welcome to this special worldwide exchange no top five at 5:00 today because today wall street and the entire investment community is remembering the life of a man who forever changed the way we invest and the way we think about investing. jack bogle, the founder of van garde group. he passed away last night at 89 years old. considered one of the world's great long-term thinkers and investors, bogle revolutionized wall street by creating the world's first index mutual fund. he was a true pioneer, someone that we got to know professionally over the years and one of the most cherished guests here on cnbc. there is news and important

things to talk about this morning, and we will get to it we have to begin with jack tyler matheson takes a look back at the incredible life and career of mr. van garde. >> indexing always works best. up, down, or sideways. >> reporter: in 1975 jack bogle started the van garde group, and with it a new way of investing >> jack was the creator effectively of the index fund. >> reporter: index funds, mutual funds whose portfolios match a market barometer like the s&p 500, are common place today, but they were unheard of in the 1970s. much less the early 1950s. when boglewrote his senior thesis about the concept at princeton. >> i said mutual funds should be operated in the most honest, efficient, and economical way possible i had a sentence in my thesis that said mutual funds can make

no claim superiority over the market averages. >> bogle's thesis research laid the ground work for what would become one of the most powerful investing movements of the late 20th century he concluded that active trading mutual fund managers failed as a group to outperform the relevant indexes. especially when you subtract fees and expenses. >> anybody can do it for a year, and if you can do it for five years and if you can do it for ten years, but over an investment lifetime there's about a 3% chance that a money manager can beat the market. >> reporter: after princeton bogle went to work for wellington management for over two decades. eventually, becoming ceo he was later terminated for what he called an unwise merger so he started over putting the indexing concepts from his thesis into practice at van garde.

to a great extent he democrati de it was a huge thing in the mutual fund space. >> that investment trust and later renamed the van garde 500 index, tracked the s&p 500 skeptics ridiculed it as bogle's folly. by 1990 index envesting had taken root the reason bogle turned out to be right in the 15 years ending in january 2017 nine out of ten actively managed large scalp mutual funds underperformed van garde's 500 index. today van garde has more than $5 trillion under management. >> jack bogle is pretty much leak a t-rex in terms of what van garde is versus, you know, a little tiny lizard over here you don't see too many folks anywhere in the world that manage that much money >> after retiring from van garde in 1999, bogle started a research center on the van garde campus there he continued advocating

for indexing and buy and hold long-term envesting. he called trading stocks a loser's game >> it comes right out of shakespeare. these moves in the market are like a tale told by an idiot full of sand and fury, signifying nothing i think speculators speculating on what other speculators are speculating on >> reporter: speaking of speculation, few would have bet on van garde back in 1975, even fewer still would have thought bogle would still be jousting with critics deep into the second decade of the 21st century. he had his first heart attack at age 31 doctors said he wouldn't make it to 40, much less live to 89. he had five more heart attacks before undergoing a heart transplant at the age of 65. >> i may be -- i don't want to get carried away here -- the luckiest guy in the world. >> jack bogle, always outspoken, was 89 years old van garde ceo tim buckley

releasing this statement about the company's founder. "jack bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children's futures. reaction is also pouring in from some of the biggest names in the business warren buffett saying, "jack did more for american investors as a whole than any individual i've known. buffett says that a lot of wall street is devoted to charging a lot of money for nothing, but bogle charged nothing to accomplish a huge amount also, carl icahn weighing in saying, "i had great respect for the man and for the many things that he stood for. jack bogle, again, was 89. we're going to be right back here on "worldwide exchange.

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it's bring your own phone, not pony. so i could have taken the bus? yeah. bring your phone. switch your carrier. save hundreds a year with xfinity mobile. plus get $100 back when you bring in an eligible phone. call, click or visit a store today. a live look at hong kong i'll tell you what, if you have not had a chance to get to hong kong, i know it's a long way to get to the states. if you are watching from hong kong, headline low good evening welcome back we're going to have much more on the life and investing impact of jack bogle all throughout the day here for us on cnbc. there are other items and news to get to as well. here's how things look for you on this thursday dow futures indicating a drop of about 100 points remember, we do get the initial jobless claims number out at 8:30 a.m. eastern time things certainly could change before the market actually opens, but right now we are down across the board by about .4%.

overseas in asia we just showed you hong kong. japan and the chinese markets fell fractionally. south korea squeaked out some very fractional gains. a similar story to asia in europe where we are seeing slight drops in the major market averages the dac and the ftse 100 and the cac are down around 3.5% that is where we stayed right now. europe brexit remaining front and center for investors after theresa may survived a no confidence vote in her government last night. steve sedgwick is live on the scene in london with more of what happens now steve. >> reporter: mrs. may had a confidence vote. she won. she succeeded. she had support from the unionist at the u.p. as well she won 325 votes to 306

the same people who voted so vihamently against her the night before, which gave her a resounding defeat on her version of brexit voted for her in terms of back benches in this in order to insure that it didn't lead to a general election the biggest leader, jeremy corbin, he said no, i'm not going near any talks with you until you drop the scenario, the default position of his deposit of a no deal brexit. we could hurdle towards that on march 29th under this article 50 timetable. mrs. may can't get over that she can't drop her opposition to a no deal default because then she'll lose support from those members who voted for her last night, but didn't vote for her the night before

what a hor endous choice for her as well. what happens next is what the viewers want to know she's got three days -- only about two working days, to be fair, to come back with plan b sher version of how we're going to move forward out of this quagmi quagmire, and she's trying to build consensus. whether she can or not remains to be seen, and all options, i'm afraid, are still on the table we're not in thebrexit end gam just yet back to you. >> is plan b, b for brussels, does ms. may now have to go back to the european union and effectively, steve, start over >> you're right. with what? honestly, brian, i studied this and i have spoken to several really important ministers i spoke to the defense minister just now as well fantastic grie the fact is there is consensus in parliament for one thing. that is they know what they don't want they had no idea what they want.

they have to get over 326 mps to say, yes, we want this you can't request back to brussels again until you know what they want the idea would be at the moment the most likely scenario is that some form of customs union is agreed upon by mrs. may, who is previously against that because it would tie all kinds of rules and regulations with the e.u. and stop us going forth. that seems to be the soft breck it consensus idea that we could go forward with that, but, again, whether mrs. may is going to drop her red lines, whether she's going to forge a real consensus remains to be seen we've found out what her plan is on monday, and the next exciting installment of brexit. >> steve sedgwick laying it out as clearly as you can on what is no doubt a very complicated story. steve, we appreciate t by the way, that jacket is going to be immortalized in the british museum someday, my friend thank you.

if you can follow this brexit story, you know, you're a better person than we are it is a very difficult story to sort of follow and understand the investing impact from. let's stay there what is the base case scenario at principle is it the so-called no deal hard brexit, or do you guys ultimately believe that some kind of a customs deal will get done? >> it seems like there is the most likely, but i have to say, you know, i think the path ahead is going to be as jumpy and volatile as we've had in the run-up until now

>> part of the job of strategists is to plan for the unplanable i know it does seem like an extreme outliar, but i'm sure you have to make contingencies for it we've had guests that said it would be a disaster, catastrophe. they're using words like that. is that your view as well? >> we've had a lot of criticism. i think the bank of england has had a lot of criticism about its forecast for growth to plummet kind of 8% or so if there is a no deal brexit i have to say i don't think that's too much of an exaggeration i think we could expect there to be a significant recession in the u.k. i think that all the kind of scare mongering about how the m 25 being blocked up by lauries

all the way through -- all the way up, sorry, from the ports, i think that's a reality >> if this does go ahead, the armageddon scenario is possible. would a no deal brexit hurt the united states equity markets >> there's a couple of steps here if we have a no deal brexit for the u.k., i think that the impact on the u.k. economy is very negative, and, therefore, the u.k. equity markets is extremely negative some would be help out by a drop in sterling, of course the impact on europe is a little bit more complicated now because a european economy is also slowing.

there are growing fears. europe can really not afford to have a u.k. falling session as well. it weighs on the chinese economy, and, therefore, on global growth with obvious repercussions for the u.s. i would hasten to add, though, in terms of looking at the most, you know -- the kind of most important risk for the u.s. economy this year, i would not put brexit as one of them. >> not yet, but as we get closer to that march date, the nervousness, sima, may rachet up you may have married we've got a government shutdown here in the united states, and investors have so far given it a pass. the equity markets are higher this year, but at some point they may not

>> those kind of black swan events or things that we can't necessarily plan for, and i think it would be -- it would be ill-advised for investors at this stage to get so cautionary that they start to go into cache. there's still opportunities out there. if and when -- i should say if that scenario doesn't fold, we should have a very clear idea at the beginning of march, and at that point, yes, there would be some kind of warnings to our investors, but mainly really with regard to the u.k. that this is the scenario for the u.s. we still don't expect there to be a recession at the end of 2019 if the situation were to deteriorate significantly, and even in that scenario, i still don't put the u.s. shutdown as a key risk to the u.s. economy >> you ultimately recessions, though, seema, as you know -- recessio recessions are not caused business governments

people stop spending businesses pull back ultimately, humans make that decision we had our retail strategist stacy on a couple of days ago. she actually lives in london, and she was saying, you know -- she's really worried about simply people just not spending. don't buy that we don't know what's going to happen with brexit don't go out and buy that new car there is a great unknown about which way this whole thing is going to go what is the risk of this sort of self-fulfilling prophecy of a downward spiral economically >> if you are looking to increase investments, this is not the time if you are holding credit in the u.k., you know, bank stocks, this is probably not the time to be dropping them you could well be missing out on the trade of the year if things

work out is there the risk of a self-fulfilling expectation, yes, there is. the concerns about business confidence, consumer confidence, then plummeting and pushing into equity markets for the u.k. is a realistic prospect, and i would absolutely agree with that, but when it comes to the u.s., i think it's a different situation. >> we will call on you again, because this thing is far from over steve sedgwick seema, have a great day. thank you very much. brexit is certainly just one piece of the big global investing puzzle right now a bigger slice may actually be trade and china. china confirming overnight that high level trade talks with the united states will pick back up at the end of the month. china says its vice premier will travel to d.c. for two days for negotiations those talks set to get underway on january 30th. well, sticking with trade news, the u.s. is reportedly pursuing criminal charges against china's -- and zte for alleged

theft of trade secrets an indictment is expected soon in the meantime, a bipartisan group of senators introduced a new bill that would ban the sale of u.s. semiconductors and other telecom components to huawei and zte. china responding to that lenls las vegas calling it "hissaria." zte, it's been beaten upthe last couple of years down another 3.5% right now. still ahead on "worldwide exchange," rising risks in american real estate we've got an alarming new government report on the housing market diana ohlich is live on set with you next first, more on the d.c. dysfunction as the shutdown now enters its 27th day. no sign of a break in the impasse. dow futures down 90, and we are back after this.

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>> get that 8:30 a.m. jobless number that could turn things around. the fed in focus any piece of economic data has got to be viewed as crucial to the way that jerome powell and company think in commodities let's see if the price of oil will continue what has been one of the best starts to a year for any commodity ever price of oil down a little bit right now. about .9%. still, just under 52 per barrel. well, the other record continues to grow longer we are now entering day 27 of

the partial government shutdown, and there is no end in sight nbc's blaine alexander live in washington with more on shutdown week four. >> hey, brian. good morning to you. a shutdown week four, we're seeing this impasse certainly continuing here in washington, but now it's going up to a new level because now it's including the state of the union address we're less than two weeks from when president trump is supposed to come to the hill to deliver that address, but a new letter from house speaker nancy pelosi is calling that into question. >> reporter: with washington still deadlocked over border wall money on day 27 of the government shutdown, there is a new fight brewing over the state of the union address house speaker nancy pelosi in a letter to president trump urging him to either send his speech in writing or postpone altogether until the government reopens, citing security concerns >> hundreds of people working on the logistics and the security of it. most of those people are either

furlowed over victims of the president's shutdown >> reporter: homeland security secretary says her department and secret service are fully prepared to support and secure the state of the union already at least one planning meeting canceled republicans promising the president's speech will go on. >> he can come to the senate if mrs. pelosi doesn't want him to come to the house. >> some lawmakers trying new tactics to end the shutdown. a group of freshmen house democrats trying to deliver a letter to senate gop leader mitch mcconnell, but saying they could not find him >> we're here doing our jobs we have voted repeatedly over and over again to reopen the government >> as thousands go without paychecks -- >> until you have to make rent, until you have to feed your children, then you know how it feels. >> and thousands more called back to work without pay >> and, brian, that group of some 50,000 federal workers called back to help with things like flight inspection, food inspection, and tax refunds.

back to you. >> blaine alexander in d.c thank you very much. >> yep >> now let's get a check on the morning's top headlines, including some nasty weather, which apparently is headed our way. nbc's francis riviera in new york now with that francis. >> all right hi, brian. happy thursday buckle up. we are monitoring these powerful storms threatening americans from coast-to-coast. blizzard warnings are in effect for parts of north-central california where weather systems are dumping several feet of snow the nypd trained first responders in ice rescue techniques ahead of the two storms expected to slam the midwest and northeast over the next few days hyundai and kia are recalling around 168,000 vehicles that pose a fire risk some may have been purchased as far back as nine years ago the recall covers 68,000 kia optima sorento and sportage vehicles from 2011 through 2014 model years and hyundai says it effects 100,0002011, 2014

hyundai sonatas and santa fe sports according to the automakers, the vehicles have faulty fuel pipes which could spark fires. the light heavy weight champion and activist mohammed ali will be honored with an airport named after him in his hometown of louisville, kentucky officials voted to change the name to louisville international airport to the louisville mohammed ali international airport. this decision came one day before what would have been ali's 77th birthday. brian, those are your headlines this morning >> long overdue in that decision certainly. the greatest francis, thank you still ahead, more on the life and times of jack bogle, the van garde founder, passing away yesterday surrounded by family we give tribute all day on cnbc. plus, you may be thinking between the d.c. dysfunction, brexit, the trade fights, how do i make sense of the markets and v investing right now? don't worry. we're breaking out your protection playbook straight ahead.

that would be the biggest revenue drop in a decade remember, taiwan semi, you mapt care about them, but you might care about apple, and they are

an apple supplier. stock actually up. maybe it's a case of the news not as bad as people thought gannett, tribune is rekindling takeover talks this comes days after gannett received a backing from media group mng. stock three, csx reporting a better than expected fourth quarter profit however, the company sees revenue growth slowing this year the rail operator chalking that up to some operational changes and not a slowdown in the american economy that's important transportation companies often seen as a leading indicator. by the way, csx also announcing a $5 billion buy-back. your final big stock story today. alcoa topping forecasts. the company citing strength in its illumina business. we are down about 08 points. bring in peter bookbar, chief

investment strategist and officer. also a c northwenbc contributor. we said it going into the break. you have the breck it news, which is confusing it's scary and confusing it's this big story. trade, scary, a little confusing. big story. you have the dcht c. shutdown, which every day it goes on sapps a little bit of strength out of that american economy. okay now you got the fed on top of that maybe a little bit untested. >> right >> i know you tend to be on the bearish side, but you are a prayi pragmattist. give us the bull case. flip the coin. >> flip the coin the fed -- i think the most important -- >> you didn't expect that, did you? i put ow the spot. >> i'm going to try my best to answer it. look at the other side of the table. can the fed create a soft landing? since world war ii they've only been able to do it 20% of the time if they're able to pull that off, if they're able to continue to shrink their balance sheet

with any major repercussions, if they can maybe hold rates here where maybe even hike one more time and not tip over the u.s. economy, that's really the bull case can they or can they not >> do you think they will? do you think they'll be able to do that? >> i think considering the extraordinary length of their easing over the past ten years, keeping rates at zero for seven years and quinn it upling the size of their balance sheet. that's the bull case putting china aside, putting brexit aside, the slowdown in europe, the government shutdown, to me the most important driver in that question answer is the fed. >> you're going to go to dinner, and somebody will come up and say you are peter bookfar, i love your stuff. they'll ask you this, i guarantee you. given all we just talked about, why is the u.s. stock market up 4% or 5% this year >> well, the market has gotten what they wanted the fed is pretty much done raising interest rates they're expressing flexibility on their balance sheet, and there's optimism that the u.s.

will come to a trade deal with china. that's all the market needed to hear >> are we priced a little to perfection >> we're still -- >> brexit will be okay don't worry. there's no way we're going to have a hard brexit don't worry. there's no way we're going to go on 30, ho 40 days in the shutdown don't worry. we're going to make a deal with china. what if we don't >> still there's 10% off the peak where, there has been an aus judgement to all these worries. yes, we've gotten this bounce back, but in the context of the sharp selling that we saw in october through december put that into perspective. the question the rest of the year, putting aside the fed, is how do u.s. corporate earnings manage through this macrodifficult landscape >> they look pretty -- >> i becoming more challenging >> they look pretty good so far, peter. >> the guidance has been pretty good too not great, but pretty good >> most of it's been from the banks that are more domestically centric. next couple of weeks we're going to hear from more multi-nationals that will tell us, well, what's the effect of the china slowdown having on your business? what's the effect of the european slowdown having on your

business that will be very important to digest >> is there a group of companies that you watch or pay attention to all my buddies have their one name, caterpillar or something, that they look at for their own true guidance. do you have name like that >> i do, and it's amazon >> amazon? isn't that domestic u.s. >> they still have global reach, and their aws business has a lot of small companies that outsource their business to the cloud. do small businesses -- how do they manage through a difficult environment right now, and will they continue to spend for those kind of services >> amazon, is that your one tell, huh? >> i think because their tent tick icles. let us switch gears now and find out what else besides brexit and trade and the shutdown that you are going to be talking about at the office today. here's your trending stories.

>> we're talking about one of the most iconic cell phones of all time, and it's making a comeback the "wall street journal" says lenovo is relaunching the razor as a foldable smartphone it could be available as soon as next month here's the kicker, though. that new phone could come with a hefty price tag of roughly $1,500 now, just as we were talking about mobile phone sales being soft, they're coming out with an even more expensive iphone i call everything an iphone now. a more expensive phone than the iphone >> it's not going to be a basic phone. it will be a smartphone that simply happens to be foldable, correct? it's like the dumb phone where you have to hit a three times to text somebody? >> i think it's more of the razor brand they're bringing back >> it will be cool, though >> $1 5rks00, would you spend that >> i would be happily to see

somebody who has one check it out pretty cool. kraft foods is doing its part to insure furlow government workers do not go hungry during the shut doup. there's a pop-up shop in washington d.c. where fellow workers can get a free bag of kraft food if they show government id. kraft is only asking that they pay it forward by donating to a charity once they are able and from fast food over to fine dining. earlier this week we told you about president trump serving fast food to the clemson tigers football team, the national champions, at the white house. one chicago restaurant thinks it can do a little better the owner of the only three michelin star restaurant in the windy city has invited the team to dine there in celebration of their accomplishment no word yet on whether they will accept or if the ncaa would even allow it you know, they have funny rules over there about amateurs and accepting gifts and things of that nature. >> that's the restaurant you are talking about, alidia. it's spectacular and spectacularly expensive. it's about a three to five-hour

meal the chef, amazing. i love chicago i love the restaurant. i tell you, though, a 19-year-old college kid, i would not have known what to do at 19. i would have been, like, give me the big mac. >> i have been invited to linia, and it's a price fixed menu. i don't know if this is for me it's just a little -- it's a lot. >> it's a once in a lifetime experience >> it's a gastronomic experience >> it's also $300 to $500 a person >> they're offering it for free. >> it's a prettyexpensive meal >> it's an experience. if you are a 300 pound lineman, you are going to have to order a lot. let's put it that way. >> they do have multiple courses. >> i mean a lot of courses frank, thank you per person still ahead, an alarming new report on housing and the economy. how climate change could be impacting your biggest investment nt ton set with usexinhe latest part of her rising risk series

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well he spoke with warren buffett about jack bogle's ledge endary career i know you interviewed mr. bogle many, many times i've interviewed him many, many times. the thick i love the most about jack was he could tell you, you know, us that we were wrong in sort of this gruff manner, but always with a gentlemenly air. you never got mad. he would be, like, becky, that's completely incorrect for some reason you never got upset about it because you knew he had his vision, and he had been proven right over time. >> you know, brian, that's completely accurate, and it's a great way of saying it i think just on a personal note, jack was always kind i've known him for about 18, 19 years, and i have to say he was kind to me when i was just starting out at cnbc just a gentle manner he took the time to say hi to everybody who walked by, everybody he saw along the way a kind gentleman.

>> started out in how much he saved the american public in fees and how they convinced this emto be long-term investors. he really reset the investment mind and just talked about the savings that you saw for those american investors, the average american investor. he said if you look at etf's and mutual funds, mutual funds, in particular, he thinks they're a better place for american investors, and he really thinks that is what bogle built. i dropped that down to zero. just if you are talking about $1 trillion he said a lot of wall street is

devoted to charging a lot for nothing, but bogle charged nothing to accomplish a huge amount he said he did all this with very little personal gain for my any of it, and he said over a 30-year period that he was doing this, he really converted a lot of people to the right religion of investing it's a good religion, and it pays off he said if there was anybody -- i think it was last year or maybe the year before in one of his annual letters, buffett wrote about jack bogle, and said if there would be a statue put up to anybody on wall street, it would be to jack bogle >> a chirtable man there's a school called the blair academy. he has donated money for a new science center there i have been blessed to know some members of his family. they live around me. very frugal man. well loved by all members of his family, despite being tough and just another guy, becky, who his business, kind of like fred smith of fedex, was started with a college thesis that was his thesis and kind of left it on the table for 20 years. then came back to it after leaving wellington i know you guys are going to do much, much more on mr. bogle in "squawk box," and we will look forward to it, becky

thank you. >> good to he so ysee you. thank you. >> we'll pay tribute all day long here on cnbc, and we'll be right back this is a tomato youk from farm, to pot, to jar, to table. and serve with confidence that it's safe. this is a diamond you can follow from mine to finger, and trust it never fell into the wrong hands. ♪ ♪ this is a shipment transferred two hundred times, transparently tracked from port to port. this is the ibm blockchain, built for smarter business. built to run on the ibm cloud.

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lexus ux and ux f sport, also available in hybrid all-wheel drive. experience amazing at your lexus dealer. there is an alarming new report from the u.s. government that is shedding new light on the impact of climate change on real estate. as part of her continuing series on the rising risk of real estate, diana joining us now on set with more. good to see you. >> good to see you too, brian. from floods to drought and wildfires, the threat of extreme weather to homes it clear, but the risk to the mortgage market of a climate foreclosure crisis is just now coming into focus. ♪ >> reporter: hurricane march have i flooded close to 100,000 houston area homes, and the vast majority of them had no flood insurance. >> ultimately ended up about four feet. >> reporter: jennifer and andy

taylor did have insurance, and at the time vowed to rebuild >> the fabric of the community has been amazing >> reporter: but as they watched several homes on their street go into foreclosure and the fabric of their community seemed to unravel, the taylors joined other struggling neighbors and sold to hungry investors who descended on the city. >> we have sold. >> reporter: houston's strong economy made it a hot housing market before the storm and investors are still swarming foreclosure auctions like this one now rekindling images from the foreclosure crisis a decade ago. >> i've heard plenty of stories of homeowners whohad no choice but to walk away >> reporter: in harvey's federally declared disaster areas, 80% of the homes had no flood insurance because they weren't normally prone to flooding serious mortgage delinquencies on damaged homes jumped more than 200% according to core logic. houston could have seen a massive foreclosure crisis were it not for that strong investor demand the next city to get hit by a

natural disaster might not be so lucky. in houston investor purchases of ten or more properties jumped nearly 50% in the year following harvey, according to adam data solutions. some were large buyers like cerberus capital and homevestors. others were small flips like j.p. patel >> it was a kind of perfect opportunity. >> patel and his team have bought more than 80 flooded properties so far. >> we literally can avoid the whole problematic nature of the foreclosure process. >> reporter: it's not over yet >> sold! >> reporter: even a year after harvey, neighborhoods like this one are still rebuilding littered with empty houses and empty lots some say all of this should be a wake-up call to the nation's banks and mortgage lenders we asked ed del gado, the ceo of a mortgage industry trade association, if the mortgage market is prepared for increasingly severe weather. >> i don't think they are. i think if we look at the basic foundation of what drives the mortgage market is the

application of credit risk what's missing is the understanding of weather risk and where those weather events can take place >> delgaudio emphasized that most of the damaged homes in houston were not in fema flood plains >> you have this tremendous urbanization, population growth, rows that are being built in the last ten years where does the water go? is there an underlying risk for us to examine with respect to our portfolio and then make decisions? should we be lending in those markets? >> reporter: lenders today and the federal government that backs most loans base their risk on fema's flood maps, but even top fema officials admit their maps don't accounts for increasingly extreme weather david leads risk management at fema >> we can't try to determine what's going to happen in 12 months beyond because insurance is set up for what your risk is today, and it wouldn't meet accuarial science to charge you for a future potential >> reporter: fema is required to update its maps every five years, and maurstad says it

relies heavily on local communities reporting problems some don't because they don't want their insurance premiums to go up. >> we know that only one-third of the properties in the high risk area have flood insurance, so we have a lot of work to do >> reporter: as does the mortgage industry, which could ultimately see a climate foreclosure crisis >> i think it could come close in terms of exposing lenders to uncontrollable risk. >> when you have a trillion dollars of real estate at risk in coastal markets, it's about time you start paying attention to that. >> most lenders follow underwriting guidelines from fannie mae, freddie mac, and the fha, which back the vast majority of mortgages today. in the end it may be the taxpayers left holding the bag on climate foreclosures. >> excellent piece part of your continued series. i got to imagine that fema and the mortgage market are going to have much more to say and much more to do on this topic >> absolutely. i mean, the more storms we get, and i'm not just talking about hurricanes and floods we tend to slow a lot of water, but fire

damage due to drought. they really have to start focussing on what the risk is, but the problem is right now they're looking at the here and now and not projecting the risk five years, ten years, 15 years out. >> it's amazing to me too, having been in galveston and houston during harvey and seeing the water level, being on some of the boats that these investors keep buying these homes. some of them had four, five, six, eight feet of water >> but they're fixing them up and flipping them. the demand in the houston area, i mean, that was a year later. hundreds of investors there making money >> all right stick around let's turn now to talk more about what is happening in the broader housing market joining us is mark flem, chief economist at first american. mark, welcome. outside of the rising risk series, just sort of broaden it out for the regular market here, which is where do you expect mortgage rates to be for the whole of 2019 because they spiked a lot towards the end of 2018 with the fed, with the change in the bond market? >> right i mean, the fed has been working on trying to normalize rates overall as well as push -- >> what does that mean,

normalize? >> 3.5 is not normal for a mortgage rate. getting rates up into the 5% to 6% range that's where we were there briefly at the end we've had a pullback for reasons outside of the mortgage market in the last couple of months i think something in the low to mid 5s is where we should expect to be. >> i have seen a lot of people revising their predictions lower, though, for mortgage rates. it was supposed to be 5, 5.5, and back when i did my predictions in december, that's what everybody had we did that. now i'm hearing 4.5 to 5 because of the latest drop. >> people don't buy homes on the price. they buy homes on the monthly payments they do all the math with rates and they say i can afford

$2,000, and this is what it gets me, and they always spebtd e spend pretty much the most that they can any sign that the housing market can sort of stand up in the face of higher rates? >> well, you know, we saw in the fall when rates spiked, home sales dropped off really dramatically >> what about prices >> prices start -- the gains started shrinking. they're still gaining according to a yoer ago. >> slowing growth would be a way to -- >> yes i say gains. anyway, but they're very sensitive right now. i mean, we saw rates drop back in december, and mortgage applications this week, last week, really spiked. i was surprised to see how much on the purchase applications there's rate demand out there. as soon as they get -- it's not just what can i afford what can i qualify for >> the most common three years, because i always get it mixed up, so i don't want to say it exactly is 25, 26, and 27. those are the three most populous age groups in america there is a huge demographic boom that is coming to this countries. >> give us five years. >> they're going to start getting married and having kids. >> yes >> then again, you can say,

well, they have so much student loan debt, they can't afford a house. will that demographic shift benefit real estate long-term? >> yes i mean, we already see it. we're seeing a rise in homeownership largely driven by millenials the older millenials buying homes in their lower 30s they gain the benefit of a better income because they're more educated, and that's good for being able to buy a house. the data is showing that by their mid 30 rz, there's no difference in the homeownership rate for those that do and don't have student debt. >> you don't believe in the whole millenials don't want to own where, they want to rent and be urban >> once you have children and get married, it all changes. >> i hear you. >> you are so right. i mean, have you that apartment in the city, and then you have a kid, and all of a sudden that baby crying four feet from you, you are, like, i need a basement i need a man cave to go hide away for that toddler. it's a huge thing. demographics are going to play a large role in housing going forward. >> everybody talks about the millenials the baby boomers i think we should be more focused on them. they're going to be selling, downsizing a lot of them are buying

a lot of them are in a good wealthy position now following the recession, they were not had he slowed their downsizing because of the recession now they're picking back up again with a better economy. >> imauto actually worried about the baby boomers for a slightly different reason, and that is we don't have a lot of supply to give it to all the millenials, and that's because more than half of all homes today are owned by baby boomers or the silent generation, and they're ageing in place, and they've got their low rates. they're locked in, and so they're not going to make that home available and so all this millennial demand is coming on-line. where is the supply? >> absolutely. a great discussion huge demographic shift mark flem, thank you very much see you all dayhere on cnbc. so, finally, just a reminder that jack bogle, titan of the industry and all-around good guy passed away yesterday at 89 years old. like becky quick echoed earlier, i want to thank him and his family i know many of them may be watching cnbc because i was texting with a few last night, and i just want to say thank you for all that uncle jack as some

of you have called him, titan of the industry, always willing to give us an interview, a guy that wouldn't hold his thoughts, but always in a polite and gentlemanly way, jack bogle, tsndrarso ur tyo family or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. healthier brain. better life.

zplienkts we're going to hear from morgan stanley after a big number from goldman sachs and bank of america pulled stocks higher then new this morning. carlos ghosn's bail, his appeal has been denied. he will now remain in jail until at least march under japanese law, and we are remembering an investing legend. jack bogle pass weapon of mass destruction at the age of 89 we're going to talk about his life and his impact on the way americans invest and save. it is thursday, january 17th got it right today

2019 "squawk box" begins right now. live from new york where business never sleeps, this is "squawk box." >> good morning, everybody welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernan and andrew ross sorkin. let's take a look at the markets this morning u.s. equity futures at this hour are indicated a little lower dow futures down by 75 points. s&p futures off by ten the nasdaq down by 37. yesterday it was earnings that came to the rescue of the markets. you saw the dow up by about 140 points after goldman sachs, bank of america, several other companies that we heard from kind of soothed some investors concerns about away we're going to be hearing during this earnings season. we do have more earnings coming today. we'll take a look and see where that goes.