♪ we are the champions my friend ♪ >> live from new york where business never sleeps, this is "squawk box." good morning, everybody. welcome to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. u.s. equity futures have been under pressure after three down days in a row. the dow futures down by 40 points. s&p is off by 4 1/2. the nasdaq off by 12 1/2. in asia overnight, take a look. you'll see, in a moment, you'll see that the nasdaq -- the nikkei was down by 1%. the hang seng was higher. in south korea, the kospi was down by 0.3%. in europe in the early trading already, the markets are mixed. looks like the dax is down by

0.1%. the ftse is up by a quarter percent. the ten-year yield, which was below 1.4% -- or below 2.4% -- yes. even additional pressure, 2.334% closed yesterday at 2.359. >> buying in the -- we had -- we had nine straight down days last week, then 10 out of 11 something. then we had one more positive one. now we have three straight. so we're like 15 out of 17 or -- >> you're looking at the ro roulette table where it's time to bet on green? >> we had a big upd day. we're not far from the highs, with you 15 out of 18 down days. i remember the 9. we forget so quickly. we were on a 9 or 10-day streak of down days.

then we had an upd day. >> this would be four, right? >> today would be four after 9 or 10. >> so a bit of a shift in momentum. >> maybe. >> let's look at crude oil prices. oil yesterday down about 36 cents to 50.24. this morning down 3 cents to 50.22. couple big stories we're watching. aol ceo tim armstrong announced that aol and yahoo! will join under one entity called oath once the purchase of yahoo! has been closed. armstrong writing last week billion plus consumers, 20 plus brands unstopibility. team #take the oath. summer 2017 when all of this kicks off. re/code reporting that marissa mayer will not continue with the company. it will, instead, be headed by armstrong as oath in chief. we will be talking more about that. tim armstrong will join us here

at 6:30 a.m. eastern time, first on cnbc to talk all about it. today's economic agenda. the pay checks small business job index comes out at 7:50 a.m. eastern time. february trade deficit figures, that comes out at 8:30 a.m. eastern time, followed by february factory orders at 10:00 a.m. and fed governor dan tarullo speaking this afternoon. he is officially stepping down tomorrow. it will be interest tock heing what he has to say. the white house taking steps to hash out a compromise on the healthcare plan. vice president mike pence met with moderate republicans at the white house last night and then headed to capitol hill to meet with members of the conservative freedom caucus. the trump administration trying to find a compromise on insurance regulations. president trump telling nbc news he thinks the best way to finish the bill is to reach consensus

with republicans rather than working with democrats in this instance. he gone back and forth with how to deal with the freedom caucus, whether you needed the democrats to offset them or vice versa. >> weird. what does back burner mean? this is putting us on the back burner -- they never put it on the back burner. >> on the quiet burner. >> it was an ultimatum, take this one or we're not doing it. a week later they're back at the table. >> listening to some of the -- trying to read between the lines, meadows said there is no agreement on this. there was a proposal that was sound, that was put forth, but that sounds like it's something tough for both sides to agree on. >> lots of talks going on with mike pence, trump playing golf with rand paul. >> at minimum you lowered expectations. if something does come of it, surprise to the upside. possibl

possibly. >> this is andrew's mantra for the day. >> think positively. >> he will look for the upside in any scenario. >> armstrong -- #take the hoeoa. that's a good one. four letters, one syllable, it was available. the word oath for a company was available. i want to know how it happened. who thought it up. whether they paid anyone for it. >> i was trying to figure out if it had anything to do with trying to get over the yahoo! customer issues, the customer information being stolen. >> they plan to use the yahoo! brand for yahoo! finance, and aol for aol sports. huffington post will continue its brand. this is more of an umbrella organization. >> when you swear, like

epithets, sometimes that's called an oath, isn't it? >> you will take the oath, i swear i will take care of -- >> i swear that i will never read the huffington post again just about every day. actually i swear at the huffington post. does that count. >> that's not really -- >> that's not really -- >> i don't think that's the take the oath they're thinking of. >> it's not -- what are you looking at, andrew? >> i'm noticing we were talking about who would have thought of using this. the oath.com looks like it's taken. >> oh. >> but not by them. at least at the moment. it's owned by attn media groups. >> that would be interesting if it was at&t. >> no. >> it's based in bedminster, new jersey, where at&t used to be based. >> i went to oath.com, because i was curious what was taking place at oath.com. it's a place holder site for nothing. >> yeah. >> let's get to eamon.

president trump meeting with business leaders today. eamon javers has more on that story. when does a news story become, like, mainstream? how does it become mainstream? that's an interesting question. >> i watch fox sometimes. i saw susan rice a thousand times yesterday walking around. i saw her previous testimony about bengahzi. i saw so much made of this unmasking revelation broken by bloomberg and some others. i don't see it anywhere else. when does that become something that you would lead with? how does that happen? how do people decide? >> i would talk about it if it was a business story for the business network. >> that's not true. when would it be moved to, like, a -- >> i think -- okay. fair question. on this one i think you're looking for some threshold of inappropriateness or illegality

or questionability. i'm not an expert on this story to know. i haven't been diving into it deeply. it seems like asking for unmasking, is within the purview of a white house. the nsa is the entity that decides whether or not to unmask. and then ultimately whether any of that was appropriately done has to be sort of litigated out here but i don't know. i haven't been following it closely enough to give a hard and fast answer on it. >> if there was a front page story with someone with a russian investor -- i don't know. the level -- the line doesn't seem -- the bar doesn't seem to be high for it to be a russian story. on the other side, for this, i don't know. i would think there would have to be a body before it became -- you will be positive. >> i would think that -- >> did you watch this yesterday? >> i did. there's eli lake at bloomberg news who has been writing

brilliantly on this. he's all over this. he's the one broke the story yesterday. >> does this seem significant to you? >> it does. former daily beast reporter. >> you saw what she said two weeks ago. she said i knew nothing about this. she was the one unmasking it all along since july. >> i think the connection of when it would break out, if you will, would be when there's evidence that she was taking that information back to the white house for reasons other than national security. >> but we know why they loosened the rules to spread all the information. you know what i was telling my kids yesterday, when will this be a story? i don't expects the networks to cover it or cnn. the new york ti"new york times" t because they do try, deep down, to be the paper of record and to be legitimate. >> it's a legitimate question. who was unmasking inside the obama administration. >> i'll say. if you were doing trump family members, trump, everybody

associated with him, that's damn close to surveillance of the entire -- for political reasons. it had nothing to do with russia. >> the question who brought up unmasking is npr. they have been doing deep dives on what unmasking is. >> they've been doing it in the last week. >> then god bless them. >> finally. that is a service to the public. >> let's walk through what we're talking about, though. when you talk about unmasking, you're talking about people who have been incidentally collected in terms of intelligence gathering. that is if they have a wiretap or surveillance or audio in a room, that's done with the fisa warrant or legal court warrant based on some kind of legitimate intelligence reason to surveil that person. if you're surveilling the russian ambassador, for example, and you come up with conversations in which he is talking with people close to trump, those people would typically be masked. they're americans. >> citizen one, citizen one.

>> right. >> it's a felony to do it to mike flynn. >> if you're in the white house and you want to figure out who u.s. person one is, that's an entirely separate legal issue of getting access to that. that's called the unmasking. then you're asking for that -- for some intelligence reason you need to know who that person is who is feeding information to that russian. but if you're doing it for political reasons, that is inappropriate. could be a violation of the law. that's where the nexus is. if this is done for reasons of gathering intelligence in this investigation into russian espionage, that is legitimate. it's done just to gather dirt on the trump team, that's inappropriate. >> you might want to know if the russian ambassador was talking about either the president or the president-elect, you might have security reasons for wanting to know with some of the unmasking going on. >> some of it had nothing to do with russia. most of it.

>> well, that's what -- you're talking about what devin nunes brought to the table. >> that's how it all started. >> some kind of information about trump associates who have been incidentally collected as part of routine intelligence surveillance. but he said it had nothing to do with russia. to be clear, the united states monitors ambassadors from foreign countries, russians of all stripes all the time. we have a massive spying operation, so if you're an american and talking to those people who we're surveilling, your conversations could be sweptd swept up. >> and schiff, since he saw the stuff, he's been nice lately. he has not been bloviating nearly as much. you do know a lot about this. you said you didn't know a lot about this you did know a lot about this. i'm glad you shared. >> i had a whole hit prepared on a different subject. >> what was your other subject? >> i was going talk about ceos at the white house today. doing the big ceo town hall

today. >> another one? this is a president who likes the convening power of the presidency. likes to gather ceos and business executives. thinking positively about business at the white house today. dozens of big-name ceos having breakout sessions, meetings. some name there's, lee ainslie of maverick capital, stephen swartzman, paul taubman, steven roth of vornado reality. robbin hay robin hayes of jetblue. it will be a big day of top executives at the white house. again, as you pointed out. >> yeah. all right, eamon javers. you sandbagger. you know a lot. >> you expert you in that department. >> i sneak in a hit on another subject every now and then. >> appreciate it.

let's check the markets and economy. joining us is ed keon, portfolio manager at qma which has 1$116 billion in assets under management and bruce kasman from jpmorgan chase. welcome. good to see both of you this morning. ed, let's talk about the market. we started off at the top of the show talking about how we've seen three down days in a row. this morning futures are indicated weaker. we had a longer stretch of down days recently. has there ban chaneen a change momentum? >> we've pulled back a bit in our portfolio. we've been selling stocks, buying bonds at the margin. we had a nice run in the post-election run. we stalled here. though the fundamentals look good. we'll get a boost from earnings season, which starts in about a week. the hope that you will get a lot of strong pro growth policies has been damaged a bit as a result of the healthcare issue. >> what would it take in order for you to be convinced it's

time to start buying stocks again? >> if we saw progress on policies. some path to get through a fairly aggressive change. >> meaning if the white house decided to work with the freedom caucus or with democrats? >> yeah. i'm hard pressed to see a way to get politically -- i'm not an expert on politics, where you can get aggressive enough corporate tax law changed that it would make a material difference in earnings. the already quite positive earnings expectations are baked into stock prices. you can see that because valuations are on the high side. >> bruce, guest after guest say the earnings outlook is a bright one. we're continuing to see earnings outlooks being upgraded. things are looking good. when you look at the underlying economy, is it the same story? >> i would say the earnings outlook is good. i think the global dynamic, not specifically driven by u.s. conditions is reflating the world. it's helping pricing power,

improving growth. the u.s. is in a funny position during the first quarter it looks like we're having a weak quarter, we're forecasting 1 % growth. a lot of other things are suggesting the underlying pace is solid. i think the u.s. is a 2%, 2.5% economy. not that much different than we've been. the rest of the world is doing a lot better. we do believe soberness is the right message about the ability of the u.s., the administration to deliver significant growth enhancing policies. so we're down playing the u.s. policy shift and emphasizing a global reflation story which we think has power and will continue to run here. >> why do you think we're looking at a 1% gdp with these other issues, with business confidence running high, consumer confidence running high. what's happening? >> a couple things you can see. the most important one is the consumer is being hurt by a spike of inflation into the start of the year. might be some other stuff around the tax refunds coming in slowly. there's also an issue that we

have a disconnect between the gdp adding up, labor market data, production data and survey data. we've been seeing this over the last number of years in the first quarter. the data on gdp has been revised up. the second quarter has shown a rebound. >> a head fake to some extent. >> i believe it's a head fake, fake news. >> don't get too worried if we see a low print? >> i don't think so. not by itself. we want to track more fundamental things going on. gdp in the first quarter is not sending the right signal about where the economy is heading through the rest of the year. >> listening to all of that, do you like stocks outside the united states better than in the united states? >> marginally, certainly growth outside the united states is getting better as our growth is stuck around that 2% level or so. there is also better valuation outside the nights. at the margin we're positive towards stocks. >> in terms of the hard data versus soft data.

i read a chart this weekend that showed all of the soft economic indicators, things like confidence for businesses, confidence for people has been skyrocketing. the hard data like gdp numbers have been more concerning. is there a point where one of those two trend lines wins out? does it concern you that there's a disparity between the two? >> we have to be careful. there's hard data that's been strong. manufacturing output has accelerated. labor market data has been strong, notwithstanding we're expecting a stronger number on friday. there's been a connection between direct inputs to gdp and this survey data. there's a case to be made that some of the rise in confidence came with expectations on u.s. policy. we're not building in big policy changes this year. again, there's a more organic story about global conditions and u.s. conditions boosting profits. strong fund tamentals for

consumers. that's an important signal for where we are heading for the year. the sentiment moves up and the hard data outside the u.s., western europe, japan, asia have been moving in a very impressive way over the last three, four months. >> all right. bruce, ed, thank you for coming in. big sports news, big sports week with the masters coming up. last night north carolina has erased the memory of last year's buzzer beating loss to villanova in the ncaa championship game. the tar heels pulled ahead with less than two minutes to go and held on to beat gonzaga 71-65. it's the sixth crown for the men's team at north carolina. the third under hall of fame coach roy williams. it's hard to do brackets. but i picked north carolina. >> you did. >> to go to win. so i came in second. brian steele, who will be

already feigning modesty -- >> i'm glad it's cnbc number one and two. >> and your husband -- he came in fifth. >> strong showing. >> this is like tv news -- of all the news people, peter alexander, a lot of people picked to do this. >> strong showing. >> it is. >> 1 out of 64 teams. i thought north carolina -- you never know. things bounce one way, it doesn't happen. we're proud. we're good. just really smart about sports, i think. and the markets. >> and statistics. >> and politics. >> coming up -- >> you know, for a while you were ahead. >> i was ahead briefly. >> this is just another --

annoying -- >> you know, but i'm feeling great about it. feeling great this morning. coming up, we'll talk about tesla's ceo, elon musk. he's taking a victory lap on twitter, as well he should. his company market cap just passed ford's. details straight ahead on what he had to say about that. ♪ predictable. the comfort in knowing where things are headed. because as we live longer... and markets continue to rise and fall... predictable is one thing you need in retirement to help protect wh you've earned and ensure it lasts. introducing brighthouse financial.

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♪ >> welcome back to "squawk box." warren buffett not just a huge coca-cola investor, but a huge fan of cherry coke. the billionaire investor helping to launch a coke drink in china. his picture is appearing on cans and bottles of cherry coke. buffett is popular in china. an estimated 2,000 to 3,000 chinese investors attended berkshire hathaway's annual meeting last year. buffett said no compensation was involved in the promotion. >> he owns 12% of the company. >> he doesn't allow his image on

a lot of products. though i do have those brooks sneakers with his face on it. unfortunately you step on his face. it's inside the shoe, if you put your foot down. >> could have been worse. could have been fruit of the loom underwear. putting something else -- >> yeah. >> it's not diet coke he drinks. >> no full on. >> i would drink that. i would. but i can't -- >> wash down the peanut brittle. >> exactly. i like that, too. those are calories i can't afford to waste on a sugary drink. i don't even -- i stopped drinking the diet things, people tell me -- >> soda is why you're fat! >> that's one of the reasons. >> diet soda, i'm told, can cause you to be fat somehow? >> because you're appetite still is expecting the sugar. >> it tricks you. >> it makes you hungrier. >> a doctor once told me you can't have a predisposition like kidney stones from the carbonic

as si acid. >> is that true of sparkling water. >> i don't know. that's what i drink now. >> carbonated water fills you up. >> it does fill you up. if you drink two of them -- last night, i was like, oh, my god. >> fills you up. good thing. >> i did that when i was pregnant. that's all i was drinking. >> you have to move around and -- got to let it out. better out than in as shrek says. >> always better to avoid the diet. go full on. do you do 1% milk? skim or whole? >> i use whole milk, but only in coffee. i'd like to have. >> half & half? >> sugary se y cereal with whol milk. isn't that the best? >> the milk at the end. >> buffett, my point -- he's 85 or 86, worth $70 billion.

not exactly an indictment of what sugar will do to you. >> his point is you get to pick your calories. >> you do. but he's not dying from sucrose or whatever the hell it is. it didn't ruin his brain, dent make him poor. this latest thing about sugar being -- they're saying it's like cigarettes now. we go crazy on this stuff. bloomberg, and -- while he's using all that salt on everything, nobody else is allowed to use it. >> sugar is problematic, though. it is. corn syrup is problematic. real sugar is better. >> in moderation. doing it in schools and cutting the exercise in gym classes. >> you have seen the link between that and diabetes -- >> there are ways you can cut diabetes rates and do it -- >> you look at studies, there's not correct -- >> tony cosgrove points out a lot of these are diseases that

we can control. >> but not necessarily from sugar. >> but it is from obesity. >> from overeating. >> yes. >> but that's not necessarily linked -- >> to corn subsidies, how cheap it is. >> carbohydrates. >> it's all called cascades. >> cash high drarbohydrates mat >> verizon announcing plans for yahoo! once they close. tim armstrong will join us with details. when you're a diabetic -- >> you don't want to be a diabetic. >> a look at yesterday's winners and losers. ♪ remember here at ally, nothing stops us from doing right by our customers. who's with me? we're like a basketball team here at ally.

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♪ welcome back. you're watching "squawk box" live from the nasdaq market site in times square. good morning, everybody. welcome back to "squawk box" on cnbc. let's look at u.s. equity futures. things have been a bit weaker. if you look, you will see they're down, but only by 25 points. dow futures had been down by 40 earlier. s&p down by 2 1/2. the nasdaq down by 1/2. >> verizon unveiling one part of its plan for yahoo once its acquisition of the company is completed. a new company overseeing yahoo! and aol will be called oath.

joining us now is tim armstrong, the ceo of aol here in long acre square. it's easy to get here at the squawk roads of the -- >> times square. named after the "new york times." hard to say it loud. >> good promotion. >> that is important. that's what we were talking about. earlier in the show, we have seen companies pay lots of money to come up with what i -- four letters, one syllable, #take the oath. oath wasn't used. you guys came up with this in-house? >> came up with it in-house. building the world's largest portfolio of digital brands. we wanted something that would be a name that would connect all the brands. yahoo! aol, huffington post, tech crunch, gadget. all those brands are things consumers see. but we wanted a commitment brand behind the company which showed our commitment to the brand. it's an oath to building brands. something we did inhouse.

alli klein our cmo and a bunch of others came up with it. and we've been working organizing a house of brands. in q2 we'll unleash a major marketing campaign for all the consumer brands. this is a brand that supports our front-facing brand. >> it's not a consumer brand? >> not a consumer brand. >> but you might create some sites under the brand. >> oath is a brand that will start out as a values based brand, about connecting values. over time f there's brashgtime, can create around oath, we will think about that. but yahoo! finance, yahoo! sports, tumblr -- >> what about these yahoos who own oath.com. we looked it up today. >> we'll see something special on oath.com coming up. >> you have already -- you have already negotiated with those folks. >> yes. >> so yahoo! and aol will go into the dust bin of history in

terms of using those names? they'll be gone. >> they'll do the exact opposite. you'll see yahoo and aol still. about 1.3 billion consumers use our collection of brands every month. if you're in many countries around the world, yahoo! aol and our portfolio of brands are the most important in the world. it's the best time to take those consumer brands, push them out. have oath as the backup brand. if you look at huffington post, techcron, yahoo! sports in front, oath is on the side. >> i think of the brands you have as being a collection of different brands. are the values the same? >> the value is the commitment

to building the brands. you look at the world today with fake news, all the things going on, our mission as a company is to build brands that people love. we are a company who has believed long-term brands will win on the internet. that's one value. the second value is around talent and finding people who want to build those brands. one surprising thing out of the yahoo!/aol combination is the talent and where the talent is. >> so not making changes there? >> we are investing in yahoo, the sunnyvale campus. we will be moving aol to the sunnyvale campus. >> when we think about yahoo! and aol, we think about the brands, but the analyst community and investment community thinks about ad tech. recently there's questions about advertising, thinking about what youtube felt a few weeks ago

with advertisers fleeing briefly because of content. chase, which was on 400,000 websites because of that advertising went down to 5,000 websites. how will that change? >> program attatic is a force. it's a huge opportunity of how soft it comes into madison avenue, that's a 700 billion, 8$800 billion a year business. >> you don't think programatic advertising is dying? >> it's the opposite. advertising is one of the biggest things in the world that will change, number one. doing it in a brand-safe way is the second thing. seeing that news, that's the thing we have been building for in the last five, six years. if you like brands, quality content and advertising, and

brand advertising, that's our capital. >> what will marissa mayer be doing? >> she's getting the company completely set up to operate by the end of q2. she will see it through the next phase. >> then what? >> then that's what we're going through now. >> will she be paid severance? looks like tens of millions of dollars if she leaves, departs the company. is that part of the conversation? >> i wouldn't get into that here, i think what we're focused on now is getting the executive team set up properly to operate. we're in the middle of it now. i think all of those things are contractual and would get worked out. but we're not even there. we're trying to work through the executive team. >> is there a hangover on some yahoo! hacking issues that took place under her leadership? i think one reason becky is asking the question in terms of compensation because wall street is curious at a minimum about how she may or may not get compensated on the way out and whether some of the hacking will ultimately impact that in terms

of the accountability issue. >> a couple things. at the most macro level, security is something that everybody is focused on. it's not going away. consumers know that's a possibility when you use the internet. trust is the most important thing. we're putting huge investment into security to resolve that situation. the second thing i would say in terms of the yahoo! specific things, that part of our transaction predated what we knew about the company and the company yahoo! specifically is dealing with that part of it. marissa has been dealing with it, they're doing a good job focusing on it, fixing the issues. for marissa and her team, i think the only thing they can do is work on that issue, fix it. whatever happens in terms of the outcomes i don't know. if you're on wall street. that's not my main concern. my main concern is what the operations will be. >> speaking of how to make money. your name was associated with uber recently as being coo.

did has almost happen? >> i use uber. i like the product. >> why was that out there? you didn't talk to uber at all? >> i was on vacation when it came out. >> it's not true? >> i was focused on the yahoo! -- >> is it false? >> the uber rumors? >> that -- did you speak to uber? >> i did not speak to uber. >> and your representatives didn't -- here's why i'm asking. you're at verizon now. i guess you did well at google, obviously. you did pretty well. if you're at uber, seems like right now your compensation -- verizon won't go up ten times in value. maybe it will with oath. >> i think it might. >> it seems like uber would represented a place where you could get in and make a lot more money over the next five years than sticking with verizon. >> let me tell you how i think about the situation in terms of verizon, aol and why it's an interesting opportunity for me and our talent. mobile is the most important trend in the world.

verizon, i think, is the best-run company in the mobile space. verizon has done an amazing job putting our companies together in the internet space for sub-10 billion. the next closest company our size will literally be most likely overa billion u a billio hundreds of billions of dollars. i do think there's upside at verizon? i do. we have a lot of work to do, but verizon is doing a smart, strategic move which is to bet the company on where the world is going. >> look two, three years out in terms of strategy and content. it may be through this oath unit, i don't know. when you look at what randall stevenson is doing at at&t, buying time warner and betting big on content, dare i say bigger than the verizon content thus far. do you say yourself to lowell or lowell to you, we need to own viacom, cbs, 21st haven'try fox, we need to own a big player in this to make a go of it.

>> i would say verizon's interest, they've shown it in acquiring us, acquiring yahoo! being in digital content and being a meaningful player there. if you look at all the statistics, content on top of these networks is important. what you've seen is us lean in to where the content is going. >> content is content, right? it's the means of distribution that people are trying to figure out. >> verizon brings massive distribution both with mobile and with cable at fios and now our distribution, reaching 1 billion people in the world is an important asset to have. once you layer in the content, there's a very big business to be built with high quality content and high quality advertising and subscriptions. >> do you need movies like a netflix or television shows that would be broadcast other directions? >> i don't think there's -- i don't think there's any doubt we will smartly expand our content portfolios overall. i think if you look at the assets we own, if you take last

night's basketball game, having yahoo! sports or where we are now on nasdaq, having yahoo! finance, there's a lot of content we can continue to build. >> how quickly do you think you can move? people ask how long will it take to integrate yahoo! and another. the second that is over, the m&a machine, the gossip channel will say you're going after one of those companies just mentioned now. >> our job is to have the world's largest audience we can build in digital. the best ad system, subscription system, and the layer of content that gets you in our engagement levels. >> that a six-month plan? 12-month plan? >> integration, 12 to 18 months in terms of integrating the systems. we've been planning it for a year. by the end of q2 you will see our strategy publicly. i feel really good about it. i feel great about the yahoo! team and the tall length and the team we're bringings to the table. you'll see a focused global approach. >> where were you vacations?

wevacationing? were you vacations in san francisco? when did you grow the beard? >> i haven't been on in a while. you were not incognito. were you interviewing for the georgetown job? >> that seems like a good job. >> patrick ewing. they wanted the xavier guy. i hope you guys take the oath, be committed. >> i saw general eberhart, he's coming on. that's taking the oath. coming up, employment in focus. we'll get the paychex maul business job index at 7:30 a.m. eastern. at 8:00 a.m., andy puzder will be our guest host. he will tell why his confirmation as labor secretary failed.

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welcome back. right now it's time for the executive edge. we are watching shares of tesla. the stock rose by 7% in yesterday's session pushing the market value above ford's. as tesla stock rose during yesterday's session, elon musk took a shot at traders betting against the electric carmaker, tweeting stormy weather in shortville. >> i think he's talking about mr. chanos. >> yesterday jim cramer said he would not best against the stock because of where the funding is coming now. tesla shares up about 38% year to date. when we return, the u.s. air force air mobility command oversees global air lifts, refueling and medical evacuation. the group's commander will join us next to talk about defense spending and partnerships with the private sector. right now as we head to a break, a quick check of what's happening in the european

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welcome back to "squawk box." president trump wants to boost military spending by billions of dollars but he's vented over

projects he thinks cost too much like the f-35 fighter plane. all of this takes place amid a military with aging planes. here with us is general carlton everhart the commander of u.s. air force air mobility command out of scott air force base in illinois. we thank him for being here. we thank him for his service. and we appreciate you being here. >> appreciate it. >> help us try to understand what's going on politically in terms of the budget and what it means for you. is 10% in terms of increasing the defense budget enough? and how does it impact you directly? >> you know, as far as the budget, any increase no matter how small or large i'll be able to consume. it affects us because it allows us to do more things with readiness, more things with modernization of our program, the increase -- as you just said i'm flying very old airplanes. so i need to increase the modernization program to make them more capable because i keep them for a long time. so this increase in budget allows us to get through the

readiness piece, to keep people at the tip of the sword so to speak and ready with their skills and also to be able to support our global operations. >> in terms of priorities is it buying more f-35s. is that where you put the money? >> right now for the air force that is a priority. but we also have our bronze-new tanker coming on the kc-46. that is a program of record that we're buying right now. it's coming online. we expect the first flight of the kc-46 in september of 2017. >> it's going to be really difficult with budgets the way they've operated in recent years just to try and figure out, because so many of the things that you're talking about are long-term planning. these are not things that you spend the money in one year and they're here. you need to know two, three, four, five years down the road what you're going to be able to budget, right? >> that's a great point. and with continued resolution, that is devastating to us. we do do long-leave programs. we do set things in motion, so this day-to-day buying, is not good. it has -- it impinges us on readiness. it impinges on us on weapons

systems sustainment. in other words buying the parts to keep the airplanes flying. it takes a lot of work to keep an older airplane going. so that's, just day-to-day budgeting is tough. >> is lockheed and boeing giving us a fair price? and are we negotiating properly for this? >> i think we're negotiating properly. i really do. i think that, which is very interesting. >> yeah. >> that that came to light. but, yeah, i think so. we have a program office, general duke richardson is responsible for the acquisition program. for instance of the presidential aircraft -- >> we've heard a lot about. >> we have the best airlines in the world in terms of equipment now? >> absolutely. >> but we've got to be aware. and we can't, you know, nobody needs to be using like old parts for old aircraft. there's work that needs to be done but we're still the best. >> we are the best in the world. >> you're apolitical, as we are here.

have you noticed a change in the morale since the latest election? and, was there a frustration in maybe previous years about the way maybe the military was -- >> i can't really speak to what the frustration was. >> how about now? >> but now, you know, as we were discussing earlier, i was just downtown in memphis, last week, and i had four people come up to me in about a 30-minute period saying thank you for your service. thank you. we get that all the time. but i've just never seen it that rapid. maybe it's because of that city, i don't know. but you're also seeing that flow with our military. >> they're going to -- they're going to end us. but -- i just want to ask on the price issue. do you think that the president will be able to negotiate prices even lower than they currently are? >> that's i think what we're all trying to understand. >> you know, he's a businessman. >> right. >> so he brings that business aspect to him. and when you have ceos in the room, which he did down in mar-a-lago, it brings

conversation to the table. >> okay. >> so do i think so? probably. >> thank you. thank you for your service. >> thank you, sir. >> really appreciate it. >> "squawk" returns in just a moment. you have access to the right information at the right moment. and when you filter out the noise, it's easy to turn your vision into action. it's your trade. e*trade. you never got the brakeslooked ? a very nice girl... oh yeah. no.

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target tax reform. after members of his own party refuse to back the health care bill, does the president still believe that he can work with the freedom caucus on pieces of legislation, and what could that mean for business? that discussion is straight ahead. plus, tackling trade policy. the president's meeting with chinese president xi jinping is just days away. we'll take a look at his trade strategy and what it could mean for investors. and is the american consumer ready to travel? airlines ramping flights up ahead of the summer season. what's behind that move? and will it pay off for the sector? that story and much more. the second hour of "squawk box"

begins right now. ♪ live from new york where business never sleeps this is "squawk box." good morning, welcome back to "squawk box" right here on cnbc. we're live at the nasdaq marketsite in times square i'm andrew ross sorkin along with becky quick and joe kernen. take a look at the futures at this hour as things set up. unfortunately in the red right about now. dow looks like it would open off about 25 points down. nasdaq would open down 10 points. down and the s&p 500 will open off a little over 2.5 points down. there could, i say could be some developments in health care reform today following a meeting between vice president mike pence and members of the freedom caucus late yesterday. the caucus chairman mark meadows said that he was expecting to see a revamped bill within 24 hours. he says the caucus remains open minded to a deal but whats to see what a new deal will skwa.

chipmaker qualcomm going to file a court motion to dismiss a lawsuit against it by the federal trade commission. the ftc said qualcomm was engaged in anti-competitive practices. qualcomm says the motion will rebut all of the ftc's claims. and general motors has revealed more details about his discussions with david einhorn. the automaker saying that einhorn first reached out last august and it had several clugss with him since then. gm has come out against his proposal saying it would endanger its investment grade credit rating. on today's economic agenda the paycheck jobs small business jobs index is out at 7:50 a.m. eastern time. we will bring you that data first right here on cnbc. february trade deficit figures are out at 8:30 a.m. eastern time. and that's followed by february factory orders at ten sclook a.m. fed corner dan tarullo will be speaking this afternoon. he is stepping down from the fed

tomorrow. >> on today's washington agenda, president trump plans to hold a town hall meeting with about 50 corporate leaders to talk about the ways to improve the business climate. among those expected to attend, ceos of citigroup, blackstone, jetblue, mastercard, new york stock exchange, and others. discussions will likely focus on infrastructure, modernizing government, workforce development, and creating a pro-business climate. andrew? >> the new york public corporation, is that what the actual group is coming together? >> the what? >> what is it, the new york corps -- new york public corporations. >> oh, is that -- >> i think that's the guys that are part of this group. but, different group every day these days. president trump signing a repeal of obama era broadband privacy rules. those rules never went into effect but they would have required broadband and wireless companies to get permission before sharing sensitive information about you, such as your location or websites you visit. and now to sports, north carolina erasing the memory of

last year's buzzer beating loss to villanova in the ncaa championship game. the tar heels held on to beat gonzaga by a score of 71-65 to win the national title. the sixth one. sixth crown for the men's team. and the third under hall of fame coach roy williams. and, because it's great when you do brackets. because then you follow the team that you pick. and i've leshed to love jack condition and meeks. nothing to do with -- >> you go through the game. >> and watching these guys. >> i loved your enthusiasm. it's made me excited about this over the years. >> and xavier. and when they come through, you know, and when you most need it, like when you look at those guys, like you end up like meeks in the last game, or justin jackson all the way through the tournament. it's awesome. these young guys. the sad thing for me is i wish they went for four years. because, you know, like at

kentucky they got to get a new team like every year because they've got to go -- >> which is amazing to see some of these franchises do so well -- >> would you pay the athletes? >> andrew, that's a tough one. that's a tough one. it's a really tough one. it's a tough one. they're like -- i watched that tournament. i don't even watch nba. i watch that like, you know, it's worth a lot. that's unbelievable content. and you wonder who gets it. if they don't get it, who does get it? >> coaches. the teams. the teams that do well. >> goes back to the schools, too. >> some of the schools do well. some don't. it's totally mixed. >> markets now. joining us is global head of investment strategy at sefth ifep. >> where i come from in minnesota it's all "k" all the time. >> if you have it, use it. >> got it. >> when people come on -- if they've got a k. and it's silent, then get rid of it. >> good. good to see you.

knutson, multiasset investor. i don't know, hans, this is similar to what i've been reading from a lot of people. that the market is at a certain point, assuming that things are going to happen, and if they don't happen then it's too high. >> yeah. >> that's where you are still? >> that's where we are, yeah. i mean, if you look at the earnings trends, especially the large cap section of the market, they continue to tick down pretty reliably week after week, so where we started the year, earnings growth was something on the order of what 11% or 12%. we'll probably end the year maybe 5% or 6%. that's not bad. but we're pricing an outcome right now that is unlikely to happen and it's all predicated on really i think more policy than the underlying economics. >> what's unlikely to happen? >> tax reform and meaningful, systemic, durable way. >> so that's a strong statement that you're making right there. >> sure. >> why is that not going to happen? >> well, i mean, if there's -- if the prelude to the whole

thing was -- >> well that's not over yet either. >> no but it's certainly not going to happen on the time frame that we think. do we think that we're going to get a 1986 type of tax reform in 2017? >> you mean something that has to go through even if it goes through budget reconciliation -- >> if it goes through reconciliation, it's not permanent the way '86 was. >> right. >> so if it is permanent it has to go through the regular way. >> the only way to do that is probably with the democrats. >> exactly. >> because -- >> it has to be bipartisan. >> well then you're right. it isn't going to happen. >> if you take taxes off the table, the repeal of obamacare, even infrastructure, you say all that doesn't happen this year, i think if you talk to a lot of ceos, rightly or wrongly. >> right. >> they to argue actually that maybe even just the regulatory feats through some of these -- >> hold on. >> through some of the executive actions, and potentially even just the people that you put in place to enforce some of these regulations or not enforce some of these regulations make for a more positive business atmosphere. >> rightly or wrongly, you were

doing really well. >> rightly or wrongly -- >> no that's like him saying -- you're saying what someone else would say is what you were sort of saying there in >> but you're right. >> think positive and say it yourself dude. >> i'm trying to be positive. >> you're right, though. >> by suggesting, i'm asking how that bears on his thinking. >> you're correct. >> so, yes, i mean, and you see that especially in the small business sector for sure. if you look at the middle market. but i think if you look at what the market capitalized since the election, look, about $2.5 trillion worth of market cap. and so that's effectively the -- >> that's taken off the wet blanket from the previous eight years. that's just -- you deserve that just to get back to even. you just set up eric, though. you hear what he said about small companies? >> absolutely. we just wrote our weekly note, small is beautiful. we've been actually trimming our exposure. i told you in january and february we were overweight u.s. large cap, small cap, just trimmed our u.s. large cap. that's neutral. we're not under way. but we're reinvesting in small

cap stocks where we think there will be some tax reform. maybe not the permanent, broad, sweeping tax reform of the full-blown republican plan. but there will be some tax reform. you're going to see continued regulatory reform, and very little of that we believe is priced into small cap stocks right now. which -- which will be the largest beneficiaries of these improvements. >> and not just domestic or just domestic? >> we like within domestic stocks we prefer small caps. that's where we're biased. and we've been repositioning assets into european equities and to a certain extent emerging market equities selectively. where we think a lot of the kind of hysteria around trade wars, anti-trade rhetoric, has lrnlgly, you know, been you know kind of overblown. a lot of that has either been priced in or not going to play out in that negative way and you're seeing really durable growth immoprovements in certai emerging markets. europe is improving. we think there's risk premium that could get priced. >> part of going to neutral on the large cap is just what hans was talking about, we play this

forward? we've already gotten -- >> we're looking at -- look, there's a lot of noise out there and we're trying to look at the hard signals. when you look at hard signals you've got to look at earnings growth and valuation. where is there going to be benefits from the growth and where is there attractive valuations? u.s. large cap, there's still going to be some earnings growth. we would degree. you know, another, you know, decent earnings growth between now and the end of the year. but at 18.2 times earnings, are you going to get the full benefit of that in the stock price? we'd rather go to small caps which are much more attractively valued on a relative basis, european equities where you still have the scope for that earnings growth to play through. >> for long-term investors it comes down do you buy debts or sell the strengths? >> i don't think -- if you're set right if you're the investor at home and you are at your, whatever target that you've come up with, you don't mess around with that. if you're underweight you wait. all right. if you're not there you've got new money to put in, you wait. >> because the train's backing

up to penn station? on its way to d.c.? >> it will be waiting there for a long time, right? >> wilmington. >> no but the question is, you know, people say has the train left the station. right? has the train left the station? >> no. no. i mean, look, i think we're going to get a correction this year on 5% or 10%. i think that's definitely in the cards. >> but that doesn't get you back to newark. >> pretty close. >> it will get you close -- >> you'd be between newark and philadelphia. >> depends on if i start at the beginning of the year or start at the election. >> right, right. >> that gets you close to the election. >> right. >> good news is that the multiasset investor i get to look across, just stocks i can look to tips in a time when inflation is going to be rising. we think it's not properly priced in and our global allocation fund we're looking to buy floating rate, securities where we can go long, and short reits to try and take advantage of the environment in areas that

are less attractively priced and that gives us the opportunity to really buy on dips. >> okay. hans, thanks. and erik, thank you. both you guys are like norwegian, aren't you? >> scandinavian. >> that's right. >> we've got danish, we've got norwegian -- >> we've got -- that's right, exactly. >> like frozen. >> when we come back, tackling tax reform. what gop leaders have to do to get a bill passed. we're going to speak to alan viard. he's met with the ways and means committee staff to talk about the brady/ryan plan and he will join us after the break. and later is the american consumer ready to take off in the skies this summer? some new routes are being added by the airlines. we're going to talk competition and hear about what new cities are being targeted. "squawk box" will be right back. ♪

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welcome back to "squawk box." tax reform continuing to push bipartisan borders with disagreement, persisting on the specifics of the package and appropriate tradeoffs. joining us is alan viard. good morning to you. our last guest said he doesn't

think that tax reform is on the table this year and possibly not even next. >> there is growing doubt about that. at the beginning of the year, most people expected that there would be a significant tax package in 2017. but, as the months have gone by, that's looking less and less likely. part of the problem, of course, is how the health care debate ended, or has ended for the moment. also, there's been unexpected amounts of disagreement about exactly what tax reform should take. >> okay, so given where we are right now, what would you recommend? meaning do you think there should be a comprehensive tax reform that's inclusive of corporate tax, the individual rates, the whole enchilada, or do you just go after corporate tax rates? >> well, ideally you would try to reform the entire tax system. because, of course, there are things that should be fixed both on the business side, and on the individual side. but i think it's very unrealistic to try to do

something quite that sweeping. trying to do a business reform package is going to be enough of a challenge. i think that's where the strongest interest is and where the strongest economic need is. so i think they should probably focus on the business side. >> okay, so what makes sense to you in terms of what kind of rate do you think can be achieved, whether you think it incorporates border adjustment tax. how do you do it? >> so the 35% rate that we have right now is the highest in the developed world, particularly when you add in the 4% average and state corporate tax rate. almost everybody agrees that we really need to bring that rate down. it's not clear if you can get it down to the 20% that the house republicans are talking about, let alone the 15% that president trump talked about during the campaign. but i think there's a lot of interest in trying to get it down to 28%. the border adjustment -- >> 28% has been the number that was on the table, depending on who you believed, under president obama for the last couple of years.

>> that's right. and that's why i think it's a more achievable target. that if you get the 28%, that's something that is probably easier to get the support for, and it's easier to do it in a way that doesn't add to the deficit. >> does that make these companies competitive at 28%? >> well, it depends on the other features of the tax system, as well. part of the question is, how do you make up the revenue loss that does occur. if you do it just by slowing down depreciation deductions, which is what ways and means committee chairman dave camp at the time proposed back in 2014 that doesn't make companies competitive. because what they gain on the rate cut they lose on the depreciation side. so, instead, you really need to think about something more sweeping. i mean, one possibility, which the urban institute and i talked about is lowering taxes on corporations but raising them on shareholders. that would make companies more competitive because the shareholders wouldn't depend on where you invested -- >> shareholders in terms of the capital gains?

is that what you're suggesting. >> capital gains and dividends. >> what would you raise the individual rate? we had a guest on yesterday that suggested that if you were making more than $1.5 million that he wanted to raise that level, i don't know how significantly, but relatively -- >> 45%. >> i thought about that. that guy's nuts. >> i think if you went with this approach you wouldn't want to differentiate between one who makes more than $1.5 million or less than $1.5 million. instead you want to raise the rates across the board. how much you raise them would depend on how much you lower the corporate tax rates. the other approach is what the house republicans are talking about, which is trying to move to a cash flow tax where investment is expense instead of depreciated and where there's no interest deduction. now that expensing that investment is a powerful stimulus to companies doing new investment, and the republicans also proposing a border adjustment, which has proven to be controversial. >> let's talk about that, alan. because just in the last week we've had congressman brady from the house ways and means

committee tell us that he thinks it's inevitable that the border adjustment tax goes through, and then we had wilbur ross, the commerce secretary, telling us that this is not something that the administration has endorsed as far as he's convinced. as far as he's seen at this point and this is coming out of ways and means. where does that go? >> well it is coming out of ways and means and the administration has not yet endorsed it. at least in any definitive way. in fact if you look at president trump's statements on the topic, he sometimes seems to indicate he supports it, and sometimes seems to indicate that he opposes it. everybody is waiting to see what the administration this about the border adjustment particularly, and about tax reform in general. that's one of the big uncertainties that's out there. just waiting to hear from the white house. but the border adjustment was really originated as a concept in the ways and means plan that came out last june. the idea is to tax imports and subsidize exports. >> good idea, bad idea? >> hard to say for sure. a lot of the arguments made in favor of it don't make sense.

a lot of the arguments made against it don't make sense. >> but i'm making you tax king for the day. what are you going to do? >> okay. what i'm going to do, i don't think i would do the border adjustment in the context of the cash flow tax that they're talking about. there's too many issues involved. such as getting in trouble with the world trade organization, design issues such as whether you can give exporters cash refunds to make their subsidies real. i think if you want to do a border adjustment you should really just bite the bullet and say, we're going to adopt a value added tax. >> okay. we're going to leave the conversation there. alan we really appreciate your perspective this morning. >> thank you. >> thank you. >> you know, think about that, $1.5 million, 45% that's -- that's like, okay, you make enough money, you can't possibly need all that, we're just going to go to 45% for you. >> right. because he admitted that that would be on top of state and city taxes. >> we might as well do a wealth tax then and anybody who has accrued a certain amount of money in their life, who can't

possibly spend it and whose kids don't need it, let's just do 10%. if you go to this next route we're talking about, we have a progressive system already and there's a reason that we have it, because people who make more can't afford to pay a larger percentage. but there's also, i don't know -- then i -- you know what i'd do? if i had the opportunity, i'd make $1.499 and i wouldn't even want to make more than that >> that was my question, was it about $1.5 million? >> i guess it would be the -- >> because the number of people who have now gotten into that bracket is much larger. >> and they would say there are points and times where it's been 90% but there were massive loopholes at that time so the effective rate was not -- >> -- and do 45%. >> coming up aol ceo tim armstrong giving us an update on the acquisition of yahoo! his comments are next. and then later china's president set to meet with president trump to talk trade. north korea and much more. we will discuss the broader relationship between the

countries, and trump's china strategy in just a bit. "squawk box" will be right back. . and two in the reserves. our 18 year old was in an accident. when i call usaa it was that voice asking me, "is your daughter ok?" that's where i felt relief. it actually helped to know that somebody else cared and wanted make sure that i was okay. that was really great. we're the rivera family, and we will be with usaa for life. usaa. we know what it means to serve. call today to talk about your insurance needs.

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join under one entity called oath. ceo of yahoo! marissa mayer is not going to be continuing with the new company. it will instead be headed by armstrong as oath in chief. he joined us earlier in the show to discuss the future of the brands under oath. >> the values that are, you know, our commitment to building the brands, first of all. if you care about brands, if you look at the world today with fake news and all the things that are going op, our mission as a company is to build brands that people love. we're one of the companies that believed brands are going to win on the internet. the second value is around talent and finding people who want to build those brands. one of the surprising things that a yahoo!/aol combination will be the talent where the talent is and how the talent is focused on -- >> but you're not making changes there? >> the big issue is trying to look forward with a company like this and trying to figure out whether oath becomes the umbrella organization. but more content brands. more television oriented brands, and whether some of the big media companies -- >> programming. >> the ones that are still

independent, viacom or cbs or 20th century fox, whether they ma end up making a bigger play into that to compete with at&t and time warner combined. >> talking about -- >> still on the table. we'll see whether it goes through. if it does i think there's going to be maybe some movement over at verizon. in the meantime coming up the president getting ready to meet with chinese president xi. a preview of that meeting and what it could mean for your money and investments. next. also at the top of the hour, former restaurant ceo andy pudzer is going to join us. he was the president's first nominee for labor secretary. we're going to talk about it.

shot there of a wet times square. good morning, welcome back to "squawk box" here on cnbc. we're live at the nasdaq marketsite in times square. it is quite wet outside. among the stories that are front and center at this hour, tell you what's going on right now. well you know what we're not going to tell you what's going on. we're going to go straight to this trump story. or maybe we will.

i'm not sure what we want to do here. >> talk about apollo. >> let's do some headlines. private equity firm apollo global among some of the stocks on the move in premarket trading. show you what's going on. according to an s.e.c. filing tiger global management has increased its stake in apollo to 12.5%. you're looking at that. those shares right now up about 1.32%. that stake has increased now 12.5%. okay. so, also new york city office rents hit a record high during the first quarter. according to brokerage colliers international average rent hit $73.92 per square foot that's up 2.3% from three months ago. the increase largely driven by revitalized downtown area. and the national hockey league says it will not take a midseason break to allow its players to participate in the 2018 winter olympics. the league says club executives are opposed to the disruption of the season. the nhl players association

calling that short sighted. they have halted the season since the 1998 winter games plp >> president trump and chinese president xi will be meeting later this week. positive relations between the two countries are seen as key for future growth for companies doing business in china. kayla tausche joins us with more on that. >> you've got caylee on the brain. >> i just sent out a picture of my daughter caylee. you're right you caught me. >> she is adorable. china, majority of the foreign firms that operate in china say they believe the business environment has gotten colder in 2017 according to a survey conducted by the american chamber in china. now whether that's because china's favoring its own domestic companies, a leadership vacuum before the congressional change this year, or the election rhetoric stemming from the u.s., is unclear. but what is clear, there are three specific sets of companies that are going to be affected. first, those seeking licenses to operate. think large credit card companies. and tech firms that don't currently have operations there.

then there are those with bending mergers. geologic says there are north of 50 of those and generally companies with broad revenue exposure, beyond the biggest names you can think of. think about hotels and gaming companies. depending on how u.s./china economic talks, trade talks crystallize, commerce secretary wilbur ross told cnbc he believes there could be a counterpunch. and the china studies corrector at csis tells cnbc china could punch back at the trump voter. >> industries that are in red states. states that are supporting two china products that are supported by voters who went with trump. in the last election. so you think about agricultural products in the midwest. steel in michigan, ohio, the rust belt. those are places that also would need to be particularly

concerned to the chinese take score both math and politically. so they would know where to strike. >> that is a long list. and finally, hawkish trade policy won't just affect the u.s. companies. goldman says some asian companies with high revenue exposure to the u.s. would be at risk as well. that list is led by kia motors followed by others in the tech space namely. you think about this being the wild card in the market. it's really because there are so many companies of all shapes and sizes that are waiting to see exactly how these talks shape up, and exactly what comes out of them. becky? >> kayla. i know we have somebody who's been shining here all day long very excited about the unc win. probably not as excited as you are as an alum. >> well, yes. i was thrilled to see the win last night. especially for that team to have come so close last year, and boy what a show both teams put on for the audience. all throughout the tournament. i mean, unc, got my heart racing

a few of those games. would have liked it to not be as close as it was. hey so long as we got the outcome as last night. >> the very first game in the round of 64 was unbelievable. it was way too close. i didn't get to see it. i'm reading about it right now. that guy's my favorite him, too, now meeks. but you know, joel berry, his ankles have been hurting. the semifinal game. did you watch the semifinal game, kayla? >> oh, i did. >> he tried so hard, and he hit that very first three pointer right at the beginning of the game. but you really needed him to have a decisive win. and he said he felt better on sunday. i wish i could have seen it. i'm reading about it now. but that was great. >> i wonder how joel berry feels today. he took so many body blows throughout the tournament. i mean, in addition to his ankle last night he took a hand right to the face. and i imagine that your adrenaline gets you through that in the moment. but i wonder how he's feeling today. >> and hicks was off, and in the last game, and he came through last night. i mean, i'm reading about it,

i'm like, i mean -- >> joe, i believe you picked unc to win. >> i did. >> so there's something in it for you, too, right? >> there is. i got second in the brackets. and i became a big fan. so i think that probably lasts. >> hey. we'll take it. >> yeah. >> excellent. >> congratulations, kayla. >> well, i was personally out there winning the games. >> no, you were a big fan. you announced very early on and i know it's very important to you. >> i was an armchair commentator for sure. >> all right. we'll take it. our victory. thanks, kayla. president trump's mar-a-lago summit with president xi is fast approaching. joining us right now with more on why this face-to-face meeting is so crucial is the head of asia political risk for fci geopolitical intelligence. and nick, there have been some people out will there who have said this meeting shouldn't take place so soon into the new administration. what do you think about that? >> you know, i think it's a mistake. i think, particularly when you look at the political systems in china and the u.s. the senior leaders have

tremendous influence over foreign policy so it's imperative for these guys to start to develop a personal relationship. you know. we shouldn't look at it through rose colored glasses. clearly there's a lot of outstanding issues on the strategic side. north korea's been in the focus this week. we can talk about that. and on the economic front it's trade, trade, and more trade from the trump administration. so there are big concerns but these guys need to start talking about some of these issues and this is going to start that process. >> i would agree. i think it's good to have both sides coming to the and talking on these issues. however there are pretty hey stakes on both counts. for the major issues that are facing both of these political leaders. they both probably feel like they need to come away with a win. is it possible for both sides to walk away feeling like they came out on top? >> yeah, i think there is a middle ground here. you know, xi is coming basically to the u.s. to be able to send a message i think back home that he's capable of managing this relationship with trump. which obviously given the campaign dynamics was one that everyone expected was going to be pretty volatile. >> so in other words the bar has been set fairly low? >> reasonable. reasonable. i think there's a reasonable

expectation in china that the trump administration is going to try to find ways to push china on trade. they're ready for that. they're anticipating that. and trump clearly has an interest in messaging that in these conversations. so, that's going to be i think the big focus from his side. >> i can understand navigating the waters of trade. how both sides could probably get a little something out of this. or how president trump might be able to make some progress and feel like he is walking away with something in this. what scarce me a little bit more is the talks about north korea. >> right. >> because that is just so important on such a real life daily issue at this point. and it's something we've seen so much bad action coming out of north korea at this point. how do you rein that in? >> i think that's right. you hit the nail on the head which is that whether we were looking at a trump administration or a hillary administration, a clinton administration this is the reality that the u.s. would be facing right now. the north koreans are becoming increasingly assertive and belligerent with their programs of weapons testing and nuclear testing. they are committed to having the

capability to striking the continental u.s. with a nuclear warhead. so that's, you know, not a land of great options for the u.s. what trump said this week was that the u.s. was going to be willing to pursue unilateral action if they couldn't work with china on that issue. i think that's exactly what an administration would be saying if it was democratic or republican. i mean that's the reality. u.s. wants to find a way to work with china on this. that's going to be the plan that's put before xi jinping this week and if they can't find a way to do that the u.s. is going to have to be more assertive on its own. >> how does china respond to that message? >> i think that china is itself becoming increasingly willing to put some pressure on north korea over this issue. what they're doing is flatly correctry to china's own national security interests. this year the u.s. was able to deploy antiballistic missile capabilities in south korea. the chinese were obviously very unhappy about that. but that environment was created by the north koreans. >> that's perfectly logical response. >> exactly, exactly. so china's more upset about this, as well. they're taking a little bit, you

know, more actions than we've seen in the past. and i think the hope on the administration's part is they can just convince them to do a little bit more. >> have we reached crisis proportions? and i'm just looking, ben white picked up lester holt and alexander smith's report from last night. a senior north korean defector has told nbc news that the country's desperate dictator is prepared to use nuclear weapons to strike the u.s. and its allies. >> that was six days ago. picked that up today? >> -- nothing to do -- >> i wonder where you think -- where you think this crisis really is in terms of how you -- i think that they handicap it, how to think about it? >> i think what has fundamentally changed is that the north korean regime has determined that they will have nuclear weapons capabilities, and that they will not conduct any negotiations, any conversations internationally that is predicated on anything other than accepting them as a nuclear state. >> that's a deal stopper. >> exactly. >> on every count i would think from every nation surrounding them, as well as from us.

>> even from china. even from china. >> that's a -- >> it's a -- >> so therefore, the u.s. is faced with an option or a challenging set of options, which is, is it going to be willing to accept that or not? and i don't mean accept it from the point of view of entering into negotiations with pyongyang. i mean accepting it from a point of view of the reality that the north koreans are going to have that capability. this is where it comes down to. how do you influence them to take another road? first you go to china. you try to find ways to step up sanctions. there's a lot of space for the u.s. government to do that in ways that they're not doing currently. >> -- any of those things probably likely to work at this point? >> we don't know, right? the reality is the chinese banks and companies are actually right now doing a lot of business with the north. and there is some leverage there. whether china is willing to deploy it is another question. they have their own concerns. they don't want to completely destabilize north korea, have some massive regime collapse there, and then have thousands and hundreds of thousands of refugees flowing across their border. so it's a tough one for them. the first option is sanctions.

the second option and third options are about, you know, more assertive potentially -- >> which tillerson said himself a couple weeks ago. >> it was like a big -- he had a big job in south korea like a diplomat just underneath like the ambassador or something and i was wondering, i mean, i think he has a family. where is he now? and that was my thought of where is this guy and what is his life worth? >> right. >> how do you defect from north korea? i don't even want to talk about it. >> i wouldn't want to -- >> you know, even here. see mccain said that. mccain's now probably at risk for what he called the leader. >> nick, thank you. >> thank you. >> scary. coming up, is the american consumer back? airlines expanding their destinations this summer. most of them expecting a big travel season. phil lebeau joins us after the break with details. futures right now, they're down. weakness in asia and in europe a little bit today. down 55 on the dow. excuse me, are you aware of what's happening right now?

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the newest route added by airlines is any indication -- i think it's route -- the american consumer is stropg and ready to travel.

several carriers including united, american, alaskan and southwest have been aggressive in announcing new rates for the summer. phil lebeau has more on the airline expansion plans. i'd ask you if it's routes or routes but you say so many things in a funny way because you're from chicago. but you say -- i mean you say routes or roots, phil? >> i say roots. >> ha! becky just told me routes. >> well that's fine. i change it up depending on where i am. >> i change it up, too. >> i used to limp in the twin cities. i say don't ya know. you betcha. >> i thought i could hear some of that fargo stuff going on. >> you haven't booked your summer travel plans yet and maybe some smaller cities might be an option you're considering, you are in luck. because a number of the major carriers they're adding destinations this summer. we always see the airlines add routes particularly for a few months in the summertime. but this summer we're seeing in particular a real push to add

some of these smaller markets to bring flights into the hubs, united adding 31 des tipations. southwest is expanding in 21 markets. american adding more flights out of chicago. one reason for this is that the airlines are realizing they can -- they have an opportunity here to bring in a little bit more traffic into their hubs and that's why you're seeing with united or with american floor flights coming in to their hubs here in chicago. at the same time, though, they're trying to limit their capacity growth. that's been a big push in the industry. you want to grow but you don't want to grow too aggressively. part of the concern is that you're looking at jet fuel costs that are tinge to move higher. and a industry that has been struggling to grow passenger revenue per available seat. that's the big metric that has been, to a certain extent, weighing on airline stocks over the last year and a half. now they are higher when you look at the airline index. what it's up about 21% in the last year. but the real key is to watch what happens with this passenger revenue as the airlines start to

expand, and add some of these smaller markets into bigger cities. now this is not a huge improvement in terms of a big push in terms of capacity. but it is worth watching this summer. and one more thing, guys, this speaks to how much demand is out there right now. we've talked about record travel for the spring. we're likely going to see something similar to that this summer. there's a lot of demand out there with consumer confidence high and fares still relatively low. >> i got -- i was listening. and it's very interesting. but i do have an update on the root versus route thing. 30% of people say it rooms with poot. 20% say rhymes with out. 31% say either. they go back and forth. >> that's me. >> and some people depending on whether it's a noun or a verb they say hoot for the noun, out for the verb. >> what? >> and 16% and then 2.5% say out for the noun and hoot for the -- but it's from a french word,

derivation that rhymes with root. so root is the -- >> my people. my people! >> your french ancestry. >> would not let me down there. >> we butcher all french pronunciations so it's probably route. >> no, it's derived from -- it's root. it's root. >> and if you are really -- it's data. >> we're constantly giving data. >> or data. >> and you've got to use it as the plural. i always mess that up, too. anyway, phil, thank you. i just like i think fares are still pretty cheap. that's the bottom line. >> yeah, they're going to hit on average $263 for a domestic round trip this simmer. that's the expectation in terms of the high water mark. >> but as andrew and i were just talking about, you spurred all sorts of conversation on the subject. depends on where you're going -- >> in california, 250u8ly. >> that's true. >> a small fortune.

>> right. >> you pick a certain destination you're going to pay a lot. >> right. especially if you pick it at a certain time if there's a festival there or something big happening. >> right. >> there's definitely pricing around these events, i know. >> okay in the meantime, thank you, phil. we have some data or data coming up. jobs in america, the ceo of paychex joining us with the results of their latest small business hiring index. check out the futures at this hour. we are in the red. the dow looks like it would open off about 58 points, s&p 500 off about 7.5 points. "squawk" returns in just a moment. you're a rabbit? im vern, the orange money retirement rabbit, from voya. riiight. and that means...? i'm the money you save for retirement. i help you get organized so your money could multiply. see? got it. who's he? he's green money for spending today. you know, paying bills, maybe a little online shopping... makes it easy to tell you apart. that, and i am better looking. i heard that. when it's time to get organized for retirement,

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free with xfinity on demand. new data just out on the state of small business hiring in america. joining us right now to break down the report is marty musee, president and coo of paychex. good morning to you. break down the numbers for us, mar marty. >> sure this month looks like the small business index is about flat to last month and flat to last year but still showing good, strong growth for small businesses from a job growth perspective. you're seeing it in the southeast, continues to be the best, southeast and south central part of the u.s. with construction jobs being the best. andrew, interesting that you're seeing the coasts having the least improvement. in california in particular, seems to have a decrease and

we're picking that up in areas like tennessee, where you're seeing better job growth. that could be nashville, with auto, fedex, and some high tech moves in tennessee, as well. >> let's just go back to the coast for a second. where do you think the problem is? >> well, i think the costs get pretty high. you know, when jobs start moving in there like we saw in 2015 and early '16 people come in, the costs start going back up, real estate goes up, people start moving back out to second tier cities, and we're seeing that even with some of the high tech jobs moving into second tier cities. >> if there's a industry i don't want to be in today, it is what? >> well, manufacturing, across the u.s., is certainly down the most. lowest index. construction is down, except in the south. and southeast. construction there residential, commercial is strong. leisure and hospitality the strongest. restaurants, big boom, even in the northeast. >> but on the manufacturing side, where do you put -- you

don't put construction is obviously not considering manufacturing, per se? >> no. it's really, and here in this index it would be those small businesses for manufacturing. tool and die, that type of thing. and those jobs around manufacturing, as well. >> you know, we talk a lot about what's happening in washington. trump administration, some of the things they want to do and we see all sorts of different confidence surveys which suggest that small business is more confident than ever in part because they think lots of different regulations are going to come off. do you look at the regulations, and then tie them to the industries and see more confidence, if you will, in terms of hiring there? >> well, not necessarily. but i do think you see some of that leisure and hospitality, and other services. so, you know, service type industries. they're coming back the strongest. i think that tends to be they're a little bit careful about regulations changing. we're still at a point where optimism is very strong right off the charts. >> right. >> consumer and small business. but the job market is still a

little bit tenuous, trying to be a little bit careful about, do they really see the results? so you see that in part-time jobs, right? other services, leisure and hospitality. they're coming back the strongest. i think you'll see it, less regulation is going to certainly mean more jobs in small business. >> we've got andy pudzer coming up. we're going to talk about jobs and labor with him. marty, appreciate your time and perspective this morning and the numbers of course. >> thanks, andrew. >> andrew just said it, top of the hour former cke restaurant ceo one-time nominee for labor secretary, under president trump. andy pudzer will join us for the hour. we'll talk wage wars, job creation, and much more. "squawk box" will be right back. f a low volatility investing approach. the power of smart beta. power your client's portfolio with powershares. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc. containing this information. read it carefully. kevin, meet yourkeviner.

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"squawk box" newsmaker, president trump's first labor secretary andy pudzer speaking out about the nomination, jobs in america, and wage wars. >> health care overhaul. the white house takes steps to hash out a compromise on reform. we'll talk to senator bob corker straight ahead. an iconic song is officially an american treasure. ♪ so bye-bye miss american pie ♪ ♪ drove my chevy

>> don mclean will join us on set as the final hour of "squawk box" begins right now. ♪ i started singing bye-bye miss american pie ♪ ♪ drove my chevy >> live from the most powerful city in the world, new york. this is "squawk box." >> good morning. and welcome back to "squawk box" here on cnbc. live from the nasdaq marketsite in times square i'm joe kernen. along with becky quick and andrew ross sorkin. our guest host this morning, andy pudzer, former ceo of cke restaurants. president trump's first pick for labor secretary. we'll hear from mr. pudzer in just a bit. first a check on the markets. three straight down days. this was before indicated down, it is red to start. this is red as can be. in terms of the change in the futures, fair value and the implied open down 7.5 on the s&p. down 55 on the dow. and the nasdaq indicated down 20. and bonds strong again whether it's short covering or what's

that article yesterday? now 2.31. 2.31 now on the ten-year. >> among today's top stories aol's ceo tim armstrong announcing aol and yahoo! will join under one entity called oath. earlier on "squawk box" armstrong said that yahoo!'s ceo marissa mayer would not be continuing with the company after its launch. >> we're working with marissa and her team to basically get the company completely set up to operate by the end of q2. and marissa will see it through the next phase. overall and then that's what we're going through right now. >> armstrong will head the property, as oath in chief. >> okay the u.s. government has ordered wells fargo to reinstate -- this is interesting. reinstate a former bank manager who was fired after reporting potential fraud at the company. the occupational safety and health administration saying the bank must also pay $5.4 million back wages, damages and legal fees. osha says the manager was forced to leave in 2010 after telling his superiors he suspected two

of his subordinates of bank, mail and fire fraud. the decision not related to wells fargo's accounting skoonl. i get the fines and all of that. i just wonder whether you actually want to go back to work there. reinstate you. do you want to work there? >> but i guess that's the employee's choice. but that might be a little -- >> you get your reputation back even if you leave in six months again. >> exactly. i was reinstated. >> that's a good point. >> andy pudzer is here. proper introduction in just a moment. >> in washington, president trump will be holding a town hall with about 50 corporate leaders today to talk about ways to improve the business climate. among those expected to attend are the leaders of citigroup, blackstone, and jet blue. >> let's get to our guest host. he was donald trump's first pick for labor secretary now he's stepping down as head of cke restaurants. joining us now is andy pudzer. he also served as one of president trump's, when he was running, campaign economic advisers. good to see you. >> good to be here. >> thanks for joining us.

you've done some other interviews. i haven't seen you in awhile, though. on "squawk box." >> they cut you off -- when you're nominee you can't be on anything. i mean i sent out a tweet, jeb bush sent out a tweet that said congratulations, andy, we're behind you. and i just sent out something that said thanks jeb. and people in the administration came down said you can't tweet. you can't do anything. so -- >> there are people in the administration who tweet pretty regularly. >> i've heard that. it actually would have been a big advantage. because i could have defended myself throughout, but you know, it is what it is. it's over. so, i'm back. >> there's -- i don't even know why -- whether we discuss it or not. but it's an interesting environment. must have been an experience that you'll remember for awhile. how would you characterize it? >> it was tough. when i became the focus of the efforts to try and wipe somebody out it became very intense. because there was -- they were spending millions of dollars to kind of go after me. and i had this group of five or

six people that were working hard trying to defend me and did a great job. but it's hard if you can't go on and defend yourself. because i'm sure if i had called and said, look, you know, i'd like to come on your show and kind of explain some of this you guys would have said sure. >> tell us what happened. take us inside the room. would they ask you 100 questions in advance during the interview process? so you know what they're going to come out with? or how is it all -- what's the -- >> there's fewer questions than you would think. you're assigned what's called a sherpa. which is somebody to guide you through the process. and that person, man or woman, will go through with you if there's any problems that you can see on the horizon. and you know, we went through that process. >> less about you, and just more about -- i mean, this would be a, you know, you could say that kicking the can was a phrase. animal spirits. i use trump derangment syndrome. i mean that's really what it was. which is tds which i think is more pervasive than std which is

tds backwards. and i think it's even worse than std. but tds it's out there. i see things online in the mainstream media. there is a trump derangement syndrome. they hated bush. they waited w. >> trump is deranged? >> no, no, no, the people that lost the election and lost to trump are absolutely deranged. they're at a mets game, there was a huge -- yesterday, still, a huge -- >> andy -- >> you always get enough people to carry us -- >> a scapegoat? >> you can't help but feel that. i've done a lot of interviews, and i've taken conservative economic position so i'm used to being attacked. but nothing like -- nothing like this. like i would talk to reporters who have different beliefs than i have. but they always listened. you know, during this process, there was no listening. i mean, it was you know, you went in with kind of this agenda journalism. you went in, and this is what the story was going to be about, no matter what i would say. >> these were senators on the

other side who were lining up. >> oh, yes. >> with the help of, you know, they've got a lot of associates, in the business. but, andrew, i mean, you've got to admit, this is at a level that you've never seen before in terms of american political -- i can't remember -- not as divided, but as this vitriolic. the head of the democratic national committee, the new guy, just said trump was not duly elected president of the united states. >> i would think back to nixon there were pretty strong feelings. >> maybe nixon. and that didn't end until he was impeached. >> one of the things that came -- and by the way i had some really good meetings with democrat senators who i think in a less vitriolic atmosphere probably would have supported me. people kind of shared the views that i had. one of the problems that really came out speaking with senators was the democrats really thought they were going to win. i mean they thought they were going to have the presidency, into the foreseeable future because demographics had

changed. and the only way a republican could get elected was if they in effect became a democrat. so, they did everything by executive order or regulation, because they didn't need congress, right? because they were going to have the presidency for so long. and then they set it up so presidential appointments only required a majority vote in the senate. because they thought they'd have the presidency. and when they -- they had to turn that over to donald trump, who they hate. they actually set him up to be a very powerful president. so, there was a lot of vitriol around that. there was a lot of resentment. >> you saw people like wilbur ross who was confirmed with 21 votes from the democrats. >> yes. >> this was not a straight up and down every nominee. >> i think you need to look at where wilbur's party affiliation was in years past. wilbur is a great guy. he's a friend. and i like him. i think he'll be a wonderful commerce secretary. but he had friends on the democrat side. >> andrew, the tolerant left, that is a complete oxymoron. i mean the politically correct

and open-minded, and sensitive, and empathetic tolerant left, that doesn't exist. there's no tolerance. look at college campuses. you can't even come to a college campus -- >> all that both parties -- meaning that there's an extreme left, which isn't as tolerant as it should be. then there's the middle ground. and then there's a group like the freedom caucus which is on another end. and i think there's an argument just in fairness. >> by the way the house freedom caucus is all about no compromise. >> i'm talking about, we're suggesting of thought. >> if you look at college campuses. >> college campuses are the scariest part. because this is the next generation. >> at college campuses that are -- >> and i say this more out of fairness than out of politics, during the obama administration there was an argument that the republicans were obstinate in terms of -- >> that's not even -- >> weren't open minded either. >> not only is it in the same

ball park it's not in the same sport. i know obama -- >> the other side -- >> andrew, obama had the mainstream media kneeling at the altar of the presidency during the whole thing. when you've got the media, and you're intolerant and you've got all the senators it's like a vortex. >> andy, what do you think happens just in terms of what policies get put in place, what things can be accomplished, in an environment like this? where do we go from sort of the saying around washington that you're not hearing. i'll say it on here, the feeling is, among republicans, that while the -- and this is a little different than what bannon said. while the democrats are the opposition, the media is the enemy. and while you may not expect democrats to be open minded, and listening to what you're saying in this environment. >> tolerant. >> but you do expect some neutrality from journalists. and people feel they're really not seeing that. and it influences what you can

do policywise. although, if you look at the results of the last election, i don't think there was a lot of credence given because trump jumps over the media. he takes twitter and goes right to the people. whether you like his tweets or not. he doesn't do a press conference or a press release or he doesn't have to go on national tv. if he wants to tell america something, he will tell them tonight. on his twitter account. the dynamic is changing and i think people have to adjust to that. >> again i try to say this out of fairness and you might think it's political, the veracity of some of the things that he says, if i'm being kind about it, are in question. often. unfortunately. and that that, to the extent that journalists have a particular view or world view, and they very well may, part of it is that they like the truth, generally. and so, it gets complicated, if you will. >> like that he was wiretapped? >> you know, i was in the green room for the first debate. and he was up there talking, and you know, he mentioned anthony

weiner. and i remember going, you know, why are you -- who cares about anthony weiner? you know, let's -- and then two weeks later anthony weiner becomes a big issue. or he goes on and says he's wiretapped. then you've got all of this coming out about susan rice today. now that doesn't mean there was wiretapping. but he does say things that get highly criticized, and then like two weeks later, you know, you're hearing there's substance to what he said. so i think there's two sides to that, andrew. i think you know, i'm taking your point. but i'm also saying that he says some things that are highly criticized, and then they turn out to have substance a few weeks later. >> it's semantics. okay so it's not wiretapping -- >> i agree. i just wanted to give andrew a break here. >> i just said if i get a truthful -- if i get a test on a question true/false, trump was wiretapped by obama, i'm answering true. i'm close enough for me, i'm a cynic. but as a realist, with the susan rice stuff it's close enough at this point where i'll argue with the teacher about whether that's true or false. anyway. andy, stick around.

>> i will do so. >> thanks for being here today, andy. when we come back, no lines, no checkouts, no registers. that is amazon ceo jeff bezos vision for the future of grocery shopping. we have an upclose look of how the ee commercial giant is disrupting brick and mortar next. plus we'll be talking to senator bob corker on compromising on health care reform and what is next on the trump agenda. and then an iconic singer/songwriter makes a stop at "squawk box." don mclean will join us on set. stay tuned you're watching "squawk box" on cnbc. it's our little differences, that can make a world of difference. expedia, everything in onelace, so you can travel the world better.

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amazon reinventing the very thing it has disrupted brick and mortar retail. the e-commerce giant's physical bookstores are expected to be in ten locations throughout the country this year and will roll out a new way of grocery shopping. at amazon's hometown in seattle with a look at the company's vision of the future in retail. deidre? >> good morning, andrew. there is no better place than amazon's hometown to get a sense of where it is experimenting and placing new bets. for a company that has typically

moved very fast in the online space, brick and mortar has been a much quieter, slower process. now groceries is an area where amazon may not actually be having a ton of success. it doesn't break out numbers but nearly ten years after launching its fresh online grocery delivery service, data suggests that people still want to pick out their own produce and visit physical stores. despite big investments from companies like amazon as well as walmart, kroger and others, online grocery penetration is still very low at about 4% of the $600 billion u.s. grocery market over the last few years. but what we found here is that amazon is experimenting with an omni channel approach. here in seattle that uses technology for a very different, a new experience. take the amazon go store right behind me. this is amazon's very first physical grocery store that is still only open to employees in beta mode. customers can go in and pick out the ripest fruit or the freshest bread but nearly everything else happens automatically using deep

learning, and computer vision allowing shoppers to entirely skip the checkout. now we also get an upclose look at another of amazon's brick and mortar experiments. that's amazon fresh pickup which was revealed just last week and it's also only currently open to employees. now here the placement of groceries into customers trunks is physical. but the selection, payment, and booking window is all done online. now the real task, guys, may be when amazon's brick and mortar project, at least the grocery ones, finally do become open to the public, whether the technology can deliver after reports of issues and delays, and whether an online offline hybrid approach will allow amazon to not just compete with behemoths like walmart and kroger but shape a new shopping experience. >> deidre, thank you so much. we want to continue this conversation. former cke restaurants ceo andy pudzer. when you talk about labor and what all of this means. i don't know if you saw the comments about a week or two ago

steve mnuchin our treasury secretary was asked about ai and robotics and its impact on employment. he said he doesn't think about that as an issue. maybe 50 years out. this looks like it might be happening right now. >> steve and i probably need to talk about this. it's happening a little more every year. really if i were staying on as ceo at cke i think my biggest challenge would be to determine how you adjust to the different way people are purchasing things. we don't -- retail is changing dramatically. and it's not just that people aren't going to shopping mauls which affects the restaurants, for example in the malls and the ones on the parking lot and in the surrounding area. people are changing the way they buy groceries. i drink a monster beverage every morning because i don't like coffee. i just ordered 48 online. well that may not sound like a big deal but to the grocery store -- >> i do all of my grocery shopping online. >> my wife does a lot of ours online, as well. so it may not be that you're going to lose, you know, 10% of your business, or 15% of your business, but 2% to 3% a year as

millennials get older and as the baby boomers get older so they're out of the market, the millennials are coming into the market and they use online more you could see retail significantly changing over a five or ten year period and the companies that can adjust to that will survive and the ones who can't will not. >> does it seem like it's gone into hyperdrive in the last 18 months, 24 months? i mean to me from the outside it feels like it's ticking up. >> i started to notice a difference in june, july of 2015 so that's almost exactly right when i started to see it in the numbers. >> are there things from a policy perspective? i know you probably thought about what you might do in this role, from a policy perspective in terms of keeping those jobs, retraining people? how do you -- even try to grapple with it? >> you mean with respect to the automation aspect of it? >> given that -- and just the trends in terms of how people are buying, which ultimately require less people. >> there are positions available, there are jobs open out there in manufacturing. in computer technology. but we don't have a workforce that's really appropriately trained for those jobs. people need to go in to

vocational training, technical training, on the job training. there's nothing better than a job. which is, you know, i had that article in "the wall street journal" this morning talking about the importance of entry level jobs. during this period of time, while we're transitioning to this new economy where people buy things differently, please don't price young people out of the labor market. when you do that you hurt them, you hurt the economy, they don't get the training they need, and you know, bernie sanders has made comments about the importance of entry level jobs. >> charlie munger has said that mcdonald's is more important to society in training individuals than universities are. >> janet yellen just came out last week and talked about the importance and low income communities of these entry level jobs and talked about this program called pocket change, where a city -- i think it's summerville, in massachusetts, is getting young people into these jobs. they don't get a lot of money but they get the training that you get when you have a job of being on time and dealing with people. but if you don't kill the entry level jobs. the company -- businesses will do this without a government

program. we don't need a government program to do what the private sector would love to do on its own. >> you never had one of those entry level jobs where you had to be there on time. you had to get there for the show. get your makeup. >> i was a waiter. >> that was at summer camp. >> at summer camp, a dollar a meal -- >> that doesn't count. >> -- to get there every morning -- >> my point is the entry level job which gets you here early, gets you here on time for makeup to read the scripts to do all that, you never had that -- i'm trying to give you an excuse. >> oh. i see. >> we're being late apparently. >> yes! coming up. >> andrew's busy. >> he does. he does. >> he's amazing and he works pretty hard all day long. >> thank you, becky. >> god bless. >> you're like a renaissance man. you are. when we return the nhl won't be heading to south korea next year -- >> i live in fear of actually being late for the show because i know if i was actually late for the show then i would never live it down. >> i would give you a lot of grief. but the show would be fine. anyway the olympic details next. thank you.

>> i love this new andrew, i do. >> later american pie officially really is an american treasure. 45 years after the song's release. singer don mclean will join us on set. stay tuned. we'll be right back. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. ♪ ♪

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the nhl announcing that its players will not be taking part

in the 2018 olympic games in south korea. the league made the decision in response to owners who were unhappy with the league shutting down for two weeks every four years in order for players to take part in the games. michelle caruso-cabrera asked nhl commissioner gary bettman about this issue during the sochi games back in 2014. >> after each olympics we sit down and evaluate whether or not it makes sense to go. there's good to being at an olympics, and there's some not so good and it's a balancing act, and the not so good has to do with obviously disrupting our season, which has a disproportionate impact on some of our clubs. we have some nhl teams with ten players here. and some with two. and there are 550 players who are on vacation. so our teams are going to come back in a little bit different shape. and depending on where we are in the world, has an impact on how powerful our presence is back in north america. >> the decision may also keep nhl players out of the beijing winter games in 2022. the ioc recently warned that the

nhl -- or warned the nhl that they would not be allowed to take part in the beijing olympics if nhl players did not take part in the winter games in south korea. nhl players that participated in the previous five olympics dating back to 1998, many players expressed a strong desire to go. washington capitals star alex ovechkin says he plans to go regardless of the nhl participation. we all remember the greatest olympic hockey game ever. >> the miracle -- >> had nothing to do with the nhl. >> miracle on ice. >> reading that, in the back -- i'm talking to you again, andy. just real quickly in the back of my mind i'm thinking, couldn't some things change between now and 2018, with north korea where this whole thing can be sort of we may be thinking about the olympic games there. i mean, we have no idea how this is going to play out. >> the olympic games, you know, are just -- >> trump is saber rattling a little bit.

we're hearing a little saber rattling from president trump and this guy does not back off this, you know, the mccain comment -- >> probably the scariest issue on the planet right now. >> right. and the olympics are in south korea. >> i thought you were talking about the mighty ducks. >> the mighty ducks? >> oh, no miracle on ice. >> the greatest moment -- emilio estevez -- >> when we come back, senator bob corker is going to be joining us. he's going to be talking about potentially working with the democrats when it comes to health care. stick around, we'll be right back. the power of 100 of the world's top companies. the power of a proven 15-year track record. the power of an etf. the power of qqq. the thinking we put in, clients get out. power your client's portfolio at powershares.com/qqq. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus

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♪ good morning. welcome back to "squawk box" right here on cnbc. we're in a rainy times square this morning live at the nasdaq marketsite. let's take a look at some of the stocks to watch in day's trading. envied yeah downgraded. the desk top graphics chip market is becoming a little bit satura saturated.

dow component caterpillar was added to buy from goldman sachs. the heavy equipment maker will benefit from underinvestment in the early stages of what it calls the recovery. and bank of america was downgraded from knew tal to buy. a valuation of a nearly 40% run-up for the stock since election day. >> stocks to watch on the move this morning, kate sfad reportedly wants more time to negotiate a potential sale, after receiving an offer last week from coach. reuters says michael kors is still interested as well in the handbag and accessories maker but hasn't been pursuing an acquisition as actively as coach. danone winning aproveal to buy whitewave. it will sell its organic yogurt business stonyfield as part of the deal. and toshiba is meeting creditor banks to ask for loan support. the company reportedly wants the banks to accept shares in its memory chip unit being split off in other businesses, as

collateral. and not call in the loan. in california setting the stage to increase minimum wage to $15 an hour in the coming months. let's get back to our guest host andy pudzer who says that wage increases will hurt small businesses, and result in job losses. we touched on it a little bit earlier. but you have a piece in "the wall street journal" which is worth reading for everybody, but head line the minimum wage should be called the robot employment act. >> i don't write that head line. >> but help explain it. what do you mean by that? >> well, if you look at what's happened with the minimum wage recently. and i'm not opposed to a minimum wage increase. i'm opposed to these dramatic ones that really price entry-level employees out of the labor market. but you've got mcdonald's is going get kiosks. wendy's said they're going to do it to 1,000. the sort of self-automated restaurant chain now on their website they have seven restaurants they're all in cities that are going to $15 an hour in the next 36 months.

they do have people in the back of the house but you walk in the front of the house you would think it's solely automated. >> would you invest in that -- it's not a publicly traded company but would you invest in that company? >> they just made some big changes. i'd like to see how they work out. they added to their menu. i thought their menu was too limited. so i would not have invested in it previously. but they've made some changes. i want to go into one and see. >> it hastens the move towards that. but when i read the article, but it seems inevitable anyway that that's the way it's going. >> this is one of the things i would have liked to address as secretary of labor and i'm sure that alex acosta will address, they've got the employment training administration. >> so we have time to people for this. >> we need to train people. we need to change the way we look at enindication. we need to do the kind of things that rahm emanuel is doing in chicago with community colleges where they work on specific, you know, each college like one will be for health care. so you need to get people prepared for the jobs that exist, and while we're doing

that, you shouldn't eliminate the jobs that they can get now and learn the skills they need to move up that ladder of opportunity. that's as i said, bernie sanders said the same thing. we just had chairman yellen, chair yellen say the same thing in a speech last week. so we need to preserve these jobs and you know, in chicago right now, 40% of the african-american males are not in school and not working at a job. that number is 30% in new york and los angeles. that's a problem. because you don't get -- i remember when i worked at baskin-robbins in my ice cream scooping days when i was 16. i walked in to the franchisee called me in to her office and said, i'm going to give you a raise from $1, to $1.10. here's the key. i want you to open in the morning. that was one of the proudest days, i went in the next morning, i felt like i owned it. that was going to be the cleanest baskin-robbins in the history of the company. i was working my butt off. that's the kind of self-confidence and experience that keeps you off the street, keeps you working, keeps you in school. but you don't get it if you don't get a job.

>> pride in ownership. if you have a really big forearm from scooping out? >> i had to learn how to scoop left-handed because my right one was becoming disproportionate. >> you've done this before, i think. >> yeah, exactly. andy's our guest host. he's going to be with us for the rest of the program. in the meantime the white house is taking steps to compromise on health care reform. president trump told nbc news that the best way to finish the bill is to reach consensus with republicans, rather than working with democrats. joining us right now is republican senator bob corker. senator, it's great to see you today. >> good to be with you, becky. especially all of you, but andy, who moved his great company to tennessee. so good morning. >> senator, you have a slightly different take on how things should be working on the hill. you tweeted last week that we have come a long way in our country when the speaker of one party your honors a president not to work with the other party to solve a problem. i guess this is a swipe at house speaker paul ryan, but there seems to be a lot on both sides of the aisle of not wanting to work with the other side.

you look like you are somebody looking for compromise. why? >> well i think andy can attest to the fact that the hill's come a long way just in going through the process he went through. but, look, i do think that something like health care is best done in a bipartisan way. it's likely that that's not going to be the avenue that's taken at first. obviously it wasn't in the very beginning. the president went through quite an experience back home we would call it a goat roping in trying to work with just republicans and obviously there's a lot of ideological differences. becky, i sat at a lunch, i was asked to come over, to a luncheon with the president, small one, at freedom caucus members there and i appreciate the views of both the president, and the freedom caucus. but when it comes to affording people the real opportunity to have health care, there's really not much overlap there. so it seems that one side is going to have to really give for this to happen on the republican

side. so, i do hope in the interim we can do some things like lamar alexander and i have proposed where people who don't have the ability to buy health care on the exchange can use their sib sidi to buy it off exchange and that would begin to do away with some of the harmfulness that's accruing to tennesseans and people all across our country that really don't have a choice. >> i mean that seems like such a straightforward, clear way of trying to patch things up and trying to make a real fix that would make things better for americans who are trying to deal with some of these issues. but is it any sort of compromise that's so toxic when it comes to health care that it's not going to make its way through the senate or much less likely the house? >> well, you know, in fairness, the -- you know the democrats, you know, really are not open to looking at changes until we move past this reconciliation process. and so we're in this place

where, again, it seems like administration after administration has led with this issue, which has been a problem for each of them. >> right. meaning health care you mean? >> yeah, i mean it's the wrong place to start. >> because it's so complicated and you burn so many relationships. >> that's right. there are so many things that we can agree to the on, infrastructure maybe one. tax reform may be one. so we kind of led with our chin. we've ended up where we are today, and you know i don't really know how to move beyond this at present. again, every one of us, becky, andrew, joe, andy, myself, we all benefit from the standpoint that our employer buys our health insurance and therefore we get a tax benefit. it's roughly about $5,000 for each individual. for those people who do not get their health insurance from their employer, they don't have that benefit, and so the thesis behind this is you extend them a

refundable credit to give them a viable option to actually buy health care and that seems to be where some of the hang-up has been with the freedom caucus. but if you look at this bill -- >> i mean we've had freedom caucus members who have come on and said this is the biggest bill of republicans welfare they've ever seen in their lives. how do you -- how do you work with that? how do you do something with that? >> well, look, you know, republicans for 20 years have advocated trying to create some tax fairness around this issue. it's been a republican threshold issue. and you know, the fact that those people who don't have health insurance through their employer don't have this benefit and you're trying to create a mechanism for them to actually be able to afford health insurance, and at the same time put in place those tools that will allow it to lessen in cost. i mean the ten essential health benefits really are driving up the cost. and if there's a way to move away from those and allow people to actually buy health insurance that benefits themselves, and

their families, that is helpful to everyone. so, there are a couple things that are not that big, becky, they're just not that big, that we could do to really transform the system, and then to move to medicaid and give governors the kind of flexibility that all of them would like to have to really implement, and in cost effective ways. those three areas that we're talking about right now would be substantial reform, and it would move us in a place that i would think that both republicans and democrats over time could cherish. but, we're just not there yet. >> senator is there -- let's say that something happens between now and next monday, i don't know, with the freedom caucus, and moderates in the freedom caucus and the house come to actually get somewhere. is there any way that that's just not dead on arrival in the senate? we going to go through that same thing again if the house finally does get something and it goes to the senate and it's even worse and it just dies there or

something? >> look, there is as wide of a diversity of opinions about how to go forward with this in the senate as there is in the house. and obviously the senate is a much less disciplined place. people a little more freely speak their minds. and so, yeah, i mean we're going to have the same issues, and so you're going to have something that ultimately likely has changed, and goes back to the house. but again, this was probably a misstep to lead with this issue. it's out there now. whether the president decides to move on to something else where he can build bipartisan consensus or tries to stay on this horse, that's a decision that he and speaker ryan and others have to make. but yes you're going to have exactly the same kind of debates over in the senate, where most republicans would like to see people have the ability to actually buy some health care, not just have a system where if they had money they could.

i think most republicans would like to see them have some refundable credit to be able to purchase health care, which goes along with the theory that we've been espousing for the last 20 years. >> but senator, let's say that we pivot and we see the administration move towards tax reform as they've suggested they're going to be doing. it seems like the same sort of complicated set of problems are going to be there. if the house picks up something like the border adjustment tax which we've had chairman brady say he thinks is an inevitability at this point, is that something that's dead on arrival at the senate as well? >> look you know people say that tax reform is so much easier. i disagree 100%. i think tax reform is much more difficult. i mean the senate is composed of people that, you know, are total supply siders, could care less about the deficit, hey, we're in charge let's have a big time. there are some folks like me that actually care a little bit about fiscal issues, maybe a whole lot, and while i'm all for

looking at reasonable dynamic scoring, what i don't want to do with deficits rising to $1 trillion in 2022 on the current -- on the current bend, if you will, i don't want to do something that's going to exacerbate that. i realize growth has a lot to do with us overcoming our problems. but at the same time, some huge tax cut that takes us underwater is just not interesting to me, pro-growth reform is. but that's a lot different than supply siders. and so, we've got people of every ilk in the senate, and look, again, if we could do this in a bipartisan way, i don't know if that's possible, it would be much better. i mean what happens, as you know when you do these things through reconciliation, the other party immediately begins working on undoing what the other party has done and you end up with an inconsistency with our business community. >> right. and that's not good for people who are trying to do budgets for

years or decades out. >> senator, in relation to trying to pass some of these policies that would have an impact on business, i'm curious how you think about the overhang as the chairman of the senate foreign replaces committee about the various stories we continue to hear about russia, also to weigh that against the story we've been talking about this morning, this issue about susan rice, have you spent some time thinking about that? >> yeah, i was with one of my democratic colleagues last night. we had dinner, and it's because of the way things are in the senate, and we wanted to sit down and talk, and there's no doubt that there's a tremendous amount of distrust building towards this administration on the democratic side over the russia issue. and there's no question that it's affecting things now. at one point i've said, you know, i thought it was going to affect things. i don't think there's any

question now that it is affecting things. and you know, it seems like, you know, if i were on the executive side of this, i would quit stirring the pot, okay. i'd try to move on. at the same time, as you mentioned, some recent revelations have come out, and look, i'm placing stock right now in the senate intelligence committee with richard burr and mark warner. i checked in with each of them about every two days to make sure that it's moving on, the way to resolve this is a fulsom, fulsom investigation but it just continues to spiral downward. and it is beginning -- it's just affecting trust. and it's making it -- it is making it, i hate to say this, far more difficult for something to be accomplished through the executive branch leadership because it just gets -- >> senator, i'm hearing like rhino like things coming from your right now. i'm sorry. but i mean if it turns out that there was nothing then it wasn't that, you know -- if there is

smoke and there is fire, that's one thing. but what if there isn't and then this other issue has been called a distraction. i think you got to wait. are you trying to do a deal with schumer to get gorsuch nonfilibustered? that sounds crazy, too. >> you know, i'm sorry what you just said sounds really strange to me. i have no idea what you're even talking about. >> okay, good. someone was saying if maybe there's still efforts to do something with schumer, i don't know, some kind of future guarantee if they don't filibuster. so it's going to be filibustered? this is going nuclear then? that's going to happen? >> yeah. >> yeah? >> i don't even know -- i don't know who is even talking right now. i'm not even understanding what the train of thought is here. but the fact is, let's have an open investigation. let's get this out on the susan rice thing. let's do the same and put it behind us. >> i was talking about gorsuch now. are there negotiations now to have some kind of deal on future appointments if he decides not

to filibuster? >> i am unaware of any negotiations that are under way. >> okay, good. all right. >> yeah, yeah. >> thank you, sir. >> all right when we return today's top stories. stay tuned. you're watching "squawk box" on cnbc. yes?

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ready to help if you need it. it's like having the power of a trading floor, wherever you are. it's your trade. e*trade next on "squawk box," singer and songwriter don mclean will be joining us on set. his legendary hit "american pie" was just added to the national recording registry. we will be right back with don mclean. stick around.

time for your stat of the day. spexx relaunched a use the falcon 9

a classic song you know 45 years after its release it's now an american cultural treasure. joining us is don mclean, his hit "american pie" was added to

the national recording registry of the library of congress. he sat down and like got peppered with so many questions we finally said we just got to, let's do it all so that everyone can be brought in this. i said i was 15 when it came out and it is truly i saw "easy rider" when i was 15 too. >> i was 15, too. >> it's iconic you can see it happening in real time. when you were writing this long sort of, i mean there's a lot in there, a lot of feeling, a lot of culture, a lot that had to be explained to people. did you know you were writing six or seven verses it would be this iconic thing? >> no, i did not. basically i had a record deal that went away and i was, thought i was out of business again, i put out one album and so i was working on this and i was having a good time enjoying to doing. t. this is probably the last thing

i ever do because like i said the record company had gone away, but they were taken over by united artists and they put money behind this song and it became a big hit right away but it was different than other hits. i've had other hits but nothing was like that. people would stop the car and you know, i know where i was when i first heard it. it was a different kind of a thing. >> top five and the other ones we talk about in the 20th century, things like judy garland's "over the rainbow" and "this land is your land, this land is my land" and then "american pie." >> these are all my favorite songs, too, "white christmas." people ask me what is your favorite pop song, i always say "white christmas" because i remember as a kid i was born in 1945, when i was '51, '52 hearing that song it was a different country. >> a back story the buddy holly,

when you hear the song you think it's great but you hear the back story and sets it. >> i had always been interested in buddy holly and the plane crash that occurred for many years, and i remember meeting phil everley at the, in 1969 at the newport folk festival, that was a weekend that they landed on the moon and all these famous people at this festival. i was lucky to be part of the singers that pete seager brought to the festival. i went up to everley, i said you knew buddy holly. he said you know he died because we to do his laundry. that changed and i started think being it again because it made him human and that's what really started me thinking about writing something about it. because there are a lot of things you think about but you

don't know whether they'll be a good song idea or not but the first part of the song came out and that led the way for this sort of dream thing and the idea was that basically politics and music are flowing parallel. this is my little theory, and so you know in a way now we have sort of a spectacle rock, owes more to liberace han songwriting, and so we also have a new kind of politics. we don't kind of a spectacle politics i guess you might say. >> they'll play us out. what are the economics? how do the royalties work? >> the economics of the song. >> i became a millionaire immediately, and it was lovely. i had had no money. >> and royalty checks still keep coming? >> are you still going to the mailbox to pick up checks on this? >> i think they do it directly into the -- >> direct deposit.

>> direct deposit, yes. >> it's such a pleasure having you here. >> thank you for having me. i watch the show all the time. >> you're a bond guy. >> i'm a bond guy. i have a degree in finance, i went to wyona college. >> got a stock pick for us? before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc.

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we thank andy puzder for being here. >> love to be here. >> we hope you come back soon. >> whenever you like, thank you. >> join us tomorrow, everybody. have a great day. right now time for "squawk on the street." ♪ >> congratulations to the north carolina tar heels on their sixth national championship, good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock ex-change. the future is soft as the dow is down 13 of 16. the president holding a town hall of sorts of ceos, broad losses in europe. ten-year testing support 2.32 and durables in an hour