that's still more than my ge option it's thursday, december 13, 2018 "squawk box" begins now. ♪ live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box" on cnbc. we're live from the nasdaq market site in times square. let's look at the u.s. equity futures. you saw a positive close for the markets yesterday. the dow finished up by 157 points, was as high as 548 points this morning futures indicated up by about 26 points, the nasdaq up by 23, and the s&p up by 3

the nikkei this morning was up by 1%. the hang seng up by 1.30%, the shanghai up by 1.25% in europe, the ftse down by 0.2%, the day after we hear about theresa may actually winning that vote of confidence from her party cac down 0.10% the dax is flat. let's look at the treasury market ten-year treasury which closed yesterday yielding 2.90%, above 2.9, back below that at 2.895. >> breaking overnight, apple now saying it will invest a billion dollars in a new campus in austin, texas. it will be 133 acres and accommodate 5,000 employees at first with capacity later on for up to 15,000 in total. it will make it the largest private employer in austin apple says it will house a range of jobs in engineering, r & d

operations, finance, sales and customer support the company also expanding its operations and adding more than 1,000 jobs in seattle, san diego. it's a big investment in austin. >> austin is already their biggest outpost outside of california >> austin is a robust city when it comes to technology we want to bring you more news a second canadian citizen is being detained by china. he is blamed for harming china's security he acted as a translator for former nba star, tennis rodman, on trips to north korea. the chinese news service says he

has been investigated since monday he's the second canadian citizen detained by china since the arrest of the cfo of huawei. china says these things are not linked we want to get over to london for a brexit update. theresa may surviving a confidence vote, but her brexit deal still in jeopardy wilfred frost has the latest >> theresa may did survive a no-confidence challenge to her leadership she gained 200 votes against 117 votes against her. she cannot face another challenge from her own mps for at least 12 months the margin of victory for theresa may was less than she would have liked >> while i'm grateful for that support, a significant number of colleagues did cast a vote

against me, and i've listened to what they said following this ballot we now need to get on with the job of delivering brexit for the british people >> so the prime minister is heading to brussels today to try to improve her brexit deal >> for my part i've heard what the house of commons said about the northern ireland backstop. when i go to the european counsel tomorrow i will seek legal assurances that will assuage the concerns that the members of parliament have on that issue >> she will continue to face opposition to her middle ground brexit deal in parliament. a member of her own party, jacob rees-mog saying she clearly doesn't have the confidence of the commons

she should make way for someone that does. this comment from jeremy corbyn saying that tonight's vote changes nothing. her government is in chaos she's unable to deliver brexit sterling, as i said up yesterday, up today, but week to date lower than where it was at the start of the week, and that already from depressed levels. guys >> wilf, i thought we were sending you over there just to look at what was happening this week do you ever get to come back it doesn't sound like there will be resolution soon >> there's not going to be resolution to brexit any time soon, but there's not an imminent vote, so i'm flying back tonight i think this focus will turn to when theresa may brings whatever deal she has with adjustments to it or not back to parliament we expect that to be in the middle of january. it has to be by the 21st of january. the indications from the government is that it won't be before christmas will she alter the path of her brexit deal or not

deutsche bank this morning saying should the uk stance continue to center on the iteratio iterationsof the current agreement, it is unlikely to pass a parliamentary vote late this year. and if there were a no-deal disorderly brexit, uk domestic stocks could fall 30% in that instance so we wait to see if she gets significant concessions, if not, all eyes will be on a big vote in january on that deal. >> okay, wilf. thanks we'll focus on one of our well known companies here shares of under armour droppin

sharply yesterday following its investor day announcements under armour's earnings and sales guidance for fiscal 2019 both below analyst estimates it's forecasting sales growth of 3% to 4% and flat growth in north america. analysts were expecting growth of 5%. under armour is facing increasing competition in the sports apparel market from nike, adidas and lululemon and they've been hurt by the bankruptcy of retailers like sports authority. separately they are telling investors that they plan to cut the number o products they source from china by half in over the next five years. the stock today, despite the drop, shares are still up 35% year to date a far cry from 50 where the stock was trading a couple years ago, almost a $10 billion market cap. under 4 billion at this point. ceo kevin plank will be on "squawk on the street" today, a first on cnbc interview at 10:00 a.m. other stocks to watch today, oxford industries down sharply

the owner of the tommy bahama brand reporting results that missed forecasts the company says demand has been slower this quarter and it's cutting its earnings and sales guidance for the full year those shares are off by 11%. shares of tailored brands down more than 27% the clothing retailer is cutting its outlook for the year after sales at its men's wearhouse chain softened last month. it expects comp sales to be in low single digits this quarter partly due to a decline in suit sales. let's get back to the markets. money markets, bond markets, stock markets. debra cunningham from federateden vefederated investors, and jeff, our old friend, from raymond james debra, is there anything you've

seen as an investor who has been around for a while in these markets, is this extraordinary, anything we're seeing now that the fed is trying to do? a lot of sound and fury, but i'm not sure trying to go from zero to 3% is that earth shattering what do you think? >> certainly not earth shattering it's also not normal we have never been at zero having go back to normal before. we think of the fed raising rates and calling it a tightening cycle we have not been in a tightening cycle yet. we've been in a normalizing cycle. they may be back to neutral now or getting close to it, but they weren't at 1 or 1.5. so it's different. as they get near the normal rate, the tightrope walking

challenge begins the fed has some history, hopefully not overshooting at some point >> you think one more in december, two next year, that would get us to neutral. is that enough you point out that the fed is not necessarily -- it's not their mandate to stop at neutral if they see inflation on the horizon or something else that causes them to think neutral is not the right rate they can always go above neutral. that could be part of their policy >> certainly neutral is not a stopping point. it ca tightening cycle from there at this point our outlook would be for the economy to have peaked, start to go back a little bit further, a little bit lower from a gdp perspective, lower from an inflationary perspective, then maybe neutral

is the right place to stay for a while. >> when people ask about the two and five re-year at cocktail parties, do you have a reason for it does it portend anything >> it portends a recession, but not a recession that is imminent, it's a recession that can take a year or two in the making i hope that's not necessarily always the cocktail conversation when it is, the patience is a virtue type of response is what we like to end up with at this point we're flat from a yield curve perspective. not seeing a recession on the close horizon. >> sorkin, you know jeff, right? >> i heard of him. >> what should we be doing with our money? did you see? >> have him explain. >> two words

buying stocks. >> yeah. this is all simple here, jeff. buying stocks. how would you characterize this mar sunset earnings driven secular bull market. i will go back to debra. we're done no is it that simple, jeff? >> that's right. the "wall street journal" said valuations are the choeapest on worldwide basis in a decade. i think that's right i think we've put in an yupd cut low, just like we did in february you undercut the october 29th low last week with that print at 2585 if that low holds up, you started the santa claus rally. i agree with debra, i don't think two to fives or three to fives or the two to tens is the right yield curve. i did a conference call with ned davis a couple weeks ago i asked him when he started

talking about the yield curve, i said you've been in the business since '66, i've been in the business since '71, the real yield curve was the three-month t bill to the 30-month t bond and that's nowhere near inversion. >> here's my thoughts, it's not that stocks look more expensive, they look better than they have in a long time, but you wonder if the market is down 10% t could drop another 10% then what happens if i don't have cash left to put into it when i really have those bargains you're not saying this is necessarily a bottom, right? >> i do think it's a bottom. on this show, we had a sell signal, and we said if you have trading positions, sell your trading position so we raised a decent amount of

cash and we put some of that money back to work so i think it will pay off as we get into 2019. i don't think the economy will slow that much i continue to think earnings will come in better than most people expect. i think people are underinvested.this are you worried about the markets? no are we in an economic slowdown marginal you look for two rate hikes next year, that's it, jeff. that's not too hard to digest for anybody, is that it? >> joe, i -- years ago i bought a 30-year mortgage at 15.25%, a mortgage at 5% is -- >> sucker. >> yeah. >> who was your adviser? >> me. >> jeff, raymond james is based where, in st. petersburg >> st. petersburg, florida that's why we do it better >> you're not -- >> removed from all of this.

>> the craziness what >> this manhattan and just the -- here's the trees. i don't know if i'm -- am i in a forest i don't know >> it's noise. we all are subject to getting thrown off by all the worriers around here. >> he's not even on the east coast of florida aren't you on the gulf coast did i get that right >> absolutely correct. >> see debra is in pittsburgh we're trying -- two burgs. just trying to expand, get away from what's always swirling around us. look where we are. this is where new year's eve is. >> armed guards? >> yeah. we think everybody has 15 cop cars right outside their window. they don't typically, do they? any way, thank you, debra. we're grateful not saying we don't love it.

jeff, thank you. >> we expand our horizons all the time we're going to davos next week >> everybody in manhattan, they just take the private jets to davos to try to solve climate change and income inequality no editorial comments there. >> never >> no. >> never when we come back, a second canadian citizen has been detained in china, meantime the country may be opening its doors wider to foreign companies as we head to a break, here's a look at the biggest premarket winners and losers in the dow. it looks like p&g is leading the way. probl procter & gamble up by 1% this morning. this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. 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

china is back in the market for u.s. soybeans. state-owned chinese companies bought at least 500,000 tons of soybeans yesterday it's the first major purchase since the trade truce negotiated by president trump and xi earlier this month soybean prices rose to four and a half month highs on this news. down just slightly this morning. there is a buzz in china about the possibility of allowing greater access to foreign companies that came out in a news report yesterday meanwhile a second canadian has been detained in china eunice yoon has more on this developing story >> thank you very much the foreign ministry has confirmed two canadian nationals have been detained here for engaging activities which

endanger china's national security one is a former diplomat the other has arranged trips to north korea including for dennis rodman that man is a businessman. when asked if their situation is related to the detention of huawei's cfo in vancouver, the minister said china is reacting according to the law china is trying to keep the trade talks with the united states on track. the commerce ministry says beijing welcomes u.s. trade representatives to visit, and there's been talk that china is considering an alternative to the made in china 2025 program sources here have been telling me that some of the authorities here have recognized that the policy has become too controversial, and it is attracting too much criticism from overseas. now there's a push to come up with some sort of replacement, possibly as early as january so the new revised plan would de-emphasize china's goal to

dominate manufacturing, drop hard targets for market share for chinese companies, and include greater market access for foreign firms. it's unclear if china would drop some mor controversial aspects in terms of what china does in trade practices, including subsidizing certain sectors. some people in the business community here are skeptical one of their biggest complaints is that the chinese government often repackages measures or counts pronouncements as progress the fear here is that that is what we are seeing here again with this latest development >> that's what we were talking about yesterday. is this a situation where they're changing goals or just what they're saying about it and how they're marketing it >> yeah, it's df cult tkult dif.

a lot of people have been saying there's reason why the chinese government or some officials would want to see change the chinese government is made up of different factions there are some reform-mined people who might be hoping to use this as an opportunity to push forward some reforms and are worried about the state's role in the overall economy. president xi jinping has been amping up the state role for the past several years the question is whether he would be willing to ease up on some of those controls and just let the markets take their course. that is a really, really big if. >> how does this play inside china? to me, the made in china 2025 plan was sort of like an american first style argument that was really made, i think less to the rest of the world in china's case as opposed to being marketed internally, then it got marketed externally. that created actually a bit of a problem in terms of what the

relationship looked like and other countries said my goodness, look what china is trying to do >> yeah. there is some patriotism attached to china 2025 it's played up in the state press and at every single government conference where they talk about the growth of china, the rise of china, how important it is. my guess is that the population here will just go with the flow with whatever the president decides to do at the end of the day. whether or not the beijing leadership decides can we tweak it a bit then we'll sell it to the public some language now is an emphases on higher quality growth and upgrading manufacturing. in fact today there was a meeting focusing on that for 2019 also this week, we saw another interesting development, that's the central government had

revised its priority list for local governments. in that list it dropped made in china 2025 instead it was playing up this idea of upgrading the manufacturing. so it suggests that perhaps at least publicly they're willing to get rid of this idea of made in china 2025, still a little bit of uncertainty how you would be able to do that here, upgrade your manufacturing without the government playing the big role that it has. >> america first doesn't include technology theft and force transfers -- >> no. no >> but it's similar? >> i think in terms of how they were marketed -- >> aspects of it are similar because that's a communist country and everything aspects of it. >> sure. i would say actually conceptually they were -- >> i remember that crazy "new

york times" piece, the american dream is alive and well in china. i know when you go in that building what thoughts swirl around is that true the american dream is alive in china more than here >> there's more upward mobility in china than the united states. that's true. >> that's why everyone is trying to get in there. thank you, eunice yoon >> it's just math. when we return, the labor market is seeing a record high of -- high number of jobs. and as we head to break, a look at the s&p 500 winners and losers [leaf blower]

you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.

welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome back to "squawk box. among the stories front and center, british prime minister theresa may will head to brussels today for an eu summit after surviving a confidence vote in parliament yesterday may is expected to ask other european leaders for reash shurshur -- reash insurances for her brexit deal

and apple announcing they will invest $1 billion on a new campus in austin, texas. the company also plans to open new sites in seattle, los angeles, and expand in pittsburgh, and boulder, colorado this will create up to 20,000 jobs in the u.s. the european central bank will meet later today planning on ending its qe program the real thing to watch is the tone of its guidance it is due at 7:45 a.m. eastern time, followed by mario draghi's news conference at 8:30. stocks in europe right now, a bit of a mixed picture the ftse 100 off marginally. the cac off marginally the dax up just a bit. checking u.s. equity futures at this hour dow looks like it would open up about 24 points higher nasdaq up about 22 mopoints

s&p 500 up about 4 points. higher education in focus as college tuition increases outpace inflation raising questions about what to do about universities joining us is michael crow, president of arizona state university, which has undergone a nationally acclaimed transformation michael, thank you very much for joining us >> happy to be here. >> let's talk about your approach to arizona state university when you came in in 2002, you looked at it and said college is not working for a lot of people. we need to radically redefine what we do you took business style appro h approaches to some of these things explain what you thought went wrong and what you were doing. >> it was an old model, not scalable, not technologically enabled so we were looking for a system where every qualified student had an opportunity to move forward we changed strublcture, culture

we doubled our four-year graduation rate. enhanced access to the institution. expanded research activities by a factor of five we produce three times the number of graduates at five times the level of diversity with a faculty of the same side. so we changed the effectiveness of the operation >> people say it was business style changes, what does that mean >> we started looking at our main product, our student. how can we enhance that product, enhance the efficiency of producing that student how can we inject technology as an underpinning. we took 200 companies and then integrated them into what we're doing in our learning platform that enabled us to do a lot of things we lowered costs of production we lowered the means of failure, all those things >> the companies that you have integrated, are you talking ing

about technological advancements >> it's data analytics, enhanced learning systems, adaptive learning systems you can come in now from any family background, you're capable, qualified, ready to move forward you will take a math class that will individually take you, be your individual tutor we built dozens of classes like that thousands of tools and spread those out across the university. that allows kids to move through more quickly, double major, triple major, learn two languages while doing everything else and make that available at scale. that's our other thing if you can't enhance the scale of educational end prizes in the country, we have no chance of meeting demand we tried to change all of our production functions >> decade from now, how many universities do you think there will be? given the work you're doing and the work -- there's a handful of universities doing the work or

endeavoring to do what you're doing. you can imagine a day where you don't need nearly the same kind of -- the same number of universities, and it changes the economics of all of this >> there's thousands of colleges and universities it's a funny sector. all the original institutions still exist hundreds of years later so we have four or five different types of institutions. each type will exist some shrinkage in each of those types. those underperforming entities will be absorbed by others, many we absorb ted one we took the thunderbird school of management and integrated that in our institution. so we're an emerging new form. purdue university is another one that jumped off the cliff with us with mitch daniels, the president there, moving them in new directions so we'll become national scale, national service oriented universities if you get 10, 12 of those, that's a new form. all kinds of new educational institutions will also emerge.

it won't be a shrinkage, there will be some changes >> will it lower the cost? that's clearly what's needed long-term. >> i think it does lower the cost it changes the model one problem in higher education is that i used to be on the -- one of the faculty members and one of the provosts at columbia university in new york, there at private schools it's -- it's very difficult to lower the costs. at the public school swres s weo figure out how to lower the costs, but the cost to who the state or the family. we're trying to lower both >> one reason institutions have been able to continue at this pace is there's an ever-growing market more people in the united states are going to college we're taking more people internationally. at what point do you think we stop seeing a growing market maybe that's when change gets enforced >> it's not likely i think what will happen is

educational content will expand in terms of demand we trademarked the term universal learner, so you will be in and out of college or learning experiences your entire life so we see that as an expansion opportunity. >> what's your perspective only student debt problem we talk about it frequently on the air. >> it is a problem the real problem is not debt the real problem is completion, not finishing. if you finish with a little debt, you're fine. you can manage your way through that if you finish -- if you have debt and don't finish, you have a huge problem more than half the people who have gone to college since 1980 do not graduate. it's a completion crisis, not a debt crisis. >> you have improved your completion crisis. >> doubled our four-year graduation rate. >> how did you do that what's the key why don't people finish? >> people don't finish because the system is too narrow

there's not enough tolerance for the complete variability in our society. >> we had a story on cnbc.com this week that talked about college endowments, and how they overall are lousy when it comes to trying to beat the market performance. they underperform drastically. what do you say about that >> when you try to run an institution which you want to last a thousand years or longer, you're logic approaching the endowment business is different. you take long-term low-risk steps and strategies it's just the length of the performance outcome you're looking for. >> if you're paying more for a performance that lags the s&p 500 over 10, 20, 30 years, i would not just put it in an s&p index? >> you have to look at it over 100 years, 150 years, 200 years. when i was at columbia, i remember reading endowment documents written in the civil war, going through the letters and trying to decide if we could do what we wanted to with the

money given in 1860. >> thank you >> less than half graduate >> less than pell grant recipients -- >> i still have that dream >> i do, too i realize there's not a course i have to go, i have to show up for the test and i don't know where it is >> it's an anxiety dream >> as a former stockbroker, i have no business i dream, it's near the end of the month. >> do you still have the test dream ever >> no. >> my dad was in the navy, i went to 17 schools >> you're not that anxious is what you're trying to say. >> he can give himself a degree. it doesn't matter. he's six credits light he doesn't care. coming up, former defense secretary ash carter will join us at the top of the hour. we'll ask about chinese hacking, the trade war, regulating big

tech companies and then delta air lines ceo ed bastian is in town talking to investors. he will talk to us on set first. his stock has been flat. with united up more than 30% and american down more than 30%. that ierewntvi at 7:30 a.m. eastern. stay tuned, you're watching "squawk box" on cnbc

welco welcome back let's look at equity futures at this hour. up six points. only ended up about 150 or something yesterday after being up 400 >> 450 i think >> yeah, whatever. good days. >> big swings. >> some of the dips are bought a lot of the rallies are sold. >> we've seen some bigger returns to the upside than back to earth from the top side this week >> this week >> this week not last week. >> no. >> which didn't offset the week before >> no.

we're still negative for the year >> but right at -- some are up, some are down. i think the s&p is back out of correction >> i thought it was just under right around flat line >> it will be either the worst year in ten years or it will be okay >> yeah. >> depends on whether santa claus who is real as we all know -- >> of course >> -- comes around if you feel flush you buy more toys >> it may not be his top priority by the way, you've been good this year. >> that's right. okay crude news -- oh okay the international energy agency sees the global oil producer tightening next year we're still right at 50 on wti almost 60. just under 60 on brent

2018 was a tough year for the co of the part company of movie pass ted farnsworth is the chief executive of the disruptor who bought the chain in 2016 the chain was hit by major outages, was forced to hike prices the stock that was farnsworth was awarded in 2015 back then it was worth 7.25 million, and now it's worth less than $50s. >> there was skepticism about how it would work. >> was a business model that never made sense from the get-go >> the deal is that they had to pay for the tickets. when you were buying and getting a very good deal, the company was then on the line to pay for it >> it was only going to work if they became too big to fail. every movie theater needed to cut them a deal, and that's a

crazy model. tencent music surging on its first day as a public company. they said they were pricing it low. the music arm of the chinese tech giant closed 9.2% higher. it raised close to 1$1.1 billion after pricing its shares at $13 a piece. the company owns the four largest music apps in china. coming up, wells fargo out with new economic predictions including a rate hike in december and two more in 2019. we have an economist who will explain why and why rising interest resat could affect stocks in the new year here's a check of the futures right now. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will

& they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. 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 your patient's tests come back...

weveryone, looknk isn'tat your phones. the design thinking, the digital engineering,

security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay? cognizant is helping banks use digital technologies at scale to advance speed to market.

welcome back to "squawk box. wells fargo releasing its economic outlook for 2019. we want to get to jay bryson with some of his forecasts for the new year good morning to you. perhaps your biggest, i think, is what the fed is ultimately going to do, not just in a week from now, but in 2019? >> yeah.

so, up until today, we had three rate hikes we thought that and we looked at our cpi and forecast, and because of the price of oil, we brought that down. and it just seems that the fed's at a point where it can feel its way along. it doesn't have to be on his preset path of hiking rates. we think you'll see slow rate hikes next year and by the middle of next year, they'll pretty much be done. >> just to be clear, you're thinking two for 2019? >> for 2019. the one next week is pretty much a done deal. we're looking for two. >> what's the chance it's less >> well, it really going to depend on the growth outlook here if growth comes in as we expect and so for overall 2019, we're still looking at 2.5% in real terms. we could potentially see one or zero >> but is one or zero a bullish

sign or is one or zero a bearish sign because if they're not raising, it means they have the same anxieties or worries that the market does. >> yeah, i would say one or zero is a bearish sign. it's showing that the market is more than what people are expecting. >> so for equity owners and investors, your expectation kims where the s&p and dow will end in 2019? >> well, so, we don't ourselves have a forecast on that. but we do believe that profit growth is going to slow. if you're looking at before tax profits and this would be all economic frosts s profits, i going to grow. and whether or not that's going to factor in the market i'm not going to opine on that but we're looking at slower growths in 2019 and plat growth in profits in 2020

>> is there any sector that you think will perform in a meaningful way >> the capital spending has a way to outperform as we go forward. one of the things we haven't seen at this point is a real acceleration in capital spending because of tax reform. that could potentially happen as you go forward when you look at consumer spending, that was souper chargd this year. >> if there's one area that you're particularly nervous about? >> one area i'm particularly nervous about, and "nervous" is a strong word. i don't know if i'll necessarily use that word. one area i'll be watching is, the labor market as we know is really tight right now and what happens if wages really do accelerate. instead of talking only two rate hikes next year we'll start to talk about what happens if they

actually start to go four, because inflation starts to pick up if i'm looking at the economy right now, if i'm looking at an imbalance or excess, if you will, in the economy, i think it's the tightness of the labor market and potentially what that could mean going forward >> jay bryson, thank you for looking into your crystal ball at wells fargo >> thank you everybody, listen up, there's a popular new toy that has parents and the internet going crazy. they're called yellies it's operated by your voice. here's the kicker. the louder you yell, the faster they move. parentsen thrilled by this new invention leaving hilarious suggestions on line, suggesting they're better for parents that you don't like i just bought a six-pack of them i'm giving them to my nieces and nephews.

ahh! i'll send some to you. >> thank you when we come back, our guest host is here to talk china former defense secretary ash carter will join us on set after a break. and delta ceo ed bastian is here and he'll join us right here on cnbc u.s. equity futures are weaker dow has taken a downturn, 42 points s&p by 2.5 and nasdaq up by 6 points. "squawk box" will be right back. some moments can change everything. you can't always predict them, but you can game plan for them. for 150 years, generations of families have chosen pacific life for retirement and life insurance solutions to help them reach their goals. being ready for wherever life leads. that's the power of pacific.

ask a financial advisor about pacific life. you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.

don't get mad. our new, hot, fresh breakfast will get you the readiest. holiday inn express. book now for at least 20% off during our annual sale.

>> announcer: live from the beating heart of business, new york, this is "squawk box. good morning welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site here in times square. the dow looks like it will open off now. we were up by 24 points right now it looks like we're going to open down. and nasdaq up 8 points here are some stories we're covering this morning. president donald trump is facing pushback in the case that he way intervene in the case of the huawei executive we'll be hearing from ash carter in just a moment

apple making big news overnight, announcing it's going to invest $1 billion in a new campus in austin also seattle, san diego and culver city, california. and optimism growing that united states and china are going to reach a comprehensive trade agreement. nasdaq does have a three-day winning streak going forward and the fourth straight gain with the longest winning streak since august the dow and s&p 500 up in two of the last three sessions. we mentioned under armour. we want to show you again. a few of the stocks we are watching include uaa it plummeted after the company outlined the new five-year plan. but under armour's guidance for earnings and sales for 2019 is where it was forecast to grow. and relatively flat growth in its biggest market north

america. analysts had been expecting growth of 5% despite the drop, the shares are still up for the year but that was after a big selloff for the last couple years. ceo kevin plank is going to be on "squawk on the street" today. and tractor supply upgraded with farming makers move to increase profit margins. and oxford industries fall 3% shy of forecasts. revenue missed forecasts as well the maker of tommy bahama and lilly pulitzer brands. they don't give the prize, do they, andrew >> no. >> these are flowering -- >> pretty dresses. >> okay. >> i'm familiar. playing dumb with two ladies --

>> you pay for them. weaker an expected quarter guidance and also forecasts for comfortable store sales. and a second canadian citizen now being detained in china. he's being investigated on the suspension of harming china's security he's being investigated as a translator for former nba star dennis rodman on his trips to north korea. eunice yoon joins us with more on this fascinating wild story eunice >> thanks so much, andrew. yeah, he's a businessman normally based on the border, the chinese border with north korea. and canadian officials said that they got a call from him where he said he was being questioned by chinese authorities but since then, they haven't been able to make contact. so the foreign ministry did confirm that they have detained both him as well as michael

kovrig, a former. >> mat fodiplomat for canada. and when asked if their situation had anything to do with the race of huawei's ceo detained in vancouver, the ministry said that china is acting according to the law. meanwhile, keeping on track with the industry, a commerce ministry said they welcome the trade visit. and operately, there's plenty of talk that china is now looking to present an alternative to the controversial industrial program made in china 2025 sources have been telling me that some of the authorities here have been fully recognized that this policy is getting too much criticism and bad press overseas so, they're looking to make some changes and replace that program with something else, as early as january. so, the new program is expected

to deemphasize china's plans to dominate manufacturing and also to include some greater market access to foreign firms. it's also expected to drop some of the hard targets that the current plan has for chinese companies in order to gain a certain amount of market access by a certain time. it's still unclear, though, whether or not they're going to include some of the more controversial aspects of their current plan or if they're going to include some of the practices that a lot of their trading partners are think are in fear. such as subsidizing certain sectors. the context and the background of all of this is, though, one the biggest complaints that the business community has here, is that they believe china will often repackage measures and try to sell them to different countries. or to use pronouncements assigns of progress. so that's one of the big

questions here, as to whether or not this is going to be cosmetic or whether it's actually going to have real teeth guys >> okay, eunice, thank you for that one we're getting more news here about ge and its restructuring efforts. it hit $6.66 at one point, that devilish number yesterday. now, the word today is the company is going to launch an internet of things software company. it's going to be started out to be funded at $1.2 billion industrial iot software company. it will be an independently owned company, wholly owned by general electric and it's already got customers, annual software revenue as i said of $1.2 billion and the company, ge has agreed

to sell to silver lake with these actions, ge is going to sharpen the focus of its internet of things for future growth >> also worth mentioning and it may be in large part why the stock has moved to as high as it has today, one of the most bearish on ge has upgraded the stock. that's for him >> it's on hold, right >> he says the key of the story is the newer terms for more balance as opposed to being overlooked by most in the past we now believe the more negative outcome -- effectively, anyway, calling it, i don't know, a bottom >> stock's up 8.2% that's only 55 cents >> exactly. >> let's get to the guest host,

former secretary of defense ash carter now with belfour center who runs their public programs, and i i'm glad you do all of ths things, because a defense secretary nowadays can be a commerce secretary and really a secretary of state because security and commerce are the same thing >> everything goes together. and secretary of defense is the biggest part of the job there. i've been in the engine room also and seen what it's like to manage all of these places defense will always be the closest thing to my heart. when i first walked into the pentagon in 1980 and worked for casper wineburger and then walked out in 2017 so i'm doing things now. and the other issue of

protecting ourselves, and the issue of our time, which i know you want to talk about is the way technology is changing life. a lot of good goes with that but a lot of bad goes that way as well. and how can we have the good and the bad. >> with china, that's all we talk about whether or not we're able to compete economically completely dictates whether or not we're able to defend ourselves in the future >> it's not just defend ourselves militarily >> they could defeat us economically >> this is a communist dictatorship >> a lautot of ability there, ah >> we were in a long competitive relationship with a communist dictatorship, namely, the so far unio soviet union but we didn't trade with them. nobody is saying don't trade

with china but with this huawei thing, the chinese government being what it is, is able to bring together the military, the economic, the trade, the political all to bear together and our governments aren't built that way >> yes, last night on "mad money" we cut a sound bite he summarized it pretty well here's what he said to jim cramer >> it comes down to what is fair game for espionage you know, there's a fine line between hacking for security and hacking for economic reasons because those would argue a strong economy is security so, i think there's always going to be aggression in cyberspace i think globally right now, nobody wants to dial up another notch. but what i've seen in the last few years, the rules of engagement are broken. i'm not sure what's going to happen next for many nations with the modern capability >> i think the next defense

secretary needs to know how to code >> well, not that, but needs to to know technology i will say my successor james mattis, a physicist, he's not, but he's got other experience as well he's paying attention to it. it's a big deal for defense, but it's a big deal for everything else we do including trade this cyber security mentioned here, that's one thing that's not the issue with the huawei it has been the issue with the marriott hack which apparently was the most apparent danger is a counterespionage danger. if the chinese actually did it, it seems their objective is to track down u.s. spies. >> you have security clearance, don't you? >> yes >> what's huawei got for 5g? do they got a little trojan horse in there if i get a pacemaker, god forbid, can they just forget

what they say about me >> this isn't classified, but you got to be careful about huawei, embedded bug that's why people are tearing a lot of hardware out. >> it really -- >> well, no, it's a state, it's a company that is acting, like so many do in klein, china, in interest of itself but of the state as well. i've seen a lot of law enforcement, as far as i could tell, our president was surprised. these things happen all the time law enforcement, as you all know, goes on its own kind of clock. >> but then they used it as a possible bargaining chip >> well, they're using it. with the canadian attention. they're trying to bring the military and economic and legal together which we don't have to bear on a friend of ours, canada, on individual citizens in a way that we don't do.

so, we have to protect our friends and our interests. for us, it wasn't a trade issue. >> well, the president now says that it is >> we can't not take it into account. he's not going to change our system >> right >> but it becomes a factor in the trade negotiations and why -- it's unfortunate, in the sense that it kind of takes the eye off the real ball which is the economy the chinese way. >> i guess we're trying to figure out, obviously, it's all related for the chinese. does that mean it has to be for us, too? >> it doesn't have to be and i don't think there's anything really the president can do lawfully to intervene in the law enforcement matter remember, the canadians have a treaty with us, so they're obliged to extradite somebody who we indicted. so this indictment was going on, law enforcement people were

doing their thing as they do in our country and it's really important to have rule of law in our country. and i don't think the president, i can't speak for him, but i don't think he's able to reach in and change the years of this particular legal transaction but he's able to take into account the ill-ill and what this says about the chinese in the trade negotiation. he's obviously prepared to do that it's kind of a distraction, but it's not really. because it does speak to the basic issue here, which is china is a country that can -- it has -- against whom we compete not on a completely even playing field. >> do we go through some type of breaking point recently? for years, we didn't confront china completely we talked to our allies.

half this country's is shocked at trump's approach to china you see how much heat. and the global supply chains and global this. are you behind what he decided to do at this point in time, in terms of confronting china >> well, i'm -- yes. i'm in favor in general of recognizing. you're right, the times have changed. it's not just administrations have changed >> right >> but in president bush's time and president clinton's time way back then and president obama's, everybody hoped for a china would be different from the china it is now. >> right >> now, we have to realize what we're dealing with china didn't turn out the way that people had hoped 25 years ago, that it would become more a kind of country we weren't expecting it to be like. >> right >> do you think there's a

containment strategy that's what this is about. we're into a containment strategy, trying to contain something that i'm not sure is containable. >> yeah. you can't contain a country in which you're so entangled. we can compete with it >> you don't look at the strategy we're pursuing now as a strategy that's much more than just competition right now >> well, you know, containment is a word that goes back to the cold war >> i know. i know >> that suggests a wall between us and them. that's simply not practical now. there isn't going to be a berlin wall between us and china. so, i'm not sure that's the right word you need to be competitive and every once in a while, you need to be contentious with china. and protect our people, protect our companies, protect our friends and allies around the world. and try to make all of the parts of our government seem together in a way that's consistent with our own system of government

and to the extent, joe, your question, is the united states, now generally, not just the trump administration, waking up to this? a tech sector, business waking up to it, certainly, defense wa woke up to it a while ago with the military but this actual sense that china has moved in its own direction rather than in a common direction over the last 20 years. >> we thought it was going to be blast nose, right? >> yeah. we thought they would more level the playing field. and they're not, they're playing to the strengths what they have, as a dictatorship. you know, we have to protect ourselves of that situation. >> they still have an interest in not totally sort of

alienating the trump administration and the united states my question is, is it possible that we have the upper hand here, at least at this point in time do they have more to lose? and would conceding that, in terms of them coming to the table more with us, are they able to concede that without losing face? >> we're a strong economy, we're a strong company, we have strong values we have all of the friends around the world china is does not. we have a lot going for us and they need us this can't be mutually destroyed construction we need them and they need us. they can't go towards containment. that's not practical in today's world. they need to go to a place that is fair, but competitive for us, and works for china as well. you got to recognize it's a new

problem in economic history. >> we've got to go but jim cramer has been talking how hawkish the speech was and now hawkish navarro and other members of the administration. do you think trump shares that regime change? >> i don't think anybody is talking about regime change. >> jim sort of read between the line with pence's speech >> i thought pence's speech was tough. his focus was mostly on the security front, at large and he was calling out some things that they're doing militarily, and we're talking economics but they're also problematic for us but, again, it's not a situation where -- i've been working with the chinese a long time. it is what it is and we need to get to a place where we can continue to have this trade relationship to the

benefit of both. but it's not, we are not, in a disadvantage and you can call that whatever you want containment is really not the right word >> thank you mr. carter, former defense u.s. secretary ash carter who is with us for the rest of the hour. i think we're going to be able to solve all of this hopefully by 8:00. >> we hope when we come back, ge shares jumping this morning after a jpmorgan analyst who at all called the stock's decline as the bottom is near right now the stock is up by 9%. plus, the push for more transparency, commissioner robert jackson joining us how it influences proxy votes and what that means for futures right now, the dow by 30 points. s&p future down by 3 point

the nasdaq is still positive up by 6 points. "squawk box" will be right back. this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. 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. time now for today's aflac trivia question. what is the leading frozen pizza brand? the answer when cnbc's "squawk box" continues no-good break. gooood break. i'm so sorry we can't make your barbecue. i'm just sick about it. aflac!? different kind of sick. if i can't work after surgery, how am i gonna pay my rent? all these bills? aflac! oh, aflac! and they pay you cash in just one day.

see how aflac helps cover everyday expenses at aflac.com.

whai tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. our new, hot, fresh breakfast will get you the readiest.

holiday inn express. book now for at least 20% off during our annual sale. aflac trivia question. what is the leading frozen pizza brand? the answer, digiorno's ♪ welcome back to "squawk box. popular index funds and etfs are leaving investors in the dark when it comes to corporate management and governance. robert jackson is here who recently proposed a series of changes to the federal trade commission conference. he joins us. we often see you in the box so it's great to see you here

tell us what you think the problem is you're trying to solve. >> well, first of all, thanks again for having me back for me, the thing that's noticeable about corporate elections over the last decade is the confirmation of votes right now, it's astonishing, votes are decided by black rock, fidelity, van gator and state street if you can convince them, you can win a corporate election what i want to do is tell americans how they're voting in those elections. >> you don't believe they're disclosing this? >> believe me, i'm looked at the filings and no one understands how they're doing. how are they actually using that money to vote. and you can look at our filings and try to figure that out >> what's the answer, what does it look like >> so, one thing you can o, basically when someone has to choose, vanguard, fidelity, blackrock, whatever, tell them these guys intend to vote these

ways in a corporate election >> do you want individual shareholders to be able to vote effectively their shares instead of blackrock >> that's a little tricky. one of the most important things in corporate elections is to get retail investment vesting. and over the last decade retail investment voting is down. in a time when technology makes it almost easier to do everything in america. >> not really. i still get a proxy center home to me. >> we need to address that if you don't know if you want to know how it's going to get voted, how can you make a conscious decision >> i don't mean to diminish the power of the retail investor, or the brains of a retail investor, they don't vote. the question is, would you prefer that the retail investor

actually be voting or not voting, or be more in control, if even if they're not going to take the control or would you prefer the big institution who actually has people who are ostensibly paid to represent the interests of these investors? >> i think retail investors should make their own decisions. if they want to cast that vote, i have no opinion on that. if they want to leave it up to vanguard and fidelity, they need to tell them what they're doing with that money. >> most of us who have money in a 401(k) program or what have you are not actually looking on an individual basis saying okay, you voted against this ge management, you did this or that, i'm not saying that you want investors to be more engaged than they are, but the reality is, they aren't. >> that's right. we need to make them think what they want or doesn't want. what microsoft is thinking on this shareholder proposal.

>> don't you think part of the issue is that effectively investors have purposely decided they want to outsource this to somebody else? and the idea of passive investing on to itself was not about taking a position one way or the other, but saying, you know what, the passive index is what the guys are doing. >> in any product in history >> you can make the argument you don't want the blackrocks to be voted. >> that's a completely different issue. i'm saying however is blackrock is voting, let's tell american what is they're doing. >> what does blackrock and vanguard -- what are their responses to this? >> one of the things because they've become so important in corporate elections they're being more forth right larry fink's writing is a must read everyone wants to know how blackrock is going to vote that

money. i would say we're better off telling retail investors at the point of sale, hey, when you make this investment decision, here's how your money is going to get voted >> let me ask you this, though, long-term -- well, actually, let me ask you one other thing where do the proxy advisers come into this? because that's a bit of a separate to date, but it relates to all of us, because there's been a big debate how much power they should or should not have >> right we're looking at this at the s.e.c. a few weeks ago, we did a roundtable and fay bipartisan gill addressing it. one of the things i think we can improve before having to do anything on proxy advisory services is just let people know how the big guys are voting. the concern about iss and glass lewis, they decide too much. if that's your concern, you want to know how blackrock or vanguard are or are not following those guys

>> is there a fight here i don't get the issue here i'm assuming that in a year from now, blackrock is going to start posting on its website what it's doing, right isn't that what's going to happen here with the steady march of progress. >> i certainly hope so here's the key, we talked about a few big names and they're the important ones blackrock and fidelity and vanguard, they're doing a lot of work on casting votes. when you go to make your 401(k) decision, you know how that is going to get voted >> i don't understand the mechanics of it. >> we can do it by rule. we got these long votes portfolio by portfolio american investors want to know if this is pro management, where is this money getting ve ting i. >> thank you, sir. coming up, a ceo ed bastian

joining us to discuss delta's fuel prices, the business, economy and much more. we'll be right back. ♪ ♪ the ibm cloud. the cloud for smarter business. lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential.

welcome back to "squawk box. fresh guidance out of delta air lines. the stock up slightly this morning. we're joining on set by cnbc's phil lebeau and he's brought us a special guest. >> well, let's bring in ed bastian. in about an hour, you guys are going to be meeting with

investors to talk about your guidance for 2019. we've got a look at that guidance this morning. you're looking the double-digit earnings growth, right >> we do >> pretext margin growth, as well as revenue up 4% to 6%. people will look at this and they'll say, why are we nervous about the airlines i know you get this question all the time and you have to answer for the group to a certain extent, why aren't the airlines g getting questions about this >> it's brought on by fuel price. next year, we're looking at margin stability, margin growth out of delta fourth quarter, we're going to be reporting, our margins are going to grow 100 basis points so we're at a good exit philosophy going into 2019 >> you've got that jet fuel expectation. and you know this can change

wildly 65 to 70 >> yeah, 65 to 70. if it fell from there, it would be upside to us. the reality is, we're cops on the outlook. >> ed, part of the issue you've been very, incorrectly disciplined, heading into higher fuel prices dealing with that. it's a weird theory but wall street is a little concerned that they'll get stupider and start adding flights and other things because you think things will get easier. >> one of the challenges is, a few years ago, that's exactly what happened. oil prices were at the $100 mark and fell off the way to $30. that proved to be fairly dysfunctional for the industry you're right, that capacity came in one thing about fuel prices, they're right back to where we started at year. it's not as if we had this massive fuel prices fall and the industry i think will

probably stay disciplined. >> but the reason that the fears came up again, a week and a half ago when you talked to wall street, you said that unit revenue is going to come up. that's what sparked things >> we are coming in at 3.5%. anytime with the street, you always have to miss to the upside, unless they think it's a miss even though it's in the guidance range >> why do you think there's been no new -- in the past few years, actually as the big four have succeeded, there's been no sort of richard branson kind of person who sort of emerged with some kind of new-found airline, trying to get into some market what do you think has happened >> there's a high capital cost to answer. with the challenge over time i think people are a bit cautious. >> i'd love to get your thoughts on this, ed, because i think,

take a look at what you've seen with some of the lower cost european airlines as they brought flights into certain markets. i think the airlines, the traditional airlines, delta included have been much more aggressive saying, no, no, no, you're not just going to bring in low cost flights to a particular market. we will respond in kind. am i correct, not just you, but all of the airlines are saying we're protecting our market share. >> you're right. congestion in the skies in the u.s., it's very difficult to find space to launch a new platform you're seeing it in europe you're seeing it in other parts of the world, but it's been challenging. >> we should also mention ash carter our guest host today ask a board member >> i am a proud board member, he's talking about delta's performance and the management i admire, but the reason i joined, it's got a great corporate culture. they take good care of

employees. it's a little bit like the culture of the defense department which i love so much. complicated global but kind of a family heart to it but in full disclosure, i'm also a board member there let me ask you, ed, about something, just picking up on the last question, tieing it to world affairs. another big issue has been the middle east carriers coming into the united states. and into europe, especially. and kind of bending the rules a little bit and they're subsidized so we were talking about china earlier and state subsidies and uneven flplaying fields you've been pretty active in spa space, speaking out for the airlines and getting help from the government >> well, the administration has been responsive to our concerns. the middle eastern airlines are wholly owned by their

governments. they've subsidized tens of billions of dollars. if we want to see the u.s. airlines grow, we have to have a level playing field. the middle eastern airlines getting them to not only acknowledge the fact that there's lack of transparency about their results, but make sure they're not going to launch new routes into the states from countries other than the middle east, use those subsidies. >> do you think they're still losing money >> absolutely. >> are you losing money on any of those routes? competitive routes, meaning you may not be flying through dubai, but there may be people using dubai to get to a hub that you do fly to. >> we fly direct, in fact, we're getting back into india, because of the amount of money we were losing because of the subsidies. now, we're able to go back is into mumbai to get there >> ed, you talked about

additional boarding classes that you now have it's going up to eight boarding classes from six what is that a recognition of? ways to kind of entice people to pay the higher cost? >> no, really, the boarding process is one of those things at the airport that's still a stress point and it's not a good process. and we need to find better ways to continue to get people onboard. certainly, your higher paying customers should have first access to the cabin, absolutely with laguardia, l.a., seattle, we're trying to get better boarding in place. long term, we got to find ways to get the entire cabin boarded in sufficiently. >> can i offer a suggestion? it seems that the airlines incentivize people to drag all of their belongings on the plane so they don't have to pay $25 to check a back you're invent invenocencentivii

people to slow things down >> actually, if you buy it with the delta credit card, you get free bags. >> how much does that incentivize people >> it really doesn't >> i check my bags all the time. >> the reality, we have to have customers feel comfortable to check their bags and know they don't need to carry them on board. whether you're paying for them or not and that they'll be there when they land we upgraded our technology, and our baggage scores are the best in the industry. allowing technology take care of the issue. >> what's the cost of baggage handling, per bag, i've been curious about this >> cost for baggage handling >> yeah. it $2, $5? >> for the bag to be there, when you get there, what type of service are you talking about? you actually expect it to be

there. >> well that would cost more >> i mean, do you use an app nowadays, you can track where your bag is. >> you absolutely can. >> depends on the infrastructure atlanta's the biggest airport in the world. we run the biggest baggage operation. i don't know the actual cost but the key is, you got to have it when you land and not wait. >> right >> if you fly to newark, your wait for the bag will be longer than the flight. >> hey, ed, i've got a quick question for you with all that you're adding in flights, not just you guys but the industry overall are you worried that are certain airports maybe not at capacity, you might land and the gate is not ready yet and you're waiting on the tarmac 45 minutes, those stories are more common are you certain you're seeing at-capacity levels around the

airports? >> we absolutely are we need to modernize hopefully, with the faa, we'll start to make progress in that area >> just connecting to the last guest, ed, i don't know you were hear he was talking about passive investors on a different issue the issue i'm going to raise, passive investors means somebody who is not really paying attention to all of the fundamentals that you pay attention to and i think you have ever reason to be proud of. here you are trying to manage this real operation every day making it profitable and you're in a market that where a lot of investment is not made how do you stand out in the street as a good performer, not just delta air lines, but a good performer in general in a market that first of all, has bubbles going on in tech and so forth, maybe that's about to end, but as so much passive

investing that you wonder who's really paying attention to how well the company is being run for the long run >> well, that's a great lead-in, we're going up park avenue, we're going to have an investor presentation that lasts six hours, we're going to get a lot of coverage out of that. the reality is, you got to perform. delta has been performing like no other airline the customer satisfaction scores have tripled this will be the fourth year in a row we're making $5 billion profits. returning 14% return on capital back to our investors. it's going to stand the test of time who can do that during the cycle? and delta has a great lead on that >> it's got to get noticed not just for delta but other well-performing companies? >> absolutely. >> sometimes, it's hard to punch through and you're just an old-fashioned good performer >> we do our best. we do our best >> thank you thank you for bringing him here. ed, thank you, this is fun

>> good to see you and the ecb decision came when we were talking take a guess anyway, coming up, we'll have a check on what's moving, the markets, the unchanged ecb and plus much more from our guest host former defense secretary ash carter as we head to break, here's a look at this morning's premarket movers and the dow "squawk box" will be right back.

for those of you that missed it, the ecb issued its latest policy statement just moments ago. as expected it left rates unchanged and announced its bond buying program would end this month. there's a look at the euro versus the dollar. time for a market flash. an interesting note this morning out on general electric. definitely, the management at ge can be back foot but if this one analyst makes a move the stock is actually showing signs of life because of this guy. he's a real ax as they call him. >> this is steven tussa we're

talking about. he's had the weight on shares going all the way back to 2016 he's also been cutting, hence, the ax nickname. he's been cutting his targets over that entire time span since 2016 today's note is interesting because he's now taken a little turn we're not going to call it bullish but it's a little less bearish. here's what happens, stephen tusa raises to a neutral rating. again, underweight since then. operating target, though, remains at $6. that's where it currently stands right now. as you take a look at the overarching reasons why in the note he talked about the upgrade. it was a more balanced risk/reward scenario but he says there's the possibility, increasing likelihood that a material

equity raise could be necessary. they may have to sell stock. still, shares are up now in context, as we take a look at general electric shares over the past three years, yes, going back to around 2016, around these levels is when he started to cut that target outlook and the share price. and he's done it another five times just so far this year. cutting that target price. and becky, just for a little more context, as you take a look at general electric versus the s&p 500 during that time span, what a gap in performance it has been that white line ge shares. the orange line here, the s&p 500. so a 75% drop in ge, versus a 72% gain in the s&p. there's a reason why, again, we oftentimes, becky, berate analysts for not getting ahead of the curve an interesting note here from an analyst who has had it ready for quite some time now may be calling for less bearish >> that's why the street is paying attention today,dom,

because of who this is, the guy making the call on it. >> absolutely. that's one of the reasons we're seeing it. i checked about 20 minutes ago, already 1 million shared pretraded up by 9% or show let's get back to our guest host former u.s. defense secretary ash carter secretary carter is now with harvard's belfour center he directs heir public purpose programs secretary carter, let's talk about what we've been watching with technology. getting brought before congress, google this week, sin dundar pii what did you think of the hearings >> let's start with the positive, you're right this is an area where maybe in a divided congress we can come behind something that the country really needs because this technology issue is

not really highly partisan everybody, and people in the middle are concerned about privacy and being driven towards extremism. and we had another hearing, becky, if i may was like the facebook hearing where a lot of ceos came. and there was, like mark zuckerberg did and there were questions that weren't very well nm-informed a answers that weren't forthcoming. imagine a different kind of hearing. imagine a hearing that the members had for them some advice and technology of their own for options. for a mixture that everybody knows is needed, which is a mixture of self-regulation by tech companies and some intelligent regulation by government. that what the subtext of both hearings so where is it we need those options. they need to be crafted.

then a member can come in not only with a complaint, a legitimate complaint, but here's something i'm sponsoring, what do you think of it and a ceo can come in and say here's what i'm going to do on my side. here's my reaction to what you're planning to do on your side that would move the ball forward. and maybe we can do that in a bipartisan way >> instead of just theatrics you're somebody who has security clearance for how many years? >> since 1980. >> all right so you've been knowing what's happened behind the scenes for all that time. what do you think the risk is? what is do you think the problems are >> in the cyber security, they're very severe. we saw that in the marriott hack with espionage and counterespionage issues. but for companies, you have to worry about theft of intellectual property. you've got to worry about getting hacked and private data exposed. and the problem is that the internet was designed in a way that makes it inherently

difficult. and we've got do get better at that and there are ways, if you apply good trade craft, can you do better we helped, for example, a state election commissioners, to simply do the basics of cyberhygiene and thereby protect the election systems. they were appreciative of it >> we hear about the data that's collected one thing you rarely hear about actually that somehow everyone has lost all their money. >> well, they do, but they don't talk about it that much. and they spend a tremendous amount of money. i think you have to pick an industrial sector that has worked hardest at this and therefore is not impermeable but is better than most. it's the financial sector, but there are breaches there they're not anxious to talk about them there haven't been any that have

been specs particular filtrations of money >> if that industry is the best at it, who's the worst which critical industry is the worst? >> little companies -- a little company that has, for example, a chemical company that has a formula that it uses that's through long trial and error and that's its competitive advantage. and that gets stolen by china or someone else, all of that work they put into it those little guys. individual users your credit card how many times a day do you use your credit card take a look at the people you're handing your credit card to and ask what's their cyber security trade craft? it's not go to be great. so the big guys who have the money to pay attention are able

to kind of keep up and anybody who takes their eyes off the ball the way marriottestmarriott e evidently did and who is big and has a reputation i know that management boards these days recognize it's something they've got to get good at. >> secretary carter, i want to thank you for your time. >> thanks. a pleasure being here always with you >> appreciate it coming up, when we return, economic data that could set up today's market moves plus, is santa claus coming to wall street we'll talk the new year's wishes "squawk box" ahead in cash back. and last year0 which i used to offer health insurance to my employees. what's in your wallet?

yes or no?gin. do you want the same tools and seamless experience across web and tablet? do you want $4.95 commissions for stocks, $0.50 options contracts? $1.50 futures contracts? what about a dedicated service team of trading specialists? did you say yes? good, then it's time for power e*trade. the platform, price and service that gives you the edge you need. looks like we have a couple seconds left. let's do some card twirling twirling cards e*trade. the original place to invest online.

apple betting big on the lone star state. the tech giant announcing a new billion-dollar campus in texas did elon and mr. musk. after a wild year for the tesla boss wired magazine tackles it. and watered banks. financials leaving one dow component down 14% on the month. a top bank analyst tells us what can turn the sector around as the final hour of "squawk box" begins right now. >> announcer: live from the most powerful city in the world new york this is "squawk box. good morning welcome back to "squawk box"

here on cnbc live from the nasdaq market site in times square. i'm joe kernin along with becky quick and andrew ross sorkin looking at futures right now, they turn positive down 38 or so, 38 or 40. back up 22 24 now 25 on the dow jones. nasdaq up 24 the s&p indicated up 3 or so and we're back above 2.90 i think as of late year on the ten-year actual rate at 2.90 and still a little -- the five-year slightly below the two-year in that inversion in the ball part of the curve or short end we're watching three big stories. number one, apple announcing a big investment in texas. the company says it will spend $1 billion to build a 133-acre campus in north austin the facility will employ 5,000 at first with the capacity of 15,000.

the european bank issuing a policy statement the ecb left rates unchanged and announced that it's bond-buying program would end this month and three, quick data coming out at the bottom of the hour, with economists expecting 225 new claims for the week ending last saturday. that would be a drop of 6,000 from the prior week. and we're also waiting for the government's november import and export price forecasts calling for a 1% prices in import and 1.1 increase in export general electric was upgraded to neutral and under water by stephen tusa who has been bearish in recent months. he's says he's less negative on ge as the known number onegative factors goes up. coca-cola was groudowngraded

and notes that the company was in the midst of significant changes. and that issues with any one of them could prompt management to drop back. and bank of america of merrill lynch upgrading procter & gamble to buy from neutral it says that it's convinced sales and earnings momented will be sustained following a meeting with procter & gamble and that up by 0.8% the results of the cnbc all america says they're in. our friend steve liesman joins us >> andrew, you and viewers at home should be prepared to go through the full range in the survey optimism, happiness and sadness. let's get to the data. economic optimism plunging we were at record levels in october. 48% of the public was

optimistic now, and optimistic for the future and this is the single biggest quarterly decline we have seen in optimism in our survey in the 12 years we've been doing this go back, it's now 39%. go back to the beginning of the trump presidency where it was just 20% so, we've held on to a lot of the gains but gave up a bunch of it in this quarter here. and a percentage of americans saying they're pessimistic now and pessimistic for the future let's look at why that is. expectations for gains in home values declined. and gains in wages declined. and saying the best time to invest also declined those that we track quarter to quarter, all three of those pillars of economic confidence did go down in terms of gains that are expected. this knocked on, it reflected on the president's economic approval rating. he had been at 51% for two quarters running now, he's down below that to

48%. 800 american polls around the country. margin of error 3.5% that's just inside that margin of error but you can see here the disapproval on the economy went up from 38% to 42% but it had no effect at all on the overall presidential approval rating. that remained right at 41% just about where he has been his entire presidency. at the same time, holiday spending plans surged. we've never seen numbers like this first time in 12 years over $1,000 all the way up to $1100, compared to the forecast last year of $900 you can see what's inside that take a look. why? well, because currently people are saying they're going to spend more because they have more income. so, the difference between the beginning of this thing when we talked about the outlook it's about the outlook for those things but what's in people's pockets right now, that seems to be motivating them to spend and one nice little thing here, the spending that americans are

about to embark upon looks to be bipartisan it 20 from 16 to 17. all of the optimism about more spending was among republicans where 69% were going to spend more now look here, it's both republican and democrat. we're both going to go out and spend with some abandon, becky, this holiday season. >> steve, when you look at the real numbers that people are planning on spending versus optimism or lack of optimism, does that really matter with confidence or what they're doing and not saying? >> first of all from an economic standpoint it matter what is they're doing, rather than saying there is some correlation. the less optimistic you're about the economy, the less you're going to spend and vice versa. however, we have seen situations and the greatest example of that if you remember back in the post-9/11 period, car prices

actually thought to plunge, but they surged. we could see that the political headlines could be knocking confidence off i will say, though, republicans are more equally confident the decline of confidence looks more to be among the independents and democrats here. >> steve, i wasn't listening to the whole report, did you say you like alabama even though they were tested by georgia? >> i'm glad you brought that up, joe. i don't like alabama, i'll tell you why, i don't have a dog in the college fight. all i do on saturday is click through looking for competitive games. and alabama does not play competitive games. they wipe out all of their competition. >> they did with georgia >> that's true >> do you know in the survey -- >> i'd like to take a step back and explain to people the running 12-year joke >> you'd be disappointed if i didn't say that. >> no, no. so, what people don't know, joe -- >> they know

you survey athletes, all-americans -- >> no! listen >> joe, joe, give me a meant because people are going to write in they don't know what the joke is >> that's okay that happens a lot >> happens to me all the time. >> i'm the joke. thank you, leisman >> let's get a check on what's going to move the markets today, anastasia amoruso. >> and i know what happened recently in the markets is something you're calling for you're calling for a pe reassessment what does that mean? >> the piece i actually wrote about 12 months ago. what we were looking at was the level of normalized earnings and

versus where we thought things would settle down. you know, when we chatted in the past, we talked about sort of the influence that was in the market and people arguing that the pe of the market should be much higher on the ultra low interest rates. which if you assume those rates were going to persist was a valid argument the case we can trying to make is the rates had to normalize. as you go through a regime change, you're moving from a reasonably hot economy to a colder economy you generally see some movement on the pe evaluation of the marketplace. we hope for that, rather than a big fall in the price of the market itself. it's more the earnings would come through and the market would be pretty much stagnate. and that usually comes with volatility >> we've gone from 19 pe to 16 times. is that a valuation at this point? >> it's valid. i don't think it's particularly

cheap, but it does make me more optimistic for '19 and beyond. because we have at least had that setback i would say 14, 15, more is what i think is cheap but 16 i think is a reasonable valuation. because we are seeing things slow down a bit. >> anastasia, what about you >> yeah, i think it's a reasonable valuation for the current markets. if the economy continues to deteriorate, i would suspect that we see the multiples come down further right now it's focused on 2019 earnings and the fact that it's calling for a pretty high number globally, given the economic slowdown that we're seeing, given the tightening that we're seeing, giving the yield curve developments for the united states, not to mention trade wars i think the eps number for 2019 looks a little bit high so, that's what i'm watching really closely is what happens to earnings revisions.

at this point, i think that's going to drive markets more than valuations >> we had a fund manager on earlier this morning who said when you look at worldwide valuations for stocks, we haven't been lower in decades and decades? >> yeah. and i think it's certainly true for certain pieces i would say emerging markets are looking interesting from that perspective. china and the derating that's taking place makes that an interesting contarian opportunity. >> is that an investment right now? >> it's one of our contrarian opportunities for 2019 a lot has been baked in. >> are there any u.s. companies that you think have remarkable composure to china you'd recommend? >> i think there are there absolutely are they're in the tech space. i'm not sure i'd be recommending those at this stage. because the challenge is the

global cycle and what's happening with the global cycle, it's not the industrials. it's the semiconductor component and that would have the greatest exposure to china. >> so, colin, if you think that stocks are reasonable valued here, you're looking at gains in the market next year, mid to sing single-digi single-digits? >> more in the midlevel. i agree with anastasia, i think earnings expectations are too high as i combine that, i end up in the midsingle digit area the issue is is that reasonably attractive, but on the other hand, with the extra volatility, is that what people are going to be excited about but, yeah, i think we'll end up with a small/middigit return >> they did affirm that qe -- i mean, i get a little misty about this -- qe is ending

does that bring this chapter to a close until the next time, i guess? >> well, this particular one, but it doesn't change a thing from the perspective of bond yields one thing that has announced, ecb has announced a lot of sovereign bonds and it's about 20% amount outstanding just like the stock purchases way down in treasury yields in the united states that could be the case for european bonds as well so, that doesn't change. i think what does change there's an incremental change that we'll be looking for wage hikes at some point from the ecb, given the data flow, that's not an imminent proposition by any means. >> thank you coming up, wired magazine tackles the management style of elon musk. the author of a new piece on aysla production st tuned you're watching "squawk box" on

cnbc will it feel like the wheend of a journey?p working, or the beginning of something even better? when you prepare for retirement with pacific life, you can create a lifelong income... so you have the freedom to keep doing whatever is most meaningful to you. a reliable income that lets you retire, without retiring from life. that's the power of pacific. ask your financial professional about pacific life today.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. 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 out right now, up 63 now on the dow they've been kind of like trading in the regulation session, all over the place this morning. but not triple-digit moves but they're up 30, down 30 up 60. as can you see right there, this is just in the last two minutes or so, so they had -- now it's 36 actually put in fair value as well andrew big "wired" story. a big feature on elon musk's behavior at tesla. focusing on the factory. the piece titled "dr. elon and mr. musk." here to discuss it right now, our friend, i should say, it's a fabulous piece >> thank you >> and really takes people

inside, behind the scenes of it sounds like former and current employees that you seem to talk to have some pretty wild stories to tell about elon musk. >> well, it started with a basic question we all saw this behavior over the summer and fall. accusing someone of being a pedophile. tweeting he was taking the company private. >> smoking pot >> what's that >> smoking pot >> smoking pot and the question is what led up to this kind of oddness? i talked to executives that said this is a culmination of a pattern that's begun in the past two years. pressure inside tesla over the model 3. the new vehicle right now, it changed the culture. >> that's what i want to ask there are moments in this story where you have anecdotes, where he's walking in the factory

saying i've got to fire someone today. that's all he is going to do, he's going to fire someone because he wants to. >> people said he would walk through factories and he would stop and interrogate people. and if they gave the wrong answer, he would fire them and one said she actually forbade employees to walk near his desk >> if i was such a mess effectively, we would not have been able to have got in this production hell. do you believe that? >> that's exactly what tesla said look, we're trying to do the extraordinary, we're trying to do something that's impossible and when that happens, you need impossible situations. you need the extraordinary employees. and you need to get rid of the people who are not extraordinary. >> there are a lot of people who looked at the people who left. some of them were considered the adults in the room >> absolutely. >> and those who are betting against this company are saying

this last piece of good news was a magic trick. >> well, and that's the biggest concern for former employees everyone said tesla had the greatest staff that's probably ever been put together in the automotive industry, right at least since henry ford started. and they have said what they've done so far is amazing at this point, many people are leaving. many people have left. and the question is can they actually replace them with anti-quality candidates. >> they talk about employee retention or lack of as being a huge issue i just wonder the pressure that he's under right now, how much of that is a reflection of a potential margin call that's going to come at a few months' time if the stock is not at a certain level, how much he has withdrawn from the company based on the stock being 3.16 or higher >> i think he's all in and committed to the company >> they borrowed against it. >> that's true i think if you were to talk to him, this is his identity. this is a man who genuinely sleeps at the factory and makes

himself crazy. the problem is he also makes people around him to feel crazy. >> but he's used that to fund other projects too >> a little bit. look, if model 3 sells well, then the company is going to be financially healthy on that car. the question is at the stock price it's at right now, people are betting it's baked in their other cars are going to do well as well. the question is for the model l, the pickup, the suv, are they able to do well. >> you quoted elon cares about humanity but he doesn't care about individual people all that much the company fought back on that statement. but what do you think knowing what you know now? >> i think he's a very complicated guy. and i think he's a guy who is in many ways more in touch with his emotional side than other people he can get you to work harder. that also means people told me,

one executive said everyone is in an abusive relationship with elon i heard it again and again and again, when people walk in, they didn't know if they were going to be fired that day oftentimes, people were fired for what seemed like arbitrary reasons. there were public hue millation humiliations that's a hard place to work. and at some point, the company is not just about who's on top the company is about how strong a team that goes down three or four levels is >> check out the article in "wie "wired" magazine online right now coming up a fresh read on jobless claims on the bottom of the hour and later, jeff harte will join us to talk about the watered ba bank sectors h that. jj, will you break it down for this gentleman?

hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit.

pgim: the global investment management businesses of prudential.

welcome back to "squawk box. let's get a quick look at the futures before we move on here now, up 72 on the dow. the nasdaq indicated up sharply, up so far this morning, up 41 points and the s&p indicated up under 9. coming up, we are just a few

minutes away from some key economic data. we've got the latest on jobless claims and import prices "squawk box" after a quick break. we'll be right back. you can see there are four minutes to go for the economic data i'm ken jacobus and i switched to the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy. and last year, i earned $36,000 in cash back. which i used to offer health insurance to my employees. what's in your wallet?

(tonand all thro' the house. 'twas the night before christma, not a creature was stirring, but everywhere else... there are performers, dancers, designers the dads and the drivers. there are doers of good and bringers of glee. this time of the year is so much more than a bow and a tree. (morgan vo) those who give their best, deserve the best. get up to a $1,000 credit on select models now during the season of audi sales event.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. 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.

we're just a minute away from the initial jobless claims which have been interesting to watch. and import data. futures up and data, 2.9 or so. rick santelli is standing by at the cme in chicago i know it's a bittersweet day for you as well, rick, eye the ecb. those wacky ecb-types ending qe. qe, we hardly knew you, qe finally deciding it. they're crazy. they're nuts they're wacky. what do you think? are you going to miss it >> well, you know what i'm going to miss, i'm going to miss all of the great discussions about

why we should never climb that mountain again and also one of the big buyers is gone. so, who's going to be the next buyer of that bid with a surge ever negative yieldsthat's occurred since the beginning of october. we now have securities back to e i think it's difficult to talk balance sheets all right. jobless claims are out they dropped to 206,000 from a slightly revised 233,000 so, you know, that's down 27,000 that's a pretty big move and if we look at import prices for the month of november, they were down 1.6% that is a bigger down number than we were expecting and if we look at x petroleum, it turns down 3 tt0.3.

and if we look at year over year, up 0.7 that's also half of expectations let's switch gears let's go to export prices down 0.9, near over year. up 1.8 that follows 3.1 so there's a lot of movement going on here. none of it in my opinion is going to build the case that we need to have for fury with regard to tightening of interest rates. but maybe the new discussion has to be how the quantitative balance sheet reduction and tightening or rising rates is a die nam we realynamic we don't history on you pointed it out, joe, the bottom line is going to take a while. many of us don't believe it's the big one. however, interest rates really

have stabilize in the intra-rate lows in the low 80s. i think that's something very important to pay attention to. andrew, back to you. >> we want to get back to steve liesman who has been looking at these numbers. but also maybe you can tie it into the all-america survey. >> survey that might have picked up with the report of rising claims but now it's moving down. it ticked down from the revised, 228. down to 224. there is an increase it's not worrisome most economists say look for that 250 market before you see an impact on the overall employment >> when you say all-america steve -- i've got him saying the all-america survey, instead of the all-american survey. >> still people want to know and

want me to explain the joke. >> and how does the university of michigan play into this, the wolverin wolverines >> exactly i do want to say quickly, this import decline is more than we expected and we continue to watch the import price channel for the praise where you might see a tariff effect but we're not seeing it. i guess we could argue a counterfaction and they would be down more. when you're down 0.3 that's a reversal. food and drink down 2.2% capital goods down motor vehicle unchanged, consumer goods i have to admit, folks, i've never had to cover a tariff situation like this, a broad tariff, to know where to look for it but somebody is eating these costs, maybe it's chinese and/or other foreign manufacturers. maybe it's the importers, but they're not showing up here in

the import price channel at the moment many becky. >> all right steve, thank you very much. >> you get the joke, becky, you get it >> doesn't matter, steve doesn't matter it's obvious you should have thought about that when you named. the financial sector taking another big hit this week. dow component goldman sachs is just one example that stock is down more than 14% in a month it's notched six straight days of loss. and given up all of its gains. last trade at $176 joining us jeff harte, and jeff, let's just take a step back. what happened with the financials when we thought we were going to be in a rising rate environment and a thing that would lift all votes in the financial sector that hasn't been the case, what went wrong >> i think you hit it on the mark when you look specifically at financials it's been interest rates and specifically the yield

curve. there's concerns historically when the yield curve flattens, eventually, it reverts and becomes a recession. more specifically for banks, they tend to buy short and the question from investors recently has been what are the banks going to do for an earnings encore for 2019 the earnings have been good, growing. and it's hard to see things getting better in bank land. and eventually, you've got to see credit get worse >> jamie dimon told us last week, he's not worried about the yield curve. what do you think, is this an indicator of a recession coming? or is this just an early sign of a lot of other things happening including quantitative easing and the central bangs? >> a couple of things. we are in a different world for you now. two words for you, quantitative

easing we've never had this happen, unwinding quantitative easing before it's a little hard to interpret how that yield curve is going to invert and what that might mean, assuming it does secondly, i think percentages can be deceiving when you look at 2019 even if gdp growth declines which would technically be a recession, you would still be looking probably at really strong gdp growth for since 2017 i think the year-over-year change can be strong from a strong 2018. >> if i was just listening to everything you just said at home, i'd think, wow, i wouldn't want to buy any of these stocks. you actually have buy rate on citi, goldman sachs, why >> i think looking at the stocks, the financials of some of these big banks are down quite as much as the market. that just seems extreme to me

relative to what the market is expecting. specifically, as we go into 2019, i'd be a selector buyer of banks right here and leaning toward the big ones, the goldman sachs, the bank of america, the citigroups they're ahead of the curve on technology they can be more efficient and ultimately, i think, a less interest rate tailwind, slower economic but still economic growth environment plays better into the brokers and the banks and all of these guys have big investment banks within them so selectively speaking, i think that universal bank area is the place to be. >> and it morgan stanley, how come you got hold ratings on them >> covering the big banks, i don't want it on everything. when you look at morgan stanley versus a goldman sachs, i think

you have potential upside on a goldman sachs. and jpmorgan, the upside reflects that. >> jeff, you mentioned the quantitative easing. this is a book we haven't read before this is something we haven't seen play out in the past. what are your guesses for what happens, how the unwind goes, how bringing the balance sheet down what that does not to affect it generally but the financials >> if it were to invert would be a short-term phenomena from the qe perspective, we've gone from having large buyers insets at large banks to becoming large sellers so it's hard for me not to see a longer end to the curve. there will be volatility to it, but this doesn't strike me as an environment where that long end even if people are bearish from that economic outlook, there's a lot of supply coming from the

central banks. >> jeff, want to thank you for your time. >> jeff harte, principal of industrial research. a big klein line up on "clo bell." ay much more st tuned you're watching "squawk box" on cnbc

♪ ♪ put your data to work on the cloud that drives business. the ibm cloud. the cloud for smarter business.

welcome back to "squawk box. take a quick look at the futures right now, ahead of the market open this morning. the dow looks like it will open up by 40 points. we've gone back and forth a bit. nasdaq up about 36 points. s&p 500 up close to 7 points we've got some breaking news from ecb president mario draghi, steve liesman has been listening in >> yeah, becky, a little more downbeat on the growth side than they expected in the markets movement on the yield in a second draghi, the european bank president saying, slower growth momentum is ahead. the incoming data is weaker than expected and sigmon tear stimulus is still needed i don't thing that represents a change by draghi in what is expected in terms of the ecb not reducing its balance sheet and not increasing rates which is

the expectation after it ended up ending qe gut s but saying we need to keep that in place the balance of risk, he said, is moving to the downside there's that euro chart that's up by now. you can see what's happening there. geopolitical factors, threat of protectionism, vulnerability of emerging markets and volatility. the key on inflation, he said inflationary prices are gradually rising which is the thing that really animates policy in that context you would not expect a reversal in policy by the ecb which as you know is a single mandate, not the dual mandate that the federal reserve does and i think that's animating itself or showing up in the dollar index as well as in the euro, which the dollar, of course, is heavily weighted with the euro

joe. >> aufll right, steve. joining us now is keith paulsen. what you're hearing there plays into your stagnation concern that growth is slowing a little bit. you are seeing some nascent inflation. >> right >> if i were over at the ecb right now, i'd just be scratching my head on german bonds and where the yields are there. it just seems to me there's such a disconnect there i know there's other factors involved but what is the german bond today? i saw it was like 28 basis points at one point. how do you match that up with big inflationary fear? >> yeah. yeah there's not a lot of inflation fear in europe right now, there's no doubt to that, joe. the thing that could be significant, though, down the road here, not right now but if next summer, if draghi

does change what he's doing, quantitative easing and if rates start to climb in the eurozone, that could really alter the rate here as well on the upside of u.s. yields overall which to some extent there's been an anchor effect on u.s. yields to what's going none europe but we'll have to see if they're allowed to do that we'll have to see if draghi follows through with that. doesn't sound like he's very confident with this with growth going south over there >> jim, do you -- we're hearing the word "peak" used as an add jec adjective for earnings peak earnings, at the peak of the economic cycle are you a believer in that and if it's a peak, it a plateau, where you were headed up one side and down the other

>> you know, joe, i am focused on that mind-set that's developed here just in the last couple of months in the stock market among investors you know, early this recovery, after the earlier crisis, we were just worried about stag, you know, the stagflation part just weak growth going back to recession. and we climbed a perpetual wall of stag worries, if you will, with the first six or seven years of this bull in the last year, year and a half, we worried more an flation part of it and despite a tremendous earnings gain last year, it was neutralized by flation fears because of models. and what's happened in the past two months, we now have both of those fears among investors. we have some people worried about stag you've seen recession fears escalate here in the last couple of months. but at the same time, we're still concerned about how many more fed rate hikes we're going

to see just this week, we had both the core cpi and core ppi accelerate we still have wage inflation over 2% for two months running now at recovery high you've got both flation fears and stag fears at the same time. that has narrowed the path of this bull market until we get away from that stagflation market, it's going to be difficult for this market to advance on a sustained basis. ultimately, for here, the only way to get out of that mind-set is to have a more significant slowdown that eliminates flation fears and we're just focused on stag and if we can revive the recovery, don't recess, then i think we're going to have another run. so, to your point, i think earnings may flatline next year, but i don't know, if the recovery doesn't end, i think earnings might recover and go on to new highs yet before the end of this recovery >> but you think it's the

mind-set you'd even say the fate of the bull market is not the fed it doesn't rest with china or trade. it comes to whether we come to grips with stag. in the oed, i do not see stag used and flation is not a word, it you're making this stuff up. >> i agree i think it's where we're at. we've got people worried about both aspects of that it's not a common thing in the market, we're generally focused on one thing or the other. when you are, there's a path to the bull when you worry about flation, you can tighten and restore confidence when you've got bull, it's difficult to see >> that was part of the goldilocks, jim, we had no inflation and great growth that's what we thought at the beginning the year, and now, we've lost both.

it's a double whammy >> that makes it difficult i think the only solution here, joe, a deeper correction that scares people enough to eliminate flation fears, if you will if that happens and we don't recess, then i think there's a whale of a guying opportunity. and then earnings can revive and go on to earnings and stock prices but between here and there there could be more carnage into the early part of next year. >> jim, you've been talking about the potential for stagflation for a long time. i understand what you're talking about, i see it. why do you think more people haven't jumped on board? >> well, you know, i don't know if you would say, when you look today, becky, that the environment in the economy is stagflation. i think most people say flation is not a problem and if anything, stag is more of a concern. i'm talking about the mind-set of recession you have some people worried

about recession and some people worried about higher rates and that's a stagflation mind-set even if the economy doesn't exhibit a lot of that pressure i do think there's more people on board with the idea that, you know, the fed is in will have to continue to raise rates. and at the same time you see people would agree that recession risk is really increased recently. you have credit spreads blowing out and the curve inverting. and i think you have people more worried about recession than they have been in this entire recovery. i think that fear of recession could, if it escalates further, could create a real buying opportuni opportunity. if people are wrong and we don't recess they could give assets away on cheap prices on their fears. if that isn't realized, there could be the one great buying opportunity left. >> jim paulson, stag inflation. you kind of have been right.

>> i gave you two new words. i want to see you use them. >> i don't know if you were bullish the previous year. >> we are down for the year. >> that's what i'm saying. >> i think you weren't that bullish in 2017. >> i wasn't. >> you were? >> i was, actually. i turned bearish at the end of '17prematurely. >> i need that info time stamped. i kind of remember at the beginning of the year. i'm trying to listen instead of just -- thank you. just listening and not paying attention. thanks, jim paulson. >> it makes a difference on who we invite back. just to have anybody on and never check what they said. when we come back, jim cramer will join us live from the new york stock exchange. dow futures up by about 30 points right now. s&p futures up by 5.5.

the nasdaq up by 33. we will be right back with jim cramer. usive today. is it because so many go after it the same way, chasing after short-term returns? instead if getting caught up with the crowd, the investment managers at pgim take a long term view. uncovering opportunities for alpha across public and private markets, while anticipating unforeseen risk, has powered our rise to a top ten global asset manager. partner with pgim. the global investment management businesses of prudential financial, inc.

the global investment management businesses of we're truck and jeep experts,ore than a store. and have been for over 50 years. from wheel and tire upgrades. to full custom builds. 4-w-p has you covered.

whether you want to order the best parts online or shop in-store. do the work yourself. or get it done by a pro. all roads lead to 4-w-p. do your rig right. shop online or find your store at 4-w-p.com. among today's top movers, general electric upgraded to neutral from under weight by

this big-time analyst, jp morgan. everybody listens to him. he has been bearish for a long time, among the most bearish on g.e. as in recent months. he says he is less negative which is kind of like more positive when you talk about g.e. probably the best you can say is less negative. there is a number of unknown negative factors has gone down. let's go down to the new york stock exchange. you said this is like you have never seen an analyst with this much -- you know, remember that tom guy from bank of america what was his name that covered the banks? he was huge. remember, the guy that covered intel, the big semi conductor? >> first union call. i'm sorry. i'm like embarrassed. >> you know who i'm talking about. and the intel guy, the chip guy that we would always have on.

>> tom curlack. >> and software. >> sherman. >> still kicking it around. >> he has as much money as gates. >> probably. i'm waiting for tom to e-mail me. it's getting embarrassing. when the stock was at 28, i met on mad money. i said we will never make the $2. he said you just listen to the bears. that's all you do. it is true in the case of i just listen because tusa knew. tusa is saying he will get a hand on this thing. they need to raise capital. and that is something that fr k frankly tusa is giving a chance to raise capital here. the piece is not saying good e bye. i think people will say buy it.

we have been waiting for tusa to catch moby dick. >> that was a jeopardy question. >> thank you for the nice references this morning. let's stop kidding ourselves. >> i like. it's once again, you are out there not just saying maybe this or maybe that. thanks, jim. we'll see you in a few. big swings. make sure you join - n information. where in all of this is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you partner with a firm that combines trusted, personal advice with the cutting edge tools and insights to help you not only see your potential, but live it too. morgan stanley.

you mighyour joints...ng for your heart... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life.

good bye. have a great day. it's time for "squawk on the street." ♪ >> good thursday morning. welcome to "squawk on the street." david favor is off today. an exclusive with underarmer ceo and president patrik frisk. that is coming up. big upgrade of ge from one of wall street's biggest bears. ecb leaves rates unchanged. claims 206,000, biggest beat since ap