>> this is a special presentation of ""squawk box"" live from the world economic forum in davos, switzerland. >> good morning. welcome to ""squawk box"" here on cnbc, where we are live with the world economic forum in daf yos. i'm becky quick. we already have news from the mountains. the imf issuing a warning on a global slowdown. this comes after china's report that its economic growth for 2018 came in at 6.6% that was the slowest we've seen since 19 the 0 let's take a look at the markets on all of this by the way, we should point out that imf number, the reason that they downgraded things was not because they see a slowdown in china or the united states it was really germany where they see a big slowdown places like saudi arabia and what people here are saying is that the imf tends to be pretty conservative with some of the numbers. you might see other economists kind of reigning in their numbers even more than that. take a look this morning you're going to see that the dow futures are indicated down by

154 points let's take a look at what happened overnight in asia you are going to see that the nikkei end of the day doung by half a percentage point. stocks were weaker as well the shanghai compositedown by 1.2%, and the hang seng off by .7%. take a look at what's happening right now in some of the european equities. the ten-point is yielding. there is some talk here about what's going to happen with the ecb when they finally this month stopped buying a lot of those government bonds it will be the first time in four years that happens. that could potentially have a lot of implications, not only for the ecb for treasuries in those markets, but also treasuries here in the united states and beyond.

dare i say possibly longer it is now day 32 of the government shutdown. the tsa says that unscheduled absences among u.s. airport security officers rose to 10% on sunday that's more than three times the rate on the same day a year ago. >> i have to say they were very cheerful, very -- >> i have to say more customers sending love and hugs and thank yous to all of those people without --

>> i was going to say they were in a much better mood than i would be you have to hand it for them where i went through in newark, i was anticipating delays that were not there >> let's look at -- good to see everyone >> good to see you, too. i'm okay right now. snoo we're going to start with goldman sachs which was upgraded goldman sachs upgraded under armour to buy from neutral i added it to a buy -- goldman says that the athletic apparel sales -- the initiatives will significantly expand its profit margins, and that's coming back to 21. it had a rough, rough couple of

years. >> we're going to talk in just a minute we're going to be talking to the heads of the banks here in davos, starting with brian moynihan i want to show you what jeffrey oven said earlier this year on the value of financials right now. >> it seems like at the end of the year because the yield curve would invert one basis point, the computers -- they were talking to computers, and the active investors kind of ran out of money, and they just had sell financials at semiprice. now you have a situation where you have companies that are almost utuliitarian because they're low risk entities, and they're pretty fortfied against

a lot of macrorisk >> joining us right now is bank of america's ceo brian moynihan, and we are thrilled to have him. we spent some time this morning on a panel together talking about market concentration, too big to fail, and all of that i want to talk we are always here and talk about global issues. i want to start the conversation back at home, which is to say the government shutdown and how you as a ceo of a major bank are thinking about that both from the perspective of the bank and the economy. at the end of the day we have lots of customers, and we'll notify them. we're getting them at least from the way we do in a hurricane or any other type of disaster,

natural disaster basically prepare their payments and payment release, no interest loans. >> how long will that last, by the way? if this were to go on for months, would banks around the country have to change their position >> it's -- in the grand scheme of things that we have 50 million households in the total number of employees that are on the -- 800,000 as long as you know they're going to get paid, which the money gets that -- >> right >> a lot of money coming in. it's not good to have -- you're talking about tsa disruptions and economic statistics. just things that are -- >> well, i was going to ask you about that we don't get a lot of the economic numbers the thinking on wall street is that we could be at a period of inflexion that all these numbers are really important right now we're not getting things like retail sales, but your bank has a very good idea about what's happening with consumers maybe you can give us the next best thing your read on the economy in

terms of how consumers are feeling, how they're spending. >> these people who come in and say, look, on my read on the economy, things look like they are weakening pretty significantly. what do you attribute that to? what you see versus what had he this see >> it's weakening from a faster growth rate. we went up a hill, and now we're coming down a hill, but we're still above -- way above zero. we have 2.5 for 19, and the team

have got 2.5 >> 2.5 gdp >> u.s. and 3.5 in the world we were talking about synchronized growth, but it's a slowdown, not a stop, and that's what we have -- >> did your mix of businesses -- was it superior to what we think of with some other big banks that allowed you to outperform, or was it -- >> it was a great management was it your people that you inspire with great leadership, because i saw superlatives about bank of america, and it's not -- not knocking bank america, but it was significant performance from your -- the businesses you are in, or from better execution, better expense control. what was it? >> i think it's the power has

been very strong the capables are best in class because we invest so much in them i think you saw this quarter not one quarter, but many, many quarters it's just got people -- >> it wasn't the yield curve it wasn't -- >> sitly it's better than dealing with hedge funds and things like that suddenly these are better businesses than some of the things you can garner doing other stuff? >> the consumer business is always -- it makes about twice as much as the next business they make about $4 billion after tax a piece. that's because u.s. economy has been going back to back. you know, if you think about a large economy and the large position and operate well that the team does across all our businesses and the consumer

business doing very well, that's going to produce a lot of earnings >>. >> the month of december was really kind of strange, and it's moved back to where it's more normal and things, but it was really a strange time. shutdown and the confluence of things that didn't go right were high a lot of people had the surprise at the end of the quarter. going into the end of november, the businesses were performing basically on par >> another thing, though, this is something you have been after a lot of years and a lot of quarters i was kind of surprised just looking at the employment for the bank 205,000, which is down 75,000 from where we were from where the financial crisis took over is that where you see employment for now? >> it won't come down.

we invest for technology for better quality and for better services for all our customers that obviously makes us more efficient too. you are seeing a cycling maybe 4,000 people you had 2,000 or 3,000 more people facing customers and less people digitized and got rid of it that's going to go on forever. what number of people that would be, i don't know you'll have a shifting of that body from one side to the other side for lack -- >> before we let you go, i care deeply about interest rates. if you were jerome powell, what would you do >> i think the minutes are clear that as they reach the neutral rate, they have said you have to be careful now and watch where

data dependent, and that is meeting to meeting, and analogy of a great economist once made to me, think of them as climbing one of these mountains there's no path. they've reached the path, and now the question is what they're going to do, and that's dependent on data. >> sthau nice on see you. >> you're doing a heck of a job, pally. heck of a job. right? things are -- >> regulator yeah >> heck of a job >> he doesn't work >> not as well as -- >> coming up, we have a huge line-up today. blackstone steve schwartzman will be along this hour.

we're going to find out how the shutdown in u.s.-china trade issues are impacting that business as well as their investments. schwarzman, really a chinese whisperer to the administration. here's a look at the premarket winners and losers in the dow. it's nice here really nice. >> it is >> yeah.

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we are live from the world economic forum in davos. we have a number of -- we have news for you right now as well starbucks expanding its delivery services the coffee giant says that it is expanding starting today in san terrific then it's going to be rolling out new stores in boston, chicago, los angeles, new york, and washington d.c starbucks also plans to test this new service in london i should say these are delivery services not to say they're expangsding new stores these are delivery service that is will be available in these new cities >> all right when we come back this morning, how worried should the markets be about the chinese economy and the slowing global economy

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>> this comes after china offers an important -- import boost to help eliminate trade imbalances. joining us right now to talk about this and much more is blackstone ceo steve schwarzman. thank you for being here >> it's great to be here it's so beautiful. >> it is we got lucky with the weather. we're hoping that will last for awe few days, at least why don't we talk to you about china, first up. people have called you the china whisperer. you yofrl know people in the administration in the united states and people in china so many people are trying to handicap this and find out what's happening next. not that you have a particular knowledge of what's coming next, but you do have a lot of insights on both sides away do you think the most likely scenario is >> i think that both sides would like to see something happen each for their own reasons auto the u.s. side one of the

more important thing, among others, is compliance. i think there's some skept sim or need for clarification that if they agree on something, the u.s. side wants to know if it's going to happen. did could be appealed to within 30 or 60 days. some mechanism so it's not just people having agreements without the ability to make them happen. do you think there's a way to do it that both sides can feel good about? >> we'll find out. i was going to say during our panel we talked a little bit about china. you seemed to suggest that you thought -- and i know there's the question about march 1st and these specific issues, but this could be a multi-year,

multi-decade long conversation, and that may be, again, the polite way of putting it do you think we're in -- do you think there has been a fundamental shift between the idea of cooperation between the two companies to one of much kind of greater competition? number one and to in the world economically china has the larnlest population they each have some type of destiny. some of which will be cooperative. of course, as it it is, and some of which will be competitive, which is what tends to happen. i think we were talking about it on the earlier panel was normalization of trade, and that's going to take some time because the chinese system is so different with state-owned companies as well as private companies as well as, you know, more restrictive access to their

country, typically, than we have of ours. these things work out. they don't happen in a day or two. they don't happen in a week or a month or a year. it impacts -- >> do they happen by 2024? did you see that obviously with the $10,000 per person dw dp that cannot be the individual consumer that the united states is, but with five times as many people, i don't see why we can't have -- i know what people say about trade deficits that's not the problem it would be really nice to match exports and imports just because we would be exporting so much. is that possible to do that? it was funny that it was by the end of trump's second term theoretically. >> it matters as to what the cost of labor is in its place as well >> right >> but over time things should normalize.

it wasn't my words, 2024 i swear i have no idea about 2020 i mean, you got a lot of great people 400 of them. >> i got some great people >> what are you talking about? >> you saw that. did you miss that in -- you have a lot of viable -- yeah, yeah. you got a lot of -- castro, is that his name? >> let me ask you. we are spending a lot of time trying to get a feel for the economy. especially with what the imf just came out talking about the downgrade that they're putting on the global economy. you own more real estate than anybody on the planet around the globe. you've got a huge number of private equity companies that employ hundreds of thousands of people what do you see on the economy both from the united states percent picture and globally >> we have 600,000 people in our company.

the u.s. economy is slowing from where it was two quarters ago was at 4.2% growth, which is unsustainable for a large country, rather, like the united states we'll probably grow this year somewhere around 2.5%, maybe 2.75%. i don't see any recession. the consumer confidence is down a little bit, which i think comes from, you know, some of the dysfunction. they're still spending a lot of money, and we're 70% consumer economy. i see the u.s. rolling along, but at a lower rate for -- it's also lower earnings growth >> but the -- what we got from reform and deregulation, it was front end loaded there aren't any residual

benefits from corporations in terms of repatriation and not sending as much back to the government is it really only doable 2.5%. maybe we're going to see the capital spending that we feel like we didn't get >> the previous eight years was 1.8% with none of these types of things i'm not an economist i can't tell you it will be a lot higher, i believe being, than where we were the previous eight years coming out of a recession. it should have been much, much higher i think we'll do okay. we'll keep creating jobs it's the gift that keeps on giving >> you'll ultimately find the cycle. i don't see that that's going to be happening in the short-term >> let me ask you about this potential threat i know there's hand-wringing in davos.

seth clarman wrote a letter and it's made its way around davos, and i want to read you does. he believes ae calamity is coming in this letter. in particular he talks about government shutdowns and trade wars he says social frictions remain a challenge around the world, and we wonder when investors might take more notice of this social cohesion is essential for those who have capital to invest >> seth is the a smart guy i didn't see the letter. what i can tell you is that the cohesion of societies in the developed world is definitely gone down. one of the contributors, i believe, is the internet itself. the ability to mobilize small groups of people to basically undercut what societies typically would want to do we're becoming fractionated, and there's no head of state who would tell you things are the same todayas they were ten

years ago in terms of the ability to run a democracy in that sense seth is correct. i don't know where else his letter took you as a conclusion. disrupting some tired policies around the world that maybe weren't accruing to as many people as possible, isn't it always going to be bad you mentioned the internet obviously, the positive things from the internet if we had to rank what we've gotten from it, versus the disruption that it's caused, i just don't know how we gauge whether it's good or bad at this point. i think the china disruption that we've seen with the administration -- i think that could end up being additive. i think he is saying look at government and look at the government shutdown. yellow jackets.

>> it is a world becoming less governable certainly in the democracies that inhibits solutions to problems, and governments need to provide solutions >> has that slowed down any of your spending or interest in making new acquisitions? >> not necessarily depends where you invest and at what price you are investing, and in what category of investment you are talking about. >> that's the biggest thing. just price alone if you look around, things are cheaper than they were four months ago >> sometimes dislocation creates opportunity. sometimes people get really scared, and they shouldn't the human condition could be emotional. >> maybe we can learn from the davos guys for once. last year as we were heading to

the perfect society and the perfect world before everything hit the fan, maybe we're not quite, you know -- maybe the world won't end in 12 years. >> this is a great contraindicator. >> maybe aoc is not right. maybe the world is not gone in 12 years did you see that >> i want to thank you for joining us >> 12 years. enjoy the 12 years >> you will still be a young man. >> all right, coming up, is the lodging industry feeling the heat from the shutdown or the trade wars? the ceo of marriott, arnie soren sen, will join us next to tackle those issues a lot more will he ever build a hotel in davos? we're begging you. where my feet don't hit the wall >> hold on >> steve has us. >> he has a hotel here >> hilton garden inn >> is it ready for -- >> it's excellent. >> i think it's fully booked >> can i walk here >> yes well, we sold out last year. >> i need somewhere i can use -- i consulted with your grandmother's doctor.

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>> clogging airport security lines. are consumers thinking twice about booking travel at this point? joining us now is arnie sorenson, president and ceo of marriott international can we start big, arnie? we'll get to marriott in general, but we were just talking about a letter and the state of the world, and i can't imagine anyone who has more tenticles -- it's a terrible thing to say someone has, but tenticles that someone has opening hotels in countries across the world does the future look daunting to you or positive to you at this point globally >> ithink both if you think about the positive side, for a second, people love to travel today more than ever young people particularly would

put travel very high on their list of things that they've got to do. when i was growing up, it used to be a discretionary luxury now, forget it i'm going to take my vacation. i'm going to do that before i buy a car, maybe before i get an apartment, whatever. that's happening all around the world. of course, we talk about it in the sense of people want experiences more than they want stuff, and i think there's -- i think there's real truth to that >> brian moynihan just said the same thing with people who are using bank of america credit cards and beyond, people are still spending more like a 5% spending growth versus 8% that we saw last year. it is going to experiences >> that's travel it's food and dining, basically. >> because the world is ending next year, i better do this? >> i think -- no, i don't think it has anything to do with that. i think it's partly instagram, and other social media where the consumption we now share and brag about in a way is the stuff we take pictures of. >> there are eco-lodges and places where people are trying to go before the world ends,

right? there are -- i mean, there are locations -- >> have you picked one >> the maldives are a place where you go in part because they think 30 years from now you might not be able to go there. >> could be. >> talking about being able to go somewhere or not, one of the questions we've talked about the past couple of weeks on our set, executives constantly amid what's gone on with china and elsewhere talk about can i go to china, can i go to this place and that place am i going to get arrested is there something going to happen to me have you felt that at all? >> no. no and maybe partly because i'm not going to stop and think about it the world has got plenty of risks in various places, including if you stay ome. for goodness sakes you got to live your life and get around and do things the china story, of course, is a little bit complicated because we've got the trade and we've got a number of very high profile event that is have happened the china story is still a very constructive one in the travel

space. we're not in a business, which is super sensitive from a national security perspective. i don't think we're going to be in anybody's crosshairs. >> what's the vacatincy rate in china hotels >> it's a good rate. >> could you see business actually being better after it's all said and done? >> which brouhaha? >> the china brouhaha. >> the trade wars. >> in china, too, you've got risks on their economy because of trade >> yes >> you've got also a shift towards consumerism, which is helpful for us >> both of those things are sort of working their way through i actually think the other brouhaha -- i've heard some folks say maybe we should just get a small recession now and get it over with, because then we could stop worrying about the length of the cycle. >> that's crazy. that's like let's raise interest rates to the points where we have a lot of ammo let's cause a recession, and

have plenty of interest rates cut. >> could well be very mild and not very long. >> so the -- so the hacking thing that we have to ask you about. it wasn't a half a billion, but it was 300 something, right? do we know of anyone in their suits -- do we know of anyone that was actually something bad happening? things that have happened from the past from the passport numbers, any of that >> let me see if i can give you just a short version of this we heard that there had been an event. we decided we had to go out to the market very quickly and be transparent. the market in this instance meaning our customers who we've got an obligation too, obviously. we tried to find out everything we could find out inthe first couple of weeks, and we went out and sent 500 million customer records. we didn't have the data about credit cards or about passports.

that's a global number that includes u.s. travellers and china travellers and the rest of it the numbers were quite a bit smaller. >> yeah, but why do you even hold on to my passport data if you can't protect it that's what i don't understand why do you keep it >> well, i think where we need to get to is it all has to be encrypted where. >> or just erase it. don't save it. why are you saving data? >> there were lots of reasons. we want east ease when we travel, and in many countries around the world we're required to take your passport. >> yeah, but you're not required to hold my passport information indefinitely in your system. >> again, if you are making a reservation and passport number is required, if you have to enter it all over again every time, most consumers will say this is a pain it takes me a lot longer >> until they get -- >> we have to get it encrypted, and we have to make sure that people have the confidence that the data that we keep is going to be kept only because we need to use it.

we need to use it in a way that delivers ease and value to you that's where we've got to get, and we're working as quickly as we can to try to get it. >> is there overlap in the average person who does an air bnb versus the average person that stays at marriott what do you think the actual number, new math we hit the circle? how much are -- i'm not -- i'm not. >> he is not an air bnb. >> ile not in there. i like, you know, room service and things like that do you think that that is that disruptive, or is it like everything else? >> yeah. it's -- we're at an interesting place. air bnb has gone from being the only one in home sharing that's known to now competing with a number of others booking has got as many listings on home sharing on their side as air bnb does you've got expedia with its own platform, and we're getting into this space, too. we're getting into it because we think at the top end of the market if we can offer a whole

home with a brand promise behind it -- >> are you going super luxury. >> it's not just super luxury, buttist size right? of course, we've got luxury brands >> size amount >> size of a home. right. >> but you're not doing like an inspirado style, but homes at that level >> homes you can say, you know, i know it's going to be clean. i know the key is going to be there. i know that somebody can be standing by if i have a problem. i can take my family to it, which i may not be feeling very good about doing >> good to see you zroo great to see you. absolutely i love high and tight with the hairc haircut. >> looks good. >> a lot more from davos the imf making headlines in the mountains already. warning of an economic slowdown. we will talk about that. the imf's christine lagarde speaking to cnbc earlier this morning. we'll show you what she had to say when we return in just a moment back here at the world economic forum in davos

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>> the numbers are coming in at $1.25 a share. johnson & johnson beating

estimates. revenue also beating what the street was expecting that stock looks like it is up by a quarter percentage point right now. a gain of 31 cents the cfo of johnson & johnson will be on squawk on the street a little later this morning. skbliench sarah is here, and it's time for executive edge this morning. we are live from davos, and ms. eisen just interviewed christine lagarde and has some of the highlights good morning >> good morning. ma imf fired a warning shot aahead of this meeting. now expects 3.5% global growth, which is still decent, but it's down from when they expected 3.7% in october. i asked her what changed in a matter of a few months >> what changed is the level of risks, and the acceleration of the pace at which risks are eventually materializing if you look at, you know, sick months ago, there were threats, there were concerns, but they

were not off a magnitude that we have now we look now at tariff increases that have taken place, and that are beginning to have an impact. however small. we are looking at threats. we are looking at an attempt to resolve it >> she talked about all the risks factors and the sort of areas that are hard to forecast when it comes to the outlook this year, including brexit. chief among them, no deal brexit >> how did she handicap it >> she's saying there's some sort of deal from this march 29 deadline it will crash out of the e.u., which would be devastating, i think, for growth. they have not modelled that. >> that's what surprised me the most not taking down numbers for china or the united states, which leads you to wonder if there's going to be another takedown in numbers to come. >> probably because the outlook is dimming they do expect a slowdown, though, for the u.s. compared to what we had last year. the effects of the tax cuts along with tighter fed policy on china.

6.2% growth. >> it's gra et to see you. >> thanks. >> when we come back, will the controversy surrounding the arrest of a huawei official disrupt trade between china and the united states, and china and canada we're going to speak to a top canadian trade official about ftat and the details of the new naa deal more "squawk box" right after this at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back...

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welcome back to "squawk box. we are live in davos, switzerland, this morning. members of the world trade organization are convening right here in davos. the last time they met was in

ottawa back in october a lot has changed since then an official who was there in october and who will be there this week, james carr, is here with us this morning canada's minister of international trade diversification. thank you for being here >> thanks. it's canada-like here. mountains, blue sky, cool weather. it's gorgeous. >> we got lucky. want to talk about the distinction between where things were in october and where you think they are now >> how about if we try to guess where they'll be six months from now? the answer is we don't know. there's a consensus among the 164 members of the world trade organization that there should be reform. but not a consensus on what that reform should be so canada invited 12 like-minded nations including the eu to talk about a frame that we could begin to develop a consensus around starting small and then working out greater and greater. every continent was represented. >> you said like-minded. do you consider canada and the

u.s. like minded >> in probably 90% of what we do the geography, the history, the relationship between us. the united states has its own ideas about wto reform, particularly about the mechanism and the appellate body we respect that point of view and we will have conversations with the americans about it. >> what were you going to say? >> if you've got more on china -- >> i was going to go straight to china. i was going to say -- i was going to pivot the conversation and ask you, actually, about the cfo of huawei. and the arrest of her in canada. and what kind of signal you think that sends to the rest of the world, what kind of dynamic you think is at play whether it becomes a pawn in a larger conversation about free trade. >> it sends the signal to the world that canada's a country that abides by the rule of law when you have an extradition treaty with a partner, you honor it and that's exactly what happened and there will be due process.

there was no political interference in that decision. our judiciary is independent that's the signal that we're sending to the world and much of the world agrees >> jim, let me ask you just about the new nafta. usmca or whatever you want to call it. >> we put canada first >> we'll take that we think this has been a done deal, but it has to be approved by legislature do you worry about it at all getting through those legislative bodies >> i don't worry about it. i know the political environment has changed, but we also know it's a good deal for the united states, canada, and mexico we would take that argument persuasively i'm confident it will be ratified and it means that access to 500 million consumers in north america will be assured. in addition to the 500 million europeans through our free trade deal with the european union and the 500 million through the asia deal we just signed i was in tokyo over the last two days for the first meeting of

ministers for the cpttp. so canada has added 1.5 billion customers in its free trade. >> i have a -- maybe it's an immigration question, maybe it's a neighbor question. >> okay. >> what do you think about the wall >> that's not the way we go about our business you know, we're a welcoming country. and canada's immigration policy is competitive advantage because our talent pool is not confined by the canadian border. it's the entire world. >> you control your borders? do i need a passport to get in >> of course we control our borders. >> what does that mean we're welcoming? you let anyone come in >> no. >> of course i misunderstood. so illegal immigration you would try to prevent >> sure. again, it's the rule of law. >> that's not what i heard good that's a good way to run a country. that's how i would run a country. >> you do seem to be taking advantage of issues with h 1 b vee sas right now. i've read stories about canada

coming after holders in the united states to say come to canada how much of an attack is that? >> we are reaching out to the talent pool internationally. we're making it easier for people to come to canada the policy difference is that our country believes that there is an international competition for talent and canada invites the world of course we have important rules of governed immigration and refugee systems. >> you just said you're a country of laws and treaties and everything else. i'm sure you control your borders. >> we want to thank the honorable james carr. >> my pleasure coming up next, atlanta council ceo -- what color is that salmon >> yeah. the pauper >> yeah. ♪

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♪hold on, i'm comin' ♪hold on, i'm comin' ♪hold on don't you worry,♪ ♪i'm comin' ♪here we come, hold on♪ ♪we're about to save you i'm comin', yeah♪ ♪hold on don't you worry,♪ ♪i'm comin' "squawk box" is live in davos. business executives and top political leaders gathering in the alps to tackle issues facing

the local economy and beyond and joining us, dan yergin on the price of oil. plus david abney on the shipping giant's plans. plus earnings season is upon us and we've got you covered the second hour of "squawk box" begins live from davos right now. this is a special presentation of "squawk box" live from the world economic forum in davos, switzerland. >> good morning. welcome back to "squawk box" here on cnbc we are live in davos, switzerland, at the world economic forum i'm andrew ross sorkin along with becky quick and joe kernen. we are live in switzerland it's the world economic forum. we have a huge lineup to bring you this week. a number of leading ceos who

already have been with us this morning. we will continue to bring you a number of big interviews as the day progresses let's show you u.s. equity futures before we get started. bring you the news of the hour the dow does look like it would open down about 145 points right now. s&p 500 looks like it would open off 17 points. nasdaq would open off about 58 points let's get you caught up on some of the headlines taking place at this hour earnings just out from travelers. the insurance company earning $2.13 for the fourth quarter that's better than the street had expected it beat estimates by 8 cents the full year total was the most ever for travelers you can see the travelers shares at this point are less johnson & johnson also reporting this morning j&j beating estimates. revenue also beating what the street was expecting on both strong demand for its cancer and

psoriasis drugs. a gain of 56 cents to 1.3125 tsa absences hit record levels over the holiday weekend as the government shutdown rolled on. unscheduled absences reached 10% on sunday. however, "the wall street journal" reports that data compiled by aviation officials that air travel safety has not yet when affected. i can also say i traveled on sunday when you were reportedly dealing with 3% shutdown it did not look like fewer screeners there. also, those people were in a pretty good mood relative to the idea they haven't gotten paid in weeks. also ubs missing estimates for the third quarter. and also warning of a tough start to 2019 because of trade disputes and unresolved tensions that stock down by 4.8% this morning. also tesla's model 3 has been approved by regulators clearing the way for the european

introduction of the electric vehicle next month tesla shares up to $306.60 also let's take a look at logitech shares. beat analyst estimates with its latest quarterly earnings. the quarter was driven by strong sales of gaming related products and that stock is up by 2.2% the economy, politics, security issues. our next two guests cover it all. for more on today's pressing concerns, let's bring in our guest fred kempe at the atlanta council and gillian tett from the "financial times." let's go back a year what a difference a year makes i don't know if the oxford english dictionary has defined davos geist i think. >> davos zeitgeist

>> it helps to know where you are because sometimes it can be so misleading about where we actually are >> absolutely. this time last year, it was all about the trump bump everyone was pretty optimistic about the economic outlook now it's more about the trump slump or more widely the problems of populism and you're looking at theresa may. in fact, what people are talking about this week is not just who's here but who's not here. >> they have things at home. >> yeah. everybody's got a problem at home you don't even know what home is at this point. >> well. >> i was in paris. i was mingling with the yellow vests. they were peaceful >> i hear your french accent >> exactly i can tell you if it's subsiding, it wasn't clear it was subsiding on saturday. so it's -- this is more than coincidence that you don't have to specify which country you're talking about that have the phenomenon >> i took part this morning in

davos in the trust barometer and the most shocking thing about that poll this year is that four out of five people around the world say the system is not working for them and two out of three think their kids are going to have a worse future that's fueling that populism here that everyone is worrying about. >> how does that happen? >> look. first of all, if you look at it in a long -- with a long lens, the last 50 years we've cut global poverty in half >> exactly >> if you look at it with a long lens, we've got technological advance that's going to help us de-carbonize the planet. there's a lot good that's happened because of the system that got set up after world war ii what people are worried about is that's all in danger now. >> if we carbonize the planet, we're going to be gone i know what you're saying. we're in davos i'm with you i don't want to be run out of town >> are you making sure you walk

everywhere or take the bus >> no. i'm just mostly carbon that we all are, in fact if you're going to de-carbonize me, that's a bleak future. >> let's talk about technological advance then in health care and energy -- >> it's unbelievable in terms of how long we live, how healthy we live the prospects for machine learning and what that's going to bring to us in terms of health it's hard for me to be pessimistic. i understand there are pressing concerns about populism and income inequality and everything else, but we shouldn't have been quite as rose colored glasses as we were last year. i don't think we should be as pessimistic as we are this year. >> people say the market's overl.a.x., last year too optimistic this year too pessimistic. even if you are optimistic like fred or joe who are the sunny people today, in the short-term there's a lot of uncertainty that spells volatility for the markets in 2019. that's something almost everyone

i've spoken to is brace yourself for volatility >> the two things ceos hate is uncertainty and they've got uncertainty in government shutdown, in trade talks, in chinese growth, in technology -- >> you read the letter >> the other thing they hate is losing the people. and i've heard from more than one ceo this week what are you most worried about and he said losing the people. we're losing the people behind globalization. we're losing the people in the last couple years. >> how uncertain things are, it's always just a figment of our imagination, right because last year everybody was so confident about things. it only took a few weeks after we left davos things fell apart in the markets maybe we didn't have clarity >> i think there are two things in particular right now. one is china and the chinese data that came out at the start of the week which left a lot of people saying there is a slowdown happening now or slowdown in growth. >> you believe the 6.6% number

>> personally, no. of course the other thing is u.s./china trade relations where people were hoping if you had donald trump here, there could have been some talks that's clearly not happening >> one thought last year was a bizarre aberration because the markets were -- i would argue this goes back to whether we think there was a sugar high from the tax cuts but there was this -- you know, coming into the election, there was a sense that everything was going to be terrible it wasn't terrible everyone thought they missed the train. the train left the station then the tax cuts came in and the train was really moving. and then everybody said oh, my god, this is fabulous. but there was always economists and others saying they were never going to get the growth that we were talking about >> we're at plus 25,000 on the dow. and the growth is still going to be 3 prst for the year next year probably be 2.5% the much hoped for turnaround going back, it hasn't occurred i don't know where where we go

from here -- 24700 is still much higher and reflects a lot of positive things globally now, china is -- we're not used to ten-year lows or whatever which is amazing in its own right. >> but joe, the biggest change may not be the numbers the biggest change is we've gone 2018 from a certain strategic engagement with china to competiti competition and conflict people here are talking about how that's going to unfold with the tech front in terms of huawei right now and artificial intelligence. and do china and the u.s. divide up the world and do you pick your sides or do they collaborate >> this is the area -- >> it's not like this happened in the last year, fred the 2025, the 2030 goal for china. it's always been there before our eyes except we were taking it instead

of perhaps responding in a way where we can -- >> joe, what's changed the last year, though, is you now have a white house which has not merely started a trade war with china, but actually there are voices inside it who i spoke to recently who make it very clear that their long-term strategic goal is nothing less than trying to disentangle the u.s. from china in the supply. now, i do not think that most investors have woken up to the implications of a possible future, not definite, where you have the splinter net, not the internet where you have china taken out of the supply chains for many u.s. tech companies. and i was talking just this morning to a couple of ceos of big u.s. tech companies saying, yes, we're having to think about it if that ever came to pass, it would take years and it would be a huge shock >> huawei's already warning about it the ceo just saying they had a pass the last 30 years and they could be in a position where they're already having to lay off people and maybe more to come as more western nations are saying we're

going to go this without huawei. >> what about the american tech companies? >> well, it goes both ways american tech companies are going to lose billions of dollars of sales but the chinese tech companies may lose global markets because they don't have the american pieces of their supply chain that they need >> so the question is, is this short-term paying for long-term gain or short-term pain for short-term pain? effectively. >> could you say all that again? >> that's like your known unknown unknown knowns again >> the market has priced in -- i think we'll have some sort of trade deal with china. and the market will price that in what the market hasn't priced in is a generational struggle with china for dominance. >> why not >> because -- >> is that new >> you can't ignore it, but how do you produce something like that in? i don't know how you do it >> the market hasn't priced in the possibility of a splinter net. we could end up with a world with two internets

that's still probably not the majority scenario. but the reality is if it ever came to pass, all of those economists who've created their model of presuming the internet stays integrated forever would have to rethink. and so it's ideas like those which are being discussed very quietly in the corners of davos. >> has anyone talked about the percentage of global debt to total global gdp it's at a high level if you want to worry -- >> that was on the tip of your tongue, wasn't it? it was 189% ten years ago. yeah >> okay. i'm bringing it up so can i worry about that while you guys worry about all this other stuff? >> well, i'm worried about that. i'm very worried about it. >> and about a sharp brexit too. >> can i worry about -- >> i am very worried about the no deal brexit >> all right >> buying of treasuries, that's slowed down enormously >> yeah.

great point. >> that's why we're at 2.70% >> we'll continue this debate during the commercial break. meantime, we have a lot more still to come here at the world economic forum in davos. in a bit we'll talk to dan yergin then the chairman and ceo of u.p.s. he's going to be our guest later, scott minerd from guggenheim we're back in davos in a minute. ♪ ♪ the unknown beyond the horizon.

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welcome back to "squawk box," everybody. we are live in davos, switzerland, with coverage from the world economic forum also continuing to watch the markets this morning take a look. the futures are indicated a little bit lower dow futures down by 134 points s&p futures off by 16 and the nasdaq down by 58. coming up, ihs market vice chairman dan yergin about oil prices and global growth then later u.p.s. ceo david abney focusing on superhubs to grow business. stay tuned you're watching "squawk box" live from davos and the world economic forum

welcome back to "squawk box," everybody. for the latest on oil prices, let's join dan yergin. great to see you this morning. >> thank you >> i want to talk about your outlook for oil prices because the prices actually defied just about everybody's predictions from a year ago at this time. you're looking for brent to be in the $60 to $80 range what about wti >> $10 less. but that will depend on the new ports that will come on.

and that will tighten over the course of the year >> part of what you think is happening is we haven't seen as much production that's been brought online in the united states because of a lack of pipelines. you think that changes in the third quarter? >> yeah. i think we're going to see a surge of production particularly in the third quarter overall we expect u.s. production to be up to 1.5 million barrels a day. we also see global demand being up 1.5 barrels a day that's going to put some pressure on the exporters of this vienna alliance >> i was also looking through what we can expect from opec you say they're on a charm offensive right now. how likely is the rest of the world to kind of buy that? >> on one hand, it's the charm offensive. on the other hand, they're cutting back the new partners are cutting back to balance the market and get it stronger. so last year the average price for brent was 71 at this point, it looks like it will be in the high 60s. all the factors you've been talking about particularly about china, trade, all of those things are going to really weigh on the oil price

>> i mean, that's -- what we mostly talked about at least so far has been the supply side of things it's the demand picture that people really have a lot of questions about. particularly if you look at china that has been slowing. >> it's the demand and the expectations demand around it. so you see the oil price very much responding to outlooks for the chinese economy. outlooks for global trade. if we see a resolution by march of the trade battle between the u.s. and china, i think that's going to be positive for oil and in fact, part of the way that gap is going to be filled in that trade balance is with exports of u.s. oil and gas to china. >> speak to our favorite topic we talk about saudi arabia, the relationship between the united states and saudi arabia and the price of oil and what they need the price to be to make their economy work >> well, the number -- of course you can change your budget, but you see a gap between the saudis and the russians on what they want the russians say $60, $65 is

fine the saudis -- >> they need closer to $80. >> they have so many things they're trying to do at the same time. >> how does that play itself out in terms of the relationship >> i think you see the saudis have done the major part of this recent cut, but i think that both sides are going to continue to -- that relationship is important to them not only for oil but for geopolitical reasons. >> last year we were here, everyone was crazed about an aramco ipo they say now that's going to be 2021 do you want to handicap it >> i think what they have on their agenda right now is do this acquisition or this 70% acquisition. >> that was on their calendar a year ago too >> that's what's happening right now. so i think the ipo is not tomorrow >> do you think it's ever? >> they will make that determination. i think they have to look at what it means to be a public company in this and all the -- >> does it take four years to figure that out? >> it goes back and forth.

but i think it was in a sense took the place that's where their focus was on right now. >> let's go back to china. you make it seem as if things get taken care of with this trade dispute that the economy there will pick up instantane s instantaneously. >> i think in a way you were talking about -- i was in china in december. you could see there is a divergence going on. it's hard now to see in the united states people who say, you know, this relationship with china is great we've got to build it. democrats and republicans are both unmoving away so i think there's a bigger split that's going on and yet neither china nor the united states is going to go away >> and if you just look at the economic numbers, they were saying 6.6% growth for 2018. i talk to a lot of people who came back recently and think the numbers are worse than that. is that what the oil market thinks >> they're responding to that. and i think the actual growth rate is slower

>> if you had to look to anything you think might come up as a surprise this year when it comes to oil prices, what would you guess? >> i think -- the question mark that's out there is phase two of sanctions on iran. i think that's a question that is going to hang over the market and this time -- last time the u.s. said we want zero exports well, we want 40% exports. so the question is, how hard -- and that comes up, i think, in may. >> meaning will some of those exceptions handed out to other countries get taken away >> either taken away or shrunk down more. i think the administration has said we're going to be tougher on it. and it's really focused on two countries which is china and india. >> and that number which is -- and you can point to oil prices being down for a large part because people were surprised by all those coming out what's the wisdom in the market now? fool me once type of situation or are they really thinking -- >> i think at this point, they're not thinking it's going to go to zero. it's going to be further, quote,

progress and subterfuge of what the cuts are there will be pressure to continue to bring that down. >> it's always great to see you. thank you for joining us today dan yergin >> a lot more to come here on "squawk box" live in davos what can brown do for your portfolio? the ceo is going to join us live from davos in a minute as we head to break, take a look at u.s. equity futures we are back in a moment. ♪ hawaii is the first state in the u.s. to have a hundred percent renewable energy goal. if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution that lets us collect near real time data on our power grid. ♪ if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪

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welcome back, everybody. first up, economic worries weighing on investor sentiment this morning as china growth slows to its slowest in 28 years. also, the imf cutting its global growth forecast for 2019 we will talk more about this in a little bit number two, apple supplier foxconn is trying to recruit 50,000 new workers amid slowing iphone sales number three, fedex has begun offering voluntary cash buyouts. coming up when we return, we'll ask the ceo of u.p.s.

about how the trade war is affecting business david abney is our guest after the break. take a quick check of futures. right now in the red dow off 126 points "squawk" returns live from the world economic forum in davos in just a moment. this is stonington, maine, a town where almost half the population is self-employed. lobster fisherman is the lifeblood of this town. by 2030, half of america may take after stonington, self-employed and without employer benefits. we haven't had any sort of benefit plans and we're trying to figure that out now. if i had had a little advice back then, i'd be in a different boat today, for sure. plan your financial life with prudential. bring your challenges.

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our next guest is making moves to shore up his company's global supply chain we want to welcome u.p.s. ceo david abney. we were talking during the commercial break you're seeing lots of different customers and we're talking about the different divides. is it more complicated for you to do business in certain countries today than it was a year ago if you were sitting with us? >> i would say it's more interesting. and there are more concerns. but there are also more opportunities too. it's really mixed. it depends on -- businesses like certainty. as we would like whether they should optimize their supply chains separately there's also some hope that the recent discussions could lead to

some kind of conclusion by the march 1st dates. we'll just have to see >> between china and the government shutdown, what are you more worried about i assume china right now >> china is going to have a bigger impact. >> is the government shutdown going to have an effect on you >> it is not right now we do get concerned about the people without paychecks, but we haven't seen it affect spending yet. but that could happen the longer this goes on >> i wanted to ask you about this there's a comment from fred smith. your competitor at fedex he made a lot of news saying this given their earnings said that most of the issues that we're dealing with today are induced by bad political choices. i mean, making a bad decision about a new tax, creating a tremendously difficult situation with brexit, the crisis in germany and initiatives in china

and tariffs that the united states put in unilaterally go down the list and all of the things that have created macro economic slowdowns do you agreewith him >> we're going to let fred's comments stay with fred. you know, there are some things. but there's also some good decisions that have been a plus. so there are macro economic opportunities. there are challenges it is our job as a multinational company managing our customer supply chains to show them areas that we can take advantage of the situation. >> talking about global situations it taking two to tango and the bad decisions as far as trade goes, you know, where's the chicken and the egg?

did it start with our decision to finally, you know, confront china with a lot of the inequities or did it start with china when they decided to run their trade operations in a way that really isn't fair to the rest of the world. so, you know, i see what fred's saying but knowing fred as i do, this certainly wasn't an indictment of what's happening here in our country. >> our focus is not really on who may have started you want some long standing issues -- >> it was all favorably. more favorably than it was >> that's right. it's just that you worry a little bit about tariffs and countertariffs >> i'm not going to address the comments president trump has

made but when it comes to amazon, they're a good customer of ours. they also -- just like many other large companies, we do watch carefully the decisions. >> are taxpayers being ripped off by amazon because of the pricing structure that the postal service is providing them that's the question american taxpayers want to understand >> and i'm not going to make an adjustment on if they're being ripped off >> i'm sure you thought about this issue >> i have. and we first -- we believe that the post sall service -- we need a healthy postal service for the u.s. we also believe that the prices that they charge for the package delivery should cover their costs -- >> by definition, they don't >> yes and we believe that there are m monopoly revenues that are benefitting this >> you can't lose $4 billion a year if you're pricing things in

a free market system you can't. it's subsidized. that's the only reason it stays in business. and by definition, they're undercharging for a lot of things >> and we've been consistent on the fact that they should better allocate their costs they should charge accordingly >> so you agree with the president then >> i am not going to tell you they're ripping off. that they should charge to cover their costs. >> we were talking in the commercial break, i didn't realize e-commerce is 50% of your business and during the month of december it's 65% to 70%. that business is lower margin business than the rest of your business is, right >> yeah. it is going to be a lower margin primarily because when you're delivering to businesses, you would have multiple packages so we're doing things to supplement that. one, by the technology that we are adding to lower our costs. but two, what we call synthetic

density where we help work with our customers to help target packages on a particular day and then you can overcome some of those. >> of that e-commerce, how much of that is amazon, would you say? >> you know, we do not break down by customer we will tell you that there's no customer that makes up 10% of our reeve knew >> is it a threat that amazon is opening its own air freight rubs >> you know, a lot of what amazon's doing is moving supplemental inventory and they do have planes and they are drk they probably have a second day network that they're utilizing in order to have a next day network, it would take a lot more we believe we add great having a to amazon. >> between u.p.s., fedex, and

the postal service, as they develop their own services who do you think gets impacted the most of those three? yourself, fed fedex, and the postal service >> and you're talking about if amazon starts taking on more of their own business >> yeah. >> i believe most people would think that the postal service would be most affected by that >> which is -- the reason i ask the question, the great irony of this debate is if the postal service is the one that's going to lose the business, it makes the least sense. because everybody says they're being undercharged you'd actually go with the cheapest you'd go with the people you thought were giving the cheapest price. >> by dfgs, u.s. taxpayers are subsidizing the post office. >> you have no understand most of what the postal service does for amazon is the local delivery that's the easiest things to be replaced that's why i said that >> another headline we read a

few minutes ago is fedex said it's going to offer cash buyouts to employees are you considering anything like that? >> we have already done that as part of our transformation it was voluntary retirements to those who were eligible. we got a good take on that it allowed us so cut back on some of our costs that we can take those funds and then apply it towards technology which is the key to our future. so we've already addressed that. >> we want to bring you back to this around supply chains you get involved now early on in supply chains as you -- as companies start to think about how to get stuff places. in terms of the way the whole china conversation goes, how much business do you think in terms of manufacturing supply chain come back to the u.s. versus other countries >> you know, it's going to be hard to put an actual number on it i can tell you a lot of our customers doing business in china are looking at other areas

in asia is a bigger option there are companies looking to go back to the u.s probably would do so with automated facilities and a little bit different than maybe when they left >> okay. we're going to leave the conversation there david abney of u.p.s., thank you so much. >> glad to be here still to come this morning, from the government shutdown to the global growth slowdown, scott minerd of guggenheim will share his perspective and what he is expecting. as we head to a break, look at the premarket movers in the dow. see which ones are leading the way. "squawk box" will be right back. his family. his steinway, which met a burst pipe.

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at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. welcome back to "squawk box" this morning we are live in davos, switzerland, at the world economic forum have some news to bring you this morning. u.s. informing the canadian government it plans to seek extradition of huawei's cfo. the u.s. and canada have abused their extra dags in this case, china says we'll keep an eye on that. a japanese court denying bail for carlos ghosn. ghosn of course has now been in prison since november. he tried to offer up concessions for his release.

but a judge in tokyo denied his appeal the decision means he'll remain in jail until at least early march if not longer. and it is day 32 of the government shutdown. the tsa says unscheduled absences rose to 10% on sunday more than three times the rate on the same day a year ago becky and i made our way through the airport then i gave one of the officers a hug. >> they were in pretty good spirits. more power to them >> and a lot of love coming to them most people give them a hard time not this time around >> if you ever feel inclined to do that with me, just don't. >> a hug >> yeah. just don't >> touche. >> spare me. the recent recovery on why our next guest is expecting a recession in 2020.

we spoke to steve schwarzman about it, he said this >> we'll probably grow somewhere around 2.5 pl%, maybe 2.75% i don't see any recession. i don't know where that came from the last two months of the year the consumer confidence is down a little bit which i think comes from some of the dysfunction but they're still spending a lot of money we're 70% consumer economy so i see the u.s. sort of rolling along. >> scott minerd is global chief investment officer at goougen ham. what is your major malfunction, soldier? what has got you in this frame of mind? you think we may even see a cut that made huge news. next move from the fed kwoub a cut. >> and it was broken on cnbc so how much better can it get? >> not much better but what is your major issue in

one sentence >> that the federal reserve is still a restricted path. we're going to slow down, but we're tightening and at the same time, we're going to have stimulus or drag come from the u.s. government. this between increasing rates and a more restrictive physical policy is going to spill over into the general economy. >> so how did we get to a restrictive rate that historically would be so low compared to other times that we would view rates as being restrictive? >> well, joe, when you look at where potential output is for the united states and then you layer on the inflation rate, you know, we're just not growing at the same pace we historically have when you have population not growing in the united states anymore, you just don't have the same latitude. >> what about the offset from technological advances that are coming so fast now even quicker than in terms of -- i mean, amazing quantum leaps

that no longer take 50 years they take, you know, 15 months >> well, the productivity gains in the economy though they've picked up recently have been pretty sluggish. i don't think that we're making the big gains in productivity that will spill to growth. >> that's the real problem, isn't it >> you consider that qe was great because all of a sudden it lowered rates. you were enticed to take on a lot of debt. now that we're trying to reverse things and having quantitative tightening, it's harder for companies to manage when they have large debt loads than when they had less debt >> could it ever get to the point where it makes the 2007-2008 period look even easier to manage maybe we didn't suffer -- i mean there was a lot of pain, but the system didn't collapse was the recovery built on something that isn't solid

>> well, you know, i think americans need to have more confidence than the willingness of the government to print money. this dplapolicy makers learned i lessons. i think bernanke waited too long which made things worse. and they'll engage in qe again if they have to. >> is there anything wrong with knowing we can print i haven't seen the dollar. i haven't seen our currency debase to the extent i thought it would be from what the negati negative hawks thought it has not happened. >> the tipping point's supposed to happen. >> again, the new view on monetary theory, modern monetary

theory saying we can print deficit. it's catching on i'm not saying it's right, but i'm saying what was considered a crazy idea just a year ago is now becoming mainstream among liberals and it's likely by the time we get to the election we'll be fighting this out act whether this theory is the way we can run government >> here's what i read that concerned me there was an analytical piece looking at the ecb which i guess is going to stop buying government bonds this month for the first time in four years i didn't realize they'd been buying at a much larger pace than we were buying. and they were buying more bonds than the ecb governments were actually issuing at any given point which explains why you have such low yields there and why we have had such a ceiling on yields here as well if they stop, what do you think is likely to happen? not only in the ecb countries but also here in the united states too

>> certainly what we're seeing is balance sheets aren't growing. we're seeing more upward pressure if i'm correct, we can't withstand this kind of pressure. your work shows once you get short-term rates to a level of 2.25% to 3%, the debt service costs for a corporate america which has become so highly levered will become so great that it will start to impinge on free cash flow for a large percentage >> where do you think we'll see yields actually this year? >> i think the fed has one or two tightenings this year. >> if it's also what's been happening in other markets with the ecb buying things, if that's been part of the ceiling >> first of all, i think we're going to find out it's going to

be back in the bond business this time they will do short-term financing of bonds which is the same thing except it's prebaked. i think long-term rates get between 3%, 3.25% and we start to see pressure. >> are there certain companies and industries that are so over-levered there's been a handful of bankruptcy bus they've all been rather idiosyncratic thus far. >> two things i'll say about that yes, there are industries. for instance, the media and telecom industries -- >> let's name names. the one with the biggest is at&t who else do you put on the list? >> i would take a look at viacom obviously they've got with the sky acquisition, they're going to have some pretty good revenue growth for the next two years. that's why the rating agencies didn't downgrade them. >> you're referring to comcast,

the parent company of this network? viacom didn't do a deal with sky. >> sorry didn't want to bash cnbc i think all of these companies have taken on a lot of debt. and it's yet to be proven -- >> when's the stock market sniff out this 2020 recession and how does it sniff it out what will we see >> that typically happens about -- the peak happens about four to six months before the recession starts so i would say that some time in the latter half of 2020. from here, we probably have more upside >> 3,000 on the s&p? >> it could get that high. i'm thinking maybe about 15% from where we are today. >> all right scott minerd, thank you. >> thank you. >> great to see you. we got ta lot more to come here in davos, switzerland another big hour of "squawk box" straight ahead

here's what we have on tap ray dalio is going to join us. then ginny rometty david rubenstein, bob dudley, and glenn hutchins a huge hour with some of the biggest news makers in the business all straight ahead we're back in davos in a minute.

good morning from davos. it's a big morning for the markets. we're going to talk investing with ray dalio, glenn hutchins >> and a special interview with ginni rometty. we'll talk to her about ai, big data, and privacy. and after a tough fourth quarter, oil prices on the upswing. bob dudley weighs in on production and pricing as the final hour of "squawk box" begins right now this is a special presentation of "squawk box," live from the world economic forum in davos, switzerland.

>> wow that is nice good morning and welcome back to "squawk box" on cnbc this is, i guess, why we do it a day like this. live from the world economic forum in davos, i'm joe kernen along with becky quick and andrew ross sorkin the futures now are not at their worst levels of the session, but we see a little bit of a pullback down triple digits. 138 points or so on the dow right now. treasury yields, like watching paint grow, really, recently to 2.70% and change. is that like a rocket surgeon? i love mixed metaphors always have. 2.75% right now. >> okay. we're going to get to our first guest of the hour. hedge funds facing a slew of head winds to close out 2018 but defying the market with a 4.6% gain bridgewater founder and co-chairman ray dalio.

we're thrilled to see you this morning. despite the sun, there is a lot of hand wringing going on here in davos you apparently were doing a little bit of hand wringing about what may or may not happen in the years to come i just saw some of your comments but i wanted to ask you, i think maybe you had a mind meld. seth has a letter going around davos a little bit this morning. it sounds a lot like you he says, it can't be business as usual amid constant protests, riot shutdowns, and escalating social tensions. he asks in the letter, social frictions remain a challenge for democracies around the world and we wonder when investors might take more northeast notice of this why do you think thus far investors seem to have tuned out all of this as noise >> well, investors buy returns on stocks and so on. so it hasn't yet become a factor in terms of creating a disruption there's a certain time horizon

maybe a few months nine months might be it. and so if you take corporate tax cuts, they make stocks worth more or if you have interest rates at such a low level that a return on investment of buying equities for those who own equities, i mean, the people who own their companies and they have buybacks that supports stock prices so the mechanics of that, even populism of the right, capitalism and making profits is what motivates the stock market. it's not what motivates the whole economy. so you have to realize that you're buying an income screen and so it's those factors that are the biggest drivers. >> where are we in the income stream scott minerd thinks a recession is coming in 2020. >> so there's a significant risk of a recession a recession, you know, is minus one? plus one okay let's not get technical too

much there's a high likelihood of a significant slowing in 2020. so now let's put that in perspective, right we're in the later stages of the cycle. we have had certain things that mean there's a hump in growth and then there's going to be globally a slowup. it's not just the united states. it's europe and it's china and then japan and we look at where we are in interest rates so we are almost zero. we have 300 basis points here. we have zero there those factors together with the income gap and the populism will lead to now the political election we're going to start to enter the election season. >> already new candidates on the list >> and so with that, we're going to now have a question about the rethinking of how we're operating. that wealth gap has brought about populism and with that we're going to have the

political conflict the implications of the political conflict for markets are very profound. so we're going to start to talk about that for example, is a 70% tax rate going to happen? does that change how we will behave with capital gains? does that have an effect so these factors, the combination, i think the three big factors are the combination of the wealth gap and the politics as we come to it. the where we are in the later cycle, and the inability to ease as much. that's the caldron that will define 2019 and 2020 in my opinion. >> go ahead. >> i was just going so say where does the relationship between the u.s. and china fit into that matrix i know you've talked a lot about sort of the longer term battle that might be emerging between these two countries. >> yes i think that's another example of why this period is very similar to the late 1930s. right?

so what are the factors? one of the factors is that we have this phenomenon in which there's a rising power challenging an existing power in different ways there's a trade component of that that isn't the most important component. i think the trade component can be dealt with well there's a way of being component. china is from top down for its various reasons. it goes back to confucius. it goes back to dynasties. and it is a way of operating there's a bottom up. that issue has implications for supply chains. in other words, you have a range of possibilities nobody knows where that will end up none of the leaders know the range of poeblgts. if you take the worst case possibilities which is a conflict, then that leads itself to am i self-sufficient? are you self-sufficient? how are you going to deal with that so what i'm saying is if you

take a period of time that's analogous of forces, these are the forces the forces of the wealth gap, the top 10% equal to the bottom of 90% you go back to the 1930s if you take populism as political, you go back to the 1930s as that compare sob. -- comparison. the ability to stimulate because everybody's long everybody's long, everybody's leveraged long and you want to be leveraged long because everybody wants it to go up that means central banks do things that provides credit. that's buying power. you want to make it go up. because everybody's leveraged long and you're at a limit to that because you can't as easily lower the interest rate or can't as easily print money and make it go up anymore these are the inflection points. these are the issues of our time >> if we're seeing some wage gains because of a tight labor market because they are moving up more than they had been in

the past, there's some anecdotal evidence that some sof the people that were disenfranchised are still coming back. there's evidence that people have one job that they now feel confident to quit to move onto a new job where they have higher wages. does that start to narrow the wealth gap in an organic way >> not in a material way >> and does a 70% tax rate -- >> i think we've looked too much at the average >> but can you assume if there's a 70% tax rate i can see how that holds back the wealth gap on the people accruing more but can we assume that somehow it finds its way into the people on the lower end that need it or initially it just goes to the government >> no. i think you're touching on the important question well, first of all, you have to deal with -- there's so much that is not dealt with what is the money used for >> is it negatively affecting

the employment gains at least they're happening >> but like education. >> okay. if you can assume -- >> the terrible condition of education for the most part of the population so what is the money used for? or does it go to -- does it go for universal basic income and so on. then the questions of the mechanics of it. if you have a 70% tax rate -- >> this is over $10 million. >> yeah. >> then there's the question of the arbitrage. do i become a company? and now i have a corporate tax rate andnow i avoid these -- >> my problem is -- >> -- on a corporation that affects the arbitrage between corporate behavior and individual behavior. does that affect how the tax rates are changed? will that affect corporate tax rates? if it affects corporate tax rates, then it's going to have that problem so there's no understanding -- >> it's not robin hood >> but there is -- there are no

specifics. i can't -- you have no specifics as to what will the money go for, what will the arbitrage s be i'm not commenting on it but it is reflective of the issue of our time. right? and that issue of our time has got to be dealt with like, if i was the president of the united states, i would have a commission and so on and deal with this in a manner that is thoughtful and worked out. because what we have is one side in the battle against the other side and it's probably going to produce messy things that can affect the markets but even more importantly than the markets, it affects -- >> you see my point though if it's not going -- if the 70% that you're collecting, it doesn't effectively make it to where you're trying to -- there's no reason to meet at the bottom it's a good thing when millionaires are created we don't want to create a society where everyone is poor

>> but that's why what we're saying here is that we have to re-engineer capitalism in a way that produces productivity and there are ways of doing this there are things like microfinance or there's paying education. you know, in other words i think you have to do an all-in accounting of the costs. like, if you educate somebody -- if you can't educate people well and you balance a budget, you're not dealing with the total cost. >> i don't have a huge amount of faith that our shutdown government right now will do what you're saying >> neither do i. but i'm saying that issue. let's now step back and be practical. okay and say what is most likely? what is most likely is that as we're moving forward in the markets and the economy, we'll deal with monetary policy as we touch on that and other things but that we'll move over we're going to have a slowing of the economy. not just in the u.s. but in

europe and you're going to have a slower economy in other places and that's going to have an effect that will bring growth down to a certain level. in that notion of how monetary policy will be part of that and at the same time politics and the disparity issue are going to merge. in other words, it will be the issue of politics and with that we're going to have glimpses of policy moves and as those glimpses of policy moves and polls start to change, it'll start to cause investors to calculate what does that mean for my return on the investment of the thing that i'm holding? and that is what the future looks like, i think. >> ray, can i ask you about what you said here last year? i think last year at this time, you said we were in a goldilocks period and anybody in cash is going to feel stupid about it i don't mean to give you grief you pivoted faster than anybody else >> i don't mean -- i think if you take what i said was in the

first half of the year you're going to get that stimulation. and then you'll have the federal reserve respond to that stimulation. and if the interest rates raise faster, then i don't believe they could tighten at the rate they said they would tighten and including the balance sheet without having a negative effect and then in the second half of the year, i figured that was going to happen anyway last year i happened to be right. i could be wrong plenty. but in terms of that arc -- and i think the fed reserve did make a mistake. they recognized things differently in terms of affecting the market in monetary policy so you saw interest rates decline by 70 basis points the bond yield and so that represents the term structure of interest rates. if you take 70 basis points times the duration of the stocks, you have that lift and you have that reaction so now we've changed -- so i

think we are now in a situation in which now you take the term structure of rates which is basically that rates will not rise that's what's built into the curve. if it rises faster than that, i think we're going to have another problem. and then so it shouldn't rise. and then i think as we're going forward, when we take a look at what will the -- how much will the economy slow and how much will some of the lending that supported the stock buybacks and supported the big growth was corporate lending. which was financed because the cost of funds was cheap in relationship to the return on equity then we'll see how that passes through. so we're in that phase anyway, i'm answering -- >> we got to run, but i have one quick question which is you have an inevitability to this recession. is there any way that actually things turn up in a surprise to even you >> well, i'm used to being

surprised. so i think there is the possibility that you achieve -- you extend equilibrium in a way where you have a certain monetary policy because we have 300 basis points and that you grow in a fairly slower way and that you don't have a classic recession for awhile that's a possibility and i think that's our best chance but we're still going to have to deal with these other issues >> ray dalio, thank you so much this morning. >> have you moved to florida yet? where's bridge wa urwatebridgew? >> i love connecticut. >> could we move to mars there's no capital flight there? people like to move. >> you and elon musk. >> if it happens in a state, it won't happen in a country? >> i think you could make part of connecticut -- i think you have to think outside the box

and i think the governor is a clever guy >> okay. >> and i think there are ways in terms of being able to do things >> all right >> supposing you made, for example, an income tax-free area for new entrants into the -- >> that's a new idea but you're talking about income tax free >> anyway. >> longer conversation thank you, ray coming up, our next heavy hitter of the morning. david rubenstein is here to talk about the fed, market, u.s./china trade war you are watching cnbc and we're live in davos. stay tuned minimums and fees. they seem to be the very foundation of your typical bank. capital one is anything but typical. that's why we designed capital one cafes. you can get savings and checking accounts with no fees or minimums. and one of america's best savings rates. to top it off, you can open one from anywhere in 5 minutes. this isn't a typical bank. this is banking reimagined. what's in your wallet?

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welcome back to "squawk box," everybody. we are live in davos, switzerland. the fed's first policy meeting of 2019 is just one week away. when chairman jerome powell first spoke, he stressed patience is often the line joining us with more is david rubenstein >> pleasure to be here >> i want to talk about comments you were making earlier here you are somebody deeply sourced in washington. you have long, deep connection

there is and your sense of things right now is that the government shutdown, over in a matter of days and that the trade talks with china will be resolved in a matter of months >> of course when you make a prediction, you're always going to end up looking foolish if it doesn't come through i shouldn't have been so precise. but here's my view the members of congress and the people in the administration know that this is hurting the economy. the shutdown and they really want to resolve this and i think there's a real resolve to get it resolved very quickly. so it could be more than a few days it could be very soon. but it's not going to go on for a month or so in my view >> on the government shutdown in particular before we move to trade talks, is that because both sides are going to be willing to reach a compromise? >> both sides recognize this is not in the country's interest. both sides recognize that something has to be done and there's going to be much political backlash against both sides if something isn't done soon that's the general sense people in congress have, people in the white house have as well. >> what does that give look like on either side

>> one idea i have is you do what you normally do in these situations appoint a presidential commission to study it get them together and ask them to come back in 75 days with some recommendation on what to do >> and you keep the government closed that whole time >> no. open that whole time that's one possibility one other option is if he doesn't veto it, it goes into lay. president could say i don't support it but it'll go into law. 75 days later we'll have a report i think something will happen relative lly soon. >> it's in the constitution, but has it ever happened >> president carter dchidn't lie

one of the bills, it went in >> where and how do you think we get to some resolution >> i think the chinese weren't sure that president trump really meant what he said about being tough on trade they now realize he's serious about this they also realize this if he were to depart tomorrow, there's somebody behind him that supports the same views. his views are probably the views of 45% of the american people. they realize if the trump goes away tomorrow, they'll still have to deal with somebody it has to get done by somebody or with somebody >> let's talk about the fed. the interview you did recently with jay powell i thought was an incredible interview

he was willing to open up. it's easy to get a lot of back and forth from him but he felt comfortable with you. what was your takeaway after that conversation in terms of what we should expect in terms of the fed this year >> he tried to make it clear as he could that the expectation of two increases this year should be off the table for the time being. there was a general expectation last year that you'd have two fed increases, two 25 basis point increases probably early in the year. i think his view was probably you shouldn't assume that's going to happen right now. that's what his main message was, in my view. >> and he didn't -- the probably was reciting what do you do when the facts change he doesn't feel that he was necessarily wrong with the facts that he had in october he just feels like at this point with the knowledge of everything that's happened since then, now it makes less sense to speak like he was speaking see, i would think that he would

feel a bit of -- i don't know. feel embarrassed about sort of retracing his comments and steps. or he could say the facts have changed and this is where i am now. and what do you do when the facts change with you? >> i've lived in washington for about 40 years i've never met a public figure who's embarrassed by something they said before they usually say the facts have changed or the situation is different. usually they don't say i made a terrible mistake i'm not saying he feels that, but the circumstances did change and he wanted to clarify it. >> but if you're a good forecaster -- i wish we had the greatest forecaster on the face of the planet. >> to be fair, i don't think he's by far the worst. >> to be the last one to find out. >> the chairman of the federal reserve, their main job is to make sure they get a consensus that isn't that easy sometimes he's got to make sure he's got people to go along with him. they generally get the way they

want, but they have to bring people along if you're the only person that supports something, you're not going to get your vote the votes taken before were supported unanimously by the fed. >> let me ask you about investments. carlyle investments. is this a time to continue to try to harvest before the great recession that ray dalio says is coming in 2020 or are you actually out there buying stuff? >> we are making some large investments. we think we're doing them at reasonable prices. we haven't stopped investing, sometimes we've made investments recently in large buyout we think in five or six years, there'll be good investments the there's probably been a devalue of some of those investments in the near term. >> in terms of your investing in china in -- i was going to say in other emerging markets -- china isn't even an emerging market anymore >> biggest economy in the world.

>> exactly are there places you are less convinced you can make investments? you guys were out there investigating russia early on. >> we were in russia and still in africa, latin america, southeast asia emerging markets, the theory is that prices are lower, the growth rates will be higher and profits will be higher it turns out over the last 20 years that emerging market irrs are roughly the same as irrs now, that could change and individual deals could be much better, but generally you're going to get the same rate of return in the developed markets. >> in terms of the politics of the moment, do you find it any more complicated, challenging to buy something there than it was even six months ago or a year ago? >> i often think the greatest political risk is in a country that you and i are familiar with this country >> switzerland or america? >> switzerland or america? >> i'm sorry well, actually i meant to say the united states. the united states is a country where sometimes you can't predict what people are going to do remember the famous due bbai po

case there are greater corruption issues, lack of good management issues disclosure issues in the emerging markets and the exit opportunities are fewer. but surely we recognize from time to time the u.s. government does things that are hard to predict in advance there's political risks everywhere and you're taking six, seven, eight year investments you don't have to worry about that quite as much as where things that happen every day are in your investment >> we want to thank you for joining us today. >> my pleasure >> david rubenstein, executive chairman and cofounder of the carlyle group. a lot more to come here on "squawk box. i want to show you the futures before we take a quick pause right now the dow looks like it would open off 137 points. nasdaq off by 52 points. s&p 500 off by 15 points when we come back, another big interview. this time with ibm ceo ginni roe

met ta that's next when we return from davos, switzerland

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♪ good morning welcome back to "squawk box" here on cnbc we're live at the world economic forum in davos this morning. among the stories front and center this morning, johnson & johnson and travelers reporting quarterly numbers this morning johnson & johnson beating on the top and bottom lines driven by demand for cancer and psoriasis treatment. travelers beating on the bottom line though we should tell you the insurance company's net premiums did fall slightly short of wall street forecasts you're looking at johnson & johnson off 1.5% the national association of realtors will be out with existing home sales this morning. they're expected to post a 1.3% drop from november levels. the number will be out at 10:00 a.m. eastern time. and ubs reporting a miss on the top and bottom lines for the

fourth quarter also warned of what it calls a tough start to 2019 due to in part what it says is trade disputes and unresolved geopolitical tensions. many of which we have been talking about this morning as we get ready to hear from ibm thenk about fourth quarter results, we're joined in davos by the company ceo ginni rometty. it's great to have you on set with us. and i'm thinking about where ibm is in the world right now. as you're transitioning. we've got ai on the cusp of something amazing, obviously maybe we're already there. and around here, at cocktail parties i throw out hybrid cloud and everybody nods they come over actually, they come around me because i use that term. but is it a transition period for ibm right now? more than -- is it a company of the future more than where we are right now, would you say

>> look, joe we're already a company of the future and we've always talked about as we reinvented the portfolio, while we do mission critical work, you mentioned hybrid cloud. it's a fact of life and chapter two for the cloud for all clients. you would have seen we had a big announcement with vodafone you'll see another big one after the bell tonight it's clients that say i want to move to the cloud. but economically and even what makes sense, some of it i'll leave just as it is on my premise. some i want my private cloud on my premise the rest in a public cloud it's that simple >> but for technology in general, it's been tough especially for ibm if you're in a calm before a what could be a time when you really see red hat will be accrued when >> when we did red hat, it will be 200 basis points to our revenue growth as we've talked about. that's right accretive in the second year free cash flow, though billion dollars. and it's really a good move for all of ibm

it's 200 basis points to all of ibm when we talk revenue growth. you look about where ibm is right now in this reinvention, now it's up to us to consistently perform you've really seen pretty much almost 50% of the portfolio has moved into these new areas while we do the mission critical work >> do you -- are you taking such a firm position on regulation for a lot of your peers because it doesn't affect you quite as much >> you know, actually, it's an interesting question i'll tell you how it impacts us. i think it impacts everybody i just left a discussion on this every government right now the issue is privacy of consumer data and so every government is itching to regulate. and i think the risk we all have is that there's a great overreaction in the casualty is the whole digital economy. where really what we have to protect is consumer privacy. that's consent, opt out, ability to delete. that is what i would call

precision medicine, precision regulation i'm vocal about that >> now it's something we need to -- it reminds me when the brokerage business said you know what we have a new law. it's going to be that we put our clients first before we put ourselves first. i would have thought we started with privacy should have been big. >> it is for us. we're 108 years old and we have always lived by that view. we exist because clients trust us with data i think every company now has to do that when everyone is looking to benefit from it you have to live by those rules. >> want to ask you about big data maybe we can run a dplclip we were talking about the competitive landscape and how the big guys are going to control the market more and more in part because of this idea that big data is the new oil and if you don't have access to the oil, if you're a kid in a garage, it's harder to compete why don't we try to run that

clip i'm curious what you think >> the supply of oil is finite data is actually more like sunlight than it is like oil because it is actually unlimited. we keep generating new data. it can be applied to multiple applications at one time to it is not actually like oil it is like sunshine. and we keep using it and regenerating >> do you buy that argument that data is effectively unlimited and everybody will have access to it? >> yes and no. so i think it was probably seven years ago i started using that oil metaphor but it was for a different reason it wasn't about limited, not limited. i think the real point to that metaphor is value goes to those who actually refine it, not to those who just hold it just like with countries poor countries have oil. that's what that meant i think the future and again i just left a discussion on this, people say if as an example china has no privacy rolls, do

they win an ai having a lot of data is useful but there's more and more innovation being done. i don't call this a war that's over our technology is going to learn with less data it's going to make a big difference here. and so don't set this just on the lot. now, all that said, we did a calculation that the world only collects less than 1% of the data it actually gives off so there is a ton more ut there. it's not collected and it's not used so both sides are right. >> you were excited about tax reform and repatriation and all the stuff we were so excited about last year. >> yeah. >> but you'll remember, it was always a head wind for us. but i was excited about it >> it wasn't a one shot deal >> i think there was another side of tax reform

why haven't we seen as much prolonged sustained? another discussion we just had we have not paid as much attention to the societal issues there's trust head wind you mentioned wi mentioned. you may take capital but if we don't help bridge the gap, this is what you're missing industrial revolution is the topic here every past industrial revolution had great technology but then it was accompanied by both physical structure and societal infrastructure to spread the benefits evenly >> ginni, i realize because it's only a few hours before your earnings call, there's a lot of things you can't say but i don't want to feel foolish for not asking you some things let me take a stab at it this way. there's this theory out there that we have seen a peak in big spending on technology because we are potentially headed into an economic slowdown or a recession depending on who you ask. do you believe in that view of the world? >> i should -- by the way, i was

going to be on tomorrow. you had some scheduling things so you'll get my cfo tonight i was going to be with you otherwise. here's what i see. i see clients starting to change their decision making. i think that answers your question i see a remix in the kinds of things i want to do from not just innovation but balanced it with productivity. so this remix moves. i see a shorter duration one thing i think is the same worth calling out is what kwlou started the discussion with. there's still this focus on if i just broadly use the word data, ia, automation, it can improve their business and so that stays the same, durations start changing, and you see the remix which often benefits us. >> that's great. >> you do a lot of u.s. government business. you getting any checks lately? >> actually, you know, the u.s. government business, the shutdown is not in all places.

so certain places we do work not that it's material yet but i like everyone want there to be a conclusion to this, right? so we not only get folks back to work, absolutely, and move on. >> very good great to have you. >> thanks, ginni when we come back this morning, it was a bit of a rough quarter for crude oil in the fourth quarter but we have seen a bounce back recently after the break, we will be joined by bob dudley who's going to tell us what he sees ahead in the energy complex this year stay tuned you are watching "squawk box" live from davos on cnbc. well, it means i can trade after the market closes. it's true. so all... evening long. ooh, so close. yes, but also all... night through its entirety. come on, all... the time from sunset to sunrise. right. but you can trade... from, from... from darkness to light.

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futures not so sunny most of the morning has been triple digit indicating the lower opening largely due to a presooefed slowdown in the chinese economy. more data points indicating that this morning i think we got 10-year 2.75% noticed the dollar was strong. but makes you wonder whether the dollar really will be ahead. >> but at the same time if you have other slowdowns also oil falling today on china's concerns about the economic growth. we'll show you what's going on right now. they fell during the second half of 2018 before rebounding in late december to get back above the $50 level. joining us now to talk about oil prices of 2019 also technological developments bob dudley,

they have a new advertising campaign going on we should talk about as well. where do you think prices are headed we had a fascinating conversation with dan yergin about this topic >> well, dan's an expert, of course you know, the world probably needs a fairway. it is tightening up. iran's sanctions whether it be applied or not, big overcorrection up. one down i think we're heading back into reasonable balance and by the way, we don't see the demand actually falling. >> how much is china a linchpin to all of this >> well, it's very important, of course growth in china. however, we just looked at the figures and project another 1.4 million barrels a day growth in crude demand this year >> is this your own internal numbers? >> own internal numbers. it's not that far off of the ia as well. so we're not seeing this worrying thought it's all going

to start falling >> even with the imf lowering its economic growth for the globe, in terms of expectations for this year. >> we don't see it, yet, in the numbers. >> what are your growth numbers internally >> internally. >> not for bp per se, but you must do your own -- you have economists who are doing their own math on what's going to be happening in china and what's going to be happening in the united states. >> i think we see growth in the united states a little bit under three. and then global growth, you know, three-plus >> we've been talking a lot this morning also about russia and saudi and their role and influence in terms of price of oil. what kind of pressure and cross currents do you feel between the two of them both of whom have different needs in terms of what they need the price to be. russia at a lower -- a materially lower number effectively than what saudi needs right now. >> well, they're two different kinds of oil companies of course all three are

basically 11-11-11 they're big in the markets russian oil fields are very different. a lot of late life fields. you can't turn them off and on as quickly as saudi arabia can they've got to be careful during the winter to close things in. so the timing is probably not the same the abilities are not the same but they seem to be very aligned and committed in working together. >> has your relationship with saudi at all changed after the murder of khashoggi? >> our -- you know, of course it's a worrying thing, but our relationships with saudi aramco, we work with them on the climate initiatives. we know saudi arabia well. we don't have a lot of investments in there found a way over the years but it has not changed our relationship at all. >> and do you have any expectation -- we talked about it last year was a big issue even the year before the expectation was coming this infamous ipo that has not arrived. do you think it ever will? >> i don't know. i think ipo'ing a big,

complicated company like that is complicated. it's simple to say we're going to do an ipo it's complicated i don't have any insight into it i don't know >> i mentioned you have a new ad campaign that's the first in about ten years. why now? >> i'm glad you saw it it is something we haven't done in about ten years we've come out of a really difficult decade of the company. i don't think we had the credibility to talk about things in an exciting way we're doing a lot in the getting ready for the energy transitions. we are working on renewables of course we have a lot of oil and i think it's time for us to just tell our story differently. let people know we're engaged in this transition and we have a core business. >> it's a tricky position for any oil company or any energy company, i should say, to be maneuvering saying you think demand is going to go up >> i think we have to get ready for a big change i mean, probably the longest wavelength capital investment industry around. although you can turn over the

balance sheet in a decade, depreciate it. we do believe the world needs to reduce emissions it's not a race to renewable it's got to be a combination of many things. going to be a natural grouping the world's going to need lots and lots of oil for decades and decades to come. so we're going to work on all three. and we work in marketing got all kinds of new businesses and new ventures we're involved in >> what is the most exciting new piece of technology in your world? people don't think of the oil businesses as a technology-focused business. but i think actually that's part of the story that you're focused on >> would it be good technology if you find more oil it wouldn't be >> i don't know. >> how do you reduce your carbon footprint? >> all of that >> make it cleaner, i don't know >> there's lots of things. you can produce things more efficiently. you can do things with technology to keep people away with dangerous things. the data analytics leading to

ai but the data analytics is unbelievable the processing of data we used to do on reservoirs and rocks, what would take ten years you can do in a week now so it's less people. lead naturo more oil and gas coming out of existing things, may be less investment, getting more to meet the -- >> a huge movement on the left to leave it in the ground. call it what it is a huge amount of rhetoric we need to leave it in the ground, anything that helps make it easier to get it out of the ground is counterproductive. hear it all the time almost part of the democratic plank at this point. >> but it is the great dual challenge, 2 billion more people on the planet, the world will need a third more energy of all kinds so you have to reduce emissions by half. we're working on all kinds of technologies, drones, satellite data, emission and flaring,

combined with natural gas. >> appreciate it. >> thank you >> thank you, bob. when we come back, our final guest of the morning, a good one, north ireland chairman glenn hutchins to talk about the market, volatility and the fed "squawk box" returns from davos in a moment. everything i buy. ack on and last year, i earned $36,000 in cash back. which i used to offer health insurance to my employees. what's in your wallet? [kno♪king] ♪ memories.

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welcome back, everybody. when it comes to volatility, the start of 2019 couldn't be more different than the end of 2018 since january 1st, the vix is down more than 25% joining us now to talk about the markets, monetary policy, the economy and more is glenn hutchins, chairman of north ireland. great to see you i don't know where to start. we started talking about market volatility i would like to start with what we're seeing in the economy. you are on the board of the federal reserve bank of new york we talk a lot about what the fed sees, what kind of input they're getting from people. the latest beige book showed that the economy was under a little bit of pressure i wonder what you're hearing and advising the fed as a result. >> two points. the first is that this doesn't surprise me at all last time i was with you folks i was warning about the sugar high that the tax cuts had injected into the economy, talking about how it would wear off in the coming year. th and that since it was in the

base and couldn't be repeated again in 2019, the economy would go back down to its normalized level. that's come in the united states precisely what is happening one important piece. second piece is that people are looking at economic data and concluding -- reaching one conclusion from it looking at the markets and reaching a different conclusion, asking why the two seem to be different. the markets are back where -- the economic data is backward looking. what happened to the fourth quarter? right. the markets are forecasting the future and so the markets right now are seeing something very different what they expect with the future than what the economic data shows happened in the most recent past. that's useful to think about. >> do you think the market is overreacting >> two things. one, i -- last year i warned that valuations were too high and volatility was too low so i'm not surprised by what is happening over the course of the coming year. doesn't feel like that is over with yet

feels like -- >> i remember what you said, the notion tloof throwing gasoline an economy was insane because the economy was going to heat up so much that the interest rates are going to have to go up to where it chokes it off that's not what happened. >> that's also not what i said, joe. >> you said it was insane to throw gas on a -- to do a tax cut in an economy that was already this hot. >> let me interpret myself here, i said that one of the risks we had was that as a consequence of the stimulus that we would end up getting more inflation than we might didn't have i said that was one of the risks. i didn't say that's what was going to happen. >> that was larry summers with the sugar high and he's wrong for 24 months. >> i can't take responsibility for -- but what i said was that i was -- the main point of my argument was that cutting taxes at that point of the economic cycle, doing tax reform without paying for it, was dangerous

>> if we're already -- >> maybe it made it -- can't have it both ways. maybe we need a tax cut or it would have been worse. i'm not saying 3% for a year. >> i'm not saying the u.s. is slowing down going back to the trend growth as a consequence -- >> was it not to pay for it to put a trillion on -- >> now we have -- >> it wasn't worth it to get one year's of growth that's my personal view. >> 2.5, that's -- >> the issue now is less about -- >> pay for itself. >> but i don't even know what that means exactly revenue did not go down this year it did with corporate, but went up -- a record for -- >> revenue went up, corporate revenue went down. >> you get 3%, then -- >> we have the largest deficits in -- >> since obama >> the largest deficit and recovery you have to -- you want to do countercyclical spending when your economy is going down by 5%, not enjoying historically

low unemployment but the main thing, the markets are forecasting, i think, right now, is a global slowdown. china is slowing down. germany is slowing down. emerging markets and then interest rate sensitive sectors of the united states not contributing as much to the economic growth as a consequence to housing and others as a consequence of interest rates going up. >> glenn, davos is one of the great contra indicators of our time we have been coming here together >> i remember. >> the question, though, is this year there is this remarkable sense of pessimism last year there was a remarkable sense of optimism. is there anything that would get you off the idea that actually we're headed in the wrong direction and that actually we might be surprised in the upside. >> i don't think things are as bad as people think we are for two reasons. one, the fed is not going to tighten and create a recession

don't want to do that. right? and -- >> i want to do that they still have the potential to -- >> if they have the potential to do it, they will stop and act. the whole thing about being data dependent is really important. they're looking at the economy they have bloomberg on their desk they read the newspapers in the morning, know what is go on in the global economy but there is an important point associated with that the fed doesn't really care about market levels. what they care about is the market as a transmission of policy to the real economy so when the real economy does falter with respect to unemployment or growth, and that can come as a -- the market transmissions that do that primarily are interest rates affecting borrowing levels or wealth affect affecting consu consumpti consumption. as long as it is the moving along, that's not within our mandate. so they don't understand how they think about that. >> we have to end the conversation i have 15 other things i wanted to get to. please come back and see us

again soon. >> i would be happy to. >> that wasn't much different than riding in a golf court, really >> i didn't have to endure your golf swing along the way, though >> learn from, learn from. >> thank you, guys >> you can -- >> thank you we're out of here. >> all right >> good-bye. >> "squawk on the street" begins right now. ♪ >> jim cramer, hope you had a good long weekend. futures are pointing to a lower open the imf cuts the global growth forecast, worries about china trade and day 32 of the shutdown europe is south of the flat line we begin with doom and gloom from davos ray daliwain