gunther, my german shepherd, it is his birthday, and valentine's day. "squawk box" begins right now. ♪ live from new york where business never sleeps this is "squawk box." ♪ good morning. welcome to "squawk box" on cnbc where we are live from the nasdaq market site in times square. i'm becker, along wiy quick, al kernen and andrew ross sorkin. it's been a huge run for the markets. it continued again yesterday when the dow was up 142 points. the s&p was up 12 points, the nasdaq up by 30 points. this morning those indices are indicated to open higher again. the dow by 15 points.

s&p by 1 point. the nasdaq by 3 1/2 points. overnight in asia, you'll look and see that the nikkei was down by just over 1%. a decline of 1.1%. the hang seng was flat as was the shanghai composite. in early trading in europe this morning. things are modestly higher. basic advances for the ftse, for the cac in france, for the dax in germany. looks like knin italy stocks ar higher. look at crude oil prices which yesterday there was some concern about crude oil prices, as it looks like the u.s. is producing once again and that is enough to overtake what the opec nations have been holding back. wti up about 42 cents. top story this morning, national security adviser michael flynn resigning late last night, hours after it was learned that the justice department informed the white

house that it believed flynn could be subject to blackmail. eamon javers joins us now with more. >> reporter: good morning. it was a dramatic development late last night after what can only be described as an afternoon and evening of confusion at the white house over the fate of general michael flynn, the national security adviser. here's how it when down yesterday after the story led all the major papers that flynn was on thin ice yesterday morning. by about 4:00 p.m., kellyanne conway had come out on national television said that flynn enjoyed the full confidence of the president of the united states. that was at about 4:00 p.m. after that, i asked her if flynn had apologized to the vice president. she told me she did not know if an apology had been offered. but shortly after that, sean spicer, the white house press secretary came out and said that the president was evaluating the situation, and then news of the resignation did not come until after 11:00 last night. here's the statement that flynn

gave or part of the statement flynn gave. he said unfortunately because of the fast pace of events, i inadvertently briefed the vice president elect and others with incomplete information regarding my phone calls with the russian ambassador. i sincerely apologize to the president and the vice president and they have accepted my apology. the acting national security adviser will be lieutenant joseph kellogg junior. this is a dramatic turmoil for the trump white house here in the early days, just four weeks in losing their national security adviser. one of the many open questions here is where does this investigation into russian influence of the election go from here. the question to michael flynn is what had he said to the u.s. ambassador about u.s. asanction. the white house is hoping this

move will tamp things down. >> can you speak to this blackmail issue? do we have color on that? . we know the department of justice informed the white house at some point last month, january, that there was concern that flynn could be in a position for blackmail because he had apparently misled his superiors at the white house that he had not discussed sanctions with the russian ambassador. in fact, he had. u.s. intelligence and law enforcement knew that from a wiretap of the ambassador's phone. they had a transcript of the conversation. at that point the russians had some information on flynn that could be damaging to flynn if it was revealed to flynn -- >> it sounds like that information was known several weeks ago. what happened between 4:00 p.m. when you spoke to kellyanne conway and what happened -- >> there was no good dirt either. because he didn't say anything. what he said was not in

violation of that obscure law. it was like, yeah, we may talk about it. >> we don't know what he said. >> we got the transcript, that is not nearly as good as saying once i'm re-elected, i'll have more flexible about the wink and the nod -- that would be a clear violation of the law. once again it's the cover-up that president obama said before he was re-elected, the cover-up is the crime. >> the new york times is reporting this morning is it's not clear from the transcript of the call, which we have not seen, what he said. apparently the wording of it left the president a little bit of wiggle room in terms of making a decision whether or not flynn should resign here. the white house was sort of agonizing about this all day yesterday. we had this dramatic news conference with the prime minister of canada, justin

trudeau yesterday, and they were not even asked about it. the reporters leaping out of shares as the president left the room. so real confusion on what to do as far as what to the white hou. >> now we're hearing what do we do with president trump from the russians. >> they're thinking twice about it. >> maybe they don't have it in their pocket. >> it's surprising how far up the chain this goes, in terms of how far this investigation could play out in terms of whether the president could be involved or get involved in this. >> well, there's no indication of that, andrew. >> there is now. >> we'll have to see where the fbi goes. you have to see where the fbi goes with this. clearly there's been an active investigation here. wiretaps are being read and people are being investigated. we'll have to see what happens.

it is a -- it's a dicey time for the trump white house now as they try to figure out who could be implicated in this and where it all goes. >> you could ask whether the russians have seen his tax returns, combine the -- combine the two to get us talking about that he won't release them now. do you know -- do you know at this point, eamon, whether the russians have seen his tax returns? >> the only reason i raise the question -- >> just putting it out there. >> if you remember when vladimir putin did not retaliate for our retaliation, trump put out that statement thanking him saying he was a smart guy for doing that. that -- the question is whether he knew anything then and whether that is connected to this. people will ask these questions. that's all i was suggesting. >> was that before or after this -- this was -- that was before. in other political news that happened overnight, the senate confirms steven mnuchin,

president trump's pick to head the treasury department. when do we see the signature? >> on the first dollar bill? >> you want your name on the money? >> you need to do a bunch of other stuff if you're treasury secretary. you're not allowed to sign it. you can't put your autograph -- if people ask for your autograph out in public, all you have is currency, you can't do that. you knew that. >> i didn't know that. >> people sign dollar bills, but, yes, you can get in trouble for that. >> mostly along party lines, 53-47, at an overoal office ceremony, mike pence swore in mnuchin. and he also spoke about mnuchin's experience. >> our nation's financial system is truly in great hands. with him we'll have no problem, believe me.

once again, with this appointment i'm following through on my promise to appoint only the very best and the very brightest. ste steven is a financial legend with an incredible track record of success. he's been my friend for many, many years. everything he touched has turned to gold. let's get ready to rumble. linda mcmahon expected to be confirmed as head of the small business administration today. the chief executives of some of america's largest retailers including target, gap and best buy are headed to the nation's capital in an attempt to kill a propos proposed proposed u.s. border tax. the meeting is reportedly taking place tomorrow with kevin brady, the chairman of the tax writing house weighs and means committee. the executives will argue the controversial tax on imports would raise consumer prices and hurt their businesses. this is the one thing i'm more interested in. how this plays out.

>> who jockeys ahead. >> because there's big proponents in powerful places. >> on both sides. ge on the side of actually going ahead with the border adjustment tax. you will see big players line up on both sides. >> exciting, andrew. maybe it will work. >> that means winners and losers. >> like paul ryan is on board. >> ryan has been on board the whole time. >> on today's agenda, janet yellen is on capitol hill for day one -- these -- i don't think semiannual is nearly enough it should be semi-weekly. testimony on monetary policy. she will speak to the senate banking committee at 10:00 a.m. eastern. several other fed official also speak today. some day we may not be telling you this. there may come a day where it's not that interesting what these guys are all talking about. richmond fed president, jeffrey lacker, dallas fed president,

rob kaplan, atlanta fed president, dennis lockhart. we will also get the december producer price index data this morning. >> that for me? >> no, i'm got going to say pp. we had a guy yesterday say pp and doo-doo. we did, dom. >> you're talk about what you do do. he was talking about the tpp and what you do do. >> he was a potty mouth guest. >> it wasn't potty mouth. >> it's cable, but there's no place for that. >> you're so mature. no place for that. as for earnings, look for results from dr. pepper, snapple, molson coors and t mobile. after the close we'll hear from aig. if you come on here with some don't chase the rally, knee jerk -- every day there was a don't chase the rally story.

>> you said dooty on air. >> do you have don't chase the rally story? >> no, i'm here to talk about the rally. >> he's here to talk about the rally and what's been happening with it. >> have i been giving good advice to people, don't chase the rally? what if people did not buy into this at 17,500, should we be happy? >> that's why investors and financial advisers all huddle up and say systemically buying over time is the best way to buy. >> if you have been paying attention, the major stock indeeks climbing to record highs again. apple was a big winner yesterday, but not only stock riding the rally. dom is here and has been breaking this down. >> what an exciting day yesterday, the dow, nasdaq, s&p 500 -- here's the interesting part about this.

we talk about mid caps at record highs now. small caps are at record highs. it's been an amazing run. you mentioned apple. that will be the lead for a lot of business stories throughout the course of today. check out these other stocks. 32 other stocks in the s&p 500 also hit record highs. i put up five of them to give you an idea of the spattering of what we're seeing here. costco record high. john deere on the industrial side, record high. not long ago caterpillar was given up for dead. home depot, jpmorgan chase, record high. netflix, record high. i won't pp the record rally or pooh-pooh the record level, i will say there had not been a lot of volume over the past cup

couple of days, but numbers were run on when we hit major milestones. the first time we hit a trillion dollars in market value, 1982. the s&p was 140 points back then. 2 trillion by '87. 10 trillion by '98, during the peaks of the dotcom era. then we cut it down a lot during the financial -- the dotcom crisis. 2009 and then the final crisis, $6 trillion. 20 trillion now. >> 20 trillion. here's my segue, i can't believe you left it out. one stock might be 5% of that 20 trillion. >> yeah. >> that's apple. 699. it's been fascinating to watch apple. it took two years. >> yes. two years ago the most universally loved stock ever. on the planet. every analyst looking for a trillion dollars. it takes two years to ring

the -- to wring the enthusiasm going out of it. there was questions about new products, then it got to the point where nobody likes it again. that finally builds a base again. >> everybody thought it would be blackberry, nokia. >> blackberry. >> now some of them have finally abandoned their $200 price target. just a study in human nature the way that works. >> it does great opportunities. for people who wanted to get into apple, it gave them a chance to buy. >> when the analysts say buy it at 133, it doesn't create -- >> you are now long apple? >> me? >> you. >> you know when i went wrong -- >> when you got apple music. >> i have access to every song -- anything i want to hear. >> welcome to the modern era. >> anything i wanted -- i can be

walking around saying, you know what? i wanted to hear some morrisey. it comes from, i don't know where. >> the cloud. >> into my phone. i've got it. >> amazing. >> have you tried that? >> amazing. amazing. >> best thing. >> ten years ago i tried it. >> show me after the show -- >> do you know how to do this? >> download music and listen to it on my phone? >> she knows. she happens to know. not everybody does. joining us is the head of u.s. equity strategy, head of b of a. it's like that, right? dom, that was a good set up for what we have seen. everything firing on all cylinders. i usually ask people about innings. what inning do you think we're in? >> of this bull market? >> it's a long bull market.

it has renewed -- >> renewed vigor. i think we're closer to the end than the beginning. this could either be a fantastic year for stocks or a volatile ugly year. you mentioned the border adjustment tax. you look at the vix at 10%, 11%, you look at all of these things in the offing. you have the french election, border adjustment tax, potential for messy issues to be resolved. trade risk, i think you should buy volatility in the market. that's the number one trade right now. the vix is way too low given what's going on around us. >> those are good points, but, paul, against that back drop, there's a friendlier -- you look at the nfib, consumers, there's a friendlier stance about businesses. you look at who trump will put in under mnuchin or goldman sachs or morgan stanley. you're putting private sector

people back into positions where they will do things that are friendly for corporations. >> there's a general sentiment. i thought the futures would be down a bit today. the s&p 500 were down a point. fair value is down three. continuing on the bathroom talk, an acronym i have -- we. >> good. >> as in w.e. washington is pro business, the economy doing okay, not showing signs of overheating. momentum has not really been accelerating forward. most of the strength is in soft data. that will leave the fed not too -- not behind the eight ball to become aggressive here. earnings season now has been fantastic. the earnings beat rate has been the highest since 2010. the revenue beat rate has been

the highest since 2014. the best sector this earning season is technology. 90% of the companies in the s&p 500 tech sector have beaten earnings forecasts. overall in the russell 3,000, it's 80%. the back drop is positive. you were saying should you chase the rally? you should never chase the rally, but also don't fight the paint. new highs since the february lows last year, as we take each step higher in the market, the new highs have been expanding. it's -- the become drop is positive for now. you could have a really good year this year or you could have a bad year this year. right now it's a calm back drop. if things -- we don't know how the future will turn out. >> what could be the upside surprise at this point?

is there one? . >> the upside surprise? >> what's not being considered. the market has rallied on the fact of what will trump do. we have seen global economy really show signs of improvement even before the election. part of the rally, i think, off the november election was the fact that a clinton victory was pricing in the fact that we were going to see a continued regulatory environment. a lot to of the talk about we'll see this great, phenomenal tax package, stimulus. i don't think the market has priced all that in. >> so, that's great news. if you don't think the tax policy is priced in, that's fantastic news. i think -- >> i think there's a lot of doubt right now, especially the last several weeks on the part of investors that that will be delayed. >> how much is that worth then if it's not priced in? >> depends on what the final results are and what the plan

is. as we were saying, we don't know what the future will be. the back drop right now remains positive. >> give you the last word. you talk about long volatility. the bond market has been as quiet as a mouse. same with currency. all the flux we expected there, we have not seen it. do you expect that to re-emerge? rn >> you have seen fairly pronounced fx volatility, which leads economic volatility. >> that was a while ago. if you think about it, we're at a masz sieve inflectisive infle rates, currency, going from globalization to protectionism. there's all of these big changes -- >> but nothing happened. it's been quiet. even emerging markets are supposed to be decimated. >> if you look at volume, it's light. there's a wait and see mode. we don't know what will happen with tax policy, foreign policy.

i do think the big upside surprise for the market could be there's a big wall of money sitting in bonds. >> i think there is. >> could move as rates move higher. >> does the market usually move up on valentine's day because love is in the air? >> the color is red. >> the futures are green this morning. >> contrarian. everything can be contrarian. thanks. hickey, i hsay hickey, i feel embarrassed. your whole life you have been paul hickey. >> rough in high school, i bet. >> good for valentine's day. new survey data shows spending for the holiday is expected to drop and fewer people are expected to celebrate. we'll tell you about the new numbers next.

♪ love stinks >> welcome back. love apparently is not in the air. that's according to a new survey from the national retail f

federati federation. valentines spending is expected to drop by 7.6%, and 9% fewer people plan on celebrating the holiday. the average american is expected to spend $136, down 10 bucks from last year's record high. don't think i forgot you on this valentine's day. i brought something for you. >> oh. >> i did. right here for you. >> gross. >> love stinks, love is a gas. this is for you guys. >> thank you. >> they're leftovers from -- kyle was bringing these in for his friends. >> these never get old. >> hard to find -- >> it's hard to surprise someone. >> if someone is not paying attention. >> my kids love these things. thank you. so $136. >> and that's part of the average. >> kind of -- what's the -- >> a dozen roses in new york city. >> 9%. >> it's a big drop.

>> all the anger and -- >> my guess is, look, i think it's probably simply it's a tuesday. who celebrates in the middle of the week. fewer people. >> only two out of seven times is it on a weekend, know. >> it's a leap year, is this -- new york it's not. last year was the leap year, when was it last year? >> okay. >> why would you give andrew this? >> given or maturity here this morning, we have a story, i don't know if you can get through this story in a mature way. >> you can't even say the word nude on tv without blushing. watch me. i'm starting to blush already. >> he will stumble. may bo playboy. >> playboy magazine is bringing nude photographs back to the magazine. cooper hefner saying the way th

nudity was portrayed was dated but moving it entirely was a mistake. the latest issue hitting newsstands february 28th will bring the nudity back. >> the analysis -- >> it's complicated. clearly it wasn't working. >> here's what i would say. i'm not sure -- they're saying that the way they portrayed nudity was dated. initially i thought that meant portraying it in sort of this way that is very elegant. >> right. >> an that they need to get into what is done now, which is just in your face. but i don't think -- i think

objectification is something that they would try to avoid. you can't focus on the objectitification of men and women? >> are you calling playboy mainstream media? >> definitely. not in a pejorative the way i would usually use it. not like "jugs" like al bundy would look at. >> they took nudity out because they thought they would get into -- like google would started picking up their stories. get into the search engines. apple and others. it would become much more out there. but clearly, for whatever reason, it didn't work. >> if you were going to do a column or story, would look at the decimation of any pay site. >> what do they do, just sell advertising? >> i don't know how they do it.

>> a recent article was about porn, the people making content, they're down 80%. >> because it used to be sports, stocks and sex were the only things that sold on the internet. this is going back to 1998, 1999. that's the only thing you could charge money for. that is interesting if those are all falling by the wayside, too. >> yeah. there's no doubt. then to the next level, will it still be one of the main drivers of innovation with ai and virtual reality? >> technology. this analysis of the news of the morning, it's really smart. >> this is what i'm looking for from you. you're so bogged down worried about saying nudity on air, you don't think of the mature way of looking at it. >> i wanted to hear what you had to say. you know a lot about this subject. >> i know a lot about porn. thank you. >> great to hear. >> i was 14 once. playboy wasn't my -- penthouse

was my thing. >> coming up -- >> awkward moment. >> policy priorities from the trump administration and the republican congress. we'll talk taxes, trade and healthcare with laney chen from the hoover institution. >> who? >> lonnie chen. as we head to break, a look at yesterday's s&p 500 winners and losers. ♪

♪ some things are simply impossible to ignore. the strikingly designed lexus nx turbo and hybrid. the suv that dares to go beyond utility. experience amazing.

or keeping a hotel's guests cuttinconnected.i to 35,000 fans... businesses count on communication, and communication counts on centurylink.

welcome back. you're watching "squawk box," live from the nasdaq market site in times square. ♪ >> wow. >> welcome back to "squawk box." >> we should do every lame song ever made about today. >> i love this song. >> we are going to do it. you love this song? this is like the lamest -- >> i requested -- >> this song, i'm getting a cavity, this is horrible. "on the wings of love?" >> it's valentine's day. but do all of the worst songs. >> you will play something from "beaches" later. >> the wind beneath my wings --

>> you are. >> i'm just waiting to see how long they'll play it. president trump pushing ahead with his trade agenda the our next guest says countries like vietnam and india should be on alert. thanks for being here. why do you think india and vietnam need to be on alert? >> it's a natural thing to look at, when you look at what president trump has talked about with respected to his trade agenda you look back at the history of donald trump on trade, he thinks the u.s. is getting ripped off, we need better negotiatiors and we shouldn't be afraid to retaliate. and it's those countries with large trade surpluses with the united states. if you look to southeast asia, count ares like vietnam, india are countries that could be next. i do think this will be an interesting team, a potential

huge change in the way we view the global trade order and international economic policy. >> we spoke yesterday with michael froman, he pointed out when you have these talks that would take the entire region and wrap them up, you can get things out of these countries that have tariffs that are able to bring things into our country. that what they want is a framework and a way of protecting intellect cal properpro intellectual property rights. when you do some of these talks, you lose some of that. is that how you see this? >> when you have a big multi lateral deal, you can trade things off. one country's concerns against another country's concerns. in the case of tpp you get more than a trade deal, you get higher and stronger protect

shups fshup protections. if you go to bilateral arrangements, you can make sure u.s. interests are protected one against one. if you look recently, we have done trade deals that arguably have been good for the united states that have been bilateral in nature. it's not the case that multi lateral is better than bilateral. tpp in and of itself was a real shame that we got rid of it -- or got rid of our participation in it, because there were some potential advantages for the u.s. long run in terms of the protections it set up. >> a lot to of people wonder how do we get to this point where we have countries that with do trade with. they can bring all sorts of items into our country without tariffs, but we get slapped with all kinds of tariffs trying to bring things into their country. >> the u.s. needs to do a better job in engaging in these multi

lateral negotiations to make sure our interests are protected. this is the whole point that president trump made while campaigning that did get leverage on the campaign trail. part of the way he would propose to address it is by looking at bilateral deals, so you ensure that when you're dealing with one country in particular, the u.s. is able to get more out of the deal. that's his argument. >> if we're going up against a country where already we are paying 15% tariffs on stuff we export into their country, they're paying zero on things they export into our country, that's the incentive to get them to come to the table and deal with this. president trump can talk the falk and say we're going to do these things. how do you do that without retaliation from those countries? >> they have to see the market opportunity in the united states. the other thing that you've eluded to already is we have to do something about our tax code in the u.s. we have to make it more attractive here as well. certainly bringing these countries to the table, they see

the market opportunity in the united states. >> but we're never going to have as many people or as big a market -- right now our market is bigger because we have wealthier people who can come to the table and buy things? . the u.s. is still the leading place to be for many of these companies. they want to be here, part of the marketplace and participating in commerce in the united states. there's advantages from being in the position that we are. granted we won't have more people than china. but still we are seen as an attractive place to be. >> maybe then president trump is right, now is the time to renegotiate. >> yeah. i think that would be his philosophy. we'll see if that comes to pass. lahnee, thank you very much for joining us. >> thank you. coming up, the challenges ahead for the new treasury secretary, steven mnuchin. former treasury secretary, robert kimmitt will weigh in at the top of the hour, then joe

sullivan, he's like an attractive looking guy. handsome. has little gray here. like this. >> h we were separated at birth. i'm insulting him. we will talk about market strategy. his firm has $7 billion under management. and janet yellen speaks to the senate this morning. senator bob corker will join us first to tell us what he is planning to ask the fed chair. stay tuned, you're watching "squawk box" on cnbc.

no matter how the markets change... at t. rowe price... our disciplined approach remains. global markets may be uncertain... but you can feel confident in our investment experience around the world. call us or your advisor... t. rowe price. invest with confidence.

♪ and i will always love you >> oh. >> written by dolly parton. elvis wanted to sing it. >> what? this? >> yeah. >> it was that old? >> yeah. >> whitney houston. >> i know -- >> elvis wanted a different song. she wrote this one, whitney picked up on this. >> wasn't this also -- what was

the movie -- was this in "the bodyguard?" >> yes, that's why i'm so pained. ment don't be. >> horrible. kevin costner -- >> great song. >> loving that film. . i love that movie. >> just saying. >> do you like that horrible nicholas sparks thing, too? he's been in some stinkers, kevin costner. i feel bad for him. really bad. "notebo "notebo "notebook," whatever it was. >> did you see "water world?" >> rest my case. >> "dancing with wolves." give him some credit. >> waterworld, they called it kevin's gate. >> small business are hanging on to their sunny outlook post-election. kate rodgers joins us now. you are bringing the executive edge to us. we don't have to do it. >> small business optimism is holding strong post election.

the national federation of independent business is out with its monthly sentiment, it has climbed to another high of 105.9, not seen since december of 2004. it follows january's hike, the largest month over month increase since 1986. the index saw increases in job creation and job opening plants, but 45% of businesses still report finding few or no qualified apply can'ts to fill positions. 15% of owners say finding quail fied workers is their most important problem, only behind taxes, government regulations and red tape. this may have something to do with the actions president trump has taken regarding the affordable care act and repealing that. many are hoping for more business friendly policies under the administration. for this optimism to mean anything, we will need to see it translate into more robust

hiring and spending plans from small businesses, which we haven't really seen just yet. >> you don't think "dancing -- sorry, kate. >> i loved "dancing with wolves." >> how did you feel about yourselves after what the colonials did to the -- >> bad. >> you like that. >> you want to ask me a follow-up or -- >> i was thinking about that during -- what -- what could be a good follow-up question for this story? >> you're the anchor. i done want to put words in your mouth. >> please, help me. please. please. now listen to what we're playing. we just talked to lahnee chen about trade. when we talk about the big trade agreements, it's probably true all the beneficiaries will be d big companies, do independent businesses think about this. some of them do i was looking to

find small companies that may be concerned, but they don't have the capital that it would take to reshore operations here, but a lot of them are in the wait and see mode. they don't understand it. >> seems scary. >> exactly. >> i think wait and see is the approach to take, they're trying to run day-to-day operations. >> did you watch the very first episode of "walking dead?" >> i did not. i'm out of the tv club a bit. >> as we listen to richie lionel. >> lionel richie. oh, yeah. when we come back, apple trading at an all-time high. we'll talk strategy and the company's push into original content next with brian white. as we head into break, we're firing up the "squawk" jukebox for valentine's day. tweet us your favorite love song, we may play it during the 8:00 a.m. hour.

this car is traveling over 200 miles per hour. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t.

welcome back to "squawk box." this morning, apple closed at an all-time high yesterday. now up just over 15%. so far in 2017.

last night, they talked about creating original content and responded to suggestions apple buy a content creator. >> the things we're trying to do aren't being done by anybody else. so that's what we're bringing to the table. that's what we'd like to do. yes, to the extent if we wanted to do what everybody else is doing, then you're right. we might be better off buying somebody or doing that, but that's no the what we're trying to do. >> joining us now on apple strategy is brian white, global head of technology, hardware, and software at drexel hamilton. what are they trying to do, and is it actually different? >> what apple is all about is building out this ecosystem. what you're seeing across the -- whether it's internet or hardware world -- more and more companies are trying to control some content to increase their ecosystem. apple has a billion people nits ecosystem. i believe this is just cable stakes. >> when you talk about where we are in terms of the valuation of this company, how much can

content change the game? how much can it move the needle? >> financially, i don't think it'll have a huge impact. i think it's more of making this an ecosystem that everyone in the world wants to be a part of. the devices are phenomenal. we know that. the hardware/software working together is great. what you're starting to see is other ecosystems bring in content, and apple hasn't done that in a big way. >> who do you think is the biggest competitor for apple? google is the obvious one. when people talk about other platforms, what are we talking about here? >> well, obviously google is the big competitor for sure because of the smartphone market. apple at 18% share, which was the first time since the fourth quarter of 2011 they've been number one in the smartphone market. but there are other ecosystems starting to emerge. amazon is a prime example of that. >> is there another ecosystem we don't know about after that?

google i know. amazon i know. but they have not figured out a way to make it work on a phone. >> i think you have to think about what microsoft does longer term. they have a huge percentage of the desk top pc and mobile pc market. >> apple closed at record highs as investors bet the tenth anniversary iphone. >> it's all about the phone. >> it's already out there. they went with, hey, let's make a gold one. let's make one a little bigger. let's make one a little smaller. those are weird things. that should not be pushing things to new highs. you mentioned other things are more important than that. that's really it. i'm waiting for the 11th anniversary. >> a few things have happened here. we're out of the iphone recession. we grew iphone units in the december quarter. >> people in here say that iphone has seen its largest market penetration, that it doesn't go above this in terms of more people adding that. >> i would disagree.

>> so they still have market share gains to be had? >> 18%, like i just told andrew, this is the first time they've been number one since fourth quarter of 2011. think about all these doubts and they're not innovating and they became number one in this fourth quarter of 2016. but there's other things. it's not just the iphone 10. it's also services. they're going to double in the next four years. you have a valuation that allows for upside. there's a lot exciting to look forward to. >> brian, thank you. see you, sir. when we come back this morning, the senate confirming steve mnuchin as the next treasury secretary. we'll talk to former deputy treasury secretary about the challenges ahead for mnuchin.

bp engineers use robotic ultrasound technology, so they can detect and repair corrosion before it ever becomes a problem. because safety is never being satisfied. and always working to be better. because safety is never being satisfied. may not always be clear. but at t. rowe price, we can help guide your retirement savings. so wherever your retirement journey takes you, we can help you reach your goals. call us or your advisor t. rowe price. invest with confidence.

the trump train. investors loving stocks, sending tingles up the spine of stock prices. we'll find out if this relationship will last, or is a bad breakup on its way? plus, steve mnuchin, he's got a hot date with treasury, oh, yeah. can he bring the love back to the banks? and hooking up with congressman. we'll talk jobs, tax reform, and the trump agenda. snuggle up. it's going to be a hot, wild hour on the sexiest morning show on cable as the second hour of "squawk box" begins right now. oh, yeah.

♪ live from the beating heart of business, new york city, this is "squawk box." love is in the air. good morning. welcome to "squawk box" right here on cnbc. we have a breakup. i don't know if you just saw that. aetna and humana, off the table. we'll talk about it in a second. we are here live at the nasdaq market site in times square. i'm andrew ross sorkin along with becky quick and joe kernen. a lot of hooking up here on valentine's day. right now things are not in the valentine's day red. they're in the green for us. dow looks like it would open higher about 18 points. the s&p 500 up a little over a point. european markets at this hour, we'll tell you what's going on there as we flip that board around, if we could. here it is. green arrows across the board, not matching our valentine's day colors. we're going to talk about the breakup. >> let's do that right now.

aetna and humana mutually ending this merger agreement. a press release out right now. aetna's chairman and ceo says that while we continue to believe that a combined company would create greater value for health care consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction. they say they're disappointed to take the course of action after 19 months of planning. they say both companies need to move forward with their respective strategies in order to continue to meet member expectations. now, aetna is going to be paying humana $1 billion for the termination fee on this. additionally, aetna has terminated its previously announced agreement to sell certain medicare advantage assets to molina health care. it's going to be playing applicable fees associated with that as well. long time coming for this. there started to be a lot of questions raised about just how big these insurance companies could get. hospitals were some of the ones pushing back on this too because hospitals wanted to merge to get

bigger and have been trying to do that to be able to negotiate with bigger and bigger insurance companies. >> so much of this was inspired by the development of obamacare. that's what really pushed all of these companies to try to get bigger, to con ssolidate their costs. it's somewhat surprising in the way that we talk about the trump administration being business friendly and the way the justice department would think about these things might change, maybe hasn't changed, at least in this instance clear l instance clearly hasn't. the fight started in the obama administration. clearly the obama administration was against this. that was 100% clear. >> which makes no sense. >> the question though is whether you would have thought there would have been a shift or a thawing in this administration. >> might have been too late. >> perhaps. as we said, 19 months min the making. >> it's been quite a while. do you have any thoughts on

that? >> i do. i think a lot of the uncertainty in health care is probably playing a part into this breakup this morning. it's one of the reasons why we started the year market weight for health care despite the cheap valuations and the earnings growth. we didn't think you'd get clarity on the affordable care act. i think we've seen so far it doesn't really feel like there's a plan out there. that has to be playing into management psychology. >> the logic of the -- the strategy doesn't even make sense. >> i don't think they know what the shape of the health care industry is going to look like. we don't have a lot of details. so why go forward with something if you dpoeon't know what the future is going to look like. >> it doesn't surprise you to see this? >> it doesn't surprise us. i think we probably see more uncertainty in the space. health care has been trading more or less in line with the market. we just didn't see the catalyst this year in terms of real clarity on the aca or real change to overweight despite cheap valuations. >> okay, great. we'll get back to that in a moment. in the meantime, some of the

morning's other top stories. fed chair janet yellen is set to head for capitol hill this morning. the next meeting of fed policymakers is just one month from today. the senate has confirmed steve mnuchin has treasury secretary. that vote took place in the early evening. he won approval by a 53-47 margin. it was almost straight down party lines with one democrat voting for him. that was just the beginning of an eventful evening for the trump administration. national security adviser mike flynn resigning after conflicting statements about his contacts with russian officials. we'll have more on both those stories in just a few minutes. and retail giant walmart is reportedly taking a major step to improve efficiency. according to reuters, it will combine the operations for products for sale on its website and in stores. the market closing at record highs with the s&p 500 hitting $20 trillion in market capitalization for the first

time ever. guys, let's talk about the market rally in a moment. let's go back to this whole idea of the uncertainty and what that might mean for companies like an aetna and humana thinking about these things. just dig in a little deeper on that. >> there are sector implications in terms of health care and the border adjustment tax out there. i think the market has actually done a really good job separating the policy uncertainty from the true fundamentals that are out there. the reason the market is up this year is that earnings growth has recovered. we've seen the best growth in the fourth quarter than we've seen in the last two years. i think the uncertainty continues. it's important to point out our view is positive and it's based on no policy change. if we get that, there's upside. that's where we're comfortable with where the market has moved thus far. maybe a little bit ahead of

where we thought given that it's only february. we're comfortable given the fundamentals. >> i think client behavior mirrors that exact experience. you've seen people step back and add to their equity positions. last year 75% of investors were putting money into fixed income. this year, quite the opposite. the other thing i think is really interesting is that you're now going to see differentiation in equities based on what the implications of this tax policy will be, which exporters or importers are going to be impacted, how will taxes drive earnings and change the earnings picture. that discernment, i think, is causing people to move into sectors and to take a different look at their portfolios. >> we still don't know the details. a border adjustment tax is a huge issue that would certainly create winners and losers. we have no idea if that's happening. so how do you play that in the markets? >> what everyone is doing now is buying the indices. when you look at the research that's being done, they're looking at what the import -- what the percentage of imports are that are making goods in the united states, which

manufacturers can actually add capacity. so they're being anticipatory. >> as if that border adjustment tax is going to be implemented. >> exactly. i think that's sort of the basic assumption. you're absolutely right. what the actual tax is, we don't know. the idea there will be some type of change in the import/export relationship and for u.s. corporations and foreign importers seems fairly certain. >> the border adjustment tax has some pretty heavy hitters lining up against it. the retail industry, independent businesses. >> they're fighting it because it puts a lot of these retailers from profits to losses essentially overnight. >> and the retail industry is already in quite a bit of trouble. >> the good news for us is we don't think it should keep you out of markets, but it does significantly reduce the upside case we laid out in our outlook in terms of lower corporate taxes and the impact on earnings. it hurts your retailers, your automobiles, all of your importers. we think there's probably still a couple percentage points of upside. >> how does the market take it if there's no border adjustment tax but you hear from the

administration that effectively it's going to use more aggressive numbers in their model in terms of how they dynamically score these things and they'll show say that everything is revenue neutral. if that were to happen, if you wave that wand, how does the market react to that? >> i think that's my opinion, is that there's some form of border adjustment, but it's probably likely watered down from what we've heard and/or implemented over the course of many years. i think that's market positive in the short term because earnings go up. long term, what does that do to inflation, what does it do to the fiscal deficit, interest rates, all of that. i think that's what we're going to be watching very closely. >> you sort of have an initial bullness of economic activity that's positive. you don't have the head winds that the consumers would face in higher prices and things like that. that can be an inflationary situation. in fact, that's the thing about if you eliminate the foreign tax or the border adjustment tax, then you can potentially have a much more inflationary environment in the united states given the labor shortage and

amount of stimulus. >> another 10 trillion during this eight years but got 3% growth. it would at least be better than the 10 trillion and the 1.6% growth we got. >> if you believe it was sustainable growth. then i would agree with you. >> that's what everybody is shooting for. i looked up -- there's no good jefferson starship love song. you know what i'm going to start using? that's old for you. >> no, i like that. >> you know the head dwarf in "the hobbit" was bailon. >> i like "the hobbit." >> do you say dwarf? >> when you're referring to "the hobbit" because it is an actual character. >> i wanted to check. what about "somebody to love."

you've got to find somebody to love. that's not very valentine. >> i think it works. >> that'll work? >> i think it works, yeah. >> okay. everyone's agreed on that then. that an investing, we're happy. >> david, steve, thank you for coming in today. >> we're going to do this valentine's thing. i want to do this almost every day. >> bad love songs? >> yeah, bad love songs. >> jefferson starship won't take you there. >> not really. i looked up "miracle." doesn't really work. coming up when we return, steve mnuchin confirmed as secretary of the treasury last night. he's going to play a key role in the tax code overhaul president trump has been talking about. former deputy treasury secretary is going to join us after the break to discuss. later, are investors looking for love in all the wrong places? dom chu has a list of stocks that may be ready to go on a date with your portfolio. stay tuned. you're watching "squawk box" right here on cnbc.

welcome back, everyone. our top story this morning, national security adviser michael flynn resigning late last night. that news came just hours after it was learned that the justice department had informed the white house it believed flynn

could be subject to blackmail. eamon javers joins us with more. good morning again. >> good morning, becky. here's the development as of yesterday afternoon. there was confusion in the white house whether general flynn would retain his job as national security adviser. kellyanne conway, presidential advisers, came out on national television and said that the president had full confidence in general flynn, but then later, sean spicer, the press secretary, put out a statement saying the president was evaluating all options as far as michael flynn's career at the white house was concerned. it wasn't until about after 11:00 that we got the news that flynn had, in fact, resigned. here's a key sentence from his resignation statement. he says, unfortunately, because of the fast pace of events, i inadvertently briefed the vice president-elect and others with incomplete information regarding my phone calls with the russian ambassador. i have sincerely apologized to the president and vice president, and they have

accepted my apology. we know the acting national security adviser is keith kellogg, a u.s. army veteran, a decorated veteran. he's been active in the national security council already. a relatively seamless temporary transition there. one of the questions going forward will be who will serve in this role. then of course so many questions now swirling around the administration in terms of who knew about flynn's conversations with the russian ambassador and the fact that he discussed sanctions inside the white house and why did flynn apparently lie to the vice president of the united states and allow him to appear on television, denying that those sanctions had come up in that conversation. so a lot of questions here still unanswered. one that we know the answer to is that mike flynn will not be the national security adviser anymore. guys, back over to you. >> balancing between, yeah, it was a good decision in the first place to pick him, i'm going to stick with him, and just, you know, you got an arm that's got gang green and you might live if you rip the band-aid off.

i'm mixing a lot of metaphors. >> that's the question. is it worse for you if you fire the person and push them out, does that create the impression of chaos and scandal. or is it better to limit the damage and say, okay, we messed up here, this has got to stop, then you can kind of create a clean slate for yourself and move on. >> the way this white house does stuff, i was just thinking, will we be talking about this in a week? this could be like the sixth thing. there could be six other huge things we talk about by next tuesday. then we may not be talking about flynn. >> there could be six things today. the pace of this white house, the news that's coming out of it is astonishing. >> exactly. >> the pace of this resignation is also astonishing. i can't think of a case where such a high-profile figure in an administration has resigned in the fourth week of the administration. that in itself is a surprising fact. >> he was a -- people had strong opinions about this guy.

some positive, some negative. >> the president liked his loyalty, but he was one of the figures out there chanting "lock her up." >> other generals thought he was kind of a loose cannon. >> he lost another position earlier. the last position he'd been in, somebody who didn't really want to work with bureaucracy, which was part of the reason donald trump liked him. he ruffled some feathers and stepped down from that position. >> so flynn has now been fired by president barack obama and resigned to president donald trump. >> i'm just trying to figure out, are we going to be talking about this months from now? >> i think a week, we're done. >> the questions about the russian connection to the trump campaign don't stop here necessarily. you're clearly going to hear democrats throughout the day today asking for further investigation of who knew what. then there's the question now of the acting attorney general sally yates, who was an obama appointee, last month we were told informed the white house

council that there was concern that flynn could be blackmailed by the russians here because of this situation. was that information passed to the president, donald trump himself, last month? what did the president do about that? and if the president knew that at the time, then why was the vice president out on television saying that this conversation had never happened? >> yeah, i don't see you in the 8:00. i want to wish you a happy v-day. >> thank you, joe. i'm wearing my pink tie just for you. >> me too. >> i wanted to match. >> it's beautiful. thank you. switching gears, a newly confirmed treasury secretary steve mnuchin is bound to face the most fast-paced agenda of all treasury secretaries with big strategic issues looming at home and abroad. joining us from washington, former deputy secretary of the u.s. treasury under president george w. bush. what do we call you now? mr. secretary?

>> you can call me bob, on valentine's day especially. >> okay, that's nice, bob. i'm going to do that. i'm thinking about the environment and how -- what i would imagine just a handicap the treasury secretary, this unbelievably divisive environment we find ourselves in politically. then again, both houses of congress, you know, on the side of the president. are you optimistic things get done and move quickly, or is it going to get bogged down? >> i think it's going to be tough sledding politically going forward, but the way that you address that issue is by having a clear agenda, consulting closely with the congress, and by the way our allies around the world and starting to move that agenda forward. as you said, i think treasury has the most active, most consequential agenda of all the

departments. it's great to see the new secretary sitting in his office this morning. >> he's got to get -- obviously bone up his staff. you've got to prioritize obviously. that's something with all these issues on the plate. what should the priority be? how should they do this right out of the gate? >> on the domestic side, it would be bank, regulatory efforts. the executive order has been put out, but the deregulation plan needs to be put into place. secondly, we need to start moving forward quickly on tax reform. if they hope to have tax reform done this year. i might note we're almost halfway through the tax filing season, so tax administration in the near term is something the secretary needs to pay attention to. on the international side, we are just two months away from the imf world bank meetings. soon thereafter, the g7 summit many italy. soon thereafter, the g20 summit

in germany. a lot of those communiques were already in preparation. we want to see the stamp of the new administration on those communiques. treasury needs to engage quickly. then lastly, treasury plays an extraordinarily important role on terrorists and other finance efforts, and therefore the sanctions efforts, particularly against north korea, iran, and russia, will be right at the top of the secretary's agenda. >> sounds too hard to me. the inbox, the outbox. i'd sign a couple of dollars and i'd be out of there. i just want to go one more place. i don't know where you're going, andrew. so the tax reform. how do you do it? do you thinks that can be 52 votes, 51 votes, or do you assume that those ten red state democrats are going to work with the trump administration? because i don't assume that. if they do, they're going to hear from -- there may be riots

in their city if they even show up for a meeting. can you get anyone fro the democratic side on this to get 60 votes? >> your goal is certainly to get as many legislators of both parties, both houses as possible. when we did tax reform in the second term of the reagan administration and put our proposal out in 1986, it was roundly criticized by everybody, and we knew, therefore, it was going to pass. because tax reform is tough. you're going to find things you like, you're going to find things you don't like. the goal, of course, is to try to put together a package that gets as much support as possible but has to get through, it has to get passed. there are a lot of details to work out. in '85, '86 when we did tax reform, we did that largely behind the scenes and put it out. they're doing it in a more open fashion. in this political environment, that will be tougher. but the engagement is what is really important. i think you mentioned, too,

getting those subcabinet officials into treasury and elsewhere as quickly as possible is going to be very, very key to the success on tax reform and indeed the entire agenda. >> bob, there's been lots of questions about the relationshipings relationships in the dynamic inside the white house, namely the super structure that's been set up. a lot of attention has been put on gary cohn's role. how do you see that playing out in terms of steve mnuchin, gary cohn, and the rest of them? >> we've had the national economic council, andrew, for 24 years now. it was a creation of the clinton administration, and frankly, i think it was a very good creation. it plays the same role on economic policy that the national security council does on security policy. it will be, i think, a central, coordinating body for the work not just of treasury but commerce, u.s. trade rep, and many others.

what you want is a nice competitive balance between the white house and the departments. when i say competitive, competition of ideas that produce creative opportunities, good implementation. we don't want it to become personalized or nonproductive. i don't see signs of that right now. these are people who know each other, have worked together well. the white house, of course, was out front because they didn't have to go through the confirmation process, but now that steve mnuchin is in place, wilbur ross shortly, i think you'll start to see them work together as a team because there's no issue that is simply in the province of one department anymore. you have to look out on an interagency basis. >> bob, ronald reagan had tip o'neal. they had a couple drinks and told some jokes.

there was some collegiality back then. who's going to be tip o'neal to donald trump? chuck schumer or nancy pelosi? i mean, give me one. give me one. >> he's got paul ryan. >> the reason you mention tip o'neal is he was speaker of the house. >> but on the democratic side, who's going to be the one that is willing to compromise here? there's nobody. >> well, i hope that we would see actual proposals put forward, engagement first at the committee level. those two committees, house ways and means and senate finance, are going to be extraordinarily important both on tax and on trade. that's where your engagement begins, but of course ultimately it will be the leaders, and we're very fortunate, particularly in paul ryan, to have someone who headed the ways and means committee. he knows tax. he knows it cold. i think he will play that substantive role. politically, i hope we see

people from both sides of the aisle. >> i didn't mean leadership. i meant on the other side. there isn't anybody. anyway, thank you, bob. coming up when we return, a $4 billion hedge fund was operating at the top of its game until an fbi raid brought it crashes down. now level global founder is fighting back against the government in what he's calling a reckless raid based on fabricated evidence. he's going to join us with his story in just a bit. stick around. "squawk box" returns. this is the food system.

but what if it didn't have to be? at blue apron, we're building a better food system. where we value quality and flavor over quantity and shelf-life. where chefs and farmers work together to make farms healthier, grow higher quality ingredients, and deliver them in-season, ripe and ready to cook. because food is better when you start from scratch. blue apron.

good morning. welcome back to "squawk box" here on cnbc live from the nasdaq market site in times squa square. among the stories front and center, the big one, aetna and humana officially ending their merger. the decision comes after a court sided with the justice department, which had objected to the combination. humana will get a breakup fee of $630 million after taxes. also, fed chair janet yellen heading to capitol hill this morning to testify on the u.s. economy before the senate banking committee. she's going to do the same again tomorrow for the house financial services committee. then one economic report due today in just about an hour.

we're going to get the government's release of the january producer price index. economists there looking for it to rise 0.3% and 0.2% if food and energy are factored out both of those numbers would be identical to the december numbers. right now it's time to find out which stocks get the most love following valentine's day. dom chu using a little tlc to put together this list. he joins us right now from cnbc headquarters. dom? >> becky, stocks are probably a good gift for valentine's day. forget the chocolates and flowers. if you look at the numbers, we went back to 1980, asked our data partners at kensho to crunch the numbers and see which stocks perform well seasonally around this time of year given the valentine's day holiday. we took the s&p 500's current members, looked at which ones had 37 years worth of history, filtered out all those ones. had 20 trading days after valentine's day worth of performance. they had to be positive trades at least 70% of the time.

so predominantly positive themes during the season. these are some of the stocks. only about 11 passed the screen. among the big ones, check out these names here. you take a look at the regional banking side of things, branch banking and trust bb&t up about 3.5% over the course of that 20-day trading period. historically on average up 70% of the time. also, hershey, no surprise there. up about 3.5%. tjx companies up 5.5%, also 73% positive. and for some reason, guys, seasonally speaking during valentine's day since 1980, the stock that's had the highest winning percentage of trades is chevron, believe it or not. up 2.5%. still, better than three-quarters of the time a positive trade. so hershey not the only stock that gets some love. if you want the full list, i'll be tweeting it out later on so you can see which of the 11 doesn't match up to some of these guys here.

>> teasing us, making us sign up to make sure we're on your twitter feed. i already am. for anybody who isn't, it's @domchu, isn't it? >> @thedomino. coming up, david ganek will join us to talk about his battle. tough to fight the government. here's how you do it. also, more on the trump agenda. david schweikert will join us to talk about tax reform. before we head to break, take a look at valentine's day facts. by the way, thank you for song recommendations. keep them coming.

welcome back to "squawk box." level global was a $4 billion hedge fund until an fbi raid led it to close its doors. the ceo filed a lawsuit against the government for what he calls a reckless raid based on fabricated evidence. he joins us now in his first tv interview about the case. we've been trying to get you to come on tv for a long time.

a number of things have changed over the last six months that have gone in your favor. i wanted to understand -- thank you for coming on, but why now? >> thank you for having me. i appreciate being here. a lot of things have happened. the case has ripened in a way that arguably was unexpected. two years ago when we filed the lawsuit against the government, most people would have said we had very little chance of surviving what was ultimately their filing of a motion to dismiss it. we filed the suit against 15 people. fi i think if we had won against one person and the case moved on to a trial, we would have been happy. instead, we won against all 15 people. the judge at the time in his ruling said this case is either about a simple misunderstanding or something very troubling is afoot. typically that would lead to a trial. but in the case of the government, they have special privileges. they're able to appeal the decision to dismiss the case to the second circuit. the second circuit's hearing is

actually next month. again, an effort, in my opinion, by the government to suppress the facts. >> the two things i think are most interesting since i last saw you are an fbi settlement over eavesdropping where a person who was involved in your suit -- >> not my suit, but in one of the suits. >> in one of the suits. it was apparently eavesdropping improperly. >> yes. >> and that's an example, you would say, of how this whole investigation was improper. >> yeah, i think it's an example arguably of a pattern and of the culture of the enforcement agencies. my case is about a fabrication of evidence and a search warrant. it's about two things, that and tipping off the press ahead of the raids on that day. the government raided three businesses. in aggregate, $10 billion of institutional assets. all three businesses were

shuttered and there are zero convictions. >> why do you think the government is appealing this case when it lost so badly on the original? >> that's a great question. i'm an advocate for the truth coming out. i think that's just the reason. i don't think they want the truth to come out. they're taking the legal limits to suppress the truth, which from my perspective and anybody's perspective, to sue the government, it makes it a long road. >> it's a crazy test. you can't fight the government is the conventional wisdom. that's what people say. they have endless resources. they can do this. how do you keep up with the resources game? >> well, i think you need three things, from my perspective, in order to fight the government. you need resources, you need fact, and you need will. if you don't have any of those three, i think it's a long haul. in my case, having the resources has led me to have two terrific

partners, who are my attorneys. both really huge advocates for prosecutorial abuse and very prominent in that battle. you need the will. you need to be able to sacrifice your life in many respects. you can't go start a business suing the government. and most importantly, you need facts. >> what do you get if the appeals court decides in your favor as well? >> well, that leads to what my goals are. the two things as this started were accountability and deterrence. accountability, in my mind, will equal deterrence, in much the same way it does for the government when they're bringing cases. in this instance, it involves the southern district of new york, which is arguably at the top of the food chain for the department of justice. if that office can be exposed for what i believe are serious problems and ethical issues, i think that actually has an

ultimately powerful effect on the whole system. >> tell me about this other issue, which is that there's an fbi agent related to your case but in another case has been accused of leaking information to "the wall street journal" and dare i say "the new york times." i know nothing about any of this, except to say that he has asserted his fifth amendment privilege when asked about it. >> well, you referenced the person before listening to wiretaps in t wiretaps. in the last two or three months, there have been many different things that have happened that connect dots about the cultural of the behave of the offense. the fbi recently settled a case where agents who had wiretaps on were listening to personal phone calls between the wife and the defendant, things that are not pertinent to the case and evidently very personal things. they listened to like 180 hours of these conversations. that was number one. probably the more serious of the

two, and that person is a defendant in my case. probably the more serious of the two are these leaks that you were referring to. in the william walters, phil mickelson, carl icahn case, which got a lot of attention -- that case happened two years ago. the investigation was two years ago. before the trial, which was this year, the attorney for william walters filed, making an allegation that there were leaks. same allegation i made. in fact, the government responded to those allegations just as they responded to mine, basically by saying, are you crazy, we don't do things like that, this is speculation, it's unfounded, you can't prove it. when this judge actually agreed to allow a hearing about these leaks, literally a month later they threw an fbi agent under the bus and said, what do you know, there actually have been leaks. they've been leaking grand jury

information, which is a -- >> now, you say you want the truth to be out there, you're bothered by the leaks because you think it prejudices the case against you without proving anything. >> it's hard enough to, as you mentioned before, sue the government and fight back. but when you combine the government and the press, you know, it takes what's already an unbalanced battlefield and makes it even more so. the manipulation of the press -- in our case, the raids, when they raided our firm, it's important to understand there's zero convictions from what was ultimately a huge resource allocation by the government. the raid was a huge and demonstrable show of force. >> and by having the media there covering it, it presumes guilt before innocence. >> exactly, particularly commercially. that's not a federal thing, but commercially -- >> it's going to shut down your business. >> absolutely. >> that a vlalentine's tie? >> how did you guess snrvelg?

>> thought it might be a trump tie. >> david, we have to run, but when you think about it in the end, i know you think there was misconduct in this instance, but how do you look at prosecutions generally? meaning, do you think they're trying to do good? >> i mean, this is an awkward position. like everybody else, i do appreciate the work that prosecutors and fbi agents do. >> is this a billions question? >> thanks for the plug. we'll take the plug. >> about to open again. >> i didn't mention it the whole time. >> what about prosecutors in general. >> i didn't mention it the whole time. >> by the way, everybody, "billions" season premiere is coming up. >> if you're on showtime, you can watch it.

this is where i trade andrs. manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities-

trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you. dearthere's no other way to say this. it's over. i've found a permanent escape from monotony. together, we are perfectly balanced, our senses awake,

our hearts racing as one. i know this is sudden, but they say: if you love something... set it free. see you around, giulia ♪ 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 in real estate, infrastructure and emerging markets. partner with pgim the global investment management businesses of prudential. 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. so i talked to my doctor. she said... symbicort could help you breathe better, starting within 5 minutes. symbicort doesn't replace a rescue inhaler for sudden symptoms. symbicort helps provide significant improvement of your lung function. symbicort is for copd, including chronic bronchitis and emphysema. it should not be taken more than twice a day. symbicort contains formoterol. medicines like formoterol increase the risk of death from asthma problems. symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. you should tell your doctor if you have a heart condition or high blood pressure before taking it. symbicort could mean a day with better breathing.

watch out, piggies! (child giggles) symbicort. breathe better starting within 5 minutes. get symbicort free for up to one year. visit saveonsymbicort.com today to learn more.

the powerful house ways and means committee has promised a major overhaul of the nation's tax code this year. we're now almost a month into president trump's first 100 days in office. waiting to see how the tax agenda is going to play out. joining us now with more, congressman david schweikert. he is on the house ways and means committee. congressman, happy valentine's day. good to see you this morning. >> something is horribly wrong when i'm spending valentine's day with you instead of the family in scottsdale. >> congressman, earlier they said we were going to hook up. in the teleprompter it said that. it was even worse than what i

just said. >> thank you for adjusting that. >> yeah, okay. not that there's anything wrong with that. so retailers. there's no love. no happy valentine's day for retailers in the border adjustment tax. there are people that say they're going to go from a profit to a loss. there's a lot of people that think the whole notion is undoable and actually crazy. i think speaker ryan wants to actually do it, right? >> oh, yeah. and look, at some point, we have to have that sort of moment of truth. the fact of the matter is our trading partners functionally have created a tax arbitrage on u.s. exports and their exports. if some of these folks have a better solution on how to deal with the v.a.t.s being refounded, we'd love to hear it. until there's a better solution, right now that adjustability

seems to be, you know, the most robust path to fixing the arbitrage. >> so you're walking around there in the halls of congress right now. could the senate ever get 60 votes on any part of this provision, or is it all going to have to be done some other way? >> look, as a member of the house, we live under the motto the senate is where all good ideas go to die. but the reality, we're on such a tight time frame. remember, house ways and means, we intend to have a product at least moving by very early summer. so we're moving fast. will the senate also feel that same time pressure that we're working under. >> yeah, congressman, you know the democrats as the party of fiscal responsibility and not running big deficits. you know you're not going to get anything through dynamic scoring

because they've always been so, you know, watchful in terms of not overspending and overtaxing. suddenly they've all found religion, and if you don't have this thing be exactly revenue neutral, i mean, there's just no way it's going to go. >> yeah, sarcasm on valentine's day, it works actually. it actually works. >> thanks. >> look, if you actually have that, what we call the elevator conversation. the door closes, there's no press, no fellow democrats around, a number of them really like the things we're doing to focus on job creation, economic expansion because there's a math reality that we don't talk enough about. that is the social entitlements, the medicare, social security, the disability. those trust funds are functionally collapsing. if we do not start to have sustainable economic growth, particularly in payroll taxes, we have another wave of real hurt coming in the near future. so there's more going on here.

this is as much about economic growth as it is also payroll and growth there. >> i wonder if that's what president trump -- if that's his eventual plan. he's sort of been m.i.a. in terms of any entitlement reform or facing the reality of the situation. growth goes a long way. maybe do that first and then tackle it later. is that what you think? >> look, you have the formula. we will have to at some point step up and deal with the reality of math. but economic growth, particularly if it's economic expansion in payroll taxes, let's be brutally honest about it, that solves part of the problem. it covers up a lot of sins. so if we could actually get that moving, then we can actually sit down and start to understand what's the rest of our exposure. >> so where is it now in terms of -- i mean, where's the corporate tax rate going to be? what's being written? do we have to do the obamacare?

that's a daunting issue itself, obamacare repeal. i wouldn't like to be in your shoes right now. too much to do. >> i'm living on a lot of caffeine right now because this is intense. the reality of it is ways and means, the house ways and means right now is full speed, almost seven days a week right now because there's constantly information flowing back and forth. so my understanding is this week we'll have a lot of tax directors, corporate ceos on campus, some want to come talk about border adjustability. some are just giddy about expensing. others model the difference in tax rates. but you have to picture, tax reform is a lot of levers. if you raise or lower this lever, everything else also moves. you have a lot of folks running around here who just want the sugar rush and don't want to deal with the reality of

calories. if you choose one, you got to understand it affects everything else. >> when we celebrate a year from now our second valentine's day together, congressman, will there be a tax deal done, or will we be talking about, yeah, it's here, it's there, it's going to be voted on? what do you think? >> fair question. every fiber of my being says we will have tax reform. the ultimate question is how big and how bold can we make it. ib i believe what will come out of the house will be big and bold. and it's necessary. >> out of the house. >> out of the house. >> where can we land on corporate taxes? 15 is too high. can we go five? >> once again, let's picture the levers. that actually one day might be a great show, put up on the screen saying if you want to be able to deduct this, your rate changes over here, to understand how everything is interlinked. >> you could produce our show for us.

we have a big future here. thank you. god speed. good luck. keep the caffeine going. we'll see you. thank you. oak. when we come back, like -- jesse jackson will join us. we have the details straight ahead. fees. fees? what did you have in mind? i don't know. $6.95 per trade? uhhh- and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $6.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.

riding the trump rally. markets at an all-time high as fed chair janet yellen heads to capitol hill. washington watch. president trump's national security adviser michael flynn resigns. reaction from senator bob corker straight ahead. plus, it's valentine's day, and netflix cheating is on the rise. we'll tell you just how many people are binge watching without their partners. it's the final hour of "squawk box" right now. live from the most powerful city in the world, new york, this is "squawk box." markets hitting highs. we're hitting new lows.

is that really captain and teneille? >> i don't know. i'm guessing. is it? >> how's your cavity? >> and i'm getting cavities this morning. good morning and welcome back to squawk walk here on cnbc, live from the nasdaq market site in times square. i've requested something, like the beatles. fran sinatra's favorite song, the greatest love song ever written. we're not allowed to play the beatles. >> no, we're not. >> is that michael jackson? do i have him to blame for this? >> yes, michael. >> no, he learned it from paul. >> we haven't had any of those sort of -- like an alan alanis morissette song. new stuff but they're sad and low. >> her most famous song is so anti-love. is that what you want to do? you're sick. anyway, i'm here, andrew, becky are both here. we're celebrating valentine's

day with your favorite love songs. i'm not copping to this thing. twitter user sean requested "love will keep us together." it's his fault. the futures right now somehow have stayed positive through all this, up 17 points, as you can see. so we've got -- you know what we got? we got green for the implied open, but some nice valentine's day red for the fair value and for the futures change. so we've got the best of both. >> looks like christmas. >> and treasury yields, been a while since there's been anything to really write home about. ten year is 2.44. that inexorable rise is not coming. in other headlines this morning, aetna and humana are calling off their $34 billion merger. a judge had blocked the deal on anti-trust grounds. humana will get a breakup fee of a billion dollars, about $630 million after taxes. fed chair janet yellen heads

to capitol hill this morning. she'll be testifying on the u.s. economy before the senate banking committee. and senator bob corker will be there, but first he's going to be joining us. that's coming at 8:40 eastern time this morning. in other washington news, the senate has confirmed steve mnuchin has treasury secretary. he won approval by a 53-47 margin in the senate. some stocks to watch this morning. general motors shares are jumping. whoppers and donuts may soon come with a side of fried chicken, if you can believe that. shares of popeye's louisiana chicken jumping yesterday on reports that it has been approached about a possible takeover by restaurant brands international. that company is, of course, the parent company of burger king and tim horton gains. i do love popeye's. are you more of a kentucky fried chicken? >> i'm all those. i immediately thought of the

great tri upper have rant of taco bell, pizza hut and kfc. >> i'm all about the biscuits. >> so carby though. >> so buttery. gilead reported strong results in a clinical trial involving an experimental hiv treatment. you're looking at that stock right now. i just found out that our radio listeners can't hear the music we use because of different music rights issues. all of our radio listeners think we're crazy today. they don't know. >> what do they listen to? >> tii think it gets blocked ou. we're going to have to start singing all the songs for them now. >> we can't play beatles. i'm going to start singing.

our guest host for the next hour runs one of the world's largest asset firms with over $700 billion in asset manage management. joining us now is joe sullivama. >> i think for a guest host, you ought to let us pick the music. i would have had a good pick. al giroux. he's got a number of ballads. >> joe, we like your taste in music. next time we will oblige and let you do that. we're watching the markets hit new highs every day it seems like now. what's the sense you get, what's the feeling you get from your investors and what they want? >> so look, i do think that people see valuations and multiples increasing to levels that maybe make them a little

uncomfortable. we get that. but there are opportunities in the equity markets for sure. i would say that -- you know, and this is a little bit of my shameless plug for active management, but this is when it makes a difference. you said this morning you were talking in another segment about the fact that there will be winners and losers as it related to the border tax. you talked about that. that's clearly the case. that's something that in the passive space is hard to delineate. for active managers, kind of seeing around the corner, which is what we're today to do, can help to delineate who are the winners, who are the losers. >> but that requires that those seeing around the corners have 20/20 vision and see things clearly. there's so much confusion when it comes to this border tax, will it actually be something that's passed. what do you think? >> i agree with that. it's unclear. there's a lot of murkiness or cloudiness to what's going to happen. that's all the more reason that i think you need to be guided by something other than just the market. in other words, no investor claims to have perfect 20/20

vision on this stuff. but they can make informed investments based on what they know through research about companies. >> just on the border tax issue itself, this is something that the republican party can't even agree on. do you think a border tax -- forget about tax reform. do you think a border tax is part of that, something that comes to fruition? >> i don't know. honestly, i don't mean to dodge the issue. i don't know. i think there's a lot of pieces to the negotiation. i think what we've learned so far from the administration is that they can put something out there, but then they can kind of negotiate around it and potentially get what they want in a different fashion. i think the president has acknowledged that, whether it be on the wall. he said there are different ways. at one point in time, he talked about the mexican government is going to pay for the wall. now he's talking about different ways they may pay for the wall. >> but if an active manager helps me by trying to figure out what's happening with this, would you tell people to buy

retailers right now? >> you know what, i don't know if i would go there. i think to me, there are better values in the market. i think, for example, financials. i think you can move into areas that are kind of safer bets without having to handicap that. i think, look, there are so many uncertainties around what's going to happen, what's actually proposed, but then what actually gets passed. there are so many uncertainties around it. trying to throw a dart at a handicap is dangerous. >> that sounds like a no-brainer. the wind is blowing one way with retailers, blowing the other way with financials. >> the question is what's already in stock and what's the catalyst to make it go even higher. what do you need to see? >> i think that there's -- i do believe that there's a lot of optimism built into prices in here a little bit. i think you do have to be pretty careful. actually, if you don't mind, i'm going to pivot. joe kind of made a comment earlier, which suggested that

there's not a lot of excitement in the fixed income space. i actually think we disagree with that. >> you guys have twice as much in fixed income as you do in equities, which i didn't even realize until i was looking through some of these notes. >> i don't know about excitement, but we've been stuck. it's like watching paint dry. >> totally. and it seems to be a bit of a disconnect between the credit markets or the fixed income markets and the equity markets. the equity markets continue to grow and rise every single day. the fixed markets have been more sanguine. >> it's nice they've gotten out of the way. if we were 3.5% right now, maybe you have some problems with the equity markets, but they've been very well behaved. >> yes, bing there are opportunities, particularly in spread product. so for example, we think that, again, in financials and particularly in banks across the capital structure, there's going to be opportunities there because it's pretty clear to us, and i think to everybody, that there's going to be some sort of reform. what it is, we don't know. but some sort of reform that benefits the financials and

banks in particular. contractors, metals and mining, emerging markets. we think there's opportunity. we think there's improved sentiment. actually, the emerging markets a have priced in more negativity. >> and your name is joe. >> it is. >> people believe you don't dye it? or do they accuse you? or is it just people on tv they accuse that of? >> i get it from others. >> oh, look. they're playing the song. >> we're going to have to sing this for our radio viewers. >> so this is going to be a regular feature? >> do you like it or don't like it? >> if you say you don't like it, he's going to make it a regular thing. it's up to you. >> totally up to you. >> i'll go with it. coming up, the reverend jesse jackson. >> the revered reverend jesse jackson. >> very close to revered. jesse jackson on the fight for

economic equality. he'll join us here on set. then later, we'll talk market strategy with blackrock's rick rieder. then janet yellen is heading to the hill. bob corker will tell us what he wants to hear from the fed chair. stay tuned. you're watching "squawk box" on cnbc. ♪ why do so many businesses rely on the u.s. postal service? because when they ship with us, their business becomes our business. ♪ that's why we make more e-commerce deliveries to homes than anyone else in the country. ♪ here, there, everywhere. united states postal service priority : you

i can't wait for her to have that college experience that i had. the classes, the friends, the independence. and since we planned for it, that student debt is the one experience, i'm glad she'll miss when you have the right financial advisor, life can be brilliant. ameriprise

♪ sometimes when we touch the honesty's too much ♪ welcome back to "squawk box." donald trump ran for president on a pro business campaign pledge. our next guest wants to ensure pro business also means pro diversity. joining us right now is reverend jesse jackson. his rainbow push coalition is hosting its 20th annual wall street economic summit. it starts tomorrow in new york city. the summit is seeking opportunity for culturally diverse employees, entrepreneurs, and consumers. we're thrilled to have you here in person. we've had you, i think, over the years in the box from d.c. and other places, but it's nice to see you in person. >> nervous. >> oh, yeah, we can see that. >> tell us about this summit and what it's all about, particularly this year. >> well, in this stage of our development, access to capital, industry technology is the real

deal. many areas did not recovery in the -- recover in the recovery. we bail out the banks. in chicago, for example, 80,000 homes. if that were a commitment, a, to remove lead paint and lead out of the water, labor intensive jobs. to cut down the grass and the weeds, you could have jobs in reconstruction. if you went a step further and began to demolish that, rebuild that which can be restructured. >> how much does that have to come from the private sector, how much from the public sector? >> a combination. if, in fact, the president speaks of infrastructure -- infrastructure in some sense means not just roads and bridges but also pipes for flint,

michigan. the mayor from detroit will be here. the mayor from baltimore will be here. pipes, construction workers. if you're talking about removing the lead paint jobs, it's a combination. when you're putting in infrastructure, people are attracted to invest. >> reverend, we've spoken with some of the people are going to be involved. it's not just bridges and roads you're talking about. you can even look to things like trying to bring internet into schools and making sure there's access for everybody to some of these areas. have you spoken with either steven ross or richard? do you think that's the type of idea that you could get on board with? >> you have to. we're trying to get a thousand churches to put laptops in the

churches. teach children how to engage in stock market games just to learn the science of capital development, the science of the marketplace. so if you don't have internet today, you're completely out of it. that's a piece of it. if you would begin to demolish that which cannot stand any longer -- like gentrification. infrastructure has to come from the government. >> you recently said that donald trump's appointees are hostile to your interests. what does that mean? >> it means that the crown jewel about struggle for access was the right to vote. to put mr. sessions over justice, a man who thinks that the supreme court decision, in fact, was an act of court, code word, the right to vote is intrusion on the right to vote. that's hostile.

there's no experience there. there's no commitment. dr. price over medicine, who's hostile to medicaid. these are persons who seem to be their background is against the mission of their departments. >> you're not anti-school choice though, are you? do you see a place for that? >> all children should be chosen. >> when we haven't seen the progress that we've needed over the past eight years, for example, and where there are certain areas where you really feel like maybe the kids are trapped and the only way out is maybe to be able to go somewhere else. because nobody else sends -- no one deliberately sends their kids from a different neighborhood into where the schools aren't as good. >> i was in bowling brook, illinois, this past saturday. a public school, a school with an olympic swimming pool. it's a public school, teaches

five languages. all children, to compete, must be exposed to equal, high-quality -- they take the same exam at the end of 12 years. in education, you invest in schools on the front side, social behavior on the backside. >> is there a way of addressing whatever it is, whether it's teachers unions, whether it's entrenched tenure, whatever it is, is there a way of shaking it up, of disrupting it so that our kids end up benefitting from it? >> well, children benefit when their parents have jobs. they benefit when they have a home to stay in and safe neighborhoods. so in chicago, for example, it's drugs in from across the border, guns in. 4,000 shot last year, 800 killed. guns in from kentucky, jobs out. we lost 50,000 manufacturing jobs within ten years. there must be some plan, some comprehensive plan for reconstruction. i would like to think a plan --

we lost 6,000 soldiers in iraq in ten years. 30,000 americans are killed a year, whether it's homicide or suicide. we've become much too violent as a country. gender and racial disparity, that's a big piece of it. >> reverend, i'm getting some people asking me to ask this, and i wanted to ask you. is the answer for the next four years resistance or is there a way to try to work with the current administration to get some of these goals that you want? what would you -- >> well, the president, if he sees chicago, for example, and detroit as -- if he sees it as a model for reconstruction, there's a way to work it out. if there's a commitment to invest -- there's more lead in the water in chicago than in flint, michigan. >> so infrastructure and jobs are the two most important. >> and access to transportation.

there are nine communities with unemployment 22% or higher. on the other side, unemployment less than 2%. >> so i think you just said work with the administration, not resist the administration. >> it's according to the way it wants to go. if we're a foil, there's nothing to work with. if there's a model, we can work out a model plan that involves a comprehensive plan involving the various agencies and private sector. >> reverend, thank you. great to see you. good luck. >> tomorrow through friday is our summit here in new york. we'll talk a lot about -- mayor is here from detroit and flint and baltimore. we're going to have bankers here to talk about how we can work out partnerships. >> good. wall street can be a help. >> it was a hurt that can be a help. >> exactly. okay. >> thank you. appreciate it very, very much. thank you again. >> thank you. coming up, breaking economic data. new read on inflation is straight ahead.

stay tuned. you're watching "squawk box" on cnbc. drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley.

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. when you have $7.95 online u.s. equity trades, you realize the smartest investing idea isn't just what you invest in, but who you invest with.

♪ ♪ welcome back, everybody. >> this is yours? >> this is al giroux, baby.

>> i like his jazz. >> i do too. but this is valentine's day. >> okay. you're right. >> guys, we have some headlines we need to get you up to date on. the primary and emergency -- the damage to the primary and emergency spillway of a major dam in california that forced at least 188,000 evacuations has forced the spotlight on the nation's infrastructure. >> good morning, becky. that's right. with more rain expected tomorrow, workers are furiously trying to repair a giant crater in the primary spillway of the oroville dam as well as fortify the dam's emergency spillway. the fear is that a 30-foot wall of water could gush downstream, close to 200,000 people have been evacuated so far. now, the dam itself has not been damaged at this point. the issue has, though, shined a light on president trump's plans to spend $1 trillion on infrastructure. it's a corner stone of his

economic plan. recently reported, a list of infrastructure projects on a national priority list. the plan calls for a total investment of $137 billion that would create 193,000 jobs. among the projects on the list, a $12 billion reconstruction of the northeast corridor train line between new york, new jersey, and new york city. that project would create 15,000 direct jobs. there's also a $10 billion project to update air traffic control systems, and that will create 2300 jobs. and a high-speed railway project in texas that will cost $12 billion and create 40,000 jobs. three dam projects also made the list, one on the ohio river, another in pennsylvania, and a third in south carolina. back to you guys. >> all right. thank you very much. when we return today, we do have some breaking economic news. we're just minutes away from ppi, and we'll bring you those numbers. plus, a march rate hike could be on the table.

we talked fed and market strategy with blackrock's rick rieder. that's next. "squawk box" will be right back. . . retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars.

♪

welcome back, everybody. we are just a few seconds away from the producer price index. the futures this morning have been in the green despite this holiday. valentine's day today. still, you're looking at dow futures up about 26 points above fair value. let's get right over to rick. >> oh, boy. there was a gasp behind me. up 0.6. yes, up 0.6 on headline january ppi. if you strip out the all-important food and energy, up 0.4. month over month on the trade side is up 0.4 as well. now, let's strip out food and energy on a year over year look. that is up 1.2. that's actually very light. if we look at just headline year over year, that is 1.6. with regard to the inflation data on the back end, the year

over year cores, they were fairly moderate. the headline really is rather aggressive as the month over month core. the response in the marketplace, not much quite yet. we're still at 2.44 in tens. it's going to be interesting to see if this creeps us up much more. we all know there's a lot of buys toward the upside in rates. the dollar index really didn't lose all that much. basically unchanged here. even though this data is a bit hotter, at least so far the market reaction is a bit muted. back to you. >> okay, rick. thank you very much. let's get to steve liesman. you figured out why? >> first of all, let's watch the market here. i take my cue from the market on what to think about this. >> not much happening. >> the bond market has a lot to lose if it's mispriced or misestimated, the inflation rate here. i think rick's got that right. a hot headline number, 0.6. a hot ex-food and energy.

the year over years are still about where they were. the reason is because they revised back december. what was 0.3, 0.2 is now 0.2, 0.1. we're not seeing -- >> so combining the months together. >> it ends up being 1.6 year over year, which is pretty much where it was. i can actually double check that. a little harder without the glasses. it's actually lower than it was in terms of the year over year rate. all of the activity seems to be in the energy sector. 4.7 there. also 1.1% month over month change in transportation. warehousing, warehousing. a 1.5% increase in goods and 0.5 in services. looks a little hot this month, but there's a lot of volatility. what we're looking for is we're going to look tomorrow to see the cpi, to see how much of this filters through to inflation and of course get a feel for what janet yellen says later this morning. >> that's what i was going to

ask you. ja what are you watching for? >> i want to share this missive that came out from robert kaplan, dallas fed president, who was kind of like, you know, i'd say very much centrist, maybe a little dovish. here's what he said. moving sooner rather than later will make it more likely the future removals of accommodation can be done gradually. robert's a smart guy. using the term moving sooner sounds march-ish to me, i would suggest. >> what does he mean by that? if you go ahead and start doing this now, we're not going to get our hand forced down the road? you can slowly start to do this. >> the fed doesn't like condiments. it doesn't want to play catch up. >> bad joke. >> that was really bad, but it was an economics joke. it's all we got in the business. it doesn't want to play catch up, which means later on it will have to hike more quickly if it's playing catch up and being behind the curve on inflation. >> got it. >> we talked about it the other way. they can remove it that more quickly. >> exactly. >> the sooner they raise, the sooner they can ease back. >> we had this discussion

yesterday. the fed feels very comfortable fighting inflation, very uncomfortable fighting deflation. i think that's irrespective of who's in the white house. >> right. steve, thank you. our next guest says the likelihood of a march rate hike is increasing. rick raeieder is chief investme officer of fixed income at blackrock. he looks nervous. $1.6 trillion, manages $1.6 trillion. >> how do you sleep at night? >> i don't do much sleeping. that's part of the problem. >> my shoulders would be even more hunched over with that responsibility. someone wrote in yesterday, rick. i was talking to liesman about it. when the fed in 2015 said we'll be at a certain unemployment rate and certain fed funds rate, they've been so far off. someone wrote in today, steve, that was because of china deflation numbers that came out in the meantime. they always found a way to put off rate increases, even though they had all these targets on

unemployment. yes or no, they behind the curve or not? >> i think they are. i think they could have gone a couple years ago. you talk about hitting the goals and keep moving the goalposts, yeah, i think we've hit the inflation target. i think we've hit the payroll target. i think steve described it exactly right. if you're going to be gradual, if you're going to do three hikes this year, and they've talked about doing a few hikes, why not get started, why not do it in march. you've certainly hit the targets, we would argue. >> for march we should be at 100%. but we're not. >> 13.3, joe. i don't get it. >> so some of it is technicals. the world has been short the front end of the year curve. some of it is technicals. >> the world trades. >> a little bit. >> sorry, rick. if it's technical and it's wrong, why aren't you taking all of your funds money and putting it against what is wrong there and making money on the arbitrage? >> the problem is these technicals persist for a very

long prosecutoeriod of time. that being said, to own assets on the front end of the yield curve doesn't make any sense. you short that part of the yield curve. you just got to do it in a reasonable science. what are the odds of their going? i'd say closer to 50/50. markets are pricing in closer to 25%. we think it's closer to 50/50. >> how do you catch up? i thought you said condom. i didn't know what -- >> here's the thing, i thought you would think i said that. i said condiments. >> i did think you said that. i waited until now to say anything. i would think -- i'd like to stay at zero forever. now we're finding out they're behind the curve. is there anything bad going to happen or that's already happened from this? they should have been staying at zero because the rest of the world is a dangerous place. if there's no negative effects.

>> that's been the argument over time, there's no negative effects. however, you think about the way the world is financing today versus the way it was 20 years ago. you have a dynamic today that people don't borrow at the front end of the yield curve. so who's benefitting from the front end being at such extremely low rates? however, you have an ageing population where you're hurting insurance companies, pension funds, banks. so what's happened in the last six or seven months? yeel curves have started to steepen. you create more velocity in the system. when you keep rates at zero, you're taking money from savers, you're taking money from velocity. why is it when the bank of japan let rates start to normalize that the curve steepened? all the sudden the system has started to improve. the beta markets have improved. it's a really big deal. being at zero is not helping a system where you need actually interest to create velocity. >> you have never been overly

concerned. you don't think that the negative effects in any way outweigh the positives of staying at zero. you think it's been the right move. >> i've been looking for better research that shows me the negative effects. i understand what stan and kevin have said. >> what about what he just said? >> i think velocity is an interesting idea. as the yield curve steepens, if you see greater velocity, you could get better economic growth. look, this trump experiment, this idea that we're not relegated forever to a 2% economy, that we can do better by some deregulation, some tax changes. i'm willing to try it. i think it's worthwhile to give it a shot. the alternative is just the status quo. so we might as well give at least some of it a shot. >> i think this dynamic of monetary policy is incredibly effective when you go from 6% to 3% or when you move aggressively in 2009, '10, '11. however, when you keep the rate

too low for too long, you're creating no benefit and i would argument you create a debi debilitating impact. as we transition from monetary to fiscal policy, not just in the u.s., but why are markets doing better, why are expectations -- >> look at the reality. the reality is that the fiscal side was contractionary for many years. in that regard, what the fed would argue is it had no choice but to keep its foot on the pedal of monetary policy. >> so the debate is -- by the way, i would agree with that to an extent. the debate is what's the benefit of zero versus 1%? what's the benefit of zero versus 1.5%? >> before we go, what's the one thing yellen says, or does she say it today, that tries to move that probability towards 50%? how can she get there without, by the way, making it so that it's much more over 50%? >> i think focus on slack, how much slack is in the economy is going to be a big deal.

then i think anything that points towards -- she has to leave march hope. you've got a march 10th employment report, which is during the quiet period. so they have to keep it open today. i think the extent to which she talks about the pace of normalization and slack are going to be incredibly important. >> and how much, rick, about the future as it relates to fiscal policy? does that feed into what she may talk about today and her offset to that? >> i think she's going to talk about the uncertainty, but i think you'll see as the year goes on, you'll get more and more that will come to fruition, which means they're behind the curve, so why not get started. >> how about larry. he's there at the president's meeting. president says, you're great, larry. i've got investments with you and i've been doing fantastic. larry, he can do either thing, can't he. treasury secretary for hillary in the, in there for trumpster. larry is everywhere. cagey, smart. got to love it. >> larry fink.

>> boss. >> got to give him kudos. >> always. when we come back, senator bob corker is going to be joining us to talk about michael flynn's resignation. janet yellen's testimony on the hill today and much more. stay tuned. "squawk box" will be right back. why pause a spontaneous moment? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure.

do not drink alcohol in excess. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis. adios, honey, hasta la vista, baby. (sing-songy) fat guy in a little coat. that rug really tied the room together. any questions?

bueller? bueller? that's the unlimited effect. stream your entertainment and more with unlimited data when you switch to at&t wireless and have directv. plus, get the amazing new iphone 7 on us. welcome back to "squawk box." it is fun to -- okay, all right. that's good. "my girl." quarterly filings from big

investors will be crossing the tape throughout the day. we have more songs. we may have to do this again tomorrow. >> i can't stop singing. >> we need to do some tomorrow as like the day after valentine's day. the latest it from -- >> tomorrow breakup songs. >> that's good. >> k, wynikos has dissolved its stakes in energizer and johnson & johnson. do we just assume those are all short if we say take stakes? >> no. >> he's going long. >> okay. what about the previous ones he liquidated? long those too? >> we talk to him usually about -- >> he measures his performance based on if the market goes up, he expects to lose money a lot. he's a short fund. >> but he averages it off.

>> i don't know if he does. mostly short, isn't he? >> we'll get you some information. in the meantime, fed chair janet yellen heading to the hill this morning to deliver her semiannual monetary policy report. our next guest will be there. senator bob corker is a republican from tennessee. he's also a member of the senate banking committee and chairman of the senate foreign relations committee. senator, thanks for being here this morning. >> becky, good to be with you. thank you. >> i want to talk janet yellen in just a moment. because you're the chairman of the foreign relations committee, foreign affairs committee, i'd like to ask you first about general flynn stepping down from his role and what you think happened there, what happens next. what does this tell us? >> yeah, well, look, on one hand he was setting up the national security council in a true interagency way, which hasn't been done in a long, long time, so i applaud his efforts in that regard. on the other hand, the credibility issue became a big problem when it was revealed

what the conversations were with the russian ambassador. he stepped away. my guess is the next steps will be, as i understand it, there are three very qualified individuals that they're talking with. my guess is they'll make a change very, very soon. >> yes, those three individuals include general david petraeus. i wonder where you come out. you say they're all qualified. do you have any favorites? >> i really don't. i don't know the other two individuals as well as i know david. i will say, look, he's -- from my standpoint, an american hero, somebody that i respect greatly. no one is more knowledgeable regarding issues around the world. he's been in the private equity business recently, so brings a little bit of the business background that i think trump looks for in a lot of his nominees. he's someone certainly that i regard very highly. the other two gentlemen have had very distinguished careers, i just haven't interacted with them like i have david. >> senator corker, today janet yellen is going to be coming

before all of you. we understand at least the thinking here is she'll be trying to make it sound a little more likely like they might actually raise rates in march. the market is not anticipating that at this point. what do you think? >> you know, becky, i was thinking about this yesterday. i think the big news is no one really cares anymore, meaning that for so long they were the only game in town. nothing was going to be happening in washington. so everybody focused solely on what the federal reserve was going to do. now all of the sudden, we're in a whole new ball game where what congress and what the white house does is of far greater importance. are we going to truly put tax reform in place? are we going to deal appropriately with our fiscal issues? what are we going to do on deregulation? how are we going to handle the health care issue? all of those now are far more important than what janet yellen does. it seems to me the economy is moving along. additional interest rate rises

are appropriate. i think the question of the size of the balance sheet will continue, especially with easing, and yet what you're seeing is repurchasing securities with shorter maturities but still keeping their balance sheet at a very high level at about 4.5 trillion. >> the fed's balance sheet has been an issue. there have been some people thinking maybe they would let some of those roll off and not repurchase on the shorter end of things. sounds like that is what you're advocating as well. >> some of the fed governors when passing through town typically come in and talk. i know there's been some internal debate towards that end. again, at this point, you wonder why they don't use that as a tool to ensure that rates continue on a steady trajectory. i'm sure she'll answer that today. again, it's fascinating, isn't it, where now the focus is 100% on congress and trump and expectations and the market

today that outstanding things are going to occur. so you know, is that going to be lived up to, are we going to go in a negative direction? that's a much bigger story than janet yellen coming in. >> how do you handicap that, senator? >> you know, i don't know. my staff asked me to be optimistic. but i don't know. i mean, i'm worried tremendously about the fiscal situation. i know i've been on this program many times talking about this, but it feels like to me we're getting ready to forget who we are on the republican side. i'm worried about that. the tax reform issue, obviously the house has a plan, the senate hasn't begun developing their plan. the white house seems to be in a very different place as it relates to the border issue. >> the border tax issue. >> that's right. >> are you a proponent of the border tax issue if you're worried about deficits blowing out? then you're looking for a way to pay for any potential tax cuts, i take it. >> well, i mean, i'm not interested in revenues

decreasing. if we can lower rates and generate revenues and it's true dynamic scoring, that's interesting. what i'm worried about is the whole health care issue has really not yet been about health care. it's been about re-establishing a lower base. so you do away away with the ob taxes on -- for health care, you lower the base. all of a sudden, that's the new base you're looking at. down the road, you come back in and add costs to health care. do you deal with it or not? there's been a lot of gain gainsmanship so far. how do i handicap it? difficult to know. what i know is the territorial issue has got to be resolved for our nation to keep the companies here to employ so many people. certainly, there are infrastructure needs but they need to be paid for if we're going to put them in place. i think we're at a moment here over the next three months where we could, in fact, four months, could, in fact, deliver good

things for the country. we're at a place where it could fall apart. i think the markets built in the fact we're going to be successful. >> senator corker, this morning, earlier, we spoke with represa t representative who says he thinks what's coming out of the house is going to be big and bold. you're saying the plan could be a slimmer one. areas where you find more common agreement. >> look, it is intellectually interesting to listen to the arguments about the border adjustment. it really is. when you think about it. yet, it rearranging the entire world, the capital markets here in our nation are unique and outstanding. you look at doing away with net interest cost to companies. i mean, that's a whole new paradigm for our nation. so things like this, becky, typically take a while to come into understanding.

you're able to see how the effects are going to be on various enterprises throughout our country. this is happening pretty quickly. my guess is the big, bold plan may not be the plan we end up with. look, i'm looking at all of this. again, i want to see economic growth. that's the best solution for our bef s deficits. also don't want us to repeat cycles we've been in in the past on the republican side, where we blow up big deficits and not getting the growth that we would anticipate. >> senator corker, want to thank you for your thoughtfulness on a particularly difficult subject matter. we appreciate your time. >> thank you so much. when we return, we're going to go across the country. jim cramer is live in san francisco this morning. we'll get his take on today's top stories. you're watching "squawk box" here on cnbc. 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street, not rattled... at all! no.

sir, sir. what went right? everything. we have a brief statement on this non-breach. we're happy to report there's nothing to report. my dad's company wasn't hacked today. cool.

how do consumer sectors perform a week after valentine's day? they are

real quickly, jim says, it must be a bull market when "squawk box" starts talking about his longs. lol. one of his four funds, with a quarter of assets, picks loans.

the rest are short only. as i said, they're all benchmarked versus the market for -- it is the only way to make a fee. >> right. those are all long positions. >> all right. he's funny. must be a bull market. anyway, let's find out someone who can always find a bull market somewhere. jim cramer joins us live from san francisco. i left my heart where you are, jim. >> i love to hear the longs. what does he like -- >> he got out of j&j and energizer. he got into -- what was it -- >> net life. >> kkr and something else. >> wow. >> lions gate and halliburton. he must really like it. >> wow. okay, maybe he likes oil, entertainment.

look, i think that the larger take away is it is tough to find shorts here, if only because the rising tide is so powerful. when you find a short, you do it against the long. if you do a railroad, do it against another railroad. the group moves are, i'd say, startle startling. >> we're tight on time. see you soon. >> see ya. with the help of the lowest taxes in decades, a talented workforce, and world-class innovations. like in plattsburgh, where the most advanced transportation is already en route. and in corning, where the future is materializing. let us help grow your company's tomorrow - today at esd.ny.gov i'm connecting so we can share our amazing trading knowledge. why don't you just go to thinkorswim's chat rooms, where you can share strategies with thousands of other traders?

mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.

message for investors. live coverage, instant reaction and analysis. what investors need to know. "squawk on the street," today, 10:00 eastern. cnbc. >> want to thank our guest hosts. >> you said this morning, joe. >> we have to go. becky, nice to see you, too. >> happy v-day. >> "squawk on the street" begins now. happy valentine's day, everybody. ♪ broke up for good just an hour before ♪ ♪ now i'm staring >> welcome to "squawk on the street." i'm carl quintanilla with david faber. jim cramer is continuing his week out west. market is little changed after the flurry of market highs on wednesday. yellen begins two days of semi-annual testimony in front of congress. we'll take it live in an hour after we watch developments in d.c. and the outgoing