and we'll get close, aren't we 2018 "squawk box" begins right now. ♪ and it's all right and it's coming home ♪ ♪ we have to get right back to where we started from ♪ ♪ love is good >> live from new york where business never sleeps, this is "squawk box. >> good morning, everybody welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick. let's take a look at the u.s. equity futures at this hour. yesterday we saw strong moves in the morning. but that all fizzled through the afternoon. you had all three major averages briefly falling into the red before you did get a late day push for stocks that left us with some modest advances. dow was up by 82 points yesterday. the nasdaq was up by 30 points and then the s&p was up by less than a quarter point to close near the low for the year. you're going to see this morning

dow futures are up by triple digits futures indicated up by over eight points and nasdaq indicated up by 23 let's also take a look at what happened overnight in asia you'll see that nikkei closed down by .6%. the heng seng was slightly higher the shanghai composite was off by more than 1%. and then in europe, there is active trading taking place right now, you'll see that there are green arrows across the board. looks like the major averages are up by .5% or better for the most part. the cac and dax up by .5%. the ft-se up by .3%. and italy and spain up by more than 1%. finally, take a look at treasury yields in the united states. looks like the ten year right now 2.816% this is happening as we await to hear the fed's decision on whether to raise interest rates and what they're looking at for the economy for next year. we're also keeping track of crude oil prices oil dropped 40% on oversupply

concerns also potentially concerns about what the demand picture looks like opec cuts will won't kick in for a while. the u.s., russia and saudi arabia are pumping more. wti down a penny to $46.23 >> okay. major deal in the drug sector happening overnight. let's talk about pfizer and glaxosmithkline. they're consumer businesses and health care units. they're planning to eventually spin off that business they're going to come together the move will create a global giant for over-the-counter staples such as advil, tums and toothpaste with $13 billion in annual sales and also free up glaxo and pfizer to concentrate on prescription drugs which are more profitable. this is a fascinating turn of events we're going to hear much more about this deal coming up with the glaxo ceo emma walmsley. that is going to happen at 7:00 a.m. it's interesting only because for so long everybody said you

need to have the consumer business next to the -- by the way, much more volatile pharma business >> right >> part of this is function of the margin squeeze on this consumer businesses. pfizer actually couldn't sell that consumer business for a very long time and glaxo is to split it the question is whether you think more of this is going to happen >> you can't gouge on consumer products the way can you with pharmaceuticals. >> especially in the day of amazon that's been looked, the margin compression on the consumer part of this business is very, very complicated. >> the ceo we have on, the person who has been on has been -- is coming on has been a big pro poen enlt of tponent they bought universal. it's like whoa what is this we're going to -- okay, we're making a move for $200 million

we make $5 million back. we can't -- so that's with pharmaceuticals. you do the r & d spend on pharmaceuticals. the whole idea is to do it that's the way -- that's the future i think: >> well, they're doing it. >> the question is whether this is the beginning of af trend and everybody else is -- >> these guys have -- there is so much shuffling. remember the three way novartis animal health. i don't know if it's the titanic. >> build them up i don't know about the pharmaceutical business as well. a pure play on something that we're facing so much regulatory scrutiny

but for pharmaceuticals in in day and age where everybody is looking at, you know, you have the way they do it over in europe, we want to maybe import some of those price controls or, you know, use the bargaining of medicare and the big buyers here >> but really, it's a pharmaceutical company also does it change the model of the pharmaceutical company itself into a valiant style business where people say, you no he what we're into the going to do our own r & d. we're going to go buy promising drugs from other people. >> you're not going to take a fraction of a cent advil tablet and charge $800 for it >> correct >> which you still can do with pharmaceuticals that cost --

>> right and you get the extended release version and then do you that and then you get the patent protection >> all the stuff they're talking about. bringing medicare to -- >> right but you can still make a lot more, theoretically, a lot more money. we're getting close to where we go over. we spend all this money and then there is a quantum leap for alzheimer's and diabetes, chronic drugs. so the basic science you think is getting close thfr is the golden age for pharmaceuticals. >> i don't know t you wonder which is the right one and what is the wrong one that is the beginning of that. >> we're going to talk to the ceo of glaxosmithkline in a

little bit she's going to explain all of this to us its a big interview happening right here first on cnbc separately, the telecom unit of softbank made the public debut in tokyo overnight it is the world's second biggest behind alibaba the stock fell 14% we sh you note the difference between the parent company softbank group and today's telecom unit ipo named softbank corporation. i know that will confuse people. softbank corporation is the parent company of u.s. mobile provider sprint and holds a significant stake in yahoo japan. >> facebook has given extensive access to yours and a lot of people's personal data it's far more access than facebook previously disclosed including contact lists, private

messages and other personal data it was provided to business partners including microsoft, amazon, netflix, spotify they said they did not give access to the data without permission the integration partners help user interact with friends but facebook's denial didn't address a key point of the times story that it made personal data available without disclosing how much they were sharing. >> it is happening as recently as this summer >> i don't, you know, i don't ascribe much to what i see on twitter. but i saw some people saying they got to go how can they stay? both of them how can they stay after this you no he? >> you mean the top leaders? >> yeah. >> this is just another -- like a huge deal. >> this is a pretty big deal the idea that the times is just letting us know about this now, the company still not saying exactly what it was sharing. >> they help big companies sort

of move some of this to -- they aided in the subtrifuj of where the people that were like apple or something, did you wayou didt was happening. there are ways around. >> right >> so they're all kind of in cahoots. >> you might sign off saying okay to x, y and z but not realize that you're also signing off to a, b, and c. >> netflix, you wouldn't think has anything to do with facebook is actually able to read your messages >> that's crazy. >> i mean that's crazy that's crazy >> or the idea that -- >> we need to realize that you really don't say anything in your messages. you have no privacy. we've been saying that for a while. >> no, i know. but now we know it >> we get a lot of benefits from all. this just sign off on it don't do anything too weird. i mean i would think the. >> this goes back to the whole idea of whether actually our data is worth something and if you actually need to read our e-mail, you probably -- i mean some people by the way might be willing to sell that information. they're own information. n. that regard

>> maybe a lot of youngsters especially i think they don't particularly care about it. >> but the fact that you don't know it's happening is the problem. >> right >> all right elon musk unveiling the grand plan to fix your morning commute. musk showing off the boring company's first underground tunnel at an event in los angeles overnight. why would they need anything to address traffic? the tunnel runs beneath the streets of l.a it is designed to alleviate trough congestion. phil lebeau got a chance to take a ride in the tunnel it is like a roller coster ride? >> i don't know. are you on rails it looks like it there you go it's like being in a car wash but goes super fast. >> what did you there was an article in the "wall street journal," he fought back against just yesterday about the fact that pacex whic actually has not public shareholders but out signed vestors that resources -- some resources from spacex were being used to support and create the boring company >> i was an investor in spacex

and didn't know that >> they very recently spacex gave -- boring company gave spacex 6% of the company to alleviate or pay back effectively the investors given that the location, space is used, engineers, a lot of the other pieces of it >> i guess it's a private company. so i guess they have their own investors. >> keep everything private >> the issue -- these are -- the issue is these are private investors that invest in spacex. the resources for spacex being used on the other company. >> he's done that pretty rapidly with solar city and some of the other things it's a public company. >> he tweeted out back to the author of the article that he thought it was misrepresenting the situation and apparently peter teal's firm said that they no longer have a problem with

it >> if you're going to invest with ee lolon musk, you're givi him a lot of latitude. he is not reporting to anybody he's the guy in charge he's the major owner so i guess good luck to you. >> yeah. >> that's what you signed up for. >> let's talk about your money today. that is the fed. policymakers are announcing the final rate decision of the year at 2:00 p.m. eastern time today. thalt is fald by a news conference by jay powell stay tuned to cnbc for full coverage of the big decision wall street is betting on a hike but it is no guarantee and not everyone thinks the fed should be hiking >> the fed should not raise rates. we're now below two which used to be the fed's target and drop it that is a sign they shouldn't be hiking >> i think they'll hike. again, there is so much

momentum and central bankers by definition are so conservative they require this unbelievable change >> the only argument i hear from the fed to raise rates now is somehow they have to exert their independence from the white house. this is a bad argument >> when the risks of the fed doing too much too fast is also risk of doing too little too slow of course, it's easy for people who own assets it's all about lower rates normalizing rates is a good thing. >> they shouldn't raise them this week. >> they shouldn't. i don't think she should you know, fed, you no way should be raising interest rates. >> a lot of different opinions and thoughts on this i don't know definitely follow stronger growth is growth stronger do you ever try to build up ammunition for the next down turn if in the process you're making the next down turn more

likely >> you try to do it if you can if can you skate by. >> what if you're providing ammunition for the down turn >> well, you don't want to do that a quarter point is not going to kill anyone, right if you do one more quarter, just for credibility and then say that's why we're going to wait now. >> they raised and then -- >> right it could be twofold. but that is not the end of the world. if you did a quarter -- >> if the next move is to drop, thats the -- >> that would be like what i'm talking about >> i just have hope that there is no further, like, 800 point

drops. from where -- from the lows that we put -- that we put in now i would hope that we don't -- >> would you say it's an impossibility? >> no. no a lot of people definitely think it's a possibility i can see it going up 100 points and everybody forgetting, you know, not watching market and then all of a sudden you're back and they say wow, we're only 3% off the highs. that is how i can see it happening. i don't know if it lasts anyway, maybe mandy knows. she's got some good thoughts here and i sign on for this right now. joining us now, along with mandy, janelle woodward head of fixes income she's going to tell us what the fed is going to do and what it means. and then on set, mandy, chief strategist at credit suisse. higher volatility but 15% upside

next year. can i sign on? can i just take that to the bank >> so, yeah. it is constructed on equities we think at this point. have got too pessimistic on growth and earnings. i think two main take aways from the options market, one on the more negative side is people have high volatility to stay around we think the growth uncertainty and trade warhead lines. that will likely persist going forward. what is unusual in recent years is whenever we get a spike, everyone plays for that quick

normalization. >> two months ago we were goldilocks forever people want to be ahead of the curve, i guess >> yes that's not in the data i think, you no he, if you look at -- >> there is weakness oil scares me. $46? >> oil scares us the question is next year, everyone expects deceleration. but is it so much deceleration that you sip intip into recessie don't think so >> janelle, what -- you know, they're gone today give me 75 that they go 80, 100? what are they doing today? >> we do think that they will increase today i think when we look at we think that the uncertainty going to this meeting is higher economic data has been resilient. but certainly the softening as you noted and the flow through into financial conditions and the way it's been reflected in the yield curve creates a delicate balance for the fed i think what is important to remember is really where we are in the cycle and if we think that longer term expectations, 3% type level is neutral, then we have to remember that even with additional tightening,

we're still doing it with an accommodative range. at the same time, i think we have to acknowledge that fed has to acknowledge what is happening in the market. so we would look for some change potentially in projections or even in the commentary to really reflect that and capture it. >> when the idea that -- i mean, we go between what jamie diamond said and behind the curve and not normalizing quickly enough or going a little bit too far like the fed has done many times in the past but never from such low levels, do you think a quarter point doesn't make or break anything, does it? would it be okay to go up another quarterer? the markets have definitely gotten a little nervous about where -- what the fed is -- i think it's partly that i mean, maybe it's china maybe it's the slowdown. but there has been some

consternation with what the fed is doing in the equity markets can they go another quarter and not kill things? >> we think that they can. and again, it comes back to really where we are and that this is about getting to neutral not being about tighter policy it reflects that they see signs of increased weakening and then also the risk they do get behind the ball and that the catchup as we have seen it in prior cycles and in earlier times is more significant and has more negative ramifications >> if i was powell, i would say gorby wish i was here when bernanke and yellen, what are we doing this time? got any decisions to make? no the really. we're staying at zero. this is a hard decision. this is a much more momentum --

not momentous but, if you go back to the crisis, obviously, that was tough i guess that's always tough. it seems like this is a period where you are definitely set up where you can make mistakes. >> i think this is where the financial conditions and as we watch that and the shape of the yield curve come in to play. we think about longer term rates, simplistically we think about it reflecting growth and inflation. so as the fed impacts short term rates, we would see them tighten beyond what we really think that neutral level is this is where it is problematic for the economy. given what we've seen in two sides recently, the markets are focused on where this neutral level is and what the shape of the curve looks like

>> and the transports and commodity prices, i saw copper yesterday. i mean what is all that? >> i agree with janelle in that the fed is most likely going to hike today on balance, we talk about being too slow or fast, the risks are not symetric if you get below the curve, we're still at 2% rates. there is a lot more on the upside that you can tighten if inflation gets out of control. >> the risk of that is much more severe >> would the fed freak out if they decide not to raise today >> i think that we'll send a message that the economy is weaker than expected but also tells you the fed is more pro active than expected.

the president is pressuring them not to and by doing so the fed will will likely want to exert -- >> you think there is going to be a political element to this >> absolutely. i'm not saying out of the mouth of babes and he's a real estate guy and a totally different reason why he was way ahead of all the other guys >> he may have done it he has done it for the wrong reasons but he was the first one. anyway, thank you. >> he was saying it when he was president lekt th president-elect. he said that on the show. >> who doesn't free money thank you mandy and janelle. i just feel bad for powell he could be a bag holder

everybody gets to throw the party. we have to really stop he's in a tough position >> when we come back, driverless delivery cars making their debut in arizona and these cars don't even have an option for a human driver we'll have details next. right now though, as we head to a break, let's take a look at the biggest premarket winners and losers in the dow. pfizer leading the way, up by 1.4% this isn't just any moving day.

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welcome back, everybody. kroger is partnering with the self driving start-up to make driverless grocery delivery a reality. they're smaller and lighter than traditional cars i want to see how small. i've been watching this footage. it is like a remote control little bitty car anyway, they don't even have space for a human driver the pilot program is going to be rolling out at one store in scottsdale, arizona. a lot of stuff is happening in arizona where they're testing this stuff out >> it zpt lodoesn't look like i very fast. it looks like a golf cart. >> i might be okay with that >> former star of wall street banker stepping down as ceo of block chain. the company says she is leaving for personal reasons the block chain industry has come under a lot of stress as we've been talking so much about. bitcoin has lost 80% of the

value just this year masters jumped to digital asset from j.p. morgan where she was a pioneer behind credit default swaps. when she made that move originally gave a lot of credibility to the industry because there was a person who clearly had had been a pioneer in so many different spaces. effectively saying crypto is the next big thing. >> legitimate wall street person >> a lot of people are looking at her decision to leave i know she said for personal decisions. people are going to try to read between the lines and say if there is something -- >> i think you should have made your move on $3300 on bitcoin you thought that was the -- >> no, i think you should. >> you think i should make the move now >> i tried >> i think you should have at $3300. >> i should have yeah >> that is 20/20 hindsight you were already under $5,000 and then under $4,000 and now it may be going -- it's like everything else. hard to pull the trigger even when you are well bow lwe low.

>> my thought was just one bitcoin for each child so three kids. >> right >> and then just let it ride for a long time. >> incredible. >> my wife said let it go. so the $300, if i were to do it today, wouldn't matter hopefully. one way or the other >> the latest bomb scares were trying to go against bitcoin i told you about the letter they sent out hi mr. so and, so i know what you've been doing. i'm going to tell your wife. send me, you know, $5,000. the uses for it are rubbing somebody out. >> this case is problematic. >> they're all just really sleazy, like the reason you use it is just really sleazy thing i guess makes it probably going to work. you no he? it will be a -- it's going to work for somebody. >> it's the driver of technology in every form of technology. >> you can buy fake ids with bitcoin. >> how do you know that? people you know.

you have friends >> i'm trying to get one that says i'm under 21. i'm going that way >> honestly. i got carded >> really? >> i'm not throwing anyone under the bus. the entertainment world -- >> we haven't had that in a long time >> andrew brought it up. i mean, i said it. but it would not have been seen as an offer. >> you normally have the old t-shirts i wear it all the time it says squawk word on it. >> i never got one of those shirts. >> do you want one i'll get you one >> penny marshal died yesterday. entertainment world remembering the life and work of penny marshal. she portrayed laverne. before that, she would not have been -- that's what her brother said when he was casting her we need every woman to -- that has not been and then directed these really big time movies first woman director to ever get to $100 million movie like

"league of their own." "big" and then she also did "awakenings. she died in her hollywood home monday night and tom hanks tweeted, man, did we laugh a lot. wish we still could. love you and geena davis tweeted, i'm terribly sad to hear the news about penny passing. i'll be forever grateful to her for letting me be a part of "league of their own." and danny devito said she had a heart of gold, tough as nails. she could play round ball with the best of them penny marshal died of diabetes related complications. but she had already had a bout with cancer as well. she was only 75. 75 >> i was shocked >> when i saw that, i was, too she didn't seem like she was ill. >> i knew she was sick before. >> at 75, i don't think of as old. >> yeah. >> coming up, china kicking off the key conference that expected to provide some insight on the

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♪ i always feel like somebody's watching me ♪ >> welcome back, you're watching "squawk box" live from the nasdaq market site in times square ♪ when i come home at night >> good morning. among the stories front and center, facebook reportedly shared more of its users' data than previously admitted they gave icrosoft, netflix, amazon extensive access to personal information and that includes the contact information of users friends and the ability to read private messages facebook denies that it let tech companies misuse the data. and pfizer and glaxosmithkline are combining their consumer health care units. the move will create a global giant for drugstore staples like advil, tums and sensodine tooth baste.

they will have annual $13 billion in sales and eventually be spun off as a separate company by the end of next year. we'll talk to glaxo's ceo ea walmsley at ttop of the hour an first on cnbc interview. japan softbank corporation began selling in tokyo it plunged 14% on the debut. it's the world's second largest ipo behind alibaba futures at this hour are up. up triple digits not worth talking about or publicizing or getting excited about, not worth noticing. >> trying to talk it down. >> no not trying to talk it down look, the plus 600 rebounds just turn into down 1,000 next week, you know what i mean >> that is a lot of triple digit gains. >> just stabilize. 2305 on the dow. that seems like a decent place like a decent place h 2500 on the s&p 500 seems like a floor

just seems like, you know, below that seems like you are overdoing things you know let's not be rash. let's not jump to conclusions here >> you're trying to tell capitulation >> no. >> i just don't -- i don't want any more of those gut wrenching things that make you think the world is ending. because we don't know something. because i don't know what we -- we never know what we don't know and the market has been acting like there is something we don't know >> which is why i wonder if the fed did not raise rates. >> that's why i'm saying do a quarter and then say nothing >> a quarter is not going to kill you, is it? >> i don't know. >> we'll see >> we will i have a new take on facebook. we'll talk about that later. >> you know a lot more about that i'm ready to sign over my privacy. i guess i am because i love my -- i love my iphone i couldn't live without google maps i can't. >> that will get better. >> when you are going to be -- what time do you think you'll be home i don't need to think.

i will be home at, you know -- >> 10:04 >> but -- it may be 10:05 or 10:03 >> you didn't agree to this. it is like my parents. if i really wanted to do something and i thought my mom was going to say no, i would go to my dad and completely distract him dad, you care if i go out with so and so? no, do whatever you want and then run before my mom could find out or figure out what was going on because the parent that wasn't paying attention had given me clearance. that's kind of -- i think the question here is what did users know that they were signing up for? what do they know they were giving away. >> i know that's the question. but i think you need to assume the benefits are significant >> this is happening as recently as -- there are some apps i grant that to like a waze. there are some apps i wouldn't >> waze sent me down i got stuck on a dead end. i don't know if waze knows what's going on. >> i like waze >> remember when it used to be coming in the city the tunnel or gw

i have to make a choice. then you make a choice the there is where the accident is you no he? you never knew >> right >> and then you're 30 minute ride is four hours with this you see it it's all red i mean it real why i is like -- >> i know. we have a guest. we'll talk more about this we do have three hours to talk this morning in the meantime, china kicking off a policy meeting this week, that could provide some clues about the trade skirmish with the united states. for the latest in the u.s.-china trade tensions let's join our guest we keep calling this a skirmish s that what you call it at this point? >> i think it's much more fundamental than a skirmish. the two sides stepped back from rapid escalation now and are starting to talk there is a lot of big fundamental issuesen o the table between u.s. and china they're not just about sort of bilateral trade. they go to obviously much deeper issues about the way china runs

the economy and about the interrelationship between the state and businesses there is technology issues and security and a lot of other things this is a big issue. obviously, we're watching carefully how the two sides handle it. we're talking about how china is not pushed around. and how they will not be listening to outsiders telling them what they need to be doing. should we read that as a sign that tensions are going to ramp back up? or is this just each side speaking to its own constituency while behind the scenes there are things happening behind? >> i think it's more the latter. you're not going to start talking about how, you know, china is willing to concede points to the u.s. you're trying to reassure your own constituencies that you know china has got the strong position hopefully the chinese have been

sobered by the fact that, you know, they need the relationship by the u.s by the same token, you know, a few weeks back the narrative was all about how china's market has been declining and they're under enormous pressure. we're talking about why it's important for the two biggest economies to do business with each other >> do you think that will lead the two sides to come up with some sort of solution in the 70 or 71 day that's are left before the deadline we're getting chun tina to addrs issues about how the system operates, technology transfer, ip those things take a long time to put in place and implement correctly. at the same time, the chinese want assurances about, you know,

whether or not the u.s. is going to treat them a certain way. so i think it will take longer i hope over the next 70 days we get some substantial progress which keeps the two sides from going back into a sort of tit for tat tariff war i think now there is down side risk for both the u.s. and china in escalating those kinds of frictions. >> we want to thank you for your time today this is going to heat up before we see any sort of resolution. so we'll continue to check in with you again, he's national foreign trade council president. >> coming up when we return, elon musk taking the wraps off the first part of a high speed tunnel system in california. it happened last night phil lebeau was there for the demo and he's going to join us right after the break to show us what went down. and then to the top of the hour, our guest host will be home

pot co-founder ken langone

welcome back to "squawk box. elon musk's boring company demonstrate rg the new tunnel last night in california phil lebeau is there and gives us a look at the first step in this high speed tunnel system. good morning you to, phil. >> hey, andrew it was a fun ride last night at the boring company's first loop

tunnel, the first completed one. it is far from finished. it was a bumpy ride. still a thrill nonetheless to have a chance to go through there and people were wondering all along would we actually have people going for rides inside the tunnel this is what it's like you get dropped down 45 feet in a tesla model x. not a special car or a small, you know, something you sit in that you zip through there you're in an actual car with deployable tracking wheels ku you can't see it here once we get through the video, you may be able to see it. their small wheels that fold out that keep you buffering against the two side walls you can't be steered into a wall we hit a top speed of 49 miles per hour it cost the boring kcompany $10 million, actually elon musk put his own money up to build this tunnel it is 1.41 miles long. this is all about defeating traffic congestion

>> traffic is gone from just like seventh level of hell to the eighth level of hell it's terrible. so this is, i think, the finally, finally, finally something, something that i think could solve traffic problem. zblr typical musk event. pt crowd loved everything they hear from him. take a look at shares of tesla over the last three months elon musk said that these tunnels if they can build as many p as they would like to, not only in los angeles but cities around the world, it will be for electric cars only. obviously if they have the deployable tracking wheels, that will will keep them inside the tunnel and on course once they smooth out the tunnel, they believe they can get top speed of 150 miles per hour in cities interesting to see whether or

not this happens >> that was the question i h you said 49 miles per hour and said a little rough what do you mean by that >> it was rough. it was bumpy i want you to imagine that you were -- i mean you're uk buffered back and forth. was i being thrown around back and forth? no but it was no the a smooth ride. they said, look, we just finished this. we need to smooth it out the pavers, the machines have not gone through and made everything as smooth as possible when it is as smooth as possible, they believe they'll hit 150 miles per hour >> phil, not like bumpy riding down one of the streets in manhattan, right even when i had my four wheel drive car i'm getting bounced around >> it's a little bit like cobblestone is what it felt like you didn't hit any big potholes. there was nothing like that. but at the same time, they just bored this they have not smoothed it out yet. this was truly an early ride. >> the thing i don't understand

is you're going to come down on the elevator, that takes time. then you're going to link up on to this system and then are these cars going to go at one time how many off ramps are there going to be or on ramps? >> he says you can have dozens of them in cities. tha that's his vision have dozens of the entrance ramps and exit ramps throughout cities >> all right phil lebeau, thank you for showing us that. very cool. >> you bet >> coming up, is your data safe? there are few members that have not been exposed to a data breech we're going to talk about the dangers next at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. nventupdates.

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welcome back to "squawk box. cyber threats in focus

late last month marriott announced as many as 500 million guests might have had their personal information compromised. here now to look at the threats individuals face in 2019, we are joined by the ceo of checkpoint software technologies. before we get into exactly what the biggest threat is for the next year, what was your take on what happened at marriott? >> i think i can't speak too much about marriott specifically because it's under fbi investigation. but i think it's not different when any of the dozens of the different hacks that we've seen, data exposed in the cloud, some computer system opened to external entities that have access to it that is something that we are all vulnerable. >> tell us this though we often talk about major headlines of major breaches. everybody gets very anxious, very scared. people talk about liability. they talk about all sorts of things then you never hear or very rarely do you hear about somebody whose information was taken in one of these hacking

efforts being used elsewhere why is that? >> first we do see it's being used. >> we do >> yeah. we do see identity theft again, if we're talking about foreign organizations trying to use but not showing what we have, i think the main risk is not just for our daytime the risk is the functionality of all our systems. if you can shut down the checking system. think about all the infrastructure is connected. it's not just my record. it's about being able to shut down by room in a hotel if we're talking about that industry or the entire city. >> the reason i ask, though, there is rarely a major headline that -- so 500 million of these accounts were hacked and passport information was taken and all sorts of things. you would think, right just logically that all of a sudden lots of people's identity would have been stolen people, maybe their bank accounts would be attacked

maybe other parts of their life would be attacked. you're saying they are or they aren't >> they are to some extent i do get something from the credit company saying here's a new credit card because your old one was compromised and you didn't even know which it was in a database we saw people with various social media accounts being hacked and used. >> what's the single biggest worry you have now for 2019? >> the single biggest worry is the entire infrastructure. our infrastructure is under attack it's not that difficult and there are many organizations -- by the way, i'm not afraid of the big governments around the world. there are ways to mitigate that. i'm afraid of the individual criminal organization that have today the same tools the government has >> really? and if you're a ceo watching right now, what are the things they should be doing that they're not? >> i think it's challenge the

organization to stand up most organizations today are doing a lot of security themselves in a way they feel comfortable which is the third generation of cyberattacks we're in the fifth generation now. >> thank you for coming in happy holidays not exactly a happy message, but nonetheless, thank you coming up, our guest host for the rest of the show will be home depot cofounder ken langone. >> there he is >> andrew somehow messed up his schedule he's here today with langone it's a first

facebook under fire. a company gave more access to data than it disclosed this morning the social giant is responding pharma deal news pfizer and glaxo are combining their consumer health businesses glaxo ceo will join us live. plus the countdown is on investors are focused on one big event today. the fed decision

the second hour of "squawk box" begins right now live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here i'm andrew ross sorkin along with becky quick and joe kernen. but guess who our guest host is this morning ken langone is here. we'll see if you're going to hold back this morning >> no way. it's christmas i'm going to give you a double dose >> oh, boy folks, synchronize your watches. we are counting down to the fed decision which will then be followed by the jay powell news conferen conference a lot riding on what we're going to hear this afternoon from the fed. take a look at u.s. equity futures right now.

see how they're setting themselves up ahead of the market open this morning dow looks to open 117 points higher s&p 500 up about nine points and the nasdaq looking to open 22 points higher right now among the corporate stories front and center this morning, facebook says it did not grant certain companies access to user data without their permission. facebook's response follows a "new york times" story that allowed the company greater access to that data. one example "the times" gave was the binge search engine saying that facebook allowed it to see the names of a user's friends without their consent. we'll talk more about this in a bit. >> somebody would have to use binge for that to happen though. do you >> i have one computer that comes up just binge. >> you haven't changed it, the default on it? >> i have not. also fedex shares are slumping this morning after the company beat estimates with its latest quarterly estimates and revenue. pointing to weakness in europe

and an overall decline in global trade. pointing to politics for all of this on the call, one of them said i'll conclude by saying most issues we're dealing with today are induced by bad political choices. down 6.3% raising questions about what this means. also japan's largest ever ipo hit the market this morning. but it was not a bullish debut fell 15% in their first day of trading. analysts cited concerns over the company's exposure to chinese telecom equipment maker. pfizer and glaxosmithkline are combining their consumer health units joining us from london, glaxo ceo. great to have you this morning to get the details here.

it has been said that you were a big fan of the health care business as sort of the way to offset the risks involved with pharmaceuticals. people are wondering whether you changed your view or whether the facts changed for the outlook for the industry what makes this -- what caused this change of heart, if you will >> good morning and thanks for having me on this landmark day for gsk where we're announcing a deal that strengthens two businesses and creates significant value for shareholders actually, there's no change of heart here at all. i've been absolutely consistent since i took this job and laid out our priorities 18 months ago. that we quite like the broader construct of the business with pharma vaccines and consumer health care. there are always conditions to that access to sufficient capital for each business and also the board

would be pragmatic about the structure. and this opportunity is truly a unique one an all equity deal to create the world's leading over the counter drugs company. leading consumer health care company with significant value creation for shareholders. but it also allows us to strengthen our number one priority, our pharma pipeline by the incremental cash flows over the next few years then gives visibility with this pathway to eventual separation after we've substantially delivered on the integration and continued to make progress as we expected our pharma pipeline thereby creating two focused uk-based global companies. one pharma and vaccines company based on the science, immunol y

immunology, and technologies and one this new global leader in consumer health care in this joint venture that we brought together with pfizer a partner we know well >> previously did it make sense for the cash generation of the more -- i don't know if i call it more stable business in consumer health. that helped fund some of the drug development efforts do you feel more confident in the dg able to predict what happens in the pharmaceutical development side of things than -- and i know vaccines. that's a little bit more stable. that might take away some of the risk in developing -- >> that's exactly the right point. so, you know, we have today three businesses consumer health care, pharma, and vaccines we've been working very hard on new leadership appointed new heads of commercial and r&d in pharma

since i came on board. and we have a lot of data reading out on that pipeline including not least from our recently announced proposed acquisition of tasro just a few weeks ago. we do like the stability of cash flow from the consumer and vaccines business. which is in part why we are announcing we expect the separation to be within three years. but we want to take time to do that because we've done it before we know how to integrate joint ventures we did it previously with novartis we don't want the consumer business to be distracted around separation we want them focused on a successful integration and delivery of operating performance. but also we do like the cash flows in this near term period as we invest strongly in our pipeline in the next wave of growth but your points on vaccines is critical the new company for gsk that will be focused on pharma and

vaccines is going to be as we are today the world leader in vaccines and this is a business that i think is a bit under-inspected we had tremendous growth we recently launched very successfully new shingles vaccine. remember one in three of us will tend to suffer from shingles and this has had a tremendous start in the u.s. and has great growth prospects internationally in the next years. so we do see that as a considerable cash flow contributor. but don't forget in our pharma business, we're also today world leaders in we have a big and growing hiv business with an exciting pipeline as well that's under development. so we do think at the moment as we've pointed out today that the separation in -- within that three-year period but certainly

not immediately would set us up for two stronger businesses. very importantly with the right capital structures because that's what the separation also allows for to invest in their future growth. >> emma, do you see this specific to your company or do you think this is going to be the beginning of a trend which is to say for so long the industry has been connected? smoothing out the higher risk part of the pharma business. also say to themselves you know what we're going to put the stable part of the business over here but people know what it is then we're going to have this riskier higher margin business on the other end >> well, i think if you look across the industry, you probably see two groups. you will have seen several large pharma companies that had consumer divisions deciding to move away from them. so i mean, that's what novartis

did. which was the first we integrated and now pfizer have done the same but there are others that have been consolidators of the business for the reasons that you outlined i think in our case, we very clearly have been a consolidator but now this new consumer business is going to have such significant scale. and, you know, is really important that we free it to have its own capital structure and its own prioritization in its own future growth. now is the time for us but you'll probably continue to see across the industry people taking those two views >> good morning. this is ken langone. how are you today? >> good morning. i'm great. >> emma, if you take one-half of this deal pfizer, go back and look over the last 20 years at the number of deals that have been done. the number of acquisitions of consumer products. i think there's a right for certain skepticism here about the continual moving around of

parts. this is rational at this point and that's rational at that point. the one thing you should certainly be able to have some measure of is in doing consolidation. are you going to be able to yank cost out to begin with that's one thing the other thing is very frankly, this al amalgamation of -- in these countries at jen tech and look how they've grown dramatically frankly, as i look at this whole landscape, this is great for wall street because i'm sure they're around the deal. eventually i assume you'll announce it. but i think the drug companies and i'm partial because i've been an investor in lilly for many, many years a happy one right now. but i think all this moving around of parts the last 10 to

20 years, you made a few years ago -- pfizer bought a whole collection of consumer product companies. now you're going the other direction. i'm sorry, but i think there needs to be more clarity here about what's going to be the benefit for the owners you know, the -- >> well, let me be extremely clear on the benefit for gsk shareholders i can't speak for pfizer's history. but i will speak for gsk the company i have the privilege of leading today. >> right >> you refer to the question of value creation in the combination of this joint venture. we've announced today half a billion pounds worth of synergies that we expect to bring by bringing these two companies together so there is significant -- a significant value created in that duplication but also we are truly creating a world leader in this industry. we will have 7.5% market share of the over-counter drugs

business we will be the number two is around four. we will be number one in pain relief number one in respiritry and number one in minerals and supplements. a leader in over the counter skin health, in gastrohealth and also in oral care like sensodyne. and hopefully a top one or two player in 10 of the 15 biggest markets in the world including the u.s. and china so we believe we are bringing together a powerful new world leader by the way, bringing the best of both companies and again, we've done this before you know, our margin in 2015 the consumer health care business was 11%. we're now forecasting an outlook by 2022 of the mid to high 20s and of course at the moment of

separation at the point which we will have substantially completed this integration, we are obviously then unlocking quite a lot of value in a new listed or demerged listed consumer health care business. but just as importantly is the solution we bring for our pharma and vaccines business. because we're able to use near term those cash flows to keep investing in our pharma pipeline and then at the moments of separation because the consumer business can carry a lot more leverage, a much bigger consumer can leverage we're expecting that to be three and a half to four times of separation we then have a delevered business and continuing distribution to shareholders >> emma, i wonder if this is a commentary on a hope that maybe we're getting close to taking a lot of the basic science -- i used to think about glast sew,

you had casual drug design and sequencing the genome and all these techniques but i haven't seen the quantum increase in unbelievable therapeutics for diabetes or cancer or whatever you want to talk about it seems like the progress has been tough i don't want to call it a golden age of this coming because i think we've had a golden age ever since penicillin, if you think about it what we're able to do now. but is there some quantum move coming in the next five to ten years where these things, we'll start making progress on these things we're counting on you. >> counting the most -- >> yeah. we're all counting, actually, because ask not for whom the bell tolls >> it's a great pouint. because we've been talking about the benefit to shareholders, this deal. the reason why a company like gsk should exist and should

endure is because of the impact we have on people all over the world and their health to help them feel better and ultimately live longer what we're talking about here is setting us up to create two companies. and one of them, the bigger one, the higher return one is going to be focused on pharma and vaccines the biggest contribution in terms of clean water in terms of the economics of health care is absolutely critical. in pharma we've just hired new leadership since i started commercially to make sure our operating performance is delivering the fuel. but also a new very exciting leader, chief scientific officer who laid out his vision for the future of r&d which is all about the science of immunology and combining that with the new science and technology of genetics and all of this explosion in technology opportunities that we have because never has there been more advances in our

understanding of biology and advances in technology that should create the opportunity to solve one of the biggest things it could take ten years, cost billions of dollars, and still have a 95% failure rate. when we can validate the tarngts we look at, we know the success rate doubles when you start to think of all of the opportunity which is why so many technology companies are talking about health care. all the opportunity in analytics and machine learning to get more predictive about the studies and the data we have i think the long-term future for this industry has got to be bright and ultimately so that we impact people's lives >> emma, i think i've heard this song before. i can't think of a deal like this that's ever been announced that didn't have all kinds of promise in positive benefits going forward.

i guess my concern is all these moving around of parts i think specifically on the board of general electric, every deal immelt announced was going to be the second coming of the lord. i think, frankly, and who am i to say i've never owned a company like pfizer and i'd probably be bad at it. but i think it's time for the pharmaceutical industry and all business to start looking at managing their business and less emphasis on the so-called strategic deals. lilly bought an animal health business a few years ago now they spin it off this is great for wall street, but with all due respect, your argument sounds compelling but we'll know better after you've had time to see it happen i said earlier -- >> that's always true. >> i'm skeptical because we've been around this dance floor long enough to know that at the end of the day, you've got to run it and it gets down frankly to the

kid on the bench in the laboratory that kocomes up with molecule that becomes a lipitor or whatever you want to call it. >> of course >> this all sounds good, but like i said we've heard this tune before. i think the proof of the pudding is going to be in the eating >> well, that is always true and we will need to demonstrate confidence quarter by quarter. but we've been pleased over the last 18 mornths of the progress we've made in our operating process. i would refer you to the deal we announced today is a joint venture in consumer. and to perhaps give you the confidence that we have, we have executed on a joint venture in exactly the same model with novartis in our consumer business and made significant moves in the margin with value creation for shareholders and impact for consumers around the world in terms of the growth of our market shares.

and the opportunity we create here for pharma is the cash flows to invest as you say in our bench scientists and in the program. >> emma, thank you >> and then give us the capacity to look inorganically too. >> and you don't have anything else going on with brexit or anything else. just relax it should be smooth sailing. we'll hopefully see you again and talk to you about how this is going and brexit and everything else if you come back on we'd love that thank you. >> all right well, thank you very much for having me today. happy holidays >> good luck with the deal when we come back, the economy, trade, taxes, and much more these are some topics we'll talk to ken langone about and a big countdown as we look to the fed decision. so much riding on it stau stay tuned. you're watching "squawk box" here on cnbc

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welcome back to "squawk box. president trump continuing to publicly criticize the fed and today is the big day will jay powell and company raise rates? joining us n, mike santoli, our

guest host ken langone i'll go to julia first you think there's any chance he doesn't raise today? >> i think they're going to raise rates today. i think there's been a lot of tl breathless commentary in the market but this is anticipated and justified on the basis of the da data yes, we've had a market correction yes, that's something that might inform them about future rate hikes, but this rate hike is -- >> so let's assume it's on the table. what's not totally on the table is exactly what he's going to say. >> exactly the real question is the message. i don't even think it's about the dot. they're going to come down probably but it's the message of what they need to see to hike rates again. how worried are they about the outlook which i don't think he's going to be -- i think he's going to want to express some optimism but not pollyanna-ish optimism you know, seeing what's going on in the world

>> you think it's a mistake for them to raise today? >> i don't >> you think it's the right thing to do? >> i think it's probably the right thing to do. >> what is the stock market built for right now? >> if the market's not primed for this 25 basis point move, then it's a problem. and in fact, i was joking yesterday that powell almost has it in his lap. because the market is so over-sold right now no matter what happens today they would get -- it would look like a right call >> he says he's data driven. there's no inflation look at commodity prices the 10-year treasury is 2.81%. everything i look at is there's ample room in the economy. >> sure. >> how much do you think of his doing a rate increase is asserting his independence vis-a-vis what trump said to him. >> i don't think he's reacting to trump right now

but the idea is not to hit the economy over the head. the idea is to move to an economy that doesn't need stimulus from the fed. the idea is to get to a neutral rate setting and nobody would really argue with 2.25% to 2.5% being extremely restrictive. >> as somebody who has lots of investments throughout the economy, you look at what's going on and you think that the economy is in trouble? >> okay. i think the growth next year is going to be a lot -- it's going to grow, but a lot less than this year. don't forget here's the thing >> it had to we had to slow down. >> i'm sure you all read what stan and walsh wrote on monday in addition to rate increases, you're deleveraging the balance sheet. it would seem to me that's enough >> and it may be >> what i'm saying is, i'm sorry, i think -- the fed needs

to let the world know we do things based on what we see. >> right >> i think unfortunately, and you can't prove it, a lot of what's going to happen today is going to be a reflection of his need to tell the world the president of the united states doesn't run the fed. we run the fed >> well -- >> and you can't prove it. >> and if that's right, who do you blame? >> oh, here he is. i guess the answer is donald trump? >> always. >> we got to go to a commercial break on that answer and we will talk more about that with my friend ken langone julia, thank you mike santoli, thank you. >> people are rejoicing. >> no one. >> all right you told me so you told me so coming up, this morning's top corporate headlines. we'll be right back. alpha seems more elusive today.

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that's smart for rhinos. yeah. rhinos. because smart only really matters, when we put it to work- not just for a few of us, but for all of us. let's put smart to work. ♪ good morning welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square we are watching three big stories this morning number one, it is decision day at the fed a policy announcement due at 2:00 eastern time followed by a news conference by chairman jay powell lots of eyes will be all over what he has to say two, facebook shares, they are under pressure this morning again after "the new york times" reported that the company gave

other tech giants this time more access to data than it had previously disclosed we'll talk to one of the reporters behind "the times" story live at 8:00 eastern time. then three, pfizer and glaxo planning to spin off their joint venture. shares now looking at glaxo up 7% pfizer up about 1.5% pfizer has been trying to sell that consumer business for quite some time. couldn't find a taker. in other corporate news, ge has filed for -- ge would not specifically confirm the filing but points out it announced in june to separate the business. that stock now up about 3% general mills out with earnings reporting 85 cents a share beating estimates by 4 cents revenue did miss forecasts, however, and organic sales fell

by 1%. and then mortgage applications tumbled by 5.8% last week. according to new figures from the bankers association. refinancing activity fell. the average 30-year mortgage rate was down by two points during the week to 4.94% ken, back to the ge story quickly. ipo spinoff of the health care unit what does that do in terms of raising cash potentially for the company or giving it back to shareholders >> it sets health care on some course look ge unfortunately is a disaster that's the only way you can describe it. a disaster it's a monumental example of bad governance and horrible leadership you look at virtually every major deal they did. oil and gas, security, go right down the list of things. alstrom, an $18 billion blunder.

there's a great story in ge. take the combined lotsss of world come and exxon together and they don't add up to ges look, this -- by the way, that article in the journal on saturday it was -- >> i thought it soft pedalled it >> it did. i asked a former ge director who was on the board after -- >> we should point out to people you were on the board of ge. >> and i was asked to leave the board by jeff. >> because of your potty mouth >> i had a potty mouth >> still do. >> but i clean it up for this show give me credit i have it under control. >> wait until andrew gets going. >> i said what happened. and this former director said too much cheerleading and not enough supervision zero supervision one of the directors of general electric on the audit committee

said they never did a retrospective on any deal they made after they made it. >> sandy warner tried, right and he got thrown out, too, by immelt >> sandy was in jeff's camp. okay and he flipped but the point is look at the lack of governance where were the people in the room saying, hey, wait a minute. we bought this last deal three years ago. don't you think we ought to work on that before we buy another deal it was a series of deals this is a tragedy. you know what the tragedy is guys like me that sit in a room and make decisions you have no idea the lives we impact of people who are betting on us doing the right thing. they believed in the company so much they bought the stock this is a tragedy.

now he's talking about a leadership through the crisis. if you heard what he's writing, you'd say this guy did a great job. too many people on the board >> frankly what i feel about the board is you need one person on the board that has the courage and the self-confidence to ask the tough questions. okay now let's talk about what we got for that deal and why we didn't get what we thought we were going to get oil and gas. look at oil and gas. look at the sail of nbc. they were a model of governance. so it's easy to look back in

hindsight. >> of course it is >> how do you do it? what are the classic signs and symptoms to look out for >> first of all, people sitting in the board room ought to be a risk there shouldn't be any cash payments at all for five years all your fees come in because guess what a lot of people sit on boards. they make more money on that board than they made at their full-time job. they're not going to rock the boat >> and they don't have any stock, potentially >> and i'd say, all right. you sit here for five years, all your investments are going to be no cash up you're going to give it time then the end of five years, we'll talk about cash fees they have to be at risk. i think better as an owner than a consultant yum, i always -- home depot. so ownership matters

and i think it's a -- what happened at general electric is a tragedy and the whole story needs to be told not for any purpose of punishment, but to learn. why did this happen? how could this be for fear it might go broke think -- these are tragic -- who was in the room saying, hey. wait a minute, are we going to need this cash there was a piece written about six years ago. i forgot who wrote it. by an analyst in wall street questioning ge's financial strength boy, did it come home to roost but the bigger question was what was that board doing i don't know if it's true. i'd love to know the answer. but i've been told that the aggregate fees when i mentioned this the aggregate fees at general electric paid wall street was $2

billion. guess what guys come from wall street to sell you deals i don't blame them i don't blame them one bit it's like trump saying about bad trade deals. i don't blame the guy on the other side our representatives gave away. but the beginning to me of understanding what happened to ge was that "wall street journal" article but unless we really do a deep dive and understand, we're never going to learn from what happened there >> ken langone is our guest host today. we'll hear more from him throughout the show. when we come back, what wall street wants to hear from the fed this afternoon we've been watching the futures this morning dow futures indicated up about 126 points right now the s&p that closed by a fraction of a point yesterday is now indicated by about nasdaq. the nasdaq up by 25 points stick around you are watching "ua b" ghhe ocnbcwkox

♪ plunging when we return.

welcome back to "squawk box" this morning oil and gas stocks continue to be the worst performing sector in the market. brian sullivan joins us this morning in the newsroom with a look at the companies most at risk brian? >> yeah, andrew, thanks. as oil goes down, you're going to hear a lot about how lower oil prices mean lower gas prices and that's a good thing for consumers. but remember there is another side to the oil slide. that is the debt side. crashing oil prices can be a problem for the debt heavy oil companies as well as their investors. i want to focus on some names that have high net debt to earnings look at some of these returns.

oasis down 61% whiting down 54% matador and even the giant marathon down 38%. okay now, all oil and gas stocks are down big, but what we want to focus on are some names specifically to watch. i raen a screen of companies that have high net debt levels compared to ebida as well as a junk credit rating so these are companies that have high debt ratios and low credit ratings. you have callon petroleum, matador resources, and oasis the average return of those companies behind us is a decline of 51% this quarter. that is 15% worse than the xop oil and gas etf. in other words, guys, when we're talking about oil if you're looking at companies thinking, okay where are some names i might

want to focus on either to invest in or maybe go short? look for a high debt level and lower credit ratings because they matter. by the way, who are some that have solid credit ratings? you know the big dogs. also conoco phillips and eog resources. they've got solid credit ratings, low debt ratio paps lot of debt out there, guys. we talked about this years ago it is not just a low gas price story. it is a servicing story. you need cash flow if you want to make your interest payments at $46 a barrel, there are a lot of companies that will have a hard time doing that we're not picking on these companies. we're just noting they got a lot of debt compared to earnings and low credit ratings just something to watch. >> avoid that porizo a lot of indigestion

>> it's a new chipotle topping >> i heard them talking about that. >> he batted 200 back in '78 >> oh, that guy. okay all right. not the spicy italian sausage. okay never mind. >> it's not italian. >> spanish sausage sorry. chorizo. it's spelled the same. that is a -- >> i got it. >> you got me. >> it's not adobe. >> it's a spicy sausage that goes on tacos. >> and pizza anyway, brian. thank you very much. great to see you when we come back, two wall street strategists will tell us what they want to hear from jay powell this afternoon. "squawk box" back after a quick break.

let's talk markets now joining us now is jim carron he is fixed portfolio manager at morgan stanley and sarat sethi from douglas a. lane and associates. the market did plenty of work on the down so is it in the market, whatever powell does today? or is he -- if he goes a quarter

is he dovish will the market be satisfied and rally? >> well, we have to define dovish it's going to be a high bar to be abovish today what's priced in is less than 50% chance we get one hike next year and even people are pricing a recession going into 2020. it's still out there so the fact of the market is that powell has a very difficult job in terms of not trying to be too dovish if he is too dovish, that's going to send a different message to the market where the fed is nervous that's the wrong thing if he's not dovish enough, that also creates a big problem too i think it's going to be difficult for powell to actually satisfy the market and for us to get the reaction that we want. although it may happen but it's a narrow line >> i think on the equity markets, you've already priced in a recession on so many sectors. if you look at the cyclicals,

manufacturing, financials. we're already down to below book we're looking at balance sheets that are strong. also if you look at what the di dends are getting now compared to your 10-year. i think the fed is in position to say things are still good but our inflation inputs are down. the story we had in 2016 you're going to get other issues now. you're going to get foreign selling stock. that's going to put more pressure on equity markets i know his job is not equity markets, but it's also saying let's have stability in the economic system. part of that should be we're looking at all the data and going forward we will be data dependent and not just raise rates. >> i thought with fedex saying yesterday, it was really concerning they'd be the first ones to see

it >> and i think exactly to the point we knew the tariff overhang would cause some of this slowdown. and you're seeing it now. >> real weakness in europe too we're not just talking china. >> there's something else. the structure of our market, etfs, index funds, quantitative approaches stan was interviewed by bloomberg. >> druckenmiller >> he said one of the reasons he gave up was because it's a new game so there's a disconnect between what used to be the yardstick by which you measured stocks, earnings, dividends, so forth. it's a casino now and the only hope you have is to own great companies, put them away, and don't look at the market >> i agree with you. sol some of the data points in the past are now just muddled. >> look at caterpillar they're having an excellent recovery guy running it is doing a great job. balance sheet is better.

he's doing a hell of a job larry before him i mean, there's some great values out there the thing you can't do, you don't have the luxury of being emotional about the market anymore. because there's so many things that defy logic that if you go with the win yao going to get whip sawed at best >> i think the one thing we hear a lot from investors is this recession is coming but it has to come. >> let it come this self-inflicted wound that is happening now i think if that doesn't happen i think this could rebound now

we're certainly priced for a significant slowdown what are we talking about here we're talking about potentially the fed downgrading their expectations from 2.5% to 2.3% we're growing at 3% this year. you're still growing above potential growth, right? this isn't a collapsing gdp market the fed can actually go a lot slower if we think about the knneutral range. they go today at the lower end of the range, they normalized. then they say the bar is really high for us to continue to go further from here. that could be communication. the other is on the balance sheet which is something else that's out there, too, which is that that's another lever they can pull are they on an automatic preset course to reduce their balance sheet $50 billion per month, let's say. for the rest of 2019 and into 2020 or can they take a bit of a breather i think they have some levers to

pull >> there's a perception, you guys that staying at zero so long caused a debt explosion globally >> that was druckenmiller's position >> so if you go up a little, the amount grows exponentially. or are we screwed no matter what >> there is a path there's a high level of debt out there. everywhere, of course. if you hike slow enough and keep earnings robust enough, then you can delever yourself with some growth the problem is if you have a sudden shock in growth, slows too fast too quickly that could be triggered by a fed policy mistake where maybe they hike too much too fast

then your leverage ratios go up. then that level of debt becomes a much, much bigger problem. as long as we get decent earnings for a period of time, then yes you can delever in a much more orderly fashion. >> and i think if you add to that the global economic slowdown going on as well, we need to be cognizant this is an economy. >> we've got to hit, so we'll say good-bye why can't we get doug lane on? >> he is the founder we can get him on. >> and jim caron you could come in and act like a guy from -- but thank you. >> when we come back, facebook shares under pressure. back in a moment

♪ not long ago, ronda started here. and then, more jobs began to appear. these techs in a lab. this builder in a hardhat... ...the welders and electricians who do all of that. the diner staffed up 'cause they all needed lunch. teachers... doctors... jobs grew a bunch. what started with one job spread all around. because each job in energy creates many more in this town. energy lives here.

fed on the clock we are in the home stretch counting down to one of the most anticipated fed decisions in years and markets are getting impatient. >> well? we're waiting. big deal in pharmaceuticals. pfizer and glaxosmithkline merging their consumer health care businesses in a deal with some of the best known drug brands on store shelves. and facebook under fire. 2018 won't end for the social media giant.

the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york, this is "squawk box. >> neither one of us dye our hair oh, my god good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kernen along with becky quick and andrew ross sorkin i wondered you don't touch anything up yet do you >> no but i was saying i'm getting a couple of grays because of this conversation >> growing so fast >> i'm doing my work well. >> our guest host this morning is ken langone one of the great capitalists with one of the great books. that's what people always say. a lot of times when they're

arguing with him, they say read your book. because he likes china now he thinks china -- that's where the american dream lives now >> that's not what i said. >> please let's never forget we are the finest nation on earth >> don't look at me. address him. >> we have a lot of things to work on, but we're doing better than we were go back -- i'll give you a for instance one of the greatest things to happen in my opinion in america is that people who are gay no long ver to live with this horrible feeling of what do they call it? outing it's their right to live that. god bless them if they're happy -- >> acceptance on the rise. >> i'm telling you we're better as a nation than we were we're more tolerant. we got a lot of work to do don't misunderstand me we got a long way to go to get to the promised land but don't sell america short >> in history the quality of life is up >> look at idiots like me.

i'm i'm 83 and arguing with someone wherever it is >> glaxo you were associated with home depot in some way? >> something to do with it >> the futures which is also -- think about that how much employees >> 480,000 >> how much market -- you know, how much shareholder value is created. >> and i had lunch with 24 store managers last week in queens i said go around the table, tell me about yourself. you want to hear great america success stories? listen to these kids that came to work for us with no skills, no talent. they're running $50 million, $100 million businesses. and let them tell you how great america is let them tell you about -- >> i don't know. nothing good's happened since 1980, right andrew the classes have been stratified since 1980. >> i'll concede this we have a lot of things we can do better. we have a lot of things to work

on >> china >> but put america against any other nation on this earth. >> that's fair that's fair. >> all right if you want to change your tune, that's okay. look at the futures -- >> he's going to be slow to bring around, but we're going to get him. >> it's been nine years so far >> give it time. wine sometimes need 25 or 30 years to develop >> i don't know. you can get too engrained in some of your thinking where -- you know -- >> all i know is my life wouldn't have happened except for the fact i was born and raised in america. if my grandparents didn't come from italy, if i was there, i would still -- i'd be squeezing grapes with my feet or doing something. >> i'll never understand the socialist mentality. >> go to venezuela go to cuba >> i understand that i'm talking about i don't understand how people still put it forth as a -- >> i love america too. i think the opportunities that you had, though, and the specific time period and everything else made it -- >> it was after world war ii

>> it made things -- it's harder today than it was then. >> you know down there there are bars on the windows at "the new york times." it's like they're endocketry nated. >> longer debated. >> can i tell you about the three big stories we're watching this morning number one, the federal reserve's final interest rate decision of 2018 that comes today at 2:00 p.m. eastern time general expectations are that the fed will raise rates by a quarter point. but there's also room for a surprise with markets volatile and president trump slamming the fed lately we'll have much more on today's central bank decision coming up. number two, facebook under fire. "the new york times" reports that the social media giant gave other big tech companies extensive access to users' personal data. it's far more access than facebook has previously disclosed including contact lists and private messages data was provided to business partners including amazon,

netflix, and spotify and three, pfizer and glaxosmithkline are combining their consumer health care units which plans to eventually spin off that business. the move will create a global giant for over the counter products like advil, robitussin, and tums glaxo ceo joined us last hour right here on "squawk box. >> this opportunity is truly a unique one in an all-equity deal to create the world's leading over the counter drugs company a leading consumer health care company with significant value creation for shareholders. and a few stocks on the move to tell you about this morning the food company reported an adjusted 85 cents per share. revenue also short of forecasts. and organic sales were down 1% however, overall sales at general mills up by 5% from a year earlier that's helped by the acquisition of products maker blue buffalo

and then winnebago got to go on a road trip, guys topping estimates for its first quarter. the rv maker reporting 70 cents a share. that was 6 cents above estimates. also raised their quarterly dividend to 11 cents per share i think a "squawk" road trip over the summer -- >> we've done it you don't want to do it. >> just us three >> we were in a bus. it was david faber, mark haines, and joe. >> and >> i did it with the kids. >> he showed up for the original -- >> you should come on ours >> he showed up for the sendoff then he either drove his buick or flew where we were going. but faber and i thought we had to go on this. it was horrible. trash builds up in those things. you get car sick if you go back there. no >> okay. we can discuss that later.

>> you're not going to like it you're not you don't even like, you know, you're in the front of these beautiful planes. >> what are you talking about? middle seats in the back united, delta. okay separa separately, hershey scoring an upgrade at merrill lynch from underperform to buy it jumped the line there investments made by hershey last year and this year should result in improves organic sales and operating profit growth of 2019. doesn't john madden, he would always take the bus. >> he had a pretty nice one, yeah but just -- take my word for it, flying is better flying, right? >> quicker >> it's quicker. you know, you don't have to pass all the big 18 wheelers. those guys are good drivers, i'm not afraid, but there's a lot that goes on if you're going to travel that way, andrew. and it takes -- you know, to go across the country it's three days ken langone is our guest host

this morning i want to try and go back to all the varied and sundry businesses you're in right now and try to get a better feel for whether -- are you seeing fatigue i mean, what caused all of this angst in the stock market and just people's feelings about the economy. >> i'll give you one business we're in that is incredibly accurate looking ahead that's the truck leasing business >> yeah, how's that? >> it's phenomenal it's not good. it's phenomenal. the biggest challenge we have right now, these trucks are no longer just big vehicles they're rolling computers. so in addition to mechanics, you need technicians and the problem is with the technicians. we can get drivers we're able to get drivers. we're able to get great mechanics. but when you think about it, automatic transmissions, emission control this is high-tech stuff.

and the guy that's going to be able to change a tire or service a vehicle is not the same guy that goes into the box and understands that there's a disconnect, that something needs to be fixed. >> everything is so much more technical. >> which is a good indicator mileages are up. customers are adding to their lease fleets customers are -- a freightliner corporation has now gone to a second shift we just dropped a big order. i think we can't get final delivery until next june or july but don't ask me why there's something about where we are that i'm cautious. what i think is not a recession, but i think maybe next year's 1.5% or 2%, maybe this is what i think. >> is that your gut telling you this or leading indicators >> no, no, no. it's my gut. i don't feel bad about the economy, i just don't feel the

way about it i did a year ago. >> can ki ask a policy question? >> yeah. >> we had lots of debates. >> you're always right >> no, no. about on the corporate side and on the individual rate and whether we were going to be able to pay our debts and whether we were going to wear the budget away and all of these things we did a lot of things about a year and a half ago which seemed very beneficial at the time. and the question is if you only get 1.5% growth, all of a sudden the math for a lot of this doesn't make sense the way it did before >> you don't get as much revenues of course not. >> so what do you think of that? >> number one, let's forget about taxes for a minute let's go to something we have to address at some point. the federal budget is 71% entitlements i don't care what you do with the 29%. what the hell is a guy like me -- my wife and i get $4,000 a

month from the government. i won big. i shouldn't get 5 cents. we need to have the courage in congress to do the right thing and the right thing, frankly, is to look at entitlements. frankly, i think i should have to be responsible for my own health insurance maybe even pay for it yself. >> can we wait until we get to 1.5% before we write it off? we're still at 3%. >> i'm hoping we're not going to be there i think we're going to be at 2.5% >> hope springs eternal. but can we wait? let's do our 3% year first before you get back to it didn't work and 1.5%. >> you have a big kick coming in april when the tax refunds come in >> we hope that works. >> i don't know if it will or not. >> this has been -- >> i know this 71% of what the government spends needs to be addressed and you know what? no matter how much screaming i do, get over this nonsense i'm only getting my money back i got my money -- >> we got that

did you see moskowitz's 99% graduation rate at the charter school for algebra we'll talk about education. >> yes >> you saw that yesterday? >> yes yesterday morning at my charter school, we had a skit by these kids playing crayon. these kids, they're creative they're capable of learning and growing. we need to address public education. you want -- >> when you go in there, do they think you're santa claus >> they think i'm an old man with no place to go. >> you look like santa claus after he shaves. >> i don't have a beard. >> we got to go. >> this is druckenmiller and jeff's thing what they've done here is fabulous >> ken says he's got a message on johnson & johnson we'll get to that later too. in the meantime, facebook under fire yet again this morning. this comes after "the new york times" reported that it gave

tech companies like microsoft and amazon more intrusive access than it has said in the past facebook says its partners abide by users' privacy settings joining us now on the "squawk" newsline is reporting nick co confessore we're hearing that partners did abide by the rules what's the distinction what here is the big issue that you think people need to be aware of >> here's the problem. facebook is taking pieces of facebook including the data of its users and embedding it or was embedding it in all these other companies and platforms. and they did that both to serve their users and to serve themselves to be out there everywhere but here's the distinction about the privacy thing. so facebook is giving its partners access to data but not

asking the users if they want it to be accessed through these companies. so if i'm on facebook and i'm friends with you, becky, if i'm on facebook and i've decided to access a piece of facebook through spotify, spotify can see a bunch of things about my friends and no one asked my friends. facebook says that's okay because i've already shared it with my friends. so too bad and that's their attitude towards this you've already given permission that you share things with your friends and i don't have to ask if they want to then share it with all these other companies that your friends choose to use. >> is facebook still doing this today? i was under the impression after reading the article they were doing it as recently as the summer but they've stopped since. >> so were a lot of people, becky. i think we all thought these partnerships were older. in fact, a lot of them were still active in this year. and they started to wind them down or so they say. it's interesting right? they have said that we kind of missed the ball here and these aren't as bad as we're saying,

but they also acknowledge they're winding them down. you have to ask why. and the reason is that people think they're kind of weird. and the second reason is i think that facebook has decided that the business imperative for these partnerships is less than it was so they can afford to wind them down. >> why are these so important? what was facebook getting out of the deal >> when they started these partnerships in 2010, it was still a young company and they were afraid of being obsolete. they were afraid they'd be overtaken. they wanted to expand as fast as they could but also embed themselves into the experience of being on the web. so everywhere that people use the internet in different ways whether it was spotify or for searching or other services, there'd be a piece of facebook there at the same time and that was their strategy at the time and it worked. they got big very quickly. they made tons and tons of money. it also meant they were saying

to their users, look that wall garden that we promised you where you come in and put your kids' pictures and everything is safe, it's actually not a wall garden because there are tunnels into it from all over the place >> nick, we've got to go, but do you have a facebook account? >> i do but i don't log on too often. >> is this one for work or one you started and used as an individual before you started doing all of these reports >> i started it as a personal account. i got on there a lot in the old days but really i just don't use it much as a person anymore it's mostly for work >> i want to thank you for your time we really appreciate it. big story this morning and we are continuing to watch the fallout from it. thank you. okay coming up when we return, eight trading days remain in the year. then we'll do it all over again. when we come back, what to expect from the markets in 2019 ffy cahe news editor of barrons. jerein stay tuned you're watching "squawk" here on cnbc

welcome back to "squawk box," everybody. we've been watching the futures this morning and after another crazy session yesterday where we saw highs in the morning, things that gave up during the course of the session and ending the day with gains for the dow and the nasdaq and the s&p closing up by less than a point sitting just at its low for the year you're looking at some green arrows once again this morning dow futures indicated up about 76 points. nasdaq by four and s&p up by

four and a half. 2019 may be less gloomy for the markets. that's according to barron's market forecast. joining us is jeff cain from barron's >> good morning to you >> you guys interviewed the top ten strategists going through what they think is going to happen in 2019 >> that's right. this is an annual exercise we do we survey ten market strategists both from wall street banks, asset managers, and we get their views on where they see the s&p 500 ending next year, where they see the 10-year, where they see the economy next year. >> and where do they see it? >> well, with the stocks they see the s&p 500 -- the consensus or the median is a gain of 14% from where we are now. so that's -- >> man >> well, let's keep in mind -- >> stop right now.

this is great. >> it certainly adds to the discussion you've all been having this morning. so market strategists are by nature tend to be optimistic but they have reasons to be optimistic because this economy although fill robust, there are warning signs. consumers are still confident. corporate buybacks are strong. >> here's the question when you've looked at their track record over the years, right? is this a positive indicator or contra indicator we talk about that at davos then the opposite happens they should have been optimistic >> i think in recent years -- i think if you were to blend the yearly forecasts, it would average out to something that's pretty close on track. but last year, for example, they were much more optimistic about

this year which has improved the case for 2017, they were much more pessimistic which was a much better year. one can draw conclusions from that >> you guys have picked out three stocks that it seems like are across the board toll brothers, american, apple >> those are a list from ten that our chief stock writer andrew barry discussed so several of them are somewhat contrary in place. toll brothers is a profitable whaen and it's in the high end luxury end of the market it's trading for essentially book value we think there's a lot of potential there. >> ken, that's your world. what do you think? >> there is a shortage in housing. kids are now leaving homes and setting up in their homes. there was an article i read about rental units, the way it's

going up there's a demand for housing here and i think right now once the market adjusts to higher monthly rates, what they're going to pay for a mortgage, we're going to be fine we need housing in america how do i feel? i feel good. >> bank of america and apple >> big banks, another unloved group given the state of the economy. given the buyback problems all the big banks have been doing. there's reason to be optimistic about all the banks. maybe less so goldman sachs and wells fargo for their own particular problems. of that group, we especially like bank of america >> and they got a great franchise. you look at the merrill lynch franchise. brian's done a hell of a job running. i mean, these are great franchises and you're not paying much money for them. >> we got to run, but how much does the fed factor into all of this in terms of what this group was thinking about

>> they were thinking about, you know, last year they were thinking we'd be at 2.25% with the federal funds rate we're looking ahead to one or two more hikes next year >> all right jeff kane of barron's, thank you. >> i hope you're right i'm positioned for that. it's been a banner year for stock buybacks there's still time -- little bit of time left to set a record coming up we'll speak to standard & poor's howard silv silverblatt on what we'd have to see to set a new water mark. stay tuned you're watching "squawk box" on cnbc

see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with 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 coming up, the fed's latest decision on interest rates just a few hours away when we come back, the case for hiking and the case for holding. we'll be joined by david wessel of the brookings institution

stay tuned you're watching "squawk box" on cnbc

♪ good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square

among the stories front and center this morning, fedex reported adjusted quarterly profit of 9 cents above forecast then fed exlowered its forecast for 2019 mainly on weakness in europe and an overall decline in global trade then just this morning, jpmorgan cut its price target on fedex from 256 to 233. well, with the stock at $185 -- or $170 today. that's just beautiful. what was that again? let's see that again if you're at home and you're trying to decide what to do, jpmorgan now thinks that the price target for fedex is no longer $256. they're now going to $233. >> and we're at $170 >> and the stock is $170

>> yeah. >> by the way, fred smith does a hell of a job with that company. >> great american. >> damn right he is. shares of eli lilly are on the rise drug maker issued an upbeat forecast for 2019 on strong demand for its newer drugs also raised its quarterly dividend by 15%. that's why you're in a good mood >> oh, brother i'm going down to their analyst day after i leave here. >> are you really? >> oh, yeah. david ricks is doing great >> he's going to be with cramer on "mad money" tonight >> i threw a big bouquet at jim for admitting he was duped by immelt a big bouquet. because he was really in that -- he was taken in big-time for him to admit -- >> a lot of people were. >> looks like he ate a mouse >> what are you talking about? no this is a fabulous story.

>> getting some talking points for someone. >> you're a great writer you should write a book. >> you know who's writing a book >> cohan >> yeah. i talked to him. sempra energy has signed a deal to provide liquid gas with poland terms of the deal weren't disclosed. that means a lot to people 2.7 billion cubic feet of gas. i'm just trying -- >> to envision what it means how big of a well we're talking about. >> it sounds like a lot. our guest host this morning as you probably know, ken langone. we have talked about a range of subjects with him. but you saw the interview that jim cramer did with alex gorsky of j&j this week you wanted to make some comments about the overall story. >> let mel the you let's start with the fact that johnson & johnson has one of the great corporate cultures in america. i own some stock, but not a lot.

you go back to 30 years ago tylenol. they showed their colors by how they reacted to that and what they did that was first class this company, i'm sure, their first concern is safety. no matter what it is some of it's the fda but as a company, they've always demonstrated their commitment to the best for their customers if there's a company out there that should make the good fight, it's j&j they do it right they have great values alex is a wonderful leader j&j's always had first class leaders. you feed the monster when -- this guy yesterday that you asked him about -- >> mark lanier who's the lawyer, the lead plaintiff lawyer. >> he's begging for a settlement he wants a settlement. please j&j don't settle. take it all the way. the more you settle, the more you encourage them to keep doing this kind of thing

let them have skin in the game let them have the risk of having to finance the course going forward. but j&j deserves a lot of credit. >> did you think william weld was a good ceo >> i thought they were all jim burke. >> well, burke goes back >> but i'm saying to you i'm not going to grade one better than the other. >> a lot of people thought that was a stumble. >> j&j has never compromised its commitment to safety >> just to put a fine point on what you're talking about in terms of the settlement, alex gorsky with jim mentioned there have been about 40 lawsuits over the last 24 months or so of those lawsuits 35 of them have either been lost by the playoffs or they've been appealed or dismissed. about five of them are outstanding including this one where mark lanier was heading up where they have $4.5 billion awarded to them by a jury. but lanier did say he'd be interested in sitting down with the company. >> of course he would.

>> that is on appeal right now >> hold on he gets a nice cut he probably gets a third >> yep. >> so if they give a settlement of a modern percentage -- $4.5 billion, a third is a lot of money. >> he's collecting a lot of money. >> i'm telling you i'll give you first hand i told my lawyers the next time you mention settlement to me about that spitzer, you're fired. we went all the way and he kicked his ass pardon me. we kicked his ass from one end of manhattan to the other. you know why we did nothing wrong and settling is an implication there's something about what they said about your position. remember matters of principle never give into expediency. i think j&j's got a strong hand. they've got the science. they've got the people in the company that can back up if there's any company that should make a fight, they're a great company. okay

>> okay. from your lips, let's hope meanwhile, we're just about a few hours away from finding out whether the fed will raise interest rates as expected or pull back a bit. we want to get to steve liesman who joins us now with more on the big moment just 5 hours and 23 minutes away now. >> yeah. and this is jerome powell's big first test he tries to navigate these waters where the president has said the fed need to maintain political independence the dovish hike where the fed signals that future rate hikes will be less certain, here are some of the changes we could see today to the outlook or the forecast the fed will note the labor market, economy, but maybe acknowledge market volatility

and the weaker global outlook perhaps even that housing is not doing that well. and the weaker capital spending numbers. that will remove -- likely remove the future gradual increases. instead emphasizing data dependency instead reduce the outlooks. those are maybe the keys to what the market is looking for. the growth in the rate forecasts, they're not policies. they're the result of forecasts submitted separately by the members of the federal open market committee powell doesn't necessarily control that it seems likely, though, committee members have decided that fewer rate hikes are needed next year and that growth will be slower than the 2.5% previously forecast. here's the question. is a market that seems to want no hikes or even tolerate just one hike, will it be satisfied with the fed that likely lowers its consensus forecast from three down to two. i think the idea of going from three to one is just too much heavy lifting for the fed to change in one meeting or one set

of forecasts >> and steve, that makes the assumption that we are not going to have a dovish message that comes through. >> i don't think the statement will be all that dovish. again, i don't think it's warranted for the fed to really characterize the economy maybe it's 2.9% now. but still above trend growth unemployment well above trend. inflation at or near target. there's no reason to put out a dovish characterization of the economy. it will note that inflation expectations have fallen somewhat that might be something that they could throw in there. but i don't think they're going to be incredibly dovish in the statement. they'll remove that further increases. perhaps note some of the questions about the outlook like the weakening global economic

outlook as well as the market volatility >> got it. we will be watching. steve liesman. right now let's bring in our guest. david wessel who is director on fiscal and monetary policy david, you say you would be shocked if the fed doesn't raise rates today. do you agree with what steve just said in terms of what kind of dovish message we may or may not be getting in that statement. >> right i do agree with what steve says. there are some people arguing that they needn't raise rates in december but i think the combination of the signals they've sent and the president's pressure will mean that they didn't have to raise rates this time. i think people watching very carefully about what jay powell says, i think steve is right this is a big test for him can he deliver a precise message that doesn't lock the fed in too much but doesn't make people think that had doesn't know what he's doing >> you mean doesn't lock in to

saying we would only raise once next year? >> i think what the fed is trying to do is wean the markets off of forward guidance. and they're trying to be reasonably it's uncertain what the outlook is going to be what's happening to the rest of the world. what's going on in the stock market and financial conditions will be like in the next six months what happens with the trade war. so they want to have flexibil y flexibility. i think data dependent is their way of saying we're in a wait and see mode but that's very hard to convey when you have the dot plot where people want to know is it going to be two rate hikes next year or three he's going to try to say we don't know and the markets don't like hearing the fed say we're not sure what we're going to do. >> and we've heard data dependent before it would probably have to be a new message to make the markets hear a different sort of resonance saying we are stepping away we don't have the confidence we had a month ago based on the economic readings at this point. >> one thing that's interest if you look at the fed funds futures market, it looks like

that market is seeing very little chance of further rate increases in 2019. but when you talk to the analysts who follow the fed closely, they're mostly thinking two rate hikes so there's a bit of disagreement there. i think it has to do with the analyst prupsing and the markets may be -- >> the shocking thing that jumped out is maybe 12% of respondents thought we could see a rate cut come next year. what do you think of that? >> i think that's the reflecting some pessimism in the market about the outlook for the economy 2019 i personally think that's overdone steve's right. the economy has a lot of momentum it's surprisingly strong and the tricky thing is that this so-called soft landing a hard to pull off

>> the unwavering faith that a hot market caused inflation at some point it's weird to not -- if you knew there wasn't any inflation to want to slow it for no reason doesn't make sense and you want wage pressure sort of for people for income inequality >> absolutely. and the difficulty the fed is having now is the normal economic models would suggest we'd see more inflation now. the question is has something fundamentally changed and we can run this hot economy for a lot longer without inflation or is inflation around the corner that's always a hard call. that's particularly hard when you're under scrutiny from the political establishment and the markets are volatile >> david, how do you deal with the issue that the industry seems to be getting hit the hardest right now is home building in terms of the impact. >> i think what that tells you

is it's an interest rate sensitive industry and mortgage rates have gone up a little bit. they have to look at the overall picture. so that's one negative that's clearly a negative. and a sign the financial conditions are, indeed, tightening which means there's less urgency to raise the federal funds rate. do you think the home buyer will adjust to the rate over the next six to nine months all of a sudden, this is where it is and it's safe. i'm still going to have equity in something if you look at command right now, it's very strong. it's very good >> right >> housing starts go against the need for more housing in america. you know, housing stock is down. my question is how much attention are they going to give to this significant industry in america which is probably more impacted than any other industry with the rate increase >> well, i don't think that they -- i think housing is important. it's an important channel for

the way monetary policy works. but there's a lot of other things in the economy that they have tofactor in i think one thing we don't fully understand is how much the changes in the tax code that disadvantage housing homeownership, whether they're also contributing to the slowdown >> i think there probably is some of that but you don't get the deductions you used to get. particularly in the blue states. >> as the bond market has backed off its predictions of what's going to happen to short-term interest rates, mortgage rates have fallen a little bit the last couple of days. so i think a lot has to do with how much confidence home buyers have in the economy, in their jobs, and whether rates will stay where they are if they think they're going to go up they may be more likely to pounce now >> david, thank you. great to see you david wessel >> you're welcome. coming up, a milestone for stock buybacks we've got the numbers on a banner year for share prepurchas prepurchases and we'll give you o me co wcod surpass in the last two weeks of the year stay tuned "squawk box" will return

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welcome back to "squawk box" this morning stock buybacks hit a record. with more on the state of share repurchases, we're joined by mr. silverblatt. good morning to you. you know, there was an expectation we were going to see buybacks in large part as a function of the tax cut. so is this that surprising >> the amount that they did is surprising they've obviously made huge strides. a 50% year over year last quarter. the last quarter was $200 billion. we're 1% shy for the first three quarters of what the whole annual number is the number's definitely gone up much more than most analysts expected didn't see any estimates for over $200 billion. and going forward, the authorizations are up, the companies are talking it up, the cash flow is good. so we're looking for not just a year to be good but to maintain

this level, add potentially to it in 2019 >> what kind of math have you done to see whether these buybacks have actually created or lost value for those investments? >> well, short-term what they've done is they've added upward pressure it supports your stock when you go in and do it. but these are discretionary buybacks so they're reducing share counts about 18% of the s&p 500 as an example have significantly reduced their share count. meaning their etfs have had a boost going in there at a time we need it so the companies are having an impact not just on the trading pressure but also on the eps set increasing >> what percentage of the market do the buybacks effectively represent in terms of investor -- in terms of investments right now? >> you mean the institutional side >> yeah. broadly. is it 10% of the market?

>> less than that. there are funds in there that actually do trace those and use buybacks and cash flow as an indicator and they're more short-term but there's also short-term traders which you really can't quantify that go in and use buybacks. >> what i'm getting at is -- if companies were to stop buying their stocks entirely, what piece of the market does it represent right now? >> it is a significant amount. i don't have the quantify numbers but it would be difficult for companies to pull back now since they hyped it up so much and there is so much demand on it >> let me ask you this, we had a long debates around benefits and apparels of buybacks, whether it is beneficial to the employees in the long run or a lot of

financial engineering. >> i have to say generally speaking, buybacks are in excess right now. if you are in management and you have not done anything with your cash and you are looking at your business, the devil that i know is better than the devil that i don't know the one thing for sure is i believe 99% of all acquisitions should not be done a lot of money is burned up. ge is a classic example. if you got nothing better to do with your money, i think a balanced program of steady dividend increase all the time and only when you have not gotten no use for that money at all. you satisfy yourself i can't put anywhere where it makes sense thinking of the funeral. it is a simple common sense decision to me >> home depot demonstrated a

great ability to generate a huge sum of cash. we are not going to open more stores we are making our business better >> but if you can buy low and sell high makes sense. all ceos think their stocks are under value. >> ge, $100 million. >> mike jackson, it was brillia brilliant. >> ge did not have reality for what they had. >> right >> i will give you one that i think is a screaming -- this management has done an incredible job they did the biggest deal and they absorbed it and look at the cash flow. so what i am saying is i think it is in discriminate and i think that's one on the other hand, look at jamie

dimon and brian moynihan, these banks are strong and balance sheets are better and portfolios are in good shape. >> howard, thank you for that. have anyone done a true measure whether buybacks on average been huge improvements for companies? >> short term you can see the impact and longer term, no because you are going on 15 or 20 years i am told that the stock you can't say because they did buy backs is well under 50 now long-term to say 20 years, this is what does it. short term definitely an increase >> we got to get over to jim cramer howard, thank you. >> i was not laughing what you are saying >> i was >> there was a guy doing a little -- >> i never realize how they get rid of that. they tint the windows so you can't see what's going on. the dancing guy. >> i know you were not laughing.

>> these two were laughing at me >> ken, we were not laughing as you. >> it was hailarious, they blacked out the window when they got back >> let's get down to jim cramer, apple, i have seen it all over the place. you weighed in on buybacks for a long time. some are good and some are bad if you got hundreds of billions of dollars and you think your stock is cheap, that could be a good use of fun, could it not? >> how much do they buy at 200 or 190 their confidence was so high on the last conference call this is a classic example of what ken is saying they're not priced they bought it all the way down. that was not a good use of capital and micron bought all the way down during the crisis of 2007 and

2009, we have capital, let's shrink capitalization. that's using someone's brain to figure out the price >> ceos also think their stocks are under value. these guys are -- ge and other examples are buying all the way down >> ge could never make the $2 they thought given the fact the stock is down 25%. when business turns up against, they're going to wish they didn't >> jim >> yes >> tell your wife how grateful i am for her service, you were right, by the way. >> i listen to you and i was grateful because when i did it, you never want to admit that you

are dead wrong but i got it wrong and i think you got no credibility when you come out and say it when you got it right, who cares because you have to admit when you got it wrong >> i wish all journalists have that trait >> i will tell my wife >> thank you, buddy, appreciate. jim, we'll see you in a minute don't miss the ceosame of lily d micron >> oh great. >> go easy on him. >> "squawk box" will be right back chl ive. when you apply expertise across an industry, bye! you can put smart to work.

ken, just your final thoughts on what has been a long morning where you have given us a whole lot of information >> love america. this is the greatest country on earth. we got all kinds of things we have to work on. there is no place on earth that i think does it better than we do we are going the get better overtime i got a lot of faiths in this kids coming along. >> you do realize they are watching us overseas right now >> i don't care where you are. if i didn't feel the way about america, shame on me for what america did on me and my family. that's my pitch. god love america >> ken, we love having you here. >> thank you for having me

>> we'll see you back here again soon we are watching the futures today, once again you are looking at future in the green we have seen this story before we'll see how it plays out dow futures is up by 161 points. that does it for us today, make sure you join us tomorrow. right now it is time for "squawk on the street. ♪ good morning and welcome to "squawk on the street," i am david faber along with jim cramer carl quintanilla has the day off. let's take a look at the futures at the new york stock exchange you can see we are set up for a higher open. as everybody knows -- yeah, what does that matter right if you can see a broadly