2018 "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box." good morning you hear them? i love bitcoin in the usa. welcome to "squawk box." we're live at the nasdaq market site in times square i'm melissa lee with joe kernen. joining us is brian kelly, founder of brian kelly capital we will be sure to talk about bitcoin. >> not a horrible year alabama much better than your team, notre dame you don't look anything like that guy >> you know what's funny on twitter, every saturday if there's a bad play -- i take the heat >> you do. >> yeah. >> a check of u.s. equities at this hour. yesterday it was a record day. the sixth closing record high in a row for the s&p as well as the

nasdaq the dow also closing at a record high it looks like we'll open sharply lower. the dow losing 124 points right now, the s&p down 13 nasdaq down about 44 what was weighing on the markets yesterday and probably today, the yield on the ten-year note 2.584% right now that's the highest since march 15th a big move in the ten-year treasury yield that's challenging the equity rally today. the yen continuing its strength after the boj said it would continue its bond strengthening services the hang seng up by 0.20%. over in europe, right now at hope the dax down by 0. % cac down by 0.6% looking at the price of crude

oil, highest level since 2014. wti, 63.43 >> breaking news this morning. let's get to becky quick live in omaha. good morning >> good morning. there's breaking news from berkshire hathaway the company out with a statement saying that it's going to be increasing its board of directors by two members to include two key members of its operations team who people have been looking at for a while, speculating on whether they would be stepping in as potential sulk seccessors for w buffett some day greg abel and ajit jain will be joining. there's a lot of issues that have people speculating about who would be replacing warren buffett as ceo one day this sets up much of that situation. under this, it looks like greg

abel will be vice chairman in charge of nonbusiness operations ajit jain will be in charge of insurance operations probably not huge news for people watching this for a while. but mr. rough fete ha buffett sg time the board would know who would take over for him if he was hit bay by a bus tomorrow people have speculated these two names, and this kind of seals that in other parts, the utilities, the railroads, the manufacturing make up a bigger chunk utilities, 11%, manufacturing about 24%. this release just out, we should tell you that warren buffett

will be joining us live in the:00 a.m. eastern hour of "squawk box" to talk about what this means, why they're doing this and i would now >> ah-ha so that's coming up at 8:00. good to know i looked over at melissa, noticed that brian was not you i'm groggy i know i know >> just happened to be in the neighborhood, figured we could stop by. >> who doesn't go to omaha in january when they get the chance >> i raise my hand a destination spot that will be great we'll have warren for the entire hour, between 8:00 and 9:00. >> yeah. he'll talk about this and whatever else we can throw at

him. also we will be hearing from vice chairman charlie munger, so he can talk about what this means. there's never been another vice chairman 52 years warren buffett has been the ceo for 52 years charlie munger has been his lieutenant and vice chairman we'll talk to them about why this came about, how it came about. there's a lot of questions about what will happen next. charlie is 93. warren is 87 this has been a question circulating for a long time. hopefully we'll get more answers from them. >> does this put abel in the lead to be the heir apparent >> it's unclear. that's one question we'll ask. they've always talked so much about how important ajit jain is to the operation

in a letter warren wrote if we were all in a boat, swim to ajit because he's able to take over ajit jain is 66 years old. he runs the reinsurance operations there both of them are key members of the team but it's a good question is this a horse race is one in position to be a ceo in would this be a structure like we've seen with the investment side of operations. he has two people running major parts of portfolio for him, each of whom have about $12 billion they're each managing now out of a portfolio north of 1$120 billion. the release does say neither charlie nor warren buffett are going anywhere

they will continue in their position and will continue to manage money but this does solidify what people thought the potential situation is i'm not sure what the answer is. we'll have to ask mr. buffet >> interesting yeah putting so much authority in the hands of very young men. they're youthful, both of them what did you say, 55 and 66? both of them, you know, very youthful >> at the peak of their career >> yes >> you know, you might warn ole warren we have a close relationship he wasn't really sure that corporations needed lower taxes. we do that, the markets go crazy, and buffett is there going ka-ching ka-ching ka-ching so you might just say are you sure you didn't like this tax cut for corporations there, old

warren >> there are questions about what this means not only for the market and his investments but also directly for berkshire hathaway an analyst put out something saying it could mean a change of $37 billion in how berkshire is valued immediately we'll talk to him about what it means not only the valuations, what it will mean for their tax bill you know berkshire hathaway pays among the highest tax rates in the country. >> i don't know if that's an old picture we had of him. that looks like one we put in right after we passed that thing. let's look at that he's like this there he is. oh thank you trump. thank you, trump >> thank you, tax bill >> yeah. all right. good warn him to be ready he doesn't need that >> he doesn't need warning >> he can pay the old rate >> if he wants to. >> that's true >> that's right. >> nothing is stopping him

>> becky, great. great. okay you have a good excuse not to be here >> i'm here. >> you are here, but not with me thank you. we'll see you. stocks to watch, toyota and mazda plan to build a 1$1.6 billion assembly plant in huntsville, alabama. the announcement is expected this afternoon the plant will employ about 4,000 workers and build about 300,000 vehicles per year. toyota up 2% in japanese trade nordstrom says same-store sales rose 1.2% during the holidays the retailer was boosted by strong sales at the rack stores. nordstrom is adjusting the full-year earnings outlook slightly higher. domino's pizza says the ceo patrick doyle will step down in june he will be replaced by the head of the company's international business doyle has been ceo since 2010 and oversaw domino's turnaround including the move into online ordering and promotions. now to today's top washington stories eamon javers joins us from d.c

you weren't there, were you, for that bipartisan thing? >> no, i was out on the lawn when they did that >> you were watching >> 55 minutes. >> trump somehow kept it together what drug do they give for dementia where for an hour you can seem rational and not seem demented, senile and insane? he seemed like he was in command of that hour >> yeah. that was clearly an effective strategy by -- >> strategy. a strategy a strategy >> it was clearly an effective strategy by the president who made that decision on his own. the president decided i'll let the press in, let them roll their cameras for the entire 55 minutes of this meeting. there was another piece that was off-camera the bulk of the meeting was on camera the president conducted a

live-fire negotiating session with democrats and republicans on immigration reform. that is an effective way of pushing back on these concerns that have been raised by critics of the president that he is not mentally fit for the job we saw the president, this got to him over the weekend. owe was tweeting out he was a stable genius over the weekend there's an old saying in journalism, show don't tell. this was the president showing he can capable of doing the job, running the meeting, managing it it all raises the question with the big changes in trump land yesterday, whether or not trump is winning the establishment look at a couple of bullet points here. the president has been surrounded by some of the early trump targets. senator corker, senator mcconnell, congressman ryan. all of whom he spent pieces of 2017 taunting over twitter and elsewhere but they've been at his side senator corker accepting a pen at a signing ceremony on monday from the president he convened that negotiating session on daca and immigration

reform he announced yesterday he will go to davos. the president will attend the world economic forum in davos, switzerland later this month all of those things are things you do when you're winning and coalescing around the establishment. davos known as being the world headquarters of the globalist financial elite. this is a president who ran on a populist ticket. we'll see what kind of message he brings. at the same time, as he is coalescing that establishment support, the president is also facing some key challenges on some of his key pieces of legislation he wants to pass this year on immigration -- sorry, on infrastructure and also on welfare reform on infrastructure the president has got a couple problems. one is that house con zefrtiveas are wary of big spending one source says the president wants a manhattan style infrastructure that many will remember, but many are reluctant

to prioritize it, and even as the president is consolidating the republican establish mtmente faces significant challenges on his leg laislation what a moment yesterday to see him for an hour in command of the meeting. >> i saw some campaign trump there, too he goes, you know, heat? give me heat i've had heat my entire life there was some -- there was some trump stuff happening there. >> the problem is if you do that in the public, you take some heat this is a president who campaigned as the hardest on hard line and immigration, now signaling he's open to an immigration deal that has some hard core supporters worried

that's the danger. you negotiate in public, you might alienate some people >> we love davos i actually don't >> you don't like it >> it's cold, eamon. it's like 5 degrees, and we're outside. >> do they let you ski when you go out there do you get time on the slopes? >> i don't i come right home. i lock myself in my little closet of a hotel room they don't have room service it's bizarre it's a small ski town. they try to bring 20,000 people in for the week. i take some drugs that, you know, some tranquilizers to not get stockholm syndrome >> you want us to feel bad for you for being sent to davos, switzerland? >> there's globalests and elitists everywhere? what is the president going to do will he do will he tell off the elitists or join forces? does he want their approval or does he want to tell them to get

lost >> he don't know >> bit of both probably. >> there's neanderthal man and there's davos man. you know who epitomizes davos man? andrew andrew has been going there for 15 years he holds court he has like those little panels. he's everywhere. he's got lunches, dinners. there's one person who is davos man, and i don't know where he is this week >> now it's donald trump >> no. no he's a disruptor >> is he going there to stir the pot? >> president xi was there last year >> right >> president xi of china made a point last year of going to davos saying china is open for business he pushed back on this idea of isolationism, and said china is willing to do business with the world. this president will go there and deliver an american-first agenda we were told yesterday

is it america first but we're willing to work with you or america first and we're hostile to you global elites that's going to be the fascinating nuance of this meeting. >> i like when realists and the rest of the world comment on trump's america first. when china says we may be china first here sort of or when japan says we think about our interests ahead of other countries. that seems like -- would you really like a guy who was america fourth or fifth? america sixth. america go sixth let's get in there seventh might be good enough seems -- i don't understand that criticism either but i don't understand a lot we have to get to the markets. i don't know whether you noticed, they keep hitting new highs because of the global synchronous growth joining us is jeff sout from raymond james, and mark lucheney

and with us is brian kelly, fast money trader we will talk a bit about bitcoin. >> let's do it >> i don't think it's happening in a vacuum with the stock market that keeps hitting new highs. maybe there's relationships there. >> there might be. listen, i think there's something to be said for just this global capital pool out there. certainly searching for some kind of yield, some kind of return bitcoin has had that return. digital currency had that return i don't think it's acting in a vacuum that being said, it's not a one for run. there's very few bigger funds out there saying i'm selling off treasuries today, i better buy bitcoin. that's not happening yet but it will in 2018. >> the institutional presence of bitcoin is limited at this point, if at all >> almost nonexistent. high net worth individuals, family offices, you have some institutions starting to come into the market. no traditional asset managers

that made allocation to the space and it's difficult for funds, now with the futures it's easier, but give cult for funds to difficult for funds to get that exposure. >> we mentioned jeff and mark. jeff, i'll start with you. you must be getting some kudos from the minions at your firm. you got bullish about how long ago? you talked about melt up, all that stuff it has happened. >> that's right. our short model says we will continue into the upside there's a pivot point and a timing point that comes into play that's your first point of vulnerability in the equity markets. until then the path of least resistance is on the upside. mark, are you -- do you have one step out the door yet? do you feel the same way

>> i feel the same way expressing concern within our organization to conditions that are overbought in the tick markets. we see relative strength measures around the s&p 500 at 20-year highs. in addition to that, if you look at sentiment surveys, whether it's the american association of individual investors or the investors intelligence surveys, they're at decade highs. that is disconcerting and makes the market rife for a pullback of sorts on balance the direction we're looking for is another good year to follow last year. we have 3,000 out there as our price target i don't think it will come as calmly as the last 12 months developed, but directionally we wanted to be biased towards equities going to advance at a pace that exceeds that of other asset classes. frlts what >> what's the trigger for february's pullback? yesterday treasuries shot up and that provided headwinds for

equities to go higher. we're practically at 2.6 jeff gundlach said that below 2.6 will be the end for equities here what's your view on higher rates and higher equities? >> i don't buy that the rates will go that much higher i think the cause for potential small pullback beginning in february is somewhat disappointing earnings season. you will see a lot of people take writeoffs that may disappoint on the short-term basis but longer term the s&p can earn 160 bucks this year. if that's true, we're trading at less than 16 times earnings. >> i wonder how it happens we have to go, but if it's choppy, we have big corrections on the way, or if it goes there immediately and treads water

markets like this, they don't go on sale for 10% off usually. i don't know if you get 160 in earnings, you are looking at where the market is now, it's like -- it is in position where it will give you an opportunity to buy it cheaper. so it makes me think -- i look for reversion of the mean, but we haven't had one yet it's amazing it's like a beach ball you can't get under water, right? you said i think we want to be on -- if we have to err on one side or the other, we would rather be long stocks than assets -- it was a meh endorsement of staying in stocks from you >> again, i think it's going to advance at a healthy clip. we're looking for gains for the year, but historically we'll se a correction it's inevitable. >> we'll see jeff, mark, thanks brian is sticking around for the rest of the hour

unless something starts happening with bitcoin and you have to go >> a bitcoin emergency >> yeah. >> it seems like more of a bond emergency this morning bitcoin seems to be stable >> think of what we're seeing, close to 2.6 on the ten. but germany is at 40 basis points i know >> yin that said this mochina sy don't like treasuries as much. you have to be concerned >> you could see if there was a catalyst for a pull back in equities, you could see relatively low rate on the -- like -- 3.25 or something. that might get people really worried. on a historical basis, it's not high >> most strategists are saying once you get above 3, they'll cut back their estimates who globally in europe or somewhere else wouldn't jump on

3% when you are getting 40 basis points in germany. >> of course but it comes to the bond market not the equity market. coming up, the future of berkshire hathaway, warren buf fe fett will join becky at 8:00 a.m.

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breaking news, berkshire hathaway is increasing its board of directors to 14 from 12 greg abel was named vice chairman for noninsurance business operations and aji ajit jain will take the title of vice chairman for insurance operations buffett and charlie munger will continue in their existing positions. this includes being responsible for significant capital allocation decisions and investment activities. be nice to talk to buffett about this and we will he will join becky who is in omaha. warren got one of his statements for his assets recently. we snapped a picture immediately. he's very happy. he will join us with becky at 8:00 eastern big smile. >> worth billions that smile >> does he logon to his online account to get a statement >> that's a good question.

>> and is he surprised >> i did really well this month. i should think about doing this for a living. we're keeping an eye on a story out of the caribbean a 7.6 earthquake struck in the caribbean sea last night between honduras puerto rico and the virgin islands were under a tsunami advisory but that's been removed. officials say there were no early reports of damage on land. another developing story this morning, a powerful rain storm in southern california triggering deadly mud slides kirk hawkins is live in month see t montecito with the latest >> good morning. we're live on the 101 freeway, as crews are scrambling behind me in the darkness to remove this debris and all of the mud, a major stretch of this highway

is now shut down the neighborhoods just beyond us here, an all-out search for survivors is under way and access is a critical concern for first responders >> reporter: rescue crews racing against time, searching through a home buried under mud to find a 14-year-old trapped inside a miracle discovery. firefighters used the jaws of life to pull lauren canton to safety >> it was so hard to hear her. you know, we could have very easily taken two more steps and wouldn't have been able to hear her. wading through mud with dogs a desperate search for survivors. >> a little baby, don't know where it came from got it out. got the mud out of its mouth hoping it's okay >> reporter: the coast guard called in to help with evacuation >> it was pretty bad up there.

certain neighborhoods got hit bad. some houses were wiped out. >> reporter: pulled to safety in the hills that burned weeks ago. the largest wildfire in state history. >> i heard the rumble of the rocks. i looked over at the river, trees are coming down. >> we had four feet of mud raging through, counter-high through my house >> it was like in the middle of a river, water was gushing down the hills where where there was once flames, now there's flooding and mud >> and now this morning mandatory evacuation orders are still in place effecting thousands of people here this 101 freeway is expected to remain shut down until thursday at the earliest. live in montecito, i'm kirk hawkins, back to you >> thank you coming up, much more on berkshire hathaway adding two

directors to its board what does it mean who some day, way in the future for both of these youngsters, who finally takes over becky will join us next. then at 8:00, our newsmaker of the morning besides brian kelly. don't miss a liveinterview wit warren buffett himself "squawk box" will be right back.

welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning u.s. equity futures at this hour indicated to actually be lower by a significant amount, which

we have not seen recently. the market has been up on a stilt. but yields are moving higher suddenly >> that's right. we're down ten handles on the s&p 500. not an extraordinary move in the long history of the market, but for what we had, this is a big move >> it is maybe it has something to do with this. here is the yield on the ten-year right now 2.586. if we talk to santelli later, you go back to march, it looks like this is the highest of the year i'm not a technician, but that could be a resistance level. >> what do bitcoin people say,

is it a reversion of the mean or a regression to the mean do you want to be defined by bitcoin? probably not you're a father, husband -- >> yeah. and certainly bitcoin people are my peeps don't get me wrong we say reversion to the mean you use a regression to get the mean good i will use reversion from now on now back to becky in omaha where berkshire hathaway is making news this morning. hello. >> the news this morning is that berkshire hathaway is naming both ajit jain and greg abel as vice chairman of berkshire hathaway both of them will be joining the board, increasing membership from 12 people to 14 people. each will have their own portfolio under berkshire. ajit jain will be running the insurance businesses at

berkshire hathaway greg abel will be running the noninsurance businesses. now, these are two much younger men then the men right now in charge warren buffett is 87 years old chairman and ceo at berkshire. charlie munger is 93, he's the vice chairman. neither of them are stepping down, they will be continuing to put money to work for berkshire hathaway but this gives insight into who the people are, the names are in the envelope for who would eventually take over to run the company. no hint as to which one of these two or if both would be running that we will get more from warren buffett himself. for years he has refused to say who his successor would be this puts these two gentlemen in position to know what's going on and to be solidifying their positions in the company as

well we'll get all of those answers coming up from warren buffett who will join us at 8:00 a.m. eastern time in omaha. also charlie munger will be calling into the show at 5:45 a.m. eastern time -- or 5:45 his time, california time, which is 8:45 eastern time, 7:45 where i am now confusing with all the times but we'll hear from both gentlemen about what they see happening. greg abel is 55, ajit jain is 62 years old. both key members of the team insurance is a huge part of the operations of berkshire hathaway back in 2016 it made up about 24% of overall operations. that's down from where it was ten years earlier when it was 50% of the company's earnings. this happened as berkshire hathaway made more and more purchases in manufacturing and beyond buying burlington

northern as the big railroad that makes up a quarter of profits. buying imc, the tool parts company based in israel. all of these additions in the last decade or so it changed the makeup of berkshire hathaway we will talk to them about those issues and about some things you guys were talking about. you were talking about the futures this morning, where markets have been and looking at yields wilfred frost brought up an interesting chart earlier this morning. he was talking about the yields on the ten-year in japan skyrocketing a bit skyrocketing to 0.086% even as you see those moves, he was tying it to our ten-year yield where you see things almost getting to the point of being within shooting distance of 2.6%. we'll see what warren buffett and charlie munger think about

those issues yesterday on cnbc, it was talked about if yields get to 3%, you could see a melt up of 30% gains in the stock market. bill miller pointed it back to 2013 and said as people lost money in bonds, they took it out and put it into equity funds we'll talk about some of those things, too. >> great counter intuitive, but i'm willing to believe anything at this point >> yeah. >> sometimes those are the best trades >> right >> that's true >> when people think bk is crazy, those are the best ones to get into. >> bk stands for bankruptcy, doesn't it >> no. >> oh, brian kelly stands for brooklyn, too though i don't live there. >> bk, the company went bk that's what i think of doesn't mean it went brian kelly. burger king. burger king. >> that's what i think of.

creepy king. >> that smoke i were taste they spray on those things. ugh. don't like that. >> thanks, becky >> i'm going to get sued i'm just kidding speaking of bitcoin, if you're looking for a masfast-mon disruptive currency, blockchain may be with you. seema mody has more on crypto careers. >> as the cryptocurrency universe grows, employers are looking for more with experience upwork which connects freelancers with businesses says blockchain is the fastest growing category right now >> it really ranges from launching your own currency to understanding and building prototypes on how your company can take advantage of blockchain technology >> the job listings vary from developers with experienceing c

some looking for a consultant to come in on r. aand explain how blockchain can help things be more efficient it's not cheap given how fast the space is growing, linkedin says more members are including cryptocurrencies and bitcoin in their provides and that the u.s. is the home to the majority of blockchain professionals the next highest countries are the uk, france, india, germany the largest private company in the space is coinbase. they have a total number of 200 employees. that's expected to grow more this year. >> how do they prove they are certified or they know -- it's such an emerging technology. a lot of people i guess go out and market themselves as block tan chain experts. >> there's a check that they have to make sure there's

experience in blockchain, but some use it to get more people >> kodakcoin >> kodak, right. there's a difference between being a consultant and a cryptographer. >> and what do they do >> a cryptograper writes the code there's a shortage for those developers consultants on the other hand, there's a bigger career path for them >> i would imagine the professionals you had up varies widely bededepending on what sk you are looking for. i imagine a lot of the cryptographers are in asia >> and you will see more hubs open up. as demand rises, more individuals are saying where i do get that experience in blockchain or cryptocurrency that is coming next. >> i'm sure university also

have -- >> they already are. we did that story about how top business schools are launching classes because more grads want that experience. >> seema mody, thank you. coming up, a bold market call from bill miller. later, do not miss our newsmaker of the morning warren buffett live from omaha at 8:00 a.m. eastern with becky. at fidelity, trades are now just $4.95.

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time for the executive edge. bill miller making a bold call on the market telling cnbc viewers in the to worry about higher rates putting a dent in the stock market's rip roaring rally. >> i think that's going to come, if we get it and it will be driven, you mentioned earlier about the ten-year yields. those go through 2.60 and head towards 3.0, we could have the melt up we had in 2013, where the market was up 30%. >> that's quite a melt up. miller believes the stock market could get another boost from lower corporate tax rates. >> you can see the market wants

to go up we've got the tax cut bill, i think that was great from a corporate standpoint, most of the rest of it was typical political christmas tree ornament dogs. t dogs. but i think that the economy looks great. usually even if we get the economy accelerating, i think that inflation is probably a year or so away from becoming anybody's concern. i do think the curve is probably going to continue to shift up. >> miller still likes financials, which had a great day yesterday. but that melt up of 30%? >> that's an interesting call. he's a legend. so, any type of counter intuitive talk like that, you have to take very seriously. i think to me, if you have rates rising for the right reasons, in other words, we're getting an accelerating economy, the ten-year yield is at 3%, but we're getting 4% plus growth in gdp, you can get that melt up.

if rates as of this morning are rising for technical reasons, in other words, yourbiggest buyer doesn't want to buy them anymore, ie china, then you may not get the melt up. >> a melt up of 30%. that's not a melt up, that's a rally in and of itself >> that's our year then i'm covered for 2018. and we have to find 30% in 2019. i want three of them >> three >> three years in a row. >> like '94, '95 -- whenever it was. if we deserve it, we deserve it. >> absolutely. so much winning. >> we'll get so sick of winning. coming up what dr. oz, roger goodell, bobby brown and a former prime minister of greece have in common sounds like they all walked into a bar. sounds like a joke here's a hint, it has to do with investing. good and our next guest don't miss our newsmakers of the morning, berkshire hathaway

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silicon valley is showcasing its most exciting innovations at the consumer electronics show in las vegas this week, but a new vc fund and its star-studded board are betting on different disruptors in tech for the new year joining us now founder and chairman of the kyros society, which it's not secret, is it i mean, guys don't meet at midnight >> we don't wake up at 6:00 a.m. and come to nasdaq >> robes on and stuff. weird eyes wide shut music >> we're not that cool yet >> you have some criticisms that i think are interesting about ces in terms of that they've almost become establishment in terms of looking at tech and that a lot of what they talk about are things that are nice to have's and what you're excited about and hope to be a big part of are things that are actually real problem-solving

innovation for stuff that we're facing not just -- >> look, you guys are no strangers to this topic. i think silicon valley right now is in a precarious time. we're seeing a fairly significant backlash in uprising not that dissimilar to what we saw in the last election, where people are seeing that silicon valley is no longer in touch with the needs of everyday people it doesn't take more than five minutes at cesto see another ale alexa-enabled toilet or frig >> is that what i need seriously, isn't that what -- they sell lots of alexa. >> if my biggest challenge in life at any point becomes telling my toaster to go back and retoast for another degree, fine right now when you look at society and our communities here in the united states, people are dealing with some pretty tough challenges, right? we're graduating with $1.5 trillion in student loans. the cost of rent in cities like new york is over 60ers approximate of people's income the question is, like, is there really any hope and can technology solve some of these

problems for us? >> some of the ones that we think are already solved, which if you look at it, maybe they're not. >> yeah. >> as a result, you've got some things you would like to address and some predictions the first one -- i heard a horrible prediction a couple of weeks ago that the yankees are going to win the world series because they got this guy, you know, along with the other guy and -- okay. >> you'll want to tell that to a red sox fan. >> that's a horrible prediction. this is even worse i'm going to become a millennial baby boomers i'll never -- i got to go backwards in thinking and wisdom and everything i got to snap selfies all day long >> your tie will get skinnier and skinnier >> we have a millennial on this show he is not here today >> here's what's interesting one of the big changes we are going to see in 2018 is baby boomers will be the new millenials here's what i mean by that we have 10,000 people from the boomer generation retiring every day this year, and this is the first generation in history that's actually tech-savvy maybe not joe, but --

>> thank you >> when you look at these boomers who are retiring who 70ers approximate actively use facebook on a daily basis, you start to think what does that change in the markets and what does that mean for industries, and i think one of the biggest changes we'll see this year is the transition of health care out of the hospital into the home now folks like my parents, like you guys, we're able to go and use our technology to monitor our health, diagnose issues, take care of ours in new ways that wasn't otherwise possible, and when we start to take care of our parents, the boomers' parents as we put them in elderly care, we're able to use technology to bring that care again into the comfort of their own home >> you had four of these unfortunately, we have to get out. at $56.65. you can see the clock. you talk about being a better parent and fertility is expensive. this will be easier. paying rent will be cheaper and college degrees won't leave you drowning in debt these are the things that could help real people that aren't, like, toast ares or toilets. >> i'll just kind of close out in saying -- >> you got 15 seconds. >> there are some really

interesting exciting innovations that will happen in 2018 i think it's up to people like us here and everywhere else to refocus the attention not on the alexa-enabled toasters, but the on technology that is will make an impact in our everyday community. >> thank you appreciate it. their money into equities. they're not investing in commodities or fixed income. what people are really putting their money into is what they hope to get out of life. but helping them get there requires a real refusal to settle for average. because when you approach investing with a tireless desire to beat the status quo, something wonderful can happen. those people might just get what they wanted out of life. or maybe even more.

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a record run the s&p turning in its best start to a year since 1987 the next test earnings season. we're going to talk markets and preview some of the earnings that will be key oil prices are on the rise touching levels not seen in three years. not a coincidence that maybe yields are rising too. we'll touch on what crude and the yield curve means for the geopolitical landscape, and breaking news from brookshire

hat away warren buffett announcing major additions to the board details straight ahead, including an hour-long with the oracle as the second hour -- in the 8:00 hour. meanwhile, the 7:00 hour starts right now. live from the beating heart of business, new york city, this is "squawk box." good morning welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square i'm melissa lee along with joe kernan becky quick is in omaha. we'll check in later on with this morning's newsmaker interview with warren buffett. take a look at the futures right now. we are looking to lose up by triple digits on the dow down by 104 points at the open s&p looking to be off about 10 .5 nasdaq looking to be down by about 40 if we hold these losses through the close, this will snap the sixth straight closing record highs for the s&p as well as the nasdaq here's what's making headlines at this hour legendary investor bill miller

telling cnbc that the market could be headed for a melt-up. >> i think that's still to come if we're going to get it, and it will be driven if we get it by you mentioned i think earlier about ten year yields. those ten-year yields go through 260 and head towards three i think we could have the kind of melt-up we had in 2013 when the market was up 30%. >> miller thinks the market could see another boost from lower corporate taxes. he likes airline stocks like delta given their low value wags and says he still likes bank stocks we'll have reaction to his comments throughout the morning. there's a pair of economic reports on today's wall street agenda import prices out at 8:30 a.m. eastern time, followed by november wholesale trade numbers at 10:00 becky quick is in omaha, and she has the details on brookshire hathaway >> good to see you guys again. the news, folks, if you were just waking up this morning, is that brookshire hathaway says it's going to be increasing its board from 12 members to 14 because it is naming two people to be additional vice chairs of

the company. those two people are greg able, who right now runs brookshire hat ware energy and ajit jain. the roles will ek bra down each of them taking a major portfolio in the company ajit jain will be responsible for all the insurance operations at brookshire hathaway that includes the reinsurance, jenre, geico and other insurance operations, indemnity and home insurance companies. a major part of the company that in 2016 was responsible for about 24% of the company's profits. the second part of that portfolio is going to be greg abel he right now runs brookshire hathaway energy. he is going to be responsible for all the non-insurance assets of the company that includes companies far and wide for things like brookshire hathaway energy that he runs right now. also, burl ton northern, precision cass parts, margin, imc group, all of those manufacturing sides, and then a lot of the other companies that don't really fit in to either of those two neat buckets that includes things like net jets

benjamin moore, john's manville, nebraska furniture mart. on and on. joe, of course, your favorite acme brick would be one of those companies as well. this really kind of solidifies where you might expect to see succession planning for both dharl charlie munger and warren buffett. for a lot of time he said he did not want to name who his potential successors would be. he said the board knew those two people the names were in an envelope, but he didn't want to actually name who those two people were i guess this answers a lot of those questions that you might be expecting it comes as questions have been continued to come year after year about who the succession plans would be because warren buffett is 87, and joe, lisp to this i told you charlie munger was 93 i was wrong. he is 94 because he turned 94 on january 1st. you are talking about two gentlemen who are not stepping down who will continue in their roles as chairman, ceo, and then vice chairman, and will continue

allocating money, but these two new dags to the board and the two vice chairman is something that's never happened in the 52 or 53 years in brookshire hathaway's existence where. >> it's fine i mean, i guess people think that because he has had some health issues. >> the natural reaction is why now after decades of not doing this, why now? he is going to be here himself to tell us in person about that. tell us he is feeling okay >> he is young >> natural expectation >> charlie -- >> relatively speaking >> charlie is seven years older. warren, you know, his health is fine, and, you know, i'm going to -- i plan on the same type of thing. you know what i mean and the same tomb stone as warren god this guy was old you know what i mean >> exactly long, long life. >> wow yeah okay good >> and a long time in our chairs too, right >> yeah. well, you know, i'm going to stay and talk about andrew earlier. i'm going to stay for andrew, i think. you know what i mean as long as i possibly --

>> he needs you. >> for him >> why >> just to be here for him to never leave him yeah >> to be the thorn in his side >> no. just -- >> that's what it sounds like. >> people can interpret it different ways we will see you -- if not before, we'll see you at 8:00. we look forward to it. >> sounds good >> i had a birthday in january too. i don't need another acme brick. he has to have something else. >> an cme brick. >> i don't need more ketchup >> cee's candy >> that would work >> or net jets >> or a card not a blank card not just a card that doesn't have any money in it >> yes >> a card with -- >> waiting >> all right keep waiting >> a few stocks -- thanks, beck. a few stocks on the move this morning. lennar -- that was short of analyst expectations revenues rose 12% to 3.79 billion dollars. the homebuilder says tax reform

will reduce its effective tax rate in 2018 from 34% -- no american company has paid that rate anyway, it will reduce it from 34% to 25% >> i know. no one pays that well, actually, a lot of the retailers pay that rate and a lot of the banks pay that rate >> some of the ones that don't have been induced to move operations elsewhere to lower their blended rate, so it's self-fulfilling. anyway, leave some money in the private sector it seems to be, you know -- it just seems to be a no-brainer. nordstrom says same-store sales rose 1.2%. better than expected the retailer is boosted by strong sales, and its off price rack stores. nordstrom is adjusting its full year earnings outlook slightly hire as well domino's pizza says ceo patrick doyle will step down in june i hope they got a good replacement because this guy --

do you watch this stuff? what a bang-up job he did. >> do you remember the commercials that he used to do when he first took over saying we know, the pizza doesn't taste very good. they retooled the pizza. the flavoring. >> all like the guy at mcdonald's >> the turnaround. huge you would think how do you revitalize domino's or mcdonald's you know, i hate to say it, but schultz did it at starbucks too. i wish he would stick with that. anyway, he will be replaced by the head of the company's international business doyle has been ceo since 2010, says and oversaw domino's turn-around, including the move into on-line ordering and promotions >> and there is some chatter that he might be a candidate to be the next ceo of chipolte, which also needs a turn-around >> yes in a different way >> that will be interesting. >> yeah. >> just so you know, you don't need to make it better tasting you just need to -- >> people not get sick from their -- >> you just need to survive. no let's get more market

perspective now, shall we? for that we are joined by president and ceo of fl putnam investment management company, and jim paul sen, chief investment strategist. gentlemen, good to see you jim, i'll start off with you with the concern in the market right at this moment, and that is the riesz that we're seeing in the ten-year yield, we're seeing banks around the world, like the boj move towards more normalized policy. the anchor holding rates down seems to be dissipating at this point. are you concerned that perhaps it's a rise in rates that could pose chal ekz to where we are in stocks right now >> the markets, not just the bond marks, they're also starting to respond to over heater inflation fears if you look at the stock market leadership, this year and really throughout much of december it's led by all the inflation sectors for the most part. industrials, materials, energy stocks are leading the way then you got the dollar is breaking down. that's inflationary force in the

currency markets you got most commodity markets rising crude oil broke to awe three-year high. overall the commodity prices are right on the kufrp of doing that then you got the bond market, and you are going -- you are very close to breaking that 262 three-year high yield on the ten-year, and it's being led by a rise in inflation expectations that are embedded in the ten-year tip, which broke above 2% there last week, and they're within an eye lash of rising to about a 3, 3.25 year high. the markets are starting to react to overheat pressures. if they do, and if they break north, i think foreign yields will also rise with the united states if our ten-year goes to 3%, i think german bunde yields will come up like a mound i don't know if they'll be as big an anchor as we think if the data is there to support overheat conditions. >> we're seeing rise in yields for the ten-year bunde and jgp

>> all the inflationary sectors reviving over the past month or two. that and then you throw on top of that the impact of corporate tax and the fed's path to rising rates. three hikes at least this year is what has been telegraphed are the markets under estimating inflation at this point, tom >> i don't know if they're underestimating it i think everybody has been looking for it yields are low they are rising. they should be higher. they're nowhere near where they ought to be given the economic environment, given the global central bank pressure on keeping rates low. i agree with jim that u.s. rates really aren't going to be able to rise very far unless foreign rates rise as well if you do have along with synchronized global growth, synchronized rise in yields, there will at some point -- there will be a point at a certain juncture where the stock market starts to get spooked

i don't think we're at that point yet, and i'm not sure breaking through the ten-year yield of 262, 263 does that. >> is it concerning that even with this modest rise in rates to just march highs, that the market seems to be stuttering. >> yes, we're that the peak in yields and the market is at a brand new high i'm not sure we're there yet >> jim, you say that you want to debond your stock portfolio. it sounds like you think rates are headed much higher >> well, i don't know about much higher i think we're going to see a ten-year, you know, 3% to 3.5% this year. i do think we're going to -- last year over the last 12, to 15 months the federal reserve has renormalized short-term interest rates, and, you know, you look at the moves we've had from five years, two years, and cash, it's been big moves in the last 12 to 18 months

we've had really no move in the ten-year over that period. i think this year the bond vigilante is going to catch up with the fed and start to normalize longer term yields a little bit you know, to tom's point, you know, i'm not sure where that will break the overall momentum in the stock market, but i do think it's already broken leadership, and i don't think you want to be sitting in consumer staples and utilities and telecom if we have a rate resale on the ten-year yield yeah i think they're going to take a hit absolute and relative. i would rather be sitting in the capital goods sectors that tend to do better with rising yields and rising inflation >> you know, tom, a big part of what we have seen fuel the rallies, the kpngs that earnings season will be good. that companies are going to be racheting up expectations. what we have seen on the part of analysts is analysts have been racheting up their expectations for earnings for companies by the fastest rate in about ten years according to despoke, that could create a high expectation. you deliver on that, and that's a disappointment

how do you think earnings season will play out this time around should be an interesting one >> i agree with that as every you look at guidance going forward, people are still trying to get their arm around the new tax bill and how it's going to affect the individual companies. the expectations that analysts have, they're likely to be wrong in many cases about the future and have to adjust throughout the course of the year we concur with jim and his assessment of where you want to be positioned. we had been rotating out of interest rates sensitive areas into those that are a little bit more cyclically oriented and commodity sensitive industries as well. i think as you position yourself for this year, plan for volatility around earnings analysts are going to spend a fair amount of time trying to get their arms around this it's going to take some time for them to go that. >> i think so that for your time, jim and tom. >> thank you >> thank you all right. coming up, oil surging to a three-year high, but is it a good thing for the world stage what's it mean look at how oil prices could

affect geopolitical risks in 2018 then later, bank earnings are just around the corner what's today wednesday? friday, i think. >> yeah, friday. >> it's just so convoluted so many things to compare to expectations you really need someone that follows it on a daily basis. we'll have someone like that a preview of what you can expect just straight ahead. "squawk box" will be rig bk.htac

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>> on "squawk box" yesterday we heard columnist tom friedman suggest that may not be agood thing in certain places. >> i'm a big believer that the price of oil and the pace of freedom move in opposite directions the more the price of oil goes down, the more the pace of freedom goes up because these dictators who like in the middle east and in russia basically when the price of oil is high, all they have to do is drill the ground they never have to drill their people to unlock their energy, creativity, entrepreneurship >> joining us now for a look at oil around the globe is kevin book, managing director at clearview energy partners.

how much risk premium is in the energy market right now? >> risk premiums are a discussion because you have to know what the real price of oil is real price is what they pay at the refinery gate and the contract market. there is a froth to be sure. some is it expectation that there's a sanctions risk coming. friday marks the deadline when the u.s. has to waive sanctions again to comply with the 2015 iran deal. we think those sanctions waivers are very likely at this point, and so that is probably over bought if that is the catalyst for it >> you know, we've seen this rise in crude, and normally, you know, you separate the trade in oil versus the trade in other commodities, but this is a time where we have seen all the commodities across the board reflr reflate. does that give you more confidence that these higher levels are sustainable >> yes and no. on a fundamental bays the first half of the year is about 1.5 million barrel az day weaker from a demand perspective than the second half of the year. you have just cyclical downturn probably waiting for the oil

market that could pull it out of sync with that sort of global reflags you are talking about. more fumting for oil itself, you have the rebalancing that was undertook. you have the reduction in oecb inventories. that brought you an increase in brent crude in 2017. if things stay balanced, we're probably closer to the $60 mark for 2018 average, but we'll have to see how that balance goes >> $60 an on average it wasn't that long ago where we thought that would be really high at what point do you think it tips the balance in terms of bringing shale producers here in the u.s. back on-line, back pumping, and pressuring prices once again >> well, they already are. i mean, there's a certain mythology that the shale production undercuts its own survival by essentially bringing the price of oil down, but it's a big market, and in the end shale added a significant amount to the world last year u.s. production grew as a whole. about a million barrels per day. that's an enormous growth in a

100 million barrel per day market oeshd, doing that every year requires also a lot of capital and there's still a lot of capital discipline in u.s. producers. they're going to absolutely drill where they can, but they have to bring into market. there's dislocations that are keeping the u.s. price rather separate right now from the brent price. those also could be determined to production. >> citi had a note on oil recently i think it was even yesterday. they said 7 on $70 to $80 for the price of oil for brent, and a lot of what -- at least by my read, a lot of what was behind that was geopolitical risk, et cetera, and focussing on the u.s. and the risk of donald trump in office, i'm wondering what your take is in terms of the biggest geopolitical risk out there. for oil. >> the top headlines are probably iran and venezuela. if iran were to be pushed off the market, the theory and one we don't necessarily subscribe to, is that a million barrels per day of oil that was -- that

is currently being exported could be essentially be stopped. we think what's likely to happen is that oil would mostly move from the low risk tolerance consumers to the high risk tolerance consumers and refine products would come back on the market there would be a frictional increase, but not a catastrophic one. for venezuela the idea that the collapse of venezuela would take -- of very significant impact that too seems unlikely. collapse is not in the sbr have anyone who runs venezuela. certainly not in the duro. sanctio sanctions, however, do seem to be in the offing >> good to talk to you >> thanks for having me. >> did you go back to school or something? did you -- you have a ph.d did you get a graduate degree? >> it's that beard kit i got for christmas. it made me smarter >> it's the beard. >> oh, santa claus was so good to me.

>> this is like a symphony in my ears it's so cogent it's amazing >> that was the reinforcement i needed thank you. >> you're welcome. keep it. looks good got the gray >> glasses >> really good beautiful. >> tie it's all working >> it's not about the follically challenged coming up, a steady number of banks -- >> what if i said yes? >> steady number of banks are willing to open accounts for their marijuana businesses and actually know that's what they're for instead of just not asking a shift by the federal government could hurt those arrangements that story straight ahead. don't forget, warren buffett will join us at 8:00 a.m. eastern time becky is in omaha and will bring us that interview, and news of the changes to the board of brookshire hathaway. "squawk box" will be right back. time now for today's aflac trivia question. which states were the first to e swlize recreational marijuana? thaner when cnbc "squawk box" continues

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>> which states were the first to legalize recreational marijuana? the answer, colorado and

washington state coming up after the legalization of pot smoking. at least until the federal crackdown on the industry. a look at what it could mean for the banking industry, which was just opening up to the idea of organize every offering accounts to those businesses. as we head to break, take a look at u.s. equity futures with the ten-year yield up close to 2.6 this morning s&p looking about nine at the open dow jones looking to lose about 90 u' wchg quk x. yoreatin"sawbo

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breaking news this morning let's get to becky quick live in omaha. hi, beck >> hey, joe. good to see you guys again the news this morning is about the closest thing that we've ever seen to a succession announcement from brookshire hathaway brookshire hathaway saying that it's announcing two new vice chairman of the company. the first is greg abel who currently is the head of brookshire hathaway energy he will be the vice chairman at brookshire hathaway in charge of

all of the non-insurance operations greg abel is 55 years old, has been with brookshire hathaway energy, has been running the company for some time now. also, the second part of that piece of that announcement ajit jain ajit will be in charge of all the insurance operations at brookshire hathaway. he has been running brookshire hathaway reinsurance and has been a key member of what et cetera been happening with the insurance pieces of the company for some time. both of these gentlemen have been mentioned as potential heirs to warren buffett, who is the chairman and ceo of the company. with this news with both of them becoming vice chairman, brookshire says that its board will go from 12 members to 14 members. both of them assuming positions on the board as well as i mentioned, this is the closest we've ever gotten to a succession announcement from warren buffett, who is 87 years old. mr. buffett will be joining us in just about a half hour's time to explain the reasons why for years and years people have asked who his successor would be he has always said that he

wouldn't name publicly who these people were, but that the board knew in the event of something happening to him overnight, something being hit by a bus, him getting sick, anything along those lines, they knew who the two people would be in those positions. this is kind of a public revelation -- revelation of who the names are in that envelope he will be joining us to talk about that and many other issues out there, including what's been happening with the markets and what to make of the tax bill what it might mean for brookshire hathaway. he will be joining us to talk about all of those things starting at k a.m. eastern time. then at 8:45 eastern time we'll be joined by charlie munger, the vice chairman at brookshire hathaway he will be calling in from california back to you. >> i love charlie. i still say he is a youthful man, but he does have a tendency to not worry about how his comments are construed at this point. >> that's why we love him. that's why we love him >> if you ask him something, he will answer.

he doesn't look -- you you know, it's kind of cool because not many people can sort of talk to warren like he is a young whipper snapper, but charlie is still able to, right >> charlie is the 4 and he speaks his mind. >> you are kind of modelling yourself after him, right? >> in terms of speaking my -- yeah, maybe so maybe so anyway, look forward to tsh both of those interviews. what time is it? 7:33 we will see you in 27 minutes, which is great becky, in the wake of attorney general sessions action on marijuana last week, analysts say the big area where growth may slow is in banking it's interesting kate rogers joins us now with more on this big hurdle for the cannabis companies >> while reactions to attorney general sessions actually last week on marijuana have been

mixed, some fearful, some carrying on with business as usual, one thing analysts can agree on is that this does stand to impact banking. that's something analysts say is really the top issue right now facing marijuana businesses. a recent report from industry analyst green wave advisors estimates 5% of all financial institutions in the u.s. are on record with fin cen as having a relationship with cannabis businesses, but only 1% are actually servicing them. >> before banks were reluctant to do business based upon the loosely defined fincen guidance. now it just raises more uncertainty. >> but more banking hurdles need ancillary businesses that don't actually touchdown the plant and offer security may benefit tony gallos sapphire risk advisory group offers vaulting, armored cars and security consulting he has received calls from clients old and new in the past week seeking advice and even new business >> a lot of our clients were

concerned about whether their security is adequate at this time in their locations, whether it's a grow facility or dispensary then new clients that are looking to come on board wanted to know what kind of security are they going to be required to have going forward >> one thing that sessions' action didn't alter? projections for the industry green wave is estimating $30 billion by 2021. that's assuming that there is at least a medicinal market in every state in the u.s >> that's the great pair docrad there. >> there's parallel guidance, and that's still in place, and that says that the banks can work with marijuana businesses so long as they follow those aid gui guidelines there's conflicting advice the big players in the financial world are now farther away than ever before than getting -- about thinking about getting in the business with these chemist companies. we'll see what happens

>> i mean, definitely at this point the jury is -- there are medical uses ptsd and cancer. i mean, there's just no doubt. you have to take that into account regardless of your social sort of impression of marijuana. and, again, not sure every grade schooler ought to have the ability to -- i guess if they wanted, they could get it now, right? >> i mean, that's the fear, right? that this will push people more into the black market than err before too >> and that's right too. at least you can control it and regulate it. >> and get the revenue from it >> yeah, all right coming up, the turnover for banking executives is nearly twice as high as other companies in the s&p 500 a look at what keeps guys like blank fine and jaime diment at the top. here's a look at futures this hour as we head to a break down to about 88 now on the w. quk x"ilbeight back.

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words right out of my mouth. the median age of ceo in the s&p 500, 57. the median ten-year at the helm of their companies is four years. by that simple measure, as you said, the nation's biggest banks could be due to refresh at the top. their median age 54.5. their median ten-year is eight years. clearly jp morgan jaime diment and lloyd blank fine stand out both thoef been ceo for well over a decade welds fargo tim sloan appears the best 33%. while blank fine surprisingly stands out as the lowest 5.7% annualized return however, crucial to acknowledge that he endured the financial crisis whereas most of the others did not his bank share price performance beats all of these investment banks since he took over other

than jp morgan not to mention the stand-alone nature of some of his rivals legal lehman brothers. on the flip side, sloan's annualized performance looks super impressive as we said, 33%. it is in absolute terms, but not in relative terms. if we take performance since trump's election victory as an indicator of recent performance, wells fargo clearly one of the under performers since he took over, relative performance versus the kpw bank is down 14%. money hoon and bank of america, the clear outperformers. 72% since that election. now, back to the overall snap shot of the group. long ten-years on average, but that not a -- that alone not enough to cause a concern for any of the gentlemen here on the far right. bye, guys. >> all right for more on some of the key issues facing bank management this year as well as a look at earnings season we're joined by chris, managing director at

oppenheimer and company. there's a lot of different things tax reform there's a 2.6% ten-year now, which might be good. what else is -- are banks facing, and should we pay attention to, credits? >> well, i think, first of all, let's pay attention to the fundamental back drop. the fundamental back drop for the banks i think is basically farable because in a rising rate environment, you can turn the low single digit loan growth that we're experiencing currently can turn into double digit eps growth the basic formula for that is that you have got 2% or 3% loan growth that doesn't sound that great, but with rising short-term rates, that will turn into 5% or 6% net interest income growth, which is 60% of the revenues if you can keep your expense growth to down to 1% or 2%, that will still drive upper single

digits pretax net income growth. even with rapidly rising low provision as they normalize, and then you add 3% or 4% for buybacks that's kind of the basic underlying dynamic on a steady state basis. you are generating double digit earnings growth even with low to single digit loan growth that's pretty good, right? then on top of that, you add the impact of tax cuts which, you know, it's going to distort all the comparisons. you are going to get, you know, chashlgz in the fourth quarter this year, but then you're going to pop earnings estimates up next year. you know, i for one believe that over time that windfall from the tax cuts is going to get competed away. you're not going to see that in 2018 and 2019 because all the loans that are on the books today were put there in the higher tax rate environment. >> yeah, i don't hear anything is it sounds bad, and it doesn't

hurt if the economy grows at 3%, does it? don't people do more things and borrow more money and decide to, you know, start businesses and all kinds of stuff, don't they >> yeah. i mean, in my view, you know, the tax cuts are stimulative that helps further then roog forwarlooking forward big techtonic change to look for and how it kbaks financial markets and financial institutions, is going to be rising rates and the normalizing rates. i think at least the initial phases of that are nothing but positive for banks the short-term rates rising is all you need for the commercial banking business basic business between making loans and making -- taking composites that benefits from rising short-term rates the ten-year is really irrelevant there >> yeah. >> when the ten-year starts moving, that's going to help the fixed income trading business as

well the bond market is twice the size of the equity plarkts, and, you know, we are so low in absolute terms on all those rates that, you know, if the ten-year or the 30-year treasury were to normalize, you would have a 20% or 30% decline in the value of those bonds you know, i think that's going to be the next big drama it will take two or three years to play out. we'll see how the banks handle it, and, you know, i think people always say, like, the mistakes in the bad times are made in the good times, right? >> so some of the write-offs are from loss carry-forwards citigroup, man, they worked hard to get, you know, billions of dollars of losses in the financial -- i mean, they're not going to be able to use those. they're not worth as much, i

guess, at 21% as they are at 35%, are they? >> it's a funny kind of thing. right? it's not like the tax reform is costing citi a single penny of after tax earnings, right? in the old world if they had $100 of pretax earnings their nol would have shielded them from $36 of taxes and they would have paid zero in the new world if they had $100 of pretax net income, their shields nem from $it 1 of taxes and they still pay zero. it's not like citibank is out any money. it's kind of a weird thing >> it's a $20 billion charge for citi expected. goldman, it's expected tosh a $5 billion. there's some thinking, chris, that banks will take these write-downs to give them pat for future quarters. is that your take on it too? we're going to get all these bank earnings on friday and get the conference calls what are you expecting >> i think for the most part they don't have a need to kitchen sink the one that i think might do

and some kitchen sinking would be wells fargo they've had kind of a choppy result all yoer long you know, you could -- and it's -- the end of tim sloan's first year that's -- that would in my mind be the best candidate for it one way or the other, i don't think it's a big ethfor the stock. for the other banks, i'm not sure that there's a need to do much, and i'm not sure that if there was something really significantly off that you would get much credit for the fact -- analysts are going to look at this on a pretax basis stay near your phone we'll call you friday or something probably we need -- we're going to need some help figuring all this out. thank you. >> all right thank you. >> all right coming up, stocks to watch ahead of the open on wall

street at the top of the hour brookshire's warren buffett joins becky quick from omaha to discuss the news this morning regarding new appointments to brookshire's board it's a "squawk box" exclusive, and it happens at the top of the hour don't go anywhere. check out european markets right now. we are seeing red arrows for germany, which is down almost a%, and the cac is down .4%. ♪ it's time for sleep number's 'lowest prices of the season' on the only bed that adjusts on both sides to your ideal comfort, your sleep number setting.

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jierjs toyota and mazda will build a final assembly plant in hunts krlville, alabama. they will built the toyota corolla and it's a huge win for the trump stlaigs, and it would add manufacturing jobs especially in the auto industry. >> wow let's take a look at some stocks to watch we mentioned lennar earlier. the company -- >> $1.29 that was short of analyst expectatio expectations homebuilder says that tax reform will reduce its effective tax rate 34% down domino's ceo is going to stem down in -- ahead of international business doyle has been ceo since 2010, and he oversaw domino's very successful turnaround, including

the move to on-line ordering and promotions sno do you need a menu >> they have everything. >> they have pizza they've got -- >> chicken sandwiches. >> salads. >> they have wings >> chicken all kinds of nuggets, sandwiches all kinds of -- >> i haven't ordered domino's since college. >> cinnamon twisty bread there's a lot. >> you physically go in. >> i do. i was in yesterday >> yesterday >> i was in yesterday. on the way home from picking up my son >> a man of your physique, i didn't think -- >> for my son. i'm on the diet. i'm on the scarsdale thing starving myself. yummy salad. not. patrick doyle is going to join jim cramer on ""mad money." you know what ymy fruit salad refers to? the wiggles. that was p their famous song

-- revealing plans to mint its own crypto currency called what else, kodak coin, as part of a joint effort with wynn media group. this is part of a block chain to help photographers control their own image rights, and it plans to install rows of bitcoin mining rigs at its headquarters in rochester new york. kodak's stock up over 60% in the premarket on the news, and this is on top of the huge increase in yesterday's session on this news the use case of block chain to protect intellectual property is extremely valid. i mean, that is seen as a big use case the rise in the stock for this former dow component that used to have glory days, which is no longer, of course -- >> you got to go way back. >> way back. >> i mean, to be able to go up for $4 to 60%, you got to be a

handy stock. basically. >> the market gap is tiny still. >> brookshire's warren buffett joins becky quick from omaha to talk about brookshire's board. it's a "squawk box" exclusive, and it happens at the p top of the hour meantime, take a check on futures. we've been looking at them all morning. they almost triple digit losses looks like for the dow looking to lose 98 s&p looking to be down almost 10 "squawk box" will return with warren buffett after the break and the wolf huffed and puffed...

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breaking news. brookshire hathaway announces major changes to its board ajit jain and -- two big newsmakers coming up warren buffett and charlie mu munger join us live in omaha a special hour of "squawk box" begins right now ♪ >> live from the most powerful city in the world, new york. this is "squawk box." >> good morning. welcome back to "squawk box" here on cnbc live from the nasdaq market site in squawk square i'm joe kernan along with melissa lee. fast money square. >> it does

>> yeah. becky quick is live in omaha she's going to join us with two special guests this hour first, warren buffett himself live live with becky. then at 8:45a.m. eastern time charles charlie munger is going to join us and becky 8:45 east coast time from omaha square. >> from brookshire square. buffett square >> buffett conveyor. >> we've been noticing how the futures have been holding negative all morning long. this is after six straight record closes for the s&p as well as the nasdaq really a change in tune for 2018 s&p looking to lose about ten at the open dow looking to lose about 1100 nasdaq going to be down by about 38 points here just taking a scan of premarket action it looks like a lot of the fang stocks, for instance, are down about a percent premarket along with tesla, where we are seeing some pressure here taking a check on what's going in europe, and we are seeing a similar sort of action here with the da kb down

the cac is also down the rest of the markets there are just fractionally changed. this is the story of the morning. the move in treasury yields. it's not just u.s. yields moving higher the ten-year yield at 2.59% is the highest level at least since march of last year we're seeing worldwide bond yields rise as well. we're seeing a rise in the ten-year bunde and jgp that is helping to lift the action on the yield side >> our top story this morning, this is great to have warren today, but brookshire hathaway making big changes to its board. let's get to becky quick in omaha. she joins us now with a very special guest. yields, warren i'm sure we'll want to weigh in on that. i think insurance companies have to invest a bunch of stuff, don't they, becky? i mean, it might be better to get -- might be better to get a little bit higher. >> bond yields have been painful for the insurance companies, for the pension companies, and, yeah, i'm guessing that's probably -- so. >> is he really there with you, honest to god? >> yep you want to see?

you want to see? take a shot. >> i'll be darn. i'll be darn that's not tom cruz with one of those masks on like -- that's really -- >> nope. he is still smiling. >> he heard everything he was watching. fooelgs, warren buffett, the clarm and ceo of brookshire hathaway is with us this morning, and this is on a morning that brookshire hathaway has big news two new apoims to the brookshire hathaway board greg abel who runs brookshire hathaway energy and ajit jain who runs brookshire hathaway reinsurance. they will both be promode to vice chairman and be named to the board, and will each have

their own portfolio to run in the company. greg abeel, you see there 55 years old will be running all the noninsurance parts of brookshire hathaway. ajit jain, pictured here, who is 66 years old, is going to be running all the insurance parts of brookshire hathaway warren, we made a comment about this earlier today this is the closest that we've ever heard so a succession plan. is that how we should be reading this >> it's part of a movement towards succession over time, and they are the two key figures at brookshire. this would have made sense five years ago. they both have brookshire in their blood. they love the company. they know their operations like the back of their hand it's really -- it's very good for brookshire, and it's even better for me. >> you mentioned yourself that this could have happened five years ago. there have been people who have been pushing you to make public

your succession plans for quite a bit longer than that that raises the question why now? >> like you say, it probably should have been done a few years ago, but everything has been working fine. on the other hand, there's some value in having both of them in those positions and getting more familiar with the ones they haven't been the operations they haven't been in contact with about, and i've got a certain amount of institutional knowledge and can tell them the strong points and the weak points and this and that of the various operators. it's just -- it's a transition period that may last a long time or something happened to me it could happen very soon there's nothing magic about the time it's kind of interesting, actually i talked to the directors one at a time before we had this meeting last night the degree to which they jumped at the suggestion was a little alarming >> wanting you to go ahead and make the switch. >> yeah. there was no persuasion needed

>> you just said that this could happen it could last a long time, or it could happen more immediately. should people be concerned about your health? >> no. i am remarkably in good health, particularly concerning the life i've led everything physical gets a little -- your balance isn't as good, and your endurance may not be quite as good, and all of that i have slipped in all these various ways, but i wasn't much to start with, so the amount of slippage is fairly minor just because i started from a low base no, i feel terrific. i love what i do i can't wait to go to the ochgs in the morning, and, no, there's no -- there's been no change in that incidentally, if there was anything about my health, and this has been true since i took over, i would tell the shareholders immediately i'm not wrong to talk about my health in fact, i think you have a duty to do that when you are ceo.

>> how will this change operations at brookshire you will now have three vice chairman charlie munger, ajit jain and -- >> it means nothing in terms of physical change. ajit lives in new york, work in connecticut, and also in new york city. greg lives in des moines they won't change anything there's no change in our office. cfo's in omaha there won't be a change in one person in omaha or really any place else except somebody will move up to the head of brookshire hathaway energy is this the potential setup with todd and ted each running two things and kind of operating together. is that how we should anticipate succession planning at

brookshire hathaway? >> when i'm not discovery, there will be another ceo. there will be a ceo. how that ceo will organize things will be up to him in this case, and that will -- he will figure out the best way to do it, and it boewon't change very much it will change a little, but not very much. >> do you know which of the two would be ceo if this were to happen overnight >> you never know, but our directors know what they would do tomorrow morning if it happened, but they don't know what they would do four years from now >> i guess that raises the question, does this raise a little bit of a horse jockeying competition. >> there's no horse race at all in these two fellows they know each other well. they like each other well. they both have their areas of specialty. i mean, greg would not want to

be running insurance ajit would not be running the other operations they are extremely good at what they do. those are two pretty different businesses they're roughly equal businesses there's more -- there are more people on one side, but the insurance business generates over $100 billion of float in addition to having well over $100 billion envested in it in terms of net worth there's more or less parody of earning power. >> that's what i was going to ask you. we've been looking at some of the measures this morning just from analyst notes on some of these things if you look at 2016 profit and break it down, the insurance company represents about a quarter. at least for the profits for that year and obviously insurance profits can swing pretty rapidly you look at it a little differently. >> yeah. if we have $100 million plus a float, that means those interests in dividends and a fair amount of capital gains over time come from the

insurance operation. they're really of equal importance imauto n i'm not sure if we were to sell one side or the other which one would bring more money they both are enormously important to brookshire. >> and the key is -- it's kind of the secret behind brookshire hat ware from all these years. the insurance company creating the float that then you can turn around and invest either in purchasing other businesses or in purchasing securities and bringing them in how does that work when it's not the same person who is kind of responsible for overseeing all of that? they would have to be people who work well together >> well, they certainly have to understand each other. i invers the capital, and charlie does it with me, but in our insurance operations, tony nicely at geico, he doesn't think for five seconds how the money is getting invested, and actually the same way with ajit. their job is to develop good insurance business, create more

over time, and my job is to invest it. there's really three functions in the businesses. two different types of operations, and then there's the money. >> why didn't you do this years ago? what was the reasoning behind that >> probablileiley lethergy bordg on sloth it will be valuable to anybody that succeeds me to have had more experience in the overall management of a large area, and we have so many different -- we have a lot of different ones than insurance we have even more than the other operations just in terms of the history of which managers really don't need any help whatsoever and which ones if they're doing

acquisitions may need more input than others. there's a lot of different individuals running our different businesses, and they have different strengths and weaknesses over time on both the insurance side and the non-insurance side, each much those fellows will pick up -- they'll know a lot more a year from now than they know now >> they'll have the businesses reporting through to them? >> to them they'll decide the compensation of the people underneath i mean, certain people we have compensation arrangements with that we will have in force for their lifetime and people think that we made up the type of acquisition, but aside from the ones that are fixed, those decisions will be theirs, and smaller acquisitions will probably be theirs if there's a large acquisition, then charlie and i will get involved >> you will get involved in making the acquisition, but i would assume that any future acquisitions would report through those divisions would

report through to one of these two gentlemen. >> that's right. >> will that make it more difficult for you to make acquisitions because one of the big lures in the past has been being able to report to warren buffett? >> well, it isn't that i disappear. i will tell all these fellows and women to send me the statistical information they get. it's like looking at baseball scores or something from my standpoint i'll keep getting information, but i will not be setting the pay. i mean, they will be working for either ajit or -- but i'll be as interested as ever there's not a drop of brookshire blood that's leaving my body >> you said that this is something that you feel great. >>ist terrific. >> your health is in perfect health are you tired? do you not want to be doing as much >> i'm down -- i'm at the office on saturday -- any saturday i'm

in town, unless there's something very unusual going on. i love it. i love brock shire i look forward every morning to being there, and it's a great -- you couldn't have a better job than i've got. i just have made it one notch better >> there's a jp morgan report from september of last year and the analyst there points out that succession has always been a big question the next link of who is going to be there has always been a huge question she also points out she wouldn't be surprised to see you running things for the next ten years or so you have an actuarial brain. what do you think when you start thinking about how long you'll be running brookshire? >> ten years would be a long time, but every time i see one of my doctors, i say just guarantee me the next five years. it's sort of a running extension as i go along. it was like it was ten years ago. if there's a deal someplace, i'll get on a plane as soon as i leave here i love what i do at brookshire

there's nothing i would rather be doing because i could do anything else if i wanted to do something differently. it's more fun than i think i could imagine. >> and how you did this decision come about >> i just was -- maybe six weeks ago or so i just decided why not now? as i said, i talked to the directors one at a time individually before we had this vote last night, and they jumped all over it. i was hoping there would be a little disent or something then the meeting took about 15 minutes yesterday on the phone it just makes sense now. i know that if i were in the position of those two fellows, i would just asoon have some of the stuff. i would like to get some experience with supervising a whole group of businesses before i eventually took over

>> potentially making sure they feel comfortable with all these issues too >> charlie munger will be sharing the title. how does he feel about it? >> it was his idea, actually in terms of the title. i got about halfway through the first sentence, which is more than i usually get through with charlie before he comes up with a better idea, and he just says, look, let's just have -- >> we will be joined by charlie munger later this morning to talk about his perspective on all of this as well. when we come back right here in omaha, we will have more from warren buffett we will talk to him about what he sees in the markets at the beginning pa of this year, what he thinks about interest rates this morning and p more. again, we are live in omaha, nebraska, this morning with war enbuff rett, the chairman and ceo of brookshire hathaway news this morning and much more. we'll be right back. let's begin.

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sflo do the markets seem richly valued to you? >> they're not richly valued relative to interest rates you know, stocks -- interest rates are the long-term rate it's 3%, and we're quite a bit less than exit the long-term rate 7% there's panic many in stocks if the long-term rate is 15% like it was in 1982 interest rates are the gravity to value basically everything is worth the present value of what it's going to -- cash is going to deliver in the future

obviously, if rates go up, that present value brings the number today down we've had low interest rates now for a very long period, and we've had a bull market since -- well, really since march of 2009 when i was on, and joe asked why i wasn't buying more mesh express at 12, and i told him that i was buying things that we weren't allowed to what has happened in the market has been very sensible i mean, nobody thought we would have these kind of interest rates for a long time. now, additionally, you had the tax act, which is a huge factor in valuation i mean, if you had bought -- let's say you had bought the union pacific railroad yourself, like we bought the bnsf. if you bought it a year or two ago, you could have bought 100% of the stock, but the u.s. government would have had a super stock that was entitled to 35% of the earnings. they had just changed that without you paying them a penny

to where they now have 21% of the stock. in effect, you bought in their 14%. >> there's a major change in the silent stockholder there's various things about foreign earnings and all that, but 5% of a basic -- are basic businesses now instead of getting -- >> i have not heard anybody explain it just like that. when you say something like that, you know, we're constantly asking is this baked into the market is this reflected in the market. when you say something like that, that makes me think no, that this is a much longer term, much bigger deal than the run-up

that weave seen in the last month or so. >> it's a big deal how much of it's been baked in as people started things the tax bill and how big would it be? 21% was not baked in that's a huge, huge reduction. if you and i were partners in a business and you owned 35% of it and i own 65% and you showed up one day and said i'm giving you 14 of my 35 points, now my interest has gone from 65% to 79%. that's more than a 20% increase in the earning power, and you just have given it to me nothing has changed in the business that's -- it's a big factor. now, they can take it away too go the other direction >> we're looking at this new change it's just been on a case by case basis that investors are trying to figure out what this means for companies. we are just beginning to hear the very early pieces of this.

you're basically saying that this is good news for shareholders across the board because sometimes this is painted as something that's a give-away to ceo's or skorpt executives, things along those chbz lines >> people who own the businesses have just owned -- they now own 20% more of the domestic earnings it's more complicated. it's good if you own the foreign stuff too, foreign earnings. we happen to be overwhelm iing. it's an interesting point. the government doesn't own the assets of the business we own 100% of the assets of bsf, but we don't own 100% of the profits. we went from 65% to 79 percent of the profits at bsf, and that is more than a 20% increase. 14 points. it's a big deal. >> what does it mean specifically for brookshire hathaway stlfs an analyst that just put out a note that said that it's a $37 billion book value increase

for brookshire instantaneously >> it doesn't mean a dime of cash today we have a huge of amount of deferred tax liabilities i'm fulg these figures out don't file a suit if i'm off a little bit we have perhaps $100 billion of unrealized appreciation in the securities we own, and if you own securities that have gone up, you don't have to pay a tax just because they've gone up, but if you saw them, you do, and if you kept your books on an accounting basis, you set up a liability for the tax on your unrealized gain. well, our tax on the unrealized gain on $100 billion would be $35 billion, and then that goes down to $21 billion under the new tax law. anybody that has a lot of deferred tax liabilities gets a big kick up in book value. a company like citigroup has a big deferred tax asset the reverse is true there because that tax asset is not worth as much. what it does is it reduces their taxes in it future years, and

that reduction is worth 21 cents on the dollar instead of 35 cents on the dollar. it depends whether you have a lot of deferred tax liabilities among other things, but that's a big one with us. >> its a change in accounting, but what does it mean instantaneous instantaneously? >> it does mean if i sell stock, i was going to sell in december, and i wanted sell it i didn't sell it in december i would have had a 35% tax on the profit, and by waiting until january 1st, if i sell it today, i have a 21% tax hike. 79% of the profits for brookshire this month and last month i would have gotten 65%. >> you hinted at this in october and said if the tax changed, and -- as early as i think it was october 3rd the last time we sat down with you. and hinted at this whole idea of what you would be potentially selling or not selling as a result are you selling stocks now that -- >> net we're buying. >> net you're buying >> yeah. net. i've lived under 15 of the 44

presidents of the united states, and i have bought under every single one of them except hoover i was only a toddler then most of the year. we're basically buyers over time that doesn't mean -- there could be conditions you should which we're sellers, but that's not -- for one thing, the money keeps coming in. we keep buying >> let me ask pesk sli on one stock, ibm, are you a buyer or a siller of that because we've talked with you in the past when you were selling >> yeah. well, around the middle of february we have to report what we did in the fourth quarter well, it was advantageous if you had a loss in shares and we did in some, it was advantageous to sell last year rather than this year >> so does that mean you're not selling ibm this year? >> it would certainly mean that if we had high cost ibm, we would have sold it last year, and if we had low cost, we would

have waited until this year, and we had some of both. >> so that sounds like you're selling all the way around >> on february 15 at, you'll be the first to oven. >> i tried i tried. back to the tax law really quickly, what does it mean in terms of just what it will be on cost of business is it going to mean brookshire earns a lot more are you going to raise >> well, depends on the business if you are talking about regulating utility business, all of it goes to the customer, as it should. then in some businesses it will tend to get competed away, and in other businesses, it will be less likely to be competed away. there's a big difference in how it affects different kinds of businesses, and you can't total

totally. >> cost of diesel fuel is more important, but it all remains to be seen on that, but then it

certainly is a significant plus, and if you own the kind of business where people really have no choice but it isn't regulated, i mean, it would be regulated in case of utility or something. they're likely to widen out for foreign and domestic >> what does this mean for the american economy overall we talked about the stock market and what this means. what do you think it means on a broader basis? >> that's the big question we'll find out i mean, we're essentially changing the mix the fed was buying a lot of the treasury issuance net. that the purchasing from the private sector of debt earlier

needed to be less than the treasury was actually raising because the fed was there buying they took their balance sheet -- >> we're effectively taking our own. >> they were buying their own stuff. they took -- there was $3.5 trillion or thereabouts added. i think it's about $300 trillion, and basically that was the fed funding parts of the deficit of the united states government now it will be the other way around a little bit as the fed -- the fed is going to take it down very gently, but nevertheless, instead of being a buyer, they'll be a seller, and at the same time the treasury will be raising more money you've changed that equation how that plays out, i don't know >> net-net, i can't imagine that it will hurt the american economy or gdp at least over the short-term >> it's hard to tell -- that's the one thing i've learned we've never tried to make money by predicting economics. i mean, a tax law change actually changes numbers that you can see, but it's --

macrostuff is very hard to predict, and, you know, you have seen that in the years when people come on and try and predict what the economy is going do do. charlie and i have never made a marketable security decision or the purchase of an entire business where we've talked at all about macroeconomics >> if are you putting money to work in the markets and trying to figure it out, those macrodecisions would have a big impact he just said interest rates act as gravity the tax bill will add some stimulus, and certainly makes it more valuable to own any shares. >> i mean, that -- you have actually changed who gets the value -- who gets the earnings of american corporations in a fairly major way >> you may not buy a company or a business as a result, but you may decide to allocate more money into stocks. >> you never can do one thing in economics. you know, i mean, everything you do, it's the butterfly effect. you know

>> i would have -- in you didn't have a choice of a different bill and you were looking at leaving things exactly as it was or lowering the corporate rate -- >> if i did it as a representative of brookshire shareholders, would i have to vote for it. i've got a million shareholders that are pretty much happy about the fact it happened, but i would have had a different bill. >> let's talk about interest rates again and just talk about what's happening today you can look at the ten-year note touching up, getting 2.56% and a little north of that this morning. that kicked off early this morning after the japanese ten-year bond started climbing as well. when i say climbing, you have to look at this in relative terms it was 0.06% when i saw it it did that because the yield moved up because the japanese central bank was expected to not

be buying quite as much as had earlier been anticipated when you start seeing moves like that, it tells you what? >> it tells me i don't know anything more about interest rates than i did five years ago, ten years ago. sydney holder wrote a book, and when you kwet through the book, there's nobody whose predictions on interest rates i would pay attention to, including mine even including charlie interest rates are extraordinarily -- been extraordinarily low for a long, long time. that has -- that has acted to buoy the stock market very significantly. people originally in 2009 and 2010 didn't think they would be at these levels. they wirnded is this sort of permanent? it's a very strange situation.

we're going to have 2% inflation. if you get a nominal return of 2.8 or something, you are going to pay income tax on that. you are going to have nothing in the way of more purchasing power by deferring consumption today why do you defer consumption you are hoping to have more consumption later on that's the reason for saving essentially the federal reserve has now said for a few years that we're going to try and make sure you don't have any net gain in consumption >> so what could get in the way and mess things up i mean, that sounds like a sure bet for putting money in equities and people have taken it as a cue for years at this point. >> that's why i've said for a long time that equities were the place to be. i mean, they've been no comparison to me it's just been absurd to see pension funds and those people in the early teens of the century saying we don't have 30% or 40% bonds

there's no comparison. a bond that pays you 2% is selling at 50 times earnings, and the earnings can't go up you may have to own it for legal reasons, but to make that as a voluntarily choice in the last ten years against owning assets has struck me as absolutely foolish. >> so what changes that equation what happens >> you have higher interest rates. >> higher. you are not talking about 3% interest rates you are talking about 7% north of that. >> 3% is a -- 3% -- you pay 20%

>> you have to look at the underlying stream of cash you're going to get over time, and that determines what you should pay now. now, the question is how sure are you of getting the cash. nice thing about a bnd is you know exactly what the coupon is. if you look at american business, if you look at the s&p 500, they're earning -- they're earning well into the mid-teens or higher. we'll say they're earning 15% on assets employed, and they continue to earn that's a 15% bond. i mean, in comparison between a 15% bond and 2.6 or 3% doesn't really make very much difference >> right even before you talk about the bigger percent of those earnings that you get because of the tax bill

sflo hey, oracle man good to see you. you remember -- you know i always ask you the same question insurance is important to brookshire i mean, obviously. we just heard that $100 billion number you're very savvy. i love the way you do things insurance is such a great business because a lot of times you can figure out what's likely to happen and charge more than you really need because the things that people worry about probably aren't going to happen. i rmt right afterwards you were like this, because you knew everyone was going to predict. that's going to be every year. then for 12 years you charge these exorbitant rates because it was going to happen again, and it never happened, and

brookshire hathaway went up five fold or something because of that my question is we just had the worst year ever for catastrophic losses both insured and uninsured. is that going to be the norm from here on out, or do you think it's within the range of standard deviations for losses do you think it goes back down do you need to raise rates >> as near as you can tell, you've got pretty good records back to the early 1800s on hurricanes that have hit the mainland united states it looks awfully random if you look all the way back to 1830 or 1840 it's true that we had the longest period here up until last year most consecutive years without a hurricane hitting the main land. that came right after katrina and the year when we had hugo and i forget various ones. >> right >> it appears random, doesn't it incidentally, we did not -- we

went away from insuring -- we moved away from it after katrina because the rates kept just coming down, down, down, down. we just thought we were not getting paid enough. we have not been in the super cat business to any degree at all in recent years. we the rates have not been high. >> you argued against every shareholder. every year you get shareholder proposals that you got to start, you know, taking into account climate change you got to sell all your fossil fuel holdings. you got to do all that you don't go for it every year >> no, but we -- it goes on the ballot it will be on the balance rlot this year, and since we now web cast our meeting and we get lots of viewers around the world, i'm sure we'll have a lot of people to keep putting -- i think we have two proposals on the ballot this year. i explained our position on it a couple of years ago.

sf weapons of mass destruction, that's the big worry it's been the worry ever since august of 1945 >> i agree fukushima and whatever number is attached to it that doesn't go away for 500 years might be more of a worry than co2. i don't know that's just me melissa has -- >> okay. i would say that there was a little catch-up in september when we had irma and -- sflo no doubt where. >> harvey and -- >> yeah. >> no doubt. >> we were -- but we were not insuring super cats. we had a fair amount of exposure just generally, but not super cats >> i didn't know you were going to go all the way back to 1800 on a 400 billion-year-old plan you're whacky. >> i can tell you -- i can tell

you my earthquake. >> i'm the guy to come to. >> hey, warren, i have a question about bitcoin jaime diment called it a fraud back in november he followed up saying it was a mile an hourage. jaime diment yesterday backed away from those comments saying the bitcoin is a fraud have you rethought your position on bitcoin, and how would you feel if some of your portfolio banks wanted to make a market in bitcoin, wanted to trade bitcoin, wanted to make a business out of bitcoin trading? >>. >> i can say almost with

certainty that they will come to a bad ending now, when it happens or how or anything else, i don't know, but i know this. if i can buy long-term puts, i could buy a five-year put on every one of the crypto currencies, i would be glad to do it, but i would never short a dime's worth >> have you thought about trading the futures to take a negative position of bitcoin >> no. >> you would not do that >> no. there's no reason. there's no reason. i get into enough trouble with things i think i know something about. why in the world should i take a long or short position of something i don't know anything about? >> i think it will definitely come to a bad ending you have virtually everybody -- i have 11 schools coming on friday the questions will be on bitcoin, and i won't know the answers. >> although, when we sat down,

warr warren, you did say i should have announced we were getting involved in bitcoin this morning. >> that's true to -- that would be much more interesting to the audience that we were going to issue a whole series of crypto currencies tomorrow snoo before we get to that, i want to run through a couple of stock issues with you too. you already spoke about about ibm, whatever you would or wouldn't -- whether it comes to apple, there's a huge position you are one of the top five shareholders in apple. they have a big holiday season from what we've been seeing, what we've been watching with some of the channel checks and beyond you still feel like it's a great consumer products business at this point >> from all the stuff we published, we've added to our holdings consistently up through all the published reports, and we'll public lsh more on -- see, the market is not yet saturated

for iphones. i just want to point that out. when tim cook sent me a christmas card again this year saying he was going to sell ple an iphone this year, when i actually buy it, it's all over, folks. the last person has -- >> a samsung flip phone that you still -- >> yeah. >> you're still positive on it you're going to be -- when you buy it, it's jumping the shark essentially? >> pardon me >> when you buy a smartphone, it's jumping the shark that's the end of the run? >> he keeps sending me reminders every christmas. >> jim cramer wrote in too he has a question. i wan he wants to know if there is a point where you think general electric shares represent value. >> well, there has to be there always is for almost any company. different people will have different views on what the price would be, but, i mean, if you came to me and said we'll sell you the whole general electric company and x was the

right number, we would like to buy it if we buy little pieces in the market, that's the way we think about it >> i think he may have been specifically asking what is that price target if you have one >> yeah. well, that would depend also on what other stocks were selling in the end my job is to have the capital of brookshire invested in businessesthat we think we understand pretty well, and that are an attractive valuation. now, we can't move around in big positions that easily. it takes a pretty billing disparity from something we want to sell to move to something we want to buy. general electric is a big strong company. >> how much cash does brookshire have on hand right now >> well, we have something a little over $100 billion it's almost all in treasury bills. i think there's about 1.7 trillion treasury bills in the world. u.s. treasury bills. we own 12% of them we actually get the calls from

dealers who need a bill for this -- if they need 200 million april 12th or something. they come to us where. >> because you have it sitting around in the couch cushions >> yeah. we -- we are usually on monday we're usually buying about four bull billion or so of bills, but they're very short, so they roll solomon brothers, which was i was involved in 25 years ago, there's a rule you can't buy more than 35% of the issuing that's the -- that rule was called the mozier rule because the guy there loved breaking it. he went to jail for a few months afterwards we're very careful about how many we bid for. we never -- we don't own commercial paper we don't count on bank lines we don't do any of that. when 2008, 2009 comes along, we want to have short bills if the only thing we buy for short bills is liquidity

>> you said you like to have 25 billion in hand and that leaves $80 billion for acquisition. anything you have your sights set on right now >> no, but i would like to >> on that note, let's bring in right now charlie munger, the vice chairman of brookshire hathaway, who is joining us on the squawk news line from california at the very early hour of a5:45 a.m. california time i want to thank you for joining us today and calling in. >> well, i'm glad to do it >> you are with us this morning because of the big news at brookshire hathaway. the announcement that both greg abel and the ajit jain have been named as vice chairman of the brookshire hathaway. the first vice chairman of brookshire who is, by the way, staying in that position what do you think about this what can you tell us about greg and ajit and what you think about them being pushed into these positions. bemoated into these positions. zplie think it's a very good idea, and all of the brookshire shareholders should be very happy about it.

>> it's a deserved recognition coming to people who should get more recognition of course, i like it >> you said that you think it's a great idea warren told us just a little bit ago that it was actually your idea when he came to you and mentioned all of this. brookshire has always looked peculiar, and it's done better than -- >> yeah, why --

>> charlie, we have been talking with warren just about the future, what you see coming, what you see happening, and we've pointed out to warren that for a long time people have been pushing for a success plan because he isle 7. you just turned 94 i forgot that until a couple of hours ago. i was still thinking you were 93 you just turned 94 what do you see in the future? let's talk about your involvement. >> to demonstrate to shareholders, they probably got seven. how many for good years coming out of you, charlie? >> well, not very many i have to face reality brookshire is good at reality recognition. >> let's talk a little bit about the broader markets too. you always have some big thoughts about what you see out

there. we've been talking about share prices and whether share prices look expensive or not here, and what do you think when you look at the stock market and see new records set almost every day and just for the beginning of this year, the strongest start for the s&p since 1987 >> well, i don't think share prices are crazy i know where bonds still are less than 3% >> are there things that concern you when you look at the markets because it's part of what we get all the time procrastinators saying, well -- >> there are always probably -- you know it's going to end badly. >> i'm sorry venture capital? >> there are bubbles there >> what do you see in venture capital that concerns you? >> bubbles

too much money >> as measured how >> is this just something that you think that the arena itself has gotten too big >> well, there are always these excesses and bubbles they're just -- we have disht bubbles at different times >> think of the bubble back in 2000 that year they could have taken $50 billion into a bushel bav ee and burned it. might have gotten the same results. >> what in particular started you thinking about venture capital? is that something you just thought the last year or longer? >> everything is going on. mostly we just stau away we don't -- >> what do you like right now?

i actually like this tax reduction that brookshire has gotten i'm an unabashed appreciator >> what do you think about the tax plan overall this is something you would havv voted for? >> well, i more likely to vote for it than warren >> what do you think the broader implications are, what this means for corporate america, what this means for the markets and what it means for the economy? >> i think there's a chance that it may work quite well >> you're talking -- >> in india, a very poor nation, the capital gains tax is zero and the income tax on dividends is zero and really poor nation that seems justin conceivable and rich in india are very rich. that is really peculiar, it's a

lot more peculiar than the united states. and i'm not at all sure that india is wrong is doing what it's doing >> because >> because i think their economy may grow better doing what they are doing than it would if they were less friendly to their -- to the pest thapeople that invey >> what do you think happens to our economic growth? this is the big question in all of this. do you think gdp will see big gains because of the tax cut >> no i think the people that are sure it won't work are probably -- shouldn't be quite so sure. >> warren, what do you say to that >> i agree with him on that. i think it's -- predicting what the economy will do, when i went to colombia, i took a course and they thought they were getting the answer you have not been able to make

money in the stock market or even make great decisions in business by listening to economists. >> right. >> you know, warren, you and charlie both are allocators who look and take berkshire's money and try to figure out the best place to be putting those in the market charlie, we've spoken with warren a little bit about what he likes and doesn't like. when you look around at the stock market, are there stocks and sectors that you think are really interesting places to be? >> obviously, stocks are valued higher than they were a long time ago and it's harder to make a lot of money in the stock market that sells at 20 times earnings than one that sells at 15 and so -- but that does not mean that you should put all of your money in long term bonds at 2 or 3% i agree with warren totally on

this stuff i think you're -- the right answer for investors, a lot of deferred gratification and being well to suffer a fair amount of agony, just riding out -- as us buying equities and riding out the declines >> i think joe has a question for you as well, charlie. >> willing to try. we've got delays from here to you and delays on the phone and everything else. just people can bear with us that's what we're dealing with but charlie, you seem to have a really good grasp as far as i'm concerned of tax policy and the role of government and the private sector and i was just wondering, warren is quite a bit younger than you. when people are young, they are like that, more idealistic and do you think that eventually as he grows up, he'll adhere to your tax policy or you're thinking more or is he just hopele

hopeless where do you come down on that maybe he can figure it out. >> we don't have to agree perfectly on everything. it's probably better if we don't. >> i guess so, but i'm just -- usually with age comes sort of the realization that maybe less is more in terms of -- warren, is there any hope? you've got a few years where you have the idea about capital gains and lower tax rates for corporations or are you hopeless >> i can't -- campaigned for wilke in 1940 and head of the club in -- >> you went backwards. >> yeah, i'm a time reversal machine. >> well, i am too. i voted for kennedy and -- i changed too. we're coming together. it just takes more time than life is going to give us. >> kennedy was a tax cutter.

>> yeah. by the way, i really like that, when he did it [ laughter ] >> charlie, you mentioned broadly that stocks are the place to be not bonds, but when you look particularly, any stocks that have caught your eye recently oranything you think would be worth pointing out? >> well, i don't want to get into talking about specific stocks >> let's talk about other bubbles then if you think private equity or venture capital is potentially a place where you see bubbles -- >> and bitcoin and the other cryptocurrencies are also bubbles. >> and what tells you that i'm just thinking of the millennials and young investors who get so excited about something like this. what would you tell them what would your message be >> well they are excited because things are going up at the moment and it sounds vaguely modern and i think i'm sure the

computer science involved is difficult and interesting. so you can understand where they get excited. but i'm not excited. -- >> if you're buying something -- >> and go on somewhere else. >> if you're buying something because it went up yesterday or last week, that is not a good reason for buying anything it will get you in trouble over time. >> yesterday bill miller was on cnbc and he talked a little bit about what he sees happening he says there's a possibility he thinks for a market melt-up. he pointed back to what happened in 2013 where you saw 30% plus gains in the market and said that he would think that is more likely if the 10-year gets closer to 3% i didn't quite understand or follow that but what do you think about that potential >> i think it's pointless that people -- if they own bonds, their bonds would be going down. >> they would be losing money. >> there's no question that markets have momentum.

and that when there is enough momentum, it takes over everything, i mean, when you -- that's how you get bubbles used to say you get in more trouble with a good idea than a bad idea because the good idea originally had the idea that stocks were cheaper than bonds generally, after a while, the very action of the stocks becomes more important than the fundamental reasons and the fundamental reasons disappear and people buy something because it's going up. when people buy something because it's gone up there's no telling how far it will go but you can be pretty sure there will be a bad ending. >> anything to you that really jumps out in the markets and in the news these days? you've been watching this a long time is there anything you think may be different this time around? >> well, the whole situation is quite weird. whoever would have guessed that you could have 20 years of real interest rates at zero a lot of different advanced

nations. who would have guessed we could print as much money as have as low inflation as we did. my attitude towards the economic situation has always been one of skepticism i don't think any of these people know what the hell they are doing. >> any of these people being who? >> economics profession. they've been -- they've been confident in various formulas but economics is not physics the same formula that works in one decade doesn't work in the next economics is a difficult subject. and a lot of over confidence has been removed from the economics profession over the last 20 years. they've been really surprised.

>> and warren, your comment? >> well, i'm going to point out, the national debt now is 1,000 times what it was when i was born and now if you told my parents or anything, my dad in the waiting room that the national debt would go up 1,000 times during his son's lifetime, he would have said, everything is going to turn into pumpkins and mice and of course gdp and real terms in six times per capital what it was then and everything. it's hard to get dogmatic in economic matters people that -- i would say that the -- just the whole emphasis on the debt going up during my lifetime has been way off the mark and i've been way off the mark when i was back in my young republican days, i was going around saying another dollar of national debt was likely to threaten our future or something of the sort.

you don't want to get dogmattic in economics. >> well, warren, want to thank you very much for joining us today. charlie, thank you for calling in it's a pleasure talking to both of you we truly appreciate your time and joe, we'll send it back over to you. >> thanks for that and thank you to warren and charlie, that was great. we've dwgot to go. "squawk on the street" is coming up right now ♪ ♪ good wednesday morning, i'm carl quintanilla with jim cramer and david faber. pressure on interest rates put pressure on the futures as names like buffett on our air a few minutes ago weigh in what it means for the stocks reports that the chinese have suggested slowing or halting purchases of u.s. treasuries roadma