going green. the maker of marlboro cigarettes is in talks to buy a marijuana company. it's tuesday, december 4, 2018 "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box," everybody. this is cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. andrew is off today. let's look at the u.s. equity futures. we are under pressure. the dow futures are indicated down by 100 points this comes after the markets gave away some of the big gains at this time yesterday we ended with the dow up 290 points yesterday yesterday we were up in the morning by 500 points. all that was then enthusiasm after the informal talks with

president xi this morning s&p 500 is indicated down by 8 points, after closing up 30 points yesterday. the nasdaq is indicated down by almost 38 points after gaining over 110 points yesterday. look at the treasury yields. the spread between the two-year and ten-year hitting the narr narrowest level we've seen since july of 2007 the spread between the fives and the threes and the fives and twos are now inverted. ten-year below 3%. 2.957% two-year at 2.821. the three-year at 2.822. the five yo-year at 2.812 mike, what does this tell us >> a few things. obviously at the short end of the curve only pricing in a couple more rate hikes immediately, i suppose then on the longer end the inflation remains contained, and exfpectations are not out of hand i think unless the two-year is

falling, which would suggest that the market is sniffing out the fed would have to cut somewhere down the road -- >> stop being so reasonable. you understand what we do? >> i do. >> you understand what we do on cable? >> i like draining the dmraum ou >> let's take the panicky worst case scenario. >> please do >> fed is already overshot they overshoot every single time the reason they're overshooting at such low rates is because for 10, 12 years they stayed at emergency levels we all were worried about asset bubbles, where are they? all the easy money, where is it? the bond market might have been the as sset bubble they built the roach motel, they checked us in, now we can't get out. we can't get above fed funds

rate without choking off the economy? there's so much debt, the debt service would go up a quarter point. no one could afford it >> it's a bond bubble -- fizzif' a bond bubble, the bubble is intact because prices are strong >> we keep asking the same question over and over again what is different to put neutral at such low levels how is neutral so low. business was fine at 5%, 6%. suddenly we're choking off the global economy at such low rates? what do you say, bob you know, it i know it, the american people know it bob dahl, not bob dole >> when rates are essentially zero for as long as they were, somebody borrows money that shouldn't be able to borrow money. and then when rates start moving up, the bubble gets exposed. the warren buffett thing, we'll see who has the bathing suit on when the tide rolls out. that's what we're dealing with

you have weaker players -- >> probably doesn't turn into -- you're right it probably doesn't turn into a recession or cut off global growth if you want to take the worst case scenario and hype it as we so often do -- >> that's what the market is worrying about >> right >> how concerned are you, bob? does it change your behavior >> it does we are no longer in the beta market where you just buy them and they go up we're in an alpha world. when they're down, you buy them. when they're up, you trim them what kinds of stocks you own, what kinds of bonds you own, that's where you will make your money, not the beta trade. >> let's look at what happened overnight in asia. the markets there in terms of the shanghai and the hang seng,

both ending a bit higher shanghai was up 0.4% the hang seng was up by a third of a percentage point. the nikkei in japan down by 2.4% in europe red arrows across the board. declines of about a half percent. spain is down by 0.6%. >> if recession -- or if business sigh ccycles don't diel age, how do they die policy mistake >> policy of the -- >> if it was so obvious what the policy mistake was all the time, we would always know when it was coming i'm poz ssiting maybe they alre made a mistake >> i recall back in the mid 2000s a lot of people didn't think greenspan could get the short-term rates up above 4% >> yeah. >> for the very same reasons now he did

what did the fed funds peak out in the last cycle? 5%, 5.5% well past 4%, but maybe they shouldn't have that's the give and take >> this is the new normal. >> something close to the new normal >> the things that happened in the past, it's nerve tver the se with regulatory mechanisms we always shut the door after the toothpaste is out of the tube --. out of the gate? >> all these mixed metaphors, but we don't know what it will look like. if they don't die of old age and it's always self-inflicted by regulators that really are not great forecasters. you have to admit the fed has not been great at forecasting what will happen the normal lead time after you get inversion before a recession is long. >> right >> it's 18 months. >> right >> this is easily the most overanticipated version of the

yield curve. >> is there any way jay powell can be a hero after the hand he was dealt? >> sure. >> how he's taking the punch bowl away. he will be blamed for whatever happens. >> my view is december is in the bag. once you raise in december, it shows that you weren't taking orders from anybody. then after that, it's fair >> but four next year have people totally freaked out >> he wasn't talking about four. >> if we got to 3% unemployment, you don't think four is on the table? >> if they're data dependent and the data is slowing down -- >> he didn't say that in october. he said we are miles and miles away >> he has changed his messages >> here's why he said t he wanted to cool people's fear about they're going to go above neutral. >> little did he know they were already above neutral. >> in september the world was still worried about overheating. >> he said don't worry about

going above neutral. >> he changed his messages that's good. if the data is changing, you want to see somebody moving with the data >> he's a practical man. >> it's fun to watch stock market participants go to terminal pricing on everything the slightest whiff, it's disaster that's why i'm here. >> to help stoke those fires >> we finally figured out why. >> interested in this. toll brothers -- i've been thinking what is this? is it confirming no, they beat the street on the top and bottom lines here we go there is your big, beautiful continuing global growth chart on toll brothers god. toll's ceo notes despite a healthy economy for now -- he didn't say that, i did, the company saw a moderation in demand in the latest quarter he said the housing market is softening and he blames that on rising interest rates and buyers

impacted by well-publicized reports of housing slowdown. supply, all the other stuff that we talk about. potential pot deal in the works. cronos confirmed they're in talks with altria. our our taxicab riders know about this >> they might not already know >> anybody commuting now knows about this, they heard it from mike santoli about a possible investment. cronos rose more than 11% during the regular session. in a statement cronos says no deal has bee reached and there's no assurance that there will be any investment or transaction. any pot company getting in bed with the maker of marlboro is the greatest thing in the world. the talks come as the company is looking to diversify beyond traditional smokers.

reports last week said altria is eyeing a minority stake in that metal thing that puts flavored steam into their lungs great idea e-cigarettemaker juul. shares of altria are down 22% this year. news just crossing the wires. kroger announced a deal with walgreen the supermarket chain will sell groceries in walgreen stores the area will be called kroger express. no financial terms of the partnership were disclosed stocks to watch, shares of rh soaring this morning. the stock up close to 20%.

cirrus logic is cutting its revenue outlook citing weakness in the cell phone market cirrus logic is a big supplier to apple they join other apple suppliers who cut guidance smartsheet reporting a smaller net loss revenue rose 59% beating forecasts. the cloud softwaremake with large contracts more than double the company went public in april. shares are up 50% since the ipo. at the intersection of business and politics representatives from german automakers will meet with officials from the trump administration today to talk about trade and potential tariffs. wilburs a s arross will join us at 7:00 a.m. he will talk about a lot of things joining us now to talk about the trade headlines out of washington, eamon javers can i make one patriotic point, would you mind >> i'm sure you will any way go ahead >> you conjured up an

incredibleably beautiful day in d.c. yesterday >> was a beautiful day fabulous >> number two, we don't have the history of europe where we have 1,000 years of structures and buildings, but could you have envisioned a more beautiful spot for the casket to arrive with president bush and on a day where you could see the sun set, dubya was holding back tears it was magnificent it's a sad week, but it's also a week where you're finally -- even parts of the media that never really gave 41 or 43 their due, they're on board. what, us we never said anything about -- they did the whimp, all that stuff. yesterday was unbelievable >> look, first of all, you're right. it was a fabulous day in washington a sad day, but a moment that set the grandure of the capitol on

the world stage again. that was a real moment to reflect. i was struck as you were, joe, by george w. bush, the son and former president of george h.w. bush, really struggling to hold back tears really profound personal moment. you focus so much on the politics of this, the positions, the power these people had at the end of the day you're looking at a father and a son here i thought that was a powerful moment i completely agree >> amazing the supreme court on one side it was something >> i woke here everk here every. it's a privilege len i don't lose sight of that walking on the white house grounds. it's humbling. this is part of why we work here these things are important and they matter over multi-generational time span >> back to the nitty gritty.

>> the raw politics. >> the chinese were dying for secretary of the treasury mnuchin to be handling things, instead they got lighthizer. what does that mean? we had our 200-point bump, that's done. >> there was a lot of confusion yesterday as we went along trying to figure out what had been agreed to in buenos aires by the president and his trade team with the chinese. and sort of sussing out the details. the president put out the tweet about the auto tariffs larry kudlow suggested maybe there's no agreement on auto tariffs. we're not sure the chinese remain totally quiet about the auto tariff piece. we had this question of who would be leading these talks there you see robert lighthizer on the right side of your frame. the question is who is running this larry kudlow initially suggested that, no lighthizer will not be running it it's more of a team thing. everybody on the economic team works well together.

ultimately the only real leader here is the president himself. later kudlow did confirm that robert lighthizer is the lead negotiator he's seen as a china hawk. that gives you the sense that the administration may be taking a tougher tone with the chinese than if mnuchin had been in charge of it that's one bit of confusion we're sorting out. the other one came late last night or about 6:00 p.m. last night. the white house put out a correction to larry kudlow's briefing in which he suggested that the 90-day clock that we've been focusing on, kudlow suggested that would started ticking on january 1st we all thought it was december 1st. kudlow said no, it's january 1st. then this correction last night, they struck through the word january and changed it to december so now it looks like it's clear that that 90-day clock has already begun ticking. so that's a much shorter time

frame than we thought. during the course of the day yesterday we were trying to figure this out. i asked steve mnuchin whether the white house would put out a specific document which laid out everything agreed to on saturday night. he said, no, they won't do that. >> combination of lighthizer and that comment, we're already 14 days in. whatever it is, we're already in this -- what is the date today >> the 4th >> the idea that we're -- i don't know >> the clock started over the weekend. >> those are sort of like -- i don't know, makes me think there's still some negotiating from a position of strength that we'll see that will have everyone worried about whether we get anywhere. we're not ready to say, hey, we agreed to talk about it, so we'll give up all of our bargaining you will see a lot of rhetoric on both sides, we'll be right back where we were a month ago don't you think so, bob? >> i do. you read the chinese and the

u.s. review of the meetings it looks like two different meetings there was no joint communique. is it 90 days or 120 they're both too short to get done what they want to get done. >> i talked with a senior administration official on friday in buenos aires who told me the president is not in a rush here to get a deal. the president feels that the economy is strong on the u.s. side and the leverage that he has might grow over time he was not in a rush over the weekend to pin something down ultimately this past weekend i said on friday we might be headed for a scenario which is that squush squishy positive. maybe a burst of rhetoric, a pause, but it will be squishy in that there's not a lot of details here that's sort of where we landed, which is this sense that something positive happened over the weekend, but not a lot to hang your hat on when you look

for the details. what are we doing tomorrow we have to go. what are we doing tomorrow >> i don't know. >> i don't know either what do you like to do >> we'll be here for three hours. >> there will be some news >> it will be all 41 all the time >> you have asian markets in the morning to talk about. then no markets through the course of the day. it will be like espn with no sports scores for the day. >> when a president dies in this country, it's an amazing thing i remember the week of reagan. by the end of it, i was permanent teary eyes i was asking my kids this is something to behold the way this is done. we revisit everything that happened and reev-evaluate thes great men and women of public service. >> it does call back to mind an era in washington in which democrats and republicans, as intense as the partisan divide

was in the late '80s and 'early '90s, they had drinks together, went to dinner together, co-sponsored legislation together there was a much different feel in the city. i wonder if you fast forward 0 ye 20 years, the presidents we have now and the funerals we will have, i can't see them being as bipartisan >> i wasn't feeling totally bipartisan yesterday any way i never am where is ross perot? i guess he's still around somewhere. thanks, ross thanks, eamon. 19%. bill clinton won the presidency with 43% wilbur ross will join us to talk trade at 7:30 or at 7:00 a.m. eastern time. let's get back to our guest

host, bob dahl, chief equity strategist and senior portfolio manager at nuveen. we saw yesterday an erosion of some of those gains, this morning the futures are down people are thinking oh, the euphoria, there's trade talks coming and a potential deal. now we hear it's more convoluted >> no question the president -- we had a phenomenal dinner and we had an amazing deal there is no deal it's an agreement to postpone so they can figure out if there's something to talk about. eventually either the president will get something done or he will have to start backing off, because the economy and re-election will be front and center in his mind and he'll declare victory something far short of what he originally intended >> it looks a little bit like the rally after the midterm elections. one-day pop, people thought it was some kind of a signal. we got that behind us.

then, you know, i'm not saying we go to new lows which we did after that, but it is one of those things be careful what you wish for the fed is out of the way. >> you got something when trump tweeted tariffs are coming down on autos, the chinese news agency, if that was true, they would have said they didn't say anything. >> but there's still so much confusion over that. >> i don't think that's the swing factor >> but they aren't dismissing out of hand what do you mean we have all these requirements when a company comes here if you're doing business here? they didn't immediately say they weren't going to talk about that >> can you imagine if they were taking everything they said and disputing it at this point if it really looked like no deal -- >> i think there was a different tone set >> no doubt about it tchlit my point is that we didn't get nothing, there was progress, but is it enough for the markets

>> it also happened after the softening of powell's statements we were up 4% last week. >> more than 5%. >> compared to the fed and central bankers around the world, you're talking about 10% tariffs on a quarter billion worth of stuff it could spread to emerging markets. but at this point it's on the margin >> pure sentiment at this point. >> right >> i think it's the economy. economy and earnings are still good, but they're slowing. so that's a dichotomy. that's what -- >> they shouldn'tbe. they shouldn't be. >> but they are. they don't know -- >> that's because of the 21 trillion here. the personal -- >> back to the liquid thiity th you talked about earlier. >> bob is with us for the rest of the hour. coming up, netflix make an announcement yesterday about the sitcom "friends. we'll tell you what it is. if you like the show, you

probably won't be happy. as we go to break, the biggest premarket winners and losers in the dow. this isn't just any moving day.

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netflix making an announcement about the sitcome "friends." it will be there for you on netflix at the beginning of next year netflix confirmed yesterday that the show will be available throughout the entire year >> i had one of those panicked fans at home >> i thought you were going to say you were >> she binged the whole thing. >> my daughter did that. i saw schwimmer a couple nights ago. >> did you >> i think it was him. >> was it him of the dguy

stealing -- >> i think it was him. united airlines began selling premium plus seats between coach and business for some long flights. the class features bigger seats that recline a little more than those in regular economy also free alcoholic beverages. >> good. more drinking in the air >> amency k cc city kits, noiseg headphones, and they wipe down the tray tables. delta and american airlines already offer a version of premium economy. pricing varies, but one sample fare from newark to hong kong found a basic economy seat for $1,000 business class for 7,000, premium economy splitting the difference, $3,600 >> wow >> you know, after what you said i will no longer put my gum down for a second on the tray table >> earlier this week i was

tweeting about my phobias, germs on planes. >> bed bugs or germs on planes >> bed bugs way worse. >> how about the kiosks now -- >> with the -- >> feces on the kiosks >> ordering at mcdonald's and one of these places. >> don't you assume there's feces everywhere >> no. >> it's in the air sorry. >> i wash my hands >> you know what dust is >> yeah. i do skin >> yeah. i know >> the word around you is so disgusting >> i know. especially because we're in times square i think about what's on the bottom of my shoes >> you see a beautiful person, close up -- disgusting i'm moving away. >> i'm a bit of a germaphobe

>> i know. you have your stuff you squirt over there that's andrew's. if anybody shakes his hands, he's like forget it, don't come back >> we all have our things. it's getting into cold and flu season if little kids get sick, it shuts down the whole household >> when you see what dogs do, then they lick your tongue >> delicious when we come back, crude prices bouncing back, still down more than 25% since the start of october. we'll get you ready for the big opec meeting after this break. we'll watch this, we'll watch what's happening with treasuries the yield curve inverted this morning. we'll talk more about that right now a look at yesterday's s&p 500 winners and losers

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♪ welcome back, you're watching "squawk box" live from the nasdaq market site in times square good morning welcome back among the story that are front and center this morning. tokyo prosecutors reportedly plan to arrest carlos ghosn on a fresh charge of understating his

income he has been detained in tokyo since his arrest on november 19th. if they continue to bring charges they don't need to allow him to talk to many people other than his japanese lawyer a lot of questions raised about this it shows you the difference between different places if you think you're getting the same business treatment or the same legal treatment you would be getting here, that's not the case and the french government is expected to suspend its fuel tax to end the yellow vest protests. the protests have turned paris into a battle zone the protests started three weeks ago when a group of people called on the government to abandon planned gasoline taxes >> carbon taxes. it's tough to be green if you really are going to walk the walk for when you hear all the team talk about how green they want to be, no one walks the walk the greenest people in the world do not walk the walk al gore, i forget how many people, like 11,000 people could heat their homes for a year

compared to where al is living flying around. sorry. >> altria is in early stage talks to invest in cannabis producer, cronos this comes a altria is also looking at a minority stake in juul cronos is gaining on this, up about 6.7% this morning. after yesterday's gain, the dow this morning down 109 points yesterday at this time, the market was up almost 500 points that came around the euphoria surrounding the idea that there may be a trade deal with china soon check out the yield curve this morning. an inverted yield curve on parts of it. right now the three-year is at 2.822% the five-year is at 2.812% the ten-year is below 3% at

2.953% to-year at 2.819%. >> five year is below the two-year. the opec meeting is days away brian sullivan joins us now. i saw you on with frank holland earlier today. that was like land of the giants i think he's got you, doesn't he he what you by -- he's 6'6". are you 6'5" >> i don't know who's taller wilf could be taller >> wilf is the tallest >> but he has three inches of hair he may be hair with frank, you don't worry about that >> no. there was some height on the set. any way, kilduff coming up don't say anything wrong he will be all over you. he's next to me. >> don't let him drink your water. >> you heard that?

you heard that when are these mikes open? >> how long have you been in tv? >> holy cow. i was saying nice things about you, right >> john, i would give you a drink of my water any time you're thirsty this opec meeting is in vienna four key story lines we'll watch. and we'll be there live on thursday and then friday number one, a production cut everyone expects we'll get one prices have come down 30%. worst month last month in a decade probably 1.3 million barrels a day. that's the consensus aggregated from the folks we are talking to also the news yesterday of qatar, the first arab state to join after opec was created is the first arab state to leave. they have been a member since '61. they say they want to focus on natural gas. a lot of political overtones here is opec over the question is this qatar leaving.

that's one thing they've been feuding with the saudis for a long time is this a small crack that will ultimately become a bigger fissure? last month the saudis had a report commissioned looking at a world without opec then you have the two wildcards. you have us and you have russia. the u.s. shale boom continues. we doubled production in five years. russia is now also a huge producer the saudis and rugs have sort of come together to counter our shale threat four big story lines they'll be big rot duck shun c the production cut is the one most of our viewers care about, that may move prices >> for more on the oil market and the opec meeting let's get to john kilduff. founding partner also has his own water >> yep >> also a cnbc contributor i'll tell you what

before we were really worried about global growth this made some people think it was kind of a harbinger or a red flag, most people attributed it to supply, not demand there were rumblings about why is oil dropping from 80 to 50. now we're worried about the economy finally and oil is going back up. oil is either very early or giving us some head fakes. is it all supply >> i think the market is giving opec some advanced credit. in this move, this bounce off 50, keep in mind support at $50 a barrel is solid. most of the hedge funds that we know from the data has occurred. a lot of the hot money has come out of the markets maybe we settle in and find a bottom there it's partly trading and partly supply >> getting out of the ground is around 50, isn't it?

with bitcoin we have no idea what that is worth oil we can figure out the means of production, cost of production >> absolutely. those numbers range from single digits for saudi arabia to some of the best shale producers being at $35, $40 a barrel there are some lower numbers an incredible statistic is texas is producing more oil than iraq these days, just the state of texas. >> so does opec matter at all? >> they do the saudis really matter if they're willing to shoulder the bulk of the cut, this 1.3 million, prices will head back up especially given the situation of venezuela which keeps getting worse. they're down to 1 million barrels, texas is producing 3.4 million. >> can you pronounce quta rsh

qutartrophy. >> i saw one yesterday >> didn't melissa lee come up with one >> she did >> they're quick on that show. >> there's a back bz stostory t. like anybody would know what some people said on a saturday anyone would be watching >> back to qatar, is that the beginning -- >> i'm old school, i say qatar >> is that a signal that this is some sort of splintering of opec or is that just one -- >> that's why there's some dotcom ma goidram going into the meeting they want saudi arabia to take on the bulk of the cuts. the saudis raced a bunch on the

market getting to 11 million barrels a day. other countries can't do it. they have not been able to fulfill their quotas under the deal >> so there's a lot of unhappiness. >> there's jealousy, unhappiness. qatar quitting opec is endemic of that. there's more of that to come, particularly with the iranians, too, leading the charge of complaints here against saudi about what they're doing and undermining the price action >> what do we know about russia and saudi? what's your feeling on that? the nuance behind that >> i think it's a marriage of convenience. the russian companies never want to be holding back production. they're not happy they're in second place to the united states for them it's a more traditional capitalist setup >> a marriage of convenience -- a marriage of convenience because putin senses some sort of a schism potentially between

the united states and saudi arabia >> he has nothing to worry about over there >> higher oil prices are important to him and to his oligarchs. >> i wonder on him jumping in now and getting close and cozy with the saudis, is that because of the khashoggi incident and the tensions with the united states >> he saw the opening and took it >> so he's there stirring the pot again. >> and the bro handshake that has been widely circulated >> he couldn't feel any heat from pr in russia -- >> doesn't exist >> right >> do they bother with popularity polling there what are you using they're like comparing notes okay again capital. >> yes >> founding founder. >> yes >> the only founderment. >> i'm the founder >> good. john kilduff, thank you. when we come back, rebounded from the chip wreck. semiconductor stocks bouncing back after two brutal months

following the weekend's trade truce. we'll look at winners and losers in the sector. the smukemiconductor index up 2% and at the top of the hour, wilbur ross joins us to talk about trade with china, the eu and the meeting with german automakers stay tuned, you are watching "squawk box" on cnbc

french's president anoun nns a delay in fuel tax increases by six months they were supposed to go in effect in may. now it's time for the executive edge an adviser for the top eu court says the uk can cancel brexit without getting permission from other eu member states this is a non-binding ruling, but normally the opinion is followed bay pany a panel of ju that case was brought by scottish lawmakers and opposed by the government which says britain will definitely leave the eu by march 29th of next year forex markets, the pound sup on th pound is up on that news. we will talk about the trump trade truce on chip stocks were we the first to say that?

do we need to worry about that >> elitration. >> the sector bouncing back. here's a quick check of what's happening in european markets happening in european markets right now. at&t provides edge-to-edge intelligence, covering virtually every part of your finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy. at&t provides edge-to-edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when this happens you'll know how to quickly react...

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semiconductor stocks tumbled to steep losses through last month leaving the tech sector lower. joining us now is managing director at mizuho one of the questions i guess when trying to pull apart what this sort of trade truce, you

know, how it affects the semis is how it was affecting the tech stocks so how much of it was trade? >> yeah. thanks for letting me on i think when you look at the semigroup, they're down 25% to 35% from their peaks in october. a lot of that had to do with the trade tariff war going on. because if you look at the actual impact and we did an analysis of all these stocks they're impacted on the earnings line next year so the downdraft you saw in se m -- semis. there's uncertainty on how much of the cost the 25% cost hike can be passed onto their customers. so they have been cutting back on their own inventories they don't know what the demand is a lot has to do with the

tariffs. we think if there's some resolution, it's a delay like what we saw yesterday. we should see the stocks reacting that's what we saw yesterday and i think there's a pretty distinct possibility that we get some sort of half resolution that should be positive. >> even though it's just a reprieve right now and there's a 90-day process and all that, you think the market is going to give them credit for having dodged this bullet >> if you look at the post earnings from the semi manufacturers, now you should start to see the march quarter start to show up on the books. because before you didn't have any visibility and you might have a pull in from june quarter as people try to get ahead of that 25% hike deadline end of march. but again, if we get to some sort of resolution before that, i think it would be positive for the group. >> assuming we don't have a resolution any time soon, tell us a little more about inventories and supply line disruptions. people trying to go this way

when they're not sure if they should go that way that can't be great news, right? >> sure. with this whole tariff thing you have inventories being cut back very significantly so the channels are very lean. they don't know how much they can sell and so that's what part of what you're seeing in terms of the cutback on the semi companies. the second thing you're seeing happening is many of these oems are moving supply chains around. they're taking it out of china or the philippines or vietnam. that's causing a bit of a disruption also. but that's more mid to longer term i think that will continue to be the case you will see supply chains in even some cases it could have been moved out of china into -- back into some of the other geographies. that's a disruption, but i think the biggest impact is the deadline >> which are your favorite names? >> broadcom, cypress

those would be the names >> all right thank you very much. >> thank you bob, we want to thank you for being our guest host today too. bob doll, always a pleasure to see you. when we come back this morning, wilbur ross will join us live from the white house we're going to be talking about president trump's trade truce with china and his meeting today with european automakers a lot of things to discuss make sure to stick around for that "squawk box" will be right back. comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green."

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trade in focus for investors. wilbur ross joins us for a first on cnbc interview. his comments just minutes away storm clouds on the horizon. is a flattening yield curve or inverted yield curve signaling a recession? we'll get the latest and altria is looking to acquire kronos we'll get into that as the second hour of "squawk box" starts right now live from the beating heart of business, new york, this is "squawk box. >> good morning, everybody welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. andrew is off today. we've been watching the u.s. equity futures, they have been under pressure dow futures down by 118 points

below fair value s&p looks like it would open down by about 10 points and the nasdaq by 46 here are the stories that are making headlines this morning. questions whether a u.s./china trade agreement will resolve the country's trade dispute long-term. we'll get you caught up on the latest and tell you how investors should approach this market the french government looking into a rise of fuel taxes that sparked violent protests and unrest. that's straight ahead. and remembering president george h.w. bush this a live picture of the capitol where the former president will lie in state until tomorrow's service the markets will be closed tomorrow and we'll have full coverage of the events right here on cnbc there's a couple of important names as far as individual stocks go toll brothers above with

revenue. the company then went on to say that orders had slowed as interest rates and home prices rose and that stock was 20 and then ran up to low 50s, mid-50s i'm talking a couple years ago now made the round trip almost back to $32 and change shares of amgen this morning are something to maybe keep an eye on the company's myeloma treatment drug received a fast track designation from the fda the company said seven of ten patients given the second highest form and waste management got two upgrades actually a two move upgrade from one company goldman sachs which moved the waste processing company all the way to buy from sell i don't know >> that was cheaper a month ago.

>> i don't know how you do that on valuation do you, santoli? >> purely on the valuation no >> look. on valuation, in other words we were totally wrong how we valued it i guess. also raised the price target on the stock. and a potential pot deal in the work cronos confirms they're in talks with altria. shares are up another 8% premarket. actually, 10% right now. cronos says no deal has been reached and there's no word that it will lead to any transaction. the talks come as altria is looking to go beyond traditional smokers. sha shares of altria down 22% this year

wilbur ross will be having a meeting to talk tariffs. he's with us ahead of that meeting. thank you for being here >> thank you for having me. >> let's talk about the talks the rest of the nation is trying to figure out from this weekend. the lead story in "the new york times" and "the wall street journal" today is about the united states tapping robert lighthizer to be heading these talks. they're taking this as this is not going to be an easy negotiation. is that the read >> bob lighthizer by statute is the official negotiator for the u.s. on trade deals. just as he was in the u.s./mexico/canada deals so i don't know why anybody would have been that surprised that he was the lead negotiator. he has been acting in that capacity so that's not really news. >> i guess the reason people are reading into it is because there have been these clear signals

that the advisers surrounding the president are split on their views of what should happen here every time you see peter navarro move up, people think it's more concern about how hawkish that message will be coming out lighthizer the same. when you hear from mnuchin or kudlow, you think maybe it's a more measured approach coming from this. again, that's speculation. that's how everybody reads the tea leaves i always thought of you as somebody who has serious concerns about what's happening in china and maybe comes down more hawkish on things is that a fair assessment? >> well, i don't think it's a question of hawk or dove there are a lot of improprieties in our relationship with china in fact, i think the sad thing about china's admission to the wto was that president clinton did it on the theory they would play by the rules but had no real enforcement mechanism

that's fundamentally the problem we're trying to solve to deal both with the current trade deficit and with the theft of intellectual property, forced technology transfers, all of those activities i think all of us agree on those broad objectives and we shall see how serious the chinese actually are if they're serious and live up to what was contained in the igs press statement after the two presidents had their big dinner, i think things will be very, very good. but it's too early to tell how serious they are >> it's a lot of ground to cover. it's a heavy lift to tackle all those issues in the next 90 days what's your take on where you expect we might be able to make progress and where we'll be in 90 days' time? >> first of all, the 90 days is just a set for this first set of

negotiations we've been having discussions with them for a couple of years. president has had met in china five times during that period for various other times. so it isn't these discussions pop out of nowhere we had sent them back in may a list of 142 items that were important to consider. and the president got what he regarded as very good assurances from president xi that a large portion of those would be addressed and very, very quickly. plus some new things like fentanyl as you know, fentanyl has become a huge problem for our society and they have pledged to really crack down on it that would be an important and highly visible breakthrough just in and of itself. >> the real news, i guess, is

there is actually progress or talks taking place we've heard from larry kudlow previously when that list was sent back in may, it was sent with silence now there are talks that can potentially proceed? >> right but the proof is in the making and we shall see where they commit i do believe if they live up to the indications they had with president trump, everybody will be very happy. what's unknown is how much of that was just 40,000 foot level talk between two presidents and how much is real at ground level. >> mr. secretary, you famously were on cnbc and you used the aluminum can as a prop to talk about how small some of these moves really were. you talked about a couple of pennies or whatever. that was awhile back

as time has gone on and we've seen some market turbulence, now we have an inverted yield curve. we used to think we were in an endless cycle. you either blame the fed for going up too fast or blame the president for his trade policies so my question is did all of those little trade actions actually dampen growth in the united states or is it just the fear about what's to come that actually hurt sentiment in your view or is it the fed? what do you think happened to have us questioning, you know, the growth theme >> well, first of all, the economy itself is really strong. you've seen the unemployment figures. you've seen the new claims you've seen industrial

production you've seen executive confidence you've seen consumer confidence. those are all very, very high. it's the press that seems more obsessed with what may lie in the future and we've done -- >> the investors too >> is it the fear of fear itself so it's the we went to terminal pricing on the tariffs, we went to 25% on $500 billion or something? is that what it was? so you're saying that supply chains or farmers or aluminum and steel prices, none of those things actually had a negative effect on the economy at this point? you don't think -- >> you had 3.5% growth in the most recent quarter. remember under the prior administration, they said the most we can get is the new normal what they called new normal i called the new dismal. 1.a -- 1.5% to 2%.

that's about double the middle of their range, where we are now. so there's nothing to be quarreling about the economy is ebullient we have a lack of workers. we have 7.1 million unfilled jobs and barely 6 million unemployed people. now, that's a problem in and of itself >> we don't know what the fourth quarter is going to be, wilbur and next year. it could be back to 2% a lot of people are hoping for that when you see when they come in here. but what's the yield curve telling us >> remember when president trump first came in, people reiterated the slow growth phenomenon they were wrong about that it had to do with regulatory

reform and with tax cuts now they're saying, yeah, we grew 3.5% last quarter but what comes next maybe this, that, or the other thing. i think instead of speculating like that, people ought to judge the trump administration by what it does. not that they may be some boogeyman hiding out in the future >> yesterday the president tweeted about auto tariffs possibly coming down in china as a result of the talks over the weekend. as a result you saw the german automaker stocks jump on that news on the idea there will be less of a potential whip of a threat of auto tariffs you're meeting with the german automakers today what will the message be >> well, first of all, we meet with automakers from all around the world quite regularly. because we're trying to get them

all to increase their production in the u.s the german manufacturers are all operating very, very close to their u.s. capacity. and on balance, we're a big net importer of cars from germany and parts for german cars both from germany, from austria, and from mexico. so we're trying to reduce that deficit. our car and car part trade deficit with germany is around $30 billion. it's almost half of our total trade deficit with europe. so it's a very, very important component of the european situation. and autos and auto parts are a big part of the global if we don't fix auto and auto part trade deficit and the chinese trade deficit, we're not going to get anywhere. they're each more or less half the total.

>> the commerce department, your commerce department has reportedly been circulating some draft recommendations in terms of whether it thinks the white house should be imposing a 25% tariff on those european cars. can you tell us anything about that right now >> yes the drafting of the report and the analysis that goes into it have been underway for quite a little while and we're going through our normal interagency review process. that's a process designed to make sure that state department treasury national security council all the relevant dvpts, agriculture, everybody has a look at the report white house council and justice department vetted so we make sure that it's something that can stand on its own when it becomes released

t thee the president as you know said he will not impose tariffs on the europeans as long as negotiations with them are making good progress so the timing of this whole thing will largely be driven by what happens in negotiations china we don't really import too much in the way of cars. we do import some parts. so it's a very, very complicated picture, but we're moving along at a very deliberate and very orderly pace >> what would a successful negotiation with the eu look like in terms of automakers? >> well, as i said, we have a total deficit with them of $65 billion of which about half is from cars. so some meaningful reduction in that hopefully mainly by

increased production in the u.s. for example, they all have big programs for electric cars what's very important to us to get a lot of the manufacturing for electric cars done in the u.s., that's one of the big objectives we have then toward that end, we recently had the announcement from sk, very major company from korea that they're building a very big electric battery plant in the u.s that's a terrific development for us because that starts the supply chain >> mr. secretary, just to return to a couple things that you've said, first was that, you know, so long as china goes along with the u.s. statement and the elements of that statement, everybody will be happy if those are the terms of any agreement if everybody would be happy with that, why is there any question

as to whether this will happen what would prevent the chinese from doing that? >> well, remember when presidents get together, you're at a very, very high level, very broad principles of understanding. now comes the hard part which is translating that into a definitive agreement it's similar to the u.s./mexico/canada arrangement it took something like 18 months which is a very short time as trade negotiations go, but it took about 18 months to work out all the details in the 2,500 or so pages so our hope is that in the 90 days, we'll pin down real ways to implement the broad principles that were discussed and were related in the press release our government put out >> secretary ross, we always appreciate having you here you've been a long-time friend

of the show. there have been media reports circulated recently that you may be leaving before the end of the year can you tell us about any plans for that >> no. there's no truth to that whatsoever >> okay. well, thank you very much, secretary ross commerce secretary wilbur ross, we appreciate your time today. >> thank you for having me on. joining us now to discuss the auto sector tariffs and what the commerce secretary just said, molva group -- it's mava mava i'm sorry about that they had that ready. did you hear that? >> i was impressed >> we've done this before, haven't we >> yes >> it works, or not. anyway, founder and ceo henry wilson no diamonds, jewelry >> no. >> he's a famous guy led a successful campaign with

gm 2015. you were also a member of obama's auto task force. you also ran for governor. what happened that on that it would have been tough >> it was a tough year mostly i have four school aged daughters, the thought to be -- >> why would you >> exactly. >> you think we need help in new york >> i spent my career fixing messes i think that's the main reason >> we're here to talk about something else today jim paulsen is here as well. our guest host jim paulsen at the leuthold group how -- if tariffs came off in china, would that be aboom for u.s. automakers? >> absolutely. >> it really would is that something to shoot for that would be really positive for us >> yeah. i think there are multiple components to it one is the tariff piece which would be a huge benefit. another big piece of it is all the non-tariff barriers in china which are a huge impediment to growing market share for u.s.

manufacturers. there's no coincidence that every u.s. manufacturer that participa participates in the chinese market -- those are huge elements of the problem which i hope the administration tackles as well. >> and it's been intractable, whatever you ---ed ed a jekadj want to use on these issues. did you see anything that happened in this most recent meeting between the president and president xi that seems like it's a sea change? >> it's hard to know with the tweets but i would say you've seen a lot of changes in the stock market auto sales have started to plummet. in the first half of the year, chinese auto sales are up. and they are continuing to decline. the early november numbers suggested they were down 20%

year over year i think the chinese leadership needs to pay some attention. >> wehaven't seen you since th gm news either you know that company as well as anybody. when it happened, and then given the president's response through tweets and meeting with mary barra visiting the white house, did it need to be done is there a way to retrofit those factories? what should gm do? what should president trump do >> there are a few pieces of this first of all, it's tragic when anyone loses their job mary deserves credit for being proactive. the first gm leader in many years to be proactive. the reality is the demand. 55% of total auto sales was down to 30% unlike ford and fca which are

exiting the market, gm is reducing t reducing it. if that demand bounces back at some point in the future i think both sides was the members of democratic is unfortunate. i think that's what mary's trying to do >> what's up with you, paulsen >> i was curious about the commerce secretary i wanted to ask him about -- >> why didn't you? >> well, tough to get in with joe. >> no, no, no. i'm sorry. >> i wasn't talking to him >> i was curious about how much trump and the chinese coming to an agreement to talk has to do with the fact that china slowed and trump suspects we're going to slow. and the window for him to negotiate this is running out.

because how much does the tactic of our president go away if the u.s. slows to 2% growth? i think the game's over on negotiation. you have to kind of say, we're both going to be done throwing tariffs at each other if the economies slow i think the window is tight if we're slowing. >> it's a great question i don't know if it ends the leverage, but it narrows the leverage so i think the president should be thinking about trying to strike a deal in the first half of 2019. you also have politics to worry about as you get into 2020 and so i think the more the year goes on, the harder it is to get to a deal. and i don't think the chinese pain will be increased to the point it increases leverage. >> you're going to tell us whether it slows or not which would be 180 degrees from what

you've been telling us recently. inflation is coming back we're at 3.6% unemployment everything is overheating. we threw gasoline on a fire of an economy that was already ready to overheat. now we've got an inverted yield cur curve. looking at commodity inflation for about five years. >> no. >> how long? >> well, last couple years i think -- >> at least three. >> since in -- >> are you backing off on that now? >> we've had commodity inflation too. that's part of the reason we had a year this year like we had mainly because of overheat problems this year now -- >> we went from overheating to where we are on the inverted yield curve now? >> that's what's caused the inverted curve to some degree is the fact the economy is improved better than expected commodity prices did go up and forced the fed to tighten. so a lot of that has been some of the issue i think the problem now is going to get the other side of the

equation the economy is going to slow and -- >> that's a switch for you then. i'm glad you're here today that is definitely different than what you've been -- >> i've been talking about the economy slowing down the double edge combination, the big question for me right now is if the economy does slow, does it stop the inflation progression? so if you think about friday we've got a jobs report. if you're a bull, what are you rooting for? do you want it to be strong in which case the wage number's up for the second month in a row? or do you want it to be weak and with bond credit spreads already blown out, how much do we session fears even escalate more and i think the path for the bull is getting narrow >> could we have stagflation with just commodity inflation? everybody waits for the wage -- >> wage is up to 3.1 not long ago that was 2-ish.

>> so you're worried about inflation and slow growth? >> i think it's a possibility. if we get both in -- >> that's, like, the worst >> then maybe that's the end of the cycle. i think what could happen here is we slow this thing enough that we stop inflation pressure for a period and maybe we scare everybody a recession is coming. that might be a great buying opportunity for one more run >> as a debt guy, are you surprised that -- i mean, this is happening with rates so low how are we slowing down a hot economy with rates at levels which historically are so low? is there a lot of debt out there that's causing any increase? >> it's a concern. one, leiquidity and two quantum so if you look at the bbbs they were back in the '08 time

frame about $300 billion now they're about $3 trillion. they're on the cuspy side of the grade. the time you see any negative credit rating moves, you'll see a cascade of increase in high yield. the entire high yield mark is about $1.2 trillion. if you see bbb into the high yield, you'll see a dislocation of corporate credit. people are pricing that in then you factor that in with the reduced liquidity given the volcker rule you've got the beginnings of a risky scenario i don't think it's imminent, but i think it's something to watch carefully. >> did we fix the domestic auto industry for good? did you fix it for good a few years ago? i don't feel like we're fixed. are we >> markets continue to evolve, but you look at balance sheets and -- if you look at the balance sheets and cross structures, they are improved

balance sheets i think that's a massive increase in improvement from where they were. >> i'm trying to remember. you have four daughters. is the mava from your daughters? >> and my wife >> that's nice thank you. i'm sorry about the molva thing. anyway, thanks to harry wilson and mr. sunshine paulsen is going to be with us thankfully until 9:00 so strap yourself in we are going to keep talking with jim paulsen, our guest host today, as the futures weaken a little bit looking to give up close to half of yesterday's gain. and then protesters in paris taking to the streets in what's being called the worst riots in 50 years within the last hour, the prime minister suspended the fuel tax hike stay tuned you're watching "squawk box" on cnbc i am a family man.

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oh, sorry. both sides of -- anyway. good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square the world doesn't stop when we go to commercial >> no. and we have live mikes, they can tell you >> why don't we do a show? go straight through like subscription based >> i'd like to keep my job >> you're right. kroger and walgreens have announced a new partnership. they'll be kroger express. pilot program will be expanded next month at stores near cincinnati ikea is opening its first location in a major u.s. city. they will open a more than 17,000 square foot showroom in new york city next spring.

it will be the first of 30 city locations around the country >> there hasn't been a new one forever. people used to go there from new york and then not pay the taxes back here. so it's a different move for them they're always, like, in these zones right outside of major cities >> they're in brooklyn >> really? i didn't know that >> there's an ikea right next to the mall of america. >> yeah? >> so they're around >> one in paramus. visa and mastercard have offered to reduce charges to merchants in the eu. s -- let's take a check on the markets this morning we are looking at futures in the red. dow futures down by 132 points looks like the s&p would open down by 12 points and the nasdaq down by 50

of course that was off the highs we had seen yesterday. you saw that reverse course as all these questions rain shower raised about the details about what happens with the trade talks with china take a look at what's been happening in europe. there have been red arrows there as well. those advanced since the last time we checked. most of the major averages are down by three-quarters a percent. also oil prices another big thing to be watching crude oil up to $53.87 and the treasury complex has been one we've paid a lot of attention to this morning. the 10-year right now 2.957% but it's been the twos, threes, fives. because the 5-year is a lower yield than we've been seeing for

the 10 or the 2. currency check right now, looks like the euro -- dollar is down against the euro it's down against the yen and down against the pound all right. coming up, france is now suspending a controversial fuel tax hike after hearing anger from protesters in the worst riots there in 50 years. we're going to talk about the future of an a tfrcendhe european union right after the break.

welcome back, everyone new this morning, the french prime minister suspending increases in three taxes including the controversial fuel tax for a six-month period it's a response to nationwide protests against high pump prices and living costs. those protests have turned violent over the last three weeks with clashes between police and rioters on the streets of paris for more on the unrest, let's bring in an nbc news contributor. chris, thank you for being here today. we hear this is a suspension at this point, but six months of talking about it, is he really going to be able to convince the french people that this is a good idea or are these taxes kind of dead >> well, i think the prime minister was making the point that this was an effort to defuse the crisis. just behind me looked like a war zone on saturday with clouds of tear gas and buildings burning

and cars burning all around. nobody wants to see that again or at least nobody in the government wants to see it again. so i think this is an effort to address at least temporarily the core issues that originally created this movement mainly through facebook appeals it's a spontaneous movement, however, with no clear leadership so it's hard to know who to talk to to end this crisis. >> but again, just the idea that raises this severe of a reaction, the idea that you put it on ice for six months, maybe talk to the population, try to explain why you think this is so important, what are your thoughts in terms of whether that would be successful >> well, there's a basic contradiction here they're in favor of protecting the environment. but another vast majority support these people who are protesting against the taxes that are being levied against them precisely with that goal.

so it's hard to square that difference and without any leaders to talk to who have any coherent program, it's very hard to figure out the real problem here is the people who live in the countryside who live outside these very well served cities of france are having a very, very hard time making ends meet this is not a society built around the car but their lives are built around cars. when you start jacking up fuel prices by 25% or more in a short period of time, all of a sudden they are taking a major hit. and they just can't stand it anymore. >> that's why i wonder if this is something that's dead or something that has to change substantially. if it's something that needs to be rolled in over -- gradually over a long period of time >> well, the government has to do a hell of a better of a job than it has been doing if it's really concerned about those people who are out in the countryside outside the big cities

otherwise it's going to face really a kind of rural revolt. the violence, a lot was agitators and who want to trash things they're like soccer holligans. but they've had a lot of passive support from people in france who understand that the government has been arrogant and alo aloof. >> chris, you don't think it's rich that the home of the paris climate agreement is where this has been damaged by protesters you don't think there's some irony there? >> i think there's a tremendous irony here and it's worse than an irony it's kind of a trap for macron on one hand, he's trying to be the anti-trump in favor of the climate accord, sponsoring all kinds of talks about that.

and at the same time his people are in revolt because they don't want to pay the price for that climate accord yeah, it's a rich irony. >> i've been hearing reports about restaurants obviously having trouble through these issues hotels and other areas that have been hurt by this. what's the impact on the economy there just from these three weeks of protests? >> well, the impact on the economy, you haven't felt it tremendously yet you certainly will in the tourism sector people are canceling en masse at hotels and airbnbs in this city. normally this is a time of year where many would flood in. a lot of that has stopped. not only foreign tourists. and you've got some really conspicuous damages around here. you can't see it with this camera, but right across the

street from me is one of the nicer restaurants in the area and it was completely burned out. it's a shell now right below me is a cafe that normally caters to tourists. and all the windows are smashed in i'm going to go have lunch there after we talk just for solidarity >> you get a deal. >> christopher, thank you for your time today. christopher dickey is world news editor with "the daily beast." >> i want to go visit there first hand, i think. >> you are >> yeah, next month zbl. >> due diligence >> i'm turning things in but i think i can -- >> i don't make that call. >> i think i need a whole family perspective. rather than just mine. when we come back, could companies face an earnings recession in 2019? we are joined for a look at what

investors can expect in the new year take a look at futures at this hour ouw looking to open a litt low arnd 136 "squawk box" back after a break.

time now for a market flash. dom chu joins us now with that >> good morning, mike. we've got a few things we're keeping a close eye on let's check out what's happening first of all on at least the stock side of things we are watching shares of apple right now down by about 2% you can see that down trend we've seen as of late since the

record highs back in october this on the heels of an hsbc downgrade on the stock saying that the iphone at least maker could be seeing some slowing signs of demand for its flagship product. of course emerging markets demand might be more tepid we're watching those shares move lower here and of course as we talk about apple in the crux of the market cap battle, if you want to look at it that way, we are seeing apple, amazon, and microsoft currently very close neck and neck right now in terms of the biggest publicly traded company in the world as we finished yesterday, apple was number one amazon was number two. and microsoft was number three if you look at the overall market caps at the close yesterday, apple was worth around $877 billion. amazon, $866 billion and microsoft around $860 billion. so we're watching that play out in the premarket as well we're watching what's happening with the yield curve

that spread between 10-year treasury note yields and 2-year treasury note yields, we're seeing that come down here but we're sitting around 14 basis points as we watch that play out, what's the effect going to be on some of these big banks out there? especially the regional ones we'll watch the spdr etf it's still down 5.5% year to date back over to you >> all right, zdom. our next guest gave his market outlook to 2019 noting especially the risk of an earnings recession and that raised several questions he just put out another note mike wilson, chief u.s. equity strategist at morgan stanley you speak for the firm on this for domestic equities? >> correct for u.s. equities, correct >> all right so this is it. i'm going to start with this

so fed dovishness, we've seen that as of last week and a trade truce. doesn't change your near term range. santoli you saw this where you think we are in terms of -- so volatility within that range is going to continue at least near term. >> yeah. this year has been a rolling bear market. the average stock is down 20%. there's been 20% corrections in various markets all year this is not new news to the market that's the good point. for next year, the market has been thinking of it for six months we had a shock in october. took out gross stock, some of the small caps that's good. means everything is rerated now. that's where everything was sort of hiding. when that happens, you don't go straight back up we went from this range to 28, 25 does the dovishness change that upper end?

not really valuation at 2800 is pretty good >> we've seen strong earnings but valuations shrinking next year valuations will stay close to where they are. but there will be a modest earnings recession so we're left with the same range in the s&p based on different things >> go back to '17, our call was we would get multiple expansion which is why we were bullish in '17. because the market was anticipating the tax cuts in '17 and some of the good stuff that's now apparent. this year was the opposite very good growth multiple contraction and so next year we get sort of the blah which is a very tight trading range on multiples and really no growth we're not looking for a full recession of the year. we're looking for a couple of quarters >> okay. and so you have a bear -- if it was a bear, you're talking 2400 on the s&p if it was a bull, you're talking 3,000. so we stay somewhere in that

range. >> that's a big range. and there's opportunity within that that was the call beginning of this year. we'd be in a two-year consolidation. that's actually held very well we think that basically continues into next year different drivers. if you think about it this way, right? we've been in a nine-year bull market if you're telling me all we're going to do is a two-year consolidation, that that's our punishment for having run this bull market, that's pretty darn good long-term we think we're in a secular bull market, but you've still got to consolidate this. >> you count this as a cyclical bear, though, because of the individual stocks. the averages haven't done 20, but they don't have to for it to be a cyclical bear >> i think that's the si mase mantsic. -- semantics even though the index was only down 15 or 18, same thing in 2011 we had a 19% correction. is that a bear market? i would say it was >> that was going to be my answer haven't you then had, like, an 18-month stretch of sideways so this isn't the first

consolidation in a nine-year bull market? >> not at all. and it's quite healthy in january when we were going to the stratosphere, that would have set you up for a much more damaging type of a decline if you think about what's going on this year, the market's been very efficient attacking the weakness links first as financial conditions tightened i think that's a healthy development. it's a consolidation there's a rotation going on now. and i think the trick here is to figure out what's going to work in the next leg of the bull market which probably doesn't begin in earnest until next year >> and you're going with flo, the lady on progressive ads. you like progressive >> correct >> you're remove trade and night transportation you're going some specific things here. and you're keeping disney on the list keeping humana keeping microsoft. but you're adding -- you think

people ought to buy progressive today? >> yes the key thing looking forward is basically valuation. it's not so much value versus growth, but that valuation now matters. in a world where real interest rates goes up, the real interest rate market is going up. i think you cannot over-pay now for growth or safety long duration assets in the equity market are under attack >> you know a lot. do you watch paulsen should we listen to him? what's your opinion of him you think he's got some value? >> sure. >> okay. you want to ask -- what do you think of mike? >> i do have a question for you. something i'm concerned about, at this late stage of the economic cycle and with already concerns around the issue of recession with credit spreads blowing out, the yield curve inversion, if we have an earnings recession, don't you think there'll be broad base panic a posed to people going

buying opportunity >> absolutely. which is why i think you've got to be careful about overpriced stocks it's in the high priced growth stocks they're going to be punished severely there will be panic in individual names i don't think you're going to get, though, the big flush everybody wants. part of our rolling bear market theme is it's also going to be an unsatisfied bear market to the bears. why? you're in a structural bull market you don't get the -- >> earnings recession means decelerating growth or negative year over year >> negative two quarters -- >> of negative year over year growth single digit year over year decline? >> correct we think the risk is the greatest in the second and third quarters of next year. "a," comparisons are very difficult and you're going to have a massive deceleration in economic growth. and we've written a lot about the margin pressure next year.

combination of the three >> is jim going to davos this year >> i don't know. i'm not. >> do you talk to him. >> jim and i do not converse we should. >> gorman. >> did i not say that? >> yeah. i think mike knew who you were talking about. >> yeah. you knew all the blood left your face when i said that no we usually see him in davos. >> jim will be there, i'm sure james. he doesn't like jim. >> james, james, james sorry. james hopefully will be on thank you, mike wilson i saw james not too long ago at a restaurant good guy when we come back, muddy waters research founder carson block will join us as we head to break, take a quick look at the premarket winners and losers in the dow.

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in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. healthier brain. better life. a key signal from the bond market treasuries showing something we haven't seen in over ten years. >> if you were directly above him, how could you see him >> because i was inverted. >> we'll tell you what that means for bonds and for the u.s. economy. the activist in focus as investors search for a yield in a volatile market. famed short seller carson block joins us on set with a new kind of activism called a morality short.

and the trade debate mexico's former president will help us break down the new agreement the u.s. just signed with mexico and canada the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm joe kernen along with becky quick and mike santoli we're also joined this hour by jim paulsen from the leuthold group. you flew in for us >> just for you, joe >> it's hard to get back >> i miss you after months >> likewise. it's hard to get back there sometimes with the snow and all, right? >> no. >> it's fargo-like weather >> it's other places that have trouble with that. >> what happened here a month ago, we got like four inches and it's like the world almost

stopped. these are the stories we're watching one, hopes for cooling trade tensions investors are now showing more caution over u.s. talks with china coming out of the g20. the dow, the s&p 500, and the nasdaq have all posted gains in the last sessions. but today the dow down by 114, nasdaq off by 45 number two this morning, an inversion in the yield curve we've just seen yields on the 2-year note fall for the first time sense the middle of 2007. yield curve inversions have happened since -- and opec meeting with energy markets expecting cuts in crude production despite oil's nearly 4% gain on monday, wti remains in bear market territory it's down more than 40% from its most recent 52-week high few stocks on the move dollar general shares are under

pressure company matched estimates with $1.26 a share revenue. and same store sales above forecasts. but lowered its outlook due to unexpected expenses. also cirrus logic. it's cutting forecast due to weakness in the smartphone market oh, boy. let's switch gears now talk about a new activist short selling called morality shorts here with more on that and his position on the u.s./china trade truce is famed short seller -- so young but he's already famed. carson block of muddy waters capital and activist investment firm you must have a good record, because you don't have a lot of wrinkles >> i don't look famous >> you don't look old enough to be famed at this point but you can do a lot in a brief period of time. >> this business i'm in does put a lot of mileage on you.

especially activist short se selling. >> andrew's going to be very sorry he missed this, but i don't think it's the same as the larry fink mode. >> no. >> this is different can you distinguish it from socially responsible virtue signaling investing which we see a lot of now >> yes so i haven't studied esg in depth, but i'm skeptical of it i think it's basically a fig leaf that kind of allows companies to just take a checklist and tick the boxes and keep doing whatever they're doing wrong. >> that's cold but i like it. >> we live in a world that's dominated by checklists. right? this is the influence of lawyering, you know, not only in america but everywhere if you just -- you know, you have enough paperwork to do something, you absolve yourself of responsibility. nobody can tell who ultimately is responsible for things.

that i think is -- i think esg probably has a lot of elements of that in it. so i'm not talking about esg >> i mean, the greatest case to use is -- i mean, there are pharmaceutical companies that have cashed in on opiates. which, okay. so i see that -- i mean, we'd all like to short companies like that but is it the means to an end? is it going to make you money because they're so corrupt or are you doing it to try and do some good while making money? >> that's an interesting question when you look at, say, incense pharmaceutical which ultimately cashed, i was aware of them back in 2014. that's when "new york times" first reported that there could be a problem with illegal prescription of its main drug. now, at the time i thought this is a regulatory short. and when you want to short that,

you expect someone to wake up after 17 years and care about it that's a hard short. when activist short sellers go out and say i'm short the company. you should sell this company because i think the regulator is going to come for it, a loft investors understands that rings hollow like, regulators only act a small minority of the time what occurred to me when i looked at insis was the whole time it was public, the former ceo, he sold over $50 million worth of stock and a lot of those sales were after that initial "new york times" article and you had analysts even when bad news hit coming out rb we it rating buys, upping their target prices and here's the thing when i look at some of these really bad companies, american addition centers is another example. time and time again, investors were buying shares, management was selling it

that was the financial incentive for doing these horrific things. so investing historically has been an amoral pursuit, right? but the problem is amorality investing in today's world is leading to increasingly immoral outcomes and so it's not benjamin graham's world couple of reasons. i think the private sector has far more power over our lives than it did back then, number one. number two, we live in a world where most senior managers have significant equity compensation incentives and that wasn't always the case. so the bottom line is when there's a company that's well over the line and investors are buying it or not selling it, they're providing that financial incentive. they are contributing to the immoral outcomes so i think it's okay to go out and say this is a dirt bag company. here's what they're doing. you should be out of it. >> carson, when you start talking about insider selling in the wake of bad news, is that --

is that something you can say broad scale is always a bad issue? if a ceo has bad news, something that comes out, a bad media report, should they not be allowed to sell, basically >> well, it's -- i mean, that -- it would be hard to formulate the exact standard but something feels wrong when going back to american addiction centers, the cofounder, former president, coo jared mens, he told $22 million worth of stock while it was public. after he was indicted for murder along with two of the company s subsidiaries and the indictment was later out by the judge that's when hesold the vast majority of that $22 million after the stock dropped and he got out. so yeah. i think there's kind of a problem when somebody can do that now, he resigned from the company, so he was no longer day-to-day but yeah there should be some mechanism

whereby your shares are locked you're not allowed to do that. >> is there a broader theme? you have these companies that are in some way feeding off of either sort of a government program or insurance or kind of operating in this regulatory gray area? i'm thinking back to the for-profit education stocks which ended up being great shorts because they were really just built to the kind of launder student loan -- government student loan money. so is there a theme there you're looking for companies where the economics are set up in such a way? >> so to move -- to basically move the line from investing being a completely amoral pursuit to at least part of the time considering morality, i think we have to start with the most egregious harms and my feeling as much as would like that type of financial harms done to vulnerable segments done to the public to be a reason to sell, i

don't think we're there yet. i think we have to start with things like denial or narrowing of access to health care things that could result in bodily harm in addition to bankruptcy >> tobacco companies >> somebody asked me about that. i think it's hard to convince -- again, starting from this -- where we are right now, amoral position, it's hard to convince investors when they walk around new york and see a number of people lighting up in the street that this is a business that's immoral. i mean, i don't -- look. i'm not long a lot of stocks, so for me it's not a problem to say i wouldn't go long in tobacco stock. i think the most egregious or the case there is what their conduct is outside of the u.s. >> defense contractors they make weapons of mass destruction. >> uh-huh. >> what do we do . >> we need those contractors >> i'm playing devil's advocate. that's why the other of the ones

we talked about at the top of the interview, those are the ones that kind of get me because one man or woman's immorality is another person's cause celebre when it's that subjective, i think you need to think that through. >> it becomes subjective but when reasonable people are -- when we're having a debate about the morality of the company and reasonable arguments on one side, reasonable arguments on the other side, i think we're in a great place relative to where we are now because this doesn't factor into our thinking >> seriously you find a company, you think the financials fundamentals are bad. but it seems like you decide something's immoral and to make it work you have to convince others it is including the regulators which you said aren't part of this but some sense of what you do when you go in there saying it's

immoral, you'll have success if you bring the regulators in. right? isn't it about taking your moral code and trying to convince everyone else that you're right? >> well, so there's -- i mean, joe's example right there is debate really is producing weapons, is that immoral but if i say to vast majority of investors who are long subsi, wouldn't prescribing this open yo opioid, wouldn't prescribing it to people who have far less issues such as neck and back pain incentivizing doctors to turn their practices into pill mills to pump this out wouldn't that be immoral i think everybody would say that's immoral what i'm trying to do is convince them the immorality of a company's actions is enough reason for them to say regardless of what happens to the company legally, i want out of this stock. i don't care if the stock triples from here, i'm not going

to beat myself up over it. i'm going to sleep better at night knowing i was out of it. i think the mek micchanism -- o put a report out, this is what the company is doing and this is problematic. then i'm going to contact analysts here's my information. what do you have questions about? okay a few weeks later, if they're reiterating buy, then i say jane smith, i spoke to her such and such time. i say this publicly. i gave her this information. she hasn't moved a needle on this if people start having their kids seeing this information on the internet and saying, you know, mom, dad, wtf. is this true then they need to be able to

justify it. >> do you run the risk of those people being attacked or being, you know, having something else that comes from it other than just public shaming? >> you know, as somebody who has a ton of negative information written about him by other people on the internet, and so i'm more than prepared to have this conversation with my kids, i'm fine with it i haven't yet and there's no wood to knock on here, but i haven't yet been attacked. so i think, you know, and i'm not saying that these are horrible people, but they need to change their mind-set and understand that our actions and inactions on wall street have real world implications far beyond our pnls. >> i wonder where herbalife fit in at. >> that's what i was wondering >> so herbalife -- >> i like the "h." >> okay. that's for patrician so herbalife is one where ultimately we can hopefully get people to -- most investors to agree that a company that

financially preys upon people who don't speak english well, people who don't have a lot of money is an immoral company and you should not be owning pit it's also an example of one that clipped its ticket and its checklist. as long as they can dot i's, cross t's, they can. but it's not killing people. >> right i mean, are any of the health -- you know, let's not get into it. but i can remember 30 years ago thinking the same thing when i'd fly into l.a. and see the herbalife -- anyway. will you come back we didn't get to talk about enough individual situations too. can you make "squawk box" a home now? i mean, we bonded on summit and trojans. >> that's true you didn't grow up in summit, though, did you? >> no. i live next door >> fair enough we went to the same mall

>> thank you, carson block of muddy waters capital thanks when we come back, oil cartel opec set to meet on thursday to decide its output policy and energy markets are bracing for potential cuts in crude production we've got a preview of the gathering next stay tuned u e tcngsqwkoxyoarwahi "ua b" right here on cnbc this isn't just any moving day.

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this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. welcome back to "squawk box. the futures right now are indicated down about 100 is that an immoral or a moral hundred? >> it's a hundred looking an answer on what's going to happen with trade talks >> nasdaq indicated down about 40 world energy leaders counting down to this opec meeting. brian sullivan joining us with more good morning again >> morning, becky. this is going to be a contentious meeting. just in june they were adding to

production we needed to bring prices down they did that sort of weird ratio thing where everyone tried to do the math in their head about how many barrels a day they were going to add to the market now the consensus to those that we have talked to is that opec is going to cut production by about 1.3 million barrels a day. they're going to fight over that but here's what makes it more interesting. this is possibly the last meeting for opec ever for the country of qatar it was the first arab state to join after the origin naal fiven 1961 it will be the first arab state to leave that's what the opec meeting looks like we all stand in that stairwell and then rush up to try to get comments generally from the saudis and bigger producers there this is going to be an interesting meeting. also what's it going to be like knowing that one of your not original but oldest members, becky, is about ready to say good-bye i mean, it's a little bit

bittersweet. we'll see if that creates a little bit more tension in that meeting. we're going to be in that room, again, by the way. >> we were talking about this earlier this morning what it means if qatar, however you say it, is going to be the lone kind of disgruntled party in this or whether there are a lot of other unhappy members of opec kilduff seemed to think there are a lot of unhappy members and this is just the beginning of the fray what do you think? >> i think john is right i think your point is well taken. here's the reality if you're pumping a few billion barrels of oil a day is different than one only a couple hundred thousand a day what the smaller members don't like -- and by the way, qatar is the biggest lng producers in the world. what the smaller countris don't like, though, is when they sort of establish here's what you're

going to do and then everybody gets the ratio and some countries have a different situation. they say we want to pump more. we're able to pump more just because you're full or your pipe lines are busted, whatever it is that can hurt us you then of course have this long standing slide for venezuela. venezuela is one of the founding members. they were one o ch the biggest oil producers in the world their problems are well known. over every opec meeting, it's we'd like to do this but venezuela can't do it because their production has come down so dramatically. and i've heard the united states is producing oil these days. >> we've been talking about that awhile now is opec relevant anyway? why would you want to listen to anything the saudis say if it doesn't move oil prices anyway >> i'm not going to say opec is irrelevant one, i'm heading over there.

number two, they're still pumping 33 billion barrels a day. global supply 98 million so let's roughly a third of global oil production is still opec it may not be what it was in the '70s where they could shut off the tap and prices speck, but when you've got a third of something that may change, they still have power and i believe this meeting and i'm not just trying to sell it for tv, this meeting is going to be one that will decide if opec still matters a lot or if it just matters a little. >> we'll always have vienna, brian. you know that. >> the picture of you in those lederhosen, i'll never get that out of my mind, joe. >> will you -- are you going to go there this time around? i bet you do >> it's sold out which makes me sad >> you want me to make a call?

>> can you make -- you know, i didn't know the guy that owns that hotel is like the richest man in austria or the second richest behind the red bull guy. >> you can eat there you just got to go to the bar and eat, right >> i'm just going to follow around the opec heavyweights if they want go there, goyle there. i just follow them around with a camera >> i love the schnitzel. see you later. >> i'll bring you back some, joe. >> no thanks that's what they were drinking on that movie too. >> jagermeister? >> that's what caused the whole thing. coming up, the leaders of canada, mexico, and united states put their name on a trade deal last week final approval in the u.s. congress is far from guaranteed. when "squawk box" returns, former president ofmexico

vicente fox will tell us what he likes and dislikes about the u.s./mexico/canada agreement next

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all right. welcome back to "squawk box," everybody. we've been watching the futures this morning and they have been coming under

some pressure. although we're off the worst levels we've seen this morning dow futures down about 77 points right now. that comes after a gain of 290 points yesterday s&p futures down close to six points the nasdaq off by 32 have you practiced this? coming up, nafta's out and the usmca -- santoli you're not -- usmca. anyway that's the usmca sounds like the marine corps doesn't it anyway, we're going to talk about nafta -- new nafta on the other side of this break we're joining by the former president of mexico vicente fox for his take oamics ten era'last trade deal stay with us

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site in times square among the stories front and center, the latest company to announce a data breach, quora. an online knowledge sharing forum. a hundred million users were impacted by unauthorized access to one of its systems exposing information like names, e-mail, addresses, and passwords the company is in the process of notifyi ining affected users and autozone is reporting a quarterly profit of $13.47 a share. the retailer's revenue was up and same store sales was up 2.7% and the federal reserve says its beige book will be released as scheduled tomorrow. that's one of the few economic events that hasn't been postponed. of course u.s. markets will be closed in observance of former

president george h.w. bush's funeral. the fed did postpone chairman powell's meeting tomorrow. the spread between the 2-year and 10-year yields falling to the lowest gap since 2007 steve liesman is joining us with this it's scary you're talking about signals we haven't seen since 2007 >> it is or it's not about the only thing trade ners the bond market agree on and i've been canvassing them is the collapse in spread has taken them by surprise here's the reasons why they talk about it the reason is the recession. there's also the it's different this time idea which is the fed holds a big portfolio of stuff also, trade progress reduces

near term inflation concerns from tariffs that would be another reason technicals i don't know about you, but it feels like every year in december i have to remind people that it's the end of the year and that you get all of these trades around it currencies and bonds and stocks, they all make year-end movements. so one thing i heard yesterday from a leading bond guy was that you have pensions out there and they felt like when the fed became more dovish, that's the last bit right there, it made it okay for them to go into the long end of the bond market and make some purchases. also they were locking in year-end gains their funding was closed it's technical stuff, but it happens around the end of the year let's see how we got here to this thing this was just the change since november 28th. we came down two basis points on the 2-year but 12 basis points on the

10-year. what happened? the fed became more dovish >> november 28th is when powell spoke? >> in and around there here's some of the commentary i'm reading. it's just a little bit of there's a lot out there. none of it really comes together jpmorgan writing markets have been either pricing in a fed policy mistake or end of cycle dynamics and there still appears to be more support for the fed policy mistake hypothesis. here's peter boockvar. says it's almost as if the markets screamed out it's too late in response to the trade agreement. tariffs are still with us and now we have to wait around another three months so there's a tariff explanation there. adp will happen thursday you get the -- i think it is mathematically impossible. you can get people off the sidelines if you're going to do 200,000 jobs over a sustained

period of time you know what's going to happen? unemployment rate isgoing to fall you tell me how the market is going to react if you get to a 3.4% along with strong wage gains, we could be talking on friday about the fed being back in the game >> then "the wall street journal" today suggests they remain back in the game, right >> yeah. >> i was going to say what bothers me about the yield curve of late, when we look back, it isn't that the fed raises rates to invert the curve. it's always the bond market inverts the curve. so this is what's been going on of late. all the rest of the flattening was the normal type. the market was doing fine with it suggests more of a recession signal by them looking to invert the curve. that's different that's something new and it comes at a time when

corporate credit spreads have gone up more >> i was going to say, the five-year is really where the furious rally has taken place. it's gone from 3.09% to 2.81% in less than a month. >> can i explain why because i don't have a long-term macro signal off the inversion of the 3 and 5 >> that's my point it was a positioning thing in five years, partly >> one thing worth mentioning is that the treasury financing the deficit has been doing so very much in the way of the bills market and on the short end. and over -- people i talked to yesterday said they don't understand why the treasury isn't more terming out the debt. but in any event, the deficit's coming through it's been happening on the short end. more pressure there, lets on the long end >> can i ask quickly, we said earlier the inverted yield curve has predicted seven of the last seven recessions is it pretty accurate? >> it has predicted a couple

that didn't occur. but it's been pretty accurate. at least the longer -- >> once you get to the twos versus tens. >> or those kind -- >> it's also the issue is the time period from the inversion to the recession it can be long and variable as the federal reserve might say. the other issue is the fed is focused on a different spread. it's the fed funds to the 2, i think it is. very short that's the one they think is better i went back and did a little history on the phrase you're joking about which goes back to 1966. robert samuel writing in "news week." i went back and checked and since the post-war there have been 13 bear markets and that has predicted seven recessions

>> our friend points out that the markets predict -- the yield curve's predicted three out of the last five. the fed has predicted zero out of the last five recessions. so anything's better >> what would you do in that context? >> i know we got to move on, but what's interesting is if you follow that then the fed is too hot. meaning the economy is potential economy of 2%. wells fargo ceo tim sloan speaking this morning at the conference here in new york. wilfred frost is there he joins us with the highlights. >> yes, indeed tim sloan was positive on the u.s. economy >> today we don't really see a lot to be concerned about.

now, we're concerned anyway, that's what we do. but when we look at the consumer, you know, the statistics that we gave in terms of debit card activity continues into the fourth quarter. i was just looking at the hole i did season numbers we continue to see employment increasing we continue to see wages increasing we continue to be optimistic it's unlikely you're going to see the same gdp growth we saw in the second and third quarter. >> he even said if unemployment rose 1.5% or if gdp growth fell to zero, they still wouldn't secret costs rise. which was interesting given how much these stocks have pulled

back and the broader fears out there of being late cycle and economic growth. we will hear more from tim sloan live in an exclusive at 10:15 a.m. and john waldren live at 12:15 >> a lot ahead of you there. talk to you soon wilbur ross joined us earlier this morning talking about the trade progress president trump made over the weekend with china >> when presidents get together, you're at a very, very high level, very broad principles of understanding. now comes the hard part which is translating that into a definitive agreement >> the other g20 highlight, president trump and the leaders of mexico and canada signing a revised trade deal to replace nafta. but it still needs to be ratified by legislators in all

three countries. joining us right now is the former president of mexico vicente fox. thank you for joining us today >> pleasure. thank you for your invitation. pleased to be here >> glad to have you here let's talk about the new nafta usmca. you had been very critical of president trump's approach to some of these trade talks beforehand what do you think now that the three countries have actually reached an agreement at least between the heads of state >> well, i think it's fantastic for the three of us, for the three economies. especially for canada, united states because the renewed competitiveness of expanding growth, the u.s. economy is by working together with mexico and canada regaining competitiveness like the automobile corporations have done. they are back to the market. they are doing extremely well. >> what does it mean for mexico? is this a good deal for them too? >> a bright future ahead

very bright. because it's been very good for us this first 25 years we see the same thing happening in the next generation the gap in income between mexico and and u.s. side is narrowing and narrowing. it used to be 12-1 $1 in mexico, $12 in united states now 6-1. and i focus on this next generation it's going to be reaching 1-1. like it is canada and united states more so with the cannabis industry which is not seeing any difficulties ahead but just to speed growth, a lot of investment coming. and expansion of markets like kyron is doing right now not only in the markets of colombia, mexico, now approaching peru, chile. the wave is expanding.

>> you bring that up because this is -- it's an issue that has been ratified on a state by state basis. but it's not legal on the federal basis in the united states what's your argument to say that should happen and what do you think the likelihood would be given comments from the administration here? >> well, the best argument is returns. it's economic sector that is attracting big investment with high returns and this is already happening in colombia with kyron in canada with many other companies working there. and canada is the first market that opens both ways not only medical use but recreational use

the first that does it nationally second one is going to be mexico we're a few months away from legalizing both markets. so imagine the 130 million people market in mexico and the source of very competitive agribusiness production. and kyron is there right now. >> kyron as i mentioned is medical marijuana. do you make a distinction between medical marijuana and recreational use marijuana >> i would say yes, a lot of distinctions medical marijuana is addressed to meeting consumer needs, and through a personalized approach, the medicine, the drug improves the health conditions of the patients more and more different illnesses and problems that we

human beings have. kyron dedicates a lot of money to research and development to be serving the consumer and making sure that patients get what they want and need. >> president fox, this morning i was reading as much as i can they're never trumpers at the weekly standard. however, kevin barnes is giving president trump advice on maybe winning in 2020 because there are some troubling signals he said one of the most important things -- i'd start with mexico. i'm quoting. it's unwise for an american president to be on bad terms with a populist neighbor a new mexican president's soon going to be inaugurated. this is a great time for trump to make amends and move ahead. he said a deal's already been worked out with mexico to keep the illegals and they stay there

while appealing for asylum why not have the president surprise the new president of mexico by saying he no longer expects mexico to pay for the wall and that we'll pay for it the explanation is we've already gotten a lot of cooperation from mexico in terms of immigration let's recognize that, pay for the wall, and surprise the president -- would that -- would you -- would that make you feel abo better >> we all know how excessive optimism trump always has. he talks for the bright future for everybody. migration in the case of this caravan is not solved. it's not known now that mexico has accepted -- >> there's a possibility. >> so it's not yet committed and arranged now, the only way to solve this problem of migration is going to

the source is going back to each of those economies that have the capacity to generate jobs and income for these people or that are in violent situations so people just migrate but we need to bring peace and you will have those migrants what we need is central america is there will not be any coming up north like is happening in mexico nafta has been fantastic with nafta, mexico now is on the reverse trend. more mexicans coming back to mexico than those coming in. why? because of nafta creating those opportunities. the region i come from is full employment right now absolute full employment salaries rising and going up people decide to stay. that's why kyron is looking at that market with very clear eyes that is going to be a great market with over a hundred

million purchasing power consumers. and ready to bring solutions for disease and sickness that mexicans might have. so -- and from mexico and colombia jumping to peru, chile, later argentina, brazil. big markets that need theess products >> president fox, want to thank you for your time today. >> my pleasure thank you. >> cy svicente fox who is the fe president of mexico. we've been talking all morning about the potential yield curve. here to talk about his investments and how they can fair in a slowing economy, ceo of smead capital management. we've had a lot of differing opinions on what the cause for the situation is and what it might mean what is your view on the inversion between the 2, 5, and 10-year? >> well, steve's statistics are useful and factual

but we're long duration investors. here's how we frame the subject of worrying about recessions let's say the economy of the united states contracts 2% over a six or nine-month time period some time in the next two to four years do you divorce your wife or spouse if they love you 2% less for nine months? and the answer is should you sell your stocks because there's 2% less economic activity? it's just not a useful thing in terms of owning good, quality companies for a long time. now, the second thing is prior to that, the wells fargo ceo commented about what great shape u.s. households are in usually recessions are there to kind of cleanse sins in the economy. and right now u.s. households are running lowest household debt service ratio in 38.5 years. a very high savings rate

compared to the last 38 years. and there aren't any sins there to cleanse the last piece, joe, you're probably guessing what i'm going to say there's 40% more millennials than there was gen-x-erz so with gen x' ers it is really hard for our economy to not grow well we want to expect a strong economy for the next five to ten years off and on with the usual blimps along the way >> what do you think paulsen i agree there is a lot of good in the private sectors and i would argue most in the corporate and household sector we have late cycle events that could result in sessions at some point. if for no other reason that

we'll run out of labor here. the next recession would be milder than would otherwise be it does not mean though that there could be a short term market event that we do recess it could be fairly damaging. >> there is no question that the stock market could go down 20% or 25% from the high of 2018 it does not mean anything for someone that's going to participate for five to ten years. in the process of worrying about the next 10% down. what people forget is there are companies out there trading at bargain prices right now whose core market are 30 or 45 years old families we'll have a huge growth in those families who caters to that group while people are worrying about the stock market, they'll forget that target caters to them

while people worry about their group, they'll forget that home depot is going to be doing great the next five or ten years >> all right, bill smead thank you, we'll see you again soon >> when we return, we got jim cramer live from the new york stock exchange the futures is down a little bit and s&p futures off by 8 and nasdaq by 7. "squawk box" will be right back. exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

let's get down to the new york stock exchange, jim cramer is joining us now of a new inverted yield curve environment, what do you make of it >> i think the curve is distorted so it is difficult to try to reach as many conclusions that people want to try to reach. there is so much abnormality it is certainly anomaly. i am sure some of the bond markets opened down yesterday and came right back. i think the fact is the fed is going to tighten one more time i think you will wait obviously it adopted a much more prudence stance they're always going to be in

the game so to speak they'll understand there is a walmart verses amazon factor, meaning the price is going to be depressed. there is a big decline toll brother numbers are really daunting quite surprise this morning. the economy peaked around october 3rd or october 4 oeth it has been going down since except for what tim sloane says at wells fargo he's never negative. he's like larry kudlow, he's never negative if you are going to base things on tim, -- >> what did you say about toll >> minus 17% and consensus is 5. >> they say mortgage rates went up too much.

>> you mean cutting? >> we need a lower rate. >> you mean the game of cutting? >> bob toll had been at the game for 45 years he talked about how the mortgage rate made a collapse that's a sign of strength in the economy. i just come from the point of view that i own 12 hseous. >> i have 12 they're all down maybe that's a sign of strength. >> we got to go. we'll see you in a few minutes only half the story?

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i want to thank our guests this morning jim paulsen, i want to thank you very much any quick thought. >> i think it will remain volatile here. >> stagflation >> i don't want it >> tim, thank you. >> that does it for us today, right now it is time for "squawk on the street. ♪ good tuesday morning, i am carl quintanilla with jim cramer and david faber. futures is down about a hundred here we get our first yield curve in version in a decade. plus, another downgrade of apple. europe is down nearly 1% 10-yr, wtwo handles of a couple of