>> live from new york where business never sleeps, this is "squawk box." good morning. welcome to "squawk box" on cnbc. i'm michelle caruso-cabrera along with andrew ross sorkin and melissa lee. joe and becky are off today. u.s. equity futures are suggesting a positive open. dow would open higher by 43 points. the nasdaq by 14 nap, and the s&p by 4.5. we're doing asia first. sorry. the nikkei higher by 0.68. hang seng lower. now on to european equities. germany higher bay half percent. france, marginally positive. some news over there is that the greeks are once again back at the negotiating table when it comes to their most recent bailout money.

wti is higher by 87 cents, $54.27. brent is higher as well, 92 cents. $57.10 over in london. nat gas is lower by 7 cents. decline of more than 2%. >> among the top corporate stories, kraft heinz is withdrawing its bid for a merger with unilever. kraft worried that it would be too hard to negotiate after the public disclosure of its bid so quickly. a kraft spokesman said the company intended to proceed on a friendly basis but found unilever did not wanted to pursue a transaction. restaurant brands is in advanced talks to buy popeyes. the deal will probably be valuing popeye's at $1.7 billion. an announcement could come this week. wanda's proposed 1 billion acquisition of dick clark productions is under pressure. wanda is run by china's richest

man. it already owns legendary entertainment and amc entertainment. reuters reports wanda's deal for dick clark is shaky but not yet dead. >> part of the problem is they can't get the money out of the country. >> by the way, on this kraft heinz deal -- >> tell us. >> it ain't over yet. >> it's not. >> it's so far from being over. this has been -- >> would they just give up half in terms of gains? this is something 3g has wanted to do for so long. this is on the map of strategy. the only question is whether unilever tries to do something to make it more difficult which is to say buy something like colgate or another business to make themselves bigger. that's something you might see if they really are so aghast about the potential of merging with kraft heinz. >> in m&a, no is always maybe,

right? >> only because of the rules and regulations in terms of what you disclosed. it becomes more complicated in terms of these windows -- >> because of the european angles. >> the second you say we're in talks, you're in talks. when you say you're out of talks, you have to be out of talks for a period of time. it's na dance. >> would the uk laws apply to kraft heinz's proposal as opposed to unilever's ability to go after something else? >> they can do whatever they want. >> so shareholders really want something to happen, particularly with unilever. >> i was always -- always, this only came up last week. but they're so famous, 3g for cost cutting, cutting the amount of employment. that's much harder to do in europe. >> yes. >> i don't know if -- they're

very smart people. i'm sure they considered these things. how do you get the same level of cost synergy so quickly. >> you don't. but the conundrum is you have wrung every little savings out of kraft heinz, what do you do? it's hard to grow top line in this environment. so you have to grow bottom. that's the complication. talking earnings. new ones out from home depot. the biggest home improvement retailer earning 1.44 per share for the fourth quarter. 10 cents above estimates. revenue also above forecast with global comparable-store sales up 5.8%. the company increasing its quarterly dividend by 29% to 89 cents per share, announcing a $15 billion share repurchase program. also giving a full-year earnings forecast of $7.13 per share, slightly shy of what was the estimate of 7.17.

before the bell, results from walmart and macy's. macy's ceo terry lundgren will join us to talk about those results. that's at 8:00 a.m. eastern time. as for the rest of the week, reports from tjx, tesla, hphl brands, barclays, coles, gap, nordstrom and jcpenney. tesla is a big one. everyone fascinated by the great elon musk. on this week's economic agenda, tomorrow look because we will get january existing home sales, and the minutes from last month's fed meeting. on thursday, weekly jobless claims. on friday, january new home sales and february consumer sentiment. four americans and their pilot are dead after their plane crashed into the rof of of a shopping mall in melbourne, australia. this happened about 9:00 a.m.

local time, an hour before the mall was due to open. nearly a dozen passengers breached security at jfk story in new york. >> craziest story. >> 11 passengers walked through an unattended security line at terminal 5 around 6:00 a.m. eastern time and boarded flights. they say the checkpoint was about to open as a precheck lane, but because it wasn't fully staffed it shouldn't have let people through. tsa said all the carry-on bags were screened, so they are confident it presented little risk. >> this goes to the whole idea of security theater. >> it's all a ruse? >> we spend so much money on this entire apparatus, i'm not saying it's a ruse, they're all trying to do their jobs, but if you wanted to penetrate this -- >> you could figure out a way. >> you could figure out a way. you don't have to penetrate.

go in when people are penned up in line waiting to be screened, and you do whatever bad thing you want to do. . >> the tradeoff we have accepted and the security we get in exchange for it, i'm not sure it's right. >> every year they have terrible reports -- >> all this stuff got through. >> this stuff got through. they put fake things through. >> the fact that these people set off metal detecters and nobody paid attention? come on. that's just like -- look. >> i'm not surprised. >> i guess. one of russia's top diplomats died suddenly in new york. vitaly churkin fell ill in his office and was rushed to the hospital where he died. reports say the cause of death was a heart attack. but that's unconfirmed. churkin was one day away from his 65th birthday. let's talk some politics.

boy, was there a lot of it over the weekend. another busy weekend for president trump. eamon javers is in d.c. this morning. i have a million questions, but tell us what's at the top of your list. >> the president has a new national security adviser picking lieutenant general h.r. mcmaster of the weekend. making that announcement yesterday. h.r. mcmaster is a veteran of iraq and afghanistan. he is president trump's third choice now for the job of national security adviser after he fired mike flynn last week and after retired vice admiral robert harward turned down the job. mcmaster served in iraq and afghanistan. trump chose mcmaster because he's seen as a warrior and defense intellectual. he wrote a book that criticized for going with lyndon johnson in

the vietnam war. so he's not afraid to speak truth to power. that's an interesting selection for mr. trump. we are seeing john mccain, tom cotton and others are heaping praise on this selection. >> all right. on -- a similar score, but different name. i want to read you the top of a "wall street journal" report this morning that caught my attention. defense secretary jim mattis appears to be at odds with president trump on russia and other key issues setting up potential discord but helping to nudge the white house towards more conventional policy stances. which is it and what do you know? >> that's good question. i don't have much new for you on govern. does he allow any independent power centers to develop in his administration? does he allow cabinet level secretaries to be their own men an women in terms of having their own opinions? he said he would like to do that. but recently we've seen a lot of reports that he's not letting them pick their deputy

secretaries, not letting them pick the staff inside the agencies. he's very much interested in controlling the personnel who surround all those people. the question here is whether or not this is a viable strategy for mattis going forward, if he can nudge the white house or if the white house doesn't want to be nudged. ultimately the white house is the center of power here. >> did you see this chatter over the weekend. an op-ed by edward price. i never thought i would quit the cia, but because of trump i quit. what's the thought on that? >> i did read that. i used to deal with ned price a lot when he was in the obama white house. he was at the national security council. a lot of people inside the cia are deeply worried about this president, particularly his skepticism about the intelligence community. whether or not they're resigning or whether or not that's the right call, i'm not totally sure. ned price is somebody who says he just couldn't go along with

this anymore. that said trump will need the intelligence community at some point. he will need the national security council staff atom point. they're deeply at odds now. trump is suspicious of a lot of these leaks coming out. he thinks some of the embedded people from the obama era are trying to undermine his administration. clearly there's some tension there. >> final question from me. this is the journal this morning. almost lost in the multiple recent trump controversy is this reality on substance. clouds of uncertainty hang over the one matter that many republicans would put atop their priority list, a big tax cut. how much uncertainty is there? will we hear something in the next week. gary cohn and donald trump said repeatedly about a week ago that in the next two weeks we'll hear something on the tax plan. >> i think that's right. i've been saying that for a

while now. this tax reform effort is a big lift in a normal year. this is not a normal year. one thing they said is they'll unveil a spectacular, beautiful tax plan at some point at the white house, but we're not clear where that will go and where it will land in terms of republican divisions on capitol hill about import taxes versus export taxes. there's a lot of ways to do this. the question is how can you do it in a way that appeases all the didn't factions up on capitol hill. >> you can't, though, right? >> that's the challenge. >> you'll have a tradeoff, which constituency will you upset at this point. >> right. >> it would be the most dramatic change to corporate taxes in 100 years. it's not a surprise that it will be hard. is it still early, i guess, at this point? they never planned to take this up until the summer as it was. >> the longer this takes. you talk about going into the summer, you're giving the different business groups an

opportunity to study different plans, mobilize lobbying campaigns on one side or the other. so businesses on imports will look at this one way, businesses on exports will look at it another way. and consumer advocates are worried about price increases for consumers just going through their normal weekly shopping and stuff costs more money because of those tariffs. all of those groups will mobilize. that presents power. entrenched forces. all of that is difficult to navigate. it's not clear which way the white house wants to go on this right now. and then their leadership in terms of the legislative process. this is something that this president has never done before. so this is going to be a new territory for him. >> one final thing. it's tactical. i talked to someone in the administration last week explaining that all things being equal, you prefer to repeal obamacare first. when it comes to being able to make this appear revenue

neutral, the tax plan, that is, if you can get that $1 trillion effectively down, it makes it easier. >> one of the questions is whether they need to make the tax plan appear revenue neutral. the tea party republicans, you know, deficits are absolutely core to their value system. it's not core to donald trump value system. i'm not sure he's worried about deficits as he is abouted builg the wall. i'm old enough to remember when there were republicans in this town who said deficits don't matter. . that's why the tea party exists. >> the tea party is not that way. they have been elected over the past several cycles and feel like deficits are core.

one of their main criticisms of barack obama is that he ran up the deficit early on. >> and george w. bush. they complained about him, too. >> so how will those people react to a trump and senate republican plan that doesn't necessarily feel like it needs to be revenue nutd ral. all those are very, very pertinent questions. >> thank you for trying. >> you bet. joining us is christian amani from oppenheimer funs. welcome to the nasdaq. where are we in terms of this market. do you think we have adequately priced in any sort of political risk out there? do we not need to price it in? >> i think if you look across markets, looking at bond markets, bond markets are having difficulty breaking through 250. janet yellen threw in the kitchen sink and we got to 2.51. >> ten-year yield. >> ten-year yield, yes. >> equity markets are making

highs every day. there's a big disconnect. if the tax cuts and things like that are not delivered to the markets, we will have a bit of a problem in equity s ticipating these good things to happen, and every day we get skepticism on whether that will happen or not. in my mind, if there's no deficit, the economy will slow down in the second half. if that's the case, the equity markets may end up with a correction. >> are you saying the inability of the ten-year yield to go through 2.5% consistently is evidence that people are holding on to bonds as safety? >> the bond market itself, and investors who have lots of gains in the equity markets are buying bonds. the flows in bonds has been quite good over the last few weeks. are you of the school, a lot of people believe the bond market is smarter than the stock

market. >> well, no market is smarter. but i think it's really more a question of what you're looking at. the equity markets foe kcused o earnings. bond markets are focused on those things, too but at the end of the day far more focussed on growth and inflation. and things may be improving, but on a secular basis, for things to change radically, policy has to change. >> how much of the run of the u.s. equity markets is the expectation of policy versus fundamentals? a lot of people will come on and say economically we're doing bett better. the earnings picture has been better. we got numbers out of home depot. they're much better. everything is firing on all cylinders. >> cyclically the global economy is in the best place in a long time. that helps. for the markets to get to the next level you need some policy

action. without that, we will falter. >> so what do you do right now as we wait? do you side with the bond market or do you side with the equity market? >> i think i have to respected the bond market. i have to say that if -- we have had a good run in equities. if you have an extended position, taking profits makes perfect sense. doesn't mean equity markets can't get to the next level. but i think some level of caution because of lack of policy action and inconsistencies, that's something one has to worry about. so, oppenheimer has dialed back exposure? >> we told people to started thinking about that. >> start thinking about it. >> yes. >> wow. pretty aggressive. >> yeah. >> thanks. >> thank you. coming up, home depot reports moments ago. we'll dig through the results with an analyst. don't move.

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welcome back. home depot shares rising sharply after the company posted a ten cent earnings beat just moments ago. calling in now on the squawk news line to break don't number is brian nagel. good to have you call in stock performing well this morning in the wake of the oearnings results. besides the obvious beat, what is there to like so much about the numbers? >> i think the key message here is once again that home depot and this home improvement category are a bright spot within a troubled retail landscape. as i dig through the results, it is really quite good across the board. >> i assume that's because it's just harder to buy this stuff online? is that why the home improvement sector would be performing better compared to the rest of retail? >> that's a piece of it.

we talk about this a lot to. there really is a mote around the home improvement category that protects it from online competition. the other big piece is, i talk about this a lot, this is an area of demand growth within retail. people are spending on their homes. here they continue to spend. home depot is a big beneficiary of that demand growth. >> stock is at an all-time high after a 20% rise this year. is it all priced in? can you get more out of the shares? >> i tell our clients keep buying home depot. keep buying home depot. we have the earnings growth engine in place. you look at the guidance they laid out for 2017, i think it's conservative as it has been, but it's showing the growth algorithm is very much in place. another big key to that end with this release date is talking about once again buying back a big chunk of their stock. and if that works through the

pml, that is another froth driver for home depot to simply have them buy their stock back. >> how should we think about margins? the fourth quarter customer transactions rose 2.9%. average ticket rose 2.9%, but gross margins declined. are they giving up some on promotional activities? >> not really. a lot to of times from quarter to quarter you see a bit of a margin shift because of the products they sell. if you look down the pml, it's the operating margin. what we're seeing here, they're driving better sales. that's basically leveraging the cost infrastructure of the business. we've seen that quarter in and quarter out for a while now. >> how does a name like home depot fair in the trump world? they state in their press release the tax rate was 33.6%. so that could come down with tax reform. how would they be hit by the

border adjustment tax? . >> that's a great question but one that is difficult to answer. we have to see if this b.a.t. happens. i'm skeptical personally. but the bigger question is if this were to happen, houchl of those high how much of those higher costs could home depot pass on. this is one area of retail that has pricing power with consumers. home depot could probably, if this happens, high lyinging if this happens, home depot could possibly pass along some of those higher costs. >> have you spoken to other analysts or investors who are trying to handicap this issue and how they then math that out in terms of home depot's numbers? or are people taking a wait and see approach? >> i -- when i'm talking to

clients, it comes up almost every conversation. i would say investors are trying to handicap this issue. no one knows how to do it. there's so many variables. the first question is does it happen. after that, it's the timing of implement take. what kind of exceptions will be put in place. so people are looking at it. but at this point i think it's what you said, just most people are taking a wait and see approach. >> but no discount on the stock as a result? >> no, it's interesting. it's always hard, but with so many moving parts it's hard to say what factors are moving the stocks, when home depot, watching your screen approaching $146 premarket, there's probably not -- in the case of home depot, probably not much of a discount in terms of risk of b.a.t. in other areas of retail, we can see it clearer, i watch the news flow, whatever is coming out on the potential b.a.t., you can see how retail stocks trade

around. that's not as much the case with home depot. >> brian, thanks. when we return, let's make a deal. kraft heinz $143 billion offer for unilever may be dead -- at looesz f least for now. we have a prediction about where big transactions may be coming. let's look at last week's winners and losers. what's the value of capital? what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods?

the value of capital is to create, not just wealth, but things that matter. morgan stanley

welcome back. you're watching "squawk box" live from the nasdaq market site from times square. welcome back to "squawk box" good morning. look at u.s. equity futures at this hour. after a three-day weekend, the dow looks to open up about 51 points higher. s&p 500 open about 4.5 points higher. the nasdaq up about 13 points. bhp billiton returning to profit in its first half reflecting a higher commodity price and continued cost cutting. the improvement prompting the minie ining giant to more than e its dividend. intercontinental hotels expecting better than expected earnings. they would return $400 million

to investors through a special dividend. and wells fargo announcing two new directors to its board. the bank appointing karen petes to the finance economy and ronald sergeant to the nominating committee. >> trying to repair some damage. >> do something. >> in entertainment news, the caped crusader flew high over the competition at the box office. the lego batman movie earned an estimated $42 million in the u.s. and canada. the warner brothers spinoff of the lego movie has already reached the $100 million mark in two weeks. >> sorkin family went to see that. >> yeah? >> i've been told that adults should see it, that it was funny. the first one was great. i didn't get to go. my wife took my kids to this. i'm going to out my wife. she took them to the premiere of this. i didn't tell her it was the

premie premiere. i said, here, we got these tickets. she showed up in sweat pants. she didn't know it was a thing. they thought -- the kids loved it she thought the first one was better for adults. that's the sorkin family review. >> you have to take your wife to see this "50 shades darker" remained in second place in the second week. no? >> i heard this was not great. >> the first one wasn't that grad great. >> we'll be going in our sweat pants to this one. >> the great wall did not prove to be a hit in china. the action movie came in third with less than 22 million in domestic ticket sales, but it already brought in $171 million in china. it tells the story of the wall being built to repel monsters. it was produced for $150 million. >> what's amazing about this film, this was not built for the u.s. audience at all. >> right.

>> i got the impression they were trying to build something that would serve the whole world. >> but if trump is america first this is china first. the idea was make sure this works in china first, hope it works elsewhere. >> what's interesting about this, produced by legendary pictures, owned by dal ishgdali, the company that now reportedly is having trouble buying dick clark productions. >> could you keep the cash over here if you made the money over here and then use it to buy dick clark? >> it's not enough money. >> the movie would have to do a lot better. let's talk some deal talk. those big talks over the weekend, kraft heinz and unilever, it appears to be dead. but the $143 billion offer kicking off a record year for m&a. there will be an uptick, 6% uptake in total announced deals

compared to the first half of last year. for more, let's bring in matt porzia, vice president of strategy from interlynx. so more deals so far this year. however in terms of total volume, dollar volume, a lot lower. so the mega deals are not happening. what's happening? i thought we were in this business friendly, everybody is confident, coming together. >> i would say that the number of deals, i think, is better indicator overall of the impetus behind m&a. companies need to grow inorganically. that's happening. the mega deals, they make the headlines, but they don't drive the overall market. so we're seeing growth in the first half and a record first half for the announced m&a deals we'll see in 2017, off of a strong 2016. so the market is good right now. >> how much of this is domestic? how much of this is international? that will play big in terms of

what's going on in washington? >> so the international mar kelt market is picking up. what we are seeing in corporate america will be weaker, 5%. the rest of the globe is making up the difference. this is a natural cycle. north america led the way in the m&a rebirth. but we're seeing strong performance out of europe, out of apac and latin america. >> tax reform. we spent a lot of time talking about the border adjustment tax. if that were not in there, we would be talking about this idea of no longer being able to expense interest on debt and full expensing of investment. that would hurt, m&a, wouldn't it? because you fund your deals with debt. part of your calculation when you build the spread sheet is the deduction, right? >> a lot of factors can weigh on m&a. that's one of them. >> is it weighing now? are people thinking about that?

>> in truth, the environment right now is overcoming that. companies realize that the only path to growth right now is through m&a, not just accepted but the preferred option for growth. >> the other thing about tax reform as written by the house, it's designed to prevent inversions. not to outlaw them, but to get rid of all of the incentives for which they get done. that would have an impact on cross border m&a. >> they would. but inversions are still less than 2% of the total deal flow. when you look at the m&a market -- >> we make it sound like it's 100 -- >> or those in congress. >> if you're a betting man in terms of industry, those folks out there who watch the show trying to figure out where the next big deals will come, play it out sector by sector for us. >> we're seeing and what we'll see through the second quarter 2017 is healthcare and life sciences will show strong year over year growth in terms of announced deals. you will see the material

sector, chemical sector grow, even real estate showing some growth. where you will see a weaker m&a performance and less deals is in places like energy, especially outside of the middle east and africa region and weaker industrial and consumer retail deals. >> is it cash on the balance sheet? slow earnings growth? what's the factors? >> what we look at in terms of what drives m&a, when you look at industries affected, most by low inflation, tepid nieconomic coupled by the ability to acquire, those drive m&a in a particularen industry. for for us, we're just reporting on what we're seeing in those early stage yields. >> tell us what will happen with this heinz deal. is it really off the table? i know you don't talk individual

deals. >> in terms of individual deals, that's not the focus, i think if that doesn't get done, something else will get done behind it. in the boardroom, people are looking at m&a as the strategy for exfan shun and growtpansion. >> if you map an s&p chart over m&a volume, historically m msh& volume has been a -- >> dollar volume. >> yeah. >> a couple times lagging, a couple times leading. where do you think we are? >> i think we'll continue to see some m&a expansion outside of north america. therefore the s&p is probably a leading indicator -- sorry, lagging indicator. >> so we're not at the top. >> not at the peak globally. >> thank you. coming up, big problems at uber. details next.

later, macy's terry lundgren will join us. and american manufacturing under president trump, we will talk to the president of the afl-cio, richard trumka, plus mohammed el-erian will join us.

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big problems at uber. the company hired eric holder to probe allegations of sexism. air ran that huffington will also aid in the investigation. >> this is uber's second crisis in less than a month. the start-up is scrambling to stem the backlash. beginning early sunday with sarah fowler's bond shell blog post, alleging sexual harassment and a rampant culture of sexism ignored by the hr department and executives during her year there. by monday, it had gone viral. and the delete uber campaign that had led kalanick to step down from president trump's

economic advisory council was revived. kalanick tweeted about the alleged abhorrent behavior. uber has had its fair share of controversy over the years. but discrimination and diversity has been a reoccurring issue across silicon valley. as kalanick pointed out in his e-mail, the percentage of women across engineering, product management and scientist roles is at 15% at uber, and at facebook, twitter, it is not much better. what happens next? uber will have a meeting today to discuss next steps. it is also facing questions as to whether its review is independent enough. eric holder's law firm is retained by uber. huffington is an uber board member and they're joined by the head of hr, and its in-house lawyer. many hope the allegations directed at uber will finally start a serious dialogue on diversity and gender bias which

has plagued this area already. >> thank you very much. >> i just have this question, i want to know what you thought? >> my immediate thought was there are companies that -- when they're fast-growing, their early stages have a wild west nature to them. this is what it sounded like. this is like, wow, one of those moments. this thing is going crazy. there are no rules. everybody can do whatever they want. is it wrong? yes, absolutely. but this is like precorporate uber. >> now we're getting to corporate uber. >> so it's okay -- >> i'm not saying it's okay, i'm

saying it's way more common than we think. >> i think way more common than we think, absolutely. i think the level of detail in that blog post was tremendous. the antidote about all the people of the team wearing leather jackets to see what sizes they would get. all the women were notified they would not be getting the leather jackets because the women's order wouldn't be big enough to get the discount from the vendor. but if they can find a vendor that could sell the leather jacket for the same price as the men jacket, then the women could get the leather jacket. these are small things, but it really sets the tone. >> the big thing is when her boss comes on to her. >> wanted to sleep with her. >> she has the screen grabs there ready to go. >> i would assume somebody who has been to hr at least a half dozen times. >> yeah. >> she keeps going back to them.

that this wouldn't have reached an epic proportion inside the company -- >> the human relations department did not work for the employees, it works for the bosses. >> yes. >> but if you're going to have somebody that disgruntled and unhappy about the situation, you would have thought there would have been people inside uber that knew that this was -- that there was a problem here that could blow up. >> if this boss was a star an perceived to be making the company a lot of money, i'm sure you have seen in your lifetime that certain people get a pass. >> are protected. >> oh, i -- i get that. i wonder whether at the most senior level, this was a surprise to them. as if they had never heard about this in their whole life, which is what it sounded like, the way they tried to spin it over the weekend. or whether this was an issue internally that they were made

aware of and -- >> i give the ceo props for jumping right in. >> arianna huffington. a lot of jumping. talk about a fast reaction. >> you had to react. talk about holy smokes. coming up, new investors are not happy according to a new survey. a look at trends of some of the biggest investors. as we head to break a quick check of what's happening in european markets right now. "squawk box" returns in a moment. this car is traveling over 200 miles per hour. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere.

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♪ news just out from tiffany. they've struck an agreement with jana partners which will add three new independent directors. one will join the chersearch committee looking for a new chief executive officer. that ceo just stepped down on

the eve of its earnings report, which is very peculiar timing. the day before they aired their first super bowl ad. trying to get a more mainstream, younger customer. we see there tiffany shares jumps on the back of this news of potential activism in the stock. higher by 4%. new survey from jpmorgan citing 75% of large investors disappointed by the performance of their hedge fund portfolios last year, marking the highest level of client dissatisfaction in four years. joining us now on the state of the hedge fund industry and how performance may shift under president trump, mark connors, head of risk and portfolio advisory for prime services. everybody just wants to hug the index because the index has been working. the question is, are we about to invert, if you will, where active management becomes

important again. >> as you said, hedge fund underperformance is well documented. the fact that you see investors, you know, shift in their chairs and looking to potentially, you know, make allocations. we've seen that. we did a survey as well. we saw that there was money leaving the hedge fund industry, but the majority of it just recycled. you've seen the monetary base grow, but the hedge fund universe is still only $3 trillion. that's not a lot of capacity. >> so total dollars are not coming out, but in terms of where they're being allocated, the big guys are getting bigger and the small guys are disappearing. >> yes, we have seen that. when you look at -- our group looks at hedge funds, and we engage them on the financial side. the investment has been in the nonportfolio side. they're trying to get people into data because they want to get more calibrated, get smarter. so they're getting more mature.

the bigger hedge fund is definitely happening. >> i don't understand what you just said. >> by being recalibrated? >> yeah. >> so in the old days, you could pick up a phone and say, you know what, i think the liquidity is moving. i think i want to buy stock a, b, c, and they buy it and will own it for a day, a ek wweek, a month. now you're seeing hedge funds take in information from, you know, whether it be satellites, whether it be on other sectors, and they're chewing it, digesting it, and acting on that. >> if i was a high net worth individual on one of these platforms, how would you select where you're going to put your money today? >> i would absolutely have an alternative, not just because that's where we get paid -- >> no, i get that. >> but i would say -- let's look at where they are making money. if you have the liquidity curve of liquid funds where they're trading in minutes, hour, and days and on the other side you

have the very distressed investor, very low liquidity, those are the two areas where funds have made money. part of it is because the environment was zero rates. the middle part where it's modest liquidity, that's not what people have allocated or made money. i would look at both vectors. >> can you name some names? >> we can't. i know, it's tough. the reason we can't is because they are clients. people might say, well, if you named x, y, z, we get to look at their balances. that's part of what we get to see and speak about. we know what's going on under the hood because we're financing these folks. >> mark, great to see you. thank you, sir. >> you bet. thanks. coming up, retail earnings on deck. we're expecting results from walmart in the next few minutes. macy's later on this morning. don't move.

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earnings alert. quarterly results from walmart. the numberings and instant market reaction straight ahead. trumponomics. tax reform among washington and wall street's top priorities. mitch daniels will join us with advice for the white house coming up. plus, hit the road in a snap. messaging app snapchat is launching its long-awaited ipo to investors today 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 at the nasdaq market site in times square. take a quick look at the futures this morning. see how things are setting

themselves up. the dow looking like it will open higher by 55 points. nasdaq also opening higher right now by almost 4 poin14 points n. we're also going to take a quick look at wti crude. i did fill my own gallons of gasoline this weekend. >> you filled up the tank? >> i never do that. >> you had a car. >> i didn't get to -- i didn't buy it by the barrel like this. if you were to, it would cost 54.28. >> is this notable because you don't pump your own gas or you don't have a car? >> i, proudly, as a new york city person, have never owned a car. so there. walmart earnings crossing at the bottom of your screen. let's get to courtney reagan. >> there's been a lot of worry about retail, but the world's largest retailer actually posting a pretty strong u.s. sales performance. comp sales up 1.8% for walmart. that's the best performance in about 4 1/2 years.

walmart earned $1.30 per share, a benpenny better than estimate. there was a currency hit there. walmart expects first quarter earnings to be between 90 cents and a dollar. analyst expectations fall in the middle of both of those ranges. walmart total ecommerce grew by 29%. for the first time, the retailer is breaking out u.s. ecommerce, which increased 36.1% over last year. that contributed 40 basis points to that 1.8% u.s. comp increase. that strengthened from last year. jet.com is actually not going to be included until it becomes a comp, and that will be later this year. i spoke to walmart cfo bret biggs on the phone. he said the quarter strength was broad based, consistent spending. he notes spending got off to a slower start at the beginning of the year.

walmart thinks it's due to the delay in tax refund checks that's actually been telegraphed and something that hits walmart often. i asked biggs about how walmart is thinking about a potential border adjustment tax. he said, quote, we're pro tax reform. anything that will help jobs and consumers, we're for that, but we also want to look at this through the lens of our consumers. we have concerns that the border adjustment tax has the probability of increasing prices. it is concerning to us. he also said the devil is in the details. we don't really know what exactly will happen, if anything, so it's hard to speculate the exact impact. >> what's driving the stock right now, the belief it's finally going to get ecommerce right in a big way? >> i think walmart -- and they have admitted they were late to the party when it comes to ecommerce growth in a number of ways, and they've really been playing catch up and playing that game pretty hard recently. so i think that's what wall street likes. they came out and told analysts they were going to invest in the areas where they were behind,

and they are doing that. 1.8% u.s. comp is very, very strong. that's something the street probably likes. there was positive growth in grocery and consumable. >> okay. courtney, stick around. we're going to have more on walmart and the rest of the retail sector. joining the conversation, jan rogers. good morning. what did you think of the numbers? >> i was happy with them. that's what we've been waiting for. i think across the board, you know, we've been waiting a long time for walmart to show these kind of numbers. we like what we're seeing here. we just kept waiting for it to show up in the numbers and on the bottom line. the street will be really happy with these numbers. i think this shows that walmart's efforts to drive the

business, the big stores, small stores, online business, it's all starting to work for them. we thought it would. they're targeting the dollar stores. they're targeting online. they're showing growth on the jet side of the business. i think it's great news. >> jan, you saw warren buffett, berkshire hathaway, in large part getting out of walmart. did they get out at the right or wrong time? >> well, i think he got out at the wrong time, but i would never argue with warren buffett. he knows more about investing than i'm going to know. when it comes to walmart, i'm positive on walmart right now. i've had them in the question mark phase. i've said they're doing all the right things, but it's hard to get it to the bottom line, hard to get the roi, hard to get the dollar of operating profit to the bottom line. but they're doing the right things. unfortunately, they're competing with a really, really tough business in amazon. so we kept waiting to see, could it really happen. it looks to me like it's happening. of course, they've got strong cash flow. they can buy back stock. they're this really big, healthy

company. so, you know, i have to go against warren buffett here. i think it's a good time to own walmart. >> jan, it's courtney. does that all change if we get some form of border adjustment tax? walmart says, look, the devil's in the details, it's hard to speculate. a lot of other folks look at this and call it a walmart tax. >> well, if the cross border adjustment tax happens, it's a good bet all of the retailers virtually are not ownable at the moment it happens. we're going to see a huge reduction in profitability. it'll cut about 50% of the profitability out of the retailers on average if this really happens. so yes, right now i have a lot of people i talk to that say i can't invest in these companies until i understand the cross border tax. i don't think warren knows what's going to happen on the cross border tax either though because i don't think anybody does. the betting right now is only about 35% that there will be a cross border tarks.

on the other hand, 35% is a big number. so it is very scary. yes, it would be very detrimental to walmart, but so would it be to macy's, to everybody that sells inside the malls. >> does that include home depot? i look at walmart shares, which still haven't recovered from late 1998. >> yeah, it's less of a problem if you're home depot, for instance, because of the way the business works. and there are some other retailers that it's a little less of a problem for. in general, it's a problem for all of them. it's just a magnitude question. some get hit a lot harder. if you're importing apparel, it's really a big deal. if you're walmart and about 55% grocery, it's less of a big deal but still a pretty big deal for all those players. it's really hard to make the bet right now on a retailer if you

believe there's a high likelihood of a cross border tax. >> and correction to what i just said. i'm reading my google chart wrong. lower than it was in late 2014 for walmart. far above where it was in 1998. >> so yeah, i think everybody is really hesitant to jump into retail right now because of that. but that's not the kind of bet warren buffett makes. so he was looking at something else when he withdrew from walmart. i don't think he's withdrawing because of the fear of a cross border tax. >> okay. jan, i think we're going to leave it there. i should say, by the way, warren buffett is going to be on this show, i believe, next monday. so we'll ask him all about that decision related to walmart and maybe we'll show him some of your comments. see where that goes. >> oh, great. >> great to see you. thanks so much. have fun in vegas. >> making other headlines this morning, home depot scored a ten cent beat with quarterly profit of $1.44 per share.

revenue beat forecasts, and they also announced a 29% dividend hike and a $15 billion share buyback. when you read the report, they actually have announced they're going to increase the amount of earnings that they actually return to the stockholder. so they are very, very confident in their ability to manage cash flow, even in the face of this potential border adjustment tax. very confident. kraft heinz has withdrawn his offer to buy unilever. they announced an initial approach on friday. that bid was rejected. at that time, kraft expressed hope that a deal could be reached. three fed officials will be making public appearances today as we move closer to next month's meeting. we're going to hear from minneapolis fed president neil kashkari, patrick harker, and san francisco fed president john williams. kashkari and williams are voting members this year. coming up, the dow, s&p, and nasdaq all coming off five straight sessions of all-time

intraday highs and closing records. we'll get ready for the week ahead with two top strategists. then at 7:30 a.m. eastern time, mitch daniels joins us with tax reform advice for the white house. and later, macy's ceo terry lundgren will join us to talk about quarterly results. stay tuned. you're watching "squawk box" on cnbc.

welcome back to "squawk box." uber launching an independent investigation into allegations by a former employee of sexual harassment claims. she says uber's hr department ignored the allegations. she went to them many times. managers threatened her job as a result. uber's ceo taking a stand and doing it quickly, saying this type of behavior is unacceptable and anyone who thinks it is will be fired. he's now named former u.s. attorney general eric holder to lead the review along with board member ariana huffington. while the allegations are terrible, of course, they do deserve credit for at least trying to take them on quickly. >> and they have to. remember #deleteuber. if this is a company thatn'ts w to go public, they've got to get their house in order. >> very much so. let's get back to the

markets here. we look like we're going to open higher with the dow adding about 62 points at the open. s&p poised to add about five. nasdaq poised to add about 13 today. joining us now, mike ryan, chief investment strategist at ubs and joe quinland, chief investment strategist the u.s. trust. where are we in this rally? >> i think it's going to be an extended rally. i think the gains from here are going to be a bit more uneven. let's face it, we've had a pretty big run from election day. i think we're likely to see a bout of volatility as we start to focus more on some of the policy execution risks around the trump administration. i still think you have to focus on the fundamentals. you saw this morning the european flash pmis were strong. when you look in terms of what we're seeing in terms of wages and salaries rising, when you see consumer confidence rising, it suggests we're going to have a good earnings cycle and extended earnings cycle. we're looking for double-digit earnings growth in 2017. >> joe, is it a foregone conclusion that the fed is going to navigate rate hiking well and that we're not really talking

about it and the real risk to the rally is perceived to be the trump risk? >> right. the question there is well navigating. it's going to be choppy. that's expected. i do think the fed is biased to raise rates, which is good growth, a little more inflation. it's a good backdrop for equities. if we navigate well or choppy, it's still upside. >> where do you stand on valuations at this point? some people are saying valuations are stretched. others are saying if you look at the is sectors and which sector are coming off and which are increasing like financials, you see valuation adjustment. so you can't look at the total valuation of the s&p 500 because that's just -- it'll give you the wrong impression. >> you have to look by sector, by some companies. you have to look overseas. we try to look at where the opportunities are. we still like energy, still like technology, the big large cap names. financials obviously. we're putting money in the emerging markets. good valuations there. >> do you assume that corporate tax reform gets done?

>> i think this is a high probability we get corporate tax reform. the question is when. one of the things we're concerned about is a lot of political capital being burned early in terms of getting cabinet nominees through and some of the sideline distractions. we think it's likely -- we do include a number of issues, including territorial tax scheme, lowering of marginal rates. i think those are the critical things of corporate america. >> but the market is not perceiving political capital being burned up early. the fact we're at record highs and plodding along, not giving up much. as long as trump utters the words tax reform in any speech, no matter what the speech is about, the market holds on. >> i would think the market moves on earnings. how much of this is a tax story? >> i think first of all, the back ends could well be a tax story. i think you're right, andrew. a lot of what we've seen so far has been a reaction to the fundamentals. we're just about wrapping up the last quarter's earnings season.

we have seen a reacceleration in corporate profits, which we think continues. let me go back to something you mentioned about this issue about execution risk. the more that there's a distraction around the policy issues, the less and less there is to focus on issues about tax reform, regulatory relief, and spending initiatives. >> but let's just take the terrible downside. let's say nothing happens for this year and all you do is hear about gridlock and people fighting. what does the market do as a result of that? >> we give some of it back. >> how much? >> you could do 5%, 10%. >> you think the market -- there's a 5% to 10% premium on the market today based solely on tax reform? >> not -- no. tax reform, infrastructure spending, earnings coming along, not going down a trade protectionist path. i would say the market has given a lot of benefit to the doubt of the administration. now they're like, show me. it will be interesting with the sausage making coming out of washington. >> how long does that honeymoon

last? >> we have to see something in the second quarter. >> i think you're likely to see volatility if we see policy failure, but i think we go higher. if we get political head winds, that's a separate issue. if you get some progress on tax reform, some increased progress on regulatory relief, i think that creates additional upside for equity markets. we think that could add as much as 5% to 15% to corporate profits. >> what's spooking the bond market? it's acting like we're not going to see that much growth. if the stock market is so enthusiastic about potential improvements, the bond market does not anct like that. >> let's not lose track of the fact that rates have already risen fairly quickly. we went from a 1.85 to 2.5. i think what you'll see is more

of the rate increases from here will be driven by what we see in terms of the inflation outlook and the fed policy moves. >> a big thing for the bond market, overseas. there's more deflationary pressuring coming out of china. we have so see if the eu is actually growing. if we get that cyclical upswing globally, that's going to alleviate some of the worries. >> so the bond market is acting on global markets whereas the stock market is acting on u.s. domestic policies. >> all right. guys, thank you. quick news flash for you. i think we knew this for the most part, but dow jones citing sources reporting now that verizon/j. verizon/yahoo! expected to announce a revised deal, that could come tomorrow. also suggesting the merger price would be cut by about $350 million. that's the number that was out there last week. separately, yahoo! would agree to split the future costs of these data breaches and hacks we've talked so much about. of course, this part of that new company. >> how do you do that once you buy the company? do you set money aside? once you own it, you're splitting it with yourself,

right? >> no, no. the remaining company, which is going to be called ali -- what's the name? >> it's like alternative, right? altibaba. i hope i didn't just make up a kma company name. >> they'll split whatever the liabilities are with verizon. this according to the latest dow jones report, which we'll bring you more on as we get it. coming up, snapchat is pitching its irvepo to investor this week. we're going to talk expectations when "squawk box" comes right back. who will be hosting the 89th oscars? the answer when cnbc's "squawk box" continues. hey steve check out this guys leg. yeah looks like a real nasty moving back in with his parents. what? no. i just broke my leg. no, this is a full blown move in to the basement,

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yesterday the messaging app kicked off its show in london. the ipo is scheduled to price next wednesday, march 1st. speaking of senatechat, the company's spectacles now on seat online. they cost $130. they can only be shipped inside the united states. each household is limited to six pairs. >> i think that's like marketing. each house ohold limited to six pairs. >> the report i read recently suggested these are no longer as cool as they thought they were. >> have you seen them? >> i have a pair. >> we had them on the set one morning. >> awful. you look like the biggest tool. oh, sorry. >> it's okay. i mean, i was snapping. i was doing it in a professional capacity. >> people make fun of google glass and they're not going to make fun of this? please. >> i don't want people walking around videotaping me all the time. creepy. >> that's the way the world is

going. what does that say about the cool factor for snap? does it mean it's not so cool? is snap less cool? >> we're not the target user of snap. >> no deep thoughts? >> i think the ownership structure and shareholders would be crazy to do this. >> would you have not thought that about facebook or google? >> oh, yeah. >> in terms of shareholder control? at least they give you a little bit so there's the appearance of giving you some control. snap, they don't even bother. you get nothing. nothing, shareholder, and you take it because we deserve that kind of premium. because our revenue growth is up but losses are mounting. seems like a fair trade-off. >> ask her how she really feels. >> sorry.

i'm hopped up on cold medicine. this is what happens. the proposed $1 billion acquisition of dick clark productions is reportedly under pressure. the news comes amid high tensions between washington and beijing and tight scrutiny by china on outbound deals. wanda is run by china's richest man who already owns legendary entertainment and u.s. cinema chain amc entertainment. reuters reports wanda's deal for dick clark is in jeopardy but not yet dead. the report is they're having trouble getting money out of the country because on capital controls. super interesting because the ceo is very connected to the government. if they're having trouble, it's a signal of something. >> no money is leaving. >> right. >> evan speigle just pulled your allocation, by the way. coming up, today's top stories, including quarterly results from home depot and

walmart. and we'll welcome former indiana governor mitch daniels. he has some interesting tax reform advice for the trump administration. we'lltalk to him. plus, a programming note. next monday, check it out. warren buffett is going to join us february 27th. wake up early. 6:00 a.m. he wants your questions. hopefully he's going to give us some answers. send them to us. do it on facebook and twitter. please use #askwarren. "squawk box" returns in a moment.

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♪ good morning and welcome to "squawk box" here on cnbc. we're live from the nasdaq market site in times square. among the stories front an center, upbeat morning for some well-known retailers. shares of home depot, walmart, and tiffany are all higher this morning. home depot and walmart both reported earnings that beat estimates. tiffany announced an agreement with shareholders to have a partner that adds three new independent directors. you can see it's higher by

near nearly 4%. however, there's another retailer painting a not so rosy picture. toys r us has laid off 10% to 15% of the corporate staff. that's according to "the wall street journal." this follows a holiday shopping season which saw comparable same store sales in the u.s. decline by 2.5%. the lego batman movie topped box offices this weekend. it opened with $53 million in ticket sales a week ago. "fifty shades darker" came in second. a revised deal could be announced as soon as today between verizon and yahoo!. it was reported last week the price could be cut by a few hundred million dollars. "the wall street journal" reporting this morning that this deal could come today, and the price cut could come at up to $350 million. >> and they're going to split

the cost of future liabilities. which raises questions about are there other breaches? they think there might be? >> i don't think it's that there's additional breaches. it's related to these breaches, all class-action suits. >> i see. >> but it would imply there's a handle on what the liabilities are. if there weren't, i can't imagine anybody would agree to future liabilities. >> right. in other headlines, nearly a dozen passengers breached security at jfk airport yesterday morning. tsa officials say 11 passengers walked through an unattended security line at terminal five around 6:00 a.m. eastern time and boarded flights. they say the check point was about to open as a precheck lane, but that because it wasn't fully staffed, it shouldn't have allowed passengers through. three of the passengers set off

metal detectors. tsa says all of the passengers' carry-on bags were screened and passed. they're confident the incident presented minimal risk to the aviation transportation system. >> makes no sense whatsoever. we're going to talk politics this morning. tax reform is a trump administration priority. our next guest has some advice on how to move forward with a plan. joining us is mitch daniels, who served as budget director for george w. bush. he was a two-term governor in the state of indiana. governor daniels is now the president of purdue university and co-chair of the committee for responsible federal budget. good morning to you. >> morning. >> thank you for being here. when you scored the original trump tax plan, if i'm right, you said it was going to cost $5.8 trillion over ten years. i'm curious, now that you've heard a little bit more about where this is all going, whether you think there's a way to make it work. >> oh, there's a way to make it work. let's hope they find one. nothing this nation needs more than a faster growing economy

and a quicker way, i suppose, to encourage that than a better, less complicated, more investment friendly tax system. so yes, there's a way to make it work. the committee i'm speaking on behalf of has some strong views, of course, that work at cross purposes by piling more debt on top of the unsustainable debt we've already piled up. >> when you say it has to be revenue neutral, how do you measure that? meaning, there's the issue of die nam dynamic scoring. >> right. it was always mistaken obviously to the old static scoring method, pretending that you could make major changes in tax rates and policies and no one would change their behavior. the answer for the revenue effect of tax reduction was never zero. it's been exaggerated by some folks in the past.

we have some experience that says that some reasonable increase in economic activity and therefore revenues can be expected. let's just hope that if and as a bill comes together, they use reasonable assumptions about that. >> is there a -- in your mind, an acceptable addition to the debt? meaning, if i told you it wouldn't cold 5 trillion but maybe a trillion and we'll get this growth and see what happens. >> the committee's position is they should strive for no impact, no further impact on the debt. i will say in these discussions, these negotiations always involve a degree of compromise. so some temporary, small increase might be a reasonable price to pay if we got a real pro growth tax policy. the reason i say that is we'll never get anywhere against the long-term debt problems we have limping along. we've been driving in economy with a parking brake on for several years. let's just hope that congress

and this administration liberate it and encourage it. over the long term, of course, you want that to have a very positive effect on the debt burden we're about to dump on our children. >> sir, does the border adjustment tax sound pro growth to you? >> well, it clearly would in some ways. out here in the heartland where we are, it would be -- it appears very positive encouragement, investment in this country. it would discourage parking money overseas, as trillions have been, as you know. probably bring that money home. like everything else in this area, it's not without its offsets. i understand the concern of retailers, for instance, but it seems to me those same retailers will get a big corporate tax reduction at the same time. i think they could probably live with it. if it encouraged investment in job producing sectors in this

economy, that's positive for us all and positive over the long term for the debt problems we're facing. >> can you see the math working without it? >> well, i'm going to leave the intricacies of this up to congress. clearly it is a major solution if it's applied to the problem or the risk that this tax bill, any tax bill becomes further aggravation of the debt problems, which as i keep saying are already unsustainable. >> so the market has rallied on the expectation that there's going to be corporate tax reform. we keep reading in a lot of publications that the border adjustment tax is dead on arrival. you know the way congress works, where we are at this stage. can that be said at this point, or is it still too early in the process to make a declaration about whether or not it ends up in the final bill? >> i hope it's too early. i'm a long ways and a lot of

years removed from washington and the ways of it. this is a very different congress. it has very effective leadership on both sides. so i suspect that if that's the kind of bill they're interested in, if border adjustment is a feature of the bill that the leadership believes is best for america, that it's still got a lot of life. >> let me ask you one other question in terms of the rate. president trump was on the campaign trail. he talked about 15%. there's now an expectation that's not where this is going. what would be an acceptable rate to you? if the answer was 25, is that still progress? >> sure it's progress. these things, i think, should be approached that way. they have been successful. you know, tax reform has been successfully pursued in a bipartisan way. goodness knows we could use an issue or two or cause or two like that. almost has to be that way.

no one's ever gotten everything they initially proposed. president reagan didn't. president bush didn't. so i wouldn't expect anybody's first draft to survive intact. but let's really hope for the sake of growth and ultimately long term for the sake of paying our bills that we have -- that something does emerge here. >> and governor, final question goes to the big issue of repatriation. what is it, 60 billion some of our biggest companies have overseas. over 2 trillion, actually. when you think about the proper rate to bring that money back and actually get it back and use it for useful purposes, there's a discussion going on inside the administration about whether there could be some kind of credit for infrastructure spending or public/private partnership. how should that work? >> well, we're getting zero for it right now. so anything that brings it home has a lot to recommend it. i don't know what the right or

most appropriate rate would be. i will say since you mentioned it, i hope they're extremely careful about infrastructure if there's a program. i'm a lot concerned when i hear about borrowing hundreds of billions of dollar more. yes, there's a jobs effect over time, but this could be yet another burden on future generations if they do it in the way it's been often described. >> okay. governor, always great to see you. we appreciate your time and your perspective. thanks again. coming up, we're going raise the roof on the housing market. speculation on new regulations from the trump administration and what it could mean for real estate in the broader economy. and at the top of the hour, don't miss macy's ceo terry lundgren. stay tuned. you're watching "squawk box" on cnbc.

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points. now to the mortgage market. nonbank lenders have had a free for all, but that could change you should the trump administration. diana olick joins us with that story. >> for the past six years, there has been a staggering takeover in the mortgage market. large banks plagued by billion-dollar government lawsuits began pulling back, especially for government insured fha loans. that left the door open for nonbank lenders. these companies are also regulated, but they are newer and didn't have the leftover trouble loans the big guys did. so take a look at the growth of nonbank lenders from 2010 to today from just 10% of the market to almost half of it and beyond. names like quicken, loan depot, and caliber home loans have moved to the top. if the trump administration loosens regulations on the big banks and stops suing for every infraction, will the big banks then move in?

the ceo of caliber home loans, who used to run citi mortgage, sees yet another threat. >> i fully expect that the banks will also step up, you know, their exposure to lending a lot more. i expect there to be more from the regional banks than major banks. >> so smaller regional banks, which have seen big market share. now, higher interest rates will also mean fewer refinances, and that will up the competition for all the lenders across the board. back to you. >> thank you very much, diana. fha mortgage delinquencies jumped in the first quarter. that's been a red flag for many experts. joining us is the managing director of graham fisher and company. mortgage delinquencies spiking last month off a ten-year low, but still going up. that would run contrary to this idea that the economy is getting better. >> i'm not paying a lot of

attention to that number because if you look, the 30-day delinquencies were slightly down. what you saw was an increase in the 90 plus. i wouldn't yet call it a trend. i think that it is a question less of the broader economy than it is specific to the tightened standards in lending, which remain by the way. even when you talk about the big banks, they're largely out of that business and getting out of it more and more quickly. >> are they going to get back into it? >> the big banks, unlikely. first of all, it's become very unattractive from a regulatory per spe perspective. the fed and occ have made it less attractive to hold loans. >> you don't anticipate a rollback of any of that. >> i don't really. >> is that a good thing or bad thing for the overall economy? >> look, if you're saying that we need more lending, i think it's a bad thing. at the same time, you know, the reality is we had overlent. to me the problem right now is

most of the problems in homeownership rates are in the under 44-year-old categories, the minority communities, et cetera. we've seen declines in homeownership across the board, but those have been most dramatic in the under 35 and 35 to 44. that's less a funk of who's lending than it has to do with consumer debt levels and household debt is actually within spitting distance of the peak of 2008. that's the bigger concern. >> so they don't want to borrow anymore. >> they want to borrow. they don't have the ability to borrow. one out of three renters wants to be a homeowner, but he doesn't have the money for a down payment. >> and that's because the debt is student loan debt or other sorts of debt. >> exactly. and then if you look among minority communities, and this is really striking, you'll see homeownership rates among black households today is about 42%. for white household, it's almost 72%. so most of the declines that

we've seen is in the younger cohorts and in minority communities. >> that disparity has always existed, but you're saying it's wider now than it's ever been. >> it's far wider than it's ever been. certainly since '94. we had this whole democktization of credit, which really addressed it. >> it sudoesn't sound like it addressed it at all. it masked it. >> and we reverted to a mean. we're going to have a hard time getting back from that, especially when you have fannie and freddie who have tightened underwriting. the average fico score is still north of 7 50. >> what has to happened to change that? >> i worried about the bubble the first time around because we were digging very low into the credit cycle. we've now overshot on the other side, which could have been

expected. but yes, we've tightened underwriting standards across the entire banking industry, and we don't have the support of liquidity from a secondary mortgage. >> isn't that what we wanted, tighter lending standards? so is the choice let's give mortgages to people with lower credit scores, or do we work on policies that would actually improve their credit scores so they would qualify? that's not a bank's job. >> that's exactly right. i think the latter is what we want, but for the past eight years we ignored the opportunities to achieve those. so frankly, we have not done enough to help people figure out ways to save for down payments. we haven't done enough to help them relieve themselves of burdens. we certainly haven't had the income growth that would have been required. >> or have jobs that don't pay very well. >> that's what's scaring me right now. rather than looking at the delinquencies, i'm scared we have household debt approaching peak levels again and -- i'm sorry. >> fha delinquencies, 9%, double

what you see in nongovernment related mortgages. why are we, the taxpayer, funding that? >> that goes back to a long-standing question. people forget until 2004, 2005, we thought fha was going to be a dead program because they were nonexistent in the mortgage market. it was the private market. so as a result of the crisis, fha stepped in to the breach. you're right. they continued to lower their underwriting standards so less and less is being absorbed by the private market and more and more is directly on the government programs. >> so can i extrapolate back to housing prices. if the pendulum has swung so far to one side, if we allow them to get the mortgages in some way, whether it be policy or otherwise -- inventory is already tight. does this mean housing prices

will be -- >> well, if we end up achieving the policy by which we create the ability for people to become homeowners, yes, we certainly need more properties. unfortunately for the past eight years, we've swung our political focus, our policy focus from ownership to rental. the building has been primarily in urban centers, which is the center of population. so we aren't building enough single family. we are building a decent amount of multifamily. it's mostly for rental al tht t point. >> why does the government have a policy anyway? >> i would agree with that broadly. i would say our housing policies, whether it's for a good reason or not, the government is involved, has been involved, and the policies are

backwards. for the average wealthy household or upper middle income household, rental is the smarter move. for the lower income populations, ownership is the smarter route. if you don't have excess income, you should be building equity in a home. >> thank you, josh. >> thank you. coming up, stocks to watch ahead of the opening bell on wall street. plus, a programming note. warren buffett will join "squawk box" next monday, february 27th. and he wants to answer your questions. send them to us on facebook and twitter using #askwarren. ♪ when you have $7.95 online u.s. equity trades, you realize the smartest investing idea isn't just what you invest in, but who you invest with.

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let's look at stocks to watch this morning. tiffany's struck an agreement with jana partners that will add three new independent directors. one of those will join the search committee seeking out a new ceo for tiffany. sharing higher by about 0.6%. kraft heinz withdrew a deal for unilever. and popeye's louisiana

kitchen reportedly nearing a deal to be bought by burger king for more than $1.7 billion. the initial approach was first reported on february 14th. dick's sporting goods downgraded after a spate of soft sales data throughout the city. that stock barely down a percent. and hsbc reported a 62% drop in annual profit with the bank's bottom line falling well short of analyst estimates. the result reflected significant write downs from restructuring among other factors. coming up when we return, macy's ceo terry lundgren is going to join us at the top of the hour to talk quarterly results and the future of the company. and coming up, afl-cio richard trumka will join us.

stay tuned. you're watching "squawk box."

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earnings alert. fourth quarter numbers from macy's hitting the wires.

chairman and ceo terry lundgren joins us first on cnbc. a union boss talks jobs in the trump era. richard trumka is the president of the afl-cio. he weighs in on the president's cabinet and the new pick for labor secretary. and a bizarre lapse at jfk. >> i'm a person who has feelings and all i have to do is do what i want to do, and all i want to do is hold on to my bag. >> how nearly a dozen passengers walked through an unattended security line and boarded their flights. the third hour of "squawk box" begins right now. live from the most powerful city in the world, new york, this is "squawk box." good morning. welcome back to "squawk box" here on cnbc. we're live at the nasdaq market site in times square. i'm andrew ross sorkin with melissa lee and michelle caruso-cabrera. take a quick look at the

futures. dow looks like it would open higher about 59 points. s&p 500 looking to open four points higher. nasdaq up close to ten points higher. also, let's show you what's going on with the treasuries. ten-year yield at 2.456. among today's top stories, kraft heinz has withdrawn its $143 billion offer to buy rival food giant unilever. they announced an initial bid friday. in other deal news, burger king owner restaurant brands is reportedly in advanced talks to buy popeye's. the deal will probably value p popeye's at $2.3 billion. and on today's agenda, three fed officials will be making public appearances as we move closer to next month's fed meeting. we'll hear from minneapolis fed president neil kashkari, philly

fed president. the battle over control of csx has taken another step forward. chairman and ceo michael ward will retire in may. this comes as mantle ridge tries to install hunter harrison as chief executive. there were reports that harrison was offered the ceo slot but that the two sides were still apart on compensation and governance terms. meantime, news out this morning on three dow components. walmart reporting quarterly earnings of 1.30 a share, a one-cent beat. the retailer posted a 1.8% increase in u.s. comp store sales and a 29% jump in u.s. online sales. that stock being bid up by 3% this morning. home depot, this would be a new all-time high, scoring a ten cent beat with quarterly profit of 1.44 a share. revenue beat forecasts, and they announced a 29% dividend hike

and a $15 billion share buyback. and verizon expected to announce a revised deal to buy yahoo!'s core internet business as soon as today. david faber had reported last week the price could be cut by a few hundred million dollars and the two companies would share the cost of liabilities from the data breaches. the "wall street journal" reporting that today could be the day and puts the price cut at up to $350 million. macy's out with fourth quarter earnings of $2 per share, beating estimates by six cents. revenue came up a bit shy of expectations. joining us is terry lundgren, chairman and ceo of macy's. thrilled to have him here to talk about the quarter and what's ahead for macy's. you have been in the headlines, as you know, about where this company is going, as to whether it's going to be an independent company or not. i don't think i've seen you since then. i wanted to start by saying, where are we in perhaps negotiations for the sale of this company? >> well, first of all, you've

heard and talked about the rumors of somebody buying us, and you've probably also heard we're buying them. what i can tell you is we're going to do the right thing for our shareholders. we're not going to be a highly leveraged retailer because those movies never turn out well. we've seen that before. but we're going to do the right thing. right now we're going to be totally focused on making sure that the offering that macy's has and the position we have, the strengths that we already have are accentuated in 2017. >> but do you think that consolidation is necessary? >> we've been a con sol day to be, as you know. there probably will be some more consolidation. there will be more closures of stores. we've initiated that in our own company. we think we're in a good position at this point. some people need that more than others. i think in our case, we're in really good position with our combination of a very strong online business and now a right size portfolio. >> reading between the lines, if you don't want to be a highly leveraged retailer, that means

you wouldn't be in the position of buying a company. >> just make sure we're not highly leveraged. >> so you're not ruling out acquisitions. >> well, if the right opportunity was there for us, certainly we would take advantage of that. as you know, we're growing significantly in our online space. we've been closing our physical assets. at the end of the day, we need physical stores. at the end o of the day, in our business, most of the business done in the physical environment. so i just want to emphasize that's still a key part. >> what do you think of hudson bay? what's your analysis of that company? >> i got them started in the retail business. i sold them lorde & taylor. we're actually a retail company that is doing really good things with our real estate. it's a bit of an opposite. >> and how much pressure do you

feel from starboard, the investor? >> i think they, like our other investors, they want to see our stock price go up. and so do we. we're all aligned in this regard. so how we get there will be the answer. i think their interest has been what are we doing with our real estate portfolio. i think we've done amazing things with our real estate portfolio. we just sold our store in san francisco for $250 million. >> $657 million last year. >> yeah, $675 million in assets last year. we're finding all kinds of opportunities here and there's more. one of the things we just did, we just announced this morning that in our san francisco -- probably one of the sing tle be retail locations in america, is we're actually in the front of our store carving out space opportunities for luxury retail. we're going to either sell or lease that space to other retailers separately into our space.

there's all kinds of things that we are doing. first of all, i hired a phenomenal guy who's a real estate expert. it's not what you find inside most retail companies. this guy is a real estate expert. >> that's what it's come to. you have to become now a manager of getting rid of a lot of real estate. is that the primary job? >> for him. it's his full-time job. his full-time job is to make sure -- >> but it sounds like it's your job too. >> i'm definitely spending a lot of time on this. i'm learning a lot from doug about this idea. but listen, when we can make big asset sales such as this to reinvest in our business, that's what it's got to be about. >> but macy's is going to be a smaller company. that's the bottom line, when i read everything. >> smaller -- we're still $25.5 billion. so we're still the largest fashion retailer in our space. by a pretty good margin. we'll still be the largest seller of most of the brands that you all know. >> i just want to press pause for half a second then talk

about your earnings and retail. we have a quick headline. it is now official that revised verizon/yahoo! deal. it's out. the companies have agreed to reduce the price verizon would pay to acquire yahoo!'s operating business. it's going to be $350 million cut, according to the press release. verizon and yahoo! will also share certain legal and regulatory liabilities arising from certain data breaches incurred by yahoo!. so the news pretty much what we expected. back to macy's and the earnings story. you read all of the stories about how the retail sector has just continued to struggle. we talked about an hour or two ago about the fact that warren buffett, who had been in walmart, had gotten out in large part. where do you think retail is right now? >> well -- and walmart, i think they had a good quarter. 55% of their business is in consumables and food. so it's not exactly apples to apples when looking at the businesses you're talking about

here. clearly it's complicated. clearly consumers are making different choices today. they're buying, you know, home improvement. i thought the auto sales -- i thought everybody had a new car in 2015. obviously not because they had record sales in 2016. so consumers have money. they're spending their money. they're spending it in different places than in stores like ours. they're spending it with us online. still, at the end of the day, the consumer has the money. once they've spent their money on these various categories, they've got to be ready to come back to ours. we have to be in position to take advantage. >> this is probably too philosophical a question at this hour, but when i was growing up, shopping was an activity. the girls went out on saturday to shop. now -- >> they still do. >> i don't think so. i do everything possible to avoid walking into retail. >> you're not the perfect consumer that we look for. you're very busy. i know you are. >> there's been a change in society about the way women spend their time. i don't know why that happened,

but to me it appears it's happened. >> first of all, it has happened. there's less time. there's certainly less time on all of our parts. even people who aren't working, there seems to be less time. the truth of the matter is, there's plenty of traffic in the mall. particularly in our good malls. there's plenty of people in those stores. they're going to fewer stores because they're using their mobile device to decide. instead of just wandering and going to five, six, seven locations, they know where they're going to go. they've already made up their mind. they've done their research. they're going to come to two or three stores. >> isn't it simply too simplistic to say people will return to the stores? why is there an assumption they are going to return to the department stores? have you factored in the possibility that a portion of your shoppers are just gone forever? that the amazon effect has not been 100% factored in yet, that we haven't gotten peak amazon and that people will still go online. >> well, much of what you said is true, but let me get you back

to the reality of how consumers shop. i know you guys have your opinions about how all consumers shop. this isn't how all consumers shop. 90% of everything we sell in our store, whether it be apparel for men's women's, or kids, cosmetics, jewelry, handbags, home furnishing. 90% is sold in a physical environment. that will go to 89% and then 88%. but it's not going to 20% and 80% online. not overnight, certainly. in the meantime, people are in those stores. we all have to do a better job of converting them once they are in the stores. when they are in the stores, they can use their mobile devices and say, you know what, i'm going to buy something elsewhere or cheaper. i'm going to buy from macys.com and have it delivered. so those are the things we have to all do a better job. we and those in mall-based stores, to make sure we convert those in our stores. >> is there a mall-based company right now that you look at and

go, they're pretty clever. i'm looking over my shoulder going, that's interesting to me. >> the most productive store in the mall is apple. they do a pretty good job. i put the first apple store down the street, the first one in america, store within a store, is in our store. just put it in last fall season. >> how's that doing? >> doing fantastic. it's doing great. when you have the most desirable product, people have a tendency to find it and come and buy from you. so it ends up, by the way, at the end of the day having the most desirable product. my best performing brands were the brands that we had exclusively at macy's. there's something to that. this whole availability, you can get it anywhere for a dollar cheaper somewhere else and they'll ship it for free and don't have to make money necessarily. if you have exclusive and unique product, like tommy hilfiger only available at macy's, that was extremely strong selling. those are the hottest brands.

it's because of availability. >> okay. terry lundgren -- oh, go ahead. >> end of 2017, will macy's still exist? >> this is what it looks like today. that's certainly what i see today. and a stronger, more healthy positioned company. don't ever count us out. everybody has in the past when they said department stores were dead. we've come back from the dead every single time a stronger company. >> terry lundgren, always great to see you. he's wearing a bar three tie. you can only get it at macy's. plus, a hugo boss suit. >> great taste. coming up, what's working now. portfolio manager bill smead shares stock picks. then, richard trumka talks jobs and manufacturing. and later, squawk market

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welcome back to "squawk box."

futures right now suggest a positive open for the marks. dow would open higher by 55, s&p by three, the nasdaq by a little more than nine. our next guest is betting on housing and a pharmaceutical supply chain. let's bring in bill smead. great to have you with us. >> thank you for having me. >> i want to start out with abc. >> well, really, we like walgreens, which owns 25% of abc. walgreens is led by a kingdom builder, an international kingdom builder. so they are buying rite-aid. rite aid's current drug distributor is different from amerisourcebergen. it's a nice little triangle. we own lots of walgreens, and we're an early investor in abc.

>> this is not factored into the 16% rise year to date on abc's stock? >> well, certainly it's been a factor. we started our position last year. it's part of the reason we haven't expanded it more. we're value buyers and value matters to us greatly. over the long haul, one of the truly great and consistent businesses in the united states of america has been drug distribution, both on a retail in walgreens' case and a wholesale in abc's case. >> why lennar as opposed to other home builders? >> they're very national. they cover a wide swath of the country. we think that the last time there were so few homes for sale across the country is when people crossed the oregon trail. there were no homes, and there were people, other than kevin costner in a hut near a pond. so where we are right now is you had a guest on last hour that's given all this dire backward

looking statistics about people under the age of, you know, 40 and homeownership. the biggest economic need in the united states is homeownership. this idea that people can't afford it is outlandishly wrong in our opinion. >> he was saying essentially the average fico score is 763, so the standards just have gotten very high. so it's difficult to get that loan. >> yes. i think we kind of know that one of the things the new administration is going to do is probably release the use of the capital of the major banks. you saw statistics on how low their percentage of the mortgage market has gotten. but here's what's important. the federal reserve household debt service ratio is at 36-year lows. so the capability to make the monthly payment is very high. that's what matters. can people afford a $1500 or

$2,000 a month house payment, and the answer is unequivocally yes. they're paying $2,000 or $2500 for rent right now that's not tax deductible and builds no equity. lennar is in a very good position. by the way, the index, the s&p 500 index is in a very bad position if housing is a great place to be in the next ten years. home building, 0.12% of the s&p is in home builders. i think it's got 8.13% in the three largest tech holdings. if tech isn't the greatest place to be in the next ten years and housing is a great place to be, the index is really going to struggle. america is moving toward main street. >> all right. we're going to leave it there. bill, thank you. >> thank you. coming up when we return, retailer nordstroms drawing the president's ire for dropping daughter ivanka's brand. we should have asked him about that. her name gaining popularity as a brand in china.

plus, a programming note. warren buffett is going to join us on monday, february 27th. he wants to answer your questions. you can send them to us on facebook and twitter. remember to use #askwarren. we're back in a moment.

welcome back to "squawk box." take a quick look at the futures. we are in the green this morning. you're looking at the dow opening 50 points higher. nasdaq up about 8 1/2. the s&p 500 up about 3 1/2 points. dozens of chinese businesses are applying to use ivanka as their trademark. one beijing based company that provides weight loss services filing ten applications to use ivanka. under chinese law, businesses are permitted to use foreign na names on their chinese translations as trademarks. that leads to many disputes with western companies that want to protect their brands. nordstrom's had one view of the world. >> a lot of ivanka products

could be on the market in china that ivanka has not endorsed. >> but ivanka is a brand. >> very different than nordstroms. >> like madonna. a one-name brand. no trump in there, by the way. it would be interesting. >> ivanka is a pretty unique name. >> it is. it's like cher. >> if it's not cher already, it will be cher soon. coming up, a union boss on working in the trump era. afl-cio president richard trumka joins us after the break. we are looking a t a positive open. stay tuned. at the marine mammal center, the environment is everything.

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good morning. welcome back to "squawk box" right here on cnbc. we're live at the nasdaq market site in times square. among the stories front and center, macy's shares are trading higheri right now. they beat estimates on the top and bottom line, although revenue came up a bit short.

ceo terry lundgren told us earlier this hour the company is making progress on key initiatives to improve its performance. the other big news that happened while terry was on set with us, verizon/yahoo! officially announcing a revise the deal that cuts the price by $350 million. and for those of you who hate sitting in traffic jams, according to a new study by a consulting firm, traffic jams cost u.s. drivers an average of $1200 per year in wasted fuel and time. i wonder how they're measuring time. five of the world's ten most congested cities are in the united states. >> probably in seconds and minutes, right? >> no, how much is your time worth. >> must vary according to the person. the trump administration is considering changes to how the u.s. trade deficit is calculated

to help bolster the case to renegotiate trade deals. "the wall street journal" reports officials are discussing whether to exclude what are called re-exports from export stats. if the government adopted this method, the deficit with mexico would be nearly twice as high. president trump has made it clear he would like to renegotiate nafta, but a lot of things have to happen before changes can be made to the trade deal. kayla joins us from washington, d.c. with more details. hey, kayla. >> hey, michelle. well, the intent to renegotiate nafta was included in the president's 100-day action plan, but a formal letter hasn't happened yet. the white house must notify in writing the house ways and means and senate finance committees to begin that renegotiation period. the two branches then have 90 days to compromise, figure out what's important to each branch to put in the new deal. that's even before the u.s. can approach canada and mexico with those priorities.

aides from both committees confirmed no such letter had been sent before this week's recess. meanwhile, mexico has already begun its renegotiation clock, although that's spraeparate fro what the u.s. is doing, but it's largely a symbolic move. the president and his team have met more casually with relevant parties. a senior administration official says it will pursue the proper channels to renegotiate with congress. but that can't happen until a u.s. trade representative is installed, and there's currently no hearing scheduled yet for the current nominee robert lighthizer. in the meantime, nafta remains a key pillar of president trump's stump speech. take a listen to what he said this weekend in florida. >> we're going to have tremendous trade deals all over the world, but they're going to be bilateral or, as we would say, one on one. none of these deals will we get caught in quick sand, will we get mired in and can't do anything about it, like nafta and so many others. >> now, individual bilateral

deals with each country are still a possibility, especially given how differently the white house's approach to the two countries has been. that's even without any potential recalculation of trade deficits, michelle, which you just mentioned would increase the deficit that we currently have with mexico. as you also know, the senate finance committee and the house ways and means committee have a lot on their plate already with tax reform. it will be interesting to see whether this can happen in a parallel process to that. >> yeah, just how much room is there on the agenda. good point. thanks, kayla. and a setback for unions last week in south carolina. boeing factory workers there rejecting a union vote, but union leaders claiming a win in their opposition to president trump's original labor secretary pick. andy puzder withdrew last week from consideration. joining us with more is richard trumka, president of the afl-cio. good morning, richard. >> good morning.

thanks for having me on today. >> let me start here on andy puzder. did you look at that as a victory? where do you think that goes from here? >> i think it was a victory for working people and for america. andy puzder was a bad choice for secretary of labor. he headed a corporation that violated the laws. he didn't believe in overtime. he thought that workers should get just satisfaction out of working long hours, rather than more money. he would not have enforced the laws effectively, whether they were health and safely laws or whether they were wage and hour laws. so his leaving was a victory for all american working people and the american economy. >> when you think, though, about trump's plan to bring back jobs in the united states, is that something -- i mean, i'm sure you advocate, but i'm sure you're skeptical of it. >> well, i mean, it all depends on the policies.

we want it to happen. we can see it happen. in fact, you know, we've sent recommendations over to the white house and congress, quite frankly, that if followed, we think would bring jobs back and create more manufacturing jobs and let us focus on the manufacturing jobs of the future so that we can capture them and everything that goes along with them. you know when we lose manufacturing jobs you don't just lose the jobs. you generally lose the r&d, you lose the skills, and the quality of the other manufacturing jobs in the area go down as well. >> what's your relationship like with the administration right now? >> we call them like we see them. if they do something we think is effective for workers, good for the economy, and consistent with our values, we're going to support it. if it's bad for the country, bad for workers, bad for the economy, violates our values,

then we'll oppose it and we'll tell them which side of the ledger we're on, on every single issue. >> richard, it's michelle here. the overwhelmingly negative vote at the south carolina plant for boeing where they voted no against the union by more than 70%, what's your response to that? they didn't seem to value what a union could provide. >> look, that's a tough area because of the culture. you have business, you have government, you have everybody that says don't get a voice on the job, don't raise your wages, don't get better benefits. leave things the way they are. the governor of that state, nikki haley, in your state of the union message said we're going to run every union out of this state. you've had that kind of a culture for a long time. it's going to take a little while to change that around. we put a big dent in it this time because a lot of people in there wanted to join. a lot of others that wanted to

join were intimidated out of it or told this isn't in your best interest. union workers make a couple hundred dollars more a week than nonunion workers. we have better benefits. we have more voice on the job. >> phil lebeau was at that rally when the president was there, and when one of the speakers talked about the vote and talked about the lack of unionization, everybody in the room cheered, he said. it sounded anti-union. >> is that a surprise? i mean, you had the governor that advocates that. >> so this is a south carolina issue, this is not that the -- >> this president hasn't actually declared yet. we'll see what he has to say about it, whether he's pro union or anti-union. he says the economy works best when it works for workers and that it works for workers the best when they have a union because they make more money, have better benefits, more job security, better health care,

and a better retirement. >> maybe makes them less competitive. you're saying the situation in south carolina is isolated and doesn't speak to a larger problem with -- is there a larger problem with what the value that unions can bring to individuals? >> that's just not true. union workers are far more competitive, more skilled more our building trades people are the most skilled in the country. nonunion employers try to hire them. our employers get a better value because they have better skilled workers. that's why we're able to have higher productivity and higher pay. it doesn't make you less competitive, it makes you more competitive when we can work together, skill up our people, give them good benefits, let them buy so that they can create demand and keep the economy growing. higher wages do that. >> richard, i want to talk about robots for a second. you probably saw some of the news last week. bill gates talked about the idea of taxing robots. elon musk came out and said there will be fewer and fewer

jobs, he said, that a robot cannot do better than a human. these are not things that i wish will happen. these are simply things that i think probably will happen. what do you think of that? >> well, i think there's going to be significant changes in the workplace and the work force. we have to prepare for them. but you also have to have something for the people. if this economy works for robots but doesn't work for the people in the economy, how long do you think they'll tolerate that? this last election was an example of the blow baback and reaction workers have. they rebelled against both parties and said we want the rules of the economy rewritten to benefit us, not corporate america, not wall street, not the elite, but they want them rewritten for us. if the economy only works for robots, i think you'll have a

real problem. >> speaking of elon musk, there's an event on the part of the uaw and tesla workers to unionize. can you give us any sort of an idea of how far along that? obviously this is not something tesla wants, but the uaw says it will welcome tesla workers with open arms. can you give us a status report? >> well, of course we would. we are in the business of representing workers, and our workers, our members are highly skilled. we continue to train them every single month and every single day, quite frankly. we have better benefits, more say on the job -- >> sir, are you making progress in unionizing that fremont plant? >> i'm sorry. >> are you making progress in unionizing that fremont plant? which used to be a union plant when it was under different ownership. >> you should talk to the auto workers about the progress

they're making, but i would say when people get facts and they aren't intimidated, they don't have a governor and a senator that threatened to take away their jobs if they vote to have a voice on the job. we make progress. we're making progress. we just won several drives last week. >> okay. richard, we always appreciate your time and perspective. thank you. great to see you. >> thanks for having me. on. separately, we should tell you it is now official. restaurant brands international, parent of tim hortons and burger king, buying popeye's louisiana kitchen. the chicken's great, but the biscuits are better. $1.8 billion in cash or $79 per share. there had been reports that the restaurant brands had approached popeye's earlier this month. companies are expecting the deal to close by april. >> this is halted by the way. it's up 16% premarket, but it's not actively trading right now. coming up, squawk market master mohammed el-erian will

join us after the break. say carl, we have a question about 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. if you don't like their answer, ask again at schwab. ♪

welcome back to "squawk box." let's get back to the broader markets now. joining us to talk about the phases phases of the trump rally and potential risks, mohammed el-erian. most people know you came from pimco, which is a bond house. we've had a lot of discussions this morning about the fact that the ten-year yield doesn't seem

to move much above 2.5%, if ever, and that there are people who say the bond market is signaling something very different from the stock market. the bond market is stuck, suggesting it's worried about growth or something. what do you think? >> i think our bond market is being impacted by what's happening in europe. two-year yields in germany, record minus 87 basis points spread between germany and france. they are worried about political risk in europe. that is keeping yields down there despite better growth numbers over there. that is having an impact on our yields. >> because people are buying ours for safety for fears of what could happen in europe. >> and they're looking for a pick-up. there's an attractive yield pick-up here. the stock market is being driven by three very powerful phenomena. one is better global economic data.

two is cash continuously being put back into the market. you've reported on mergers and acquisitions. you've reported on share buybacks. and third, expectations that mr. trump's pro growth announcement will translate into policies. >> so what happens now? do you believe this rally when it comes to the stock market? >> so there's two headwinds, even if you assume these three things continue. the first one is the dollar will continue to appreciate. we're seeing it again today. there's only so much that jawboning can do. if the u.s. outperforms, which looks like it will, if the fed hikes two to three times this year, which it looks like it will, then the dollar will continue to appreciate. that's going to create a headwind. the other potential headwind is politics. keep an eye on next week's state of the union because markets are looking for more details on where congress is going to move on tax reform, on deregulation, and on infrastructure spending.

>> it's a question we've asked a number of guests this morning and a number of guests over the past couple weeks, but i'd love to get your view. on the tax reform piece, to the extent we don't get it, how much do you think that's built in or not into the current equity price in terms of the markets right now? >> i think you would see two effects, andrew, if somehow the markets are convinced that tax reform is not going to happen for the next year. first, i think you'll see lower markets. second, you'll see very different sector performances. depending on where you are, the tax reform is either good for you or actually could hurt you. real estate, mortgage industry. you could get hurt. so you would see quite a few movements within the markets and overall. >> satisfied with that? >> i am satisfied, but i guess part of what i want to understand is right now kind of what premium do you think is already built in on the tax front, or do you think it's actually earnings that's

powering whatever rally we've had here? >> i think there is a view in the marketplace that pending details we will get a tax reform that will favor corporate profitability and that will allow for higher growth. given that we haven't had one since 1986, it's high time to look at the tax regime. i think that's built into the marketplace. the exact number, andrew, is really hard. there are so many other moving pieces, as you know. >> but mohammed, president trump could theoretically keep the markets stringing along, so to speak, by just mentioning tax reform, tax reform, tax reform, without mentioning details. that's what we've done -- that's what we've got son far, and it's worked just fine for the markets. feasibly, this could go on for months. >> yeah, it could, except melissa, there's a limit to how far you can push prices without actually delivering on policies. so that's why i don't think we've yet emerged from the more

volatile phase, the third phase of the trump rally. lot lots of people hope the fourth phase will be a definitive break up, but i think we're still in the volatility phase because markets cannot just have the fuel of announcement. at some point, they need detailed design and implementation. that's why going to congress next week, laying out his legislative agenda that he would like congress to act on, is going to be something that markets are going to look at carefully. >> we'll be watching. thank you, mohammed. >> thank you. when we return, more than a dozen ceos from some of the nation's biggest manufacturing companies speaking out in favor of the gop's tax reform plan, including the controversial border adjustment tax. we have details on that next. in the meantime, here are the futures right now. we are in the green. dow looking like it could open up about 53 points higher. we're back in just a moment. elusive today. alpe is it because so many go after it the same way? chasing after short term returns. instead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming specialized active investing

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welcome back to "squawk box." ceos from some of the biggest manufacturing companies are speaking out on tax reform. >> that's right, melissa. these executives are calling on lawmakers to get tax reform done here in washington. they're supporting the controversial border adjustment tax. this tax, of course, lowers the cost of exports and raises the cost of imports, and that's why

manufacturers are supporting it. these executives are signing on to a letter that went out to lawmakers this morning. the executives include the ceos of boeing, united technologies, caterpill caterpillar. 16 ceos in all. they said, quote, we applaud your efforts to pursue tax reform that is both big and bold. incremental tweaks will not level the playing field for american workers or dramatically reinvigorate economic growth. these ceos are hoping to push back against the opposition to the tax we saw last week from the retail industry. they've got a lot of work to do in the senate, which has been much more speceptical of the ta plan. i'm told the letter issued today one piece of a bigger campaign. we expect to hear more from the group leader this morning. i'll keep you posted. >> thank you very much. nearly a dozen passengers, this was a crazy story, the craziest, breached security at

jfk airport in new york on monday morning. tsa officials say 11 passengers walked through an unattended security line at terminal five around 6:00 a.m. eastern time and boarded flights. i'm always waiting in the long lines. wish i could have gone through. the line was about to open as a pre-check lane, but it wasn't staffed at the time. three of the passengers, if you can believe this, set off the metal detecters. tsa says all of the passengers carry-on bags were screened so they are, quote, confident the incident presented minimal risk to the aviation transportation system. >> makes you mad. >> it frustrates me in so many ways because it goes back to my security theater issue, which is what, i think, the whole apparatus is supposed to make us feel better about what's going on, but i'm not sure it really -- >> without an improvement in the actual security. i agree. trade off between how much we go through to get on a plane versus

how much safer we are, i'm not convinced is right. >> what do you do about it? put more security in place? do you try to do what they do in israel, and try to change the -- >> i think the airport has to be privatized. from day one. particularly in new york city. the infrastructure would get better. there's other things that could happen. the lines happen for a number of reasons, not just because of security. >> first step is paying attention. >> right. >> metal detecter is going off. hello. it screams, look at me. something is going on. they're busy, melissa. >> apparently. one of russia's top diplomats died suddenly in new york. he was the second highest on the diplomatic ladder behind the foreign minister. officials say he fell i'll in hs office and rushed to the hospital where he died. reports say the cause of death was a heart attack but it is unconfirmed. he was one day away from his 65th birth da. uber is launching an

independent investigation into allegations by a former employee about sexism in the workplace. she said uber's hr department ignored her allegations and her job was threatened as a result. uber's ceo says the behavior is unacceptable. he had eric holder and huffington do the review. >> the question is how quickly does this have to get resolved? meaning, how long does the investigation go on for? the story is going to be a huge story in the valley, especially. how long? two week or three week story? will i'd love to interview here because she could have sued all the way along but didn't until she left. >> has another job lined up. it wasn't money. still to come, irene rosenfeld is going to join

"squawk on the street" at 10:00 a.m. still ahead on "squawk box," a round table of some of andrew's favorite guests of all time. >> look at his face. >> you have to be kidding me!

we're out in san francisco because we want to know what is driving this market's underlying strength. to be fair, this market, which i don't think gets its due, i've

never seen so many sectors break down at once. welcome back to "squawk box." andrew's birthday was on sunday. it was a big 4-0. we have some guests on set to help celebrate. >> i did not know. this is a surprise because i didn't know they were doing this. >> isn't this fun? >> this is henry and max. this is sydney sorkin. this is my wife. henry almost gave away the plot. you said there was some surprise party, but i thought -- you didn't know this. we didn't talk about it. we had dinner with friends on my birthday. i thought maybe because he'd say there was a surprise party, i thought there might be a surprise party. what i didn't know is i think you were referring to this. is that what was going on, henry? >> yes. >> that's the story? >> max? want to say hi to everybody? you know what, you've grown up on the air. you've come for a handful of birthdays on tv, right? >> show the world your baby sister. show your baby sister on tv for

a second. >> she's so cute. >> she looks like she was sleeping. >> she is. >> she is sleeping. anyway, thank you, guys. >> looks like she -- it looks like she was going to kiss. >> she was going to give me a kiss? >> yeah. >> thank you very, very much. >> happy birthday, andrew. >> thanks, guys. it is fun. thank you, too. join us tomorrow, squ. "squawk on the street" begins right now. happy birthday, andrew. good tuesday morning. i'm carl quintanilla. jim and david are off today. decent setup with the premarket higher. good news from walmart and home depot. europe is up on a strong euro zone pmi, the highest in 70 months. watch