>> you have turned -- with that passion you turned the markets around dow looks like it's going to open up by the way by 22 points higher and nasdaq would open 16 points higher and s&p 500 about three points higher and that is after we are triple digits in the red a couple of hours ago. thank you for hanging out. make sure you join us tomorrow "squawk on the street" begins right now. ♪ good morning, i'm david faber, along with jim cramer carl quintanilla is on assignment, he made it, at the winter olympics in pyeongchang he's not in the olympics but in south korea and will join us tomorrow ahead of the opening ceremonies very exciting. >> it is exciting. it is. >> i didn't get the parade

i'm a total loser. i'm with you. >> you are with me -- >> i didn't mean it with me. >> sounded just like you did let's look at futures, of course speaking of exciting, our markets have been exciting lately a higher open this morning after that turnaround yesterday, european markets and we'll answer and assume we'll have spain and italy in there there they are all down this morning. spain the worst performer of those european markets the 10-year note yield was a concern. the budget deal exacerbated concerns about a growing deficit. will we be able to finance it without rates moving higher? what's the feds' role going to be there you see it 2.866 is the current number. let's get to the road map. it starts with the stock market seeking stability after those recent very volatile days. a higher after being in the red for most of the morning. twitter shares are up more than 25% right now in the premarket

the social media company reporting its first ever net -- >> gaap. >> they didn't fall into the gap any soared into the gap. >> t-mobile, strong subscriber growth legere will join us later. >> fantastic. >> always good to see him. >> if futures are behaving in any indication of what we could be looking for today, we could be on track for a higher open, at least at this point, certainly people think jim, yesterday was -- it was a volatile day again when you and i left each other, down by 200 points in the last half hour of the session ended the day lower. the s&p had been up 1.25%. >> at 3:43, the second highest point in the day and gave it up. what's incredible, we're seeing rebalancing from these -- is my

tie not right? we're similar but that's where it ends though. >> we have to understand, that these instruments are not done unwinding and these double and triple vix pieces of paper. >> and they are able to wag the dog so to speak and also those who don't do individual stock work are fixated on bonds because it's so easy to do and you also have the bad auction so to speak i remember bad auction in '90s which is when interest rates went from 7.75 to 8. what you did is a little shorting and covered at the end of the day i can listen to these people all day. people not born when i was and certainly didn't trade 79 to 84 but they are talking about 79 to 84 as if they lived for it they were in utero did you know better than expected when you were in utero? >> no. >> did you know what a failed

auction was in utero >> no. >> did you know what it meant to have an auction where the rates went up? >> that said, to the extent that rates are normalizing -- >> qe. >> you can downplay it -- >> i'm not downplaying. >> you just brought up 7% yields i can remember it was in the '90s to your point, ge interest plus -- remember you weren't up here at the company then. >> ge, minus now. >> i had statements i can look back on 7.5, 8%. >> i do not mean to minimize i know there are bonds sloshing around do you know that six months ago what do we want? we wanted bonds sloshing around. now we get them and it's no good we want a little inflection, so the short ends up a little bit all i'm begging you to do, to realize, if you decided to sell twitter because of a bond auction yesterday and 2:30 sell twitter. all i can say, you're a genius

you're a genius, honestly, i don't care -- that's an emphasis of a commercial at one time, what bothers me is the people who never looked at the stock and don't know how to analyze it they are out in full force today talking about 2.89 versus 2.91 and they've never been better. not knowing anything about the stocks they are the tour de fours moment in the careers. they don't have to look at snap. they've got it all figured out god love them. >> people are going to miss opportunities by being focused on this overall -- >> it's so easy to talk about politics one of the reasons i didn't want to talk about politics, other than when you're not supposed to, especially because my father was pro army vietnam, i didn't want to go -- >> you're moving further and further away. >> the look alike thing is starting to bug me what matters to me, the people

who don't know the difference between a stock and bond are in asendance and telling us that everything had to do with 2.7 versus 2.8 i'm telling you what happened is a group of complete morons who traded these double and triples and didn't know what it meant to be able to reconcile a 401 are blowing up. >> they are blowing up -- >> why do you think the market went down yesterday in the last 17 minutes. >> it's not much. >> if we're going to look at the opening bell and closing bell, which makes a mockery of the closing bell because if you have to ingest at 401, i mean, that's more important than what happens at 3:59. >> i get you. >> what does it say for our market today before we start getting to those individual? >> everyone will be scared that at the end of the day there's going to be some sort of rebalancing, even when you're up dow 280 -- >> i think akron nis tick is

better than. >> i'm a re-sid vi srecidivist. >> people know don't even know what a sat is. equivalent to the stock market, they don't know. >> to digress. >> at 3:43 there will be people worried about the rebalancing at 4:01 and might sell regardless of how good the quarters are t-mobile, we'll shall talking to john legere, is he top bill, like sheryl crow lead-in act? >> sure. >> she's like att. we'll have to hear about dumber and dumber and pet peetdy thing. >> we have a lot of question for them they are typically quite conservative but they guided their guidance was not quite as strong -- >> it wasn't there are holes in the story. >> so there's going to be plenty

to talk about but before we do that, can we talk about twitter? >> first of all, we have to take out telepart and tired night football to get the comparisons, jumps to being 7% better i mean that's huge on twitter. the fact they are making money david, the fact it's now an asset class, we lost the vix as an asset class and that turned out to have no close social media is an asset class look at snap and twitter it is zero sum and facebook is not doing well this is where the money goes, i had clorox on, they are more than 50% in social media in their ads. you know who you can reach with social media >> everybody. >> millennials. >> ten second ads. >> let me refresh people if they are saying twitter is up 25% they did better than expected quarterly results as you might have expected, including first ever net profit as we said, gaap, monthly active users up 4%

from a year ago. and daily active users did -- they had a number of decent quarters in speaking to a couple of investors this morning, it appears they are starting to get credit for it and everybody is giving credit for they may not have previously -- >> it's the sum total. >> david, i have here in my hand, two sec documents and these are form 4s. this is jack dorsey. >> yes. >> it's a buy of 574,000 shares, $16.60 and then that would be in april. then just this week last year, he bought about 430,000 shares at $15.87. did he not tell you like steve wynn who bought a lot of stock, did he not tell you, listen, we're going to have a breakout year but everyone ignored it, david. they ignored it. and they have to pay for it.

they focused on qe too and should have looked at these, not the federal bond sales. >> you were making a larger point about the advertising market because yesterday with snap also up dramatically and today with twitter is there a large theme? >> it's how you reach people. >> it's -- we're going to talk about fox, i'm sure. how you reach people is no longer just broadcast. it's almost as if david there was radio and there was newspaper. and they are over in my view i'm not talking about the failing new york times which our president calls them if you want to reach people, like kellogg today, i don't know if you saw it ks they are so proud because it's not as bad as it used to be. if they want to reach people with cereals they have to go online. >> what is it twitter has done we talk so often -- >> they cut expenses by 10% -- revenues by 7%. >> there you go. that's helpful >> ease of use has always been a

concern. you raised it many, many times. >> daily average use -- >> easier, making the platform easier to use and that heads in seemingly a cap on their ability to actually grow and subscribe. >> when you talk to the snap fellows what they will tell you is that older people can on board much better. they reach the older core group they were trying to reach, people who are 35. they use that number actually and people who are older and now figuring out how to get on snap. they are trying to figure out how to do twitter. do you know some of the brokerage houses are using direct message to allow you to buy stock? >> i didn't know that. i think it's a little -- >> it's a little clumsy way -- >> he's a new age guy. >> but twitter, it would have been something interesting to see if sales force had bought them -- >> it would have been although the focus for sales force as you well know is on the data itself.

>> it was always about big data. maybe they would have. >> it was a consumer offering and the big shareholders of sales force did not subscribe to the idea of big data it would have been a brilliant acquisition. >> with this move we're back at levels that those buyers were actually shying away from -- >> they were wrong >> another example where you can say it's been a year and a half and there was a lot ground between there and here but now you've got a stock that's back above the levels that people are indicating they might be interested -- >> came in middle 2016, people laughed when he talked about ebita margins and growth double digit growth average users, they laughed at him again i have to use the analogy, not unlike carrie poured on her, pig blood and john travolta. who is laughing now with the last quarter before he goes and fixes sofi

>> agreed. >> he's going to fix sofi. >> cissy spacek was carrie. >> michael cagney -- >> cagney is coming up soon too. >> cagney? >> consumer analyst group. >> i went to icr, i'm not going to cagny, look out for cag at cagny. >> we've got to move on. >> to the parade coverage. >> to tesla. we're going to look at the results from this company and what ee lon musk is saying about profitability, gap, nongaap. john legere will join us, consolidation in his industry. >> and apartments. >> we'll talk about apartments too or why -- >> why is leaving new yorkib terrible >> i can guess taxes place will go down in value by 15%. >> bill de blasio is paying attention? doubt that we have a lot more "squawk on

the street" after this

there it is, the parade that jim is not at but you can be there in spirit. >> you just feel badly. >> you won the super bowl, you know -- >> life is complete frankly. it's complete. >> so there it is. but exciting day -- >> a chilly day in philly but i'm not sure that's going to affect the fans as they line up to cheer for their winners let's head to the bond pits now

and rick santelli joins us from the cme for an early update on the bond market. >> early update. at 24-hour chart of 10s tells you a lot. we had the auction yesterday and everybody is really dising it. it was a slightly above average -- below average auction but nothing huge the issue really is that it's about time and shouldn't be afraid of higher rates you pass them along with a good economy along with inflation look at the good 2014 chart, i look the zoom zoom let's zoom out to june 2011 for january 2014 you see on that chart, it hasn't been since mid 2011 that we spent any time above 3%. one session in between then and now and that was the last day at 2013 we're most likely going to get there. many people think it's pretty

speedy, we're up 40 basis points on the year but it hasn't been speedy, it's been steady eddie with a few seconds of speedy bund yields at the almost 80 basis points since the fall of 2015 watch the difference between the two as you see on the next chart as we get above 2010 basis points, things could get wild insofar as mario draghi, if we speed ahead, one way or the other european rates will follow, whether draghi is affirmative action on that and finally year to date in the dollar index yesterday we close at 2.5 week highs and we settle at 92.12 and already using steam here pay attention to the 90 level. it's a pivot david and jim, back to you >> rick santelli. >> put it in common sense, it's not the end of the world he knows more about bonds than

anyone that was fabulous. he's seen a lot of bond auctions. >> a lot of bond auctions. >> it was a little subpar, it's okay it's okay. a little bit of inflation, we want a little wage growth, david, we're getting wage growth c v cvs hourly wages s 11 bucks. >> we're going to take a break now. >> we have to talk about tesla too. figure out what you want to do for the mad dash coming up. >> grubhub. >> for maddash. >> we'll talk tesla around the bell a lot of other names to talk about and activism, a lot of nominating deadlines coming up want to get to that. this interesting retraction from burnstein on a piece involving qualcomm and broadcom. a lot more from stpo nine right here at the nyc after this

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we have about eight minutes before we get started here with trading, mad dash grub hub. >> we often hear there isn't enough short base in the market and hedge funds don't short. that's the old days. oh, contrary, there's a 20% shortage in grub hub, which is the delivery service they blew the numbers away, 37 cents, i was looking for 31. more importantly, yum bought $200 million worth of stock and yum partnership, which is of course -- we were talking about

pizza hut delivery, which is fantastic, now with grub hub and i think that david, this is going to become just like we saw with twitter and like we saw with snap, a stock that people recognized is real delivery is real because of the stay at home millennial factor they like to play video games and we'll get to interactive later. they like to drink beer at home. >> netflix and chill. >> they like netflix and chill. >> here's something else you need to know bar sam miguel, we added grub hub seamless in new york because customers demand it. sara fryer who just joined the board of walmart, cfo of square, don't take that as any sort of let's say negative for seamless. i mean for -- for caviar, which is their delivery system this is going to move and i think that people continually underestimate a company that how has 1300 cities as a way to be

able to sit on your couch and have the food brought to you if you don't have this, you lose share, which is why i think it was very important that yum made this for pizza hut you have to have delivery or you'll lose share. >> got it. >> a lot of places didn't want delivery because they wanted you to come in the store. >> no longer. >> get nice deals delivered -- >> they don't like to overpay for beer unless it's experiential. >> we have tesla's earnings and e eng lls. fox's earning thopinbe coming up next.

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for mad money, almost all terrible. >> why is that >> they are incredibly overvalued and opaque, but i don't mean to say anything bad about them. >> wearable technology -- >> that fitbit doing t the wearables. >> not too well. let's talk tesla before we get to the opening bell. what did you think of the quarter? >> there was a really great rocket launch the day before. >> that's not the same company but -- >> that had more to do with the fundamentals -- david, he's turned it into -- we're speaking about elonmusk there, he's talking about the 10,000 a week model 3. can they do 10,000 -- he assures you that they will be 10,000 a week model 3 and assures you they are going to be earnings positive >> i think we have time to listen to musk. >> so great. >> on the subject of profitability from the conference call. take a listen.

>> i'm cautiously optimistic that we'll be gaap profitable. not certain but i'm cautiously optimistic that we'll be gaap profitable with no asterisk. >> do you share that >> does it matter? >> i'm curious your thoughts. >> it doesn't matter if they get to the next quartera and don't d the model 310,000 -- >> the compensation plan is amazing did -- >> very good. >> have to get to half a trillion market cap to start collecting he collects big. >> it's a marvel maybe they can do 10,000 a week. and the people -- >> the stock is going open, slightly lower as people see there. any big takeaways this morning

>> i have to tell you, david when i look at the sum total of what's happening today, believe it or not, i think t-mobile may be a great tell and that's why it's so great. >> really? >> david, that industry, his portion of that industry is still growing. i want to know where are these customers coming from. >> gotcha. >> people think the group is too cut throat and won't take the stock up but we have to ask john, where did the 5 million come from? >> look at that ticker tape over at the nasdaq this morning herety big board you heard the cheering for the ipo a wearable technology company. over at the nasdaq, victory capital asset management firm cleveland ohio maybe they always drop that, didn't know. >> lebron had a good game last night. >> he did. sunk one perfectly against the wolves david, the opening has been distorted and the close super distorted. we can focus on them but i think

they are not what matters. the fundamental matters of individual stocks are now starting to play a role. that is something new. people look at twitter and say why is that up so much because investment managers wasn't very badly to be in something that has great revenue growth and could have good profitability as snap could maybe even eight quarters from now. they are all subjected to what facebook was when it inflekted. >> that inflection when they figured out mobile you're talking about. >> it was brilliant, fantastic. >> it was, that's what people are doing. they are buying it and buying it because in most of these big mutual funds, were underinvested in that particular segment. >> the belief has been that alphabet and facebook crowd everybody out. >> alphabet was an arrogant quarter. go back over that conference call and they say we did great and they missed. you don't say you did great when

you miss that was a miss. david, yesterday -- >> that said but the larger issue of facebook and alphabet dominating all aspects of digital advertising, cwhich they do. >> my sources in the justice department, which i have, the guys i went to school with run the justice department, they have no inclination to go after the guys for markets dominance, none they think it's market engeneral newt, those waiting for a big justice department investigation, you're going to need a new president for that to happen. >> really? >> i have good sources on this. >> that was an interesting piece of information. >> i worked on this and know my sources are right. there will be no market -- investigation. >> we're talking about -- >> there will be none. >> you can call for one in congress but more important there will be no justice department pursuit. >> i have to say, it was always a bit of a long shot that suddenly the justice department would start to initiate an investigation now. >> eric holder -- justice

department would have. >> the dominance only grows and you wonder how much businesses are being prevented from forming or from having any success but over time you might see a continued focus on there emphasis on whether or not they are too large. >> let's go to att/time warner which will get done and justice will not be right. if you look -- >> you think that the doj will lose >> i think the doj loses if you look at facebook, suddenly they can say if they were investigated -- have you seen twitter have you seen what's happened with snap? we have real competition it's a win for facebook too. in terms of the possibility that someone migts come after them. what does it say about the disney combo disney stock not acted well after the report give me a sense of what fox means. >> fox was fine. the quarter was, you know, nothing incredible but -- >> how about the re-ups of

affiliates how much they are making from affiliates. >> revenue growth was solid. i'm looking here at the couple of notes favorable expense timing it was fine. >> nothing great. >> i read through the call and they were asked a lot of questions and what they are planning to do over the next period of a year, while they continue to get the approvals -- >> they were justifying the reasons why they double down in the nfl on thursday and why that was an important move for them and the digital rights that come along and nonexclusive but they think they'll benefit from when you look at the analyst this morning, they are largely leaving their adjusted ebita targets the same that's why you see the stock -- >> the stub doesn't gain here. >> there will be a revision at some point they do benefit from a lower tax rate in terms of that.

they are also shielded from taxes for quite a period of time any number of different reasons why -- fox is going to be an interesting entity. >> by the way -- >> some people wonder about its size. >> we have to stay focused on that because disney should be higher another key to this market, a company with a triple a balance sheet, good dividend growth because that's supposed to matter has been almost nonstop down it is now down 19 points from its high johnson & johnson. johnson & johnson is the true bellweather of what you're not supposed to buy in a high growth inflationary environment it yields 2 pts 6, alex gorski, my favorite ceo in the pharma group, rejeneron, the stock doesn't go up much

it was the best of any in terms of year over year growth and that stock can't get out of its way. be aware, that is the epicenter of where the bond pressure is going to if you want to ascribe anything to the bond pressure. people don't want that group look at the generic copaxone, it went generic. >> one of my names you follow closely viacom, up 11% the quarter was not a good quarter. >> how is that possible? >> i'm trying to ascertain what they've said on the call and i don't know -- they were -- >> good you admitted that. clearly i know they were pointing to a better second half and of course the overriding question for so many investors here is the cvs deal which i've

reported is more likely than not they are going to fully engage, really management this time is going to be engaging more than last time when it was kind of special committees of the board, no offer was eventually even made by cvs, this time looking different in terms of that and bob batchos and lesslessly, thee going to be working this out, trying to understand where the value will come from i don't know why frankly, given the numbers, it wasn't clear there was going to be any sort of reaction. i do want to find out what was -- >> we have to work on that a work on progress. >> as to why viacom is up. >> why did you take --why do takeovers? and the answer lies in the stock like tyson foods they bought hillshir, rounded out the protein business millennials, they are in charge. they like protein.

tyson foods once again one of the top five stocks for the s&p this morning just made a great deal, even though a lot of people felt they overpaid and it worked for them. >> i think that by the way, bob gambler, that's going to work the keurig deal. >> nxp, we talked endlessly about it they still haven't received chinese approval that is qualcomm the chinese antitrust approval a meeting scheduled for next week, some think perhaps you'll get new numbers soon the number may have moved up again. nxp was weak yesterday but they reported good news. >> jp morgan should be closer to 125. i agree if you overlay corvo and sky works solutions it has to do with the internet of things, noncell phone and automotive

which was quite strong, when you look at the component in auto, you have to think texas instruments and nxp. how great is nxp for qualcomm. yet they won't point blank say -- >> it's an interesting fascinating situation of course. something we've really never had anything quite like it with qualcomm's deal to acquire nxp still in doubt because as we pointed out it is a tender offer and tendered under dutch law to be able to close it and it's not going to be the 110 they originally agreed to we all know that. >> the day yesterday, some firms were saying it would be 110 and people were bailing. >> the firm was saying that. >> sanford bernstein put a strange note out that had people believe it would be prevailing at the shareholder vote on march 6th. >> it killed nxp. >> originally they said and this was controversial because burnstein had avago management

suggesting that 24 of the 25 qualcomm investors are committed to voting in favor of the board slate come march 6th that would be in violation of sec rules -- >> to come out and make any sort -- >> you can't do that canvas. >> what does burnstein do? they retract that note look what it says today. the investor called me back yesterday to correct and clarify what he meant to say, the investor -- 24 of 25 qualcomm shareholders comment did not come from broadcom. >> the invest fund, isx is going to become important. this was an odd note from bernstein -- >> hock tan, you know, he is trying to convince a lot of people i think we'll have to speak to them, about the idea that people think it's -- how could you not tender because you get so much cash and so much stock in broadcom. i think if qualcomm raises price

together, maybe broadcom would go away. of course, broadcom saying they will not go away i do speak to the qualcomm people more than i speak to my wife. >> yes, that has been the case for me as well >> all right, i see john legere getting makeup let's get to bob pisani then get to mr. legere. >> we're down but this is the first time in a week we had a sort of normal open. it's not a gaap down, that's an important distinction. volume is lighter than recently. semis were leading right at the open and had moves up in some of the energy names as well just turned negative. banks were flat. utilities were down as the 10-year moved up and basically is fairly flat here except semiconductors, we're dealing with two market issues, one is the fallout from the volatility we've had recently we're watching fund flows i see modest outflows in stock funds but not big. we'll talk more about that this

afternoon. bond yields a big issue hitting new highs yesterday and that moved down stocks i believe. if you take a look at other things in the fallout from these volatility issues we have these volatility target funds that are out there. they weight exposure by volatility bonds you get more weighting they leveraged to lower the volatility sectors and rebalancing when you get high volatility among equities and bonds and cash we don't know, they are opaque and difficult to follow. if you look at the volume, you can see heavy volume in the middle of the day and all of a sudden -- these are institutional or volatility funds coming in. on monday, right late in the day, very heavy selling came in. just sort of out of nowhere. on tuesday everyone was delighted because we were expecting an avalanche of selling in the last hour and it didn't happen. it just dried up and the market lifted on tuesday. on wednesday the same thing happened on monday we go into the close very recently and all of a sudden we had an avalanche

of selling in last 30 minutes. it's unpredictsable and there is not a pattern that developed yet unfortunately. meantime, volatility is affecting the ipo market we've had a number of postponements this week of some fairly large ipos. i want to do a note here, the vix etfs, we talked about the short vix etfs and how they may have impacted the market i do believe they did impact the market at the close on monday. i think they are much less influ ents shal now. you see the assets under management is too small, and two major short vix funds. 794 million. on monday i think they did and i wrote about that, want more trader talk at cnbc.com here ipos postponed this week but we got a couple pricing today cactus prices well above the range. the price talk 16 to 19. and lower there for them we also have a chinese company you heard david mention this

early, small wearable technology, sme price in the middle 10 million shares at 11. they haven't opened yet. victory capital, a bu teke asset management firm will be opening about an hour over on the nasdaq 11.7 million, 13 well below the price talk of 17 to $19. the dow is down 129 points. >> i'll take it, bob and hand it over to jim cramer who can introduce our guest. >> i have to tell you, how crazy is this market there's a stock at t-mobile opened down. it looks like it was a mistake because it's setting records for revenues and growing year over year, 5 million each year, it's rather amazing and we happen to have the man himself john legere joins us at post nine. you often have talked about the notion of dumb and dumber versus t-mobile how does that play out in this quarter? >> jim, five years ago right now

is when i went on stage in january of 2013 and announced that the uncarrier was going to fix a stupid broken arrogant industry we had 33 million now and we have 73 million customers now. >> that's pretty amazing. >> we have announced our subscribers -- i saw you getting all excited about some of the other guys numbers in q4 we had 891,000 and easy math, two times verizon, three times at&t and five times sprint and actually adds up to what they had here's what was important today. we announced the financials behind them. we're the only wireless carrier with growing service revenues, 7.8 billion for the quarter and 10.8 for the year. 8.3% year over year. 2.7 billion of net income and big cash flow -- >> i know you're buying back

stock and i think that's free cash flow obviously. so robust that you can do that but i want to be in david's world for a second i look at these numbers and don't we think that t-mobile, someone would covet that. >> you talked about it on the call, that pending the time warner at and t deal in terms of what happens at the doj, there will be a scramble for dance partners of which t-mo is the obvious choice why did you say that >> the things that made sense a year ago, which is the all content going to the internet, all internet moving mobile there's a scrambling to move and it will be accelerated by the advent of 5g, to either get scale and that's where you've got ideas about sprints and t-mobile and dish and the cable guys have attempted to come into wireless it's been the most anooemic,

embarrassing entry there's dumb and dumbe eser and dumbest. >> you know we're owned by a cable company. i know you do. >> where is sprint >> i don't know what sprint does >> sprint is yellow. >> to the point of your owner deutsche telecom, you're buying back as much as 8 to 9% a year and float only about 25% now it would seem it's going the other way. they seem to be quietly taking you private, you're going to be at 80% soon ownership. >> not even close. let's get down to the fundamental component. in q4 we generated $2.1 billion in cash from operations which generated 1.14 billion of free cash flow. what we announce today is that 2016 including buyback, we expect 46 to 48% compound annual free cash flow. >> understood but people think that's the low end of the range and you're being very conservative. >> 3 million for this 28 -- i was hoping you would be more

like 3.57. >> that's why the stock is not up two bucks. >> for five years i've been doing this here at t-mobile, we've never missed a single number ever. >> are you underpromising and perhaps overdeliver? >> one or lost on the first t, as they say. last year my guidance for post paid was exactly the same as this year. and what we ultimately do -- >> you did upod. >> okay. so you're saying you are typically conservative. >> always conservative, uber conservative. >> those looking at that and saying you only raised bottom by one point at the low end, they shouldn't be concerned >> okay, somebody is going to say, you are only generating 46 to 48% annual growth rate of free cash flow t-mobile come on. this is -- by the way, the tax reform is something we should talk about as well. >> go ahead.

>> tax reform, our effective tax rate is going to be 24 to 25% opposed to 38 to 40. we won't be a net cash payer until 2024 but we have 6.5 to $7 billion of free cash flow between 20 and '27. >> back to the consolidation question, how do you see it all changing in the sense of you 5g, does it really represent a threat to the cable companies, your ability to bring in essentially a wireless broadband product? >> i know we'll run out of time -- >> the most misunderstood thing. jim was at the super bowl. alexander graham bell mcadam did a fixed broadband replacement, looking at the tablet, can you hear me? that's not 5g, that's a tiny component of what 5g is. that's not what it's all about.

>> what's it all about >> a set of standard 10 x battery life and 20x on lay tency. it will be in every spectrum band and ability to connect millions of connected devices, which you can't do if you just set up fixed broadband access frombroadband access from here to there >> it's not about the home as much as it's about a lot of other things being networked >> the exhibition conomics haven proven anywhere. maybe in one house by the way, the application is this if you had sat on your house and home on the couch and watched netflix, after the 5g replacement comes, you'll be able to sit on your couch and watch netflix. that's not what it's about we're deploying a layer of 600 megahertz nationwide, and it will be something you can seamlessly connect devices to. once this is done, everyone will have much more spectrum, much more help.

it will be huge. >> i don't know which is dumber right now, whether you think at&t is dumber, but the dumber guy or the dumb guy, at&t's stock was at $36 this time last year now it's at 40 your stock is unchanged. so is it stupider? are they really stupider jupiter? >> at&t's stock was 36 when mine was 25 play that tape back. it's been dead money forever >> you mentioned the super bowl. it's what have you done for me lately tom brady's losing he lost. the proof of the pudding is i would have rather owned at&t which is a dumb, stupider -- >> 2017, at&t lost 570,000 post-paid phones, including the 280,000 that they bought for window dressing in q4. that's where they are. >> but the direct tv acquisition. >> the directv acquisition was the biggest mistake that ever happened

it's burning down the house. by the way, you want to know what at&t does togrow? they tell their customers, hey, special for one week you can get unlimited, and you don't have to take that dog directv. then all the sudden people come in it's a -- a bundle is not something you want with something you don't want it's two things you want >> why isn't your stock reacting to all this greatness? i'm a stock guy. i'm not taking down 5 million. that's not me. i'm not dumb i'm not dumber i'm looking at stock prices and thinking smarter >> jim, most analysts -- >> watson, come here, i need you. >> analysts have us between $75 and $80 a share. that's generally the one-year target on us we have such huge growth in front of us, both organically and inorganically. >> let's end on that we haven't even talked about tv. to jim's point, there seems to be some doubt about how much

more growth can be in front of you. given the bundling going on, given the changes. >> last point. we have 19% market share 16% in post-paid 2% to 3% in enterprise all the sudden our network now covers the whole country and we have 16,100 doors. so we have tremendous amounts of growth 16% post-paid phone share. we're coming for the next ten. >> meanwhile, you keep throwing out these ideas that you're going to be acquired by somebody, partner with somebody. >> or acquire. >> every time he talks, his stock goes up ten cents. every time i talk, his stock goes down ten cents. it's ying and yang >> jim, watch this space that's all i can tell you. just watch this space. >> i'm too busy watching magenta over there >> all right >> good quarter. >> john, thank you >> by the way, when i'm old and it's my time to go away, sort of

like mcadams, i'm going to miss these times on the desk with you guys >> you can still come on >> talk about the stephenson guy. you never even bring him up. >> we bring lots of old guys on. >> we really got to go, john we can't talk anymore. it's really a pleasure >> by the way, tomorrow from south korea with carl, brian roberts, chairman and ceo of our parent company comcast "squawk on the street" will be right back is the monolithic view of emerging markets obsolete? at pgim, we see alpa in the trends, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge

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♪ good morning welcome back to "squawk on the street." we are live from post nine at the new york stock exchange. carl quintanilla is in south korea gearing up for the winter olympics we'll see him on the ground there tomorrow let's give you a look at the markets a half hour into trading.

we're down on the s&p almost a half a percent at this point worsening a bit from where we were a moment ago. of course, there's a look at wti and the nasdaq of course, we'll start right there with the markets that's where we start this morning. the market is continuing its roller coaster ride a bit. we're going to bring you up to speed on all the action next >> and shares of twitter are surging after posting its first real profit. a deep dive into social media company earnings straight ahead. >> plus, countdown to shutdown congress looking to pass a spending bill by midnight tonight to keep the lights on in d.c. we'll take you live to washington all right. first, let's get straight to these markets. stocks, as you saw, are down this morning the dow has been down triple digits as what has been a volatile week continues. with david, let me start with you more of the same today, you expect should we be keeping an eye out as the day moves along, particularly as it seems we seem to increase in volatility the longer the day gets?

>> yeah, i mean, look, let's put it in perspective. we had a tremendous amount of wealth wiped out basically in a two or three-day period of time all of january gone. there's been a tremendous amount of destruction, if you will, within performance in a lot of big funds, hedge funds in particular a lot of derisking, force derisking that occurred. it takes time for that to heal i think volatility is going to continue, at least for the near term i think people are eyes wide open, again, given the performance hit they just took about jumping in, you know, head first before they start to see things stabilize a little bit. so yes, david, volatility is here for a little while. >> yeah, don, the focus does seem to be to a certain extent on the fixed income markets. yesterday's volatility was exacerbated by that budget deal or prospective deal. people wondering about future auctions of treasuries given that large deficit is it a concern for you? how do you figure rates into this and the market's response

>> so i think we really need some more direction from the fed. we've got a new fed chair. we've got some open positions on the fed board. the fed really needs to give us a little bit of reassurance on what the path is going to be, the new fed has got to i think that the jump-in wages and prospect for higher inflation has investors spooked, especially the bond market the bond market's been ignoring the fed's talk about inflation for the last couple years, didn't believe it. now all the sudden they believe it, and we're going to see rates and yields rise because of that. that's spooking the stock market investor and i think it's a good gut check for investors right here they've been plowing into and chasing, you know, the market higher don't want to miss out on any of the return but you know, it's really tough to hang on to returns in overvalued, late-stage markets >> david, there's certainly been a lot of focus on the fed and what's going on in u.s. treasury

yields if we look across the world, you're seeing a move higher in yields, a lot of focus on the b.o.e. in the k. how much of this is factoring into the broaderer pictu picturr markets? >> the concern of yields is a real concern i say there is still -- with the earnings growth we're seeing, especially in the u.s. market, look at the earnings that have just hit, the amount of companies that have upside surprise in earnings and revenue, you know, analyst expectations for earnings are continuing to ratchet higher i make the argument that there's still a very strong argument to be made to be in risk assets over, you know, a risk-free asset, even at the current rate. i do not think yields are going to have a massive impact until we start to see the ten year peep up to 3%. i don't think that happens in the near term. i think that's going to take quite a bit of time before we get up to that 3, 3.25% range, where that has a meaningful impact, in my opinion, on equities >> given the pullback we've seen

in equities the last couple days, you're a buyer >> yeah, look, i think the pullback, it's an adult swim now. kids are out of the pool adults only. you have to really look at stocks and circle the stocks that you look at as far as quality earnings growth, as far as quality growth dynamics. on pullbacks, buy the stocks you're comfortable with. load up on financials if you're a believer in the trajectory of what's going to occur. i think that's a great place to put your money parts of technology as well. i believe that creates a tremendous opportunity >> don, i don't think a lot of people would disagree with the idea david lays out there, that earnings are moving in the right direction. i think it's a question that after this little shakeout of what's the market going to pay for those earnings, not just in light of interest rates but in light of the fact that we have seen this uptick in volatility we're reminded of the risk of equities and we're kind of the late part of the cycle most likely you're going to see winners and losers get

separated. what do you think that means for how the overall market is going to price this environment in the rest of the year >> so, you know, historically, stocks do really poorly when earnings are falling by 20% or many they also do very poorly when earnings are rising by 20% or greater. we've got earnings expectations on the greater than 20% side that typically stokes the inflation side of the coin as the economy is also very strong, which is what our buildup here is, especially with the tax plan so i think the fear is the fed's going to overreact, raise rates, and shut down the growth and earnings trend we see revenue expectations for the fourth quarter start to weaken so earnings look good because of the tax adjustments, but revenues are telling us that maybe there's going to be a slowdown later in the year going into 2019. if those things line up that way, this is going to be a very tough market cycle i think the market cycle rises

i think you've got to be very careful about just buying on the dip blindly. i think you've got to wait until some of this noise right here that we have that's causing this excess volatility starts to work its way through the system and we get into an up trend that basically is confirmed you don't want to buy on dips because the dips can continue to go down. i think you want to wait for an up trend >> all right gentlemen, thank you both. >> shares of twitter are skyrocketing this morning after the social media company reported a net profit for the first time and returned revenue growth the shares are up 23%. julia boorstin has been digging through those earnings and joins us with more >> good morning to you well, twitter defied analyst expectations by growing revenue 2% they'd been anticipating a 4% decline in revenue while earnings of 19 cents per share beat projections by 5 cents. twitter's monthly active user

are 330 million, falling short of projections because it was flat with the third quarter, though up 4% over the year ago quarter. but twitter did show its fifth consecutive quarter of double-digit daily active user growth ceo jack dorsey saying that changes to twitter's timeline are working, including showcasing more live content, and a new feature called happening now, which shows up at the top of users' timelines. >> this is a first step in a much more cohesive strategy around events. that's both inclusive of all the conversation but also potentially live video, if we have access to that. and you know, this is -- we've been talking about topics and following interest in the past this is one manifestation of that >> dorsey also says they're working not just to eliminate bots, those fake users, but also they're focused on what they call information quality across the platform >> we're going to amplify the

quality content across all of our product and start by focusing on search and trends. we're also going to give more context to identify credible tweets we are working on the overall quality. >> as for the departure of the coo, dorsey says there's no plan to replace him in that role, which dorsey says is a testament to the strength of the team that he built back over to you >> julia, in light of these results, does this take some of the heat off of jack dorsey to choose one company, twitter versus square, which is what we've heard from some critics? >> well, it certainly seems like the changes that dorsey's product team have put into place are working. if today's stock move is any indication, it probably does take off some of that heat it was interesting hearing the analysts ask questions on the call about why they weren't replacing noto, who was going to be taking on those

responsibilities so anthony noto obviously helped the company a lot, not just through the going public process, the ipo process, but also noto was really responsible in a lot of ways for a lot of the revenue and margin growth that we're seeing play out in the earnings today dorsey thanked noto, but it's going to be interesting to see how it goes in coming quarters when they don't technically replace him, just spread out noto's responsibilities. but dorsey must be pretty happy today with that stock move >> julia, thank you. i should also note that great minds think alike in terms of our color choices today. julia boorstin joins us. >> yeah, we're matching. >> thank you when we come back, tesla falling on earnings, reporting its biggest quarterly loss ever. details and analysis straight ahead. plus, more on this wild ride for stocks and what the new fed chairman might be.

former dallas fed president richard fisher is with us after this

welcome back tesla down this morning about 2% after posting a narrow than expected quarterly operating loss, though its overall loss was the company's largest ever the automaker also saying it's on track to meet its recently revised production goals for the model 3. the stock is still up more than 8% for the year. for more, let's bring in an auto analyst at ubs and brad ericson,

analyst at key bank capital markets. colin, you have a sell rating on tesla stock. was there anything in the report or conference call last night that would change your mind on that >> no, i mean, i think i'm still very cautious about the model 3 ram. really impacted by a lot of one-time working capital items we do not expect to repeat we think cash burn will remain an issue as we expect them to get close to a billion dollars in burn in q-1, which means they might have to do another capital raise later this year. >> and brad, how much weight do you put behind your reaffirmed production guidance for model 3? >> you know, i think as they have delayed now six months in terms of ramping the production, or they're six months behind, they're in a very difficult position from a credibility perspective. i think we share the fundamental

challenges and capital risks that poses that colin just mentioned. but investors are kind of waiting i think in this near-term period to continue to see how that develops and the stock probably doesn't crack as much until they see, you know, sort of further misexecution >> colin, one of the longer term bull cases for tesla has been solar city, it's been energy storage, this idea you're not just buying an automaker but also a disrupter to the energy grid, a sort of next generation utility. what was the takeaway in terms of that business >> well, i mean, they made positive announcements about energy storage, which is a business well below what they originally targeted. they said it would be a $3 billion to $5 billion business two or three years ago it's hundreds of millions. so it's a small number solar is shrinking that's a business that doesn't seem to be performing well i don't think my view on either of those has changed we're growing off of a low base in storage and solar

>> brad, the focus for good reason with tesla has been on these production delays and constantly deferring when they're going to get to scale on the model 3, but can we take for granted that the demand is going to be there for whatever tesla can deliver? are we having to rethink how this is going to shake out, whether it's because of competitors getting into similar areas or maybe some fatigue with the brand's performance? >> totally i think the competitive front, setting that aside because that's obvious, there's a lot of competitors coming into this market over the next several years, i think kind of two key things we're watching right now prior to this quarter, our checks picked up the number of blemishes off the initial production run of the model 3 seems to be significant. they have to make sure they continue to produce high-quality cars we think there could be head winds from a demand perspective there. the second thing is that elon backing away from the autonomous

trip cross country last night, that's a big deal. frankly from our perspective, it indicates how difficult it is to deliver that kind of solution. we think demand has been driven by people who believe this car will be on the market in the next six months. we don't think that's likely at all. >> colin, we're showing is video of elon musk from earlier this week after the successful launch of falcon heavy with spacex, his other company. we have a tesla roadster in space right now. it begs the question, what's the succession plan? this is very much tesla, a stock, and you could say this about a handful of companies in the world, where for many investors, they've invested not necessarily because of fundamentals but because of who's at the helm. what's the plan, especially if he were to spend more time focusing on spacex and other ventures >> that's a great question that came up on the call last

night, and a couple years ago, maybe a year ago, it came up he seemed adamant he would stay around last night he considered maybe there's another position if he's not around, that's a huge negative for the stock. people are not only buying tesla, they're buying elon's next great idea, which is why it trades at the huge premium it does obviously very concerned obviously he did say he's sticking around, but something to clearly consider if he takes a lesser role at the company, it would be a very large negative >> well, gentlemen, we have to leave it there thank you for joining us, colin and brad >> thanks for having us. >> thanks. well, the clock is once again ticking in congress. lawmakers have until midnight tonight to pass a spending bill and avert another government shutdown let's get to kayla in washington, who can give us an update >> hey, mike congressional leadership has reached a deal and written a 652-page amendment to vote on that would keep the government open for six more weeks while they hash out a more detailed

budget for the rest of the fiscal year. as part of this bipartisan agreement, federal spending will go up by $300 billion, above old budget caps. the debt limit will be suspended until march of next year it also offers $20 billion for infrastructure, $90 billion for disaster relief, $6 billion for opioid treatment, as well as some other add-ones for health centers and children's health insurance. top senate democrat chuck schumer called it the first real sprout of bipartisanship nancy pelosi chastised the execution of protection for dreamers those votes may be needed in house conservatives continue to balk at the price tag. the president tried to drum up support via twitter, calling the bill so support for defense secretary mattis and the

military, but that might not be enough for freedom caucus chair mark meadows >> obviously i consider the president a close personal friend even if he called me and asked me to vote for this, i'm afraid the answer would still be no general mattis supporting it, i appreciate the fact that he got what he wanted for his military, but at this point, i think it's fiscally irresponsible >> we're still waiting for the exact times on when these votes will happen today. the senate will convene in about 15 minutes as far as the house, speaker paul ryan telling radio host hugh hewitt this morning he feels good about the prospects for passage. david? >> okay, kayla we'll be watching closely. as we head to break, take a look at shares of amazon company announcing it will begin delivering groceries from its whole foods operations via its prime now service. and getting a check on where we stand now at this hour you can see we are down on all

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♪ despite the wild market swings this week, it is banks on wall street that might be rejoicing. after blaming placid markets for low returns for a while, some banks are hoping the rise in volatility could help their returns. for more, we're joined by long-time bank analyst charles peabody, managing director at compass point. charles, good to see you so, is this the kind of volatility that the banks can actually really use to make some hay here and get their trading operations back flush or not quite? >> no, i think so. i mean, with the caveat, you know, that things are fluid and the environment can change quickly. we started off the year on a very strong note in january. middle of next week, we'll get an update as to how february has progressed when you think in terms of market-related activities like trading, investment banking, and wealth management, with variances, it's been

constructive >> it's been constructive. i wonder if it really matters which markets are moving around a lot. one of the interesting things about this selloff is it's mostly been focused in the stock market and you have the adjacent markets. but credit markets have been pretty calm. broad fixed income markets, you know, they've been kind of an their march but not doing a whole lot. so how does that play into some of these banks' numbers? >> yeah, you hit it on the head. as long as the volatility remains in discreet products and in equities, i think we're okay. if we get bad vol, which is usually characterized by, you know, gapping prices, whipsaw moves on a broad scale, which incorporates debt, commodities, equities, then that's when the environment can get tough. but if you look at, you know, trading revenues historically on a quarterly basis for the big five u.s. operations such as

goldman sachs, morgan stanley, those guys, 21 billion per quarter at the high end, 14 billion per quarter at the low end. in the fourth quarter, we did 14 billion. that was kind of where we bottomed in the fourth quarter so i think we're going to get a cyclical bounce from that fourth quarter of '17, depressed level of 14 billion, up probably double digits here in the first quarter. >> that's 14 billion collectively for those banks you mentioned, right >> yeah, that's five banks >> total industry. who's best positioned in this environment? >> well, i think when you look at the rotation that is occurri occurring, i would argue morgan stanley, jpmorgan, and goldman sachs have the best franchises to take advantage of that rotation citigroup probably a laggard there. >> i had a question for you about technology, and specifically blockchain

technology we've been reporting on this for weeks, if not months now, that there's a lot of opportunity for that type of technology to be applied to the financial sectors. is this a good thing or bad thing for the banks? >> yeah, you know, when it comes to blockchain, i will acknowledge i'm not an expert. but i think in terms of the environment out there to the extent that blockchain adds to transparency and ease of transaction, that's probably a good thing long term >> all right definitely have to focus on the long-term when it comes to the blockchain stuff charles peabody, compass point, thank you very much. >> my pleasure and when we come back, former dallas fed president richard fisher is with us. we'll get his take on the wild ride for the markets this week and what he sees in store for rate hikes as jerome powell takes the reins at a suddenly very interesting time at the fed. getting a check on stocks right now as we head to break. all the major averages are lower. the dow is down 190 points right now.

"squawk on the street" will be right back what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley

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i'm kate rogers. here's your cnbc news update at this hour. vice president pence meeting with south korea's president in seoul. in welcoming pence, moon saying his hope is that the olympic games leads to dialogue for the denuclearization of the korean peninsula. pence reaffirming the strong bond between the countries >> as the president said in his visit to the republic of korea, south korea is a testament to the freedom and capacity of free peoples to create prosperity and security >> north korean leader kim jong-un attending a military parade in pyongyang. in a televised speech, he says the parade marks north korea's emergence as a global military power despite facing sanctions and back home, amazon getting ready to roll out two-hour delivery at whole foods

this year to those who paid for amazon's $99 a year prime membership deliveries will start today in austin, cincinnati, dallas, and virginia beach the service will be nationwide by the end of the year and that's our cnbc news update for this hour. now we're going to send it over to dom chu for the eia inventory report >> kate, figures just in from the energy department with its weekly look at natural gas inventories. supplies were 119 billion cubic feet that compares to the estimate of around 112 billion cubic foot drop checking natural gas prices, they're up by about 1.5% so far. they were about 1.25% higher just before the report so david, we are seeing a little bit of a movement here in those gas prices back over to you >> okay. thank you, dom chu treasuries are under pressure this morning, even as fears of aggressive fed tightening weigh on volatile equity markets analyzing the road ahead for stocks and the economy is former dallas fed president richard fisher always nice to have you.

let's start off on the deficit, richard. are you concerned about where we may end up this year we had a tax cut that's obviously going to generate some say as much as a trillion-dollar deficit. this budget deal doesn't seem to be helping concerned about the fed being out of the market, qe no longer the case are withe going to watch rates up >> i think some of it's being discounted right now if you look at the ten year. it's pushing up to 2.90. it's moved quickly from the 2.60 level over just a matter of weeks. we do have an increased supply in treasuries. more is expected the market is discounting that by readjusting the price if you look at the ten-year auction, for example, it wasn't quite at the same level as the quoted rate. so i just think it's a minor price adjustment i don't think it's that dramatic but nonetheless, the market is adjusting to these expectations. less guying from the central bank and more issuance from the treasury on the fiscal side.

this is a natural order as far as i'm concerned >> right is inflation also part of that natural order? >> the inflation numbers, which pretty much have been forecast by the alternative measurements done by the new york fed not as surprising the fomc has been looking for the 2% intermediate target to be met. we're finally pushing up against that these wage numbers that came through or total comp numbers. it's something that the fed wanted to have we've been wanting this for a very, very long time so i think there's nothing dramatic here, and as far as the volatility is concerned, i think a key point is if you look at the statements being made by bill dudley yesterday, my successor at the dallas fed, who's good on market operations and markets, everybody's been talking about the fact that this volatility isn't necessarily bad from the standpoint of the economy. it's showing that financial

assets are adjusting finally it's not a one-way street. i've been amazed how all the bank presidents, pretty much, and certainly the former chair on sunday morning, talked about the fact this doesn't spook the fed. i think it's pretty clear unless something super dramatic happens to the economy, they're going to continue on this path at quarterly point increases, maybe even four this year, and continue to pare back the portfolio. it's been well telegraphed everybody expects, and i think the market's adjusting accordingly. >> are you concerned with the weakness on the dollar right now? >> no, because i think fx markets, which i started my career in back in the 1970s, they come and go they're manic-depressive mechanisms like every other trading market we do have a weaker dollar right here it should help our external balance position, although it hasn't of late it doesn't tell me a whole lot because we had a very strong dollar for a very long period.

now we're seeing a reversal of that i don't think there's anything unnatural there either it does affect, of course, earnings depending on how you're positioned internationally and globally as far as specific companies. i don't think it's something that really throws the whole system at kilter to me, it's a natural ebb and flow we have a strong dollar, we have a weak dollar now. i'm not surprised the pound is back to 1.40 givnow, but thingsr not terribly out of order in my personal view. >> richard, you mentioned that the message from a lot of the fed officials has been pretty steady as she goes in light of this pullback. what's also interesting is how the treasury market did not react as we've become used to. when you see one market get panicky, you did not see that kind of flight of safety coming down i wonder if the message of that is, you know, the world no longer fears deflation as it once did a few years back.

but what does it mean for how -- how high would market treasury yields need to get before the fed got spooked? if we got real momentum in the ten-year yield, does the fed have to rethink the pace >> the fed, of course, focuses at the short end of the spectrum of the yield curve, particularly since they started pare back on their portfolio. i think the general view is the market moves the ten year. although, we hammered everything down across the yield curve under the emergency actions we took with qe i don't think this is going to deter them from the orderly methodology they've approached to taking quarter-point increases almost every quarter and just keep moving up. i view this not as anything other than a risk management exercise at some point, the economy will turn down. it's been given a boost here by deregulation and by this tax package that went through. but they want to have some money in their pockets so they can cut rates, mitigate a down turn to

when to curs, whenever tit occurs and if you listen to chairman powell in his congressional and senatorial hearings, he talked about a neutral rate of 2.5% they seem to be progressing orderly in that direction. three rate cuts will get them to the floor. i don't see any reason for them to deter that and let the markets figure out where the ten year should rest i think that's what's at play presently. >> richard, i got to ask you about the crude market, especially given all your time in texas u.s. production hitting 10.25 million barrels per day yesterday, record numbers. there seems to be a lot of push and pull in terms of this news in the energy market from your point of view, is this a good thing or bad thing? >> i think it's a great thing. god gave us the greatest gift of all. the gift of texas was a gift to the nation we have enhanced recovery techniques that i think will continue we know there's a solid base of

oil under the earth in this part of the world, in the united states the recovery methodologies are increasing csignificantly. i expect us to get up to a production level of, say, 11, maybe 12 million barrels that's really a remarkable amount if you look at it economically, it provides cheap energy, brings more people into the business, puts a cap on prices and trades in a $40 to $70 range. i think that's going to be sustained for a while, for quite a while. and it puts us in a great position as far as our diplomacy in the middle east, and it affects our positioning in the world broadly, including vis-a-vis the russians so we're in a very good position this is good for america and i think it's good for the economy as well. >> richard, finally, you're no longer on the board for the fed, but you are on the board of pepsi and at&t i know you're got going to divulge anything, and i'm not asking anything specific to

those companies, but i'm curious to your sense how business is and the economy overall, ginn y -- given you get a first-hand look at their businesses what's your sense overall in terms of how things are right now? >> i think generally, without getting into specifics -- buffett said this the best, which is we had a super shareholder that took a disproportional, 35%, of the take in the aggregate. that's been lowering to 20%. now the rest of what you take, what you make in the marketplace can be allocated to your shareholders and your stakeholders so i think this has been a big boost, not just for big companies like the ones i serve on the board of. but especially for small and medium size companies. the banks are in better shape right now. they're better positioned. they're lending money. the net interest margins are, of course, narrow ginn the spread between the short-term and the long term. but we have an active economy.

ic i thi-- i think the most impn thing has been the attitude towards regulation taking place under the new administration that's a real boost. without getting into specifics of each company, generally speaking, when i speak to ceos around the country, whether they're large companies, small, medium size, women and men that operate the real guts of america, they've been tremendously encouraged. you see it in the confidence numbers. you see it in the nfib, independent business surveys it's pretty much across the board from small to big companies from nfib to the round table. there's an optimistic attitude right now and it's good for job creation if you look at the unemployment claims we just got and take a four-week average, it's the lowest since 1973. it's a great time for american business >> takes us back full circle to talking about wage inflation richard, thank you appreciate your time as always richard fisher >> thanks so much.

and now for our etf spotlight. >> good morning. we've talked about how a small niche area of the etf universe, leverage and inverse volatility funds, may have played a part in the volatility on monday, but there have long been questions about whether the broader etf universe, the guts of the etf business, how they'd hold up under stress the answer for this week is they're doing fine the biggest etfs out there traded titanic volume this week. take a look. the biggest etf, the spyder s&p 500 traded twice normal volume on monday and more than three times normal volume on tuesday, all without incident same with the nasdaq 100 this is another one of the big ones three times normal volume on tuesday. no incidents same with the russell 2000 iwm here, also three times normal volume on tuesday also without incident. now, the largest etf provider, blackrock, which runs the

ishares suite released a statement saying overall etf trading was orderly and investors turned to etfs to express their views in a fast-changing market this is not the first time the plain vanilla etf universe has been tested. we saw similar titanic volume in 2011 during the european debt crisis with no issues. there were some issues when the chinese devalued the yuan in october 2015, but it was not due to the etf structure, and those issues have since been addressed. as for fund flows, as of the close on tuesday, that's the latest we have the numbers for, all etfs are seeing outflows of about 16.8 billion that's for february month to date this is a very modest outflow number given the nearly 70 billion in inflows we saw in january. i hope to update this at the end of the day meantime, volume in the spy, the biggest etf, remains very heavy this morning the trading has been very choppy look at that there it's another sign this volatility trade we talk about has not yet settled down mike, back to you. >> bob, thank you very much.

a quick programming note as we head to a break tomorrow on "squawk on the street," we'll take you live to pyeongchang, south korea ka carl quintanilla is getting ready to kick off our coverage there with an interview of brian roberts. don't go away. tomorrow, it's a day filled with promise and new beginnings, challenges and opportunities.

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get this, nearly a third of dow components are in or near correction territory bund out which one's maybe worth a y on trading nation. more "squawk on the street" coming up.

your an amazing machine. especially when inside another amazing machine. the lexus es. with standard technology like lexus safety system plus. the lexus es, and es hybrid. experience amazing at your lexus dealer. welcome back a quick check on markets right now. the major averages are in the red. we're near lows of the day the dow is down about 257 points, about 1% the s&p down about 0.7%. the nasdaq also down about 0.8%.

now let's get to the cme group in chicago with rick stan telly with the santelli exchange >> good morning and thank you. i'd like to welcome my special guest this morning, professor richard epstein. professor, thank you for taking the time today >> glad to be here >> listen, i'll tell you what. climate change a big topic, especially for many large cities, states, municipalities, and there are lawsuits they're going after big oil and trying to sue them the same way as big tobacco was sued decades ago with the notion there's going to be some financial costs associated with climate change and energy companies should pay up in a turn of the tables, exxonmobil seems to be going the other direction, saying if that's true, why isn't there any of this in the muni issue with the future financial liabilities. can you weigh in on this issue, professor? >> sure. i mean, generally speaking when you have an inconsistency, it's

possible that both statements are false. it's absolutely impossible that they're both true. but if you look at the incentive structure, anybody who's selling a covenant bond knows if they make overstatements or exaggerations, they're going to be hit very hard by the securities and exchange commissions, and if they basically make a very gloomy projection, which is unjustified, they're going to find they're going to have to pay very, very high rates of interest so they're locked into telling the truth under those circumstances. when you file the complaint, any degree of exaggeration is essentially without any adverse consequences so the differences between the observed numbers and the projected numbers are remarkable one statistic, the amount of sea level rise in the last 20 years is about one inch. they're projecting six feet over the next 80 years. that's clearly way over the particular top and in terms of the situation that you mentioned with respect to tobacco, this is what i would want to say. i actually worked for a long time on some of the tobacco cases.

the issue there was whether or not you wanted to ban the substance does of its toxic effects. when you're dealing with oil and gas, nobody, including these companies, are saying we can do without energy all of these plaintiffs, in fact, rely on the various kinds of petroleum products for their own kinds of behaviors if you need a sensible system of regulation, you can do that in a thousand different ways, but erratic, independent lawsuits in separate courts by separate people is the wrong nugs constitutional w institutional way to go. what you really need to do when you look at the situation is not take the exaggerated statements where big oil becomes an epithet but actually look at the situation on the ground where the behavior of the energy companies today is better than it's ever been >> professor, that was a nice sensible approach. i can tell you this. the muni market is a large, large market this could have big ramifications, but it seems as though the exaggerations on the

claims to sue big oil might be equally responsible on the other side somewhere in the middle, there's a truth here thank you for your opinions. i hope you join us again as these lawsuits work their way through the 20ers this this morning after earnings levels they isn't seen since the summer of 2015 d this a big turn arounfor company or should we be watching the user numbers that's coming up on "squawk alley. but if things go wrong and an employee takes action against you, legal fees to defend yourself can be huge, even if you're not at fault. employment practice liability insurance helps cover these costs. trusted choice independent insurance agents represent multiple insurance companies

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welcome back to "squawk on the street." markets as you can see there towards the lows of the day. taking another leg lower midday trading. every sector in the s&p 500 is in the red with economically sensitive sectors leading to declines if manies one of those taking a hit. you have prudential, intercontinental exchange and all state all among the biggest laggers. certainly a sector to watch given the changing dynamic

back to you. >> dom, thank you very much. that changing dynamic includes the ten year treasury yield getting up to 2.87 which is perhaps one of the reasons that you see the dow there down more than 300 points. yesterday's action, you know, there was a lot of up and down going across the flat line a few times. the close was disappointing. i think a lot of people said we don't have a reliable sense of where real buyers are coming in. markets still -- still seems very fragile and sensitive to the treasury yields. the s&p 500 and dow are 2% above the lows of monday and tuesday so not too much of a cushion there. a lot of people think when this kind of thing happens, you have to go back and retest, see if the lows hold. we're in technical trading mode now. >> yet, when you see what's, i guess, the best performing sector today within the s&p 500, utilities. it just turned green fractionally and you're also seeing another safe haven, consumer staples seem to be doing better.

>> surprising given that yields are going up >> exactly that's why i pointed out >> they're working when they haven't recently as havens >> one of the better performers, viacom, surprisingly the numbers reported by the media and entertainment company were not good for the quarter. the commentary on the conference call from the ceo and the cfo seem to -- well, turned it around they believe full year domestic affiliate revenue will decline in the low end of mid single digits that's a 200 basis point improvement. that was helpful as well, they said domestic ad revenue will improve they see it going positive in the fourth quarter and then, of course, do you have the prospect of the deal with cbs which i've talked about many times. that will involve the engagement plaintiff bakish, leslie moonves and the participation of special committees of the board of directors. but as i said before on all sides close to this, there does

seem to be a lot more optimism they'll get a deal done than the last time through. certainly numbers like that or guidance like this can be helpful when you're entering negotiations >> i was going to say, with taking disney, 21st century fox, viacom, cbs altogether, are we getting a picture of tv kind of stabilizing a little bit >> the affiliate feed growth has still been there how can they keep growing when everybody's cutting the cords and how are the distributors able to continue to pay? so there is that advertising is still weak though >> yes >> to be fair. more or less across the board. >> it's all relative to expectations of constant declines so hard to read. >> i also wonder with disney giving us a little more detail about what they're over the top service is going to look like, whether that makes the case even stronger for viacom and cbs to merge. >> it does scale is of importance more than ever i think that decision that r rupert murdoch made to think that he couldn't compete with netflix, apple, amazon, facebook

or alphabet really changed everything in many ways. people are still reacting to it including the prospect of cbs and viacom all right. as we head to break, take a look at take two interactive. making better than expected quarterly numbers on games due to the u.s. tax law. revenue missed forecast. the sales outlook didn't please people strau strauss zelnick is coming up next

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