up 63 points above fair value, s&p up by 2.5. nasdaq down but at this point only three points. also, wti at this point looks like it is up about 40 cents 61.36 a barrel is the last trade. finally take a quick look at 10-year, pz been trading just above 2.8%. >> join us tomorrow. quts squawk on the street" begins right now ♪ >> good thursday morning, welcome to "squawk on the street." i'm carl quintanilla and cramer at one market in san francisco looking forward to having him on set tomorrow rick san telli with peter navarro. can't miss that. futures in a tight range overnight. s&p trying to avoid the longest

losing streak of the year. europe is mixed and the 10-year in its 15th session in the 2.8s and road map begins with mr. kudlow goes to washington. larry kudlow succeeding gary cohn what will it mean for the markets? >> the biggest loosening of banking regulations since the financial crisis a decade ago. >> slight gains at the open as investors try to shake off concerns surrounding global trade. first up, larry kudlow is going from cnbc to the white house he's accepted the president's offer to succeed gary cohn as director of the national economic council this morning the president tweeted about kudlow adding our country will have many years of success with low taxes and unparalleled innovation and fair trade and ever expanding labor force leading the way and kudlow outlined his economic vision yesterday on closing bell. >> if you keep tax rates

minimum, if you keep regulations and government spending minimal, if you keep the dollar sound and steady, you're going to have a terrific economy if government has a modest approach and let's people do what they need to do and allows the freedom to do it, we will do great in this country. we're already i believe on the front end of a tremendous investment boom. >> guys, larry is always pretty candid jim, he said feds shouldn't overdo it and said he would buy the dollar, sell gold. said china needs a come uppance on trade and might even take the form in his view of a coalition of countries who say you've been getting away with murder for years. >> look, the coalition has to be built because it's clear if it's united states versus china, china will find a way to get around whatever we're trying to do i like the idea of coalition building what i want to know from larry,

when rick santelli has peter r navarro, the idea he's favor in subsidies for american industry, rather than putting up tariffs puts him at odds with the entire narrative that the president was developing got to figure out where that comes out. it's not just china. it's the notion of how to stop predatory practices away from china from anywhere and larry is not on board and we've got to find out if he's going to be >> you know, of course it occurs to me having all of us having spoken to and been with larry for many, many times for many years, you certainly jim having had a show with him for many years, the tax battle has already been won, right? in some ways where he weighs in very much, he got what he would have wanted most likely with the tax cuts enacted late last year. >> unless this phase two talk is for real. >> i guess. >> it's very for real.

look, larry is about cutting taxes to grow the economy. he's not about the economy is really growing quickly, we don't have to cut taxes. he's about cutting taxes i've never been seen a tax cut he didn't like and i don't think it really matters how strong the economy is growing he wants to put through reform, lower taxes. who do we want to have lower taxes for in larry 'regime he felt if the rich had lower taxes it would be better for the economy. >> i've gotten on him about deficits the last few months since the tax bill and also the budget which raised the deficit another 300 billion or so. >> right. >> he never has been a big deficit hawk though, right, jim? >> no. what he is is a believer like with ronald reagan that growth cures everything free trade and growth. if you get free trade and growth, you get big corporate profits and everybody wins

that is -- someone earlier saying he's not idealogical on the morning show that's wrong he's completely idealogical. there's a lot of stuff being said larry is my partner and we duked it out every day, he has a reagan agenda, to keep tax lower, lower -- and continue to get growth and that's going to solve everything, including the deficit. and look, that's his view. it's not new or old. it's him and it doesn't necessarily jive with what you're saying about deficit hawk because not a view on the deficit other than if it helps the economy grow, it's good. >> that does jive with what the president hinted yesterday, that he had been talking to kevin brady of ways and means about this phase two, which the like -- the framework of which we could see this year, jim, which might involve making individual cuts permanent, been some whispers about capital gains and they are insisting

it's not a political ploi ahead of the mid terms but something they want to push before 2018 is over >> larry doesn't believe in taxes and capital gains. he doesn't think they should be taxed. in his heart of hearts if you want to a tax lower than ordinary income, fine. larry doesn't think it makes a lot of sense to have the taxes larry believes that -- i'm not saying if you shut off all for engines of an airplane, it glides well. he fights for a certain point of view i believe we fought for lower dividend taxes and we got them and it helped people get vested in the stock market, which is good i'm not taking a facetious view but larry will fight hard for lower taxes, much lower than we currently have these are way too high for larry. way too high >> jim, it's funny, cohn seemed to be involved in a lot of

things that wouldn't necessarily fallen under the direct purview of his office. i have no idea if that's going to be the case for larry do you have any sense for that >> well, i think that larry brings a sense of history. if reagan did something that helped the economy, that's going to come up in the room you're going to hear it. and gary i think really came -- gary is a globalist. wow. you know, larry is going to toe the line of what the president wants him to because larry doesn't want to lose his job he loves his job i think he'll touch on far more reaching areas than even gary and it's going to involve growth, growth, growth anyone who stands in the way of growth agenda will be run over by larry >> one last thing -- >> and done in a nice way. nice way. >> no, he's unfailingly polite we know that about larry he did make some statements yesterday, jim and david, that appeared to bridge some of the

differences we had thought he had with the president with on trade specifically in china. take a listen. >> china has not played by the rules for a long time. i have talked about that intellectual property rights, corporate technologies, other barriers trans shipments to get around things a thought i have is that the united states could lead a coalition of large trading partners and allies against china or to let china know, that they are breaking the rules left and right. that's the way i'd like to see. >> all right, so did larry get net more hawkish, jim? >> i think it was a quid pro quo. i think there's no way that larry was offered this job unless he toed the line on this. there's no doubt about it. he's going to follow the president's lead or he would not have been offered the job and couldn't take the job. i think that you would be fired if you didn't.

and the president seems it was very good at firing, i was a judge on the apprentice show you deget fired if you don't toe the line there's no distance between the president and larry right now on china, none. >> jim, key mapart of this job to be able to see things that are not necessarily going to be positives for the economy, be able to recognize them perhaps and advise the president and administration properly. you know, larry is so optimistic, do you think sometimes it might get in the way? >> well, look, i met dana milbank, a reporter for the "washington post" through larry. he used to come on "kudlow and cramer" there was a stinging piece how larry was too optimistic during the down turn. things are a matter of record. i made many mistakes and said things that were wrong we all know -- it was a real bad downturn but larry stayed optimistic and in some ways is

it our finest hour kind of optimism no it was just i think misplaced. but people make mistakes and milbank had the quotes and the quotes were devastating and you move on from that because we all are able to be quoted and have devastating things said. i think that larry comes in with a true north growth agenda and that's what he stands for and can he be too optimistic at times? i think we can all be too op optimistic at times. i think milbank was evisceratin and it wasn't right. there are many ways to cut a lot of different slots as we call them in the business and that was a unfair terrain against a very good man who is an optimist at heart. >> yeah, does look back at the call he made about a recession in december of '07 when he said one was not coming we did get one but to jim's point, we're not infallible meanwhile, the senate has

approved legislation to roll back dodd frank banking rules. they voted 67-31 to pass the bill, to allow smaller banks to focus more on community lending and exempts firms with less than 10 billion from the rule it could risk another financial crisis and goes to the house now for consideration, guys. but it did bring members of the centrist democratic caucus to make this thing happen >> yeah, along with the mid-sized banks have been complaining what they thought was more onerous regulation than required because of their size a large asset number but it's misplaced because it is not as though they are at risk assets also getting a break here. generally, jim, a positive -- not the big banks we watch so closely, but some of the names we don't talk about as much perhaps. >> total kinard discussion about this we have to have it family farms and small business and community bank, love, love, love i mean, i pledge allegiance to

family farm and community bank let's understand each other. what's going on here, the president has pretty much destructed -- stop bringing cases against the big banks. you can roll them back, keep them no more cases and there is no business, no legal business being done against any of these banks. all cases are over and the way you change is not just to roll back regulation but stop enforcing regulation. this is kind of a codify something that's been going on since the president took over. >> lifts the too big to fail threshold to 250 billion from 50 we'll see what kind of impact that has on the smaller banks today. still to come, guys, white house trade adviser pete er navarro, santelli will have that at 10:30 a.m. you cannot miss that s&p trying to avoid the longest losing streak of the year. hasn't been down four straight since december

for the month s&p is higher but dow is down 1% we're back after i break you could simulate confidence or you could experience it for real at the lexus command performance sales event. lease the 2018 nx 300 for $339 a month for 36 months. experience amazing at your lexus dealer.

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streaks. on wednesday the dow fell 249. boeing having the most negative impact on worries about a trade war with china you look at the chart of boeing versus the dow, boeing really literally did take off and now come back in line with the overall index, down 10% for the month. what's going on? >> look, there's an underlying theme here that's not just china. i think the most respected analyst in the entire aerospace group, he came out with a piece yesterday, the quarter is not going to be as good as people think. the estimates are just probably not going to be made they have to come down a lot of us deal with bottlenecks and units shipped in february and i think it was the idea that the numbers are too high that really got this thing rolling in the second flight down the first flight down, you could link that with caterpillar and idea of being tough on china it was an actual story about boeing's earnings and today we have a pushback, bernstein

saying don't be so worried about it the business is solid. when a stock is up from 279 in december of 2017, you have profit taking here the quarter is not that great. >> people looking at volume on boeing, versus this time last year you get the sense that some guys are trapped in there having bought at lofty levels >> i think that it got ahead of itself when i was using a $400 price target out 18 months, when i met with mulen berg in december and the stock did then went up 100 straight points, it just literally on the big cash flow, the dividend boost and the buyback boost, i would not sell this stock all of those are still there i think they may have had a week february but the demand is off the charts i come to the conclusion that boeing will not be targeted by china. if boeing -- if they are going to target something, it won't be the one thing they theed, which is boeing airplanes.

they have a agreeing midd growil class. you can't get enough planes on airbus -- >> if you're china, what do you targt target >> boy, that's a great question. they are trying to figure out who to make a statements against. we talk about ag -- >> ag is important don't think they haven't already identified districts and things to put political pressure on particular senators or congressmen as a result of we're not going to buy soybeans anymore, for example >> how about blocking some tech and kicking companies out -- >> i know, listen, we come back to nxp but i have a hard time seeing them do something on that it's an anty trust review. broadcom is not even a chinese company. why choose that one. it doesn't make sense. >> look, i don't know. an upgrade today, the notes and stock going to report it for the

close. the company is cheap obviously he have to start buying back stock if they can't make acquisitions. i struggle because the natural ones will not target alphabet. alphabet is not there. attacks on facebook, that doesn't work not netflix, traditional faang stocks, maybe apple. i keep searching thinking that is not going to happen they employ too many people. >> why all of the honhai precision employees that's a good point. but apple -- national champion, isn't it and you would be helping potentially? >> look, apple at all time high two days ago i think apple is the one in the back of my mind of two birds with one stone they can say, look, we like wawai, we're going to make it so ample is more expensive and risk that they say, you know what,

we've got to take it that could happen but apple can assemble in a lot of places. and china by the way -- can we understand, china is not the cheapest place on earth to make anything china is expensive versus a lot of other countries and china has had to do that, give workers wage increases and china is trying to do something against pollution. we always think if we don't make it in china, there's no place cheaps i have gotten places cheaper than china right now. >> mexico, so much cheaper >> we'll count down to the opening bell if a few moments and look at the premarket. tight range overnight, we're back in a minute where can investors seek predictable income in an uncertain world? pgim sees alpha in real assets. like agriculture to feed the world. and energy to fuel its growth. real estate such as e-commerce warehouses. and private debt to finance transportation

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seven minutes to go. we'll do a cross country mad dash over to jim who will talk a little dollar general. >> i think we're starting to understand that there are no longer two big serious dollar store competitors. there's dollar general one and dollar tree a distant second dollar general numbers today, 595, street was look for 566 much better street comparable sales it is looking like dollar tree was a bridge too far dollar general adding 900 stores. these are no longer duopoly, only one dollar store to invest

in, that's dollar general even as i told you i like shopping at dollar tree much more. >> interesting this was a -- lbo, successful one. >> same time as toys "r" us, became public at round 17. look where it is, same thing, same time as toys "r" us, one company came out much stronger and other much weaker -- >> takes we're getting this week that it was private equity and debt that killed toys "r" us not amazon, is that fair >> look, in 1999, in the fourth quarter of 1999, toys "r" us had minus 2% comparable sales for christmas. talking about right around the turn of the century. toys "r" us, amazing thing it was alive at all the fact is when you add both tarlgt and walmart on one side and amazon which had a partnership which they violated in 2004, you had nothing

there was no raise on debt for toys "r" us. >> 800 almost 900 stores and 30,000 workers that's going to be some real estate that they are going to have to fill somehow. >> we're going to talk about those vintage -- >> 100,000 workers. >> from that '06 period as well. all right, jim -- >> this company was on the ropes. it was on the ropes forever. >> yeah. >> dollar general "r" us was on the ropes. >> got it. stay with us fire fighting is a very dangerous profession. we have one to two fires a day and when you respond together and you put your lives on the line, you do have to surround yourself with experts.

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you're watching cnbc "squawk on the street. the opening bell in about 90 seconds, busy morning, market reacting to kudlow going to the national economic down council senate rolls back regs on banks. jim, people still shaking their heads how you print 300,000 jobs in a month and retail sales go negative for the third straight

month. we haven't had three months down on retail sales since 2015 >> yeah, look, autos are weaker but some people will say gm has a better number. i continue to think we're not counting these numbers right something is wrong with these numbers. people are spending. we can use home depot, they do the best work in terms of actual macro spend. it's up big. these numbers are not -- ecommerce wasn't counted right it can't be. e commerce is too strong to make me believe in these numbers anymore. >> depot, at 177, you're getting close to levels there from last thanksgiving >> there's a lot of people that feel it's a rate play. and if rates go -- if tickets read and stock goes down to 160. the company said don't worry about rates, that didn't reassure anybody if we get good five weeks of weather starting next week,

you're going to wish you bought it but it's going to be a weather play their christmas is the spring. >> speaking of rate plays, watch the curve today, 54 basis points is the lowest since january or so there's the opening bell at the big board, biosciences a developer of cancer immune know therapy, celebrating an ipo and human rights watch as we see it fill in nicely quadruple witching this week which might lead to artificial volume today and tomorrow. >> look, we -- this market has changed its stripes and it would be great to see volume verified in some way but we've had interday and sessions and three sessions yesterday it is becoming very we'ry some and tiring and i think a lot of people are saying, who are these jokers who come in every morning and buy the market and get their

heads slammed? i come back to the pajama traders, they were bidding things up yesterday and they give up between 5:00 and 6:00 a.m. like they got the point maybe this day could be a little better for all i know at 10:30 when rick santelli interviews peter no vario navarro, might hear this is the time to put the pedal to the metal. that kind of talk sends stocks down. >> big interview. >> yeah, that's going to be a big interview. >> specific names, jim you and i covered unilever fairly closely when the failed bid came -- failed attempt really from kraft heinz. interesting and worth noting and a worldwide subject, more important perhaps in the uk, unilever announcing, its corporate structure will be simplified into one legal entity and that's going to be based in

the lednetherlands, not the dua entity which has it in the uk and netherlands. the company also now making it very clear it's got three divisions, beauty and personal care, home care and foods and refreshment. and that's what you're going to deal with. taking the hpc business, having that head quartered out of the business, perhaps assuaging the fears that brexit would mean a total exit from them from the market they get rid of the shik ting, which i like to be able to say it's unfortunate i won't say it as often when it comes to unilever and go by what is now uk and dutch corporate governance codes some people saying that should alleviate concerns about rising protectionism. jim, any thoughts? >> i think paul pollman is one of the great ceos in the consumer package goods

i've got ben on from clorox, he's terrific too. this is so under pressure. it's under pressure in the channels and from the raw goods that is needed to be able to make the different -- packaging that comes in and under pressure from mill len yells who do not have brand loyalty in the end you've got to cut costs and cut costs and cut costs and it's still not enough. look at kraft heinz, if you cut krost enough, what happens your stock goes down even harder. >> when your strategy is based in part on the next yield and the ability to cost costs on whatever it is you're acquiring and aren't able to do a deal, yeah, that's the problem not to mention when all of the competitors adopt similar zero based budgeting and as you pointsed out so many times, you're focused on the center where millennials have no interest >> they do like the frozen food aisle. millennials have a little money. the conagra frozen food i'll is

doing aisle. they have too much debt -- discretionary income they like to buy video games and buy expensive beer and watch netflix. >> unilever in the uk, 88 years, almost a century. >> one of great companies. >> national starch. >> still have the listing, the stocks will still trade in those places but only have legal headquarters in the negligether. >> they are all tech companies now. >> what do you mean? >> unilever works close with sales force to figure out personalization and where the puck is going, and the reason i mentioned this, look at unilever and dollar shave club. they recognize that millennials hate the big plastic packaging and the whole lock and key thing, it's easier to get into a chase manhattan bank vault than into a gillette shave.

and they recognize that and did dollar shave club. even then it may not be enough to make it so you can kpeecompen a world with amazon is driving prigss and amazon stock is down even though it caught another price target this is one tough market >> is that allowed to go down? i thought they passed some ort of a law -- >> let me check that. >> amazon has to go to 2000 -- >> just passed senate. >> we talked about a bit lately you used to like, allergan, the comments from brett saunders at an investment conference, he expressed concerns around the disconnect between the share performance and fundamentals indicated all things are on the table in terms of options to address what is that disconnect. though did not go where some analysts would like him to, talking about a potential split-up of the company. >> yeah, my charitable trust owns it and it's been terrible, but great lately

i think brent fieeels under the gun. i suggested in my letter, if he does the face and the body and the biotech the fast growth, you can get $190 in a base case, at one point i thought 230, that's too optimistic when they lost the exclusivivety on that that was a cash cow. it pambecame a story of debt coverage they have plenty of debt coverage but the bears have been winning on this one. brent trying to take it to the bears, i don't know how much more upside there is talking about the parts without making it some of the parts. >> right for its part, citi weighs in and says their part suggests $210 a share, jim. >> right i can get there. >> but to be clear, he's not discussing it simply saying sort of all options are on the table. remember the deal they did with the native american tribe as well for that drug

that came and went. >> that was ill-advised. i thought that was ill-advised, kind of a -- look, they are trying to get it so they could be -- there was a reason for -- legal reason but it came out as desperation. and i think brent realized it did seem pretty desperate because it kind of hits you like really, like an indian tribe and patent -- huh? that actually i think cost the stock 10% of its value >> guys we covered retail with dollar general, sears though comps down 18. 18.1, that's sears 12.2 -- >> that's a suboptimal figure. >> i'm amazed they have that much still left to lose. >> give up, sort of think you would -- listen, it's got a 270 million market cap, it's controlled by. there's nothing to talk about here from an investment perspective, the only question is, does it file or not. jim, and new loan commitments, they managed to maintain

liquidity but it's not a player anymore -- >> no, but -- >> still employs a lot of people. >> there are 16 billion in sale -- 15 billion in sales. what i tell you, when you listen to carol tomei, this is one of the greatest share donors of all time as long as it keeps losing business, home depot can continue to have great numbers it has that much it's just a gift and it's a gift that keeps giving even though trying to put a good face on it. what do you do have down '18 numbers, signs that don't shop here, please don't come in here? our prices are highest we're short supply what do you say to -- stop, go elsewhere? >> it's funny -- >> on the flip side. >> it's a negative narrative. >> williams sonoma beats by 7 cents, revenue above, guides strong and buyback added see if it can break out of

mid-50s, it's been years. >> this markets is not a great market right now the stock goes up three in the afterhours and now does nothing. we didn't talk enough about cignet jewelers, that stock trying to find its footing, down huge mall if it's the mall people are skeptical eastbouven if you put good numbers i don't know who keeps coming in and buying things higher, they are just getting their head handed to them let stocks come in and stop being excited about anything retail unless it's dollar general. >> guy s worth noting our paren company stock down 10% for the year do we have like a sound effect to play? >> the old squawk would have done it. >> they would have below 36 you know, obviously they have yet to take from a 2.4 to a 2.7, meaning a formal offer for sky they are trying to get 50.1% there. this is going to play out over the next few months, probably doesn't get really going in or

significantly until june as i reported previously, does appear they are going to face competition from disney for the asset itself they are going to not stand back and allow it to occur. they already will own it when the stock becomes complete will comcast come back to compete for the fox asset if the doj loses the case against time warner and at&t and their ability to merge that's going to start next week. we're not going to know the in and out come for some time but the expectation is if in fact the government loses comcast will come back to compete on an apples to apples basis and continue to drive a wedge between disney and fox in some way worth watching but investors jim, they don't love it right now. although they haven't in the past but roberts is aggressive >> patience is required and there have been periods where comcast has been very aggressive and initially it wasn't liked then ultimately it's been one of

the great growth stories of all time there are lulls and this is what i regard to be a lull. i saw a note today about via com, saying that stock could be -- getting no value for paramount. the assets for some of these entertainment companies, they seem to get revalued every day and revalued down. >> we have a big re-oregon over at disney yesterday and reuters with a fascinating look at a.m. zorn company documents, they say the original video programming added 5 million customers to prime as of early last year. >> that's right. we don't get a lot of insight into prime, and how many prime customers there are, various analysts have estimates. they will spend what second to only netflix i believe in terms of content spend as amazon. >> yep. >> larger than to the point jim just made any other entertainment company out there. amazing. >> guys -- dow up -- >> go ahead, jim

>> just the there's a thing about ethereal thing about netflix. always helped the netflix story. >> september they paid that guy 300 million bucks a few weeks ago for nothing. he does american crime story still committed to fox for the rest of them and paid him $300 million. before they even paid for the shows. i'll work with them for that. >> we need him to show -- >> obviously a tight range hey, bob >> happy thursday, we have a little bit of a problem in the market we start up and sell off into the close. a little bit of a pattern. today at least at the opening what we've seen recently the market leadership remains what it is, semiconductor stocks, banks have made a little come back but haven't been doing well recently industrials selling off notably. all started in the green here and just now moved negative. tech under water here.

fa facebook, google, they all open in the red tough week for the markets, we're down 1% on s&p but it's the pattern 245z not good, down three days in a row and selling into the close this is a reverse of the pattern earlier in the year. this is a quadruple witching, this is typically is typically an up week we're going against a number of patterns what's going on? i call it headline roulette, it's kind of difficult to trade right now. the weak retail sales was a major problem yesterday. they were down wshd reward revisions all over the place killing the industrials and railroads and inflation concerns have been muted for the last few reports. that's good news but the yield curve has been flattening and that's putting pressure on the banks and we're approaching the end of the quarter we had a lot of winners, banks and semiconductors and you can kind of see the pattern what's been going on when you look at the numbers this week. so aerospace is down 3%, that's

on the trade concerns. transports are down nearly 2%. that's also a trade issue. railroads are getting killed this week. banks are down they've had a great run-up, haven't been going up because of the 10-year yield and technology stocks weaker and semiconductors had a great run and some are overbought here. elsewhere, speaking of semis, first big tech ipo of the year is coming on the nasdaq, pricing tonight, big cloud based network security service they upped the terms, 50% this week we were talking 10 million at 10 to $12, upped it to 12 million at 13.50 there's not a lot to buy in high tech cyber security a hot space everybody is watching drop box and spotify. they are live streaming an investor day but remember this is a very unconventional ipo this is a direct listing there is no real traditional road show and no real investor meeting.

it's not clear how we'll forecast from the analysts and no underwriting or bank buying anything or book building, there's no lockup period the truth is we don't know how much volume this is going to have or how it's going to trade. we really don't no it will be ant interesting adventure. we don't have a date we have reports it will be early april. perhaps we'll get confirmation today. the dow up 23 points david, back to you >> thank you, bob. we kind of hit this very briefly talking dollar general but worth coming back. tomorrow is the anniversary of bear stearns, we'll talk about that but covering m and a, sometimes it's also worth taking a look at the deals from that era, particularly the enormous leveraged buyouts which is why we were talking dollar general worth discussing the bankruptcies that followed iheart radio, may have seen that filing for bankruptcy, that used to be the old clear channel.

look at these deals. we don't have when they actually occurred so let me tell you when they occurred. txu was announced in october of 2007 it was the largest leveraged buyout of all time and by the way i haven't even included debt here there was debt there of 13 billion that they were acquiring in addition of course to all of the debt that went into the $31.8 billion purchase price there were a bunch of -- it was kkr and tpg, and the main equity invest investors. they were borrowing enormous amounts of debts clear channel became iheart radio and that deal was done -- when was that? i'm trying to find that here in my list. i don't have it on here. there it is. november of 2006 so that gives you some sense there. that also had about 8 billion in debt associated with it. toys "r" us was '05. that didn't have that much debt, a billion dollars in additional

debt the point is -- what is the point? it's funny, first of all, take the money when it's offered to you in some of these deals take the money, don't argue and be happy when private equity comes along at the height of the market and wants to pay an enormous sum as willing to take debt to leverage ratios and multiples of years of ebita we haven't seen before. we can cite any number of reasons for why these deals failed iheart radio, old clear channel, growth of streaming. txu then became first energy, one of the biggest bankruptcies of all time given it was also one of the biggest -- they made a terrible bet on natural gas prices and didn't foresee what fracking would mean and creating a glut of natural gas. toys "r" us, growth of amazon, not sure what happened to harrah's which is now caesar's in terms of changes overall. it is interesting to look back sometimes.

this '05, 06 '07 period was the most fertile for the largest buyouts of all time and many have ended in ankruptcy. one of the others is univision, unable to go public but has managed to avoid a bankruptcy filing, jim. >> staggering period that i come back and think, how great was burlington coat factory that it was able to pull off something and go -- ten times. that and dollar general are the ones we think about. i'm worried about clair's. >> yeah. >> it's incredible that period -- a lot of people just wrong. >> and again, sure, there were a lot of other reasons but the fact is adding enormous amounts to debt to these companies balance sheets, certainly curtailed their ability to be potentially more flexible when it came to facing the changes that were occurring in their businesses just a quick look back

beginnings of the financial crisis let's head to the bond pits and check in with rick santelli. there are the bankruptcies let's go to rick santelli at the chicago cme group. >> you look at the yield curve today, two-years up one and rest down one we continue to get flattening. look at the two-day chart of tens, what's fascinating, we're holding. right around 2.80, 2.81. open up to february 1st, this could be the 15th day -- 15 days trading days that we've cloetsed in the 2.80s i think that consolidation is important but maybe your view of it and whether it holds or not might be affected by the following charts these are all charts of european rates. let's look at the bund starting in mid-january it's under 60 basis points and that's a key level let's look at the french instrument it is also at the lowest closing yield should it close here since

january. now let's move down the curve a bit. let's look at 30-year instruments in the eurozone, 1.23 going back to mid december and that's the last time they were there if you look at the french 30 year instrument, the same scenario listen, the differential between our tens and european tens is now around 2.24, 2.25. the highest closing wideness going back to 1989 is 235 basis points the point here is the relative value trade would auguer that we're going to have upward influence on bund yields but let's see how it turns out finally let's look at the one week of the dollar index the dollar index is just below 90, 90.5 since midpoint in the year well off the lows and not acting badly but also well off its closing levels from last year.

in the end, this is a pretty sideways trade in the markets. 10:30, peter thnavarro, carl, jm david, back to you. >> we'll see you in 40 minutes. >> if you follow disney youmy want to open up this read with john skipper, who of course left as head of espn after 27 years with disney, sit down with jim miller who covered espn for many years. in the interview, skipper details not just cocaine use, which he says he had been able to manage through the course of his career miller says someone you had dealings with in past and says as it turns out i wasn't careful this time and goes on to say he

realized that he put iger in what he called an untenable position >> the exposure would put his personal life at risk as well. people wonder -- then the interview with the hollywood reporter doesn't seem to report -- that abusive in terms of his use but does admit use of cocaine in question here cocaine. >> fascinating push by "hollywood reporter. he admits to cocaine they say any heroin? he says, never but what a departure for skipper after many years at disney, jim. and now it's going to be up to the likes of pataro and others to wrestle not just with the business but the way it's being impacted by outside forces >> yeah, i knew skipper for, i

would say, just as an acquaintance, but a loved guy, really funny guy a great literary guy who was also in the business side. colorful, exciting look, i just wish him well i just hope everything works out in his life. but this is a tough story to read >> yeah. >> tough very tough >> yeah, jim, tonight you've got -- man, you've got adobe, broadcom, and alta if you were going to create an aftermarket earnings program for jim. >> i got intel we got to ask about this security breach. very important >> yeah. >> all right we'll take a short break here. dow is up 48 points. don't go away.

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basically saying a lot of their apple business could be at risk. they are talking about cutting numbers, and it's more broadcom fallout. hey, david, now that broadcom, which reports tonight, may not be able to buy somebody else in the sector, they're talking about going after some of this business wow. that's just a big downgrade. and it's killing it. i think it's also causing people to worry about the group entirely what will broadcom do? will they lash out will they stop acquiring will they cut margins? will they take business? david, broadcom, it's not done carl, i'll be happy to be by your side tomorrow, and david. and thank you for allowing me to be out here seamlessly, hopefully. >> you did great great job, as always >> thank you >> can't wait for tonight, jim see you at 6:00 p.m. eastern when we come back, white house trade adviser peter navarro with elntli at 10:30 this morning dow is up nearly 40 points don't go away. i'm very proud of the fact

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february's reading was revised down by one point. the street was looking for a little higher, 71. sentiment is now one point lower than in march of last year builders say demand is still very high, but they're concerned they can't find enough buildable lots to meet that demand the index component measuring sales expectations in the next six months dropped two points to 78, and the index gauging buyer traffic fell three points to 51. current sales conditions are still holding steady at 77 anything above 50 is still considered positive. regionally on a three-month average, sentiment fell everywhere but the northeast, although it's lowest in the northeast. it fell everywhere else but remains highest in the west. back to you guys >> all right diana, a lot of good information. thank you very much. good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with melissa lee, david faber at the

new york stock exchange. markets holding on to moderate gains. dow is up almost 65. s&p up about 2 busy morning as we reflect on kudlow's ascension to the national economic council. got a lot of data out with philly empire and claims on the tape our road map begins with one of our own heading to washington, larry kudlow taking over at the national economic council. >> plus, peter navarro is going to join rick santelli in just 30 minutes from now >> plus, rolling back dodd-frank, the biggest loosening of financial regulations. first, straight to the big news of the morning. our own larry kudlow named the president's top economic adviser, replacing gary cohn at the white house. steve liesman joins us this morning with more. we all know larry well question now will become how he operates in an operational and political context. >> i think that's a big question, carl here's another question. what does a tax cutter do after the tax has already been cut

on cnbc yesterday, larry kudlow, our former colleague, answered the question >> i'll just say it in a little phrase lower tax rates and sound money. >> personal tax rates? >> personal, corporate lower tax rates and sound, stable dollar. if you have that combination, as brian and i wrote in our book, when that model has been tried under jfk and under reagan, it's worked fabulously. >> president trump himself in a meeti meeting monday with the houston astros spoke of a, quote, phase two of tax cuts. that can include making the individual cuts permanent. now, it is questionable as to whether there's appetite in the current congress to take another bite of the tax cut apple, especially since they just passed a sweeping bill, and there are deficit concerns, trillions of deficit concerns. tax cutter or just tax promoter? that's really the question right now when it comes to larry is he an econ leader or an econ follower depends on if president trump

lets him be the leader inside the white house there. is he a tariff slayer or a tariff backer? on that issue, kudlow looks to have agreed to follow the president's lead on tariffs as negotiating tools in trade agreements and being tough on china. but listen to what he said yesterday. there's a difference with the president here >> china has not played by the rules for a long time. i've talked about that intellectual property rights, corporate technologies, other barriers, transshipments to get around things. a thought that i have is that the united states could lead a coalition of large trading partners and allies against china or to let china know that they are breaking the rules left and right. that's the way i'd like to see >> so yeah, be tough on china, but kudlow is talking about a coalition against china. the president, as you know, much more unilateral. as larry said many times on television, stay tuned this could get very interesting,

guys >> got that right, steve we're all waiting to see what it's going to be like. steve liesman back at hq, thanks for more, we're joined by jared bernstein, former chief economist to vice president biden. sara fagan, former white house political director for president george w. bush morning, guys. good to see you. jared, we all know him well, as i said so is he there to drive policy is he there to defend against ideas that some might say are bad for the markets? both >> well, both, but interestingly, and i don't know that this has come up so much, the role of the director of the national economic council is really very much an organizing role the way this works, at least traditionally, and this is not a traditional administration, but just for the record, is that the president expresses an economic goal the president says i'd like to lower the trade deficit or i'd like to raise middle-class incomes or something like that then all the economic teams

scurry around, trying to figure out the best way to get there, and the organizing function there comes from the director of the nec, now larry kudlow. so you get the treasury secretary, the cea, omb, all the different offices and pods within the administration, and you at the nec organizes that process. it's more of that function than it is, well, mr. president, here's my idea for what you should be doing. >> sara, under that guise, do you think the balance of power amongst the economic forces within the white house has shifted at all with the addition of larry kudlow? >> i think so. i think for a couple reasons one, you know, jared is right, that is an organizing function, the role in the white house. but larry is such a well-known and respected and clearly respected by the president he is going to have a voice, and he will have the ability if he seizes it to try to drive an agenda i think the other thing that is important to note here, you know, we all know larry in the

context of cnbc and as an economic commentator and friend. for a generation of young republican operatives, he's an icon so i think some of these younger staff, you know, will really work well with him because they will be thrilled to have the opportunity to be in the same room with larry kudlow >> how can he use that power, sara what does he need to do first and foremost >> well, i think first and foremost he's going to have to build a very good working relationship with the other senior leaders of the administration, steve mnuchin, peter navarro, and others. he's going to have to work to drive the agenda most importantly, he's going to have to figure out how to work with trump he knows donald trump. they've been friends for a long time, but getting a principal, even the most organized principal with the best intentions, to always function in an organized fashion isn't easy donald trump has his own style

figuring out how to get donald trump to do the right thing, you know, that's really where larry, i think, can have an impact. >> yeah, i think -- i'm sorry, go ahead >> no, i was going to ask you how seriously you're taking this talk about phase two of tax cuts capital gains, making individual cuts permanent, and the like >> great question. not that seriously yet and i'll tell you why. it's not so much that -- steve made great points about second bite at the apple. as far as the deaf sficit concei don't think anybody up there cares all that much about that, and i'd certainly put trump in that camp. larry has never been much of a deficit hawk as far as i can see, but i think the problem is actually very much a process where you can't do this unless you have what's called a reconciliation budget, and they don't have that. i don't think they're going to get it that would mean they need 60 votes in the senate for it, and that ain't going to happen it simply isn't. i don't take that very seriously

at this point. it's just the musings you hear from a donald trump. interestingly, it's the kind of musings i would argue about with larry kudlow on cnbc, but that's not the game he's playing anymore. hey, one quick point here's another source of potential friction and larry said this in the interview with steve just a second ago he is a strong dollar guy. i mean, we know that i've known that for decades. that's not necessarily where this administration is at, and interestingly, treasury secretary mnuchin was very explicit about that. he said correctly sometimes a weak dollar can be helpful, particularly if you want to make our exports cheaper relative to the imports coming into our country, which has positive implications for the trade deficit. >> right >> so i'm going to be very interested to see how larry's, you know, strong dollar all the time philosophy plays out in the context of his new gig >> yeah, sara, i'm interested in his comments about taking on china, giving them this come up

pa -- come -- comuppance >> i think this is a way to the president's, you know, getting the president to do the right thing, to agree with him on china. and most people agree, china has been a terrible actor, particularly on ip and other issues to the united states. so you know, if he can take his free market fillphilosophy, fige out a way to work with other countries to move china in the right direction where we don't set off further or worse trade wars, he will have done the country a great deal of service. >> one quick point on that, trump does not play well with others that's why this coalition idea sounds a little flat to me >> it's difficult. you know, the one thing is that larry kudlow does play well with others >> he does >> he's a very well-liked individual proximity is power he's in the west wing, and some

of these other economic advisers are down the street. >> it's a great point, sara. i've been arguing with larry for lit literally 25 years, and i really, really like him. how many people can you say that about? >> i think that his style, he's a gentleman. that west wing needs somebody with larry kudlow's style. he couldn't get there soon enough >> one last thing, guys. dana millbank in "the washington post" today takes larry to task for that famous december 2007 call saying there is no recession, obviously on the cusp of what would be the worst recession in generations you cut him some slack for that, jared? >> you know, i actually do that was a uniquely bad call because at that point, we were already losing employment at a fairly decent clip but find me an economist who hasn't made a ton of those sorts of bad prognostications and, you know, you won't be able to do so and larry's been on tv for so long, he has such a long paper

trail. so i don't consider that to be disqualifying at all. >> sara, your last word on that. >> yeah, no, we've all made bad calls in our professions and you know, larry was wrong about that clearly, and he'll be wrong about something again in the future but he'll be right way more than he's wrong >> guys, going to get interesting. really appreciate your insight today. good to see you both when we come back, the economic hawk in the white house. national trade council director peter navarro joins rick santelli, talking trade, tariffs, the stated of the economy, and a lot more. plus, as a strong advocate for free trade joins the white house, here's what kudlow told us about his relationship with navarro. >> peter navarro is a good friend of mine i talked to him, or yesterday, at some length he was a regular on the kudlow report for many years. he's a good friend we agree on some things, and we decemb disagree on some things. th oppo.

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stocks higher this morning as markets continue to digest the news out of washington this as incoming national economic council director larry kudlow joined cnbc yesterday, gave his thoughts on the market. >> i love the stock market i love wealth. i think rising stocks helps everybody. let me finish this point many of the people who are critical of me or the president's tax cuts are the very people who are being helped the most for example, my friends in the

union movement teachers union, government workers, they hate this stuff. well, you know what, the lower tax rates and faster economic growth and the better profits is the only hope they have of ever seeing their pensions. >> for more, let's bring in david rosenberg, chief economist and strategist, michelle gerrard, chief economist good to see you both this morning. david, i'll kick it off with you. what does this mean, what could this mean for the markets, particularly one that's been on edge about tariffs >> sorry, melissa, i could hardly hear you at all over this phone. >> all right let's try this again what does this mean, what could larry kudlow's appointment mean for the markets, especially for markets that have been on edge because of tariffs >> okay. well, look, i have great respect for larry kudlow i used to be on his show when he did it with cramer years and years ago when i was at merrill. he was a great economist when he was at bear stearns.

i've never seen so much hoopla and hype for an appointment. this position, this economic position, was created by bill clinton back in 1993 you know, the only chief economist position at the white house that ever really spun the dial on anything was the first one, who was probably bob reuben, who managed to push a left-leaning bill clinton, you know, closer to the middle so you know, the plethora of these roles ever since has had zero impact on the economy and zero impact on the markets i think that it's a nice flash, but in terms of what it means realistically, for the markets or the economy for that matter, i think is very little >> for the markets, though, there could perhaps not be a better time for somebody to be in a role whose job it is to push the president more towards the middle, michelle

that's certainly what the markets would want >> i couldn't disagree more, i guess, with what david has said. it's true that the import of this position kind of has waxed or waned depending on the person in the role. i think larry is going to bring so much to this position, in addition to his economic knowledge. the fact that he is the team player, he's a bridge builder. as sara has said in the previous segment, you know, he will -- he's an adult in the room. he will learn how to work with the president to get the president to see both sides of the agenda his pro business agenda, his america-first agenda, bringing balance. i think it's a great appointment on so many fronts. and i do think it's going to be -- i do think it could be a game changer for an administration that in recent months has been really focused on in terms of the concerns, the

moves towards protectionism, the dp disarray this could be a huge stabilizing force that could end up having both economic implications and positive market implications >> look, if i could just weigh in what i said before about hype and hoopla, i think we just got a good dose of it. we traded in larry kudlow to replace gary cohn. honestly, if you think that's a trade up for the country, i would wholeheartedly disagree. there's lots of people that have been great people that have had this role. ben bernanke's had this whole. a lot of great teams people had this role. i think it's totally exaggerated as to what this is going to mean in terms of shifting policy. so you know, the reality is that the decision on tariffs has already been made. the decision on protectionism has already been made. and we already have, you know --

larry kudlow had a stump on the tax reform that's yesterday's story i think the jury is going to be out, but you know, in terms of decision making, spinning the dial for the president, i think it's way overblown i think this position has always been way overblown like i said before, it was just created out of bill clinton in '93 because he loved to engage in debate. he was curious on macro issues so in 1993 creates this chief economist position -- >> sure. i want to get michelle in, david. >> sorry >> the only thing i would just say is that i do think the fact that you've got someone with the views that larry has between free trade, obviously the continued support that he would probably offer on the tax front, is an important point for the markets because it's viewed as a counterbalance >> but how is that different from cohn?

>> what i was going to say is the fact, first of all, had the president, for example, put peter navarro into that role, the markets would not have been very comfortable with that, and i do think that you would have seen a negative reaction so the fact that the president -- >> but navarro in his position already has considerable influence. >> but he doesn't have that balance check larry provides i think that's an important point the markets can takeaway >> we trade away from gary cohn. we have to talk about not hypothetical but what the trade was. gary cohn was everything larry kudlow is but maybe with an exclamation mark beside it >> i think larry is more impassioned about the views and the importance of the tax cuts, and don't get me wrong, i'm sure that gary cohn felt strongly about that as well but i also think that perhaps larry goes in with an open ear in terms of trump's willingness -- i'm sure larry has talked to the president about a willingness to hear

other views. and of course, a new person going in, i think, you know, again is going to provide -- maybe it's counterfactual, but again, given some of the other choices that could have been made, i think for the markets, this is an absolutely positive development. >> we're going to leave it there, guys. thanks so much >> well, didn't respond too positively yesterday afternoon, but so be it >> we're going to leave it there. thank you. when we come back, an interview you do not want to miss tariffs, a possible trade war with china, and more with national trade council director peter navarro. of course, kudlow is the talk of the town in washington and wall street here's a look back at some of larry's comments in recent years. >> king dollar is nice and hefty and strong all that's a good sign another kudlow call to action, drill, drill, drill. drill, drill, drill. i will say it one last time this evening. the kudlow cdore free market capitalism is the best path to prosperity. mercedes-benz glc...

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boeing's recent drop is affecting other industrial names. dom, worst week for boeing in a couple years >> yeah, it has been, carl, but those industrial stocks like you point out have a very big focus for investors as that talk of trade and future trade policy heats up boeing, like you pointed out, they've been a particularly big battleground, let's call it that, for much of this trade talk as speculation swirls about whether or not it could become a casualty in a broader trade battle with the likes of china, hypothetically the aerospace giant is the most heavily weighted stock in the price weighted dow jones industrial average because it has the highest price. no rocket science there. if you look at the ticker dia, known as the diamonds, boeing the most heavily weighted, 9% there. we wanted to look at what other big etfs boeing has a big influence on turns out that boeing has the most sway over the aerospace and defense fund, ticker ita that's a $5.8 billion funds. it's gott an 11.5% weighting in

boeing stock ticker xli, it's got a 7.5% weighting there. with today's down price action, like you said, we're on pace for the worst week since february of 2016 and the worst month since january of that same year. boeing shares, of course, have been stellar performers over the medium to long term. they've been a big driving force blind the gains in the broader market as for the industrial sector and defense industry in particular, but for some investors, it might be worth looking at whether your basket of holdings includes some of these popular big etfs and what that means. maybe it could mean a whole lot more boeing exposure than you realize. but those three etfs in particular, melissa, have a big exposure to boeing stock back over to you guys. >> dom, thank you. dom chu. when we come back, an interview you will not want to miss the white house hawk, national trade council director peter navarro, joins our own rick santelli we'll get his talk on a possible trade war, his reunion with

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still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. welcome back to "squawk on the street." i'm carl quintanilla with melissa lee and david faber at post nine of the stock exchange. dow is up 107. trying to get some help as boeing is down again worst week since february of 2016 we're getting some breaking news on new russia sanctions. for that, we'll turn to kayla, who's in washington. >> hey, carl treasury announcing that it will sanction five entities and 19 individuals for activities including but not limiting to the interference in the 2016 election among those sanctioned, the internet research agency, which posed as u.s. users and organizations to post content on social media sites as well as 13 of the ira's employees the department of justice charged the ira and those individuals last month

today's actions also include sanctioning two russian intelligence agencies and six employees for separate actions, including targeting u.s. government entities and infrastructure in cyber attacks since march 2016 senior administration officials said there will be more to come and that by no means will this constitute the end of the administration's campaign to instruct vladimir putin to change his behavior. carl, back to you. >> all right we'll watch that closely thank you very much, kayla let's get over to the cme in chicago. rick santelli, who as we've been telling you, has a very special guest. >> hi, carl. indeed i'd like to welcome peter navarro. thanks for joining me this morning. >> and thanks to carl for calling me special in some way, but hey, great to see you in virtual space here, rick >> exactly listen, let's start at the very beginning, peter we have some time here the last i looked, the month-over-month trade deficit was close to 57 billion. that is the highest

month-over-month level since october of 2008. many do not agree with the way you frame the issue that we need to address unfair practices in trade by targeting some of the dollar amounts in trade deficits why is your opinion on that different than other economists? >> sure. the way i look at trade deficits is it's a reverse mortgage essentially that the american people are taking out. they send -- you know, we buy our stuff, send the money to china or europe or wherever it is, and what happens is that money comes back not in the form necessarily of investing in our factories but rather buying up our assets over time, there's a problem that warren buffett has actually called conquest by purchase. so if we do as we're doing, which is to run a trade deficit at about half a trillion dollars a year, year over year, that adds up to trillions and trillions of dollars in the hands of foreigners that they use to buy up american --

american factory, american real estate, things like that that's just not good for america. it's not good for national security not good for economic security so that's -- and the president understands that we cannot continue to run this reverse mortgage situation so we go into a situation where what are we going to do about it you and i both know -- >> let me stop you right there peter, letd me st me stop you a. i agree, but let me hit you with a couple asterisks many of those countries use that money to buy our debt. there have been periods of time where that was very important, especially now when we consider what the ramifications may be if there's less money in those hands. your thoughts just on that slant on it. >> sure. and what you say is kind of the bright side of the picture, but the dark side is that many of those countries also buy our paper so that they can undervalue their currency, which in turn allows them to sell us exports cheaper, makes it harder

for us to sell exports to them and exacerbates our trade deficit. it's a complex question, but at the end of the day, we have trade deficits with every single major trading partner we have. the biggest one is china $370 billion in trade in 2017. europe, it's 150 billion now, rick, let me tell you this. for every billion dollars of trade deficit we have according to some estimates, that's 6,000 jobs we lose we essentially ship our factories over there so the european deficit alone is over a million jobs we don't have in america here, and that's another reason why these trade deficits really werenaren't worg for the american people. >> all right that's a perfect segue into my next issue now, in my opinion, people are making this in the media that we are already in a hot trade war like the cold war that we had after world war ii, i look at it more as a cold issue with regard

to tariffs but what worries me is i agree with your numbers. but to resolve that issue is what i'm thinking about. that if we take a certain path, do we provoke activity that would negate some of those positives, or do you think it could be done in a way that won't turn into a warm or hot trade war. >> i think we can obviously do it in a way that can be good for the american people and good for the global trading system. let me work you through that a little bit if you think about it, we have the lowest tariffs in the world amongst our major trading partners that's simply unfair if china exports a car here to the u.s., they pay a tariff at 2.5% >> now, wait, peter, this isn't only china either. this is china, europe, japan they all have these wto strange vats on imports. >> let's take japan. they end us a hundred cars for every one we send to them. that's a problem of nontariff

barriers so the point here, rick, is that tariffs basically first of all provide a defensive measure to level the playing field in a time when we are defenseless against this because we are such free traders and have signed on to the world trading system. but let's look at what's happened since the president has put tariffs on courageously, i might add. solar and washers in january what have we had we've had a tremendous influx of investment so that we'll be building washing machines here in america with that foreign investment using american hands. when we did the steel and aluminum tariffs, guess what, rick, the first day when those things were signed, century aluminum announced a $100 million investment to modernize and expand its plant and u.s. steel announced the opening of a facility in granite city, illinois, that's been shut down this is the reason why tariffs

can be good in defensive for the american people, and president trump, i think it's courageous what he's doing. he takes all sorts of heat from the swamp, the usual suspects. if you look at it clinically, we can do this in a way that is peaceful and will improve and strengthen the trading system. right now it's not fair. >> and that's the crux of this matter, peter. >> i totally agree >> i don't think anybody i talk with would disagree that between tariffs, vats, import vats, all the issues of china, europe, and japan, we're not getting a great deal but the adoption of the globalization of economies has made it so tinkering can have outside consequences i guess that's what most people, the unknown, are nervous about i know larry kudlow joined the party here >> let me just say one thing we come in peace here. everybody on wall street needs to understand, just relax.

if you look at the negotiating fostu posture of this country, all these countries running huge trade surpluses with us have no incentive to rock that boat. all we're doing is standing up now let's talk about larry i think this is probably our 15-year reunion here he and i go back to your network, cnbc. i was on his show frequently i worked at cnbc for many years. i find him to be a smart, warm individual he's going to come here and be a team player. it's going to be great the president, president trump, in order to make the best decisions possible, he needs diverse opinions i think it's a great choice. everybody here is going to welcome him with open arms we're looking forward, not backward >>. >> my final topic. i remember a day, peter, where the big news is china was welcomed into world trade, the goal was to make chainina more

consumption economy and the u.s. a more export economy. i don't hear much of that anymore. embedded in that basic principle seems to be the direction you would like to see things move. is that correctly framing the issue? >> china entering the wto in 2001 was a fundamental shock not just to the united states but to europe and the rest of the world because china came in basically saying they played by the rules. since that time, they basically have broken every rule in the book basically, they've destabilized the world trading system for example, in the coming weeks, president trump is going to have on his desk some recommendations on ambassador robert lighthizer's quote, 301 investigation, of china's theft and forced transfer of intellectual property. this will be one of the many steps the president is going to

courageously take in order to address unfair trade practices and rick, i don't think there's a single person on the floor of the -- anybody on wall street that will oppose cracking down on china's theft of our intellectual property. >> and that's universal. that's why i'm actually happy that you're there and larry's there. because the real issue here is trying to get a job done that needs to be done and it's the right time, in my opinion, because world economy is coming out and getting some tail winds to address these issues. it's how we address them and how we frame it. i guess my final question or series of questions would revolve around the following how do you think it will play out with regard to this adoption of these new rules companies that import, that are looking for exemptions, will they be able to navigate this

wou without doing undue short-term damage to the economy? >> well, i think the beauty of president trump is he's firm but flexible and this is what's going to happen look, if you think about the markets, which you look at every day, this administration has cut taxes, undergone tremendous deregulation we've unleashed our energy sector we are working hard to restructure the trading environment in a way which works not just for americans but also for the rest of the world. so it's going to be done in a measured, firm, but flexible way, and we're going to work with our allies and trading partners to make things better for everybody. that's the direction we're trying to head i think it'll be fine if you just look at the chess board because nobody really has any incentive to pick a fight with us they're getting too good a deal from us. all we're looking for is a better deal for the american people >> no, and i get that, but the only problem i keep coming back to, peter -- and i agree with

you on the major points. every dollar we gain on a renegotiated deal is going to come out of one of these economies' pockets even if it's in their pocket unfairly that transition is going to take some getting used to they've always said the stock market is a forward-pricing mechanism. let me ask you one question, yes or no. is what you're doing going to be really good for the long-term u.s. economy >> it's going to be great, not just for the american economy, but for the rest of the world. i don't see this, rick -- >> now, wait, let me continue. if it's good for us and it's good for the global economy, then what you're really saying is if you're a stock investor watching this right now and you see uncertainty playing out, it's going a bit sideways here, that this could be, in your opinion, an opportunity because ultimately this uncertainty leads to a better set of outcomes >> totally agree let's face it. if we're stronger, if we're hitting our 3% gdp growth rate

benchmark every year, what's in it for the rest of the world we buy more of their stuff, and we're able to fund our defense budget so when japan needs us basically in the east china sea or when europe needs us for nato purposes, we'll be strong. president trump, one of the most important things he said in office, is that economic security is national security. when we have both, the world is safer. and more prosperous. >> and you know, on that final thought, i want to ask you another question when i hear our allies, like europe, like japan, say, you know, why would you put tariffs on us, why would you question our activity on fairness, we're your allies, am i wrong to differentiate from a defense standpoint they're our allies, but aren't we in a soft economic war right now, even with our allies am i overstating that? >> yes, let's not use the "w"

word basically what we're in now -- >> no, but you know what i mean. >> i know exactly what you mean. let's look at that relationship so we understand each other. basically, we're in a situation with the rest of the world where the trading playing field is highly tilted in their direction. because of that, we are having trouble historically growing the way we should. when we don't grow, we don't have the money to help defend them so the allies can't bring the idea of strategy into economics without understanding our core principle. economic security is national security, not just for us but them as well look, there's going to be posturing and public pronouncement, whatever. but at the end of the day, behind closed doors through diplomacy and everything else, our allies are going to understand we're simply defending ourselves against what's been an unfair relationship for many, many years. this is going to work out fine the world's going to be a better

place. the trading system -- >> all right now, they're giving us more time let's talk about the logistics of the rollout i'm a logistics guy. i like talking about things i can touch. >> you missed your calling you should be running an aircraft carrier >> there's going to be countries exporting. they're going to want exemptions, exceptions, and carve-outs i know based on some recent head lines, and tell me if you feel differently, that we're going to probably pass a few of those out. will that procedure be trump-like, in other words, no red tape, it's not going to take forever, not going to be bureaucratic, that we're going to have an efficient way to implement especially the carve-outs, exceptions, and exemptions >> so we're blessed with having amou ambassador robert lighthizer and secretary of commerce wilbur ross they're working as we speak to make sure this moves in what i like to call trump time, not in

government bureaucracy time. these carve-outs and exemptions are going to be done in a way which is sensitive to the strength of our economy but also makes sure -- remember, the steel and aluminum tariffs are being done for one reason and one reason alone, national security, defend those industries as pillar industries. so whatever is done within the framework will also ensure that those industries maintain the staunchest defense so this is trump time, rick. we do things different here. i think you've seen that the first year -- look, rick, the first year of this presidency has been one of the best years >> oh, i'm with you. peter, your boss is cut from a different mold i get it and maybe this is exactly the type of person we need because these things aren't easy the global economies and the global political environment has melded in such a way that it's very difficult to peel back the onion. a man like trump, whether you like his style or not, has the

right style to peel an onion politically, globally, financially. peter navarro, thank you so much for being a good sport >> my pleasure to talk with you, rick >> give larry a big hug from me when you see him tonight >> i will. >> carl, back to you >> rick, thank you for bringing peter to us. before i let you go, rick, some reflections on the conversation you just had we could have let that go for a lot longer how convinced are you that the remedies we bring to a trade deficit, for example, aren't outweighed by collateral damage in the short term? >> see, that's the part that bothers me i am totally, 100% behind the notion that we aren't getting the best deals, we could do better, and everybody can, as peter said, grow together. implementation -- the president has a lot of inertia on this as much inertia as he had on immigration, on taxes. be up the problem is we can't have any snares in these rollouts if we're going to do this, we're going to have exemptions and exceptions and we're going to take bold stands we need to have all the is

dotted and ts crossed. we don't want to put the market or the economy at stake for not the principle of what we're doing but how we accomplish it >> yeah. rick, don't go anywhere. great stuff. thank you once again let's broaden out the conversation just a bit here, bring in steve liesman, mike santoli, and kayla talk about what we just heard and what it means for markets and the economy. mike, as navarro was talking about washing machines, i looked up whr you plot that against the s&p over six months, it's not encouraging. >> whirlpool, yeah look, the overall message was that this is a give and take this is a long game. this is not about reprisals and things like that, which i think is welcome but i do think that even if it works, this whole campaign works as promised, it doesn't necessarily accrue to the benefit from an investor's point of view of corporate profit margins and the price earnings multiple and the s&p 500 all those things may actually work on an economic scale that maybe the president is trying to

approach, but it's not something investors say, this is -- this should be job one right now. >> maybe it works on paper, but steve liesman, the concern here, you just take a look at the price action in boeing boeing tells you a story where, you know, you can protect certain areas of the economy, but boeing is really losing out here in terms of the impact that it will feel so all in all, i mean, it's sort of like robbing peter to pay paul >> melissa, it's just simply hard to know where to start with peter navarro and his thinking, which is so outside the mainstream of economic thought i don't think the end of the day his conclusions are that far outside in the sense that the idea that we could renegotiate some of our trade deals and do a better job on those, i don't think that's outside the idea these trade deficits are so damaging to the united states, can i just point out we've had a trade deficit for 41 years, over which time the size of the u.s. economy has tripled. the idea that foreign investors

are investing in the u.s. economy is a really good thing it's bid up the price of assets, made every american richer the idea that somehow trade deficits are negative for the u.s. economy, i guess there's a point of view out there, i i gus peter navarro represents a point of view that's prominent in the white house, a point of view that was abolished over 300 years ago in the thinking of most economists and people who think about the economy. i have to say his thinking is the equivalent of a medical doctor going back to leeching or bloodletting when it comes to solving a person's health problems >> that wasn't a cheer for leeching we do want to listen to peter navarro's message for wall street moments ago >> we come in peace here everybody on wall street needs to understand, just relax. if you look at the negotiating

posture of this country, all these countries that are running huge trade surpluses with us have no incentive to rock that boat >> back to rick santelli, who interviewed peter navarro. your thoughts? >> listen, steve brings up -- we're not far away, i'm not far from peter and not far from steve. couple of things steve, on those years where we had bigger deficits, i remember them well, okay, the gdp was also for the most part from an averaging perspective, those years you are talking about, much better. this is the reason we are looking at these things now. >> rick, give me -- >> we had a high-flying economy, we could see a lot that went under water, we could have done better let me finish. you can address it the second thing, the comment about 300 years. you know what? >> adam smith, baby. >> but you know what, no situation is identical you can't make blanket statements if we are getting a bad deal, i

don't care what people say about trade. a bad deal's a bad deal. >> rick, i want to address that in two ways. first, i did work on this. i know president trump wants 3% growth every time we do 3% growth, the trade deficit goes up. trade deficits are a residual. we take them out because of the decision to buy imported goods by companies and households, it's like a cost of goods sold if nbc was reporting terrific earnings but our costs of goods sold went up along with revenue, we wouldn't say that's a problem. it's not a problem you are making money on the back end. >> we could lower expenses 30%, you don't think people would like that at comcast come on. >> i don't want to get too far into comcast financials here >> i know. >> but let me tell you, the idea was if you lower the cost of goods, and you lower revenue and profits along with that, that would not be a good deal let me tell you -- >> wrigley gum company would

disagree with you. the guy made tens of millions of dollars selling something for a penny. sometimes you see the growth output move up in ways that the economic -- >> it hasn't happened before let me he got a high horse for one second >> we never had an administration like this before. >> let me make this point. last one here. the united states has created the world in its image the global trading system is one the united states created, it's one it dominated what's so important here is not that we don't have bad deals we continue our dominance of the world trading system that was dramatically benefited not only americans but people around the world, to create a better, richer world for everyone. >> that's great. when we had dominance the rest of the world -- >> we still are dominant we still run the world >> we are, but they were a fraction of what they are now.

>> why are they bigger >> we wanted china to rise now they are rising and biting the hand that helped them. >> more richer china is better for america. >> right >> this idea that we are losing is wrong >> doesn't mean we can't do better >> we are winning. we have won. >> good stuff, guys. >> great discussion. >> it is a great discussion. i want to save some of the time for stephen roach, the former morgan stanley asia chairman who joins us where do you come down on it >> i'm exhausted after hearing poor confused rick and steve trying to educate him. but what's lacking in the discussion is one critical point. trade deficits don't occur in a vacuum they are a symptom of a deeper problem the united states has,

not that we are necessarily being abused by others we do not save as a nation i can give you the numbers our overall national savings rate adjusted for depreciation, adding up businesses, consumers and the government sector, is 2% of gdp that's one-third of what it was in the final three decades of the 20th century the way the story works is lacking in saving and wanting to grow, which is what the president wants, which is what navarro and kudlow want, lacking in saving and wanting to grow, we import surplus savings from abroad and we run a massive balance of payments deficit to attract the foreign capital. that's what gives rise to our deficits with many nations last year we had trade deficits with 102 countries china was the biggest but by higher math, that means there was 101 other countries other than china if we don't like those deficits, we have to save again and the

budget deficits trump is running is taking our saving the other way. these guys are telling you only part of the story and it's really tragic that our economic debate is being abused by these so-called experts in that way. >> couple that with entitlements and demographics and you get the long-term ugly outlook that dr. greenspan talks about all the time is your point then that the white house, between the focus on trade deficits and our own spending deficits, are hitting the gas and the brakes at the same time? >> exactly so what is needed here, just to round this out, is a good debate and good appreciation of the fact that you've got both fiscal policy and trade policy acting together to create a potential problem. that's the job of the national

economic council to convene the debate to understand both sides of this issue. in larry kudlow, you are not going to get this honest broker who convenes a debate as the national economic council was set up to be in 1993 under bill clinton and bob ruben, the first director of the nec. this is an important function in the white house and it's being turned into a job of political advocacy driven by an ideology rather than by an appreciation of these powerful forces at work >> as somebody who is expert in asia and spent a lot of time obviously as you did in china, navarro mentioned section 301 of the '74 act, we are in the midst of an investigation but a lot of people believe the outcome will be tariffs or some sort of action towards china when it involves i.p. in particular, which they have been stealing from us for years.

where do you think that goes what are your expectations >> well, look, we have a co-dependent relationship with china, david they sell us exports but we rely on those exports to create value for consumers on the shelves of walmart. they buy our treasuries, as rick alluded to, and by the way, they are our third largest and most rapidly growing export market. so we slap tariffs on them they will certainly respond, they will do the same to us, and that will hurt our most rapidly growing piece of our export business boeing's stock is down for a reason china will, i think, underscore the role they play in providing support for american exporters, and if we can push them around further, they won't show up at a treasury auction and we will see how interest rates do in the u.s. as well

there's two sides to the story poor rick was trying to get to that other side, but he just, he couldn't quite do it i felt really sorry for rick's intellectual constipation. >> so just to extrapolate what you're saying, there will actually be much more impact in terms of the sectors of the market, not more narrowly the boeings of the world but any multinational that sells goods overseas, specifically to china. there's no such thing as a targeted trade war, if we can even say that, targeted roster of tariffs that will just target one industry >> absolutely, melissa these are broad trends by the way, the idea that nations compete with one another like it's us versus china, that's outdated. the world is chopped up into supply chains and value chains, and there are pieces of

different economies that participate in the construction of these value chains. the iphone you guys are holding is shipped out of china but very little of it, less than 10% of it is actually made in china so, you know, these are trends that will span the gamut of global supply chains and the idea that we can surgically excise and focus on one is absolutely ludicrous >> we appreciate your straight talk, as always. thanks for being patient, listening and weighing in. see you soon >> thanks, carl. i'll take a pill it is 11:00 a.m. on the east coast. the news of the morning in washington on wall street, larry kudlow appointed director of the national economic council, replacing gary cohn. rick santelli just talked to national trade council director navarro, widely perceived as the most hawkish voice in the administration a few moments ago. take a listen. >> let's talk about larry. this is our -- i