen now is when you change it and try to make promises that you can keep, it will look different. as you do that, as in all legislation -- >> you have one thing you looked at that you think is the best way to think about how obamacare might be fixed or -- >> i think a likely part of any reform is that they block grants to the states more and let states work it out. there's a difference in medicate. if you block grant it, you make it more efficient and do so in a cost effective manner. that i'm sure will be in any replacement bill. >> you are satisfied? >> no. first of all, i feel like i have 700 more questions. we have kevin here. you're hanging around for a bit? >> sure. >> yeah.

coming up, sir paul mccardtney taking legal action. and in the next hour, morgan stanley's ceo james gorman will join us live from davos. find out what he thinks about the markets and the economy. stay tuned, you're watching "squawk box." nihe

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welcome back. the battle for the snapchat ipo is heating up. snap inc is expected to go public this spring with a value that could be as high as $25 billion. both the new york stock exchange and the nasdaq want that listing. late last year nasdaq hired a helicopter to film the manhattan skyline using the video camera sunglasses. it september the footage to its social media followers. and the nyse tweeted out a video shot from the floor of the exchange. the fees each exchange would earn from the ipo would be minimal but the company could

help them earn future listings which are important to their business. sir paul mccartney taking legal action to get his beatles songs back. he filed a lawsuit against sony atv music publishing to get the rights back to the songs that he wrote or co-wrote with lennon. he said the copyright act should let him reclaim the ownership of the songs beginning next year. he was outed by by michael jackson and sony in 1985 for $41.5 pill ondmillion. the michael jackson estate agreed to sell some of the stake back late last year. he has some recourse for getting this back, but i thought he sold it. >> be interesting. i wonder if he'll get it back. she have it back. >> he should. i remember being astonished he sold it, that you could even do that. that was in the mid '80sment you could take the songs you

wrote -- >> it was a genius deal that michael jackson made. >> there was a seinfeld episode where it's -- it's cramer sells the right to his life stories to somebody else. >> to peterson. >> that's what that remained me of. >> peterson thought his own life stories were more interesting. >> paul mccardny setney sells e songs of his life. colet's get a quick check o european markets right now. in, . an a

as we count down to trump officially taking office, let's find out which sectors our guest host is bething on. phil orlando is the chief strategy at fedderated. >> so financials in terms of deregulation and higher interest rates, margins will widen. that's an area that was really beaten down. i think the important thing to understand, though, is that there's a total change in mind set here. we were actually underweight equities going into the election. the reason is -- >> you and a lot of others.

>> the pundits were telling us clinton was going to win, the senate was going to flip. the only question was would the republicans maintain the fire wall in the house. so we had to change that whole mind set on the fly the next day based on very stunning election results. but financials at the top of the list is a sector we think has worked and will continue to work. >> what about, you know, cyclicals, industrials, some of these things that had really sort of lagged and then jumped higher after the election? where do they go from here? >> so we've shifted the focus a from dividend oriented focus to one that's more sensitive. the cyclicals we think will benefit from all the infrastructure related spending and greater capital equipment. >> reflation trade? >> absolutely. and the energy sector is another sector we like that based upon stronger economic growth, this opec deal, this production cut that was put in place. we've seen definitively the bottom in energy earlier last year. we're in that $50 to $55 neighborhood on wti.

that will continue to drift up to 60 bucks. so energy stocks are another area we think is going to work. >> do you have a target for the end of 2017 on the s&p? >> we do. so we thought the market would jump up to about the 2250 level last year, which it did. it actually got a little ahead of itself. we're at 2350 this year. more importantly, 2500 next year. so the question is at what point does the market start to price in 2018 as we start to see some of the legislative initiatives actually get put in place. >> that's sort of what you spoke to earlier when we were talking about 2017. you had jumped ahead to 2018. that's when you think you get the real bang for your buck. >> 2017 is sort of immaterial because of the unperscertainty timing. >> liesman thinks you're going to get stuff quickly. >> well, we ought to get some stuff done by april on paper, but it may not get approved until congress goes on vacation in august. that's sort of the key thing. what we're saying is, all right, let's figure out what is the

full-year effect look like in '18 and discount that. so on that basis, a 2500 s&p looks like a reasonable bet. >> maybe we've pulled some forward after the election. >> i think we absolutely did, which is why we're only at 2350 this year. >> okay. thank you. >> thanks, phil. coming up, president-elect trump's pick for treasury secretary steve mnuchin on the hot seat today. also, morgan stanley chairman and ceo james gorman will join us live from davos. that's coming up. "squawk box" returns in just a moment. bito

today on the hill, president-elect trump's pick for treasury secretary steve nmuchin, his confirmation hearing will have the ears of investors. a preview of what to expect, plus senator shelly joins us to talk about the trump cabinet. and morgan stan lieley ceo s gorman joins us live from davos. what he's expecting from the markets when donald trump takes office. plus, off the tracks. long-time railroad veteran hunter harrison leaving cp rail to join activis investor to shake things up at csx. that story, plus other stocks to watch as the second hour of "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box."

good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm kelly evans along with steve liesman and scott wapner this morning. why? because joe, andrew, and becky are on their way to washington for the inauguration of the 45th president of the united states. donald trump. they're going straight from davos to d.c. they will be back tomorrow morning live from washington with a morning full of pundits and politicos and special coverage of inauguration day begins at 6:00 a.m. tomorrow here on "squawk box." meanwhile, the markets are getting ready for another trading day on wall street and trying to trim their losses. futures this hour still have the dow implied lower by about five points, the s&p by two. the nasdaq is slightly green. we'll keep an eye on all of it. and of course the key ten-year note. 2.435% this morning. the dollar, a real back and forth story this week. dropped nearly a point after donald trump spoke about its strength over the weekend, then

rebounded yesterday. here's how the euro is trading. up a third of a percent against it. dollar-yen a little weaker. the pound stronger by half a percent. crude, of course, this one moving higher today. we'll see if that does anything to move equities in the same direction. wti and brent up a little less than 1%. here's what's making headlines a the this hour. former georgia governor sunny purdue is donald trump's choice to serve as agriculture secretary, that according to transition officials for the president-elect. that choice completes the president-elect's proposed cabinet picks. the pentagon and lockheed martin reportedly near a deal, $9 billion involving the f-35 aircraft. that deal would bring the f-35's price below $100 million for the first time. it follows criticism from mr. trump over the cost of that jet. apple is running into some resistance from indian government officials as it seeks concessions in return for manufacturing iphones in that

country. india wants apple to make iphones for the indian market locally, but at least some officials consider apple's demands for tax breaks and other concessions to be excessive. >> interesting. another stock on the move this morning, netflix shares rising after the company's latest results, topping wall street estimates. the streaming video giant added 7.1 million new subscribers globally during the quarter, a third more than expected. you can see there $144, up nearly 8%. >> record high. canadian pacific ceo hunter harrison is stepping down five months earlier than expected. reports say mr. harrison may be in talks about taking a stake in u.s. railroad company csx. he's said to be working on teaming up with paul hallal. he left pershing square to launch his own fund last year. check out the reaction in csx. it is big. those theirs are up 85% over one

year and a nice chunk of that this morning, up 14.2%. more senate hearings today for nominees to donald trump's cabinet. this morning, former goldman sachs executive steve mnuchin the nominee to head the treasury department will testify before the senate finance committee. meanwhile, the senate committee on energy and natural resources will hear from former texas governor rick perry, who's the secretary of energy designate. eamon javers joins us now with more on today's hearings. >> good morning. start with steve mnuchin. he's the guy democrats think they have the best chance of taking out in terms of a trump cabinet nominee. they think he's wobbly enough they might get some traction here. look at this video that was put up on youtube by a progressive group opposing steven mnuchin. the video goes back to his days at one west and talks about foreclosures that that bank made. a lot of democrats are going to focus on one west and call steve

mnuchin a foreclosure machine. democrats are expected today to talk about mnuchin's ethical competence and ask how can we trust you, sir, to run the nation's economy. they're also going to focus on policy. they want to talk a little about terrorism finance as well. as for the republicans on this panel, well, chairman hatch who runs the panel is going to say, i don't believe anyone can reasonably argue that mr. mnuchin is unqualified for the position. there's been some reporting, guys, that mnuchin has been a little wobbly during hearing preps behind the scenes, but in talking to some folks in trump land last night, i was told he's primed and ready. they say democrats are throwing wild punches, so they're expecting a big hearing today, guys. back over to you. >> eamon, am i right that mnuchin took over a company or bank during the financial cry circumstances and his company stepped up with capital when others would not. is that correct? >> yeah, so a lot of people will

argue on mnuchin's defense that he, in fact, bailed out the bank and kept it up and running at a time when a lot of people maybe would not have stepped up to take that risk. >> and there was a public service aspect to that. >> sure, absolutely. that is the argument that they're going to make. politically, though, when you're out there with videos of people who lost their houses, that can be effective particularly for progressives. we'll see how it place out in the hearing room, where republicans will definitely have mnuchin's back. >> those were foreclosures that resulted from the takeover, not from loans that he originated at the bank. >> and just a little wrinkle here. "the journal" yesterday had a big story about the bank that he took over and whether it was basically a forced sale, whether that bank was in as bad shape as some of the others. >> that's interesting. i missed that story. >> but you're right. the reason why it was a forced sale was to avoid the taxpayer bailout and the depletion of the fund. >> i have a thing about people who came in and provided capital

to the system in a crisis that later were raked over the coals for the previous sins of the things they took over. to me, that's been an ongoing problem. >> you mean like big bank executives pushed into doing deals then blamed. >> precisely. i think the obama administration was wrong about that. i think some of the attorney generals were wrong about that. i think these guys stepped up. i think mnuchin is one of them, provided capital at a critical time, when it could have been what we consider to be much worse of a time, which was a taxpayer bailout. the taxpayer bailout -- anyway, we got to move on. that's one of my things that bugs me. more on the trump transition now. let's welcome west virginia senator shelly moore. we've been rehashing the financial crisis. it's going to be a busy day with a couple key hearings. what are you looking to get out of the day? >> well, i think the nominees that the president-elect has put forward, they've all done a very good job. we just had scott pruitt in epw

and also wilbur ross in my commerce committee yesterday. both men did a great job talking about getting america back to work, and that's what i think people certainly in west virginia, that's what they want to hear. >> the jobs focus being a big one. we were also talking this morning about genuinely the prospects for this tax change happening. what do you think -- i mean, are we talking about, you know, the inauguration happens tomorrow. there are going to be bills in the next week or two moving this forward, or is that all too aggressive in terms of the timeline? >> i think we're formulating that right now. we've talked about tax reform for years, as you know. it's been all talk, no action. i believe we will get action this year, certainly, on the inversion issue and the corporate tax rate. i think it'll be a big package. i think those conversations are being had, whether a bill is dropped specifically, i can't really say that. but i know that the plans are in the making, and i would expect to see that early spring. >> how much of a sticking point is the funding for that overhaul

or any of the other pieces, you know, of regulation that might come out of the new administration? in other words, if the border tax adjustment is too complicated and it gets jettisoned, do you have to come up with another way to raise a trillion dollars in revenue, or is this discussion in your mind not so much about the deficit, about the debt, and what happens there? is it more important to move on some of these big pieces and in a way kind of figure it out as you go? >> well, i think where we're going to really see an answer to that is what the stimulus package looks like, what the infrastructure package that the president-elect puts forward. that's about getting people back to work, but it's also going to be about how we're going to pay for that. so i think once we see if we can get bipartisan agreement on that, which i think we can because it's something i think that we're all very much interested in, getting people back to work, i think then you're going to see a better and more clear formulation on what can happen with tax reform and how big we could go.

so i think we'll see that very early. i think the infrastructure bill will come within the first probably 30 days. >> senator, in your hearing yesterday with the designate for commerce secretary, wilbur ross, he seemed to surprise some people in the speed at which he saw nafta being renegotiated. we follow the markets, obviously, so we saw some pretty interesting moves in both the peso and canadian dollar. i'm curious to know if you agree with his time frame that it should be renegotiated as a top priority pretty quickly out of the gates. >> again, i think the president-elect and certainly wilbur ross yesterday talked a lot about american jobs, jobs here in this country. the perception, real and even imagined, is that nafta exported a lot of jobs. certainly in my state of west virginia, we lost probably thousands of jobs. i think they'll go to it quickly. it's bipartisan. if you listen to the questioning on the republican and democrat side, there's a lot of interest

in renegotiating these trade deals so they're fairer, so that they advantage our products for our workers. so i was surprised he spent as much time as he did on trade, but he's obviously had international exposure to a lot of different companies. he understands it. and i think he understands what will make it fair. >> i'd like to get your reaction as well sort of along those lines to something that the former treasury secretary, larry summers, told our gang out in davos yesterday. that when the president-elect and some folks in his administration speak of these issues, just like we saw yesterday with the ppeso, it gos lower, only accentuating the fact it makes more sense, companies think, to do business overseas, to have workers building stuff in mexico, where the currency is cheaper. i get the whole point about everybody wants more jobs here, but how do you deal with that issue? some of the very things you're talking about are having a negative effect on some of the

things you want to correct. >> well, but at the same time, we're having a conversation about tax incentives or tax advantages of making and producing here in this country. and i think that is having the effect where our domestic companies are looking at renegotiating where they're going to put their manufacturing facilities, how much of their product is actually made in this country, and how that will impact them. so i think all these discussions are good in terms of having our large international corporations really look at the best way to not just afford -- and i understand what you're saying about is it incentive to keep our jobs offshore, but i think if you look at the bigger package, i think a lot of people are looking at how we're going to bring those jobs back here because that's what the president-elect ran on, was elected on, and that's what the heartland cares about, and that's where i live. >> senator, help me out with the economics of coal here, which is

so important to your state. there's a story that's told that it's the obama administration's environmental policies that killed coal, and there's another story that those policies are not really that relevant. really, it's the economics of natural gas that has undermined the coal industry and it's not coming back. what's the reality in your opinion? >> well, i think it's a little bit of both. i think the regulatory environment, not only on the environmental emissions side but also on the permitting side. for eight years it's just been slash and burn for the coal industry. there was no dropping off point. there was no transition. we've lost in our state tens of thousands of jobs. it's a very -- for the state economics, it's bad. our region is really hurting. at the same time, the recognition that we have prolific natural gas is driving some of the coal, you know, some of the power plants away from coal into natural gas. i think that's an economic thing. we're going to rebalance. we just need to keep that base load of coal going for our

country. it's affordable. it's accessible. and it employs a lot of people. >> all right. and we'll talk more about this coming up, senator. thank you for joining us. >> thank you, all. coming up, donald trump promising to roll back regulations on the energy industry, but environmental issues and opposition are hard to ignore. we're going to take a closer look at some of his proposals and what it could mean for companies across the energy sector. and later, we head back to the world economic forum and hear from morgan stanley chairman and ceo james gorman. stay tuned. you're watching "squawk box" on cnbc. ofta e su , e lurbe gulck st od

the president-elect promising to roll back onerous regulations on the energy industry, but the environmental issues and opposition are hard to ignore. cnbc's jackie deangelis joins us now from beasley's point generating station in new jersey. i hope i pronounced that right. i apologize to the good folks there. >> reporter: good morning to you, scott. that's right, if president-elect trump does roll back these regulations, create more energy infrastructure projects, then theoretically you get more americans working within the industry. but the question right now, of course, is how easy is that going to be in the first hundred days and through the rest of his term.

behind me you have an electricity facility that runs own coal. the goal here right now is to transition to natural gas. but a pipeline is needed to get the natural gas over to the plant. that pipeline is proposed to run over environmentally sensitive areas. that's where the problems begin. now, creating a papliipeline li this would create jobs in new jersey, but opposition is mounting and there's a public hearing scheduled on january 24th. so this is the classic jobs versus environment clash here. the question, will new epa and department of energy heads change the game? well, not necessarily. this is a state issue specifically in this case. even with governor christie's support, there have been challenges to moving forward here, which highlights how trump's pro-business, pro-energy agenda may be difficult to push through, even at a federal level. now, analysts are saying that he may have to tread lightly here and battles like these may not be resolved so quickly. they also say energy issues may fall on to the back burner because he's focusing on tax

reform and health care first as immediate priorities. so of course you can stand up and talk about how great it would be to move the energy business forward, but how easy will it be? that's the question as trump's term gets under way. scott? >> jackie, thanks so much. for more on mr. trump's energy plans, we're joined by kevin book, clear view energy's managing director. good to see you this morning. >> good morning. >> why don't you speak to some of the issues jackie spoke about. it's one thing to get on the stump on the campaign trail and talk about all this stuff. what's the actual agenda going to look like and how easy is it going to be to pass it? >> the elelegislative agenda is going to be crowded. a supreme court nominee, health care, the infrastructure package that senator capito mentioned. it's crowded. it doesn't leave a lot of room for rollbacks. rollbacks take time. there's going to be a couple marquee rollbacks that won't move the market very much.

changing the coal policies that were just recently finalized by the obama administration, the stream protection rule, changing the venting and flaring policies on federal lands for oil and gas. these don't necessarily move markets, but their symbolically important. on the executive side, day one, you can start to enforce differently. discretionary enforcement is really going to be the trump administration's biggest tool for deregulatory agenda. but in the end, it's going to go further than environmentalists want but probably not nearly as far as republicans hope. >> you would be -- you would figure it would be a very energy industry friendly administration. rick perry, even rex tillerson, secretary of state, for the obvious reasons of being the ceo at exxonmobil. then scott pruitt. maybe the most energy friendly administration we've had in an awfully long time. >> one might say it would be the most fossil energy friendly

administration we've had in a long time, but maybe not that long a time. there was a president i can recall not so long ago who was characterized as an oil man. he was also the same president who mandated ethanol and gasoline. what i will say is that you have deregulatory nominees, and what that means is when they are faced with questions of how to address markets and the regulatory role in markets, they're going to stand back. the problem is that standing back on coal, for example, can ease some of the pain, but it can't cure the sickness. if you look at the market, it is as senator capito said. gas has played a big role in changing the shape of things. u.s. producers have a lot of opportunity, but it's a long game. it's not a tomorrow thing. so changes can happen tomorrow, but the market is a slow shift to turn. >> the point i guess i was making, of course, that george w. bush, and i'm not naive to the prior administration there, but having a secretary of state who ran the largest oil company

on planet earth, if not one, two, certainly has to mean something, especially for the international energy game. >> there's some very specific examples inside the portfolio of the secretary of state, scott. one of them is the keystone xl pipeline, which was a permitting decision that falls on the state department. it's hard to imagine rex tillerson as secretary of state saying no to keystone. obviously that's a big impact. in terms of u.s. companies, trade is super important now. when you think about what the demand picture looks like in the u.s., producing here and selling over there is a big part of energy companies' businesses. rex tillerson will understand that and probably help to temper any protectionist sentiment. >> kevin, i've had a chance to spend time in places like wyoming, which is a heavily red state. a lot of republicans out there. a lot of republicans who love their environment. i think senator capito was a good example of that, somebody

who appreciated some of the work the epa has done on keeping chemicals out of the water. i wonder if you and/or the people valuing the coming deregulation are underestimating how much republicans are supporting some of these environmental rules out there and how difficult it's going to be to remove some of them. >> some of the environmental rules are well entrenched. the endangerment finding that greenhouse gases endanger public health and welfare. yesterday scott pruitt said he wasn't even going to try to go after it. it's wedged in. but some of the direct rules that have come out either explicitly in the form of notice and comment regulations that went through a long process or in the form of guidance really do look like they can change and change relatively quickly. faster leasing on federal lands. >> kevin, thank you. >> thanks for having me. coming up, morgan stanley chairman and ceo james gorman live from the world economic

forum in davos. that interview just moments away. time now for today's aflac trivia question. who was the first guest to ring the opening bell at the new york stock exchange? the answer when cnbc's "squawk box" continues. w ? st b b ofor w w ed atm.u t

now the answer to today's aflac trivia question. who was the first guest to ring the opening bell at the new york stock exchange? the answer, a 10-year-old named leonard ross in 1956. or..ntgues od aredtiac or..ntgues

good morning. welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. among the stories front and center today, we're just about 15 minutes away from the latest policy statement from the european central bank. the bank's not expected to change key interest rates or the amount of stimulus it's currently providing. in about an hour, we'll get three separate economic reports, initial jobless claims expected to increase slightly for the last week. december housing starts are seen rising by a little over 10%, and the philly fed index will post a decline for january, according to consensus forecasts. two dow components are set to report their quarterly numbers after the closing bell today.

when we get the latest earnings from american express and ibm. ibm has posted declining revenue for 18 consecutive quarters, and analysts do expect that streak to continue. steve? all right. time to head back to the mountains of davos, switzerland, home of the world economic forum. that's where wilfred frost and zai sarah eisen join us with a special guest. >> yes, we're joined by ceo of morgan stanley, james gorman. fresh off a record quarter. congratulations on that. a lot of the beat came down to sales and trading. has that continued this month, that strong positivity in sales and trading? >> well, you know, i don't really want to get into this quarter, but if you look at what's going on in the markets, a lot of activity. there's movement in currencies, in rates, in oil, and in equities. it's a rare time when there's a lot of emotion.

i think it's a market that screams through that view and has a lot of activity. >> there was a sense you perhaps weren't as optimistic about what this rise in rates means for your bottom line. can you just sum that up for us. how optimistic are you about the move in rates we've seen? >> very, but getting back to the analyst call, it was interesting. we put out some goals 12 months ago for 2017. we're on great track to hit those goals. everybody gets halfway through and says, why didn't you raise your goals? my response was, why don't we get there first? if we do get the rate increases that chair yellen and others have been alluding to as recently as yesterday, there's no question it helps our business. we have $150 billion in deposits. so it clearly helps in the net interest income. >> your stock is up 26%, i believe, since the election. how much credit does president-elect donald trump get

for that? >> i don't know that i credit an individual. it's more a credit to a sense of some real positive change that is likely to occur on the economic front. now, a query whether that change would have occurred whichever administration came through, but frankly corporate taxes, tax remediation, infrastructure spend, these are pretty big movers if they actually happen, particularly for companies like ours that have large u.s. operations. >> big movers, but for how long? lloyd flablankfein said he thou we were at the start of a new cycle. do you agree or are some of these measures coming quite late on? >> if you think about where interest rates are, if you think about where corporate taxes, if you think about infrastructure spend, we're clearly in the early days of all of those. if you think about where the economy is, the economy is recovering. unemployment is at 5%. we're seeing some wage increases. so there's more economic pressure.

u.s. is putting on 170,000 jobs a month. it needs about 80,000 to 100,000 to hold the employment levels where we are. but honestly, there's so much geopolitical and political change going on that it's very difficult to -- this is a cycle, a normal cycle. we need to see what the new president-elect does, president tomorrow, and what actually fiscal changes take place. >> based on some of your optimism, is 4% economic growth realistic for the u.s.? >> i think that's unlikely. i mean, 4% would be a massive move. this economy is a $17 trillion, $18 trillion economy. china, which is the second largest economy in the world is a $10 trillion economy. it's probably growing at 6%. obviously that percent increase is shrinking. so 4% is unlikely. if we're at a solid 3% growth, i think that's a really good outlook for the u.s. >> and on that, how much of it is this animal spirits that we keep hearing about, coming back to the markets and to business?

>> i think it's more a sense of changes afoot, and it remains to be seen from a policy perspective how productive that will be. change is afoot. you have to have a view. as an investor, youan't sit on your hands in the market like this. that obviously generates for those having a bullish view on this a more animal spirit type scenario. but recall that the u.s. economy is the global economic driver. within the u.s. economy, the u.s. consumer is the global driver. so if the consumer is feeling better, the wealth effect of the market increases better employment prospects, better wage prospects. it's going to drive activity. >> you said in this type of market you can't be sitting on your hands, you have to have a view. given your exposure to retail investors, what you feel like the regular retail investor who has 10,000, 20,000 to invest, what's their positioning like? are they already deploying the cash?

>> honestly, our typical investor has much more than that. we have about 800 billion of clients' money. the person who's got 10,000 to $20,000 to invest should not be looking for market opportunities. they should buy an invest fund and sit on it. we have 7 million accounts. there's in question engagement is ticking up. when you see choices coming from raising rates, you see the equity markets recovering the way they are, you see some of the global movements in currencies and commodities, they're going to be more engaged, just like the constituti institutional investor. >> you're pretty optimistic. as optimisting as you've ever been? >> i love that business. it's like a railway track. it's how many -- once you get the railway track set up, it's how much freight you run down it every day. we've got nearly 16,000 advisers. we manage over $2 trillion of people's money. i think we're ranked number one or two in the world on various

measures. very stable business. and it does a great service. it helps clients be properly invested for their long-term savings and retirement. i love the business. >> you did allude to some of the risks, geopolitical and policies around the world, populism we're hearing a lot about here at davos. when you look at this trump rally that we've seen, tremendous in the equity markets, do you see those kind of risks being priced in accurately? >> not really, no. somebody on the earnings call laid out all the positives that are going on, rising rates, et cetera. well, that's the bull case. there's another case. we have massive geopolitical uncertainty. we have the second largest economy in the world, china, going through a marriage transition. there's a lot of geopolitical risk in the obvious regions, north korea, parts of the middle east, what's going on with the refugee crisis in syria and across europe. there's a lot to remain cautious about. our house position and certainly how i feel is the world is getting better, but this will not be in a straight line.

>> you mentioned china's going through a tough transition itself domestically. there's also the threat of possible trade wars between the u.s. and china. >> sure. >> yet despite that, you've increased your stake in your china brokerage. talk us through that. >> yeah, we've been trying to get a domestic license and be a domestic player in china for a bunch of years. the regulators are opening up ownership levels, so i think sensibly, we're increasing our stake to 49% and obviously we'd like to get to a majority. it's an entity called washing securities. again, the size of the economy, how could you not be on the ground if the regulators and the government will let you be on the ground? how could you not have a view that you need to be in china when the third largest economy in the world, japan, is a 4 trillion economy. it's just a sense of -- it's obvious to me. >> but if we start to see tariffs and other trade barriers put up, especially as we've already heard the rhetoric get more confrontational between

president-elect trump and china, that could be a problem. >> morgan stanley has been around for a bit over 80 years. we have to have a longer term view. china is not going away in the next 80 years plus. it's going to be an important driver of global economic growth, and we need to serve chinese companies. >> one of the other big risks out there is brexit. we had a clear message from the prime minister, theresa may, earlier this week. she's going to pull the united kingdom out of the single market. your take on that. >> you know, i think -- and i've said this publicly before. i think brexit is disappointing from an economic perspective. obviously i respect the will of the british people. we're seeing that sort of more isolationist, protectionist, populist vote, which has appeared various times. we're going to work with the british government to do what is critical for institutions like ours that have large, very complex businesses, to have as much transition forewarning. we can't just move people

overnight. we can't create legal entities overnight. that's what we'll be working with the government for, a sensible transition as we can manage. the will of the people have spoke. . >> are you meeting with prime minister may here in davos? she spoke this morning. >> i am, with a group of people. >> what is your message there on london as an international financial center, potentially losing the passport? >> you know, london is our second most important market. it will always be our sort of regional headquarters, if you will, in terms of our thousands of people. but now with brexit, we're going to have to have a parallel headquarters on continental europe. we're working through which country that would be in. we're going to have to move a number of our people to those local markets whether it's a debt raising firm in germany or an ipo in italy. the coverage is going to have to be in market. we need time toed a just to that. we're corporations. we can't change the vote of the british peel.

>> are we talking hundreds of people or thousands? >> you know, it won't be thousands. we haven't -- part of the process with the british government is to figure out whether they attain the sort of special status that i think the prime minister talked about this week. if they do, then that will dictate the kinds of people. >> we heard rhetoric over the past weekend from donald trump towards europe more broadly. he doesn't seem committed to wanting to see the european union to stick together. is that a foolish position? would that be damaging to the u.s. economy if other countries started to leave? >> you know, i think if you step back from it, what i've admired about the union is europe has been through a period of seven decades of prosperity and most importantly peace. as you know, the last thousand years i'm not sure there's been a 70-year period of effective peace. there have been some regional skirmishes and challenges. the social, military, political

stability of the region -- in aggregate, the european economy is slightly larger than the u.s. economy. that's incredibly meaningful. that said, there are obvious populist sentiments that have risen. the immigration crisis, the sense of certain countries funding other countries' businesses. that's what's created the tension. personally, i'm very disappointed. i can't speak for the president-elect and never would, but personally i'm disappointed with this push, but it's not new. spain, parts of northern italy. there have been regions before who have sort of waved their stick. this is the first time it's been pulled. >> but if we see something in france, germany has an election this year, how disruptive would that be to the global markets, the economy, if we continue to see this trend play out? >> i don't think it will be as disruptive to the markets as it will be expensive for the economies and the people operating those economies. you're going to raise the cost

of doing business. the beauty of globalization is it lets flow the most efficient traffic of capital from issuers to investors. when you put barriers or create separate markets, i think that becomes a real challenge. >> goldman sachs recently reshuffl reshuffled some of their leadership. on your own earnings call, you spoke very positively about the quality of your own management team directly below you. when it is time for you to step down, do you think your replacement will come from that level of people internally at morgan stanley? when might that time come? >> what sort of a question is that? >> how many more years would you like to stay a ceo for? 20, 30? >> no, definitely not 20 or 30. there is a natural time limit to these jobs. i think from a personal, physical, mental, that's for the board to decide. i'm fully engaged and plan on doing it for a bunch more years. obviously i came from the

outside. we've had two of our last three ceos not come from the original morgan stanley. i would love to have a successor come out of or management team. i think that'll happen. >> steve mnuchin will be on the hill today. one of the things he's talked about here on cnbc already is getting rid of some of the regulation for financial firms. what's realistic on that front? he says he wants to get banks lending again and reduce the complexity. >> well, banks are lending. i think the bank balance sheets have been relatively stable. i'll be very clear. i'm not a fan of getting rid of dodd-frank. there are elements that clearly need to be curtailed, parts of the volcker rule are unambigu s unambiguously affecting market liquidity. but the structure at the front end, making sure banks have enough capital, at the back end, making sure there's a resolution process so they don't cause systemic risk, and in the middle having an annual health check is

a great structure. the challenge is let's stop moving the ball. let's absorb the regulation we've got. let's accept the capital levels we have are now sufficient. let's take away things causing liquidity to dry up in the markets. in other words, let's accept we might have just done the right thing in the last several years and stop trying to redo the right thing because the more change we make at this point, the more destructive it is to the markets. >> james, final question. we'll let you go. you're an australian. you've come to america and made a huge success of it. i think you're the only ceo of the big six banks that wasn't born in the united states. president-elect trump has had quite strong words towards immigration. what's your take on that? >> you know, when i grew up in melbourne, australia, the sense was if you could make it in america, you could make it anywhere. it was a beacon of opportunity, and i was fortunate enough to come here as a student and be able to get work here. i actually have dual citizenship, for a very good reason. i'm very proud of my u.s. roots,

and i'm very grateful for what the u.s. has done in accepting people like me. i think it's got to be additive to take people from around the world who want to work hard and who want to contribute to this economy. i don't think president-elect trump doesn't believe that. but i think some of the rhetoric needs to be clarified to make sure everybody understands america is still a very welcoming place for people around the world. >> james, great stuff. thank you very much for joining us. >> you'll be happy to know vegemite is australian again. >> i'm more than happy. i eat it every other day. >> fun fact. i think only australians like it. >> thank you so much, james gorman, chairman and ceo of morgan stanley. back to kelly. >> thank you, both. great interview this morning. and this now comes to us as we're going to find out from the european central bank their decision on interest rates today, steve. >> unchanged, kelly. left the deposit rate unchanged. left the re-fi rate at zero.

they said they'll be doing purchases of 80 billion euro a month through march. as they previously said, they'll be notching that down to 60 billion euros a month until the end of 2017. they did say if the outlook becomes less favorable or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, in other words if they get further away from their inflation goal, the gorning council, quote, stands ready to increase the program. >> they're still worried they're going to fall shy of the inflation goal when german inflation has been at a three-year high. i wonder if there's been an inflection point that's going to be more of a quandary. >> and maybe a broader inflection in central banks in general. you have the fed now raising rates. janet yellen very firm yesterday on this forecast for three rate hikes next year. and then probably three a year through 2019. >> our inflation number yesterday was 2.2%. we know what's happened in the uk. if you were to say the uk, the

china's producer data, german inflation data, you could put a case together. >> i think it's interesting the way you said that. it's different from moving away from the global deflationary impulse to worrying about or getting it to a zone of having an actual inflationary impulse. i don't think we're there. i think you're right. the risk of deflation has abated, but the idea of there being actual inflation -- i think what you're seeing is essentially the follow through of higher oil prices into the core and headline. >> which is a one-time effect. now that we're going to lap that, it only happens once unless they go up another 25% or 30%. the press conference starts at 8:30. that will be quite telling. >> i'll be following that from here. >> you're going to stay with us. >> are we going to check the euro, or is there not time for that? >> a little stronger this morning. >> we'll come back to the euro and all that other fun stuff later on. >> sure. we'll take a quick break. more "squawk box" right after this. ayugho♪e rsstocded

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one of president-elect trump's priorities is a repeal of obamacare, but our next guest

says this is easier said than done. for a look at what aspects of obama's legacy will survive the trump administration, let's bring in author of the new book "audacity: how barack obama defied his krcritics and createa leg say that will prevail." the view is that the election of trump is a repudiation of the legacy of president obama. why is that wrong? >> well, it's wrong. the easiest way to measure what the voters think of those two politicians is just to look at their favorable ratings or their approval ratings. barack obama's at 60%. trump's below 40%. hillary clinton lost despite, not because of, her association with obama, who's the most popular politician in america. >> when i look at the legacy of president obama, one of the things i see is over a thousand lost democratic seats. i think i was among those who had it wrong. i looked a the a crisis in the republican party. in fact, the crisis appears to be more in the democratic party and certainly the legacy of

president obama would have to be tainted by the loss of democratic seats throughout the country. >> well, keep in mind the last five presidents have all left congress in opposition party hands. that's a very natural term static public response to one president having control, the other party tends to gain seats. obama's down ballot record is accurate compared to history. i think you have to look at the things he controlled and the public policy changes he made in office, which were more significant than people realize. >> what lasts of this? what can trump not undo? and is it -- are you having a legislative argument here that it's hard to undo it? or is it an argument that it's something that is popular and will endure for that reason? >> it depends on every issue. we can go through the issues, and i can say which is most likely to survive and which is

not. obviously the economic crisis response cannot be undone. that's in the history books. other pieces of legislation like obamacare, the closer republicans get to repealing it, the harder a time they're having repealing it. >> jonathan, i'm sorry we're of time, but the book is "audacity." a well-timed book that ought to be read. thanks for joining us this morning. atioow m fabus i et

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inauguration eve. as president-elect trump prepares to take office, his

pick for treasury secretary heads to capitol hill. why it could matter to the dollar, coming up. plus, a "squawk box" news maker. newly named goldman sachs president and co-coo, david solomon, live from the world economic forum in davos, switzerland. and breaking economic news. key reads on housing and employment 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." good morning. welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm scott wapner along with kelly evans and steve liesman. joe, becky, and andrew are on their way to washington, d.c., for the inauguration tomorrow. take a look at the premarket. dow would open lower by almost 17 points. s&p and nasdaq negative modestly

as well. making headlines this morning, the ecb leaves rates unchanged, maintains its bond buying program as spelled out in december. the euro was a touch stronger, but not all that much. that's showing that -- you can see overall how much it's weakened over the past year. this morning it's up just a little bit. mario draghi will hold a news conference in under 30 minutes. in corporate news, netflix shares rising after the company's latest results top wall street estimates. the streaming video giant added 7.1 million new subscribers globally during the quarter, a third more than expected. its stock up nearly 8% this morning. in washington today, two key confirmation hearings. president-elect trump's pick for energy secretary, rick perry, and treasury secretary designee steve mnuchin will both appear before senate panels.

tomorrow afternoon donald trump will be sworn in as the 45th president of the united states. he's set to make major policy changes within his first few hours in office. how will those governing our states work with the president? joinings now is wisconsin governor scott walker. he's also the chair of the republican governor's association. good morning and welcome. >> good morning. great to be with you. >> it's strikes me that the one area where governors might have the hardest time is dealing with obamacare. simply because some have had to accept the medicaid expansion, others haven't. now the whole program seems to be up in the air. and this is a program that in many ways is being carried out at the state level already, governor. so what kind of discussions are you guys having about how to continue to provide for health care for people living in the states while also trying to kind of wait or deal or support with whatever change to this program is coming out of washington. >> i think the best thing the new president and the congress can do is follow through on their promises. it's part of the reason why there's the highest number of republican governors we've had since 1922. we've followed through our

promises, whether it's in wisconsin or michigan or ohio or florida or elsewhere. when it comes to obamacare, i think it's pretty clear. we want people to follow through on their promises here in washington. that means getting rid of obamacare, repealing it outright, and then coming back and putting in place a replacement that moves more towards a market driven solution. at the same time, parallel to that, giving block grants to the states so we can control medicaid and do the kind of innovations we've done in wisconsin. we're one of the best states in the nation in terms of coverage. we have one foundation called no insurance gap. we didn't take the obamacare medicaid expansion. we didn't set up a state exchange. yet, we have one of the lowest rates of uninsured in the country. we can do it elsewhere as well. just give us the flexibility to do it state by state. >> and is that one of the things you're doing in your new role at the governor's association to kind of provide a blueprint for other states to follow your lead? >> not only in wisconsin, but each state is unique. we've had great success around the country. i think it's important not only when it comes to health care but many other issues. education, transportation, you name it.

to put in a reminder here to our friends in washington that one size doesn't fit all. in fact, it's very clear that what our founders intended with the constitution, they felt so strongly about it they actually added an explanation point, as we call it, with the tenth amendment. we're more efficient, more accountable at the state and local level. the more that this president coming in, this vice president certainly is one of our former colleagues in mike pence, and certainly the house and the senate. people like paul ryan, who i've talked to for years, understand that much of what's concentrated in washington would be better off in the state houses and with the people. >> still, there are some things that clearly are only going to be resolved at the federal level. that includes tax reform. it may include infrastructure and some of those big bills to come out of washington. what can the states do in the meantime? >> i think the two go hand in hand. if you look at the states that have had the greatest success, it's states like wisconsin and many others that have cut taxes.

we cut taxes nearly $5 billion since we took office. we've now seen this last year more people employed in our state than ever before. the lowest unemployment rate in more than a decade and a half. that's very common in many other states, particularly states led by republican governors. those are the sorts of things we want to see here. not only cut and reform taxes here in washington but bring those american dollars back from overseas, cut the corporate tax rate so we're competitive again. that will help grow the economy, not only across the nation, but state by state. that means, i think, not only is it good for the country, it'll be good in two years when many of us are up for election again. >> what should be the first priorities of the administration here? on wall street, we've seen the initial euphoria in the stock market. go away a little bit. people are waiting for the timing and details of a lot of these plans. are you concerned yourself that this might be a lot of talk and less action, or how should the new administration prioritize here? >> no, i think -- again, going back to the states, we've shown

states all across america we can do more than one thing at a time. we can handle structural reform of our government. we can handle legal and regulatory reform. we can handle tax reform and welfare reform and investments in infrastructure. we've done that not only in wisconsin but across the country. there's no reason why it can't be done here. we've got a clear plan. dr. price is going to be a great nominee as secretary of health and human services. dr. price has a great lane for repealing and replacie ining obamacare. there are other big things that can be done. and do it in partnership with the states. we're ready and willing to help the federal government. we just got to work together. >> governor, have mentioned tom price's name. do you think he gets confirmed, and do you have a problem with the issue that many others have a problem with related to stock bi buys and sales? >> i think in the end he's well respected in the house by republicans and democrats because of the good work he's

done. he's got a great medical background. i think he's exceptionally well qualified. betsy devos is going to be a great advocate for families. you look right down the line -- i was just over last month in afghanistan, particularly with coalition forces, they love general mattis. there's just such a great cabinet that donald trump has picked in large part because of the leadership and my friend mike pence and people like reince priebus and others that we very much admire. i think they're going to do exceptionally well. >> sort of artfully answering the issue. governor, thanks for joining us this morning. >> by the way, go pack, go. >> scott was just talking about aaron rodgers. >> i was. >> we're excited about the big game coming up. friday's big, but sunday is even bigger for us in wisconsin with the green bay packers. on their way back to the super bowl. >> all right. >> we shall see. >> thanks for beating dallas. >> the folks down in atlanta may have something to say about that, but that's neither here nor there, i guess. coming up, newly named

goldman sachs president and co-coo david solomon will join us live from the world economic forum in davos, switzerland. stay tuned. you're watching "squawk box" on cnbc with the other a-team. hell

♪ your live shot of new york to your live shot of davos, switzerland. welcome back to "squawk box," coming to you from the world economic forum. sarah and i have a special guest with us now. david solomon, president and co-chief operating officer at goldman sachs. recently crowned with that title. david, congratulations on the promotion. >> thank you very much. thank you for having me. >> let's talk about the promotion, first of all. how has your day-to-day job changed? do you oversee absolutely everything now? >> harvey and i will work together with lloyd to help run the firm, focus on our clients,

drive the strategy of the organization. for the last, you know, ten-plus years, i ran the investment banking business. i'll certainly continue to be very active in that business, but now working with harvey i'll broaden that to other areas of the organization but always with a focus on our clients across the firm. >> replacing gary cohn, who's going to the white house to be the chief economic adviser. what to you think his role will be there? >> bewell, garry obviously wille a very important part of the trump team. i've worked with gary for 17 years closely. i've got an enormous amount of respect for him. i think the president-elect made a terrific choice. we'll see how that all plays out. >> you mentioned your background in inforvestment banking. let's talk about 2017 in terms of m&a. do you expect it to be better than 2016, possibly as good as 2015 was? >> i think we have an interesting environment at the moment with respect to thinking about m&a. there's no question that there's a lot of momentum coming into the new year. but at the sam point, there are also a number of questions about

policy actions that could possibly occur during 2017. so if you think about m&a, confidence and optimism of which there's quite a bit at the moment, certainly has an impact on it, but at the same point, if you're trying to negotiate a deal -- for example, there are questions about where tax policy will wind up. sometimes bringing sellers and buyers together can be more difficult. in this environment, until there's more policy clarity, it's possible there can be some headwinds. but i think the environment is such that we'll see a reasonable amount of deal activity. >> what are your expectations for tax reform? a lot of corporations are looking forward to lower rates. there's also the talk of repatriation, which could implement steel making. but this border adjustability uncertainty as well. >> i think we're in wait-and-see mode at the moment. these are complicated issues. they're multilayered issues. they obviously have a big impact on our clients. our clients are very focused on trying to understand the different potential scenarios. we'll have to see how this all unfolds. >> what about ipo outlook?

>> look, the ipo outlook particularly in the united states last year was very subdued. i do think we'll see a pick up in ipo activity. there's a good amount of pent-up activity, but we have this phenomenon where capital has been available more amply. i don't think that's going away. if you're a private company, you're growing, you have access to capital, you don't have a lot of pressure from your shareholders to be creating liquidity for them, and you can continue to grow with that capital. there's not a big push to get public quickly. if you don't have ipos for a period of time, you ultimately get to a point that a number of companies will come to market. >> is that ipo activity so pent-up it's going to release in q-1 regardless, or do we have to wait and see, similar to the m&a comments, what trump does and it's more of a 2018 phenomenon? >> i think the ipo activity is going to be less sensitive to some of those policy shifts. i don't think it's so pent-up that it's going to come pushing out in the first quarter, but if you think about the way the year

unfolds, you know, last year one of the reasons it was such a quiet year for ipos is we started with such a low difficult point in time in markets. if you remember being here last year, obviously people were very pessimistic. there was very little capital markets activity. >> worst start to a year ever. >> a tough start to the year for sure. ipo activity really shut down for the first, you know, four, five months of the year. people come into a year with pla plans. when you have a start like that, the plans get pushed out. obviously we have some pent-up activity that was pushed out last year. so i think we'll see a good flow of ipo activity throughout the world. >> you mentioned corporate tax reform or any tax reform. what about the regulatory environment under donald trump? last year and the past few years of the obama administration, anti-trust concerns have held back and broken up big deals. what do you expect from the trump administration, better or worse, friendlier or not on that issue? >> well, look, we've had a tougher regulatory environment with respect to deals. if you listen to the tone and

rhetoric right now, you might expect that there's going to be a little bit of easing in terms of that, but we'll have to wait, watch, and see. >> the outlook, of course, for the u.s. pretty positive, as you just highlighted. markets have reacted accordingly. sometimes there's a sense that markets are just focusing on the domestic situation and ignoring perhaps challenges around the rest of the world. protectionism aside, if that doesn't arise, what is your view on china domestically at the moment? >> well, the chinese, if you remember, if you go back to last year when we were sitting here, everybody was very fearful. the growth was really plunging in china. we were really in a position where you could have a very, very tough economic situation. that has not come together. in fact, as i get around and i talk to our clients, ceos dealing on a global basis, they feel like growth has been picking up a little bit and has been pretty meaningful there. it continues to be 6, 6.5. our expectation is that's going to continue. certainly the prospect and perspective on it right now is much more solid than it was 12

months ago. >> what about the prospect of rising interest rates? for years it's been easy money, super low interest rates. that's fueled deal making. how do you see the environment changing now that the fed is starting to raise rates and projects more this year? >> so the projection is two to three rate increases this year. there's no question that we have nearly full employment. we have economic activity picking up. we have a little bit of wage tightening. so there's no question we're starting to move into a different environment. i think it's hard for people to imagine an environment with higher rates because we've been in this environment of low rates for such an extended period of time. but when the sentiment shifts and rates start moving up, that can happen very, very quickly. if you go back and look historically. the expectation is rates will move higher. i think we're going to see the u.s.'s monetary policy, because of the strength of the economy here diverging from the monetary policy and the rest of the world. already that's starting to happen. >> david, i want to dive into a little bit of the q-4 numbers.

the debt and lending business grew from having been 16% of the revenue q-4 last year to 21% this year. some 52% growth. also, of course, launched markets on the consumer side. goldman sachs trying to become a more traditional bank and make lending a big part of its business? >> well, unfortunately one of the reasons that number is bigger is there's certain other agency and client revenues because of the lack of activity in the first half of the year. we're expanding. we are a bank. there are benefits to being a bank. we're looking at our businesses and trying to find opportunities. we thought with markets we have an opportunity without historical infrastructure and some of the technology skills we have to build an interesting product. we're working on that. we'll see how that develops for that client base over a period of time. we've increased our lending activity to our clients, our broad corporate clients and securities clients over the course of the last few years. we continue to use the resources we have available to us to broaden our impact on our clients in all different parts

of the business. >> another ex-goldman member, steve mnuchin will be on capitol hill, treasury secretary designate. what are you hoping to hear from him? he's going to help shape tax policy. james gorman just told us we don't want to get rid of dodd-frank. >> well, you know, steven obviously is going to become -- well, steven is going to his confirmation hearing today. i expect steven, to the degree he's confirmed that he becomes the treasury secretary, to work like the rest of the cabinet, to do the best he can for all americans and move forward with policies that stimulate growth and help us all prosper. we'll have to see how the administration moves forward with its policies. >> it must be odd for you. what is it like for you and inside goldman to see it vilified on the campaign trail, those ads with lloyd blankfein, and now so many ex-goldman sachs bankers in the white house. >> look, things run in cycles. public service from inside

goldman sachs has always been a core value of the firm. it's nice to see the fact that the cycle is swinging and there's some people that have worked at goldman sachs that are giving back and going into public service. people inside goldman sachs have an opportunity to learn an awful lot. hopefully that will benefit the country and the nation. i'm excited to see it. >> to finish kind of where we started, in terms of gary cohn's departure and your promotion, did it create a good opportunity for goldman sachs? was it time there was a shuffle in terms of leadership? how long do you see lloyd blankfein remaining as chairman and ceo? >> we have a very, very deep management bench. certainly we were doing just fine, and we all would have been happy to continue on running the business exactly the way we were. one of the things that's happened in the past is people have left for different reasons, whether to go into public service or whether to do something else. when it happens, it creates room for others in the management structure to move up. that's part of the tradition of goldman sachs. that's what happens here. i'm honored to be a part of that

tradition. the team that's now moving up because of the leadership structure has worked together for 15-plus years. so all that will continue. lloyd is the ceo and running the firm and doing a really good job as far as i'm concerned. >> david, great stuff. thank you very much for joining us. congratulations again on the promotion. david solomon, president and co-coo at gol man sachs. coming up, much more "squawk box" still to come from new york, including breaking economic news. jobless claims and housing starts due within minutes. they'll have the numbers and the market reaction for you straight ahead. stay tuned. you're watching "squawk box" on cnbc from davos and new york city. k hedo we

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welcome back to "squawk box." among today's top corporate stories, canadian pacific ceo hunter harrison is stepping down five months earlier than expected. but that's just the beginning of the story. morgan brennan joins us with the rest. morgan? >> hey, scott. that's right. take a look at shares of csx premarket. those shares are absolutely soaring right now. they're up 17%. this is on reports that it could be the target of paul hallal and hunter harrison. harrison a long-time railroad is stepping down at canadian pacific. he's forfeiting $89 million in compensation to pursue

opportunities involving other class-one railroads. he's in final negotiations to team up with activis investor halal, who's started his own fund, mantle ridge. he initiated pershing square's proxy fight for canadian pacific, recruiting harrison to turn that railroad around, which he did. that caused that stock to double since 2012. now mantle ridge is reportedly circling csx, which harrison had unsuccessfully tried to merge with cp. this could be a very different situation. current ceo michael ward has said he wants to retire by 2019. so csx may be amenable to bringing harrison into its management ranks. that's a scenario that could, according to citi, result in a major earnings tail wind for that company. if harrison spurs the same type of operating efficiencies at csx that he did at cp, that could mean 2019 eps of $3 per share

versus the $1.81 that was just reported for 2016. if you were to see tax reform happening, specifically the ryan plan, $3.69 per share. now, throw in the fact that harrison is taking the helm at canadian pacific, and merger talks wouldn't be too far off. the entire rail complex, with the exception of canadian pacific, is higher in premarket on all of these headlines. guys? >> okay, morgan. thanks very much. coming up, folks, breaking economic news. weekly jobless claims, housing starts straight ahead. stay tuned. you're watching "squawk box" on cnbc. e x00 ar thckn'ininbo goa

♪ we are just seconds a i way from weekly jobless claims and

housing starts. joe does such a good job vamping here. i have 16 seconds to go. let's look at the boards. down 20 on the dow, a little weaker than it was. >> eight more seconds. can you do it? >> joe is so much more entertaining. that's why he's got the big job. i'm just filling in. now let's get to rick santelli standing by at the cme in chicago. rick, the numbers. >> all right. we have a bit of a pop on housing starts. we're expecting a number up around 9%. let's say somewhere around 1.18 million. we ended up with 1.226 million, that's seasonally adjusted and annualiz annualized. that's up a bit over 11%, but it's from a number that now stands down at almost 19% when you look at the revisions that we had last look. so we want to make that really clear. the last number wasn't very good. this number popped from 1.10

million. if we look at permits, which is down the road, we had an upward revision for 1.2 to 1.21 million. the current data just doesn't seem to be out yet. so don't have anything on permits, even though i have starts. on claims, 234,000. wow. now, that really is something else. we went from 249, which was 2,000 higher than reported last thursday, then dropped down to 234. that's a biggie. i know there's holiday issues here maybe to work through, but boy, that really goes back into the 70s. continuing claims, 2.046 million. do i have any permits numbers on any of the other venues here? permits, yes. looks like 1.20 million, so 1.20 million is the permits number. i'm sorry, 1.21 million. it's finally out. and that is just a push from our

last look. so down barely. maybe a couple tenths of one percent. draghi. this is draghi time right now. of course, we're all watching the euro. right now it is down a bit. the dollar index is up about a fifth of a cent. of course, interest rates, last couple of sessions it looked as though maybe 230s. intraday earlier in the month we came close to those levels, but it wasn't meant to be. here we are back in the mid-240s. was it yesterday's inflation data? many think it was, but in addition to a lot of other aspects. oh, philly fed. 23.6. that's a surprise. guess what, that's a january number. that follows a nice 19.7. so sequentially, good number. back to you. >> i don't know how much better those jobless claims could get, rick. 234. steve, what do you think that is? >> that's the lowest since

november 2016. rick is right. we didn't really have any of these numbers sustained in the 230 level when the population was much smaller. so this is going to make people think that maybe the january employment data is strong. is it goes along with the beige book yesterday. they said in all districts, labor markets either tight or tightening. they talked about tight labor markets for low-skilled workers. shortages. we already heard about the high-skilled workers. now the low-skilled workers coming along, and on top of that the possible higher wages. i just want to make a point about housing. i think the upshot of what rick said, it's very volatile. up 25% in october. then you were down 60% in november, up 11% in december. ultimately, housing is not pulling its weight relative to prior expansions. you look at housing as a percent of this contribution of gdp. look at the shaded lines. those are recessions. you just don't see the pop that happened. a very long way to go. if you look at the housing

starts, relative to the population, we're underproducing houses. there's room for that to expand. you can't find a home, folks. if you got a house for kelly -- i don't want to do that. >> it's gone from being an average of 25 years old to about 40 years old. i'm telling you, you look around out there and you realize that it's going to take a lot of money to put into a lot of these homes, which already have seen the prices run up partly because the inventory just really isn't there. >> it's not there. >> it's a great climate if you're a builder. >> and you're going to get some distortions or you may be seeing distortions from the weather. a big pop in the northeast in housing starts in december. it could happen again in january. if it's warm, they go out and buil build. they're not stupid. >> got to watch rates this morning. >> one headline on draghi. a few more coming over. he says rates will be there for an extended period. let's see what else we have here. barring conditions are benefitting from ecb measures.

he'll use all instruments in the mandate if necessary. i think the statement was like december. i think his press conference is going to effort to be as much like december. they don't want to change or make policy. >> i still want someone to ask him about inflation. >> great point. >> one issue maybe for them to deal with. keeping an eye on the euro, it is unchanged. it was higher by about a third of a percent this morning before this decision and the press conference got under way. we'll bring you more of those headlines as we get them. we're also counting down to tomorrow's inauguration as donald trump gets ready to take the oath of office. there are some towns near the mexican border paying close attention to what's happening in washington. jane wells joins us from the border town of calexico, california. hi, jane. >> reporter: hey, guys. this is the end of america. no, really. this is the end. that is mexico right over there. people coming across the border through the check point today. border patrol agents tell us that folks regularly somehow get over this tall fence illegally.

so do we need a better wall? a bigger wall? depends on who you talk to. bob malpin has had a ranch along the border for decades, but he's spent thousands of dollars repairing damage to it and his property as waves of people have come over illegally. he says most of them are from drug cartels. he's taken to patrolling it himself, and he's thrilled trump is in charge. >> as an american, i'm protecting the country as best i can on my property. and the way i feel, if you don't think that's right, why don't you go live in cuba. >> reporter: now, some people say you've got it all wrong. there's too much stereotyping going on here. over 27 million people come across the border into calexico every year. a lot of them come to shop. 95% of the people who shop are mexican, but sales are down double digits since the election, in large part because of the devalued peso, which a lot of people blame on trump's

tough talk. >> early november, the first week of november, that's when we started noticing the business slow down. up through the end of october, we were seeing increases. once people started getting the sense that he might be elected, you know, it unfortunately scares people. >> reporter: now, just west of here this week, officials from san diego and tijuana got together to try to figure out what now. i mean, san diego, the regional chamber of commerce told public radio that san diego alone exports more than $4 billion a year to mexico in car parts, aerospace, electronics because manufacturing has become so integrated between the two. at least for now. guys, back to you. >> jane, thank you so much. calexico, california, the edge of the country, as she said. we'll see you throughout the day. our jane wells. >> kelly, before we go to break, draghi heard you.

his first comment on inflation. says there's no sign of a convincing upward trend in underlying inflation. goes on to say the risk to the downside. he had a little move in the euro. about a half a cent maybe. it got a little weaker. so we're going to keep monitoring draghi. small business optimism has been on the rise since donald trump was elected president in november. so our kate rodgers went on the road to find out if the trend has legs as the president-elect takes the oath of office. kate? >> reporter: hey there, scott. that's right. small businesses here in detroit are thriving. that's also true of this operation, ellis island tees, where revenues have doubled in recent years. but small businesses here are paying close attention to the administration. we chatted with a handful of companies here to hear their hopes and concerns ahead of donald trump's inauguration. >> he is supposed to be business friendly, and his policies should be business friendly. we just got to wait and see what

that is. i feel as long as the auto business is doing well, we will do well and detroit will do well. that's my chief concern. >> when people talk deregulation, i get worried because it doesn't really help the common person. >> if i had one wish for the trump administration, it would be to continue to strengthen the economy. we've got wall street and we've got people like me, clay street in detroit. so i would love for the president to represent the smaller communities as well. >> reporter: back here at ellis island tea, ellis brown told us she's continuing to keep an optimistic outlook about what a trump administration might mean for her small business as she continues to expand across the midwest. back over to you guys. >> thanks very much, kate. up next, trade regulation and russia. we're going to talk to senator ron johnson about congress's agenda. and tomorrow, "squawk box" back with the other a-team or the main a-team live in d.c. for the inauguration. pregame show, full coverage starts at 6:00 a.m. eastern.

stay tuned. we'll be right back.

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welcome back. a pretty decent move in the euro. we fell about half a cent here, down towards the 1.06 level. maybe breaking 1.05, depending what's happening. you can see that drop there on comments from mario draghi, kind of talking stuff down. he said the risks are to the downside. at the same time, he says potential upside in fourth

quarter growth here. but i think what he's doing, kelly, and you tell me if you disagree. he wants to keep his coalition together, keep his dovish comments in place. and he can't really talk stuff up too much. on inflation, he said, you know, what, not as big. >> i was looking at comments about inflation. he says inflation in the eurozone is likely to, quote, pick up further in the near term. >> right. that's the near-term stuff. that's not what he's going to base policy on. if he had a change in the longer term or medium term outlook, he would change policy. saying it's all local, it's all near term, the longer term is not changing. >> everyone's talking their currencies down. trump is talking the dollar down. draghi's talking the euro down. >> boy, that was something to hear the president-elect say that. i got to say. >> all right. we're a little more than 24 hours away from president-elect trump taking the oath of office. with plans for sweeping reforms,

what's first on congress' age a agenda? joining us now is u.s. senator ron johnson. good to see you this morning. >> morning, guys. >> looking at a comment from you, if you wouldn't mind. we're sitting here talking about politicians talking about currencies. the president-elect talked the dollar down yesterday. do you think it's appropriate for the president of the united states or the president-elect or whoever to talk about the dollar? >> well, from my standpoint, we've had strong economic performance, we've had a strong dollar. that allows american consumers to be able to purchase more things. i think that's a good thing, but i realize a strong dollar harms exports. so there's always winners and losers when we start talking about currency manipulation and exactly what we do in terms of monetary policy. from my standpoint, being a business person, coming from the private sector, you go after the low-hanging fruit. i think you have to focus on the number one component of a solution, economic growth.

from my standpoint, the biggest problem, the biggest hindrance to economic growth is overregulation. so we can, through executive order, overturn a bunch of these midnight regulations, other executive orders. we can use the congressional review act to repeal some of these regulations. i think we first do that. it'll inject greater confidence, greater certainty. if business owners and entrepreneurs, business managers aren't worrying about complying with federal regulations, they can concentrate on producing better products and better services at a better price. that's what creates economic growth. >> so you think right off the bat, as of january 21st, if you will, that you're going to start to see some of these regulations come off the books or at least be rolled back in some respects fairly in short order? >> absolutely. evidence it'll work, just take a look at the confidence that's already been restored to the economy by the election of donald trump, who businesses view is going to be more friendly, have a better attitude, focus on economic growth, get government off the

backs of entrepreneurs and businesses, and so that actually does create that animal spirits that you need for strong economic performance. >> you said of obamacare, quote, it's not going to be fixed overnight. let's be honest with the american public in terms of this is going to take some time. you think the republicans have been honest with the american people to this point? >> well, i think the phrase repeal and replace was appropriate prior to obamacare's implementation. you could have repealed it, put something in place. nobody would have been harmed. you didn't have the tentacles of obamacare. you didn't have the harm, destruction created by obamacare, driving premiums up, distorting health care markets. no, it's far more complex. from my standpoint, i've been talking about repairing the damage and then transitioning to a system that actually works. that takes some time. it's way more complex than simply repeal and replace. that's a fun little buzz word, but it's just not accurate.

>> do you think your party is on the same page as you are? >> i think more and more people are as they're starting to take a look at the daunting task of how do you start repairing the damage of obamacare, realizing it's not particularly easy. we're going to need democrats to help us because we can repeal. a big chunk of obamacare, the taxes, the subsidies. what's not necessarily on the table right now are the market reforms because i don't know who can do that with 51 votes using a budget reck silluation process. it's the market reforms that on the individual market literally have caused in wisconsin individual rates to double and triple out of pocket maximums to also skyrocket. it's those market reforms we really have to address. that's been, from my standpoint, the real disaster of obamacare. again, it's a question oz to whether or not we can do that through budget reconciliation. my thought process is let's start working with democrats. let's transition to a system that'll actually work. democrats are talking about it. they want to fix it. well, let's fix it for the benefit of the american public. >> senator, when i hear a lot

about -- talk about deregulation, a lot of those rules tend up being environmental rules. yet, when i talk to republicans from their individual districts and individual rules, there's support for some of those individuals. how far is the republican party ready to go in the senate when it comes to rolling back environmental regulations? >> well, i take the regulations and put them in different buckets. what can we repeal with executive action? what can we repeal with a congressional review act? that's a finite bucket, based on when they were finalized. then you're going to have to overwrite bad regulation with new regulation. but it should be focused on what regulations are doing the greatest economic harm for the least amount of economic benefit. again, even that is pretty complex. the obama administration has flooded the zone -- >> sorry, sir, did you mean the least amount of economic or least amount of environmental benefit? >> well, both. it's kind of part and parcel the same issue. so you take a look at the

cost-benefit of any regulation. how much does it cost to the economy, what's been the benefit. economically, environmentally, whatever. so you take a look at that cost-benefit relationship. i don't think this administration has been particularly rigorous at the cost-benefit analysis. we need to be pretty rigorous as we start repealing these regulations, take a look at that. >> senator, thanks for the time this morning. >> have a great day. >> you do as well. senator ron johnson. and when we return, jim cramer joins us live from the new york stock exchange. stay tuned. "squawk box" will be right back. time for kensho fact of the

and they're absolutely right. they say that it's hot... when really, it's scorching. and while some may say the desert is desolate... we prefer secluded. what is the desert? it's absolutely what you need right now. absolutely scottsdale.

let's get down to the new york stock exchange. jim cramer joining us now. jim, what do you think gets this rally going again? >> well, there's an animal spirits thing that's going on. i mean look at csx. the quarter was a so-so inconsistent quarter. suddenly we hear about a guy leaving 118 million canadian on the table to be able to team up with a hedge fund manager and put something together that involves csx, stock is up big. this is the kind of thing you get a netflix because absolutely the quarter was blowout, definitely. but upgraded, upgraded, upgraded, but doesn't matter. you got tesla. >> yeah, adam jones. >> this is all about research. you should get all these guys on

your show at halftime. >> well, we're trying. adam jones at morgan stanley who upgraded tesla, that's the call you're talking about there. >> yeah, that's the kind of bite the bullet. like, look, i thought they weren't going to make a lot of cars, looks like they are, so numbers look good. he's got a bull case in the 400s. this is a guy kind of looking for to be a little more neutral doesn't even talk much about solarcity. we're overlooking any negatives. we like the positives, today. i mean, it was different two days ago. csx is really controlling things. csx is saying, listen, if you're trading on fundamentals, you're missing a big picture, involving taxes, coal, world trade, takeovers, the big picture is kind of taking over here. >> jimmy, we got to run. we'll see you soon. >> no, come on, man. >> i know. >> you got to go why where it's cold again with the coat thing? >> i got robert frank who has something good coming sglup stay with me longer if i wear a kout e coat and hat? >> stay with me, i got robert

frank with something good. see you in a bit. tomorrow on squawk joe, becky and andrew will be live from d.c. for the inauguration. that starts at 6:00 a.m. eastern time. good lineup, can't wait for tomorrow. elesceork done00 atednto 35arar

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welcome back. we're now just more than 24 hours away from donald trump taking over of the presidential office. >> he is the richest and america's first billionaire president, even adjusted for inflation forbes, bloomberg and others putting donald trump's net worth at $3 billion or more, but ranking second surprisingly is our nation's founder, check it out. the wealthiest u.s. presidents are at number five, james madison, who would have been worth $101 million at his peak. in fourth, andrew jackson at $119 million amassed largely from real estate on the tennessee frontier. third, teddy roosevelt at $125 million born into a prominent industrial family, he blew his inheritance as a young man before making big money on land holdings later in life.

in second place, thomas jefferson at $212 million. his 5,000 acre plantation was an extravagant project at the time. it was also one that would deplete his fortune once he left the white house. and our nation's wealthiest president until now, george washington, who at his peak was worth $525 million. impressive, but still more than $3 billion short of the newest member of this prestigious club. now, some of course question whether trump is still a billionaire since his assets are under trust, but since he effectively still owns the company, the official wealth trackers like forbes, bloomberg and others say he's still worth $3 billion. some of you may wonder why the kennedys, john f. kennedy's not on there, some put his net worth at around $100 million, some say it's a billion, no one knows how the family's trusts were structured. so how much to allocate to john f. kennedy versus bobby, edward and others. hard to tell what he was really worth. >> george washington, why?

because of real estate, mt. vernon? >> real estate, farms, he had some business in agriculture. and we forget, i just didn't realize at that time he was a very wealthy man as were a lot of the founders. so we tend to think, oh, now we have an oligarchy, rich guys in the cabinet and office, but back then that was the norm. >> what about george w.? >> that family is attributed to around $20 million to $30 million, which i think is low. it's really hard to say what anyone's worth, particularly these private families. i think the bushes are worth probably in the $100 million range but still nowhere near where we're at with trump family. >> it is unprecedented in so many ways, robert. it would be a lot of fun to watch tomorrow see how he handles it all. apparently it's going to be, you know, it's going to have all the pomp and circumstance, but in some ways it is dialed back a little bit. >> yeah. and fun to watch tonight by the way because we have that trump special where that piece and others will run. you'll see the childhood home where trump was actually born and grew up tonight at 10:30.

>> good tease. >> thank you guys. >> thanks, robert. >> quick check on the euro here, it is on the move this morning. a little weaker after comments from ecb president mario draghi also moved interest rates. we'll be following the rest of his press conference. >> join us tomorrow. big show from d.c. ahead of the inauguration. "squawk on the street" right now. ♪ good thursday morning, welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. premarket's a bit soft but steady on this day before the inauguration. confirmation hearings on the hill, netflix earnings last night, big calls on coke, tesla, exxon and more. ecb keeps rates unchanged. we are watching draghi and claims hit 2.34, that's a new four-week average cycle low. our roadmap begins with trump treasury, steven m