♪ live from new york y business never sleeps, this is "squawk box"". good morning, everybody, welcome to "squawk box"" here on cnbc we are live from the the nasdaq market site in times square. let's take a look at the u.s. equity futures at this hour. as joe mentioned, big moves on friday first we were up in the morning bouncing back from some of the declines we had seen earlier in the week, but then it was really powell that moved the markets. jobs report we didn't move much. it was very strong jobs report, but as we said at the time, we didn't know that the market would think about a strong number it was really powells comments softening things and pulling things back a little bit saying we are not on auto pilot necessarily when it comes to the balance sheet. >> she was afraid to steal his thunder, but i remember at one point i said we're up about 300. a jobs report like this without the fed overhang is worth double that it ended up being about double

that there were two big things you sort of knocked out in terms of all fears. fear of the fed and fear of recession. >> the one thing people say is the jobs report the back ward looking, but it was such a strong number, so much better than anybody had anticipated and the revisions were strong, too. >> the yearly wage gain was the best in a long time. and participation, you were down there like this, people putting grapes in your mouth and stuff like that. >> i was reading the papers. >> you were? >> yeah. the problem this phone is a terrible thing >> a terrible and wonderful thing. >> i was looking i was watching. >> were you reading jill abramson's former paper? >> i was reading jill abramson's former paper. >> you knew that was coming at some point let's not go there it's a new year. it's a new year. got a new year's resolution. >> the concrete wall, the steel

wall. >> some type of -- if we're going to have single payer, we can't do single payer for central and south america, too can't have medicare for the entire north and south americas, can we >> we'll do the news and have a big debate i'm sure. >> i'm sure you saw that >> i did see aoc. >> did you see the bear's mascot fall sideways. >> oh my gosh, i almost fell over watching that. >> i never heard a statement go sideways like that. >> normally if it glances one, it goes through. but it hits the one and then hits the other one it's like -- then the fourth quarter -- the fourth down, they had one play left to try to tie or try to go ahead, which they hit. it was unbelievable. they looked like destiny. >> i did not realize that kicker had problems earlier in the season. >> that poor guy. >> i felt terrible for him for the bears. go eagles. fly eagles fly. >> so those two things are

removed a little bit >> back to the fed and the economy. we have some china talks coming today and tomorrow. >> that will be another thing removed then it might be clear sailing. >> in fact with the china talks let's look at what happened over night in asia. you'll see that the markets there ended higher as well the nikkei up by about 2.4%. hang seng up by more than .8% and shanghai composite up more than .7% europe right now, you'll see across the board -- well, actually italy is a little higher but other markets are a little lower this morning. the dax is down .4% as is the cac. the ftse down by half a percent and spain stocks are relatively flat look at what's happening in the treasury markets here. again, major moves in treasuries on friday, too you can see the ten-year is back above 2.6%, sitting at 2.645% and that move happened almost instantaneously with some of the jobs report and with powell talking on friday. right now you're still looking at the two-year, five-year

inverted but just slightly two years 2.49% and five year 2.484%. little bit of news for you this morning, elon musk breaking ground today on tesla's first factory outside of the united states located on the outskirts of shanghai. the company expects to begin producing vehicles in china and says it will reduce costs from tariffs and transportation musk tweeted the following, he said affordable cars must be made on same continent as customers. he was welcomed there in china given the back and forth between the u.s. and china gets interesting everyday meantime, in other geopolitical news the bbc reporting that british prime minister theresa may is holding a brexit vote in the parliament on tuesday, january 15th mark your calendar prime minister had been forced to pull the vote in december after she said it would be defeated by a large majority happening now, we eluded to this some high-level trade talks

are under way in beijing between the u.s. and china let's get to nbc's janis mackey frayer with more good morning >> reporter: good morning. both sides sounded positive as they were heading into talks, but there are very major differences that need to be resolved over issues of technology, competition and access to market the american delegation is being led by jeffrey gerish joined by officials from the agriculture and energy departments these are politically important industries that china has been targeting with tariffs as well as representatives from commerce treasury and the state department now, it's unlikely that there's going to be a deal by the 1st of march. the sense is that beijing's goal is to try to show enough progress or enough compromise that president trump might be persuaded to extend the deadline already there's tariffs on about $250 billion in chinese goods and of course the threat of duties on much more. and it's no secret that a trade

war would be punishing for china's economy. there have been signs emerging over the last several weeks showing that the economy is slowing down, factory activity is lower the profits at some of the big industrial firms are at the lowest point in three years and consumer spending is also showing signs of softening and things like auto sales and other goods. so there is the sense that beijing is coming to the table wanting to make a deal perhaps a little less gloves off than they were a few months ago when they appeared willing to go head to head with the u.s. over tariffs. but there are some major gaps that need to be bridged. one of them is trust the relationship has certainly deteriorated over the last several months with this trade war brewing. and there was the arrest of the huawei executive that added further tension to things. the way that china sees it it was a u.s. move to try to offset competition, china's rise as a potential competitor in

technology so there are a lot of issues that are coming to the table at the same time. it's unlikely that we're going to see anything concrete after two days of talks, but they will likely say that they have been constructive joe? >> okay. very good, janice. we may not need concrete, steel might do thanks to janis mackey frayer. programming note, we'll talk trade with wilbur ross at 8:00 a.m. eastern not just trade, we'll talk a lot of things, shutdowns, all kinds of stuff. >> tariffs, too. >> yeah. >> the auto one is coming. >> the auto tariffs still being considered by his department and just what exactly that will mean for europe and for asia. he says that nothing is off the table just yet >> yes but like we were just saying if

we get -- i don't know some of the recent numbers out of china, feeling the squeeze over there they may realize, wow, better to be friends than enemies. we're all in this together, aren't we, in this new year? isn't that one of your resolutions. >> apple would say we're all in this together. other way, though. >> apple it's 18% of their revenue. average s&p it's more like 5%. >> i knew you would be quick to embrace that as a trump problem, i think it's much more of an apple problem. the upgrade cycle is no longer a year if you're going to charge a grand for a phone and you have people in china where their gdp is 10,000 a year, they're not spending over 1,000 dollars to buy a phone. apple has a tough -- what's new? what's been new in three years. >> you're not leaving the apple ecosystem. >> no. i have the things in my ears now. >> do they have different size pods. >> one size fits all. >> my left ear, just constantly

feels like it's loosening, so i'm constantly pushing it in you know what i mean do you have that problem or you have a perfect fit? >> i have a perfect fit. i love them. they're the greatest things that ever happened. >> if you were like -- i guess you wouldn't do it on a ski lift or something. >> about them falling out? >> it's always loosening. >> you can jog with them but i just want to go back to the china thing for one second. >> oh, please. >> which is, yes, china is being squeezed but at the same time clearly their economy is struggling and clearly if they get a cold, we get a cold. that's the point. >> that's the huge concern. >> we talk about that with you out. and it's not whether all of a sudden we have a domestic recession here it's that china is so important to the incremental growth for the globe in terms of incremental growth that if that slows, everybody around the world slows a little. >> you have to be sensitive to that. >> then again, there are times to try to change some behavior

before they take over the world, before 2025 or 2030 where it's total domination. >> the question is how you do it that's the whole -- all of this is how you do it. >> none of your friends have had better suggestions for 20 years. we have to get the allies. we have to go to the wto, we have to do this. they've been taking us to the cleaners and we've been like thank you, sir, may i have another? we're mad as hell and not going to take it anymore welcome back. >> so glad to be back. >> can i just say thank you for not disappointing me. >> in terms of us? >> in terms of i had a bet with max. we're trying this new break str structure getting out early. >> we're supposed to be out by ten after? >> you should have seen the last week and a half, there was none of this acrimony. >> when you were done talking afs '08. i thought we were going to get out on time. >> zero balance. >> you don't have 92% of the

mainstream immediate dwmedia wi >> thank you for saving me $20, gentlemen. i appreciate it. i'm still down 5 bucks. >> we don't hear enough of your side of things in the media, andrew inspired by satan. >> you saw that last night, stay up for the golden globes >> i saw the first hour of it. it was okay. >> i watched the beginning of it, too. it was okay. >> it was okay any way, when we come back, i'm still going to be out 5 bucks because i didn't think we would be out by 6:12 the government shutdown rolls on in washington. we'll talk about what it means for the markets next. and it's big monday here at cnbc we're taking the raps off our new midday lineup. at 1:00 p.m., after halftime, it's the debut of "the exchange" with kelly evans look at the stories moving the market, the economy and much more 2:00 p.m., kelly will join tyler and melissa for power lunch. 2:00 p.m. hour has been the most volatile hour of the trading day, so tune in. it all begins at 1:00 p.m. today

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this morning, activist investor starboard value has reportedly bought a nearly 2% stake in dollar tree. asking the company to sell its family dollar business, that's according to a letter from starboard to the ceo starboard seeking majority control of dollar tree's boards and pushing for changes to its pricing model. pg&e is reportedly weighing out whether to file for bankruptcy as protection against liabilities resulting from california wild fires. the utility is considering the sale of its natural gas business their shares are down 60% since the campfire broke out in northern california back in november and private equity firm apollo global reportedly in talks to buy general electric's aircraft leasing unit, one of the jewels of the company big day on friday and then in after-hours trading as well for ge back to 8.5 now. people familiar with the matter say the deal could be worth as

much as $40 billion. 3% move. i think that's today i'm not sure but, yeah, i think that's today. >> i read about that on friday >> yeah. and after-hours trading i think some of this came out on friday. yeah, because it closed at 8:23. >> the government shutdown continues. president trump holding firm yesterday on his demand for a border wall. let's get to walk with the latest on that. >> reporter: good morning, becky. we remain at an impasse in washington as the shutdown is now into its third week. president trump retreated to camp david yesterday to talk about national security and the border he defended the need for a physical barrier immediate of steel instead of concrete. >> so we've been in touch with a lot of people. and i informed my folks to say that we'll build a steel barrier, steel it will be made out of steel it will be less obtrusive and it

will be stronger but it will be less obtrusive, stronger and we're able to use our great companies to make it by using steel >> reporter: now democratic aides say there's been no progress despite two meetings over the weekend with vice president mike pence, jared kushner and dhs secretary kirstjen nielsen they were miffed they were kept waiting 45 minutes at one point for one of the meetings to even begin mft at the end of the day here, the white house is still demanding $5.7 billion for the border wall and dcs are still saying no. now, there are three potential pressure points that could change the dynamic here in washington this week house democrats will hold votes to reopen every agency that is currently closed down starting with treasury and the irs. there has been a lot of anger over the possibility that hundreds of millions of dollars in refund checks could end up getting delayed and that would cause real pain. second, over in the senate, three republicans are now calling for the government to reopen, so mitch mcconnell is now feeling the heat to bring

those bills that pass the house up for a vote in the senate. and finally, guys, federal workers are supposed to get paid on friday. it would look really bad if both sides don't meet that deadline back over to you. >> ylan, that was going to be my question, has anyone missed a paycheck yet or did they get paid through the last pay cycle and just this week coming up that will really see the pressure hit >> the december 31st paycheck that federal workers got was smaller than it would have been otherwise. i think about 7% or so so they're already feeling the pain in terms of having a slightly smaller paycheck, but the first actual missed paycheck would come up this friday. >> ylan, you talked about mitch mcconnell feeling the heat that he would bring these things to a vote he has been relatively explicit he won't bring anything to a vote that he doesn't think the president will sign. >> that's right. but that was for cory gardener, susan collins came out and vocally supported the idea of reopening at least parts of the government to get those federal

workers back on the jobs so, you're starting to hear some grumblings amongst republicans, many more of whom will be up for re-election in 2020. so that could potentially again shift the dynamic here, but both sides are so dug in that you're really looking at perhaps some sort of externality to happen in order to force them to come to the table and to make some sort of decision here they had been so dug in. we're almost now at a record for how long this shutdown would have last. 21 days is the longest shutdown previously and we're at day 17 we're getting there quick. >> you're not going to feel pressure on congress until the average american starts feeling this we did start hearing some reports in some airports where there were very long delays because tsa agents had called in sick again f you get to the point where they're not being paid and they miss their paycheck, and that is the type of situation where you have people who are waiting online for four or five

hours and still missing flights, that's what he thought it would take to really break this when congress starts getting phone calls from constituents who had situations like that happen. >> reporter: yeah. this is sort of the tough thing about this shutdown, right it's a partial government shutdown so part of the design because lawmakers were worried about this exact thing happening was that they passed a lot of the appropriations bills, funded a lot of the government in the advance in order to limit the impact of the shutdown the downside politically is there hasn't been that level of crisis in order to force lawmakers to make that decision and make some of those tough choices. you know, now as we see overflowing toilets at national parks, deaths at national parks, refund check situation, businesses not able -- small businesses not able to get new loans, all of those things could add up together to create that outside pressure on lawmakers to act, but again, i think this is really going to come down to a decision by both the president and by chuck schumer and nancy

pelosi and trying to find what common ground they can possibly come up with some people have suggested that the move toward steel slats or steel barrier or some sort of steel fence might be able to provide that compromise that allows both sides to save face however, i think it's important to note that steel barriers have always been allowed under the language that both the house and the senate have looked at. so, right now it's really a philosophical argument that's tough to solve. >> ylan, thank you good to see you. >> good to see you, too. apple taking a shot at tech rivals it's happening at ces, the consumer electronics show in vegas. we'll show you billboard the company put up on the side of the hotel that's making waves next as we head to a break, though, here's a look at the biggest premarket winners and losers in the dow right now. back in a moment ♪ ure is not an option.

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welcome back, everybody. oil prices on the move today check things out you'll see right now wti is up by more than 2.5%. it's a gain of 1.22 pushing wti back up above $49. $49.18 a barrel. also, samsung is set to post results overnight tonight. analysts are expecting the first drop in quarterly operating profit in two years weighed down by slowing economic growth in china. revenue is expected to fall by 5% hurt by lower memory chip shipment that stock is up by 3.5% new over the eekend, apple announcing a partnership with one of its fiercest rivals soon customers who own select samsung smart tvs will be able to access movie content.

apple is focussing on its services businesses. it could be a hint as how apple plans to distribute its new original television content including a show with oprah winfrey. >> significant because it also represents a shift about apple tv itself which is the actual device selling those devices which was never a big moneymaker for them. the apple tv, the little box, the margin on that was never the game for them. >> so it's bigger -- >> maybe just doing this way is okay. >> here is my other question, how do you do a show with oprah winfrey when the own network is with discovery >> well, that's a bigger question for david and oprah and apple and how that was arranged. my understanding was that under the arrangement with own, there were specific types of programming that she was -- she had to do with them and there were carve-outs to do other types of programming clearly she was able to leverage both of those relationships. separately apple has a message for its rivals ahead of this year's ces

consumer electronics show in vegas. tech giant put up this 13 story advertisement that reads what happens on your iphone stays on your iphone. the ad is seemingly aimed at google and amazon both been faced with privacy issues. a conversation going on in the halls at ces likely this week. coming up, we'll talk about friday's fed fueled and employment fueled rally. what it means for stocks in 2019 drew mattis and brian will join us next. as we head to break, here's a look at friday's s&p 500 winners and losers we'll be back. ♪ ♪

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♪ >> announcer: welcome back you're watching "squawk box"", live from the nasdaq market site in times square. good morning, everybody. welcome back among the stories that are front and center on this monday morning a fresh round of trade talks between the united states and china kicking off today. reports say that a working team led by deputy u.s. trade representative jeffrey gerish

will meet chinese officials to have positive and constructive discussions. we will keep an eye on this story and of course we'll bring you any developments as we get them bring water pure alpha defying the market with a 15% gain for 2018. this comes as many other big name investors saw losses amid the major market volatility. and the happiest place on earth just got a little more expensive. disneyland hiking the price of its cheapest tickets to over $100 this change comes ahead of the opening star wars themed expansion. it's now $104 for low demand day. check out the u.s. equities future at this hour. this morning we're a little weaker dow features down by 34 points s&p future is down by 6 points and then the nasdaq off by 26. >> by the way on the fund, the alpha piece has outperformed remarkably, the other part which is actually larger of bridgewater the all weather fund has struggled relative to the

market over the past couple of years. so, separately, right now let's get a check on the biggest market movers oversea. get over to juliana joining us this morning from london good morning >> good morning. so that strong session that we saw in the u.s. on friday has filtered through to asia over night asian markets rallies quite strongly as investors there digested that rath of supportive to begin with federal chair jerome powell reassures markets 2019 we had the nonpharm payroll. so together this created an environment where we could see asian stocks rally the mainland shanghai composite up about .7% overnight. the kospi up 1.3% and the nikkei up nearly 2% in japan. here in europe, stocks are struggling for direction the uplift we saw in the asia

session is only filtering through to a degree here in europe now, the only region in positive territory this morning is italy. the ftse is up .2% other than that, we're seeing caution from investors early on the european stock 600 did rally on the back of that strong handover from asia, but since then stock have paired back gains. the best performing sector of the bunch is basic resources which demonstrates how closely european investors are watching what goes on between washington and beijing with those trade talks. but the sense from europe this morning is very much one where investors are in wait and see mode back to you guys >> okay, julia, thank you. news out we want to bring you after the big celgen concerning e eli lily announcing a deal to acquire loxo oncology for $8 billion in cash and $235 a share. you can see it closed at just

under $140 its pipelines in oncology will help broaden the scope of lily's oncology portfolio and the press release says that there's a couple of things that are imminent potentially in terms of being approved one is -- i don't know what this is i could look it up, but it's an oral ret inhibitor being studied across multiple tumor types. it's been granted breakthrough therapy designation by the fda could launch as soon as next year there's something called vitrakvi an oral -- i'm not sure, trk inhibitor developed in collaboration with buyer that's a big deal. the acquisition would be the latest in series where lily is attempting to broaden its cancer treatment efforts to be first in class and best in class in certain therapies.

>> this makes you wonder if the bristol-myers deal is going to speed up the acquisition process. anybody who thinks about a deal feels like they need to get out and ramp things up jim cramer is sitting down with the ceos of bristol-myers and celgen >> he was watching then, huh he wasn't in chicago >> no. investors had this weekend to digest friday's big market moves. now, to discuss what could be ahead, drew mattis, chief market strategist at metlife investment management, brian bell ski, chief market strategist at bmo capital markets. before we get to actual equity predictions and how we're feeling now, brian, let me just talk about this jobs report and how much more in terms of the participation rate is possible because that's key in holding

down inflationary expectations you can't -- i don't know anyone who would have predicted -- look at what mark zandy said two years ago, we're not going to basically add jobs anymore because we're at full employment somehow 312,000 people were somewhere, some came out of the participation rate how much higher could we go on the participation rate >> it shouldn't be too much? >> how many are 25 to 54 >> they're growing, but they're really offsetting the baby boomers who are moving out and kind of ageing into retirement. >> we stay here for the participation? >> you could see another tenth or two one of the other areas that's still weak is the core prime working age males are still kind of -- there are more of them still sitting on the couch than there used to be they're not really actually trending up at this point. the move we saw was in other demographics so if we see a sustained

improvement in the u.s. economy, we get 3% next year or this year for growth, maybe we see a pickup in productivity, things all line up properly, that number should come a little bit. >> if we had a big wage gain, biggest in years, not big enough, but year overyear was 3.2%, right? so if we got no more workers, which is what you're saying and wage gains are starting, then inflation is something the fed needs to keep an eye on then >> the main reason the fed has been moving the way it has is because they're looking at that unemployment rate and while everyone looks to greenspan's time in the 1990s and say he made a great call on productivity then, i think what this fed is looking at is the 1960s. at that time everyone thought inflation was dead, unemployment dropped lower and we sat around debating how low it could go and ended up with inflationary environment. this fed doesn't want to fall into that same trap, particularly given the size of the balance sheet and low interest rates. >> but with oil is looking

better today in terms of the bulls, i guess but you look at a lot of things it looked like in terms of risk the fed needed to take into account, inflation still didn't seem to be the primary risk. since they have no idea what neutral is, in my view, they don't know any better than anyone else the auto pilot for this year, you know, with copper down and oil down and the german bonds 17 basis points and the pan going negative again, it just didn't seem like -- it just -- you look like an enemy of prosperity when you're on auto pilot and don't see any inflation. their other mandate is full employment why not let it ride? >> they don't know where the neutral point is. >> they don't. why don't they think they do >> they don't. this regime does not believe they know where the neutral rate is think think they have an idea of it my best guess is to where their idea is based on the dots is it's higher than we are right now. >> i get that impression i'm not sure it's the right

answer. >> well, what that does is allows them to go very, very slowly that's what they've been trying to articulate and the market has been ignoring them trying to give that sense of uncertainty that they have that's not a bad thing that the fed is uncertain, particularly if they're responding to that uncertainty. >> what was your target for 2018 s&p? >> 2950. >> now you're 3,000 for 2019 for the s&p? >> correct. >> from here that's a pretty good move. >> it is i must say that 2018 was incredibly humbling for the bulls. i like to give a gulf clap to the bears out there, you've been right six years of the last 30. >> i love them they pick on you and it's harder to be a bull than a bear. but they're right once every 30 years and still take victory laps. >> i would say the whole term perma bull -- >> they're not right >> i guess the thing that we

take serious is most of the bears think they're smarter than everybody, number one. number two, they probably never sat across the table from a client that they managed money for. when you manage -- >> i don't think they have any clients. >> when you manage money for people and lose money, it's incredibly humbling. act justly, walk humbly. you need to walk humbly. the true test of a person is how they handle adversity, not success. the bears are right last year. guess what they're doing, they're pulling their muscles patting themselves in the back in the meantime, people are losing money i think that's wrong the true fundamental construct with the united states stock market with respect to earnings, cash flow and balance sheet still remains very strong. yeah, i feel very comfortable. i have conviction in our 3,000 target for the s&p 500 we had to revise down from 3150 just because of what the market did in december, but we remain bullish on america we remain bullish on profits we think we've seen irrational superrans to the upside and now irrational stupidity on the

downside it's a great question. here is what i would say valuations are probably the worst metric in terms of future performance of stocks and the market. >> say that again. >> valuation is one of the least predictive segment, right? >> that's fair. >> but what i would say this is that the multiple came down before the correction. right? because earnings went up more than price in 2018 many people lose face of that because of the majority of the upside, andrew, as you know for the ten years the multiple expanded. >> correct >> i think earnings will be positive. >> i'm more interested in earnings we were at 8% in terms of earning growth the whisper number is zero or negative is it zero or negative >> no. the average earning growth is 6%, right? i think we'll be somewhere in that 4 to 6%. >> we'll be positive. >> we'll be positive remember, too, that this is a marketing on stocks not a stock market. >> comes on top of a big gain in recent years in earnings.

>> you have the big inflation, inflated numbers we need to come back down to reality. at the same time, too, we're not talking about cap x or on shoring or any of these types of things we talked about a year ago. we haven't really seen investment back in american companies yet. that could ultimately happen once calmer heads prevail with respect to china and this whole notion of global growth. >> so zero rate increases 2, 3, 4? >> we have cuts. >> the fed says they'll go 2 no reason to fade them. >> they don't know now what does the fed fund say >> i'm not going to worry about the fed funds market the same pessimism affecting equities is affecting income it doesn't hold water in terms of growth numbers. productivity seems like its inching higher that's happening, natural interest rates are going higher as well. that's not a bad thing that's a positive thing you have equities behaving well, yields

increasing an feds moving rates higher that's something to welcome not to be afraid of. >> you think the lows are in >> i think they are. i think we're heading back into this mid '90s, environment where it's about stocks, joe, and not about buying etfs and buying the market the stock market is a market of stocks i think we have the best company in the world right here in the united states. they've been on sale thanks to what we saw in december. >> is this new >> i'm trying --got to try to mix it up a little bit. >> i guess it's not so people don't recognize you from your wrong calls last year. >> maybe that's a little bit of that i'm trying to look smarter i need all the help i can get. >> those glasses are cool. >> thank you i appreciate that? >> really? >> i do. >> anything coming from you is good. >> i want to know how -- i never how those things work, though. i don't know whether we hit you on the perfect day or you have something that gets it exactly that length. how does it -- >> it's always the perfect day when you're on "squawk box"" always a perfect day when you're on "squawk box""

>> andrew has -- >> i got close as of almost yesterday if i stuck with it until i shaved yesterday. >> what happened >> no. looks good on him, doesn't look as good on me unfortunately. >> now, coming back, did you just walk across the border or did you have a passport to get back how did you get -- >> you know what, i went through the airport where actually -- >> there was no one there. >> where most of the people who actually get caught. not at the walmart fence. >> state department. >> state department. >> all he will do bingo. >> and fox, too, yesterday. >> so you did show your passport, or do they even check anymore? >> you know what, joe, there's a reasonable and fair conversation to be had about immigration and legal immigration and illegal immigration, this is not it. >> okay. we'll have jill on and talk about it all at once.

when we come back, carlos ghosn is set to make a public appearance in court. we have the details on that next right now, though, as we head to a break a quick check of what's been happening in the european markets this morning. red arrows looks like declines of more than half a percent for london, france, germany roacss the board. we'll be right back. ♪ it's the first day of school. yeah, he's so nervous. tom is letting him know it will be alright. i know, it's a big day. i'm so proud of him. gotta go. ♪ good luck on your first day. just as we help companies advance in the digital era, cognizant is helping people do the same, by investing in skills training in communities nationwide. ♪

carlos ghosn expected to make his first public appearance in seven weeks tomorrow. the ousted nissan chairman has requested an open hearing in a tokyo court. to hear the reason for his continued detention. three of ghosn's attorneys will hold a news conference after the hearing. they haven't spoken publicly since mr. ghosn's arrest on financial misconduct charges back in november >> this is a situation where he's going to be addressing the charges apparently one by one. >> we'll hear what he has to say. >> there's a story in reuters yesterday saying that they want him to sign a confession but the

confession is all in japanese and he doesn't speak japanese. >> he doesn't know what he would be confessing to. >> right. >> a wild story. coming up, the hunt for yield. barren is out with its annual look at the best income investments for the new year we'll bring you those top picks next. it is a big monday right here at cnbc, we're taking the wraps off a new midday lineup. right after "haf time" the debut with kelly evans the strorryes moving the market and economy and more 2:00 p.m., kelly will join for "power lunch." 2:00 p.m. hour has been the most volatile hour the last few months tune ibennn giing at 1:00 p.m. today on cnbc. we're back in a moment at&t provides edge-to-edge intelligence, covering virtually every part of your finance business.

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welcome back to "squawk box. on the cover of barron's this morning, the look at where to find the best yield plays for the new year joining us now is the associate publisher of dow jones wealth and asset management's division within the barron's group. why don't we go through the list, but can we have a philosophical conversation on whether this is the move in this environment, whether this is even where you want to be to begin with >> a lot of people really want to be here whether or not it is the best move. i mean, this thirst for income has been going on for ten years. finally the market has given us a few decent options i also think at scary times, people do go for these sort of income plays you've seen that move in utilities, we're thinking that's overplayed right now so where else can we look >> so let's talk about some of those. who's at the top of your list? >> i have to do a mea culpa. i sat here a year ago saying

mlps looked great. they look a lot better now so the one that we name is ept, enterprise partners. that's within the class of the operation. then we give a couple of funds they do have leverage. you know, there's a little bit of danger there. i think the key is and barron's has been really tough on the mlps broke the story about lin. he was tough on kinder morgan. but now they've become a lot more disciplined they can actually afford those payouts. they're showing organic growth instead of just borrowing to grow and so we think this might be a good time to get in. that's not to say they couldn't dip farther. >> i want to ask about a classic traditional payer. at&t in the telecom space. they have a huge amount of debt at this point in the ball game "a," do you think they're going to be able to pay it off what do you think happens here >> i would be lying to you if i said i'm in complete agreement

know a lot more about the market than i do. they're positive on at&t that debt scares me. if interest rates tick up and things roll over at higher rates, if reed hastings, i don't know, john malone, and bob iger teamed up to run that conglomerate of assets, i might feel more comfortable. but every single thing at&t owns -- >> is that a commentary on randall? >> i don't think anybody -- how could anybody take all of those elements in all those industries that are so disrupted right now plus pay off $180 billion in debt i mean, the pro argument is they've got enormous cash flow >> huge cash flow. >> all of us are helping them pay off that debt. whenever the market gives you 6.9% yield in this interest rate environment, you have to be worried. i would rather play a safer play than verizon or own a basket of

them if i was going to go into telecom, i would go into it with a basket >> 6.3% today. i think it was up on friday. there were some upgrades, too, i think. >> craig moffett who's been a long time bear i don't like to argue with them, the $180 billion -- >> i should never come on and say i was wrong a year ago on something. you are not a self-serve guy that's unbelievable. >> that's a hallmark at barron's every year we publish what we got right and what we got wrong. >> but i didn't remember >> real quick, utilities >> i think so many people have flooded into utilities because they're scared wait until the market gets happy and we have six more 800-point up days. utilities will be cheaper. >> all right we're going to leave it there. jack otter appreciate it. there's things you can put on air pods? >> yes you got that tweet

>> yeah. that's if you have bigger ears what if -- >> if you have baby ears, if you have tiny ears -- >> i'm not sure i do i'm not sure what the problem is >> your ears are probably too big if they fall out >> i can't get it in far enough. >> then maybe you have tiny ears some people -- i'm going to call you tiny ears. >> i don't know what's worse tiny ears or big ears. >> i'm ahead of the game >> you better hold up -- >> okay. coming up, much more about the trade negotiations with china and the possibility of a deal. as we head to break, here's a look at the u.s. equity futures. kind of flat big day on friday. "squawk box" will be right back. hey... saved you a seat.

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the fed's message to the markets. another big week with the central bank in focus. a look at what could move markets and where you should be putting money to work is straight ahead high-level trade talks in beijing. could there be a breakthrough and a possible trade deal? we'll get you up to speed on what it may mean for u.s. companies. plus tesla breaks ground outside of the united states in an effort to make more cars in china. those stories and more headlines as the second hour of "squawk box" begins right now. ♪ live from the beating heart

of business, new york, this is "squawk box. >> good morning, everybody welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. things are a little bit weaker remember, it was big-day gains on friday after what we heard from the fed and that stronger than expected jobs report. dow futures indicated down about 15 points. s&p futures off about 4.5 points and the nasdaq off by 20 here's what's making headlines this hour. officials from beijing and washington, they are meeting in china today in an attempt to hash out the ongoing trade dispute. china's foreign ministry says both sides have expressed a willingness to work together talks are to conclude tomorrow we'll also hear from wilbur ross at the top of the 8:00 a.m.

hour also elon musk breaking ground today on tesla's first factory outside of the united states it is located on the outskirts of shanghai. company expects to produce vehicles in china and it will reduce costs musk tweeted affordable cars must be made on same continent as customers and apollo global in talks to buy general electric's aircraft leasing unit. that's according to people familiar with the matter as a result of that but still at $8.53. most people started a lot high er. a few stocks on the move upgrading salesforce and adobe from hold to buy that's one of our friends

analyst brian weiser i did not call for this but i approve. salesforce new price target is $164 up from $140. goes to $262 mr. weiser thinks these names would hold up best in a market downturn activist investor in dollar tree and asking the company to sell its family dollar business i don't know such a good fit. that's according to a letter from the ceo starboard pushing for changes to its pricing model. i was just -- yeah you were out i mean, hedge funds and activists just sucked last year, sorkin they were, like, both of us -- either one of us just in our

sleep could have done better than these guys that are billionaires, half of them you see david einhorn? don't you think we could put our heads together and lose 33%? i'm almost sure that the two of us -- >> you're going to put your heads together and lose 33% of whatever you could raise >> i guarantee we could do that. >> we might be able to do down 50%. >> we might be able to do down 20% though down 15% >> hard to be a value player >> that's not the only one and you pointed out we were singing dalia praises. >> this goes back o the index buffett argument which is throw your money in the s&p and look away >> i don't mean to take any satisfaction about all these guys losing -- >> you don't >> no. i try not to isn't it when you see these

guys they're around town here and they're masters of the universe and they're naked emperors, half of them. i guess past results are no prediction of future performance. >> right >> you're also seeing 2 and 20 is coming down you can't charge that for -- you hear the deal. joining us now to talk about the market conditions is stephanie lang with homrich berg also charles campbell from mkm let's talk first of all what we heard from powell on friday. charles, you were kind of surprised to hear his take he really was speaking the market speak when he was out there. >> good morning. he was speaking the market speak. it was his second pivot in about three months in early october he made the comment about we have a long way

to get to neutral. he walked it back when he pivoted in mid-november. he then made the comment in december at the fomc conference about autopilot. then he reversed that second pivot this past friday. >> what does that tell you though >> it tells me that he is learning and increasingly sensitive to market participants' expectations of arguably one of the most powerful people in the country and that he is learning on the job even though he's now basically a year into it he a learning as he goes the question, will there be another misstep? he speaks this coming thursday the fomc is going to be meeting eighttimes there's a press conference every meeting in 2019. unlike, you know, prior years. so there's opportunity as well as risk for him to reinforce that he has learned or that he still has to learn

markets will be less forgiving and increasingly critical if he missteps again >> stephanie, i didn't get the impression that he particularly cares about what investors are worried about. didn't want to go back to some of the temper tantrum days, but he probably, it sounds to me, is concerned about a self-fulfilling prophecy if markets react badly that can bring in turn economic downfall as well. what's your take on that >> i agree with that basically what's going on is powell is definitely listening to the markets we like that we think it could become a self-fulfilling prophecy if financial conditions tighten and ultimately we think what's going on is the fed's listening to the market. the tale is actually wagging the dog. and ultimately we think this will be more like the 2016 period where there was four rate hikes at the beginning of the

year and ultimately the fed only raised once. we think the fed gave the market exactly what it wanted in terms of its language last week. and it's listening to the markets in ternlsms of the financial conditions we think the fed is going to go on hold at this point. if we see the market stabilize, if we see credit spreads come in and the market stay strong and inflation stays in check, we'll see it on hold for awhile. and if he reverses course, we think it's a good thing because then the economy and the markets are in good shape. >> if we take the fed out of the equation and don't worry about what they're going to do because we don't anticipate anything happening at least for the next few months, you do have earnings front and center what we heard from apple concerned a lot of people about the takedown in their numbers, what they're seeing in china you say that it's not apple that is the canary in the coal mine, but it may be energy you want to explain that, stephanie? >> i do.

if you look at what's happened with energy prices since its peak in 2018, energy has declined 35%, but you're still seeing earnings growth within the sector right now analysts are projecting 5% earnings growth. and if you look back at the 2014 to '16 time period, energy went down in that period. then another 70% in 2016 so we think it's a little aggressive right now that 5% growth number. we saw it come down quite a bit. even last week i was looking at it it came down from 7% to 5% ultimately we don't know what energy price wills do. but if they stay in this range, we think that we're going to need analysts to come off of expectations in the 2014 to '16 period that caused an earnings recession. that's our concern for next year

>> charles, how about you? what are you anticipating from earnings season? >> earnings in 2018 are probably around the 163 level for 2019 you might expect a 175 level. modest single digit gains. if you put a multiple on it you could get to 2975. that would suggest moving up, you know, high teen percentages. if you look at what's happened in the fourth quarter, the s&p was down about 17% classifying as one of the worst quarterly performances in about 15 years -- in about 15 years back to 1926 so there are about 360 quarters in there if you take out the fourth quarter of 1929, second quarter of 1930, two worst quarters during the depression, the average return for the s&p one year out after going down one of these big amounts of 15%, 30% was about 25%. three years out, it's up 50% five years out, it's up almost 100%. >> that completely confuses me

you think this selloff has been overdone is what you're saying >> the selloff is basically overdone until you have proof you're going in a recession. even then it's declined from the highs. >> you're talking about an economic recession, not an earnings recession >> that's right. >> so if we are dealing with an earnings recession, what happens in that scenario >> then you have some compression and the market comes back in again. probably tests the lows we saw of the fourth quarter. >> so even with powell and the fed on hold, you're not convinced necessarily that this is the time to jump back in. or you're saying that you think the more likely scenario -- >> there were three critical head winds one was powell the second was the u.s./china trade situation. we'll get more information on that hopefully tuesday morning the third situation is the global slowdown from ems, china. to europe to the united states dovish implication around the world, pvoc cut by a hundred on friday

bias towards easing for the ecb. the boe has its own set of situations pivot by powell and the u.s. fed. >> we've seen one of the head winds out of the way we'll get more on the way. you think the selloff we've seen overall has been a bit too much. do you think the rebound we saw on friday was warranted? >> the rebound was a bit of covering you had a hundred s&p move from trough to peak pretty unusual even in the times we're in now you don't see that very often. so part of that was built in in the powell market anticipating before he even spoke he was going to be dovish in fact, he did come across that way. then you had the better than expected non-farm payrolls >> strong economic numbers too charles, thank you charles campbell from mkm partners also stephanie lang. we appreciate your time.

when we come back, high-level talks are under way in beijing we'll discuss it and then later, wilbur ross is going to be our special guest. that big interview at the top of the 8:00 a.m. hour stay tuned you're watching "squawk" right here on cnbc

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welcome back to "squawk box. we've been watching the futures this morning and they're a little bit lower but not by much dow futures down by six points s&p futures off three points and the nasdaq down by 20. another acquisition by big pharma in biotech here or at least in small pharma, smaller pharma it's really semantics what you call these companies i don't know whether celgene is that eli lilly buying loxo for $8 billion in cash. i started reading a little bit about ret inhibitors let's just leave it at that. has to do with gliel cells >> it could act differently for

cancers. >> and the other one too makes me realize how the field is moving fast but it's very complicated, complex versus 20, 30 years ago up next, trade talks are underway in beijing. both the u.s. and china saying that they want to hammer out a deal we're going to speak to china beigebook ceo leland miller after the break. and then later, jay powell giving the markets the message that it wanted to hear on friday we're going to ask former fed president richard fisher about the fed's path and the state of the economy. "squawk box" coming right back hey... saved you a seat.

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welcome back, everybody. u.s. negotiators are in beijing for a two-day meeting as they try to work out a trade deal ylan mui has more on that story. good morning >> this is the first time the two sides are meeting face-to-face since president xi and president trump sat down together saying beijing has good faith in these negotiations and the president sounded hopeful yesterday about the prospect of a deal

>> my relationship with president xi is as good as any relationship that a president here has had with a president or leader in china. and i think good things are going to happen. >> now, it is significant that the first visit is happening on china's turf and who is going can tell us about the scope of these talks. these are all third tier but still high-level officials jeffr jeffr jeffrey jeffrey gerrish, david malpass, and garrett kaplan both points of contention and areas of opportunity for both sides. if this meeting goes well, they could follow up with another meeting possibly here in washington or maybe in davos guys, the administration has not

confirmed the meeting just yet but since you'll be there, you can let me know if and when it happens. >> we will do that thank you. we're going to continue this conversation for the latest on the u.s./china trade talks i want to welcome leland miller, beigebooks ceo he's been crunching numbers trying to figure out what's going to happen here i think your date is march 1st >> well, the 90 days will run out by march 1st you'll start hearing the outlines of the deal as we approach march 1st but the 90 days will not run out and you'll see tariffs right now unless something big intervenes, you're going to have a deal on march 1st. >> you will. what will that deal entail what does that look like to you? >> frighteningly little. they're going to get the number up sufficiently. and soybeans and all that stuff flowing again. the other thing is ip. so there's -- when you're getting a readout from what the discussions are, it sounds like they're covering nine different

topics no, no they're focusing on one thing. that's ip theft. if they can get a framework from the chinese that's sufficient for them to defend china with ip >> if you're mary barra, what do you think is going to happen to the auto sector in all of this >> well, you had tariffs at 15% before you had the trade war you'll probably go back to 15% i don't think they're going to do much more there is some wiggle room there, but there's also mnf rules which means they'd have to bring the date down for everybody. so i wouldn't be looking for much different than 15%. they could do more, but it would be a big haul for china to move it anywhere. >> how much pressure do you think their economy is under right now? i know last week you were talking about this in the context of what happened in terms of apple's earnings. >> it's under a lot more pressure than what public data is showing now there's an idea that china's feeling a little bit of a push from credit and a little bit of

a pressure from trade war. the economy right now is under high pressure. manufacturing was weakening with manufacturing weakening more now it has brought down the entire economy with it and every sector in our data was slowing in the fourth quarter. >> but are you chocking that up to the trade war or something different? when you talk about manufacturing, that relates to the rest of the world and the nus a meaningful way >> there's no doubt there's been an effect. all the front loading had been done with and you start to see it really fall off you would have had a slowdown this year no matter what in china. but the trade war combined with the fact the economy is slowly combining and the fact people are borrowing, but not spinding. they're paying off cash flow problems so it's not good right now basically every indicator is suggesting that they're under a

lot of stress and these things feed on each other >> we've seen in the past they have these levers they can pull to kind of juice the economy once again do you expect to see that? and "b," do you think they will work >> two aspects the monetary stimulus everybody is waiting for is already there. we've seen lending actually go up you know, firms reporting more borrowing. bankers reporting more lending we're seeing more monetary stimulus at the same time they're cracking down on the shadow banking system is it a net increase even with the cuts >> it was a cut in shadow and up in banks now we're seeing the cutbacks and the shadow are gone. and they're ramping up and going the other way. so you are seeing not only is deleverage reversed. you're seeing a clandestined -- >> do they strap themselves in and say we're not going to lose face or do they somehow main tas

space by making a deal how should we feel when we hear about china and the economy slowing? should we say it's working or say, uh-oh, that's going to be bad in the long-term as well >> we shouldn't be hoping that china slows dramatically that'll have implications for everyone i think the chinese are looking at a trade deal. if they could get a few tweaks to their ip enforcement, this is a wonderful thing for china. it allows them to focus on securing their economy 2020 is going to be much worse on the trade side. >> for us it would be small benefits or can we actually glean something that is a game changer for us >> we're not going to get a game changer. this is all about enforcement. if u.s./china relations decline other the next year, they get worse, then the chinese will stop enforcing the new mechanism. you'll see things get better so long as the u.s./china relationship gets better this is not going to be a long-term trend. this is sort of a 2019 thing

opposed to a longer term the ip is not going to be solved they're going to try to move on. >> okay. thank you. good to see you. leland miller of the international beigebook. coming up, this morning's top stories. and is a global earnings recession -- earnings recession -- that's a little different than an economic recession. is that on the horizon robert buckland will be our guest. take a look at the equity futures. we'll be right back. my experience with usaa

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♪ welcome back to "squawk box. "squawk box" this morning. fresh round of trade talks kicking off today. a working team led by u.s. deputy trade representative jeffrey gerrish is meeting to have prostive, constructive

discussions. we will hear from commerce secretary wilbur ross in about 30 minutes right here on "squawk box. we'll be able to ask him about the state of those talks and so much more. also, big week for the fed we'll get fomc minutes then jay powell will be giving a speech happening in the last hour, eli lilly buying loxo for $8 billion. the second major deal in the industry following last week's big deal all right. coming up, dom chu has your morning market movers. plus citigroup's robert buckland will be our guest. plus then at 8:00, wilbur ross will be our guest to discuss the government shutdown, trade, and much more. "squawk box" will be right back. for your heart...

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time now for a look at what's moving in the premarket dom chu joins us now with more what is moving, dom? >> a whole heck of a lot, joe, of biotechnology, biopharma, large cap pharmaceutical companies. we have the spdr etf as well spdr health care etf, by the way, one of the larger ones out there. all of this is on the heels of that big deal by, of course, loxo oncology and eli lilly buying them for $8 billion in cash $235 per share that's why you're seeing the shares moving the way they are right now. if you take a look at the relative performance of biotech versus the s&p 500, over the course of the past year there may be a reason why some people are feeling at least a little

bit better or at least a little bit more curious about what's happening with the pipeline. because if you look at that particular etf, the biotechnology stocks are trading at a bit of a discount to the overall s&p 500. treats all these companies on a more equal weighted basis. like the nasdaq, biotech ticker. but all of this will be made a little bit clearer in the 10:00 a.m. hour today when we've got a big interview. the ceo talking to david ricks about what it was. we know bristol-myers, pipelines, all of those big themes from these companies amidst the conference out in san francisco, california, happening right as we speak. back to you guys >> thank you very much our next guest is predicting a big rally for global equities in 2019. robert buckland is the chief

global equity strategist thanks for being here today. >> thanks for having me. >> you think that the street has this wrong the street is looking too bearishly at things. what is it that makes you think we are going to see markets up by about 14% this year >> i'm not that bullish. i just think the market is too bearish if that's the best way of putting it. we think global analysts are expecting earnings growth of 7% this year. that isn't going to happen we think 4% is going to happen but we think the market's now pricing in minus four, minus five we think the market is too bearish on earnings. >> you have a bear market checklist that has gone to about three and a half what are the red flags that are still remaining? and how do you kind of put all of that in to figure out whether it's a big problem or not? >> i think the most worrying things for me are the signals we're getting from the fixed

income market. so you guy wills have heard concerns about flattening of the yield curve which happens towards the end of a cycle and before a bear market i'm also worried about rising credit spreads so those are the two main red flags that i'm concerned about but elsewhere it's hard tore see signs of success you get at the top of the bull market. >> can you break it down for us and tell us what you think about the united states and some of the emerging markets >> our preference at the moment within our kind of up 14% target for global equities, our preference for the moment is in the u.s. which is a bit of a momentum call. it's one of the stronger markets of this whole cycle. i know it's not been strong recently, but we turned more positive recently on emerging markets which has been a seriously unloved asset. we think those are the two that could provide leadership in this rally we're forecasting for this year >> how much of that is because

of what central banks are doing and what we even heard from jay powell here in the united states on friday? >> that definitely helps the market's kind of throwing a bit of a tantrum they don't want to see rate hikes and they're trying to find a level, perhaps, that they need to fall to to potentially stop them happening i think effectively central bank policy has been tightening, but i really think this selloff has been more about the markets starting to price in weaker earnings there's a lot of talk about it being about the extraction of cheap money. i think it's really about the market trying to think about pricing in a contraction in earnings we don't think that's going to happen that's why we're bullish >> we don't think there's an earnings recession what would happen if earnings came in weaker than what you're expecting with that growth >> yeah. i mean, i'm telling you that i think the market is pricing in minus four, minus five you know, if we were to get

minus four, minus five, it would go nowhere they'll downgrade it even further. i just generally think that over the year when the market sees the number's got a plus in front of it on earnings, that will be enough to stabilize prices and make the markets think there isn't a recession just around the corner >> robert, what makes you think that the market is pricing in down 4%, a decline of 4% on earnings right now because as you mentioned, the average that analysts are looking for right now is north of 7% gains. >> yeah. i don't think the markets believe the analysts right they can see analysts are downgrading that only back in august/september. so i think the market's a straight line in further downgrades that's the right thing to do i think they've straight lined it too far they are now discounting minus four, minus five on earnings they're right to be cynical. but we think they're being too cynical right now.

>> your biggest recommendation to this point had been i.t what are you replacing that with right now? >> there's been some changes in the way sectors work effectively we've downgraded the i.t. sector and upgraded what is called communication services. nowadays what that has is a whole bunch of internet stocks so we've turned a more positive on that part of the technology universe partly because it's a bit more defensive and should downgrade less than the more cyclical hardware i.t. stocks where we're now neutral. >> all right robert, want to thank you for your time today. robert buckland from citi investment research. coming up, the fed's message to the markets where we're expecting more central bank fed speak later this week including fed chair jay powell we're going to talk to former fed head richard fisher an the president for the club for

growth, david mcintosh after the break. and it's a big monday here on cnbc we are taking the wraps off of our new midday lineup at 1:00 p.m. after "half-time" it's the debut of "the exchange" with kelly evans. then at 2:00 p.m., kelly will join tyler mathisen and melissa lee for "power lunch." 2:00 p.m. hour has been the most volatile hour of the trading day in the last few months, so tune in it all begins at 1:00 p.m. today on cnbc. "squawk box" will be right back. ♪ [ dog snoring ]

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i think the markets are pricing in downside risks is what i think they're doing i think they're well ahead of the data particularly if you look at this morning's labor market data and the other data i cited markets are expressing concerns, again, about global growth in particular i think that's becoming the main focus and trade negotiations which are related to that. i'll just say that we're listening carefully to that. we're listening sensitively to the message that markets are sending. and we're going to be taking those downside risks into account as we make policy going forward. >> jay powell giving the markets the message that it wanted to

hear at least that's what the market has interpreted no rush to raise rates joining us on the phone, former dallas fed president richard fisher he's a senior adviser at barclays and a cnbc contributor how do we know it's really you, richard? oh, i recognize that laugh >> okay. it's me, joe i promise. >> okay. what piece of golf equipment did you finally buy because you needed some type of change and this i'll know it's you. >> just so the viewers know, joe and i played amateurs in the pro am at pebble beach and he's been razzing me ever since. >> you got a new putter because that old one was broken. anyway -- >> but joe, i'm not broken >> no, you're not. and we need some good analysis here but we're joined also by david mcintosh, president of the club for growth

anywhere you go -- does anyone argue with you, david, they don't want growth? i don't know i would like to be a head of the club for growth too. let's start with this headline in the journal fed officials after guiding the u.s. economy through the financial crisis in the rebound from it now face a new test this year managing a soft economic landing. are we -- with rates this low, is that really where we are right now? do we have a risk of going -- of overshooting and having a hard landing? >> well, we'll get a view on the global standpoint. but everybody is looking for something negative here. i think it indicates people sitting on a hedge the fed propelled these markets starting in 2009 and when you look at it, joe, now there's this enormous angst. all they've done is reduce the

balance sheet by 11% it's not a huge number although that's the focus right now. and interest rates are only trading at the low 2s to mid-2s. and the 10-year is down to the 2.60% level. this is still a pretty accommodative monetary policy. now, when jay powell says flexible, he's saying nothing new. he's been saying this all the way along. so of course they're going to look at the data the data is stronger than what the markets seem to be anticipating the market's looking around the corner here's what i worry about. let's assume that we start to turn down and go into a recession which i don't see immediately. do they have to work with? there's not much to cut. and there's not a whole lot of room to expand the balance sheet. so i would be worried that they don't have enough ammunition and they need to have the ammunition in order to mitigate

a downturn and the downturn right now is not visible. there's some indicators and cracks in the fabric, but we don't see a wholesale indication that the economy is sliding backwards. but i'd like to hear david's views on this. >> maybe we went to the well too many times last time and we're not in a position where we can get back to where we have a lot of dry popowder, richard >> we don't have dry powder right now, joe >> i know. that's what i mean. >> that's what i worry about neither does the central bank in europe the japanese have very little. >> you don't want to, you know, cause the next recession by building up enough dry powder to counter it, right? >> that's the judgment and that's what we pay the federal reserve for. >> david, why is rates so fragile and low that the slightest move higher sends shock waves through some of the financial system is it that fragile >> well, i think fundamentally

the economy is very strong and as richard pointed out the numbers look very good people are nervous about when will that change i think there are a couple of areas that they've got significant uncertainty, if you will and people are wondering is that going to bring about that change one is the global markets. i think down pressure there is a result of the trump tariffs and trade pressure you can say in some ways that's a direct result of our attack on china. when people are not doing as well they buy fewer apple phones there and apple didn't correctly project that but that's just one data point the other area is the political economy here in washington where democrats have come in i would have predicted this, but everybody hopes that people will get along, they'll be partisan shich. but they're signaling from the

start it's partisanship, we're going to attack the president and his agenda there are some elements of his agenda that are pro-growth the deregulatory emphasis, the tax cut bill if those things don't continue, that puts further pressure downward on the economy. i think it's that uncertainty that's leading to the selloff. we'll see when people get comfortable enough or decide -- >> if that's the case, we'll be living through this uncertainty at least the next two years. >> i think those areas, that's right. although i do think the president has a lot of pressure and his psychology would let him go there at least trying to get a partial agreement with china in the next couple of months that could remove some uncertainty. >> a real agreement or a face saving agreement >> i think it will be in between. it won't be everything, but there will be real concessions there in order to ink the agreement. >> so richard, do you -- for

years you worried about staying too loose for too long i think many times you said we've given -- we've primed the pump now the underlying economy needs to take the -- you know, all the priming that we've given it and run with it. so you want it to go higher. isn't it possible that they stayed low for so long that now we don't know what neutral is. we're already at neutral are you sure we're not at neutral right now? and if you're not worried about inflation, you said 2.6% on the 10-year. you've seen everything else. if they got a dual mandate of prosperity on one hand and dollar stability on the other hand, if you're not worried about inflation, why not let it run? let it go. don't be afraid of prosperity. i bet david would agree with that you want dry powder? what you want to go to 6% after we go down to 3% >> i'm not saying 6% that's the tension

you have been a great underwriter of this since 2008, 2009 and you have to look at that versus what are you going to do when things begin to weaken? what tools do you have left? that's the tension i think all of this, joe, bottom line what david mentioned and we're talking about a monetary policy is you can expect a great deal of volatility we ran it out of volatility. it went to zero in 2017. we saw it come back with a vengeance in 2018. and i expect we're going to have a voltive 2019 doesn't mean the markets can't go up, can't go down it'll do both. but i think it's going to be a great time for traders and confusing for fundamental investors. >> can you speak to this as someone who sits on a number of boards including at&t we talk about the debt level at&t has

the conversations that's happening, you don't have to speak specifically though i'd love you to, to the conversations at at&t but broadly inside boardrooms. >> it depends on how well prepared they are. i won't mention at&t except to say what they've done is they've moved the debt tower so that they're taking advantage of these longer term rates. i see that happening elsewhere good corporate cfos have anticipated an interest rate rise they positioned themselves accordingly. particularly large corporations on the board of pepsico, at&t, et cetera. i think they're prepared for this that's the exercise that's been going on for quite some time and the good cfos, i think, have been prepared for an increase. and if you have the 10-year

which it comes down from 320 which was the peak down to 2.64% where it is now. you take advantage of that because you realize that over time you're likely to have higher interest rates. in any case, if we go into a weaker economy, you want to be prepared and have your balance sheet in good shape. i think that's what's taking place here whether it's the companies i'm on the boards of or other companies run by good cfos >> david, the club for growth. how's your relationship with president trump right now? is it a love/hate sfl you like everything? you hate everything? i guess you like the unemployment rate, probably. but you don't like the china stuff or the tariffs >> we go policy by policy. we like the unemployment rate. we like what he's doing in regulatory reform. we think trade, if you want to get to a better deal, let's do it then remove the tariffs afterwards because those are hurting us and the economy. i will say one thing about the

federal reserve. by returning to a more normal price for money in the long run, i think that also is pro-growth. there's some pain that is involved in getting there in the markets, but i think for a healthy stability economy having a real price for money and a real interest rate is a good policy the fed's pursuing. >> it is but you look at the competing interests around the globe we've seen so much, so out of whack in terms of -- that's something we didn't talk about japan or germany i guess italy's got higher rates than us, but that's about it that makes no sense. >> that's a great comparative analysis, joe. just where you want to be. one comment here the most important cost factor in any economy is the cost of money. >> okay. >> and what we did at the fed is -- >> all right

all right. you party pooper all right. thank you, richard and good luck with that -- >> i like david's smile on camera, by the way looks great. >> and your smile looks great. i hope the long putter or claw or whatever you're trying to do -- you needed to do something. but good luck. >> m cog up, the big interview of the morning wilbur ross, our special guest we're going to talk trade, the government shutdown, and so much more with him right after the break. you don't want to miss it. take a quick look at the futures. "squawk" returns in a moment with the dow looking it would open up 38 points. who says our bank isn't tech enough?

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. trade talks underway u.s. officials in beijing trying to find a way out of the u.s./china impasse that's keeping markets on edge around the world. wilbur ross joins us for the latest on the china trade talks and the government shutdown. and an alternative take on doing business in china. eric prince, the founder of blackwater is here to talk about his latest mining venture as the final hour of "squawk box" begins right now live from the most powerful city in the world, new york, this is "squawk box.

k. good morning and welcome back to "squawk box" on cnbc i'm joe kernen along with becky quick and andrew ross sorkin the futures have added to their gains. green almost across the board. nasdaq is still down a point right now. less than half a point but the dow jones is up almost 40 and the s&p has now turned positive and is up a point and a half a look at treasury yields. figure this continues, maybe we're headed back over 2.70%, you would think. wouldn't you we could muster that >> right now we're just breathing a sigh of relief we're back above 2.6%. >> we're not below 2%. >> right we are watching three stories this morning eli lilly buying loxo oncology for $8 billion that deal breaking in the last

hour it's the second major deal in the health care industry following last week's big deal between bristol-myers squibb and celge celgene. we'll be getting fomc minutes on wednesday. and then thursday jay powell will be giving his speech. the markets will be listening for any hints on the agenda. any pushback on what we thought we heard also high level trade talks. officials are in beijing meeting with thinker chinese counterparts for the first face-to-face talks we're going to hear more about that right now >> we. let's get to our squawk news maker of the morning wilbur ross is back in a new york state of mind do you reck nieds ognize it wheu come back now? >> i do. very few of the buildings have been moved >> but you've been in the beltway for awhile are you familiar with stockholm

syndrome do you think you're going to join the liberation army any time soon? >> my visa still hasn't expired to come back to new york >> so we've had conversations about these talks in china i've heard very, very low level. then i've heard mid-level. then i heard that a high level chinese individual stuck his head into the meetings how would you characteri izize s talks? >> they're the appropriate level. from our side, it's been deputy secretaries and assistant secretaries including a couple from commerce. all together it's a pretty large delegation because there are quite a few sets of different issues that have to be dealt with ranging from immediate trade issues to the big structural issues most importantly to enforcement and compliance how do you make sure they live up to whatever it is comes out of the talk? >> what do you think is going

better or who's more intractable? the shutdown meeting over the weekend with the democrats or the chinese? or are they equally -- are we making headway in either place >> well, i'm beginning to think that there are language differences in both camps with the administrations. so i'm not sure -- there's also beginning to be a bit of cultural difference. >> we won't mention any names, but the perception is this china thing, we're never going to get anything we want it's just going to be window dressing it's not going to work and we're hurting everybody because of the tariffs is there something positive that can come out of this or not? >> what will come out of it is a resolution are we going to go the negotiated route or are we going to go and go on the original direction of higher tariffs? it's really a binary set of decisions. >> what was your reaction last week when apple announced it was going to miss its earnings >> well, i don't think apple's

earnings miss had anything to do with the present trade talks think about it there have been no tariffs put on apple products. so that's not it >> but do you think it is clearly hurting the chinese economy and therefore companies that are doing business in china including multinational companies u.s. based >> it certainly has hurt the chinese economy. look at this morning's paper rate of growth and gdp heading down rate of growth and retail sales heading down. >> are you happy about that? you and the president happy that china's economy is being hurt? is that something we should be happy for? because it may allow us to extract something? or is it -- do you feel guilty happy you're hurting another -- >> not happy nor guilty. we expected this would happen. because what is happening is the movement of foreign companies including american ones out of

china already began before these tariff discussions what that's done is focus people more on them not that everything is necessarily moving back here some is moving to vietnam. some is moving to here and there. so the compounding effect on china is both some stuff coming back here and quite a bit of stuff moving -- >> it's the world's second largest economy at this point. if that economy gets dragged down, there are a lot of real concerns that will wash up on our shores too what do you think about that >> well, think about how little we actually export to them what this whole trade thing is about is they export several times as much to us as we export to them. so what we have at risk is a very small amount both absolutely and because our economy is bigger than theirs, certainly relatively it's infi gn -- infinitely smaller

>> i'm looking at it from a global connectedness market. if they fall into a recession, if that's dragged through other economies, how does the united states withstand that? >> first of all, them going from 8 with% 8% to 6% to lower is not a 1930s-type depression. it's only a problem in their context of having a big need to create millions and millions of jobs to hold down social unrest coming out of the little villages it used to be aggressive young people from the small villages which have not benefitted at all by the chinese economic boom the aggressive young people were leaving going to the big cities finding jobs now they're having to go back to the little village well, that creates a real social problem. because they were disappointed in their home village. they went to the big city. it didn't work now they're back in the home village. that's a very disgruntled group

of people that's a real social problem for them >> the way you're describing it makes it sound like we definitely have the upper hand is that what the president thinks too >> upper hand, lower hand. i think what has changed is china now understands how independent they are on us i don't think they had truly realized how much their high-tech companies depended on american ones. but when we cut zte off from u.s. supply, they essentially shut their doors >> and the same can be said about the future of huawei what do you think the future of huawei is going to be in the united states? >> well, that's a pending matter that's in litigation there are a couple of charges that have been made. we'll have to see how the canadians -- >> is that being used, though, as a negotiating position? when we firsted talked about zte. you said that original arrest was not a chess piece in all

this later the president effectively said you know what it's going to become one if it wasn't then, it will become one >> well, it wasn't in the beginning at all nor was huawei that warrant for that lady's arrest, the huawei cfo, was issued in august, not now. it took quite a while to get to a place where nay could apprehend her. because she was not coming into the u.s. any time soon she went into canada, the canadians and u.s. have a good extradition treaty and that's what led us to where we are >> are you personally writing this auto tariff report that's coming out on february 7th you're involved with it. >> it's very much a group effort we've been through lots and lots of drafts of it, lots and lots of research because the picture also keeps evolving.

as you know, it has to be put out by a date early in february which is 270 days from when we started it >> and so the -- what do you think finally that you're going to see the president do in terms of that? >> from the negotiation? >> yes >> well, i think there's a very good chance that we will get a reasonable settlement that china can live with, that we can live with, and that addresses all of the key issues and to me those are immediate trade. that's probably the easiest one to solve more so it means more lng, things like that second, structural reforms much harder. that's about intellectual property rights. that's about market access that's about all kinds of things in the list of 142 items that we submitted to them many months ago. then the third is the hardest which is an agreement is fine but the history here has not

been so good on compliance so the real issue is what are the enforcement mechanisms, what are the punishments if people don't do what they were supposed to do? and that's frankly where commerce will play the bigger role we tend to be the enforcers. >> you're going to be one of elijah cummings' first witnesses, apparently. what do you think -- what is the landscape looking like with elijah cummings, head of the oversight committee? and what will you tell them? will you need a subpoena to go or just go if asked? >> elijah cummings has been a ranking member of committees before so he and i have had discussions in the context of other various committee hearings so that's nothing new. and we feel we have nothing to hide, so we will deal with all

of his questions >> this is about adding a question about citizenship to the 2020 census and there is allegations that you've given misleading testimony about that. what does that stem from >> well, read the testimony and you'll see that's not the case >> specifically the question was you said in the testimony that the justice department was the one that asked for that question to be added and then later evidence suggested that you were the one who actually had pushed for this before the justice department ever asked and that it sort of came via you. so true that the justice department asked you, but untrue because the allegation is that you effectively asked the justice department to ask you. >> no. it's much more complicated than that it's in litigation right now there's another trial that's starting in san francisco today. we're awaiting the verdict from the lower court and the new york one. and there's also a pending case in maryland. so all of this will be discussed

in infinite detail in the courtroom settings >> do you have a feel for how this shutdown saga plays out, wilbur what do you think the end result -- the -- certain people say the border's not a problem i mean, the president in the briefing room brought out some i.c.e. individuals that said that's the only thing that they really look for that it helps. others say all the illegal activity is coming in on airplanes or whatever. >> as far as i know, i.c.e. and cbp are continuing to function just as they had been. >> right >> i'm not aware of any defactions or any real shutdowns. but that's not my department. >> is it going to go another month? is it going to -- i mean, the president said years >> very, very, very hard to judge. it really depends on when some sort of a detaunt can be put together >> pelosi is now speaker pelosi.

will that change things? >> what it won't change are the facts. we do have a big problem at the borders. there are 60,000 people a month trying to come into the country. >> so how many come in on planes, andrew the issue is not the border. it's they're coming in on planes >> the issue is the border because in those places where walls have been built, san diego, el paso, yuma, and tucson, illegal immigration is down between 90% and 95% since they built the wall. >> no, no. by the way, i think the issue is it's a semantics issue it's a larger issue. it's about people being grounded on two sides of a discussion >> what about the planes you're not worried about people coming in? >> terrorists have been apprehended. >> but what about illegal immigration? >> there's been more people

apprehended for overstaying their visa >> but is the argument not to try to secure the southern border >> i don't think that's the argument actually. i think neither of these things have anything to do with anything i think on one side -- >> it's political. >> on one side is president trump saying he wants this wall. and the democrats are sitting there -- why does it have to be about the wall the wall itself, the idea of the wall and what it represents. and to some people the wall -- to a country that was, you know, born on this idea of being a welcoming place, that is what this is all about. i'm not saying it's right or wrong. but there's so many other issues here. >> you kind of are >> you can't have a country -- you don't have a country if you don't have borders if any you don't police your borders, you don't have them 60,000 people are trying to barge in each month in the last couple of months the vast majority of those are

not even mexicans. they're people from nicaragua, from honduras, from other countries. of those coming in, one-third of the females have been enthuse sy abused on the way up are those people you want to welcome in the people who abuse those women? i don't think so >> you've seen president obama in the past, chuck schumer in the past talking about how important the security is. but -- >> we had a republican on last week who said there are places on the border that they would like to see that walls should be there are also places on the border where they don't think it's necessary >> why not secure the border some way electronically, whatever you need to do -- >> it's not mutually exclusive nor do we intend to have just the wall there will still be aircraft surveillance there still will be -- >> i don't see how you can argue the other point that you don't secure the southern border >> but there's no reason not to

have a wall when it's known by the experience in el paso, in san diego, and yuma and tucson the fact is illegal immigration in those places went down between 90% and 95% after the wall was put up. walls work the wall has also become a bigger symbol as andrew was saying and it's really a symbol are we going to be strict about making sure that the people who come into this country are people we would like to have here? it's not that we don't want any people to come in. we actually need immigration but what we don't need is immigration where bad people -- >> but wilbur, what i think's happened here is you're having a reasonable nuanced conversation about this and i think what's happened more broadly is this conversation has -- both sides have dug in on either side in -- without any

nuance and that's fundamentally what the problem has become >> well, in terms of nuance, all these facts that i've been giving you right now, the president and his staff gave to the democrats over and over and over so the lack of nuance is on the democratic side. they've heard all the facts and figures. they probably knew them anyway but they chose to ignore them because the wall has become a big soymbol. i don't think anybody can realistically say that you aren't better protected with a wall than without it i mean, it's pretty obvious -- >> you're dealing with a government shutdown at this point. >> it the beall end all, no. >> you're dealing with a government shutdown at this point. and while it has not affected a large majority of americans, that shutdown, it could as it drags on and as the paychecks actually stop for a lot of these people we have heard some instances of

tsa lines getting longer >> sure. and it's reasonable for the democrats to hold this up over $5.6 billion in the budget it's less than 1% of the remaining unappropriated discretionary funding. under 1% the reduction in aid that the president put into some of the countries that we were at odds with are $1.9 billion. that it's not about the money. it's not about whether the wall works. this is pure and simply a political decision by the democrats to deny the president something that's important to many americans and i believe is very important to our border security >> the republican who is were in charge before this latest handover in congress had agreed to a deal too. they were surprised when the president turned it down for

this that may be why they're pushing their submission for this. whether someone is surprised or not doesn't change the facts facts are walls work facts are we need a wall facts are we need other measures as well. and the last fact is it's small potatoes count how many crimes have been committed by people who have come in. not saying that all immigrants are bad. they obviously are not all bad but ms-13 didn't spring out of nowhere. ms-13 sprang mostly out of illegal immigration. and even more than that, if people are coming into the country illegally, that, in fact, is a crime we ought to recognize it's a crime. we want immigration and we need it take a look at canada's model. it's a very good model they welcome immigration but

very, very selectively and that makes sense to bring in people we need >> okay. secretary ross, thank you. don't know if you saw "60 minutes" last night. the 70%, the aoc 70% i think i'm there. i might go down. >> what's sna. >> 70% taxation. >> thank you we appreciate your time. >> sorry we didn't get to cover everything >> thank you for all your time and being here on set makes it much better, i think it does. thanks coming up when we return, we're just an hour away from the market open. coming off of friday's 157-point gain for the dow when we come back, the biggest forces driving the market and a breakdown of what we jushed omommerce secretary ross stay tuned on cnbc

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double hands. get fast reliable internet and add voice for a low price. just one more way we go beyond for your business. and now you can also enter for a chance to win $10,000 from comcast business toget your year off to a fast start. there's a new $10,000 winner every day in january. go online now and enter for a chance to win. comcast business. beyond fast. welcome back to "squawk. we have some breaking news for you. a group of financial firms are joining forces to launch a new stock exchange to challenge the new york stock exchange. yes the place we're looking at right now the nasdaq "the wall street journal" reporting that morgan stanley, fidelity, and citadel would be part of members exchange, controlled by the nine banks and brokerages trading firms funding it

members exchange plans to apply for status with the s.e.c. early this year. that process could take 12 months or longer >> reminds me of members club. remember the jackets >> yes yes, i do. >> if you had one of those -- >> bet you had one >> oh, yeah. still do are you kidding me once you're a member >> the question from an exchange perspective, if the banks control it, "a" there's not a switzerland-like element to it there's been a whole debate around front running and who gets access to what once you have these banks doing it. how does that change the dynamic? i think this could become a pretty big debate pretty quickly. santoli's here >> yeah. >> my guess is the banks wouldn't want to pay a middle man. >> that's what it's about. the dispute about fees you've had these sort of private sector exchanges pop up. then it became an official exchange so i think it's all about

segmenting the customers and the kind of activity that gets done. so this wouldn't necessarily be for every type of order. it would be to try to stave off some stuff wilbur ross joining us moments ago. >> well, i don't think apple's earnings miss had anything to do with the president's trade talks. think about it there had been no tariffs put on apple products so that's not it. >> joining us now for reaction is mike santoli. senior economics reporting steve liesman, and rick santelli at the cme in chicago gentlemen, welcome to all of you. mike, why don't we start with you. just about his takeaway, about whether the trade talks can be blamed for the pain that apple is feeling and others. >> i mean, apple cited itself as one of the factors i think it's pretty clear that

the china slowdown has been pressured by the tariffs and by the trade friction. so i don't think you necessarily have to say yes it's all about that or not. but it seems obviously to be a big stress point in the markets but also potentially a big leverage point in negotiations i do think right now what it means is the markets just crave a signal that incrementally things are looking towards an easing of that pressure. i think that might be all you need with the market at this level. >> with the three big head winds the market was facing, to one of those issues would be the fed after powell's speech. steve, you were there. you heard what he had to say and were able to interpret it pretty closely. is this a different message to the markets? >> certainly potential on the balance sheet. i talked to a lot of people. i just didn't hear the same

thing. i had heard him being flexible on rates but people said they heard on rates that i'm not going to argue with him about that. but the idea that the balance sheet is now up for discussion and could be changed, quote, if they see it's a problem which they haven't quite done yet. i do think the fed might not be able to go quite as far as markets believe. apparently new york fed surveys show that people see the balance sheet as ending up around $3.5 trillion which means they have about $0.5 trillion to do total. there are people who welcomed the reduction of the balance sheet and seeing that get down to at least a smaller level could be a good thing. >> rick, it's the balance sheet, that flexibility that people certainly caught onto. i also heard him emphasizing this lack now. like they'd be okay trying to take several months to watch and see what happens with data coming from there.

>> it's difficult to always assume this is definitely different this time. he expressed he didn't like two active tools recalibrating at the same time. he's of course talking balance sheet and interest rates that makes sense you know, the fed's always tried to be transparent and their notion has always been that they're data dependent i think when steve said he didn't hear what everybody else had heard, i totally understand. because i think the notion of being data dependent was a red herring for many, many quarters that the fed put it out there. but i think jay powell in a very anti-economist, anti-modeling way is going to be true to observing and looking for feedback loops between markets and policy in a way that may be

unique over the last several fed chairmen >> can i ask you a quick question i've been doing a quadruple take on the numbers this morning. are they pricing in now more than 50% chance of a rate cut this year? i know you don't like looking ahead. i know but if you just took the numbers at face value, do you see a rate cut being priced in now? >> i think taking the market at face value is a big mistake. that's the whole point that's why we end up in these areas. the wind blows a certain way and like all short rate contracts, the fed funds especially one for distant meetings even with the log jam pricing, they get distorted. it's gotten distorted the other way. >> i got 2.182% on the january -- >> i get it. i get it was it right when it was looking for 3% >> no. no >> i rest my case.

it's probably not right now. >> i get it. >> when we get within three weeks of a meeting look at the next contract. >> i get it. i just want to know. becky, one more thing about wilbur ross which is what i picked up on the weekend about this trade issue when he says something like think about how little we actually export to them. what we have at risk is a very small amount part of the big complaint i get is the administration as a zero sum game and global growth that way they will point out we had a lot more at risk and what we don't get directly from chinese growth we get from other countries growing because china's growing. they see a much more interconnected world >> it's an interesting experiment one we'll see play out over the next several months. gentlemen, thank you >> really nice to see you and rick on the same page, liesman defeat this whole purpose. we booked this for a reason.

yeah, rick, you're right it sounds awful. that was awful we'll figure out something else for next time, all right >> that's fine >> kerfuffler in chief >> we had santoli and santelli on at the same time. that was very confusing. but we made it next time, try harder. would you? >> rick, steve, mike, thank you. when we come back, a different kind of take on doing business in china. we are live with the founder of blackwater eric prince on his new mining venture "squawk box" will be right back. ♪ ♪

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we've got some breaking news this morning on toyota's efforts in the electric vehicle market let's get to phil lebeau and a special guest. phil >> hey, joe. let's bring in bob carter who is the executive for sales at toyota the company is announcing it's stepping up its efforts to bring out electrified vehicles over the next 10 to 12 years. thanks for joining us this morning. let's talk first off about what you guys are planning to do here by 2025 you plan to have an electrified option for every model you sell in the united states does that mean it's going to be a plug in or are you talking electric hybrid?

>> phil, our approach is a portfolio approach we don't think one technology is absolutely the best solution for each customer. we are working on an entire portfolio of hybrids we've been selling since 1997 full battery electric vehicles as well as our is -- we set a goal that it would be 15% of our sales just next year in 2020 as we work towards our goal that we want to have an electrified option available at every model that we sell be it a toyota or lexus by 2025. >> but bob, let's talk about the plug-in electric vehicle market. when you look at that, you guys are number three in the united states but you're way behind tesla. there are a lot of people who said look, we applaud what toyota wants to do when it comes to electrified vehicles, but they don't have the mantle

anymore. tesla has it have you waited too long for plug-in electric vehicles? >> no. i'll argue, phil, the contrary when you're looking at full electric battery electric vehicles whether it's tesla or others on the market, they represented last year less than 1% of the industry the industry had a fabulous year last year. less than 1% of the 17.2 million vehicles that's here in north america so our strategy is to continue to utilize and enhance our hybrids, plug-in hybrids and eventually bring in battery electric vehicles as the market grows. our forecasts indicate that within north america with the current dynamics we have with our long driving distances and highways and low fuel prices that the market is going to slowly mature to perhaps as much as 4% to 6% of the industry on

the second half of the next decade >> you're not worried about the lead that tesla has established? look the model 3, there's clearly demand there and so people look at this and say okay why don't you come up with that pure electric car right now? >> and phil, we are very active in battery electric vehicles you'll hear some new news coming from us of introductions in the early 1920s. but we believe right now that the hybrid technology in the short-term is the best application for consumers today. and what you're seeing from toyota is we're taking our technology that we've had from the market and proliferating that throughout the market into the new rav, corolla we took what only was available in the prius and have spread that through the lineup. >> one last question here.

we are coming off four straight years with sales topping $17 million in the u.s many believe we'll see a cut back to the mid-16 million range. have we seen peak auto >> auz you point out, we had a fabulous year last year. it beat expectations it beat our expectations due primarily a strong fourth quarter. what i would describe 2019 to be is it's going to be a story of head winds and tail winds. still relatively low rates the head winds in front of us are what you're discussing this morning. increased interest rates, commodity prices are going up. so as the head winds and tail winds were analyzing this, we believe there will be a moderate pullback in sales. but our forecast is for a high

16 million market next year which is still a solid auto industry >> bob carter, executive vice president of sales for toyota in the u.s. joining us this morning from the consumer electronics show guys, there you have it. toyota planning to really push the electrified vehicles but don't look at that and say they're all going to be plug-in vehicles we're looking at a lot of hybrids as far as their portfolio options in the future. >> thank you very much phil lebeau. when we return, u.s. officials are in beijing trying to find common ground on a trade deal when we come back, an unusual perspective on doing business in china. erik prince who is the founder on blackwater will join us to talk about one of his latest ventures in mining and metals. also ahead, jim cramer will be joining us live today from san francisco and the jpmorgan health care conference check it out right now the futures are mixed at this point. s&p futures down by just over two points

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what's in your wallet? welcome back to "squawk box," everybody. yes, we know u.s. officials are meeting face-to-face with their chinese trade counterparts in beijing for the first time since the current 90-day trade truce went into effect. ylan mui joins us with more on this we're trying to figure out what this means and the likelihood of success from these talks >> well, there are many agencies

represented during that delegation to beijing. and we did just hear from commerce secretary wilbur ross and he said the discussions will determine which approach the u.s. takes >> what will come out of it is a resolution are we going to go the negotiated route are or we going to go and go in the original direction of higher tariffs? it's really a binary set of decisions. >> ross arguing there that the administration's hard line approach has highlighted how dependent china's economy is on ours he called out the sanctions on zte as one example and he said that apple's troubles were not caused by the most recent trade tensions now, ross also outlined three layers to any trade deal first immediate trade reducing the trade deficit with china by increasing u.s. exports. second structural reforms like addressing intellectual property theft. and finally enforcement measures to ensure that china complies. now, on the chinese side, the

foreign ministry is reportedly saying that beijing has, quote, good faith in these negotiations and yesterday on his way to camp david, president trump also said he has a good relationship with president xi and he thinks good things are going to happen so these are all positive signs. we'll see if they can keep these talks going either here in washington or maybe even over in davos. back over to you >> all right thank you very much. >> ylan thank you for that we have a unique investor here today with a unique perspective on the chinese business erik prince is here. you may remember him as the founder of blackwater, the private security firm contracted by the u.s. government in iraq and afghanistan. erik prince sold blackwater in 2010 and 2012 started frontier services going fsg has a majority of a research mining fund. here to talk about that and everything is erik prince. >> morning >> thank you for being here.

>> thanks. >> i want to ask you how vee all of this taking place, but you now have a mining fund you're setting up >> yes. >> what is that about? >> like your previous segment was talking about, huge growth in hybridization of vehicles and to do that for all that technology and development, it takes minerals coming from rugged places. and cobalt is what you need to concentrate all of those elect rons two-thirds of the supply comes from the drc a rugged place as you see all of these automakers developing electrical vehicles, they need a lot more cobalt we see that bottle neck coming way, way up stream that's why we put a fund together to find, prove, and bring into production those unique resources to make that possible >> how much is the plan to take that cobalt, sell it to the chinese and russians >> i wouldn't say the russians would be a big customer. look, the chinese are very, very

hot on electrification of their vehicles they've done electric buses and cars certainly the west and europe as well all those automakers are developing it. china is a big consumer. it's easier to get them interested and investing in a fund but i think u.s. automakers and the europeans are waking up to that as well >> how does this fit into the larger discussion in terms of trade with china by the way, we should say your sister is betsy devos and you're a trump supporter. >> for sure. >> what do you think of him doing this have you talked to him >> i haven't seen the president since before he was inaugurated. >> the question i ask is if this is ultimately going to benefit the chinese and we're in this back and forth -- >> no, no, no. i would say having more access to the key battery minerals is of greater benefit even to the western manufacturers so there is an assured supply of those

minerals needed. otherwise your bottle neck is going to prevent the electrification changing to wind power and all the rest because it needs batteries to make that possible >> erik, let's me ask you. you call these places rugged places we're not talking about the terrain. that may be where blackwater's expertise comes into play. these are some pretty difficult surroundings it's hard to get into. >> there's mud there's rainy seasons, all those things ebola, right the drc provides two-thirds of the world's cobalt right now and there's the biggest outbreak of ebola there right now. there's all kinds of hairy places that it's not your standard build a mine and truck it to the rail head and be done. it's -- there's a little more complication to that and there was just an election in the drc a couple weeks ago. hopefully those election results will be announced this week. >> we've had this discussion before >> we have >> with people buying cobalt >> that's what i wonder. why is blackwater specifically equipped -- >> it's not blackwater

i sold the business. but certainly acquired the skills and organization. because it's a matter of doing logistics in difficult places and people -- the mining engineers to go into the remotest places, to find the resource, to drill it, to prove it and to make it sure and make it to markets. >> one of the big issues when you get into these hairy markets, though, is whether you have to pay people off to get stuff done and that becomes a larger issue for multinational companies that end up perhaps having to do business with you to buy some of this stuff. >> well, there's a full spectrum of problems. some of these minerals are considered conflict minerals in a lot of cases -- like 15% of the world's cobalt is guys in loin cloths digging by hand. us coming in will give them a proper job and prevent child exploitation those manufacturers can tag and locate those minerals and know

they came from an ethical mine >> separately i wanted to ask you two other things wanted to ask you about china. you guys do business in china right now. you guys have trained security people in china. there's a big big piece in "th washington post" about this and about where the line is in terms of what that business should or should not be. >> i'm a chairman of a hong kong-listed company and siddic is a big chinese company, a significant shareholder, but not controlling. we have not trained any chinese security people. that is fake news. so all we really trained are our own employees how to operate in difficult places or other workers that are going to prevent being a terrorist victim themselves it is kidnap avoidance, it is threat avoidance, that kind of stuff. it is not fsg is not in any way a blackwater like private military contractor. >> why is mueller interested in you anyway what do you think that relates to >> because i went to see an old friend, leadership in the uae after the election and there was

a russian there. so i had no contact with him before, no contact after >> what did you tell mueller >> i answered their questions and i haven't talked to him since. >> what did they ask you >> what was i doing there. and i explained and that was it. >> and that was it no contact after that? >> no. >> did you pick up any -- did you leave the meeting and think, okay, i now understand where they're going with this or no? >> anytime you sit down for an interview like that, it is -- you probably would rather go to a proctology exam. >> i know you said you haven't spoken to the president. i imagine you talked to your sister during the holidays do you have a sense in terms of just a relationship between the u.s. and china and where you

think all that goes given your own interests in china now >> look, out of the last 20 centuries, the biggest gdp in the world was china. 19 out of the last 20. so china is a great economy, and they'll continue to grow i know they're looking for ways to work with the united states i know they would like the united states to not abandon afghanistan because they're very concerned about that becoming a major terror sanctuary again and so hopefully we get the president to consider a proper alternative to the very conventional military approach where we have been wasting $62 billion a year as a country the last few years >> what is your own experience with ip in china >> i don't have any ip this is best practices so much not ip we're not an ip-based business. >> fair enough thank you for being here. >> you bet. >> good luck with the fund how big is the ultimate? >> we're raising 500, we should close on 100 million by the end of the month. >> how quickly do you think you deploy it? >> significantly a lot of it this year. >> okay.

erik, thank you. appreciate it. >> most people just use root canal, just, you know what i mean, instead of -- >> sorry >> either way, that's worse than -- >> agree >> forgive the term. >> you wanted to go all the way up to that, that's fine. let's get out to san francisco and the jpmorgan health care conference jim cramer joins us now. i just had rick on and to be perfectly honest, i didn't bring up anything with santelli about what happened yesterday. i think it is -- with you it is okay to bring it up. how often do you see something hit the vertical bar and usually goes in, usually skips off that, but then to actually come down and hit the horizontal bar and come -- not go over that time, don't you think that there is more than coincidence to all of this that's weird, is it not? >> it is divine. we know it is divine we know it is destiny. there is nothing to -- look, it is inconceivable that it is not logical, not supposed to happen, it has to be some sort of law of

physics because it was amazing, the icing the kicker was incredible i guess my hat is off to them. >> and fourth down was something too. what a great game, though, jim i don't know why i think about you, but i was, and i did, but it was amazing for you, i'm sure too pad ybad you weren't there r were you >> no, i had to be out here. the second time i cried this year, the first in february. if you remember february, what happened, kind of significant because it gives a road map for what we have to do >> could happen again though. >> that was last year. no, we're the champs >> it could -- you never know. >> long shot only three more games. >> saint nick versus the saints. let's go down to this -- oh, my! look at that it didn't go in. no, senor! no, senor! no, senor! >> you got to love the bears'

mascot did you see? >> i'm out here in the health care conference, there are a lot of health care companies trying to solve what's going to happen to cody parkay today we have a lot of health care companies dealing with that kind of central nervous system issue. but i got to tell you, it was a great game and on our network and we did a great job. >> can you tell me with a straight face that powell didn't hear at least someone or hear some market somewhere? was it really business as usual on friday? wasn't there a change there? wasn't there some type of realization on the fed chairman's part, don't you think? >> i was listening to this person who spoke from 6:00 to 6:10 a.m., i don't know if you caught it, arguing with andrew about how significant it was it was huge, though. and you got it right and i think it is very significant and people don't want to give it the significance because what it says is now we have a trade deal, we'll be 2

for 2 and that's really wild card going to the super bowl if we get it done >> all right >> sorry to be so positive, joe. i'm just taking my cue from you from 6:00 to 6:10. andrew was back. look, i love you, andrew. >> yes, thank you. i don't believe you, but thank you. >> to know him is to love him. >> andrew, i'm the most sincerely and sincere man in north america. how dare you contradict me. >> jim, thank you. we'll see you in a few minutes and i was the first omg that you received on your e-mail, huh, last night >> you were the first omg and i thank you. >> unbelievable. my jaw was -- great though is it not great? who better than alan to be there for the call and everything. a big monday michael and cris collinsworth. >> i was watching. >> i was watching as they were dissecting the call. >> that one i didn't agree with. i thought it was incomplete.

i thought the guy's hand was underneath the entire time, but they pulled it out, still thought it was incomplete. >> i still appreciated the conversation. >> a big monday here will be. or no, today, today is monday? we're taking the wraps off the new midday lineup at 1:00 p.m. after "halftime," debut of "the exchange" with kelly everyones she takes a deep dive into the stories moving the market, the economy and more tune in at 1:00 p.m. today on cnbc "squawk" returns in a minute [leaf blower]

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welcome back final check of the markets you see things have barely budged dow futures slightly positive. s&p 500 futures down by less than three points. nasdaq off by 14 make sure you join us tomorrow right now, time for "squawk on the street." see you later. ♪ sometimes i get a good feeling ♪ ♪ i get a feeling i never, never, never had before ♪ >> good morning, welcome to "squawk on the street. i'm carl keequintnilla with dav faber. we'll have exclusives with the ceos of bristol-myers, celgene, glaxo this morning good news flow on m&a and china trade today. prices soft in europe and oil is near 49. road map begins with the rally pause. futures pointing to a relatively muted open as the street waits for developments fro