what's brewing at starbucks now? company founder howard schultz on earnings buzz, new products and his next move, "squawk on the street" 9:00 a.m. eastern. that does it for us today. steve, thank you for being here. >> pleasure to be here, thanks. >> have a great weekend, everybody. see you on monday. ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. coming up this hour, an exclusive with starbucks howard schultz. we'll talk earnings, this new revenue outlook in politics. meanwhile futures little changed. all major indices on track for some solid weekly gains. europe is red. theresa may of course visits the president today. q-4 gdp up 1.9. that's below estimates of 2.2. our roadmap begins with the white house, president trump and uk prime minister may meeting.

a news conference is scheduled, a standoff with mexico looming. >> plus, it's a busy day for earnings. we have alphabet, microsoft, intel, all moving in the premarket. >> and as we've mentioned starbucks howard schultz joins us this hour with his company's earnings and a lot more. first up though, another busy day on tap for the president one week after his inauguration. trade will be among the big issues on the table when he meets with uk prime minister may at the white house. their joint news conference slated for 1:00 p.m. eastern time. still a lot of buzz surrounding the mexican president canceling that meeting with president trump scheduled for next week insisting that mexico would not pay for a border wall. within the last hour the president tweeting, mexico's taken advantage of the u.s. for long enough. massive trade deficits, little help on the very weak border, must change now. former mexican president fox on with the guys with squawk this morning saying we don't worry about trade. we've got china to trade with. >> yeah, cicente fox, this was

kind of a -- i think that this is the most serious break obviously with mexican relations since -- well, we can go very far back. and i think that this is the first time i've said to myself, well, we'll be a republican senate -- i mean, this is something -- this is almost like the dennis green. remember i even got the quote about, you know, maybe you should realize that trump is exactly who he said he is with the wall because it's, well, why don't we just go to the quote? i think one of the things -- this one is one that's different. i think this is very different. i think this is the one where the republicans who will break rice. >> mccain's already said he's troubled over rolling back nafta. >> i think this particular spat has a different coloration to it. it's not -- there are a lot of

people who want to adjust nafta. there are a lot of people who absolutely want to adjust the currency because the currency is really the issue. a lot of us trade guys really think the issue is currency, not the wall. but have gotten very sidetracked because trump is sticking by exactly what he said when he was running for president. i just feel like that what's happened is this one took my breath away. because i just didn't see this one coming. i thought there would be -- do you think i'm wrong that this isn't a much more political risk? >> you're referring to the wall and the tax that made the associated -- >> the 20% tax, the idea that this is not about jobs as much as it is just a spat between two countries that have had very good relations. the spat should be about nafta. the spat should be about the way that we set up trade with the mexicans. i don't think the spat should be about not talking to each other, which is what vicente fox was saying. i thought it was meaningful. >> you also have that tweet, i believe from lindsey graham, about the price of margaritas

going up. >> analysts out today on the impact of chipotle lock. >> we're putting in a 20% increase -- all we do is serve modelo and corona and -- >> you're going to put the 20% increase through now? >> no, i'm not going to do that. i would lose a lot of customers. if they make my suppliers pay 20%, i have to pay 20%. now, as my wife said, are you kidding me, jim? do you think this is our biggest problem? i'm embarrassed that you asked. no, no -- >> i think one of the key points certainly for investors focused on tax reform so much and what the timeline will be is does this erupt into some sort of political difficulty for the president. >> thank you. >> with lindsey graham and john mccain who are such key parts of any votes they're going to need in the senate when it comes to repealing and replacing the aca, which by the way is first out of the box supposedly.

but maybe difficult has to be done under reconciliation, but not the replacement. and then of course tax reform itself and the idea of this border tax and where are the senators from, oh, arkansas, where do they come town on this? given walmart is their -- >> right. that's my issue. >> this becomes more of the question. >> it's not a bloc after this. i think it -- the bloc may be more suspect. the political risk got higher because of this particular spat. >> here's the journal op-ed today, mr. trump is a foreign affairs neophyte, but he's already learning that nations can't be bullied like gop candidates or ceos. they have their own nationalist political dynamics. when attacked, they push back. >> well, i just think that they pushback, look, whether you think mexico is fair trade or free trade, whether it's right or whether it's wrong, i'm talking about the bloc of senators needed to be able to get the agenda through. i do not believe -- i believe mexico has some friends in the

senate. and that this is a reason to break with the president. and i'm surprised that this is where, well, we said we are who we are. it's dennis green. it's dennis green. yeah, let me just give you a quote of who you thought trump was, well, here we go. it's nfl like. dennis green is exactly like this. i'm asking my executive producer to play this. >> the bears are who we thought they were. that's why we took the damn field. now, if you want to crown them, then crown their ass. but they are who we thought they were. and we let them off the hook! >> trump said he was going to build a wall, he said mexico was going to pay for it. why is that a shocker? it's just when push came to shove, it was a little like green in he really meant it. >> maybe what he meant was he's going to build a wall and the american consumer's going to pay for it through a tax. >> well, yeah. we know from this is not -- look, i'm a little startled by this because all i know is as

david has said endlessly if the agenda of lower corporate taxes and repatriation is what's on the table, it's a lot of the reason why -- we need it to go higher. so suddenly i say to myself, okay, does he still have 50 senators after this? >> well, we'll see. listen, border tax adjustment is an important component and perhaps the most important component in terms of revenue raising in tax reform based on the blueprint we have from house ways and means. >> the paper on the wall. >> we have no idea where we're going to end up when you get to the senate. but anything that has the potential to delay the timeline for this so that we're sitting here three months from now still talking about the same things and saying, okay, it's probably '18's business it's going to impact the stock market. >> thank you. you're better than i am. you said it more dispassionately than i did. >> i am not better. or smarter. >> the idea that deregulation moves to the front of the line because that's what the market is excited about. >> deregulation is a problem. all the pipelines, do you know

there's only two guys on firk. you need three in order to be able to speed up pipeline dereg. but they don't even have a core. how about they hold up the additional person for firk, you can't move the pipeline agenda. i'm saying there are ways to clog the machinery here and the standoff with mexico i don't think is necessarily going to make it as easy with the agenda. >> so when you put this week one into perspective, jim, all the meetings with ceos, nafta, tpp, the wall -- >> all those executive orders. don't forget those. >> inauguration crowds, bannon in the times today. what is the net effect on the market, do you think? >> i think the net effect on the market is we got to go back to the fundamentals and not think that we're necessarily going to have a fast track to much other than some deregulation. >> pipelines. >> but pipelines need ferk, you have to have ferk agree and ferk

can't have a --. i had on last night they still have to decommission. i know the president called coal what he called it beautiful. the head of the largest power transmission company in the country does not regard coal as beautiful. so, i mean, it's very hard. there's -- i guess the whole -- because the agenda is necessary to get profits up and make the stock market go higher than 2017. >> yes. speaking of which let's get to some big tech earnings this morning. microsoft posting better than expected quarterly results helped by cloud, intel driven in part by demand for the company's data services. alphabet missed on bottom line but top line does exceed forecasts. jim, you were tweetding this morning about why it should be higher. >> oh, yeah -- sorry.

i'm sorry. i'm sorry. >> that's exactly how you tweeted too. >> yes. okay. so i'm doing "mad money" while the alphabet call is on. i'm thinking this must be some call with ruth porat saying, i'm sorry, this is bad, this is bad, this is bad. no, so i go to the quiet of my home where i told the wife to stay away because i got to focus, i read that conference call and then listen to the conference call and said, oh, y my -- this stock should have been up 20, not down 20. plus, by the way, you see the cash reserve? did you see the cash? >> i did. i did. >> what'd you think? >> they got a lot of cash. >> they have a lot of cash. >> i'm still looking for that mysterious 320 million equipment charge. what was that? >> boy, you focus -- boy, you really are a small thinker. >> i am?

>> yes. >> 320 million is a lot of money in the neighborhood i come from, my friend. >> okay. well, yeah. i'm talking about the billions they have overseas. >> i understand what you're saying. and it's a very large number. >> i think that your equipment -- there was a lot of one-time issues that mystified me including that one. >> yeah. i mean even analysts are calling it mysterious. >> even analysts, the lap dog analysts. >> yeah. >> i can't believe -- they are a trump stock, trump stock, trump stock. >> so you do like the quarter? >> yes. >> comes to alphabet people say what's the multiple? >> 19 times. >> the bottom line was not particularly strong even though top line was. will you ever see the multiple go up? >> yes, if they diversify away from search. this is like -- this is like tim cook. if he decided to go into another business line initially it doesn't turn out to be great. but the fact is, david, we are not going to be talking about

alphabet as a search company. we're going to be talking about diversified data play. >> okay. >> that includes search. >> and a.i. >> machine learning, david, artificial intelligence, this is google, amazon, wow. david, the machine learning that's going on. ruth porat talked about machine learning over -- >> she did. >> i thought the quarter was remarkable. i thought people selling it didn't bother to listen to the call. >> really? remarkable. >> yes. >> i will say two things, one is they are going to include stock based compensation in nonbase calculations. that's a big deal. >> they use g.a.p. >> yes. microsoft does that. good for them. good for google. >> yeah. >> that's going to be a little dislocation there non-gap suddenly going to include and then this interesting thing they didn't buy back any stock in the quarter. they said, quote, we were unable to do a buyback in the fourth quarter due to trading restrictions, but we do hope to get back into that.

>> well, but they're spending a lot. now, some people don't like spending -- >> why would you not buy back stock? >> maybe because -- >> you were talking to somebody about buying them. >> i don't know the answer to that question. >> i'm telling you. >> i know 22% growth is good. i know hardware is good. i thought the actual revenue what i care about, revenue growing three times profit, youtube content is going to be monetized, hardware, search, video, you have 19 p/e, $52 billion overseas, 61% of their cash. >> $l e86 billion overall in cash. i can see your notes over the shoulder. >> you said take notes, that's one thing i do. >> one writes in says you invented a new language. >> sometimes you get -- plus i got the wife 20% price increase on the modelo here. >> yeah, we're watching constellation this morning. we'll get to that. we'll get to starbucks ceo howard schultz, a week into the trump presidency take another look at the premarket.

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♪ i was born in a city they call the windy city ♪ let's get to the windy city, check in on the bond pits.

rick santelli at the cme. good morning, rick. >> good morning, carl. you know, the real reason they call it the windy city is because all the flap in the politicians over the decades. that's the real reason. anyway, let's get to the markets. we definitely had soft gdp. you could argue soft durables, but i will talk about this later today. if you take the durables and you don't look for the seasonal adjustment process and look at the raw data, it was actually pretty strong. and that's for later today we'll cover that. intraday ten you can see how rates came down when the data started to hit. look at one-week of tens, not a bad week. we're basically hovering about four basis points higher than we settled last year. one week of bunds eerily similar, wouldn't you think? except they're under and we're under 2.50. open the chart up to december 2015, that was the high water mark going back to '14, significant level. keep the same date for all the rest of the charts.

look at bunds, hey, they're going in the right direction now, a lot of room. but here's the money ball trade if you're looking at euro to impact rates and foreign exchange, look at the same date with our two-year, now let's look at the euro two-year, currently m ll lly minus 64. that's the chart to pay attention to. if that starts to turn up more and mario draghi starts to cave a little bit, i think market inflation will force that, when that chart reverses you're going to see one thing for sure, a much stronger euro currency. carl, david, jim, back to the gang. >> all right. thanks so much, rick. starbucks down in the premarket, the coffee chain posting quarterly earnings in line 52 cents a share. revenues and comps came in below consensus. also trimming their full year revenue guidance. we'll have exclusive with howard schultz later this hour. jim, this revenue guide eight to ten versus prior double digit, what does it mean? >> look, this is something that unfortunately's become a bit of

a pattern in that we keep expecting an acceleration, a lot of this is domestic. the company has a two-year what's known as stack that's still very impressive. the company's still got the fly wheel of many good things going, but i'll ask howard about what i regard as a high quality problem which is mobile pay is kaudsing a throughput issue which i believe is causing genuine comp decline. now, it's a decline -- in other words, it's a slowing of an increase. it's not an actual decline. >> second derivative. >> exactly. china's a great story. the reserve will be a great story. i can give you lots of great stories, but travel trust owns the stock. i am concerned about how if you budget to trend, so-called budget to trend, meaning if you just look at the trend of what's happening, then the second half turn they are predicting, i need more evidence. i need more evidence just to be able to say i'm not concerned. just can't do it. i can't just say i'm not

concerned. >> fair to say your elasticity, meaning you stuck with starbucks through thick and thin. >> since howard came back. >> yeah. it would take a lot to shake you off of that tree, i'm assuming. >> yes. but i am concerned that there are secular issues to the way people go out in this country. i also -- >> what does that mean? >> well, i mean, look, i'll give you a good example. if you just go to -- there's a company called breaker, this is chi chili's, that reported a disappointing number, this is a quote, we believe largely driven by the shift in retail traffic to online is starting to impact holiday shopping patterns play out. stay at home. is stay at home cannibalizing? this is the domino's theory. >> people are not going to the mall, they're not leaving the house because they can do all their shopping at home. >> the traffic is down of people going outside. now, look, i go to starbucks. and i've got to tell you my starbucks are jammed. but they're jammed the wrong

way. they're jammed at the pickup. they're jammed at the pickup. it reminds me of -- reminds me very much of panera. when mr. -- recognized. i'm mosh pitted at my starbucks. and i don't like to be mosh pitted because i feel like, wait a second, that's my third place. but as ron said because i love panera too, it doesn't have a great feel at the pick up. we'll get cramer's mad dash in just a moment. don't go away. this car is traveling over 200 miles per hour.

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when we come back, starbucks howard schultz on earnings, politics, the revenue outlook. and we'll close out this incredibly busy week in just a few minutes.

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that's the sound it makes when it's time for a mad dash. we got about three and a half minutes to the opening bell. we'll do it seated. we haven't talked to any microsoft yet, really. we only spent time on alphabet. >> it's very difficult for huge cap stock like this to move like i would have expected it to. but this was the conference call i told you i like the alphabet call, i know i'm an outlier on that. people are going to try to short it. i've got to tell you the microsoft quarter was a thing of beauty. cloud is great, but david, you know what else is great? windows 10. can you imagine? the pc is great. gaming is great. it was a great, great call. linkedin could be great. this was the cloud evolution, s satya nadella -- >> they've also been guiding toward compressed margins for a period of time which seems to be

ending now, jim, at least according to a couple people i spoke to this morning who own the stock. >> you're dead right. and i've got to tell you that linkedin, operating expenses declined 2%. that's a good number. i just feel like it was just an excellent quarter. there were no flies in this quarter. they were very matter of fact about it. they delivered. and the stock can creep higher over time. it does have a real multiple now. remember it had such a bad multiple before? but i like the call. they are matter of factually changing the company into a cloud company that's going to be a real competitor to amazon. i think that's fair to note you'll be able to pit them against amazon. and it's real. cognitive services is real. satya nadella's changed the company in a rather remarkable fashion in a short period of time. >> i'm thinking that's a nice way to put ballmer, a guy you know well. >> i'll see at my 40th reunion in october. i expect to see him. >> speaking of pcs at least, intel gets the upgrade at morgan stanley, jim.

>> no longer selling intel. by the way, they're spending, which is a nice increase in cap x. means they're growing. i didn't like the data center as much as i would have, but i've got to tell you personal computer was good. they've tried that before, that's a mistake, but their move, their shift to other areas, to internet of things is starting to pay off. and intel is a cheap stock. it was a good call. they put cold water at certain times on real growth. but i like the quarter. i like the fact that they are doing much more than just pcs, but pcs are good. i also felt there was good readthrough to amd. i thought you could buy amd off this call. last night i had lam research, makes a lot of semiconductor equipment, a lot of companies want to be more bullish but you can't even get all the machines you need to be able to grow. so it's a strong industry with supply constraint. inventory's not a problem, i like intel. >> a big reason the nasdaq is on track for the best month since

july, way out pacing the dow this month. speaking of tech, today is the anniversary of steve jobs unveiling the original ipad back in 2010. unbelievable. said we're going to make an iphone with a really big screen. [ bell ringing ] >> -- talk about spats. that's a vicious one. look, i think that one of the nasdaq names people ought to focus on, steve nguyn was an excellent -- his conference calls are always exciting. the communist party's come back to the idea of letting the high rollers come back, which is why wynn's numbers are up. excellent number. >> rev group, manufacturer and distributor of ambulances and

buses. we'll talk to the ceo as soon as that stock opens today. at the nasdaq chinese consulate general in new york celebrating chinese new year tomorrow. the year of the rooster. tim cook tweeting to all the people in china last night happy new year. >> talking about how that's always been a great, great weekend this weekend the chinese new year, i don't think wynn is done going up. >> honeywell, looking at nice of aerial components. >> the organic number is fine. what worried me -- commercial helicopter bad. i still continue to dislike as part of lockheed martin. doesn't jibe at all with boeing. but that said, great quarter.

great quarter. continued great quarter. there are certain divisions you might quarrel with. i'd like to go back to 3m, i liked them because synergistic in terms of pastiche of businesses. and if we take up honeywell, we should take up 3m. emerson, maybe it's coming back. there's a pulse. there's a pulse. >> been awhile. >> that's true. >> as far as gdp goes, we haven't asked you the headline numbers are weaker than expected on a surge in imports, but consumption and investment actually not bad. >> no, but i think trump could use this one very easily to say net exports took off 1% of growth. >> yeah. >> you could say this is what i'm talking about. this is our problem all these trading agreements are bad for us. i think you could easily may hay with that. >> biggest drag since 2010. >> that would be a good tweet if he's like tweeting that would be a high end tweet to go with that tweet. >> although senator jeff flake today saying when nafta began u.s. exports to mexico 68

billion, today 235 billion. so that twitter debate as you call it is happening within elected officials. >> i'm telling you the next one is canada. transcanada, they applied for keystone. by the way keystone not economic here, they do have the cushing in mexico, but it's not economic a lot because some of the other enbridges done a lot of work around keystone because they figured out obama was going to reject it. yes, our trading partners are up in the air. up in the air. >> chevron was a miss but you're not too concerned as big oil earning season begins. >> production was good. they conserved a lot of capital. they've done great. i mean their balance sheet is really good. yes, it is a headline miss. and i totally understand -- there must be a computer that says headline missell because that's the way it was with

alphabet. but if you look through what i wanted to see was production growth. i was happy with production growth. i think chevron is doing remarkably well at this point in the cycle. they're still producing a lot, they're finding a lot of oil. i think chevron's fine. i would not sell chevron off this quarter. i know people are going to because it's been a nice run, but chevron not that bad. >> want to do a faber report talk about a lot went on yesterday in sort of a follow through, of course that story reported by the journal in terms of at least some interest in verizon and charter. charter was up 7.5% yesterday. what it has done is focused a lot of people on the potential for consolidation amongst many of the providers of both video and telecom services in this country. but as for verizon and charter, what i can tell you right now is there's really nothing going on. >> what? i read the journal every day, it's a done deal. >> there's nothing going on. there may have been an overture.

and if you made one, you probably would want to go to the person at liberty, maybe it's maffae because they have a 25% vote and they're a key and they might be willing to sell and if they were willing to sell at a certain price they could get other shareholders to follow along, but there's no real talks going on. numerous sources indicate that. these are people who would be in a position to know. the dilution continues to be the issue in part for verizon and what it would face in trying to get to a price that would be acceptable liberty, forget even to chart er. it's got to be above 400, could it approach 450? if you get into those kinds of numbers, you're talking about significant dilution here. tax reform plays a role by the

way. think about deductibility of interest that may go away. >> yes. >> but right now it's really going nowhere. that doesn't mean we aren't going to see a lot of different things happen this year. final point by the way on price, tom rutledge, i pointed this out yesterday, the ceo of charter, his options package, its last price $563 a share. that gives you a sense as to how he's thinking about the long term plan here, which is to get 41% ebitda margins which seems quite attainable when you look at sudden link's margins these days owned by altice. by the way, our parent company always somewhat uncomfortable to talk about, but hey, we're right in the mix. for example, given what may be less onerous doj rules or overseeing of this industry as possible comcast could buy charter. why not? why wouldn't comcast have an

interest? >> the journal is not going to write you just said that. >> i'm not saying there's anything going on. this is all pure speculation of people who are looking at what may happen in terms of consolidation. the expectation we'll get one if not two big deals in the course of this year. by the way, as we pointed out a koul p weeks back that auction of spectrum which is ending which has basically muzzled a number of companies being involved to talk to each other because of the anticollusion rules, talk mid-march where they can start to talk again. would comcast and verizon everconsider trying to do something? you could imagine a scenario where verizon spins fios and wireless separately and merges wireless into comcast. it's at least something you got to think about given, again, a regulatory approach we think from washington that is going to be decidedly different although may have that populous tone to it, you never know, but decidedly different than what we've seen in the past. finally, we always come back to

t-mo and sprint, certainly in the mix. and/or wireless and then you throw dish in. not the last time we're going to be talking about this. but when it comes to verizon and charter, don't get ahead of yourselves here. >> okay, thank you. i read the article wrong. thank you, david. >> you're welcome. >> we're going to switch directions. we're going to go to starbucks. they're out with earnings. it was the lowest same-store sales growth in over five years domestically. joining us now exclusively starbucks founder and ceo howard schultz. good to see you. i got to go right to it because i know the stock is down. there's the flywheel in effect, overseas terrific, china amazing, people are focused on the domestic not being able to come back as quickly as we thought since the analyst meeting. i wonder whether you don't have the highest quality of problems, which is that you've got mobile pay working too well. and how do you keep that from becoming an actual problem and customers not being happy?

>> well, jim, thank you. thanks for having us on. let me try to explain the situation in a wholistic fashion in regard to the 3% comp number. clearly we were significantly impacted by a good problem, a problem that we will solve, and that is the congestion and the runaway success at peak of mobile order and pay. we didn't anticipate how successful it would be and has created a bottleneck for us and that impacted comps and traffic during the quarter. but if you look at the rielevany of the company and the success of holiday, you've got to put into the factors we had $2 billion loaded on people's phones and cards that are sitting on our balance sheet. and we could not, as you know, record those sales until they are validated. and we'll see that in the quarters to come. the last thing is, if you look at comps, and i understand the focus everybody has on it, but if you isolate new stores, our new stores are continuing to

perform the best they have in years. so this is a problem that people are focused on in terms of comps we will fix. it's not a problem that is beyond our ability to understand what's going on. and it will be fine. i'm not really worried. i know the market has overreacted to it, but we're going to be fine. and then you look at china. we're opening more than a store a day. and the success of the company there. so this is, again, if we go back to the long term, the five-year plan that we have committed to, mid single digit comps, 10% revenue growth and 15% and 20% eps growth over the next five years, i wouldn't get too concerned about this quarter. we've said all along there will be ups and downs, but here we are a company that's been public for 25 years. and we've proven over and over again the sustainability, the relevancy and the growth and development of starbucks. and at the same time the impact that we want to have as a company that is highly socially responsible. >> howard, the other thing i'm

concerned about, you were the first person to see the downturn in the mall. you knew it. you knew it was a secular trend. >> yeah. >> we know mr. nordstrom, i know you know those guys, the worst mall traffic since '72. we know from chilchili's recent see the stay at home factor becoming more of a secular trend. do you think the idea that people are staying at home, doing more things at home is hurting traffic of starbucks? >> no. i don't think starbucks is deeply affected by the seismic change in consumer behavior. now, we called this three years ago. and clearly you can see it in every mall in america. but, no, and the reason is that we are a destination. and i think those retailers and those merchants that understand we have to provide an experience, we have to provide an emotional connection, unlike a department store, unlike the apparel business, starbucks is not going to be affected by the downturn in traffic.

which will be significant and have an adverse effect on the overall retail sector. but if you compare our results even though it was lower than our usual standards, it is best of class within restaurant and retail sector. and over time it's going to get better. we've said publicly on the call yesterday at the second half of the year will be stronger in terms of comps. we'll fix the problem, and we'll be off to the races once again. >> now, my travel trust is a shareholder, i am a huge drinker, my starbucks in new jersey are precisely the things i'm worried about. we spoke about ron who had to fix panera that there's a bit of a mosh pit where i pick up. i've got to tell you, howard, it's a little longer and it's a struggle for me. not necessarily to go to dunkin donuts, but say, wow, i don't want to be involved in whatever's going on right there with mobile pay. you say that's going to be fixed in the second half. i know you have adam on it. you know i think the world of him, but what's going to happen this quarter?

don't you have to rearrange things in the stores? add more people? because it's not as comfortable third place as it used to be. >> no, i think -- jim, i think that's a fair point. and i think we were very up front yesterday in talking about the problem. we recognize it. and we understand that very clearly wooe in our stores every day and certainly in high volume stores like new york city and the east coast in the morning day part we are facing this congestion problem. and the anxiety of the customer, but it is a problem we will solve. it won't take us that long. we've been on it now for 30 days. and in the quarters that follow we will get back to the experience that you have come to expect and love at starbucks. you know, i will say we serve more customers in our stores than any other time in history during the christmas holiday season. it's not as if people are not coming to starbucks. it's just at the morning peak as a result of mobile order and pay, which is a runaway success and a great problem to have, did cause us some problems.

and, jim, we recognize it. we're humbled by it. and we will fix it. >> howard, the whole nation's talking about trade. it's unbelievable. of course it's a topic that's been close to the coffee business for years. you got china giving speeches in davos. what do you make of the rhetoric between trump and pena nieto? or at least the rhetoric to come between trump and xi jinping? >> well, you know, i've said before that the market in china's very important to starbucks. i probably have traveled there over the last ten years as much or more than any other ceo in america. i'm there almost every quarter. we've got 2,600 stores, we're under construction in a major roa roasterie there. we can only control the relationship with our customers and relationship with our people and the strong relationship that starbucks has built with government officials over many years. and i think the reason that we're insulated from some of those issues is because soft way

we have treated our people, the compensation, the benefits and the fact that the people in china view starbucks as a friend there. and we've demonstrated that we're the kind of company that is building the business the right way. so, again, i think any business in america that's looking at what's going on is sensitive to the issues. but we can't control what the government's going to do. we can only control those things in front of us, that's our customers and our people. >> you know, howard, it's david faber. but i'm curious given your experience in china you just mentioned and your knowledge of how things work there, which does take quite some time to figure out on the part of executives like yourself, what are your expectations for some of the responses that we may get from china at this point given this very different tone that they're hearing from this new administration? >> well, david, i certainly can't speak for the chinese government, but i think i would hope that both governments recognize it's not in our

collective interest to have a trade war that would have such an adverse effect on both economies and citizens from both countries. so again, i can't predict what's going to happen. i am confident that starbucks is going to be able to navigate through any storm that's going to happen. and i hope that on both sides we recognize the need for civility and degree of understanding that we must live in harmony together. >> howard, just want to go back to the concept of the newer stores because i know you're going to be opening one in china. it's going to be very big. the newer stores i felt got short shrift by you on the conference call. >> okay. >> there are many different levers of the flywheel that i think can move the needle in 2018 when i hear the number of

reserve, when i hear roasterie, can you give us a sense of what we'll be talking about a year from now and a different mosaic than we're talking right now? >> i think it will be quite different because, jim, you and i have talked many times i'm very fond of the state motto of missouri, the show me state. we got to show the market and show our customers the success of the reserve stores, the reserve bar and the roasteries around the world. a year from now a 30,000 square foot facility in shanghai will open. in new york on the corner of 19th and then tokyo and hundreds of reserve bars and reserve stores open over the next couple of years that will create this ultrapremium experience. shine a halo on the starbucks brand. be a growth vehicle for the company. i think all the issues we're talking about in terms of a quarter in which comps were not as strong as they have been in

the past will be -- we have some issues that we have to fix. but as an operator and as a merchant these are things well in our control. and we will fix them. and starbucks once again will demonstrate best of class performance in terms of retail and consumer brand in america. >> all right. now, i know you're speaking today and not kevin johnson. i have to believe that if you were really concerned that the same-store sales were going to be in a continual decline you would budgeted the trend that perhaps you might even delay your move up to chairman. is there any chance -- >> no. >> -- you've had any misgivings at all? >> no, no, there's no chance of that whatsoever. we're not looking at the next 30 or 60 days. we're looking at the next five and ten years. kevin johnson will assume his responsibility as chief executive officer the first week in april. he's a world class ceo. i'm going to be his partner. i'm going to help him as much as

i can, but he will be the ceo of the company. and he's well prepared for everything that's going to come his way. and he's going to be a great leader for the company and build long term value for shareholders. >> howard, as we're talking the white house has put out the president's list of business leaders on their manufacturing jobs initiative. mark fields, gors ki, elon musk, liveris and the like, would you accept an invitation to serve on a council like that? >> well, certainly i would do anything i could to ensure the fact that the progress of the administration and president trump is successful. you know, people know that i supported hillary clinton, but president trump is the president of america. i'm an american. and i want america to succeed. i want the president to succeed. >> fair enough. i got to go back again to your initial comments three years ago about the mall. howard, do you have stores that

you should close? we see all these closures of very fine retailers because we know there are some malls that you just shouldn't be in. are there places where you say we got to redeploy because these malls are dead? >> we don't have many starbucks stores in malls that are under pressure. we have some teavana stores in malls that are under pressure. i think we'll look at that over time, but we're not going to make any short-term decision. jim, this is something i've been talking about the last three years. we think we're insulated from it. one thing we haven't talked about with regard to that is people, yes, people are going -- there's going to be less people shopping, but people are going to be longing for human connection, longing for experiences, longing for community. and that is a strong suit of starbucks not only domestically and around the world. and if you would see what is happening with starbucks in all of these countries, the universal acceptance of the brand, the experience, the coffee and social agenda of the

company, you'd see why we feel so strongly that we are still in the early days of the growth and development of starbucks despite the fact that it was not our best quarter in terms of comps. this is a short-term issue that over time will be a memory in the past. >> all right. now, you have spoken many times on "mad money" and with me both publicly and off the side about the notion, you know i've said that starbucks is a great american ambassador. if starbucks had been open during another period of turmoil in our country, early '60s, perhaps we could have avoided confli conflict. are we in a situation where you find some of your people when they go overseas are getting a kind of blowback from the president of the united states? maybe some resistance to think, you know what, america first, well, i'm not going to an american first store, i'm not going to starbucks? >> no. we have not experienced that, jim. let me tell you why. starbucks is an employer of choice in every market that we're in, the 75 countries.

the values in the company in giving back to the communities, the benefits we pay to our people and the relationships that we have built with local governments almost in every country that we've been in. we also have very interesting license in j.b. partners that give us local opportunities to really understand consumer preferences. honestly, we have not experienced anything along those lines. and i think starbucks is a great american company and people view us very positively. >> well, howard, i want to thank you very much -- okay. >> okay. thank you. >> i do feel less concerned. i shobtuldn't take it so personally but recommending the stock since the day you came back when mr. donald left and i'm not used to seeing decline but i think the decline is caused by something that is technical and therefore will be solved by you. thank you so much, howard

schultz. great to see you again, sir. >> thank you. thank you, jim. >> good interview. good insight, jim. we'll get stop trading with jim in a moment. market's pretty flat. "squawk on the street" will be right back. a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley they all...want...to... how charge me.xes going? have you tried credit karma? does credit karma do taxes now? yeah, and they're totally free, so they'll never take any of your refund. file your taxes for free with credit karma tax. won't replace the full value of your totaled new car. the guy says you picked the wrong insurance plan. no, i picked the wrong insurance company.

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time for cramer and stop

trading. >> i went through the caterpillar call. i'm doing a facebook live today at 2:00 talking about these earnings reports. i went through the caterpillar call and i absolutely loved it. i felt like i was alone until wells fargo upgraded it today. that analyst does not upgrade easily. he's calling cyclical bottom. i agree with that. i felt much of the tone of the caterpillar call was mining is okay. how much oil? oil up here, did you see harold hamm, he's going to double -- >> i did. i've heard him say 20 million barrels. he's crazy saying that number. >> but he's putting money -- >> he is. he's done it. i'm not -- believe me, i know. father of fracking, i get it. >> you need cat for infrastructure. you need cat if you're going to have a cyclical rebound. caterpillar is done going down, i think, and i think the wells piece is good. and people just slaged it because they said, you know, this or that. >> 70% gain in a year is the beginning, halfway through?

>> a little late. a little late. i'm just saying there are a lot of people wanting to short cat. it's a big hedge fund short. you know, like they love to short stuff? which is fine. but i think caterpillar is. >> what's on mad tonight? >> a company defied all expectations, carnival cruise. unbelievable. arnold donald has delivered, delivered, delivered. i know, you can say, listen, royal's good too, but this company has done amazing things for travel and for people who want to have a vacation and a reasonable price. he's done it, also great technology guy. i cannot wait to talk to him and congratulations to him for really turning that company around. >> yeah, absolutely. >> great man. >> jim, strong week. >> yeah. and i'm getting started. i'm going to set the alarm at 4:00 tomorrow. all right told the wife. 4:00. because the honeywell call and --

>> it's saturday. >> big deal. >> take a rest. a rest. >> oh, please. i am who i say i am. >> jim, we'll see you tonight. "mad money." when we come back, jim stewart of the "new york times" on the budding bromance between trump and elon musk. don't go away. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

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♪ good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at the new york stock exchange. a lot going on today as president trump meets with uk prime minister theresa may this afternoon. gdp's out. durables for the time being not much amplitude in the markets. dow's down three points. and oil down a full percent. we have some economic data crossing the wires. let's get to rick santelli. >> carl, anybody out there watching has a heart condition, take a breath because i'll tell you what, if consumer confidence is as important as some think, this is a powerful number. 98.5, 98.5 is our final read for january of university michigan sentiment. this takes the 98.1 mid month

and tosses it out. why is 98.5 so strong? because prior to this we had a 98.2 read, the last read of last year after the election. that was the best since january of '04. january of '04 read was 103.8. so this of course comps to that. but it really is quite a strong number. another thing to hit on is the university of michigan has two inflation reads. on the one-year it's 2.56. keep in mind on the one-year 2.6 is a high water mark now going back to and it's the same as the mid look april of 2016 when it was at 2.8. and if you look at the 2.6, you have to go back on the five to ten-year read to march of '16 to find a higher number. so even though those aren't long comps on inflation, they're definitely in the upper end and we want to pay close attention to those. sara, back to you. >> all right, rick, thank you. so better consumer confidence,

but a miss for fourth quarter gdp. the final read for president obama's term, our senior economics reporter steve liesman has been digging through those numbers and fascinating impact of trade here on those numbers as well, steve. >> soybeans, sara. we're going to talk about soybeans in a minute. but i want to start out where sara pointed, president obama's term ends with the number center of controversy for his eight-year presidency. 1.9% growth for the fourth quarter, that's a bit below the 2.2% expectation but right in line with the 1.8 that prevailed during his presidency. his economists, many economists argue that's the new growth rate, the potential of the economy has stepped down and obama did well to hit it and grow faster than other developed countries. president trump argues that he can do better with better policies. let's look at details for the fourth quarter, total gdp 1.9, consumer spending, 2.5, that's a step down from the 3 in the third quarter. business investment that is stronger in the third quarter up 2.4%. and exports plunging in part

because we had a surge in soybean exports in the third quarter and now they rolled off. but you also had an increase in imports. are we seeing the effect of a somewhat stronger dollar in that data? take a look at one more screen here. you can see that we had a very lackluster first half, then you have the surge in the third quarter and now come back down to right around what the trend is and what the trend has been. since the election of president trump there's been a -- one more look at data here which is the capital spending number. we had that -- thank you, guys. and you can see that's come back as well in the fourth quarter in december there getting positive on the year over year basis for the first time in a while. one thing that's depressed that number is the decline in investment in the oil and energy space. and now maybe that's come back a little bit along with perhaps a little more confidence in there. but since the election of president trump there's been a surge in confidence both among consumers and ceos. and that can translate into some additional spending and growth right now. but the effects are the real

stuff, tax cuts, deregulation and infrastructure, if they're going to boost growth, it won't be felt i think for several quarters after they become law. and that could mean, carl, some time next year. >> we still got to get baker hughes rig count this afternoon. >> there you go. >> a lot going on. thanks so much. >> thanks. >> steve liesman. tensions heating up of course between the u.s. and mexico. president tweeting this morning mexico's taken advantage of the u.s. for long enough. massive trade deficits and little help on the very weak border. must change now. our michelle caruso-cabrera is in washington this morning. knows this story backwards and forwards, good morning, michelle. >> good morning, carl. yeah, that border war of words only getting more intense. that's what president trump said this morning via twitter. but he backed up or he said once again his repeated his threats against american companies that would move jobs to south of the border. here's what he said in an interview last night. >> they understand that if they build a plant outside of the united states, fire all their employees, when that product, whether it's a car or an air

conditioner or a washing machine, when that comes through the border, it's going to be heavily taxed. >> we've seen how entrenched american manufacturing is south of the border, particularly in monterray. ryder, johnson controls now known as jci manufacturing, lots of auto parts as phil lebeau has highlighted to us many times, carrier, a lot of hvac is done down there. i've spoken with mexican business leaders in monterrey, they're very, very unhappy. thar angry about what's happened between president trump and the president of mexico. they're glad enrique pena nieto canceled his trip. and the former president of mexico vicente fox reiterated that this morning on "squawk on the street." >> we get this ceo trump coming in to sit in the presidential chair and keep acting as a child, as a ceo of his

corporations making deals, he says, but he in reality is making mad everybody, like happened with mexico. fortunately president pena stood up, faced him and canceled the visit. >> another prominent mexican voice that's going to weigh in today, carlos slim, one of the richest men in the world, telecom billionaire from mexico. he's decided he's going to hold a news conference today, decided late last night. i spoke with his office earlier in the week, they said he had no desire to address anything. but now he's going to do a rare news conference suddenly deciding in the last 24 hours. so certainly the events of the last couple of days have affected him and driven him to speak out. that ironically enough or maybe on purpose is going to happen about the same time that british prime minister theresa may and u.s. president donald trump are going to hold a news conference, guys. >> we're going to see what

happens there for sure, michelle. a lot still to come headed our way this afternoon. michelle caruso-cabrera in washington. and focus this morning as well the meeting with uk prime minister theresa may at the white house. joining us this morning on the phone is jim o'neill, former commercial secretary to the uk treasury. jim, it's good to have you back. good morning. >> nice to speak with you. hope you can hear me clearly on the phone. >> in addition to what michelle just said, we got comments out of the german foreign ministry today that transatlantic ties are going to remain the core of german policy, they say. to what degree are these alliances truly fraying, do you think? >> well, i think we need longer time than you want to give me to discuss this in all its aspects. but, you know, it's so hard to fathom out where your new president is really trying to go. i mean, just listening to your previous discussion on global

economy and trade perspective to be trying to provoke such confrontation with someone as important trade wise to the u.s. as mexico and yet being so remarkably welcoming to our prime minister sounds very kind of strange to me. doesn't make a lot of economic sense. but, you know, i'm sure i'm not the first person that's said something like that. the very idea that trump seems to be pushing so much about use ing tariffs to cut the u.s. trade deficit is extremely dubious too. it's all very interesting and fascinating that the markets seem to be so relaxed. but i'm not entirely sure a lot of it makes a lot of sense, to be honest with you. >> do you think, jim, at least that this america first kind of

policy can succeed in bringing back american manufacturing jobs, which have been lost over the last few decades whether it's nafta's fault or not? >> yeah, but as most economists will try to say -- often i like to think of myself as not entirely conventional economist, but, you know, the u.s. -- deficit also not more directly is a consequence of how little the u.s. saves relative to its investment needs. so it's not status quo. the u.s. has to attract a lot of foreign capital from the rest of the world. and by definition that means often the u.s. having a deficit on current account of which trade balance is the biggest part. so if your desired policy solutions to that is to deliberately constrain imports, all it will do is either/or raise imported inflation significantly through higher

tariffs will just cause the deficit to appear to other countries that you're not having such aggressive policies such as mexico. obviously the u.s. should try to improve its trade balance, but you can't really do it in a progressive way for u.s. citizens without doing something about international savings rate. >> jim, you mentioned inflation. and i'm just curious to get your point of view at this point, some people believe that we are at the end of that incredible bull run in bonds that we've had for, i don't know, 25 years. are you one of them? do you see inflation both here as a possibility as a result of some of these policies we just discussed? and even in the eu right now where things do seem to be picking up? and if so, what is your outlook? >> yeah, i have some empathy with that. i think the only other time i've been on with you guys was quite some time -- it was actually the

day after the election. and it was my hunch and it's grown a little bit that we are indeed at the beginning of the end of this 25, 30-year period of growing deflation. i think you have a whole series of things happening at the same time. there's obviously a turnaround in commodity prices, but of more substance we're beginning to get a shift in policies arguably from a social perspective justifiable to almost deliberately boost lower income earners wages here in the uk that's happening, it's happening a bit around europe. it's obviously an aspect of the policies of trump to deal with. you have a whole shift in fiscal policy to less restraint. and then on top of it these kind of trade policies trump appears to be following would give perhaps more emphasis to it.

so, yeah, i think it's a reasonable thing to think about. and it's not surprising in that regard that the bond markets have started to seemingly turn the corner. it makes a lot of sense to me. >> jim, we had vicente fox on the show earlier this morning. he said we're not worried about trade. we can always trade with china. and there are those who believe somehow we're handing the global free trade ball to that country. are you there? or do you believe that we're going to just fix the problems we've had with them cheating and work our way back? >> i have some sympathy with that as well. i think another crucial judgment the trump team seems to be making is that the u.s. dominance of the world trade agenda is the same as it was 30 years ago, and i think with the evidence it clearly is not. china today we all think of

china as an export and obviously trump obsessed about that, but china is actually the number one import partner for at least 70 countries and already more than a third of the world. before this decade is over they will be a bigger importer than the eu. and one of the most interesting things in this regard was president xi appearing at davos last week, the first time a chinese president has ever been there. and i think the u.s. is giving china a chance to set more of the criteria for not just more deals with people directly with china, but for china to be having a bigger influence on some of the global trade rules going forward. and i'm surprised that there isn't a greater balance of thought coming from the u.s. in that regard. >> finally, jim, we need a market call. i know your first love, like mine, is foreign exchange. so what does a trade war mean

for the u.s. dollar ultimately? >> oh, god, you know, the dollar's going to go up and down. and if it doesn't go up and down, it's going to go down and up. who knows? >> that's not an answer. >> i've spent more than 30 years of my life trying to guess that, and i think i learned more than most, but it wasn't much. you know, the only thing i would say is i am surprised how optimistic so many people are about the dollar. i think there are a lot of obvious reasons why that is not a very sound argument. i can see some cyclical reasons, but it seems to me from a policy perspective presiding over so-called strong dollar is certainly not going to be attractive to this administration. and from what i did learn it is not nominal interest rates that typically drive currencies, it's usually what you might call so-called real interest rate. and if the fed is only going to move slowly after inflation has

started to rise, which is currently the case, i don't see why that's so bullish for the dollar at all myself. >> so a weak dollar call. >> jim, it's good to talk to you. a lot to talk about. >> we'll see. up and down. >> hope you'll come back soon. jim o'neill. >> all right. thanks for having me on. when we come back, big tech earnings are in focus today moving stocks. we'll bring you the numbers and the analysis straight ahead. plus, the president announcing his manufacturing jobs initiative early this morning. u.s. manufacturer rev group going public here at the new york stock exchange. we'll speak to the ceo about the economics of manufacturing in the u.s. when we come back. seeing is believing, and that's why

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visit an xfinity store today and see for yourself. xfinity, the future of awesome. tech giants google and microsoft reporting pretty strong earnings after the bell yesterday. microsoft growing its cloud business, in particular showing it's not necessarily your father's old tech company anymore. while google's parent alphabet doubles down on artificial intelligence, reviewing these nasdaq heavyweights today we've got gene munster, managing partner at luke ventures and keith weiss tech analyst at morgan stanley. gentlemen, good to see you both. first, gene, broadly speaking tech stocks have joined the party. and the nasdaq is trading near all-time high. anything in these earnings dramatically that makes you question or disrupt that rally? >> no, just in terms of google it was right where it needed to be.

the underlying search growth continued to be healthy at 20%, which is where it's been for the last several quarters. so paypal is a little bit of a different story, but that's competitive related. i think google as you mention is a great bellwether and the hemt of google right now is strong. >> so you're with cramer that the stock should be up 22% revenue growth, 36% growth in terms of users clicking on ads. is that the big tickaway? >> yeah, the big takeaway near-term is everything is going really well with their search business. and that just continues quarter on quarter to turn out this 20% plus growth. the other piece as you mentioned is this theme of a.i. they've been hinting towards that over the last couple quarters. but their ceo last night emphasized that they're going to shift from a mobile first company to an a.i. first company. and that is significant. not over the next several quarters, but eventually the ten blue links are going to go away, and that's going to be a major change in terms of how we interact with google. so i think investors should take

note that two, three, four years down the road google's probably going to go through another transition similar to the transition they went through to desktop to mobile. >> i want to hit microsoft strong quarter as well, keith. satya nadella continues to deliver for investors. the stock is rewarded. how do you think about the valuation now that microsoft is in growth mode? >> definitely. thank you for having us. so microsoft's a strong quarter on the back of not just the cloud business, which has been really pushing up the multiple for this stock, but really earnings came through on the other side as well. if you look through the fx noise, if you look through the linkedin acquisition, you saw microsoft core earnings growing 15%. that comes from gross margins starting to turn. you're starting to see op-excontinuing to be load. that's really what drives the stock from here on out is the earnings growth side of the equation which really came onboard last night. >> gene, let's hit some of the big political topics, certainly

foreign exchange was harmful to paypal last night, has big remittance business. what are some of the trump policies? jn they got a lot of questions on border taxes, potential repatriation of foreign earnings, what do they mean for paypal and some of the other companies you follow? >> well, the biggest is just this pool of money just like a lot of companies that they have offshore. and google is a company that has a large part call 25% of their cash is offshore right now. so there's an opportunity for them to bring some of that back. i think more thematically in terms of how trump has talked about technology we all know it hasn't been very supportive of some of that. but i don't think that changes some of the momentum that companies like google and apple and facebook and amazon can still do in terms of innovation. and so when we think about the trump presidency and think about these companies, the biggest is tax repatriation and then separately for companies that aren't selling products or at least hardware products the impact is more just around the

thematic in terms of how they're supporting investing in tech. >> gene, real quick on alphabet itself. a couple of quick questions from me. one, they didn't buy back stock during the quarter. some people wonder were they trying to negotiate some sort of a deal. i wonder if you have any insight on that because they did say it was specific to being prevented from doing so. and second, what's the impact on nongap of them now expensing stock compensation? >> so there probably was some sort of a transaction that caused them to basically the window for them to buy back stock to be closed during the quarter. so something as you mentioned was going on behind the scenes. hard to say what that would have been. people speculate that things like twitter could have been behind the scenes. i don't know necessarily believe that, but -- >> yeah, i don't know. maybe snapchat. who knows. >> maybe snapchat. and separately as far as the stock based comp is this is something that warren buffett has been supportive of for a

long time. and so i applaud google for actually just saying we're going to give you one number and not break this out. at the end of the day is the stock based comp is part of expenses. it's surprising to me that it's taken this long for companies to make the step. i would expect other companies to start to take that same step and just have it as one -- reporting as one line. >> right. which microsoft already does, of course. >> and, keith, we'll end with you and let you sort of comment on some of the trump policies. gene's watching repatriation of overseas cash. clearly that's a big issue for tech companies. who benefits the most, who gets hurt by potential protectionist moves? >> sure. when you think about repatriation, in software definitely have guys with big offshore cash pal lances microsoft being one of them with over $100 billion in offshore cash. really all large caps have a significant percentage of cash in offshore that could benefit those guys bringing back the cash being able to do more m&a,

able to do more stock repurchases. on the flip side of the equation is the guys who are actually going to be bought, the small mid cap names in our group. who we think are trading at pretty attractive valuations. they could benefit from a freer set of capital out there from repatriation as well. >> we'll leave it there. gentlemen, thank you so much for joining us. >> thank you. >> thank you. >> gene munster, keith weiss on tech stocks. when we come back look at shares of rev group just started trading at the nyse. we'll talk to the ceo tim sullivan after a short break.

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u.s. manufacturer rev group debuting for trade here at the nyse today. ticker symbol revg up about 13% in the initial trade. joining us first on cnbc is the ceo tim sullivan here who joins us at post nine who tells us he's on cramer's wall of fame. having done his show a few times. congratulations on that. and congratulations on this. >> thank you. thank you.

>> interesting time to come public when there's so much focus on manufacturing in america and all your facilities are domestic. >> yeah, we're domestic centric. even better we are really looking for some of the infrastructure spend coming. that's a direct reflection on a lot of things we do. all of our buses are aostensibl funded. fire and emergency local funding through municipalities but all those tax revenue bases are improving. fed money is there was kicked up in 2016. so a lot of good tailwinds for what we're doing. >> contrast that with the way it's been in the past few years. >> it's been tough. >> municipal budgets and things like that. >> it's been tough. after the collapse of 2008 the entire tax base was eroded. there's a pent up demand for fire and emergency apparatus, these are critically important vehicles for the communities but they've struggled to get the tax money to pay for those. they're not inexpensive. with the improvement now with the tax revenues we're starting to see a nice pick up. our fire backlog is out 12

months, first time in the two years i've been here that it's that long. really good tailwinds we're looking at right now. >> how do you make the manufacturing in this country work, from an economics and math standpoint? and do you have an opinion over whether the big automakers can profitably manufacture a small car in this country? >> absolutely can. we have 16 plants now, we just opened a 16th right here at the end of the year. manufacturing in the united states is not complicated. i mean, it's really about, you know, doing your job and really getting your operation set up properly. working with the labor. laborers in this country are looking for good paying jobs and the manufacturing sector has the highest paying jobs out there. so it's just a matter of really getting the word out, kind of community communicating is a great profession. i think we lost that. >> you're talking assembly, i assume. >> yes. 85% of what we source is united states.

>> is it? >> 85%, again, it can work, but you got to work it. you've got to put some effort into it. work with your suppliers and you can make it work. >> are school buses in this country new? it feels like they're old and they're in need of a refresh. i know you make a lot of these school buses. how much are you selling? >> the school buses right now we have about 42% market share. it's over 4,000 buses a year. we build the small ones, type as, which are very popular. popular is growing in type as. school buses look similar to when we rode them. we probably need to innovate more and we are looking at that. >> like what? >> well, it's interesting, everything is wi-fi and things like that today people are looking for something a little bit more modern and modern looking. so we're looking at ways we can actually, you know, kind of get those types of technology aspects into their indoor products. >> has fire suppression changed from a technology standpoint? >> not a lot. >> really? >> not a lot. again, i think if you look at the last eight, nine years there hasn't been a lot of ability to

innovate. and because the industries have been down. but now's the time. now is the time to really kind of lead with new ideas and new designs. >> what are you going to do with the capital you raise today? >> well, if you noticed, we've kind of grown a portfolio through m&a. it's been over a dozen mergers and acquisitions that we've done here in the last ten years. just been a ten-year run. we're going to do more of that. we've got a lot of really good organic growth because we've got a very good diverse large portfolio. there's a lot more to do in specialty vehicles. we like where we're at in specialty vehicles. there's a lot more consolidation that needs to be done. we plan to do a lot more of that consolidation. >> you have a currency to deal with now too. >> we have a lot of currency. >> not just cash. >> we're very pleased about that. >> it's good to have you, tim. congratulations once again. >> thank you. thank you very much. >> tim sullivan, watch revg, yes. >> let's get to courtney reagan now for a cnbc news update at this half hour.

courtney. >> good morning to you, sara. here's what's happening at this hour. british prime minister theresa meleeing a wreath at arlington memorial ceremony this morning. she's scheduled to meet with president trump later today. it will be the president's first meeting with a foreign leader since taking office. prosecutors in germany say they have sufficient evidence to indicate that former volkswagen ceo martin winterkorn may have known his company's emissions cheating software earlier than he claims. they say they have increased the number of suspects in their investigation from 21 to 37. israeli police arriving at prime minister benjamin netanyahu's residence to question him about corruption allegations. netanyahu has repeatedly denied wrongdoing portraying the accusations as a witch hunt against him and his family by hostile media. well, the star attraction at the pro bowl skills competition, the drone drop. drones carrying footballs to dizzying heights before dropping them to waiting nfl wide receivers. the winner, odell beckham jr.

ezekiel elliott i understand was excited about his dodge ball team win. that's our cnbc news update, david, back to you. >> thanks, kourtney. >> when we cam bak-- >> dodge ball's a great sport. >> "new york times" columnist jim stewart with us, why he says there's a budding bromance between president trump and one tech ceo, what that means straight ahead. is happening before our eyes. shift in human history sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha

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a republican controlled white house and congress should be bad news for environment tally focused companies and stocks, right? well, then why is tesla up over 30%, that being the stock, since donald trump's election? our next guest says it's because of the bromance that seems to be budding between president trump and elon musk. joining us here at post nine pulitzer prize winning "new york times" columnist jim stewart. yeah, you think they like each other? >> well, they seem to be getting

along and who would have guessed? elon musk didn't support trump. he was here on cnbc saying he was the wrong person for the job just a few days before the election. his whole agenda is green, high-tech, all electric cars, anti-fossil fuel. i mean where is the common ground? and now suddenly he gets invited to trump tower. he gets invited to the white house. he's on this special group of industry people that trump has put together to advise him. he's talking to advisors. i mean, trump is listening, and they seem to have bonded. >> yeah, well, i mean, a lot of manufacturing jobs in this country. now, grant it his plants are extraordinarily automated, but still it's domestic and they are producing cars only here and solar panels and things of that nature. >> it's fascinating to me when you really start to bore in here how much of the two agendas do overlap despite the superficial differences here. i mean, starting with jobs, they

employ 25,000 people in the u.s. right now. there are estimates it could be double that within a few years when they ramp up production in this big battery factory. that has a huge multiplier. in fact those are good jobs, high paying jobs. even more impressive if you look at solar power generally the latest energy department figures they employ over 300,000 jobs in energy -- electricity production alone compared to coal which is only about 80,000. so when you look at jobs, green and environmentally friendly solar power has streaked way ahead of the old fossil fuel areas. >> so do you expect the president's discussion of clean energy to coal that ratio to change? given those job numbers. >> you're already hearing some changes. again, i think investors in tesla and solar stocks have taken heart by the fact in these confirmation hearings like tillerson, you know, some of these other nominees have kind of softened their whole language about global warming. i mean, it's like no one's

calling it a hoax. and i think one of the analysts i talked to at morgan stanley, i think people have misunderstood. it's not a zero sum game. you don't have to be anti-environmental or anti-electric power or anti-solar to be pro fossil fuels. there is room for both of those in the current economy. >> i wonder to your point about the stock price going up. investors do seem to be putting a premium on stocks whose ceos have had that photo op with president trump. look at the automakers, they were there, they had a powwow, even though bringing back manufacturing for autos is best for their business. i wonder how investors are weighing that pro and con with the new administration. >> the pipeline to trump seems to be a big business plus right now. and i think that has been a big factor in tesla. of course, like all these things it could be wishful thinking.

i mean, we still have to see what actually happens with -- >> how about the subsidies? >> well, the subsidies are a big question. are he and the republican congress going to just cut those subsidies? i think it's worth bearing in mind the subsidies are going to die anyway. they are on a phase out schedule in a deal when they extended subsidies it was bipartisan republican democratic agreement. they're phasing them out anyway. so you can make a case like don't touch these right now because they have worked. they have gotten the solar industry on its feet and it's very close to being self-sustaining without the subsidies. musk says tesla doesn't really care, he doesn't need the subsidies. it will soon be at a level of production where subsidies go away anyhow. in some sense subsidies are a red herring. if they decide to slash and get rid for symbolism that would be a blow to solar. >> there many who believe the president's son-in-law, jared kushner, is his single most important advisor and if not the single most influential person in the white house. any sense to the relationship

between kushner and musk? kushner's younger brother is a venture capitalist, certainly there is at least some exposure there to technology and new tech and things of that nature. >> you know, i haven't actually heard -- i've heard of other people in the administration that have reached out to musk and talked to him. i haven't heard the kushner name in there, but i think it is consistent with his, you know, somewhat -- shall i say more youthful view of the world that is, i think, more willing to embrace some of these environmental concerns. >> have wu heard anything from musk at all? has he said anything so far about his relationship with the president? >> no. he didn't comment -- he wouldn't make a comment for my column. i thought it was interesting this week he did come out and endorse tillerson and said he thought he could be a great secretary of state. now, that's, you know, they're about as far apart, exxonmobil and fossil fuels, elon musk and tesla, that is a meeting of strange bedfellows, but i

thought that was significant indication that, you know, they're both finding ways to compromise to get along. >> in terms of automation, i mean, musk has talked about the lights out factory where you don't need lights because there are literally no people on the line. >> there's no people there. >> that hasn't been addressed yet. >> no. but there are, you know, let's say, i don't think the tesla factory is going to be a huge -- it's not going to be a huge employer of the blue collar workers being displaced in appalachian. but he has raised the idea of upgrading the electric grid in this country, which we do need and that could be a huge project. that could actually employ a lot of displaced workers from other industries. i mean that is not all high-tech stuff. there's a lot of basic construction work that needs to be done on that. >> infrastructure spending, perhaps another column in the future, jim. >> yeah, i like to say infrastructure investment because you get a return on this. i want to keep reminding the deficit hawks this is an

investment that yields a return. >> right. you've actually done that column already, i think, if i recall. jim, as always, thank you. >> sure. >> jim stewart. taking a look at stocks this hour. dow within a very tight range down about nine points right now. we're back in just a minute. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. and the wolf huffed like you do sometimes, grandpa? well, when you have copd, it can be hard to breathe. it can be hard to get air out, which can make it hard to get air in.

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the stock market's certainly been on a tear, but could bonds be better pick now? that case made at tradingnation.cnbc.com. more "squawk on the street" coming up

it's not just a car... it's your daily retreat. go ahead, spoil yourself. the es and es hybrid. this is the pursuit of perfection. dow's down about eight points. let's get to the cme group. rick santelli with "the santelli exchange." happy friday, rick. >> thank you, sara. doug, thanks for taking time with me this week. >> thanks for having me, rick. >> let's have a philosophical trade discussion. trade's a big deal right now.

there's a group of people in this country that believes that you can have a political freedom of individuals in this country was built on versus a collectivism in a board like world run by tech -- removed from voters is a better way to go. i'm not necessarily arguing that, i'm arguing that like milk doesn't cause addiction even though most addicts started out as babies drinking milk, does the notion of individualism and nationalism always lead to tyranny? i mean that's what i read, your thoughts. >> i think the notion of freedom is the foundation not just of our political system, it's the foundation of our economic success. economic freedom has characterized the united states since its founding. and the freedom to trade across state lines, you and i are voluntarily trading right now, freedom to trade allows me -- i'm an economist, allows me to

actually get food and eat and survive. those freedoms are everything in terms of economic success. trading's the foundation. >> you know, listen, i'm not saying that the current president's going to do it right, but i think there is something here to discuss that having bilateral agreements, whether it's with mexico or canada versus including everybody and have so many more voices isn't necessarily a bad thing, even though it might be a little messy in the beginning. your thoughts. >> i think this is a really interesting question. you know when i listen to what the president says, he says for example, i want china to abide by its international obligations and not cheat. that's been something every administration has said for a long time. what he's saying is i have a different set of tactics to get us there. as far as i'm concerned, it's an open question whether that will work. go ahead and try, let's see what the results are. it hasn't worked the other way, so we need to try something new. >> exactly. you know, i have this problem, it seems like all governments

are in this all or none business. when it comes to regulations, big is better than less, doesn't matter about quality. and if you say less, it's like, oh, no, it's all or none, education, no choice, all or none. immigration, all or none. when it comes to trade and nationalism, it becomes this all or none. there's always a middle of the road here. on your final comment, what do you think this president should do to try to push back some of the notions that we can't have our individual freedoms and trade with foreign neighbors? >> well, i will say this, rick, in economics the right answer is never zero or 100%. it's always in the middle somewhere. and as far as pursuing our ability to get good trade agreements, i think the president needs to negotiate, negotiate quickly, say for example with england. see what that looks like and have it be a model for what comes afterwards. that would be a good strategy. >> i agree. and take it further is a great op-ed about this in "the wall street journal" today, angela

merkel and the european union in brussels ought to pay close attention because i think that trump and may could make history and change the dynamic about the eurozone pressures on the uk. thank you for taking the time today, doug. really appreciate it. david, back to you. >> my your time. david, back to you. >> my pleasure, rick. >> thank you very much, rick. let's send it over to jon fortt, look at what's coming up on "squawk alley." jon? well, david, we've got quite a show. vmware's ceo is joining us on their earnings home run, the stock flirting with two-year highs. we'll dig into what's next for the enterprise. also, we've got microsoft's new evp of commercial. going to talk cloud, going to talk global perspective. and oh, a couple of other little companies like intel and alphabet had earnings, too. what does it mean for investors? we're going to find out next on "squawk alley." there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be.

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starbucks reporting earnings this morning, matching profit estimates, but that revenue side of the pie missed as same-store sales weighed on the stock today. the company partially blaming the success of mobile ordering that's created somewhat of a bottleneck in the stores. here's how ceo howard schultz characterized it earlier on "squawk on the street." >> we were significantly impacted by a good problem, a

problem that we will solve, and that is the congestion and the runaway success at peak of mobile order and pay. and we didn't anticipate how successful mobile order and pay would be, and it has created a bottleneck for us, and that impacted comps and traffic during the quarter. >> cramer called it a mosh pit at the counter of starbucks but says they'll recover because this is something they can fix. >> he's still a full believer in the leadership of that man, who is going to be moving up to chairman soon. >> yeah, something that makes investors still i think a little queasy, right? taking a look also at shares of colgate, a mover on earnings under some sharp selling pressure, down almost 7% after quarterly sales fell more than expected. that's despite the fact that the bottom-line earnings matched street estimates and rival p&g had a pretty good quarter. stay with us here on "squawk on the street." dow's down about 14 points.

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president trump focused on infrastructure spending, saying he will leverage public-private partnerships. our jane wells is in long beach, california, taking a look at how some companies back public-private partnerships and may be profiting. jane, good morning. good to see you. >> reporter: good morning, sara.

they're getting a brand-new civic center faster and cheaper by outsourcing building and operations. it's going to pay the builder a rent, if you will, which is pretty much equal to what it's paying to run the old city hall. this public-private partnership for p-3 has no public tax incentives, but the president is suggesting those to spur more projects like this. moody's, in fact, says the united states could become the number one market in the world. pwc said there were nine deals worth billions of dollars which closed in the first three months of last year. now, more on the way. thez projects carry risk, but public-private pension funds are drawn to the slow, steady returns. >> many of the projects are accelerated by in some cases a decade or more, one, because we are able to put the capital up front where the city would spend many years trying to figure out where they would get the funds. >> the great thing about this project also is we have a local hiring component, so we're bringing in local veterans, local workers who also work on the building. so it's pretty much a win-win

all the way around. >> reporter: now, north of here at l.a.x., they're taking bids on private partners to modernize l.a.x., much like they have done at laguardia. >> there is no city in america that's moving more aggressively on its infrastructure, and we're funding our part. we want the private sector and the feds to be there along the way. so far it's been very successful. >> reporter: well, there is a potential hitch. los angeles is a sanctuary city. long beach is in sort of a sanctuary grayed area, and we'll have to see if the president tries to withhold deals for projects in cities like that. guys, i'm going to toss it back to you. but quickly, look over here. it's just fascinating watching how fast these guys work. they are pouring concrete here, and they have to do it in a specific way. it's sort of a choreography, because that stuff sets quickly, and you've got to make sure you have a path out when you're done. back to you. >> all right, thank you for showing us. great live shot, jane wells, as always, with a hard hat. the race is on for those companies to get in on public-private partnerships for

infrastructure building. just a quick look at the markets here before we let you go. the dow's down about 24 points, broadly holding on to some of the recent gains. s&p down 0.2%. miss on first-quarter gdp, which showed 1.6% growth for all of 2016, worst it's been in years. that could be having an impact here. that does it here for us on "squawk on the street." have a great weekend. over to you, carl, for "squawk alley." >> same to you, sara. thanks so much. good morning. it is 8:00 a.m. at microsoft headquarters in redmond, washington, 11:00 a.m. on wall street, and "squawk alley" is live. ♪ ♪