live from new york where business never sleeps, this is "squawk box." good morning, everybody. welcome to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick with andrew ross sorkin and joe kernen. and we have judd gregg. >> new hampshire, please. >> i'm sorry. new hampshire. >> oh, my goodness. >> it's early in the morning. i should have caught that. i know it. >> vermont's the upside down state. >> they're the ones with the maple syrup that doesn't quite live up to new hampshire? >> that's right. >> who is the guy that went -- was that you? >> might have been the governor of vermont. >> that wasn't you. >> but he has the better maple syrup? >> no, no, no. >> you have the -- >> we just did that. >> new hampshire has the better snow, the better maple syrup and

it has nice -- >> pretty mountains. >> very strange place. >> anyway, senator greg is here with us for the rest of the show. we're going to get caught up with him in a moment. among our top stories this morning, fed chair janet yellen returning to capitol hill this time to return to the house financial services committee. she told the senate panel waiting too long to raise interest rates would be unwise. >> we have eight meetings a year and it means that at some meetings we would, if things remain on course, increase our target for the federal funds rate and not act at others. and precisely when we would take an action, whether it's march or may or june -- >> right. >> -- i know people are focused on that. i can't tell you exactly. >> they are. they are. just so you know, they are. >> i can't tell you which meeting it would be. i would say every meeting was live. >> that was their goal to make sure they know every meeting is live. every meeting could potentially

lead to a rate hike. let's check out the market reaction. the s&p hitting its 15th record close since the u.s. election yesterday. no concerns at least when it comes to stocks. take a look at u.s. equity futures at this hour. you can see this morning things are indicated up once again. like every day a new record. >> don't chase it. >> every day a new record. s&p futures indicated up by a point. dow futures up 32 points. nasdaq up by 1.5. if you check out overnight in asia you'll see that stocks in japan were up by 1%. the hang seng was up by 1.25%. shanghai composite slightly weaker. this morning at the early going in europe there are green arrows across the board. modest advances for these markets. >> said without a hint of irony. >> if you wait too long there could be a problem. >> said without -- not even -- i don't think it even occurred that people might think they've waited too long.

all righty. don't chase the rally camp, do you remember the s&p number where we pegged for the latest don't chase the rally? >> no, what was it? >> 2360. >> we're at 2368. >> 12.9. in the two days since that we've got 21 points so far. is that about 1% so far. >> yes. >> little less. >> we'll never remember. and then -- we'll never remember and then we'll do-when we're a couple hundred points higher we'll do another story, don't chase the rally. but we never did the story, chase the rally. >> but, joe, historically -- >> we've been -- >> there are hold backs. there are in life. >> andrew, since the beginning of this move every day you've asked. >> it's gone too far already. nothing's happened yet. so you're off by 3500 points already. admit now there may be a pull back but you missed the 3500 points. >> absolutely. >> okay, good. i mean, you can always say there's going to be a pull back, but if the pull back doesn't get down to the point where you were

calling for the first pull back, then what good was it, right? >> this is true. >> okay. invest some money. get some experience investing some money. >> let's talk to you about some of the big stories we're watching this morning. on today's agenda, january retail krals and cpi are out at 8:30 eastern time. that's followed by industrial production at 9:15. and we mentioned fed chair yellen back on capitol hill. we'll be hearing from three other top fed officials today. as for earnings, here's what's on the docket. pepsico expected to report at 6:30 a.m. eastern time. we'll bring you that. we're also looking for groupon and soda stream. after the close you look for numbers from cisco, cvs, kraft and heinz. then japan's softbank buying fortress for $3.3 billion in cash. they will operate within softbank as an independent

business headquarter. in december you might remember that president trump met with softbank's president who said he plans on investing $50 billion in the united states. it's not clear if this is part of that plan. all of a sudden he has $170 billion in assets because he's raised 100 billion on sprints and other things. >> what happened to fortress? >> that's a big premium. >> it is a big premium. >> what were the problems? >> there were a lot of problems. >> for years. >> there was a guy who left. >> there have been a lot of problems. >> a penny problem. >> unclear what he wants to do given he's usually about technology. this is a very unusual purchase for him. by the way, we don't talk about it enough but in this $100 billion fund, you know who -- he's really a front to some degree for saudi arabia. so $45 billion of the money is saudi money, which i find fascinating given all the

conversations we have about make america great, who's investing. if you really understand where the money is, you follow the money, it's not like american money, it's not some other -- it's saudi money. maybe that's fine, i'm just -- wanted to point it out. it's worth knowing. >> our whole relationship with saudi arabia as we get completely worried about other countries, the other countries are failed states that we're talking about with immigration. people have pointed out, all 19 of the -- 19 of them were from saudi arabia, the 9/11 guys. they can freely move in and out and we go to these other places. we have a weird frenemy relationship. i think it may have something to do with oil perhaps, but it is. i mean, it is true. so you're worried that -- so it's being shuttled -- >> i'm not worried. >> it's oil money coming through him. you dauldcalled it a front.

that implies most people don't know where it's coming from. >> most of the conversation is -- >> now everybody knows because you just said it on "squawk box." so this is going to explode. >> go viral. >> what about a column? >> could be. >> what's today. that was yesterday. did you write one yesterday? >> i did. >> what was it about? >> steve schwartz. about the changing face of wealth in america and houten years ago it was like a five alarm fire that he had a birthday party. >> yes. >> and yesterday nobody cared. >> was it -- one was in new york -- >> not about the age of trump or -- anyways. >> one was in palm beach, the other one was in new york city, right? >> you could crack it up to that. >> where the media is. >> this one costs more, didn't it? >> supposedly. >> who was the musical entertainment last time? >> rod stewart. on the 60th. >> okay. >> and gwen stefani on the 70th.

>> i don't begrudge the man at all. >> you what? >> i don't begrudge the man at all. he's done a remarkable job. >> he's done good. >> blackstone is hitting, he gives away a lot of money. have your cake. >> i'm sure he will. >> it's his money. >> an effect. >> if you remember, you were watching it at the time. after that birthday party there was the blackstone bill. their hair was on fire. they couldn't believe anyone was spending this kind of money. >> my hair didn't get on fire. i'm pretty calm of it. i'm sort of the antithesis of that. >> are you having "sports illustrated" models on? >> i'm the antithesis. i'm the balance. >> the sexy. >> you are calm. you are a calming influence and we appreciate that. folks, there were a slew of 13f filings released yesterday. those are the sec filings that

offer insight into what the world's most powerful investors bought. berkshire hathaway making moves. it raised its stakes in appleby 42 million shares. it now reports owning 57.4 million shares which would make berkshire stake worth more than 7. $7 billion. that makes buffet's firm one of the biggest ten apple investors. also reporting a $9.3 billion airlines stake. we knew about these investments -- we knew it made these investments but these are much bigger. they increased them dramatically. at this point he owns american, 9%, delta 8%, southwest, 7%. united 9.1%. that makes him the number one or number two owner in those airlines. the congress glom mer rate talking about theirs.

buffet says he's not going to be speaking about any of these issues until he sits down with us on "squawk box." that is coming up on february 27th. that will be three hours. the live ask warren show. it's not too early to send in some of the questions you might have for warren buffet on twitter or facebook. if you do that use the hashtag #askwarren. we'll ask him about the annual report that comes out on that saturday. he'll sit down with us for three hours. he'll talk more in depth about all of these moves. he put in $12 billion. >> the other headline that i saw was it looked like he was getting out of walmart. >> that i don't know as much about. it looked like that stake was sold down. >> what that says about retail. we keep talking about retail in this country. also all the retail ceos meeting with trump today. >> yeah, exactly. >> pretty interesting dynamic. >> joe is looking up the "sports illustrated" cover. >> no, i'm not. that's my twitter feed. that's "the new york post" twitter feed. i didn't do that. if someone sees that on my

screen they're going to think i -- >> you're preparing for the interview. >> no, i'm not. that came up. i'm he sorry, my friend. >> what's happening there? >> am i on there, too? >> yes. >> split screen between you and spor"sports illustrated" model. >> there's angela merkel. no one can accuse me of everything. two out of three germans want merkel out. that's a new poll. new report from "the new york times" last night says that trump aides made contact with senior russian officials during the 2016 campaign. eamon javers joins us now with more. the third paragraph was weird though, wasn't it, eamon. it was like no signs of any cooperation. they killed them to have to put that as the third paragraph, but at this point i'm not sure what -- it's manafort once again. is it mostly maafort? >> reporter: it is, joe. when you see this story, savvy

readers meade to read what they're saying and not saying. this is the headline here in "the new york times" this morning. this is going to be driving a lot of conversation. the headline, trump aides had contact with russian intelligence. let me bring you a couple. key points from the article this morning. they're saying that the trump aides and associates had repeated contacts with senior russian intelligence officials. they're saying the contact occurred in the year before the election at a time that donald trump was speaking glowingly of vladimir putin. to your point, joe, they're also saying there is no evidence so far that trump aides colluded with russians of hacking for russian interference. that is an absolutely key caveat. they're saying the fbi has closely examined trump associates including paul manafort and roger stone and mike flynn who resigned earlier at the white house. here's what paul manafort had to say. he said, this is absurd. i have no idea what this is referring to.

i have never knowingly spoken to russian intelligence officers. so, joe, to your point, there's a lot to sift through here, but this is the kind of story that will dominate the conversation in washington today. and i can bring you a couple of the other things that are happening in washington today as well. andrew, you mentioned the retail ceos coming to town. we have a list of some of the ceos here, some of the companies that we expect to be at the white house today. jcpenney, gap, best buy, target and some others. we haven't gotten an official list. >> is walmart not on the list? >> well, we don't know. we don't know who's coming and who's not coming. of course, the subtext of this and the thing that a lot of people in washington will be looking for is this comes a week after you saw high white house aide kellyanne conway getting in trouble for recommending ivanka trump's products or retail products and we saw the president tweeting about nordstrom's decision -- >> guessing nordstrom is not included.

>> my question is will any of the companies that pulled ivanka trump's products from their stores be invited to the white house today? a lot of people will be sifting through that as well to determine whether or not the white house is playing favorites or not playing am with this. >> doug was at the meeting a week or two ago when eamon and i were together at the white house. >> surprising not to see them. or maybe he's already got his -- >> i don't know if -- right. i think these guys can't make the pilgrimage every week. >> reporter: i don't know about that, andrew. we've seen a couple of the ceos come in. elon musk has been there four or five times. some ceos are making repeated visits. it's in their interest to do that. >> eamon, i think eric schmidt went four or five times. in fact, i think he punched a time clock during the eight years of the obama administration, right? >> reporter: like an absolute regular. >> 1700 times. yeah. something like that.

depends what you're getting. >> reporter: depends on what's at stake for your company and industry. >> eamon, let me ask you quickly about the russia scenario. regardless of what's found, my guess is because of this storm that's been created over all of this, this is going to make it a little more difficult for the white house to negotiate with russia to get to the point of being able to lift any of the sanctions that have been some of the early talk just from the optics alone it would make that much more complicated. >> it put sand in the gears in terms of foreign poi si, in terms of dealing with russia and their domestic agenda. the more you have republicans on capitol hill spending time working on this issue, that sucks the oxygen out of some of the other things that the trump administration wants to do. we do know that intelligence committees up on capitol hill say they're going to be investigating all of this. they want to know more answers about the mike flynn situation. you can imagine this would dominate the conversation throughout the day today. all of that is going to require

attention and time by the trump administration including the white house council, don mcgan, the president, reince priebus. that takes mind share away from some of the other things they want to do. >> true, but then again there has never been oxygen for the first month not being taken out of what was going on on a daily basis. that's what we've been hearing all along that, oh, my god, he had this message and instead he's focusing on this message. he was doing this but now this is -- they're just powering through. they just -- i don't know whether they're as worried about the perception as people that are watching or deciding. they seem to just -- it's like water off a duck's back. they just keep moving forward. >> we'll see whether or not they can get this tax bill moved this year. that is a big lift. they're talking about something on a scale that we haven't seen since 1986. that's a big lift in a normal year, in a normal political

dynamic. >> right. >> we don't have that now. republicans have the votes on the hill. you might see republicans on the hill sort of go independent of the trump white house and start pushing their own stuff in the expectation that trump -- >> but i wouldn't extrapolate mccain and lindsey graham and what they say. there's a collective eye roll with most of the rest of the republicans, i'll ask senator greg about it. mccain has a problem. lindsey graham, maybe he's mad. when trump said when you get over 1% of the primary vote, then talk to me. i think they've both got like a -- >> reporter: look, those are the high profile sort of republican opponents. marco rubio i saw on the schedule is expected to have dinner with the president at the white house. we'll wait and see what that is all about. look, when you go through the republican conference, look, i've talked to republicans who are very pro trump, very pro trump agenda.

they want to build a wall with mexico. they scratch their heads on how he makes decisions. >> no doubt. >> why he says what he says, the tweets. so there is a feeling of a slight shallowness of support even among the republicans who support what he wants to do and what he campaigned on. >> look at the primary. the entire year and a half of primary there was head scratching the entire year and a half. >> right. >> were you a republican? >> certainly. >> thanks, eamon. >> reporter: you bet. >> our guest former u.s. senator and governor from new hampshire, judd greg. mrs. greg, the first -- >> she looks to you for all things. she thinks you can be a -- >> she thinks you can be a little more faithful. >> she often holds you up as an example. go out and mow the lawn, joe would mow the lawn.

>> she needs to spend some more time with joe. >> i'd at least make sure that the lawn was mowed. >> that's a different -- >> that's a difference. i have someone handle it. >> there's an inside and there's an outside washington. i mean, eamon, i have tremendous respect for. everybody in washington is in a thither about the fact that this president is chaotic in his style and his white house is chaotic. this flynn thing is very bad. outside of washington most folks are saying, i'll give him some running room. we sent him there to shake things up. but you can't shake things up substantively unless you can pass coalitions in congress because policy that is instituted regulatorily is not going to last very long as president obama's finding out. real policy change comes from legislative change and in my opinion legislative change can't be accomplished, even though the

republicans have control the senate and house, without some bipartisan participation. right now that's non-existent. i mean, i do think that some of the blame for the chaos right now in washington has to be put at the feet of the democratic leadership in the senate which has essentially refused to give the president his cabinet. i never voted against a cabinet nominee of president clintons or president -- i felt they had the right to their own cabinet. when you as a cabinet member walk into an agency, you've got nothing. you don't even have a pencil holder so you need people around you. >> they have enough with their own party to push through all these nominations and forget what the democrats -- >> they're being slowed up by the senate leadership on the democratic side. they can slow it down. the senate is all about slowing things down, and they have. they have every right to be critical and ask the right questions about ethics.

the labor secretary has an issue there, nominee, but as a very practical matter, they should be approving these folks so that you can get a government going because this is not appropriate for our nation not to have a functioning government. >> you think it's unfair to say that there are more ethical questions around some of the cabinet members than historically? >> no. every cabinet has had some ethical issues come up. i remember tom daschle was one of the best senate leaders and he had issues and he had to resign but the people who are being slow walked, i think slow walked on ethics issues, being slow walked for political reasons. there's an intensity within their base. >> that's what it is. there are the base wants to resist for four years. >> right. >> and that's -- this is part of it. and if you don't resist you're going to hear it. there's still people demonstrating. >> the senate and democrats have a responsibility. >> put some balance on it.

i'm not saying -- >> put balance on it by saying all the candidates and nominees have more ethical problems. like which ones? which ones have the more ethical problems than previous ones? >> by default -- >> which ones? name one. tom price? >> i would even suggest a friend of this show, wilbur ross, has more ethical issues only because he has more money. >> conflict. those aren't issues, those are conflicts. >> call them conflicts. >> they don't become ethical issues before -- >> all i'm saying is most of these cabinet members have much -- have a much more complicated background given more -- >> we're talking about private sector experience. you're right. there was no ethical conflict because not one of them had private sector experience. >> wilbur ross has said he doesn't want to recuse himself. it is complicated. >> we're going to need more money. >> i get it. >> 80 years old. >> $3 billion. >> yeah, but we know wilbur.

again -- >> by default there's more conflicts because there's more money involved. >> conflicts are different than ethics. >> the issue isn't the conflicts, the issue is there's a coordinated effort within the democrats to slow the government. >> i by the way think it's a terrible thing. i think on straight principle there should be compromise. the flip side is you could say for the last four to eight years the party was doing the same thing. >> they didn't do it. >> terrible. there is no question that washington has become marginalized. >> we'll be back.

welcome back to "squawk box." the dispute between anthem and cigna is expanding. anthem has filed a suit against cigna seeking a temporary restraining order to keep them from ending their $48 billion takeover deal. cigna is pulling out of the deal to be acquired by anthem. they're looking for additional damages of 13 billion. it believes the deal cannot and will not be approved by regulators.

ab them says it's committed to finalizing it. >> humana and aetna. >> yeah. that deal being called off as well. folks, another record-breaking session for the major stock indexes. fed chief janet yellen indicating that a march rate hike could still be on the table. making it sound like every meeting is live at this point. for some insights we're joined by steven whiting, global chief investment strategist at citi private bank. joe zito is a strategist. and our guest host as you know former republican senator judd greg. steven, why don't we start with you. >> sure. >> it seems like every day there he is a new record. is this the type of thing that is getting clients excited about things? you get more calls, hear more things coming back? >> absolutely. i say through the whole recovery and investors were under invested. very high cash balances in actual portfolios and seeing most of the dislocations, whether it was a couple of

chinese currency related selloffs, brexit, fed worries a year ago, each of those dislocations we had strong rebounds and that is encouraging a lot of bullishness. what we're going to do for returns, higher prices. you know what it does. certainly the speed at which markets are coming back and people are realizing that negative cash returns are a drag on portfolios. risk aversion is diminishing. >> joe, we've talked about how we've hit the new levels because we've moved so far so quickly. 10% move since the election. makes people nervous when you get to these levels. what was happening and how much of this is because of earnings picking up, too? >> yeah. i think the key is earnings. we are about a year removed now from the actual trough in s&p earnings. it was exactly a year ago when earnings bottomed out. over the course of the last year when you think about the

narratives that had dominated the headlines it had been hard landing in china a year ago. then it was brexit. then it was the election. then we turn the page on 2017 and we have uncertainty with the new administration. but all the while we've seen this massive recovery and reflation in corporate profits. i think that that profits growth story is one that's been overlooked by most investors. here we are in the midst of the fourth quarter 2016 earnings season and we're looking at s&p earnings being up anywhere from 8 to 10%. that's bullish. >> you said overlooked by investors. i'm thinking overlooked by a lot of people if that's the case if you think that what's happening is based on earnings. so you think this is an earnings story. this is not a trump rally. >> no. i think it's an earnings story. the world really changed for us or turned not with the election last year but it was way before that. it was in february of 2016 when oil bottomed, profits bottomed,

inflation expectations troughed and started to move higher. it suggested that the global deflationary environment that we had been mired in over the last six or seven years was coming to an end. >> right. >> that's something if you think about equity valuation at its most basic level, if you think about how to value stocks in the most basic level comes down to profits and interest rates. >> that's a remarkable irony if true. >> it's not. policy and animal spirits boost earnings. we've had the airline ceo come on saying bookings are up. you don't think policies can boost earnings. >> some of the biggest gainers have been in financials. potential deregulations. >> earnings that you're seeing are happening because of the change in the environment. >> one thing i'm curious about is given all of the -- >> i don't think it's ironic at all. >> -- black swan like headlines, russian cruise missiles, the flynn story, all of this stuff, historically when things like this happen, headlines like this

happen, the markets seem to oftentimes move in tandem, meaning people get anxious, the market would go a little -- this is doing the opposite. >> yes. >> why is that? >> there's an expression that says it's never the snake that you see that bites you. it's never the bus that you see that hits you in london. >> the mike flynn situation isn't going to be a long-term negative for the market? i'm pretty worried about this. >> i think because we're talking about it. >> i'm kidding. i'm being sarcastic. mike flynn has nothing -- you already made the point. people out there are not paying that much attention but certainly investors -- >> i'm listening to joe because joe is an inciteful individual. joe may be from a state north. where would that be? >> new hampshire. >> new hampshire. >> okay. >> hometown governor and senator. >> pepsico is rolling out the results. s sara eisen has got the results. >> big beat, $1.20 earnings per

share. it was around $1.16 expected. $19.5 billion. that was pretty much what analysts were looking for. everyone goes straight to the organic revenue growth for this one because it's so internationally exposed. it gets hit with foreign exchange off the strong dollar which did chip away. a few percentage points off the revenue growth. 3.7%. i would also note volume growth is always important. we look at both frito lay which is the big snack business, profit driver, 3% organic volume growth. 1% for global beverages which stood out to me because coca-cola reported last week and did not see growth in its beverage volumes. pepsi has a smaller beverage portfolio. it leans on the snacks but it is managing to squeeze out some nice profits from its beverage portfolio. in terms of guidance which is also going to be looked at here for 2017, pretty much in line. pepsi continues to see 3% organic revenue growth.

they're boothsing their dividend here and this pretty much jibes, guys, with what has been an outperformance for a consumer staple stock. they've outperformed their competitor coke and the entire group, but at a time when consumer staples aren't as appealing perhaps. when you have some of the growth stocks like consumer discretionary, financials, demand, investors are going to look to this quarter to see that there does continue to be growth. pepsi makes a big point of highlighting how it has more better for you snacks and healthier snacks as part of its portfolio versus its competitor versus something that's been important. >> thank you. >> thank you, sara. appreciate it. coming up, whale watching. we have a rundown on the new positions by some of the world's biggest investors. robin lawle talks about beauty at every age and for every body type. that appeals to me for some

reason. both male and female body types and ages. as we head to break, right, john? >> absolutely. >> i think i should be on the cover. >> isn't beauty something from the inside? innfor ern l of innfor ern l of is ttuhayo fans,akes are so ghgh ut olhiyodon' partwi advis vernmentsforte cer insht pson, t maers to you.nl.

♪ ♪ welcome back. you're watching "squawk box" live from the nasdaq market site in times square.

welcome back, everybody. berkshire hathaway making some bik moves in the fourth quarter along with many of the other big players as well. our leslie pickers is whale watching this morning. she's been digging through some of the filings. good morning. >> when it comes to apple, berkshire hathaway didn't double down it quadrupled down. it showed a holding of 57 million shares. he's known for shying away from tech but his deputies have been more keen on the sector adding a position to apple last spring based on yesterday's price at another record berkshire's apple stake would be worth about $8 billion. berkshire is getting further into another industry he's previouslyioned with a bet worth about $10 billion on airlines. the firm did some major buying during the fourth quarter doubling its position in american airlines adding 24 million shares. it boosted its holdings in delta

which went from about 6 million shares to 60 million shares. those in united jumped by a factor of 6. we learned the size of his position in southwest which was not included in last quarter's filing. he owned 43.2 million shares at the end of the year. i also spoke with david tepper last night right after his filing hit. his firm appaloosa took advantage of a dip in pharma to buy names such as teva, mylan and pfizer. he's excited about allergan. it now represents more than double his other pharma positions combined he said. >> who's not bullish on allergan? that's the question. >> well, it dipped in the fourth quarter of the year and it's a little uncertain. >> isn't it botox? >> i think it's body con touring. >> who's botox? >> that's botox but body con touring has become the new -- >> they're both important to some people. i mean, i'm not -- >> some people? >> yeah, the needle in the, you

know, forehead is a deal breaker for me but -- have you tried that? actually, you have. i can tell you have. >> missed that opportunity. >> you still smile and you have good expressions. thank you. this is you. >> thank you very much, lessee. appreciate it. programming note for the -- by the way, folks, we're going to be sitting down with warren buffet on february 27th for the annual ask warren show. he wouldn't comment on any of these moves last night when i spoke with him. he says he's not going to be talking about any of these moves to anyone until he sits down with us on february 27th. again, this is the show that we do right after the annual letter that will come out on saturday. you can take a look at the annual letter if you have questions on that or any of these stock moves. the more than $12 billion that he's put into the market since the election, make sure you go ahead and write those in. you can use either twitter or facebook. use #askwarren for that. coming up, markets climbing to new highs. chase it though. we're going to talk to kate

moore, black rock's chief equity strategist. and then at 8:00 a.m. eastern billionaire ron baron will be our special guest. he'll tell us what he's buying and holding. plus washington senator john barrasso weighs in. >> tease what's coming up next? >> the swimsuit? >> "sports illustrated" swimsuit issue. >> okay. >> stay tuned for that. >> stay tuned, you're watching "squawk box" on cnbc.

welcome back, everybody. right now it's time for the executive edge. we're going to start with some stocks to watch. heineken reporting solid results thabeet forecast on strong beer sales in asia and mexico. the dutch brewer is upbeat about 2017. expecting margin grows of 80 basis points. danone is saying that the turn around of its european dairy business is taking longer than expected and tough conditions in china will remain this year. credit agricole's fourth quarter profit fell by 67%. the drop was less than expected, believe it or not.

revenue rose 7% on stronger results from its asset management and investment banking business. and this object at thobjectm okay with. rumor is a true beauty german shepherd. only the second time, look at that gorgeous dog. only the second time a german shepherd has taken the top honors at westminster. >> all the way back to 1877. >> one won in 1987. rumor retired last year and she decided to give it one more shot. she actually beat like 2500 other dogs named after the adele song "rumor has it" was favored to win last year but was upset by a german -- another german, short haired pointer named c.j. after this year's big win her owner said she'll be relacking and finding an appropriate husband. >> for rumor or herself? >> for rumor.

>> that's my female. she's absolutely gorgeous. >> beautiful. >> yesterday was gunther, my male half brother -- half sibling of zara, it was his birthday. i tweeted out and got hundreds and hundreds -- people love dogs. >> got more for you and penelope. >> i got 300 for a little valentine shot. you know, i've had dogs my entire life. i've never had a dog like a german shepherd. i don't think i'll ever be without. have you ever had -- >> i had a german shepherd when i was growing up. they love their owner. >> they love their owner but you can see in their eyes how smart -- they are so, so smart. >> very smart. >> they do love their owner. they don't like other people very much which is sometimes -- >> perfect dog for you. >> exactly. exactly. they don't see the good in everyone typically. they think people are up to -- >> no good? >> especially the mailman. i don't know what they think. bringing things, not taking things.

relax. but he's on our property. what are you thinking? >> coming up when we return, "sports illustrated" unveiling the cover of its annual swimsuit issue. this year's theme is about women of every age and every body type being accepted. we'll talk to the swimsuit editor and model robin lawle. as we head to break, a quick check of what's happening in european markets right now ♪ does she walk, does she talk, does she come complete ♪ thistrinover miles r ho. inerond matts. th o thilwainover miles r ho. tmeanu our .ra cha criioouevriny mhees areetng

♪ welcome back to "squawk box." the 2017 "sports illustrated"

swim suit issue is here. three covers were revealed last night on jimmy kimmel. kate upton is on one of the covers. joining us to talk about the issue and its embrace of diversification in the beauty industry is m.j. day, "sports illustrated" editor. good morning to both of you. here's a question for you, which is i heard you want to create model moguls. >> that is right. i do. >> she is one of these model moguls. what do you mean by that? >> my ultimate goal for every woman that appears in the swim suit issue is to take them to the next point beyond modeling. i want to create opportunity and basically, you know, turn these amazing women into the personalities and the businesswomen that you'll be talking to hopefully for the next ten years.

kathy oo kathy ireland is aspirational for me and a lot of these women. >> this magazine is big business for "sports illustrated" but also big business for you in many ways. tell us, what does it do for you and how do you become a mogul after this experience? >> i think "sports illustrated" is so iconic. being a part of it is just -- it gives you that platform, that elevation of authenticity. they want to know so much more about you as an individual. for me, i'm a swimwear designers. "sports illustrated" is like the swimwear bible. it's what you really aspire to get your swim suits in. having curvier girls featured now, and my brands are curvier, so it's amazing. >> were you wearing your swim suit? >> i was in the interview, yes. it's been in every other issue since i've been in it. it's been in the last two issues too. so that's like a huge honor to have ashley graham where my swim suit, to be able to wear my own swim suits.

of course, spor"sports illustra is like itsy bitsy bikinis. but it's amazing and definitely sets you up for life. >> we talk all the time about the oprah effect, like when oprah would endorse a book or liked a company. is it the same thing with "sports illustrated"? if you get yourself and your swimwear in it. >> i think for sure. anything to do with "sports illustrated." it's the pinnacle. it's like the top swimwear brand. if anything gets in "sports illustrated," it definitely helps your sales for sure. >> 70 million people will see this magazine. we always talk about the shift to digital. how many of those people are physically picking up the magazine that we're holding here, and how many are now spending their time online? >> the number 70 million is who will lay eyes on the brand, you know, throughout. for instance, the christie brinkley shoot that was pre-released has seen over 1.7

billion uniques. it's a dominant place in positioning. >> she looks amazing, by the way. >> it's insane. she's incredible on so many levels. she's another aspirational model that's taken the opportunity. >> her first cover was in the '70s, right? you're talking about four decades that she's been there. >> exactly. and she's a multifaceted, super talented human being that not only models but is also an innovator and actress and creative force. that's what we embrace. that's what we have always embraced really. >> i can't imagine you've ever focused on this, but somebody has looked into all of the cover models and what country they come from and then extrapolated out what happens to the s&p 500. >> yes. >> you know about this? >> yes, yes. it's going to be a good year. >> it's supposed to be a good year. if there's an american on the cover, the average return is 10%. non-american on the cover, 8%.

i don't know. >> you're welcome. >> and you've become the face of westfield. how did that happen? >> that was in australia. that was through "sports illustrated," through getting your name out there and becoming someone. i think in australia, it was a huge opportunity because i am an australian size 16, which is an american 12. it had never been done before. having the "si" platform really helped me secure the deals. >> okay. thanks for waking up early, guys. >> thank you so much. >> go out and get the magazine. >> also want to thank judd greg, the former new hampshire and senator. when we come back, another day, another record. high for u.s. stocks. we're going to talk strategy with blackrock's kate moore after the break. and later, buy and hold billionaire ron baron will be our special guest. "squawk box" will be right back. '.

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global stocks rally. futures pointing to a higher opening again on wall street after janet yellen says that waiting too long to raise rates could be unwise. major averages posting new record highs on the comments. now investors awaiting more juice on what they can expect from the fed. face to face, president trump and israeli prime minister benjamin netanyahu meeting for the very first time today in washington. we'll talk u.s./israeli relations with former u.s. ambassador to israel. plus, why the push for diesel cars in europe has turned into a horrible decision. "the wall street journal's"

holman jenkins is sounding off on dieselgate as the second hour of "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box." good morning. welcome back to "squawk box" here on cnbc. we're live from the nasdaq market site in times square. i'm andrew ross sorkin along with joe kernen and becky quick. green arrows across the board as we keep accelerating upwards. the dow looks like it would open about 39 points higher. nasdaq about 4 1/2 points higher. european markets right now as well if you look across the board green pretty much. in our headlines this morning, the legal battle between health insurers anthem and cigna is escalating.

that action came in a suit filed by cigna late yesterday in which it also seeks a reverse termination fee saying it doesn't see how the $48 billion transaction can possibly be completed. there was more than just the transaction fee though. it was that and another $13 billion or something in additional fees they were seeking. so you are talking some really big bucks. pepsi co. beating estimates on the top and bottom lines for its latest quarter. reporting earnings of $1.20 a share, 4 cents better than expected. the full-year outlook is slightly below consensus forecast. that stock is up by about 18 cents. and amazon's echo and google home devices may be used as phones in the future. that's according to "the wall street journal," which says the two companies may launch those features sometime this year. the potential hang-up for using the smart speakers as phones, privacy concerns and telecom regulations. a little bit of deal news

for you this morning. japan's softbank buying u.s. asset manager fortress for about $3.3 billion in cash. it's going to operate as an independent business headquartered in new york. as you'll remember, president trump met with the softbank ceo. this purchase is part of that plan. a slew of 13f filings were released yesterday offering insight into what the world's most powerful investors bought and sold in the last quarter. warren buffett's berkshire hathaway making moves in the fourth quarter, raising its stake in apple by about 42 million shares. berkshire now reports that it owns 57.4 million shares. that would be worth more than $7.7 billion. it makes buffett's firm one of the biggest ten investors in apple. berkshire also reporting a $9.3 billion stake in the airlines with invests in american, delta, southwest, and united

continental. berkshire is now the number one or number two owner in all four after those airlines. the conglomerate also disclosing new stakes in sirius xm and monsanto. while warren buffett would not comment on any of these filings, he says he'll be waiting to talk about all of these issues until february 27th. that's when he sits down with "squawk box" for a three-hour show. we'll be live from omaha. by the way, it's not too early to send in your questions for the oracle of omaha. send this them em in on twitter facebook with #askwarren. >> i know he didn't comment specifically, but do you know if any of the moves we just highlighted were warren versus -- i don't know that a single one of those were warren. >> i don't know. he didn't tell me, but he did say he'll tell us on the show. >> apple is not, probably. >> you start to get some of these big moves -- >> he never did tech before. >> berkshire hathaway put $12 billion into the market since the election. a lot of those moves are his

moves. >> do we know with his recent airlines stuff? >> he's into the airlines. >> unbelievable he came back. >> he told us before that he had some interest in this. i think it was one of the deputies who brought it to him. i don't know who did what in terms of which airline. >> from u.s. air to where we are now is 180 degrees for him. >> he said he'd never get involved in the airlines again. now he effectively is the number one or number two. >> he believes after 20 years of not making a dime that now it can be profitable. you'd rather have them as utilities where they do it just to serve you with no kids in first class. other people actually realize that it's an ongoing business that needs to be viable, therefore they need a return on equity of maybe 10%. >> part of it is the consolidation of the industry. >> once you finally -- when profit doesn't become, you know, analogous with greed --

>> i didn't say that. >> profit is what allocates capital. >> it's a business that has now a high barrier to entry. that's all i'm suggesting. >> anyone we have on from that industry says competition is still rampant and they have to watch every penny. i'm just glad it's viable. >> as warren buffett would say, if you go to a barber, he'll tell you, you need a haircut. >> go decide to drive to florida and go rent a car and drive down there and tell me whether you need airplanes with your two kids. and the baby. >> the rental car is very expensive these days. >> they are. >> it's pretty safe to drive, but you do pass a truck like every two seconds where something -- he can be, oh, i don't see anyone. it's very high stress, andrew. you get on that plane -- well, that's high stress for some people. >> in both cases, i have a driver, so it's fine. >> you have a pilot in both.

the s&p posting its 15th record close since the election of president trump. joining us now with more on how much further the markets can go from here, head of merrill lynch wealth management, overseeing $2 trillion in client balances. and our guest host for the next hour is kate moore, chief equity strategist at blackrock. we have a lot of people come on, andy and kate, that are just like all we really hear is there's no rush here. just don't chase this. isn't there a risk in not embracing it? if you didn't embrace it in the last three months, there was a risk because you've lost about 10% or 11%. >> you're absolutely right, joe. that's why we advise clients to be in the markets. at merrill lynch, we've always expressed bullishness. >> you're bullish on america. >> absolutely. >> bring that slogan back. >> we're bullish right now. i just got off the road meeting with about 2,000 merrill lynch financial advisers in six or

seven cities. what they're hearing from their clients is very bullish right now, especially clients who are small business owners. the expansion is under way. they see deregulation in the offing. they think tax reform is coming. they're thinking about investing in their businesses. that is a stirring that is happening out there. i think at the same time, they're not exuberant about markets. so you take that and put it together and that's a bull case from our perspective. >> even your logo is a bull. you know what, it's an anatomically correct bull. have you ever noticed that? >> sure. >> that's a male cow. >> absolutely. well, you'll remember the thundering herds. >> i always thought it was kind of funny they actually -- it's a drawing. this is a bull, andrew. have you looked? it's a bull. >> i haven't paid attention to that part. >> we are proud. it's our symbol. >> i agree. a great firm. are you ready now to say be a

little careful, be ready to sell? >> not feeling shaky, actually, no. in fact, i think a lot of what's driven the market more recently has been a huge improvement in fundamentals and macro. the next leg will come from policy and perhaps a deregulation, but i think andy makes a great point. small business owners, medium size business owners, even large business operators are feeling much more constructive. a lot of this kind of reflation and sort of macro momentum started in the midpoint of last year before the u.s. election. we think economic data will continue to improve, not just in the u.s., but around the rest of the world through the balance of 2017. there are a lot of very strong fundamental reasons even before policy or regulatory change to want to take advantage of risk assets. yet people aren't fully in the market. i think that's it as well. you look at this now where you have high cash balances for sbr individual investors and a sense of paralysis because they get hung up where multiples are.

>> be the financial press, listen to the financial networks, and you don't hear buy with both hands. same with people -- and the other thing, we know the market tripled from the lows of the financial crisis. that's what everyone says. so how much further can it go? that's why when it was pointed out that it took 17 or 18 years to double from 10,000, that, i think, is a more important point. since 1999, we've averaged 4% a year. that's not an outsized return. that doesn't mean we have to -- the standard deviation, we don't need to regress from the mean from like 15% returns, do we? >> but is it like gdp where you're not going to see 8% gains again? >> historically, 4% would underestimate what you get. >> that's what i'm saying. we think we can't grow past 3%.

>> 4 to 6% over the next five years annualized between u.s. large caps all the way up to emerging markets. it's not exceptional. what we're talking about right now is the next 12, 24, even 36 months where we have this growth impulse, support from policy, strong structural reforms in a lot of different places. barring a big change in politics,ing i thi politics, i think we can continue to print some strong, solid equity returns. >> i think, kate, to your point, that change that's happening politically and geopolitically, that has a way of knocking clients off track. so in addition to being a bull market around equities, this is a bull market for advice in our view. people need to be reminded the case for equities and the need to stay invested with discipline across the cycle. that's something our advisers are focused on. >> it sounds like you're expecting there could be pullbacks if there are surprises. >> we certainly have a bullish view. our bull case is 2700 on the s&p

at year end. if you see deregulation, tax reform happen, we're going to be trending toward -- >> 2700? that's more than 10%, isn't it? what is that? >> from here, i think another, what 6%, 7%. >> is the market fairly valued if we don't get any of those things? >> we think the market is fairly valued right here. we think the next move up is probably going to come around second quarter, around earnings season. >> let's say none of the things that -- let's just do taxes. if taxes don't come in 2017, maybe it's 2018, i don't know, is the market fairly valued currently? >> i think what you have to take into account is sentiment is not exuberant. we think valuations could go up. the professional investor might want to pull back a bit, which is why underlying our bullishness is the fact we do not see, as i said earlier, exuberance right now.

>> historically, it's what you assign to the e. >> so it's an earnings story. >> no, no, the e is not what's important. it's a sentiment story. if people are overwhelmingly bearish, the multiples can get to these crazy levels. >> i think we started off right after the election with a lot of people immediately looking at different scenarios for much, much lower corporate taxes. i think as we've gotten further into the discussion and as we get greater details over the next couple weeks and months, there's an understanding that it's going to be a lot of push and a lot of pull and perhaps the effective corporate tax rates for many companies will not change once we remove some deductions. >> but we don't know what each component is worth. >> that's right. at that point, i would say it would be more upside to earnings if we actually got a significant follow through from tax reform. >> but just the other stuff is worth something. the deregulation, the dodd-frank, the animal spirits.

even if rates go up, corporations start not spending all their time rebalancing their portfolios. they start investing for the long term. all these things could be bullish, ep withoven without ta reform. >> i think so. and i think it's coming on top of what i said before. a solid recovery and finally got out of that profits recession. >> maybe europe is coming -- did you see the lead story on "market watch" today? europe needs to find a way to get out of the euro. that's starting to become -- these riots in france aren't going to help the status quo. then you have these polls with merkel right now. i don't know what happens. those guys need to get a better system. that would help. thank you, both. kate, you'll be with us, obviously, for the rest of the hour. when we return, the ceo of

bioverativ. also, president trump meeting today with benjamin netanyahu. plus, "the wall street journal's" holman jenkins is here to talk about dieselgate. stay tuned. you're watching "squawk box" on cnbc. er nafolio.re sini acces therketananldarts geintoitrconfmed- i haaccessancan whatd th oat ii silenftotrconfmed- i ht adngorouan whatd th oat ii

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welcome back to "squawk box." in 2016, biogen announced its plan to create a separate company to kater to blood disorders. the spin-off company, bioverativ, launched this february and is following the path of its parent company through a patient-first approach. meg terrell joins us with a very special guest. >> thank you, andrew. that special against is john cox, the ceo. thank you for being here. >> thank you. >> tell us about this spin-off. you're one of the youngest companies on the nasdaq. why did you spin off? what are you planning to do? >> the times was great for us to spin-off. biogen has been a neurology focused company. it's dedicating its life not only to multiple sclerosis but also alzheimer's. those are big investments. at the same time, we had a hemophelia business with

extremely novel products. the community appreciated those products. then it was time to really focus. the idea of putting a portion of the company in the hands of shareholders with a management team completely focused on hemophilia, made sense for us. >> you have two drugs which did advance in the space, being able to treat less frequently. but there's a lot of competition. how do you position yourselves to make sure you're bringing forward the next future treatments? >> there is competition, but if we back up, these two products are long acting. they use a technology that's highly differentiated. really the first innovation in 20 years for that community. it puts us in a position, i think, to lead in innovation and as the products are used more and more over time, real world data, real world experience and they see how quality of life is impacted by these types of products, i think we can compete against the different prukoduct

that are trying to imitate that, really follow-on products. really, we're focused on the next generation, even longer acting, more convenient products so that people can dose less frequently and maintain the lifestyle they want. >> of course, the next wave, a lot of people are talking about gene therapy, a potential one-time treatment to solve the underlying genetic problem of hemophilia. you have a lot of competition nf that space. >> gene therapy is a biotech company. i love the idea of gene therapy. we're rooting for gene therapy across the industry. i think in hemophilia, it's a space we're working as well. in hemophilia, this is a place where there are products, clotting factors where people have shortages that we can replace. there's known biology that works. so i think the gene therapy has a ways to go. it's got to be evaluating

safety. adoption in this community will take time. we would like to be part of that, but right now it's about better products, proven biology, and that's what we have in our pipeline. >> you don't want to reinvent the wheel. it would be nice to make it yourself through a gene to make whatever you need, the factors for blood clotting. pretty easy just to do it that way. there's so many unknowns still in gene therapy. i haven't followed it that closely on whether there's been a lot of strides made. it's scary. there's been some setbacks, some serious setbacks in the past with gene therapy. if you can do it that way and you don't have any of the side effects or risks, makes sense just to continue. >> i think having a proven biology, in this community, the value of safety -- as with all drugs. the history of hemophilia, i think there's a big advantage to that. it'll take some time with gene therapy to see that it's robust, that the dosing is consistent,

and that you can actually manufacture to a supply that people can count on. so we'll be part of that, but i see that longer term. >> we were talking about pricing a little bit before we came on here. this of course is one of the hottest topics in biotech with the president saying drug prices have to come down. do you think as a young company, do companies need to think differently about pricing their drugs? does the paradigm have to change? >> i think companies do, but i think -- i hear so many people come out and talk about pricing. the conversations have to get deep and longer and more intense. ultimately in this field, if you want innovation in this field, it takes time. it costs money. ultimately, the innovations we're going to put forward, if we're going to be putting forward work like in sickle cell, which is our next area, we'll pay more that wifor that prices of the drugs today. i do believe the clinical development timelines, regulatory timelines, us working with government and with the fda

to figure out how to bring the next generation of products together is key. if we're not careful in biotech and we squander biotech by cutting prices, the opportunity to deal with alzheimer's disease, the looming cost we have in this society of health care, this is our chance to deal with it. biotech can be part of that solution. >> looking from two different directions, it's one thing to say we're not going to see prices get cut significantly, but when you're looking at drug prices that have come up 1,000%, 2,000%, 3,000% in come cases, that's where people really say, wait a second, these were drugs that were much more affordable just a few years ago. >> let's be honest, there have been some bad players in the field. that gets highlighted politically. that becomes the conversation. i think about the people that work in our company that have been in the labs working for 15 to 20 years to develop these products. they are working hard to do that. we want to have products that we

invest in, that we price so we can invest in that next generation. there's no excuse in my mind to be jacking up prices and not have associated innovation investment with it. those should be treated separately. >> john cox, thank you for joining us. >> thanks, meg. coming up, prime minister benjamin netanyahu meeting face to face for the first time with president trump. we'll talk about u.s./israeli relations in just a bit. then at the top of the hour, a special interview with the founder of baron capital, ron baron. "squawk box" returns after a break. time now for today's aflac trivia question. which inventor applied for a patent on february 14th, 1876? the answer when cnbc "squawk box" continues. wh? juke noths a b min he ben y're gonork that mon fa

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now the answer to today's aflac trivia question. which inventor applied for a patent on february 14th, 1876? the answer, alexander graham bell.

good morning, everybody. welcome back to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. among the stories that are front and center this morning, mortgage applications fell 0.8% last week according to the mortgage bankers association. new purchase applications did rise, but refinancing activity fell. this comes as the average 30-year mortgage rate edged slightly lower to 4.32%. restaurant chain chuck e. cheese may be hitting the stock market. the current owner has hired investment banks to consider either a sale or an initial public offering. a tifinal decision is said to b several months away. zbrrc and we'll be getting the january consumer price index as well as last month's retail sales. president trump hosts israeli prime minister benjamin netanyahu at the white house today. for a look at what's at stake, let's bring in the former u.s. ambassador to israel, who's now

a professor at princeton university. thank you for joining us this morning. help us understand what you think is at stake today. >> well, there are really three dramas unfolding. the first and perhaps most important is substance. the two leaders will talk about the prospects for middle east peace, the question of iran's nuclear pretensions, syria, russia. but it's unlikely that they're going to make a lot of progress on any of those. there are significant differences on the peace process. netanyahu would like some green light to build more settlements. the president would probably suggest caution. on iran, they probably will agree that some more care has to be taken with respect to iranian activities in the region. the other two dra mamas are the story today, politics in both constituencies. the president's problems here at

home, which are besetting his administration, and netanyahu, who has similar problems with his coalition and with legal issues. the third thing to watch is the atmospherics. they'll come out of the meeting and be happy and sfiatisfied an say everything is fine. beneath the surface, there's a lot brewing. >> the settlement issue has been a big one. president trump has said repeatedly that he wants to have a great relationship with israel, then put out a statement relating to the settlements, which was a little more circumspect this time. said, the construction of new settlements and expansion of existing settlements beyond their current borders might not be helpful in achieving that goal. it wasn't a strong condemnation of the strategy, but it wasn't a wholehearted endorsement either, clearly. >> well, it really was interesting, given what we had thought would be the attitude of this administration, kind of okaying whatever netanyahu wanted to do. but i think what happened is that the right-wing members of netanyahu's coalition jumped the gun and pushed for these big

announcements. 5,000 units, calling for annexation of parts of the territory, a law that would retroactively illegalize some of the settlements. i think trump saw this as a bit too much, too fast and therefore put out this cautionary note. >> at the same time, trump during the campaign said he wanted to move the embassy from tel aviv to jerusalem. >> well, you know, welcome to government. campaigning is one thing. every candidate in the last 30 years has talked about moving the embassy to jerusalem. as soon as they walk through the doors of the oval office, they realize that it's not so simple. i think that's what trump has come to realize. i don't think he's taken it off the table, but he knows how dangerous it could be, not just for the peace process, but for u.s. relations with the arab and muslim worlds. >> what do you know about jared kushner and the role he's expected to play in all this? >> well, it's largely unknown.

there were a couple profiles of him in the press over the past few days. he's a young man, clearly talented with respect to real estate and other activities, but very unknown in the middle east. he visited israel as a younger man, had some exposure with his family to the jewish and israeli side of the conflict, but there's not a strong indication that he's got a balanced view and probably will have to do a lot of homework before he jumps into this. >> ambassador, is there any way to go but up with israeli relations right now? >> you know, they said the peace process has been on life support for many years. i suppose at some point we might say that the life support is over, but any progress now, whether it's on the ground in terms of improving living conditions for palestinians, providing more security for israelis, bringing down the

temperature would be helpful. both sides also need a horizon. they need to see that there's something out there which we call a two-state solution that gives them some hope for a difficu different future. >> ambassador, thank you for your perspective this morning. really helpful. appreciate it. let's get back to kate moore of blackrock, our guest host. we talked so much about equities. there are bonds, all these things play into asset allocation. one affects the other. it's hard to really make firm decisions without having an opinion about these other things. so yellen. when you heard what she said that maybe there's a risk to waiting too long, did that sound kind of ironic?

>> it sounded kind of right, joe. >> they said when we got below 5% unemployment, we should be at 3.5% fed fund. if she can't hear how ridiculous that sounds to say it at this point, it makes me wonder. >> i think the acknowledgment yesterday that we were pretty much at full employment, we've gotten to a point where we're getting a little inflationary pressure. the rest of the global macro drop looks strong enough. if the fed doesn't normalize and get off this floor, then we're going to be in a challenging environment. >> that reminded me of bernanke in 2010 saying we may have a housing crisis at this point. this is so after the fact, and so many people have been pointing this out for so long. is it really just occurring to the chairman of the federal reserve that they're behind the curve? >> of course not. of course not. >> sounded like it. >> when we think about the march fed meeting, you know, and we have this discussion, we think the fed probably should move, but it's a coin toss at this point whether or not they do move. >> why? that's ridiculous. looking at all the possible

fiscal stimulus we've got, looking at the recent inflation data, looking at where the unemployment rate is, looking at how long we've been at emergency levels, why isn't it 100% for march? >> you had a keyword in here, which is the possible fiscal stimulus. i think the timing of the stimulus is so uncertain at this point. tax reform may take multiple quarters, not multiple weeks. we may actually have a significant lag between when policies announced and enacted, even if we do have a framework. we're not looking for inflation to take off to, say, 2.5%, 3% without a significant amount of additional fiscal stimulus. >> we did see a hotter than expected ppi number yesterday. it was something that you could probably write off to say they revised the month earlier numbers. is it something you think is a concern that's already showing up or not? >> when we talk about inflation, the one place we're seeing god inflation where hopefully we're going to get a surprise to the upside in today's read is coming

from wage inflation. we want more of that to lead consumption into this next stage of the economic expansion. i don't think we're going to get a huge sustainable amount of inflationary pressure from other parts of the consumption bucket. what i do want to say, though, you mentioned this at the beginning, joe. looking at other asset classes and the interplay between, say, currencies and bonds and equities, is it's really important to consider the valuation of each of these other asset classes when you're looking at the equity market. very few people are just equity focused. we have to look at the full opportunity set. i think bonds are still relatively rich. you know, especially the dollar has moved relatively quickly after the election. equities look more attractive on an allocation basis for us. >> so the dollar and bonds have both been sort of kwquiet for a

month. they haven't been a hindrance to the equity markets. >> well, been relatively quieter range bound. i would say the dollar has been something we've been -- >> how is that going to break out? >> how is the dollar going to break out? >> yes. >> i think we're going to be range bound for a bit. >> because nobody knows. >> forecasting currencies is difficult. i would worry if the dollar rallied significantly. some of the progress nas cay to bes and forecasters were suggesting it could go 15% to 20% in 2017. that would be bad news for u.s. equities, bad news for the u.s. economy, really tough news for a lot of international markets as well. perhaps my range bound comment is wishful thinking. >> and i don't want to buy any bonds, kate. >> joe, i'm not going to force you too. do what you feel comfortable with. >> the ten year for 2%.

s. >> people used to give bonds for people's bar mitzvahs. $25, $50, $75. >> that music, it's really good. kate, thank you. coming up, the dash for the diesel. in the late '90s in europe and why car companies are being vilified now. we're going to talk about the green agenda and why reform of a policy with a huge cost and zero benefit has no chance. that's pretty strident language. sounds like holman jenkins, and it is. and stick around for ron baron. not the red baron, the ron baron. his latest investment calls and

stock picks are coming up.

the ongoing emissions scandal surrounding volkswagen shining a light on european policies that may have been doing more harm than good. this morning's business world column in "the wall street

journal," holman jenkins explains how dieselgate has turned into a disaster. holman joins us now. thanks for joining us. in this piece, it's about dieselgate, but to me it encompasses a much bigger discussion about the green lobby and what they've decided to focus on for god knows what reasons. in the effort to cut down on trace levels of co2 -- >> infinitesimal amounts. >> and man's impact is infinitesimal, really. the notion we can control broader climate issues is up in the air as far as i'm concerned, whether it can actually be controlled by man. in the interest of lowering co2, particula particulate pollution, sulfur d dioxide. they mandated a move to regulate co2, which opened up more pollution. >> 1% or 2% of american cars a

diesel. europe is much higher. none of the makers could meet these standards, so they all cheated. they all cheat, not just volkswagen. they have much dirtier air now in european cities. paris and london have had days worse than beijing because of these misguided quests to have these march untginal co2 gains. >> i have stole than movie, the name of a "star wars" movie. co2 is a phantom menace. mainstream media will show you pictures of china in soot and particulate pollution. they'll show you black smoke. what's up, andrew? can we just talk for a second? >> i do want to talk for a second, which is to say we are on some form of mainstream

media. i think there's an argument to be made that there is some form of climate change going on. >> okay, all right. well, climates always change. we know that, right. >> even so, the question i have for holman is, the problem is these automobile makers were cheating. everything was done with the right intention, which was to do two things. they wanted to reduce co2, and it was then the -- >> but do you want to pay the money for it? the scale of what you'd have to accomplish to change the atmosphere, the amount of co2 going into the atmosphere is so huge in comparison to the steps we're willing to take. steps that cost hundreds of billions of dollars that accomplish nothing. it has to come down to cost and benefit. we have huge cost and no benefit. >> but to look at the automobile makers and say, well, they cheated and of course they had to cheat is a different issue. if the automobile makers didn't

cheat, we'd be talking about this in a different way. >> there are so many worthy environmental causes. particulate plu particulate pollution, water, plastic in the ocean, deforestation. there's all these incredibly important things. >> but it's an elite culture now. you get this mantle of green holiness if you support these things. it creates an environment where you get these policies. the only rewards, they don't go to the public, they go to the special interests who build electric cars or windmills. >> you're not going to fund big foot research if you don't believe in big foot. so there's going to be no funding if you're not on board. i think you're going to see nasa change. i think you're going to see a lot of change. skeptics have been run out of town for the last eight years.

>> now they're back in charge. i think the public is by and large on their side. they may believe there's a threat, but they don't believe in throwing money at a problem that isn't going to fix the problem. >> it's estimated at $100 trillion by 2100 to lower the celsius by, what, half a degree. >> they assume that business as usual continues when, in fact, energy technology is being revolutionized before our eyes. fracking has brought down the co2 output of the u.s. economy considerably. you have the lithium ion battery, which is still working its way through the energy system. i don't think we're going to have the same energy system 100 years from now. >> do you think we should have incentives for lithium ion batteries? >> i don't think you need them because they're so useful. i wouldn't be opposed to a carbon tax so you can get rid of all this stuff and increase labor and proceeds.

>> don't conflate what we're seeing. we're saying whether the anthropogenic component -- we're saying it's unclear. >> if we get rid of the testa subsidies and windmill tax subsidies, all that is corrupting our system. if you get rid of that and replace it with a carbon tax, that would be a net improvement. >> i do like the smug certitude of the group think involved and the anti-science. >> it's very fragile. you can sense it's getting ready to crack up. >> i agree fully. holman, thank you for being with us this morning. coming up, final thoughts with kate moore of blackrock. futures at this hour are indicated up again. don't chase it. anyway, "squawk box" will be right back. ♪

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[ laughter ] cartoons. wait for it. [ cat screech ] [ laughter ] ♪ [ screaming ] [ laughter ] make everyday awesome with the power of xfinity x1... hi grandma! and the fastest internet. [ girl screaming ] [ laughter ] welcome back, everybody. let's get some final thoughts from our guest host this morning, kate moore of blackrock. we've talked a lot about the u.s. markets, but we haven't talked much about international. what are you telling people right now? >> interestingly, we're probably more constructive on non-u.s. equity markets and the relative opportunity in the near term than we are on the u.s. not that we don't like u.s. markets. we want people to stay invested. when we look at relative valuations, relative earnings momentum, and also sentiment and positioning, it's all kind of

pointing to, you know, i think good opportunities in europe. we're still overweight and constructive on emerging markets. really shifting some of portfolios into equities outside of the u.s. >> how does the dollar play into that for a u.s. investor who has to then translate whatever they earn overseas back into u.s. dollars? >> right. without question the biggest risk comes from emerging markets at this point. if the dollar appreciates significantly, that changes the calculation for u.s. investors and also ends up being difficult for some em stocks. we would note a couple things. number one, we've had a real turn in the profit cycle and profitability for most emerging market campaigns. this is particularly true in e marriaging marke -- emerging markets. we're in a different part of the earnings cycle than we are in developed markets. plus, valuations are not stretched. i think sentiment on emerging market equities is very weak, and positioning is just not there.

if companies are not as sensitive to a much stronger dollar and the fundamentals and valuations and sentiment are all lining up, this is a really interesting place. >> you also point to europe as a potential place for opportunities. there has been so much concern about the political outlook in europe. it seems to increase on a daily basis right now. is that already in the stock market? if any of those things happen, you wouldn't see a fall? >> look, i think the chances of higher volatility in european equities as we go into the french election, as we get further into this situation with greece, as we go to the german election, is quite high. we're going to have higher volatility in european equities, but european equities in general, if we're right around the macro environment, should produce solid earnings growth in 2017. they tend to have a higher beta to global gdp growth. a lot of that is because they have higher fixed costs.

so any increase in sales leads to, you know, better overall profits. we're pretty constructive on a better earnings environment this year, barring a major disruption in activity from political risk. at this point, i don't think we're going to get that. >> all right, kate. it's been a pleasure having you here today. thanks for joining us. >> thanks for having me. >> kate moore is the chief equity strategist at blackrock. coming up, baron capital founder and famed investor ron baron is going to be our guest. his latest investment ideas are next. then, is a march raise going to be on the table for the fed? we'll ask mark olson about that. and then senator john barrasso will join us to talk about the big meeting today between president trump and prime minister benjamin netanyahu. "squawk" returns in a moment. anthdd

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breaking economic news. new reads on the consumer just minutes away. we'll bring you the numbers and market reaction. plus, good news for chalupa lovers. taco bell has a new item on the menu, weddings. the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york, this is "squawk box." good morning and welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm joe kernen along with becky quick and andrew ross sorkin. futures are up again. up 33 on the dow. in corporate news this morning, a lot to tell you about. pepsi co. posting better than expected revenue and earnings, but the full-year outlook fell slightly below forecasts. also, fossil's quarterly

results falling short of estimates. the watch maker also giving worse than expected guidance for the current quarter, blaming the ongoing impact from currency fluctuations and a decline in the overall sales of traditional watches. then anthem, we've talked about it before. anthem has filed suit against cigna seeking a temporary restraining order against their move to end that $48 billion transaction. cigna sued anthem late yesterday, saying that the planned purchase of cigna cannot possibly be completed. and hilton worldwide beating the street on the some and bottom lines, helped by increased bookings at higher prices. berkshire hathaway nearly quadrupled its take in apple by buying 42 million more shares. they also added stakes to airline companies. a programming note, becky will be sitting down with warren buffett on monday, february 27th. you don't want to miss it. it's not too early to send us the questions you have. go right now to twitter or facebook and be sure to use

#askwarren. >> by the way, he says he's not going to comment on any of those stock moves that were just announced until he sits down with us. he'll be with all three of us for the three hours on that day. our next guest remains focused on the long term when it comes to investing. joining us now is ron baron, the founder of baron capital. ron, it is great to see you this morning. >> thank you very much for inviting me. before we start talking,s i just wanted yo uh wanted you to know this was my mother's birthday. she would have been 96 today. she passed away three years ago. she would have been very excited to see me here. this was her birthday. >> so you have to remember that every year. >> a good celebration day. >> it is. you know, ron, we haven't talked to you since we passed a few milestones in the stock market. 20,000 for the dow, 2300 for the s&p 500. i know you're not a macro guy. i know you look at stock

specifics. wh we want to hear your broad thoughts about where we stand right now with the market. >> mary erdos is one of the top executives at jpmorgan. about two months ago she asked if i would be interviewed at a conference for robin hood, which is a conference for hedge funds. so i went, and she started interviewing. before i did, i said i was really pleased to talk to these 500 people. i was the warm-up act, actually. end of the day, just before jeff immelt and jamie dimon. i was the warm-up act. so the first thing i said is thank you very much, all you hedge fund guys, because in the 1970s when i started my career, you kept me alive with brokerage

commissions. now you're selling short all my stocks so i can buy them at better prices. thanks for that, too. the macro that a lot of people are interested and focused on in trying to figure out what the stock market is going to do next is what everyone talks about. my feeling is how many people in the audience thought that donald trump would be chosen as president. a few people raised their hands. i said, and how many people thought that if he were elected president the stock market would right away go up 3% or 4%? nobody raised their hand. i said with brexit, it's the same thing. how many people predicted it, not very many. as well as oil prices, brexit, trump elected as president, commodity prices, interest rates. it's the same thing. you're trying to focus on what's not predictable and make investment decisions on that. instead, we think that we have a big picture. the big picture is that the economy basically doubles every 11 or 12 years and the stock

market doubles every 11 or 12 years with the economy. so that's the big picture. >> so you have to be a macro, macro guy. >> go back to -- presently the dow jones is selling at 20,000, and the economy this year is 19.5 trillion. in 2007, it was 14,000 and 14 trillion. in 2000, it was 10,000 and 10 trillion. 1960, it was 600 on the dow jones and 520 billion for the economy. so 6.7% a year for the economy and 6.3 for the stock market. add dividends, it's about 8%. it that's one side. the other side is that this is for certain. for certain is the value of your money is going down. so buffett says two years ago was the 50th an verse i have ni

firm. it's eight times the cost. every 17 years, that means you lose half the value of your money. if you put your money in the bank and you want $100,000 of buying power, in 17 years you need $200,000. we take an asset that's folding in value, that's the dollar, and use it to buy something that's increasing in value, investment and businesses. the economy grows 6 or 7, and that's what most businesses do. so we're just trying to do better than inflation. so the easy thing to do for most people is say, okay, i'm going to double my money. the way we should do it is put money into an index fund. you put it into an index fund, match the market, and you have double your money every 11 or 12 years. >> in other words, don't fear the big numbers. don't get spooked. just keep your head down. >> and keep going forward. you don't get rich by taking all your money and investing it. you get wealthy by investing all

the time and doing it for your life tame and getting to be old. that's how you get to be rich. what we do is try to double every five or six. if we're doing that, then we're going to do better than index funds over the long term and we're going to get enough money to make a living. that's the idea. >> to do that, you focus on specific stocks. correct me if i'm wrong. i think something like 15 stocks have been the bulk of the major gains that you've made in the funds. am i butchering that? >> so over -- since 1992, we had $150 million then, but since th, now we have $21 billion. we've made almost $20 billion in profits. that represents a compounding of about 12.5% a year, the market at 7.5% a year. of those 20 billion in profits, half of them have come from 15

stocks. so we made a billion in charles schwab, 500, 600 million in a bunch of companies. most of the money -- half the profit is from 15 stocks and we have 450 investments. we've probably invested since 1992 probably 2500 companies. buffett says -- again, using his name, but man, he's the best. he says that if you took out 12 investments that he's made over the years, his performance would be average. phil fisher, same 50, 60 years, take out 15 stocks, have average performance. so the key is identifying these great businesses. when you get them, not selling them. the average turnover we have -- the average turnover for most mutual funds is 115%.

you hold a stock for 12 months, 13, 14 months. we hold stocks an average 12 1/2 years. so that's three presidents. everyone talks about what's this president going to do? well, three presidents, three elections. i own stocks 20 years. i've owned charles schwab since 1992, alexander since 1989. but it takes a long time. 2001 to 2007 we got 65 million in dividends, 800 million in profits. let's talk about some of the stocks you hold right now. obviously you're reassessing this on a constant basis. some of the stocks you have major positions in have been in the led lines.

let's start with under armour. how much do you own? >> i don't have the exact number, but we sold about 10% or 15% of our stock about two years ago, near the highs. haven't sold any since. i've been buying stock, actually. doing some tax things, actually. essentially net buying. under armour, what happened presently in this last quarter -- so when we invest the in them first, it was 500 million in sales. it's now 5 billion. the stock is up six, seven times from the bottom but was up 10 or 12 times. it's had a sharp decline in the last two years. what's interesting about it is that they have been with problems, as you have some turnover of people, too much inventory, they're expanding in europe and internationally, which is costly. >> the retail landscape has

changed. >> he's trying to sell a $70 sweatshirt and guys are selling $30 sweatshirts. they've lost some distribution. sports authority went out of business. that was where they sold stuff to. but the positives are that it's a $5 billion business. a billion dollars in sneakers. that was up 50% last year. nike does 9.5 billion in the united states and 20 billion overall. a big, open space there. women's is a billion dollars in sales. he's got as much opportunity in women's as he does in men's. the online business, direct to consumer, is a big opportunity. >> as a major investor, do you still have faith in the company? >> to be a major investor, you have to have faith in kevin. yes. we thought after we had made all that money two years ago, i thought we're not going to make ten times again.

what's going to happen here in the next ten years, if he can get to $18 billion of sales, which he thought he'd be able to do in eight years. i thought it was ten. he thought, you know, that you can make three times your money from there. now that the stock has fallen, you can make five times your money from here. >> does that mean you're buying additional shares? does that mean you're not selling? >> i can't say what i'm doing at the moment, but the stock is very cheap. i thi in order to get to the vision beyond, you have to get across the screen. you can't drown. he didn't drown, but he had some tough things to go through. now i think that he's back on sound fatting again and he's focused on doubling his revenues in five or six years, getting from 5 to 10 as opposed to 10 to

20. china this year will be 180 million. it's got a big upside in international. that's very costly. margins there are half of what they are in the united states. 6.5% compared to 13. big opportunities to expand overseas. big opportunities in women. big opportunities in sneakers. >> you don't even have to want to buy under armour. i went in at the tournament and said, i need a white turtleneck. i go over here, it's the only one we have at a pro shop. it's an under armour turtleneck. it's everywhere. there's no stopping it, i don't think. >> well, it's not an easy thing to do. you're competing against the guy who's six times as big as you are. adidas is a big company also. but he's a real talented guy. a real hard working guy. he's really innovative. i think he's going to be very successful. he already has been very successful.

>> ron, when you think about these individual stocks, do you even contemplate things like this border adjustment tax and what it means to retailers and if you have factories outside? is that even on your radar? >> i read about it. it's real interesting. >> but it's a nonissue? >> that's not what makes decisions. i figure people adjust. if things work, they'll do it. if it doesn't work, they won't do it. elon musk, when he sells cars in china, $100,000 car, there's a $25,000 tax, then there's a license cost that people in china incur to buy their cars. when they sell cars here, it's 2%. why is that fair? so i think that there's -- >> but clearly somebody like -- and we'll talk about this -- >> but on the other hand, he could do it -- >> but he clearly thinks that having a voice at the white house is important not only to him personally but to the company, right. >> his point is that it's better

to be in the room where the decisions are being made, to influence decisions as opposed to being outside the room and watching. so he can provide advice and be opposing ideas he thinks are not good, and he thinks he's more powerful that way. and he's a big job creator. this guy is creating lots of jobs. he's got 30,000 employees right now. >> we can continue talking about this in a moment. all of the things you mentioned with under armour, the operational issues. there's been controversy recently since kevin plank had an interview here on cnbc. we'll get to that after the break. >> six trump tweets. have you seen them? >> i have. >> he's not a happy -- he's not so happy this morning. let's slip in a quick commercial break. a lot more from legendary investor ron baron next. plus, janet yellen returns to capitol hill today. we'll talk to former fed governor mark olson. later, john barrasso on the fate of obamacare. stay tuned, you're watching "squawk box" here on cnbc.

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welcome back to "squawk box." we are back with investing legend ron baron. when we left off, we were talking about under armour, but we also were talking about elon musk. i want to move to tesla, the company that is, which is to say you have been a big supporter of elon musk and tesla for a long time. do you continue to be so, and are you buying more? >> well, as i said, i can't tell you what i'm buying now. we report once a quarter. but we have bought about 106 million shares over a 3 1/2-year period of time. our average cost is about $208 a share. so it's a $300 million investment. i think that in 2020 that we're going to make from present prices four times our money. i think that in 2025, we can make another triple. and in 2030, it could be another

triple. i get this 15-year time horizon. i think this is potentially 30 times. i think the likelihood of a quadruple in 2020, i give that a high probability. 2025, making another triple, something less than that. for 2030, something less than that. but still better than 50/50 in 2030. >> we talked briefly before the solar city deal. you were a little anxious then became a supporter. how important is that transaction to the success of tesla one way or the other? >> well, they could be and would be and will be successful without that, but that sure helps a lot. i think it's very important long term because there's not enough electricity being produced in this country. the grid isn't growing. so as a result of that, there's going to be a point, as i was describing it in the past, 40% of electricity in the united

states is used by single family houses. that 40%, if you put a car in a garage, that car uses 30% of the electricity of the house. if you put two cars in the garage, that uses 60%. this is a 2500-square-foot house. if you have two cars in every garage and 40% electricity now, you've just increased the demand for electricity by 24%. where is it coming from? in order to sell the cars, you have to be able to have some way to have more increase in power. the way the electricity grid works is there's a spike a couple times a day for peak power. if you eliminate that spike -- therefore, you have to have capacity for that. but there's this level amount, which is half as much as you do in that peak. >> let me go through a couple other stocks you like. vale. you going skiing this year? >> i don't know, but i wanted to hear -- you were coming to a conclusion there, weren't you? >> yeah, so the conclusion is that for tesla -- >> sorry. >> i'll do it real fast. for tesla, what's going to

happen is these roof, that's a potential $40 billion business for them in, say, ten years. i think the car business is a potential $750 billion business. i think the mobility business is $100 billion business. >> to supply it in nonpeak hours -- >> so they have batteries. they're going to sell batteries also. this enables them to sell more batteries. then they are going to have a network of these batteries. therefore people in the daytime produce more than they need in solar, store it in the batteries, then use it at night. in the morning when you have peak power, tesla will have a network of batteries hooked up to these houses. >> for the extra cars. >> they're going to be able to hook up and rent these batteries. >> then you have a back-up generator out there. that's another one. go ahead. >> i was just going to go through the list. so vale. it's been a great story.

but it's been a roll-up story. >> well, that's not the whole story here. the idea behind vale is that when we started investing in 1997 -- so we bought -- when i was talking about those t-shirts i gave you, exceptional takes time. that was the whole theme. it took me 3 1/2 years to buy tesla. it's taking us -- you know, i guess it was three years to buy manchester united. as far as vale, it took us ten years to buy 15% of the company. we ended in 2006. we made, i don't know, 50%, 75% over ten years. since then, we've made seven times our money. the reason for that is that initially my idea was they should be investing in the mountain. they should be investing in $15

million restaurants and new $15 million ski lifts and new snow making equipment, new grooming, regentry regentry if iing the town. they said, no, no, no, that's too much risk. i felt if you made all these investments, then what would happen is you could charge $100 a day. >> which they do. >> now they charge $175 a day. now they have over half of their money in the till before the day -- before the season even starts, whether you know whether it's going to snow or not. although it snows 350 inches a year. you have half the money in the till from these season passes. now they have these other places. they have park city and canyons. then they have whistler. they're going to both increase

whistler and at the same time they're going to increase park city. those guys are going to go skiing in vale and beaver creek. so you have these roll-ups, but that's not the idea. it's the season passes where you get more and more. you have this business that's way in advance. someone's going to come along at some point and say, okay, listen, vladimir, my great friend, buddy and everything, but maybe i should own vale. some day, five ten years from now, someone is going to come along and pay a fair multiple on the valuation and the company is going to be -- we're going to make another double. >> you'll be out before the end of snow. i know you're worried about that. we've talked about it before. you'll be out -- >> oh, you mean global warming. >> yeah, the end of snow. we had kate on. she said they had to close down jackson hole when she was out there because there was too much snow. >> i'm going to buy you a pair of flippers. i'll send them to you just in

case. >> okay. you just get one foot out the door. i'm really worried for you. >> if i get a house on the ocean and a house in the mountains. things don't exactly right, i know where to go. >> so exposed. ron, you're an inspiration. it's amazing. and it can happen. i didn't know that about vale. we used to have the guy on five, six, seven years ago. i didn't know it was going to go up from 20 to 180. i w >> i was telling everyone. one of my friends was a director in vale at the time for leon. he tells me, you know, what do you think i should do. i said i think you should buy more stock. he said, no -- >> if all these guys are raising their prices -- >> it's not a poor man's sport. >> i agree, but i wonder whether there's an opportunity. >> let me give you one other idea. manchester united. th that's one we've been buying. a lot of these companies, it takes a long time to make the investments. out in las vegas, we were visiting a family that had

bought ultimate fighting championship. know what that is? >> yeah. >> so the guy who owned it, who started it was sort of a marginal person and wasn't following the rules. there were no rules. >> 15 seconds. >> bottom line is this family bought it for $2 million and just sold it for $4 billion. 15 years. it was losing money, making $200 million a year. andman chest y a and manchester united happens to be making $260 million a year. >> thank you, sir. >> thank you. coming up, breaking economic data. your brokerage 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.

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welcome back to "squawk box." breaking news, we look at a february read on empire. it jumped to 18.7 from an unrevised 6.5. cpi for the month, whoa, it's like déjà vu all over again. up 0.6 on headline, up 0.3 on core. here's where it gets different. we're up 2.5 on year over year inflation, up 2.3 on core. retail sales for january up 0.4. that's definitely a better than expected number, but sequentially, it follows an upwardly revised 1%. so in that regard, it's

sequentially lower. if you strip out transportation, which always is a good thing to do, what you end up with -- i take that back. strip out autos. it's up 0.8. that really zooms. so we can see that autos had an effect on headline number. take out autos and gas and it's up 0.7. that's a very, very healthy number. if you look at the control group, that was up 0.4. that's pretty healthy as well. can these numbers be better? yes, but the ex-autos, ex-autos and gas, pretty solid. now let's go back a minute to that year over year core. first of all, up 2.3. what's significant here is the 15.2% or higher number we've had. in terms of 2.3, how important is that? it's important. i have to go all the way back to may of '12 to find a 2.3 number. to find a higher number, zoom, zoom, zoom all the way to 2008,

sent september of 2008. so what are we looking at treasuries? 2.5% on tens. becky, back to you. >> all right. thank you, rick. steve liesman is here. what do you think? >> wows and oohs and ahhs. i think i saw a 7.8% month on month increase in gasoline prices. >> whoa. >> so i don't think that's going to repeat. elsewhere, commodities were up 1%. you know, they get angry at me in the back room when i say this, but airline fares were up 2%. i know you have an ongoing thing about the competition. they were down 3.3 year over year. 1% in december, 2% in january. let's see. that's about it. other stuff is kind of

controlled. i like to look at rent and owners equivalent. that's up 0.2. that's not really a big thing. 2.5 year over year, i think that's something the fed is going to watch. it's going to be another thing the hawks on the committee are going to say, you know what, we need to take account of this. also is the growth, which is what happens in retail sales is a pretty big number. beating expectations at 0.4. take out the autos, 0. 8. >> real quickly, steve. what janet yellen said yesterday to the senate, the takeaway was she did exactly what we thought, made it sound like march could be a live meeting potentially. >> this is the problem with my life. i can sort of tell you what janet yellen is going to say. i can't tell you how the market is going to react. take a look at the feds funds probabilities. she set up a situation where the market would price in a higher probability of a rate hike. kind of did. what's the number? there's the two-year note, which is spiking on the data this

morning. i think they think it's more likely. empire state also up higher. then you look at the probabilities, 18% for march. i heard joe was incredulous this morning. >> about what? >> about why isn't the fed just going to hike in march. the fast money traders were incredulous. >> i just love that she said, you know, there might come a time when staying too low could have an effect. >> unwise was the word she used. it would be unwise. echoed by kaplan. every single minute, every single word, joe. >> when you heard it, did it occur to you that was kind of -- it sounded ridiculous? >> i don't think it hit him quite the same way. >> i look for the level of rhetoric. unwise was a higher level of rhetoric to me. this is why you mock my english degree, but it turns out to be the perfect degree for what it is i do. i think this number -- the numbers this morning should propel the idea further towards a march hike, but i cannot price

in the market. i can tell you the possibilities, but the market probabilities are beyond my grasp. >> steving thank you. >> thanks. and here we go. fed chair janet yellen returns to capitol hill today. joining us now, former fed governor mark olson. we've had so much fed speak for the past -- mark, i love that they're a big part of my life, big part of all our lives now. i think that just that fact might be part of the problem. will there ever be a time we don't monitor every word in fed speak every day? >> i doubt that'll ever come, joe. i think it has become too much a part of the economy, and there's too much that's based on it. but i think the big news this morning, in addition to what she said yesterday, is the core cpi number. if i heard it correctly from rick, that's really a big number. i think that is going to be something that'll be taken into consideration for the march

meeting. >> that's what we heard yesterday, that they made these goalposts or set goalposts for the unemployment rate, and they hit them all and didn't do anything. the reason was because they didn't have cooperation on the inflation side. so now that's starting to happen. maybe that gives them cover to say, all right, now it's time and we were right wait. >> go back to something you said just a few seconds ago. janet yellen said exactly the same thing about we don't want to wait too long. she said that in january before the january 31st meeting. so that is in the new news. i think what is the new news this year is they're talking about both rate hikes and a reduction in the balance sheet. steve and i have had this discussion for years about when that's going to happen. it was not an issue in 2016. it is an issue in 2017. i think what we will see is sort of a trade-off over the balance of the year.

i think the cpi number makes a hike in march more likely than it did yesterday. >> mark, would you be voting to hike? what is this split between the market, which keeps hearing yellen -- i think we had guys like robert kaplan right in the middle saying we oughtn to to be hiking sooner rather than later. we can't get the market to price in this hike, even a 25% chance, let alone a 50% chance. >> well, if i were voting, i would vote to hike. i think we need to get -- i would either be voting to hike or i would be voting to strike the balance sheet. they have the same monetary policy impact on the money supply, as you well know. why the markets don't figure out, that's for you guys to understand. i have no idea why the market does not get the probabilities more correct. >> someone is writing in to me, why would anyone believe her at this point?

>> goldman yesterday went from a 15% to a 20% probability of a hike. jpmorgan said not likely. what's interesting to me is the market expectation, as mark well knows, creates an eventual reality for the fed. if they can't get that probability up, they're very unlikely to go. >> remember the other element that she introduced and talked about extensively yesterday. that's product iftivity. she's saying -- i suspect you'll hear that again today. she said without increased productivity, we're not going to have an expanded kpli. the reason i think, joe, is that they've been putting it off. number one, we don't have a consistent fiscal policy. number two, the economy still has not performed the way the expectations have been for either the markets or the fed. >> mark, i want to go out on a limb and suggest one thing. >> okay. >> which is the fed is spooked by the trump administration's

potential trade policies and a what it could mean for the dollar. i think if you were in there and you knew tax cuts were coming and deregulation and stimulus, you could price that in and figure that into your forecast. i think trade is a huge outlier for the fed, and it has them scared about forecasting too far ahead. >> okay. spooked, i think, is the wrong word. very concerned. here's why. what the fed does is it measures the impact of foreign trade as it impacts the u.s. economy. there are a lot of unknowables there. i think with some uncertainty about what's going to happen with foreign trade, absolutely. that's very much on the fed's mind. >> i think they were worried about brexit. >> great point, joe. that's a really good point. they calculated it wrong. you are correct. i'm agreeing with you 100% there was a logical outcome from

brexit, and it didn't happen. it didn't happen the way they expected. >> all the counter factuals have not been coming true. >> all we've had on brexit so far is the vote. we've not had any of the implementation yet. it's going to be a hard leave. but we don't know exactly what that's going to do with trade. we know there will be a lot more bilateral agreements, i think, as opposed to multilateral agreements. >> all right. things are getting great again, mark. >> they are. still going to be great fun, joe. >> it is. that's for sure. talking about it. anyway, thank you. hope to see you again soon. >> look forward to it. coming up next, the race to repeal and replace. health and human services secretary tom price set to brief. senator john barrasso will join us after the break to talk about it. support am for walking me through my first options trade. well, we're all aboueducating people on optis strategies i won't let this accomplishment go to my head.

get help on options trading with only at ameritre. i'm ve, the orange money rent rabbit, from voya. i'the money you sa for retirement who's he? 's een moneor sndingtoda makes it ey to telyou apar th, and ametter looking. when 's ti tget orzed apar for retirement, it's time to get i we worked with pg&eof to save energy because wenie. wanted to help the school. they would put these signs on the door to let the teacher know

you didn't cut off the light. the teachers, they would call us the energy patrol. so they would be like, here they come, turn off your lights! those three young ladies were teaching the whole school about energy efficiency. we actually saved $50,000. and that's just one school, two semesters, three girls. together, we're building a better california. welcome back to "squawk box," everyone. president trump has promised to repeal obamacare, but the big question now is what will a replacement look like, not to mention the timing of when this will all happen. joining us now is wyoming senator john barrasso. he's the fourth ranking member in the senate. senator, great to see you today. >> thanks for having me. >> so where do things stand

right now? i understand you and the senate are about to sit down and get an update from health and human services secretary price. >> well, of course, the big headline today is humana has decided they don't want to sell health insurance anymore on the exchanges. they're pulling out. the subheadline is that fewer people actually signed up for obamacare for this year than they did last year. so this is a program that has failed. the costs have gone up and up. that's what i hear about in wyoming every weekend. and the choices have gone down. >> senator, one point of clarification. those companies are trying to end their deal, at least say they're ending their deal because the government woenn't allow the deal to go through. >> they ended the deal to merge, but humana has also announced they're out of the exchanges for next year, that they're not going to offer the insurance anymore because for them as a company, it's a bad deal, and people aren't buying because for them it's a bad deal. so this, to me, is the complete

failure of the obama health care law. >> there have been people all along who thought obamacare might collapse upon itself. perhaps that's what we were seeing with humana in the early situations if you repeal it, what do you put in as a replacement? >> well, it took six years to get to this point, this downward spiral of the obama health care law. we're meeting today with the secretary of health and human services, tom price. we met with paul ryan yesterday. the house and senate are working closely together. we want to repeal the mandates that people have to buy this. we want to repeal the huge tax increase that the obama health care plan put on people. we want to replace it with patient centered care. do you want the government or do you want families to make these decisions? we want to get decisions out of washington, back home to the states, and whether that has to do with insurance plans that you can buy so you can buy what works for you and your family at

lower prices, whether it has to do with medicaid, which is the government-run program but states feel stymied in cha they can offer. all of those things are on the table as we try to provide relief to the people who have been suffering under the obama health care law. >> senator barrasso, if you pull the individual mandate that forced people to buy this insurance, if you pull the obamacare taxes that came along with this, that came on wealthier people, it's going to be much more complicated to then turn around and offer health insurance to all the people who have it right now. the president has said that if you have insurance, you're going to continue to get that insurance. how do you make that happen? how does the math add up? >> well, for the people who have actually been paying more, even those with the individual mandate, they're not buying. they're willing to pay the fine because the prices are so high. they're saying it's a bad deal for them personally. so the individual mandate itself has failed.

it hasn't driven people in. it's driven people away. so you need to have a better solution, which is more individual choice, lower the prices so people can actually afford it because what people are saying is even with the subsidies, it's still not a good deal. that's why we need to repeal the law, provide relief for people. i am committed as a doctor to actually finding long-term solutions for health care, and obamacare isn't it. >> you're a medical doctor, for those who don't know it. obviously you understand how the entire system works. but again, back to the price on how these things work, you're right. prices were out of control on a lot of these. the price hikes for the insurance has been out of control. but if you want to continue to have no issues with people over 21 staying on their parents' coverage, if you want to make sure there are no exceptions of people who are ruled out for pre-existing conditions, i mean, it doesn't add up mathematically

to have all of those things and still continue to offer affordable care. >> well, you know, my wife is a breast cancer survivor. so as a doctor as well as a husband, i know how important it is for people with pre-existing conditions to make sure they can continue with their insurance, but there are things that we can do to lower the cost, and it has to do with all of not just the mandates on people to buy but the mandates on what they could buy. >> sure. >> so there's these so-called essential health benefits that i think have driven the cost up dramatically, and we need to let states decide what they can sell in their state for the people, so people can buy what they want, what they need, what they can afford, not what president obama said they have to have. >> senator, very quickly, if you're looking for some time frame on this, when should we be expecting some sort of repeal and replace or some sort of new plan that comes out? >> well, yesterday in our meeting with speaker ryan, he said that the house is going to start mark-ups in march. we're still trying to get the

cabinet confirmed. you've seen the obstruction going on there. we're holding hearings, holding meetings every day and continuing to work on ways to help provide some relief for some of the people that have been harmed by the obama health care law and working toward repeal and replace. >> senator, before you go, do you think there should be an investigation around flynn? >> i have big concerns about russia overall. we can spend a lot of time discussing that, but certainly he's under investigation now i think by the fbi. there will be additional investigations. >> should there be a special prosecutor? >> well, there are committees that are set up to continue with the investigation process. >> all right. senator, thanks for joining us today. >> thanks for having me. coming up, wedding bells and taco bell. details about how the mexican chain is helping couples tie the knot. that is next. it is wonderful if you both like taco bell, like my house. stay tuned. "squawk box" will be right back. the furebusinenew yorkte is inotio

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to learn more about gas safety in your home, visit pge.com/safety together, we're building a better california. jim cramer joins us now from san francisco. is this four straight days? i don't know, we're looking positive again today and seems to accelerate during the session. how do we know whether this has sustainability, this most recent leg-up? what do we watch? financials, tech, what's important? >> i think we look at the ten-year. the ten-year is saying that the fed has to move. if the fed has to move the financials stays stronger. by the way, i think the dialogue about the fed has to move. has to come back to the idea

it's not justin flag inflation, economy, i understand we keep going up, but remember the bonds are telling you business is better. >> all right. i don't know what else to do but just enjoy it, jim. so sit back and watch this market. it's pretty phenomenal. 20,500 now. we may be -- >> look, you can't relate it to trump. you have to relate it to earnings. >> yeah, which may be indirectly related to trump. anyway, thanks, jim. remember the guy came on from, i think it was delta said absolutely people are -- they could see it as of november 8th animal spirits. >> yeah, big change. >> all right. tonight on "mad money" don't miss the ceos of cisco and adobe. mr. narayne out at the tournament. that's at 6:00 eastern time. "squawk box" will be right back.

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flagship restaurant. package includes a taco bell garter belt and a bowtie, a wedding bouquet made of sauce packets. just married t-shirts and taco bell branded champagne flutes. cover the cost of the couple's meal, 12 pack of tacos and cinna-bun cake. i'm going to do this to renew vows. >> there you go. make sure you join us tomorrow. "squawk on the street" begins right now. ♪ good wednesday morning, welcome to "squawk on the street." i'm carl quintanilla with david faber at the new york stock exchange. jim's at one market in san francisco. the news flow at full blast this morning. yellen on the hill, strong consumer inflation, retail sales, futures are steady but the dollar it's best day in a month as