it is 24, 2019bo this is a special presentation of "squawk box" live from the world economic forum in davos, switzerland. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the world economic forum in davos, switzerland. i'm becky quick along with joe kernan and andrew ross sorkin. let's take a look at u.s. equity futures. you did see gains after stcoe n before this morning you are seeing some green arrows, but muted green arrows dow futures indicated up by 25 points s&p futures indicated up by three skaf, and the nasdaq indicated up by 26 points. let's take a look at what happened overnight in asia you're going to see -- at least

we're going to see in a minute that stocks in asia, particularly let's start with what happened with the nikkei, it was flat. hang seng up by .4%. similar gains for the shanghai composite. also, let's take a look at what's happening in europe and some of the early trading that's taking place in those markets right now. you are going to see that in europe there was a delay here, the dax is indicated up .5%. the cac is trading higher by .7%. the ftse is down by .2%. there are gains in italy and spain. finally, let's flip and take a look at the treasury yields too. you want to take a look at what's been happening. we've been looking at the ten-year sitting around 2.7% >> some other news in geopolitical sphere. hundreds of thousands of people taking to the streets of venezuela calling for the oust er help me here >> authoritarian the u.s. and other nations backing the opposition leader

juan as interim president to the white house weighing more tough economic sanctions against the moduro regime, including a naval blockade this could have a ripple effect. venezuela is an opec member and has the world's biggest oil reserves of the economy under moduro is in sham bells with inflation running at 10 million percent. let's look at what's going on. you can buy a barrel of wti crude right about now for, there you see it $52.58. joseph, say it with me here. >> authoritarian >> that's a scary combo. the normal reading we do of some of the names, and then it's zero degrees. i mean, it's hard. i felt for you there >> thank you >> there was no smirking >> i -- >> for once. >> for once.

it will cut thousands of jobs in europe a plan to return to profitability. there there will be more reports on the way today not just ford. including bristol-myers, union pacific, and then after the bell, we're going to lear from intel and starbucks. >> also, sources tell cnbc that apple has cut more than 200 people from its self-driving car unit project titan, an apple spokesperson has acknowledged the layoffs, but says that the company still sees opportunity in that space. those cuts were anticipated by some after apple hired former tesla engineer doug field to co-head the project. >> ran into tim cook on my way to the set this morning. >> i saw homeland yesterday. >> should have asked him >> you should have collared him and dragged him up here. we've asked.

>> i said this is the first time -- this is the first time he has ever come to davos. >> i couldn't believe that he was here >> wasn't on the list in trying to stay low profile. >> probably the other reason he -- >> each of us personally has a really good relationship with him. i don't know why -- >> maybe it's the three of us combined >> is that what it is? >> i like apples i like peaches i just don't like peaches and apples together. remember hearing that? >> maybe that's what it is i got the things the -- >> all the apple devices >> yeah. >> apple music is all i use. my kids. sfwhee has been in prison since november 19th when he was arrested for understating his income at least that's the allegation the french carmaker's board set to meet later today to replace ghosn, but he had not been

resigned and had not been pushed off. of course, there's a larger, almost, i don't know if it's a conspiracy review that this is not just a battle over actually what he did related to some of the money, but actually the japanese versus the french >> it may be the japanese not not wanting the french to own a bigger stake they have 15%. we'll see. a lot of this is going to get played out in the months to come >> if you look over the history, it always takes society somewhere from ten to 20 years to figure out how to regulate and how to societize technological changes. when the automobile was created, it took 60 years before seat belts were required. >> right >> and so what you are seeing today is the economy in regulatory world isgoing to react to the technology world in interesting ways

>>. >> he doesn't look a day older >> he doesn't. >> same scarf. >> we all have our davos gear. this is mine from last year, too. i put it in my davos closet. that was last year >> no way. oh, my god >> jim is back to talk about his call that really played outs >> this is live. is this last year or -- >> this is live. >> all right i got it i got it >> jim, you were right >> that was an uncomfortable call particularly from someone who lives in san francisco to make last year certainly the euro played out that way >> what do you think happens next i mean, how serious does this get, and in a congress that can't even agree to keep the government open and funded, do you think that they can actually reach bipartisanship when it comes to something like tech regulation >> i attend events like davos in some ways to see where the winds are blowing, and this year the winds are blowing towards confusion.

>> this year there's a market that's gone totally craze montgomery in terms of volatility, totally different from aier ago. confusion seems to reign >> the confusion -- i can understand people here being confused there's so many different prevailing things. it also doesn't help that you don't have a lot of strais officials here to figure out what happens from it you think if they were here, it would be more clarity, or you just think this is confusion that reigns? >> one of my favorite terms of the week was the politics of chaos. we traditionally looked we're seeing politics adding chaos into the equation. i'm not sure it would have added a lot right now at a time that brexit is stalled and the government is closed >> last year when we were talking about the economic cycle, you talked about thinking about it a little bit like a party. i think it was a bit after midnight is how you put it last year where are we now >> i was trying to explain this

to my kids, and i said larsz year that the economy was like a fraternity party suddenly someone came in with a new keg. it's now closer to four. late in the party people start doing strange things volatility in the margaret place, chaos in washington it doesn't necessarily mean you leave the party, but it's certainly moderating -- >> it means the sun is coming up soon >> soon. >> i was going to say -- >> you are going to do the walk of shame if you're not out of there. >> as aen have investor, you don't want to do the walk of shame. >> average age at the party, when you said midnight, i'm thinking -- >> that's past my bedtime. i'm thinking, you know, in college -- >> it's a fraternity party >> at a frat party, yeah, you are just getting -- >> now we're at 4:00 a.m you know, you should go home at 4:00 a.m >> is that a stretch to say the party is very near the end, and you don't want to get caught in this, or do you think there's still opportunity? >> there's two things that are clear to me. first of all, absolutely we're a day closer to the end than we were yesterday

secondly, well, the numbers are not necessarily bad when i look at them day to day i'm seeing the seeds of the cracks being planted. >> the latest, venezuela, it's like welcome chaos i mean, you are at rock bottom where you were the possibility that something good is happening down there, and with china, okay, we -- it couldn't get much worse in terms of intellectual property theft all of these things could be -- they're getting disrupted for a reason there's chaos for a reason it might be positive chaos >> for me it's a long-term investor that this is actually creates opportunities. >> there you go. >> as a short-term investor,

confusion is a bad thing as a long tv term investor, i always say when it feels bad, it's dood. when everyone has exactly the same view, it's hard to differentiate yourself when you can sort through chaos, that, joe, is, in fact, an opportunity. >> you think it's possible to have success in it >> yes for example, what do you invest in today a lot of the investing we're doing today are in things that are driving societial change we believe that things that will drive change actually can also

drive returns, and if we're going into a period where change is needed, change will be valued >> you did not invest in jule. you had an opportunity to. you knew the ceo you decided to pass on that, and it looks like a pretty good decision, given some of the chaos the company has gone through, and the pressures they've seen from the fda. is that another reason for. >> i think it goes to the new era where people are looking for companies to have their values you can argue what the vaulds mites be, but they're looking for companies to have their values this was a company that we respected in terms of some of the disruption they were creating it's a story, but the actual product and what it was going to do to society just did not fit who we were. >> because you think they're marketing to children? >> whatever their marketing too, the usage was not something we wanted to participate. >> we just showed a list of a number of your big investments uber and abnb among them 2019, the expectation is that

both of those companies may go public what do you think of the marketplace for that by the way, in ab environment where you're talking about march harvesting, on the public side do you think the public should say, well, there's something wrong where the cycle. if this is the -- if everyone is getting out of the end of the cycle, do i want to be holding this bag >> two things. first of all, it's hard to get public when you have an sec that's open where. >> right >> secondly, to the type of investments we're doing today, we're trying to do investments where the industry dynamics will overcome the overall economic picture. the dynamics of uber and air bnb, what's happening in the change in society, change in their usage, will overwhelm what's going to happen in the economy. those are the type of investments you are looking for today. whether it's public or private >> it is public. you're not going to top it out if you are a long-term investor. >> you know what i'm saying.

you might be holding the bag temporarily, but every single company we talk about had an ipo and -- or most of them in one way or another. now the price where they are is way above where the ipo is that's why he is so wealthy. >> yes, but it depends where you are. >> i understand. >> people look at the ipo's. >> if you want to hold -- either you want to hold the bag or you don't want to hold anything. you'll be holding something else that is all you're going to have i understand what you are saying you could be buying at not the perfect price, but if you want to get in on uber or in on a growth company of the future, if it's not public, you can't, unless you are -- >> what's interesting to me is some of the most interesting companies of the world are not available to the public right now. >> right >> what do you -- >> that's been a good thing for us, but getting them into the public market over time should be -- >> i want to get -- i'm looking -- i can't figure out who made this. this year has been perfect here. i haven't been cold. >> you should buy that >> i want -- i don't know. >> we have to go we've talked about soft bank a lot and this big fund. how is that changing your whole business, or is it

>> i think it is shaping the investment in certain types of companies. >> and staying private longer. >> staying private longer. >>en forever >> why do you have a public market if there are huge pools of climate capital available to you? >> i want to thank jim coulter of tpg thanks for being here. >> thanks for having me. >> that is true. he is even nodding in the video. >> i wish i were you coming up, the battle for new listings and ipo az. stacy cunningham, president of the new york stock exchange. we'll see if the shutdown of the federal government shutdown is impacting future listings at the big board, and then, later, commerce secretary wilbur ross will join us he is not really here, but he has some technology we're going to be able to talk to him about trade, the shutdown, and more. we are jusgeint ttg started here in davos unfortunately. it's 3:00 -- >> i'm excited

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>> what is being effected at the big board? >> you know, i think it depends on how long this lasts right now there are a number of companies that are lined up and looking to tap the public marke markets, is we have roughly 160 companies on file at the sec if it extends a few more weeks, it will have an impact especially for companies looking to raise money because they'll have to choose a different path if they were counting on the public markets and can't do that >> walk us through this. i don't think people really understand if, in fact, you were supposed to start a road show, for example, in mid-february, you are going to have to go re-update all your numbers >> yeah. >> then you're going to have -- then the cycle starts all over again, and we're talking -- then that will -- that pushes it a whole other how many days? how many weeks how many months? >> if the data gets stale, they'll have to go through for the next quarter and they'll have to follow it. that might be okay for some

companies. >> we're not talking about a month delay. >> no. >> we're talking about a multiple event >> it could be a full quarter. >> it could be if you look at the companies that are needing to raise money, then if they plan odd a q1 capital raise, that becomes a problem. >> this is just one thing that could cause a company not to make its original time frame anyway, this -- you see that all the time with ipo. oh, we're going to delay this, that >> you have volatility you are tacking on another -- >> this is a self- -- this is a self-created -- that's true. >> the volatility that we're seeing, we heard, you know, when there's no volatility, like all the brokerage firms and banks we're, like, wow, there's volatility when they have volatility, we can do that, well, because there's -- how about you what do you like >> i mean, we're a little bit hedged, right? i do think we're in a unique period even though we saw volatility pick up if q4 because

it's been a ten-year bull run with the market up so dramatically i think there are a lot of companies that instead of saying, hey, i'm going to hold off on an ipo, there's more of a sense of urgency that they want to be ready to ipo when volume picks up, it's drault >> you like that >> obviously, we have a vested interest in active trading volume that does well for us when volumes pick up, and when volatility picks up, typically volumes pick up too. you know, they're 50% higher than what they were. >> yeah. that doesn't translate to 50% higher operating, but it's okay. >> right overall, volumes are much more significant. typically what you see, which is really interesting during periods of volatility, the volume in the market migrates back to the exchanges and many of the off exchange venues, you know, the roughly 40% of the market, is traded off exchanges in dark pools and not part of the public price discovery process. you see that shift.

i actually think would have a negative impact on the market, especially during% of volatility >> can i shake my fist at the machine still when things are going badly? >> if it makes you feel good you can certainly do that. i think when you look at when automation is relevant and present in so many different aspects of the market, it's not just quantitative trading. >> i like it -- i don't shake my fist when the machines are driving the market higher. i guess you should be fair both ways >> i have a question for you about esg. this is -- we're not going to talk about guns. >> must you? >> i want to ask you about this. know here at davos is talking about purpose and having a purpose. >> yes >> we just had jim coulter on, and he said he didn't want to invest in jule business, not for him in terms of their values. >> that's what's getting people

off cigarettes that's such a good value one person's value is another -- >> is another purpose's value. exactly. but the -- >> the problem with jule lately is -- >> you can do whatever you want. one thing that's fascinating is so far at least neither of the two major exchanges, a monopoly over the whole franchise, have not taken any what i would describe as value-based -- have made any value-based decisions about who lists on your exchange explain that >> i will explain that i think it's really important that we avoid making requirements in regulations that prevent companies from coming to the public markets the public markets serve a social good. our mission is to help companies raise money, so then go out and save the world >> what do you think is going to is happen when there are companies that have or think that they have certain purposes and certain values who say, you know what, i actually don't want to be with this exchange i'm going to have actually go on this exchange, because i actually think those folks have the purpose and the mission that i care about >> i think -- >> then is that going to force

you to rethink the idea that you don't actually have -- you don't care what any of these companies are doing. >> that's market forces. >> that's okay with you? >> market forces are saying this is what -- >> would that change -- if uber, which is up for grabs said, you know what, we don't actually -- uber doesn't like guns they actually legitimately don't because they don't allow guns in their vehicles, by the way if they said, you know, we only want to be on an exchange that doesn't have gun companies on the exchange, what would you say or do? >> i'm glad you used the example of uber. look at the size of uber the fact that companies are not coming to the public markets means investors are left out of that growth trajectory, and we need to find reasons to welcome them not more reasons to weigh their alternatives between private and public if a company wants to -- investors can choose with their money, right >> you going to let companies that still drill for hydrocarbons are you still going to do that, though >> our responsibility zbloosh if things are legal, and it meets the standards that are -- >> i think it's up to you, st e

stacey up to you. >> what i see happen is there are companies -- when they're choosing the bah ink that they're using to underwrite, there are certain banks they want to do business with, and certain banks they don't >> that's free market forces you are a machine oply or duopoly, there's not much kmois. that is true >> there is competition. you can introduce -- >> got to go got to go. >> you tried to block it longer story >> we have a lot more to go. coming up, from actor to activist matt damon talking to us about his mission to try to end the world's water crisis and how water.org's investment fund is out performing the market 'lta autllhanewel lkbo a tt xt after the raek (baby crying) ♪

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this is a very difficult job. failure is not an option.a.

more than half of employees across the country bring financial stress to work. if you're stressed out financially at home, you're going to be too worried to be able to do a good job. i want to be able to offer all of the benefits that keep them satisfied. it is the people that is really the only asset that you have. put your employees on a path to financial wellness with prudential. bring your challenges. we spoke to matt damon in 2014 about a charity he founded. the water equity impact fund has grown to $60 million, and they provided more than 16 million

people with access to safe water and sanitation i sat down and spoke with matt damon and water.org co-founder gary white earlier this morning about the fight for clean water. >> in 2012 we hit our first million people that we reached with clean water, and we're at 16 million now we're getting a million a quarter now. >> how much easier or harder has it been over these past years? >> it seems to be a real change here in davos. a lot more corporations, brands talking about working in social impact investing from our first visit here, we had the seed of an idea. we think we can do this social impact fund. it will ep had get water to millions of people and we came back two years later, and we had launched it. now we came back this year, and now we have $60 million of assets under management. >> it's also building the evidence base. help raising money we've done three million of these loans now. they pay back at 99% the model is undeniable now. >> when you think about fundraising and also strategic

partners, historically i think you've gone more after working with companies, individual investors. >> yeah. >> does that shift given the issue that you just talked about in terms of -- >> i mean, i think our story is out there a little bit more, and it's easier to have those conversations. classically we did better with individual investors because i sent gary into the room for a few hours. once people hear the deeper dive on it, gary does a brain dump, they get it. we have a partnership with stella artois, and they've been incredible partners because their marketing people are just -- first of all, they really understand their customers really, and what's exciting is that this matters, right to consumers, and that's what -- the difference between now and four years ago is you hear these companies talking about and they're talking about all this social responsibility they're not just saying it right? their consumers are pushing them in this direction. >> what's that done for the larger organization? >> they've got this mega phone,

and they have really helped us with messaging. >> access was this need we were trying to meet, and so we go to bank of america, and we're, like, well, this should work, right? they go, okay, here's how really want to. they schooled us on blended finance. you can bring in different partners you build this kind of financial product with different traunches with it and different expectations for different investors, and then you can really attract the real money. i mean, the problems are so massive in dollar terms, right, that you will never get there with philanthropy alone. you have to bring in -- you have

to bring in the real money >> in terms of the financial return, what's it look like? >> well, we target -- if you are our first fund we targeted at -- we had a few distribution. one at 3.6 and one at 4% now, you know, we talked to bank of america you talk about that's outperforming munis. >> like we said, we have this evidence base. these things do pay back at 99%. it really is a success story about just nudging the markets towards the most vulnerable people, and it turns out they want to participate in their own solution >> you can see more of that interview with matt damon and gary white on cnbc.com when we come back, in the middle of the cloud wars the ceo of work day will tell us about one of the biggest battles raging in technology "squawk box" returns from the

mountains of davos right after this quick break

>> they slid back into it at one point. >> we were -- >> it was in and out of it and slid back into it. the dow stayed out of it >> we have to be up -- we're up double digits from -- >> we're up about 10%. >> yeah. meantime, our next guest is on the forefront of emerging technology that is really changing how business is getting done we want to welcome work day's co-founder and ceo, neil it's great to see you this morning. your stock has been on a tear. we were talking about the different -- where things have gone i want to actually talk to you about a.i. that's been a big topic for you and something you have been trying to integrate more and more into work day before we get into sort of the bigger philosophical issues around a.i., says how is integration of a.i. and work day changing the business itself >> that's a great question we look at a.i. as enabling technology across all the

applications it's not a separate new application. what it does is it allows companies to take advantage of all their data and make better predictions. there's a great book called prediction machines that really goes into the economics of a.i., and i think it's a good read for everyone, but we're looking at all of our customers' data and using that machine learning technology to make predictions on things like which of your top performers might leave in the next 12 months what's the next step for someone at your company career-wise? >> how do you do that? that's actually very interesting to be able to see based on the data you have that i may be thinking about my next step and my next step may not be inside this company >> well, so, you look at a whole series of data points. when was the last time this individual was promoted? how competitive is this job outside the company?

>> are you staying please call me, all of a sudden you could build an interesting profile and get to the privacy issues. >> we are -- we never cross the line around privacy. that data is the data of the company. they're collecting data on their employees. they have the salary data. they have the manager data they have all that data. they look at past people in that organization to predict what might happen to this individual. i'm a big believer that every company that is using data to make decisions needs an ethics officer to lay down the rules of policies around privacy and to make sure that it's used for good reasons i also believe that technology is not good or bad it's neutral >> right >> it's how it's applied >> here's the question

should, for example, a company who does have access to their own employees' e-mail, track that for the purposes of trying to figure out whether their employees are about to leave or is thinking of the next step >> i think they have to be very transparent and need to be opt in >> buy the employee? >> by the employee if you were going to use their data to make decisions around business, they need to know, a, you are using their data and, b, what you are using it for. >> agree agree. >> separate a.i.-related question your friend from salesforce made a comment that he thinks that a.i. will ultimately become a human right and that it's going to create all sorts of inequality if people don't all haveaccess to these a.i. machines right now, obviously, only a handful of companies really have access to the best stuff i wanted to get your thoughts on that i have to admit, i didn't fully understand the sort of scope of what he was talking about. >> mark is always a step ahead of me. i'm not sure

i'm not sure i comment on everybody needs that ai right. what i worry about, the jeannie is out of the bottle ai is out. the technology is in play. companies are going to use it. those that don't use it, will not be competitive i absolutely believe that. it is going to create a skills gap, and we talk about the transition from, you know, an economy to an industrial economy and how well that went it didn't go well for the generation of people that were farmers at the time. that was a really tough transition a and arguably even for the economy, it was tough. we need to be on top of retraining a lot of people if we're going to really use this technology >> before we let you go, just speak to the global economy. you have so many different enterprise clients around the world, and we're always trying to get a sense of where things really stand the imf came out with a lower than expected gdp growth number earlier this week to sort of i think it was a bit of a paul on some of the conversation here. where do you think -- what do

you think is happening here? >> last year i thought people were overly optimistic i think this year people are cautious, and it's not cautious because of their own businesses. it's cautious because of largely the government interactions. trade war, right that is definitely having an impact on companies perspective of should they invest, should they postpone investments? i haven't yet seen it manifest itself, but it's definitely part of the conversation. >> are there clients or potential clients who said, you know what, actually we're going to hold off on signing a contract with you right now because we're just waiting to see where things land? >> we're in a quiet period right now. we have to be careful. i haven't seen that phenomenon yet. i suspect that if the trade war in particular goes on or the government shutdown goes down, then we will hear those conversations. >> thank you >> thank you >> great to see you. >> appreciate it all right. coming up, british royalty paying a visit to the world economic forum i had the chance to speak to

prince william about the issue of treating mental health. we have his comments and more coming up next on ""squawk box"" where we are live from davos stay tuned you're watching "squawk box" right here on cnbc

zblats issue of mental health awareness was -- here's what he had to say about the topic >> there are still so many people who are suffering in silence, and they're not -- it's still a stigma attached to mental health, which we've got to completely obliterate before we can progress to the next stage. when i started feeling issues myself, it was from -- i was dealing with a lot of trauma on a day in-day out basis

stuff that your body support progr i not programmed to deal with, and that's why i feel such empathy and solidarity with the medical community. you know, yes, it's a job, and they go on about how it's a job, but my goodness, they do a very, very hard job every single day someone described to me who was suffering themselves in the community that you have a suit of armor on. you know, you deal with the job every day. you deal with children being very sick. you deal with elderly people whatever it might be it's something in the day that comes along that is closely related to your own personal life, and that really takes you over a line. it's only natural. you're human if you don't feel anything, then i would say you need to go and get checked out for that it's kind of -- it's kind of totally normal that we feel this way, but for some way we're embarrassed by emotions. i take it back as far as the war. i think, you know, the war time

was very, very difficult for everybody. people dealing with their own ways, losing so many loved ones and dealing with such horrendous circumstances that no matter how much you could talk, you were never going to fick tx the issu. it was so destructive and, you know, devastating. i think a whole generation just decide thad this was the best way of dealing with it they then completely by accident passed that on to the next generation you know, we all learned from their parents and leshd from how they deal with things. a whole generation that inher inherited it that this is the way you deal with problems you don't talk about them. i think now there's a generation here that are finally realizing that this is not normal. we should talk about it. we should get over it. >> it was interesting, that whole keep a stiff upper lip, keep calm and carry on just the after effects. they needed to do that during the war because so many people have lost loved ones that were so much -- so many horrible things that they were dealing with at the time it's left a stigma

he said they went to celebrity after celebrity and no one wanted to get involved about one that would be talking about mental health issues unwilling he taktd about his own issues, and that opened things up. >> a kood conversation >> you can see the rest of it on-line, right >> cnbc.com. >> thank you to the duke of cambridge. we have the -- later, morgan stanley's james gorman, david solomon from goldman sachs, and bono "squawk box" live from davos returns in just a moment at&t provides edge-to-edge intelligence, covering virtually every part of your finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy.

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the government shutdown now in day 34. let's find out how the stalemate on capitol hill is impacting all kinds of sectors

joining us for more on this is bruce broussard, president and ceo of humana. great to see you here today. >> great being here. >> i know there's a lot of things you can't talk about because you here in a quiet period right now but i would like to ask you what you think about as a government contractor if it's showing up, if you think this is something hitting people hard right now. >> it's not hitting us as much but it is hitting some of our customers and to me that's probably the worst you don't know in the middle income and the lower income how it's affecting us. we have a large contract with tricare. our military members are being impacted by it so it's less about us and more about our customers. >> again, day 33, 34 we're heading into it. a month since some of these people have been paid so we'd all like to see a resolution. >> i agree. >> let's talk about the industry overall. there has been consolidation in the industry if you look at cvs health and aetna getting together and cigna and express scripts getting

together cvs health is $85 billion. does this make you feel pressure that you need to change and evolve to get bigger with those companies? >> we constantly wrestle with that question. i think in general we're seeing this industry slowly move to an industry that the business model is going from a utilization m maximizization to payments around value and cost and when that change is creating significant changes in the industry, technology is enabling it to happen, payment models like medicare advantage are making it happen, in addition consumer expectations. for us as an organization i think the best thing for us is to stay focused on what we do. today we are good and we've been doing this for quite some time on taking care of complex chronic patients and that's -- shows up in medicaid and medicare and that's a different business than just having scale and being in multiple different markets. >> what does that mean what do you do specifically? >> we do a few things.

we take full risks for these complicated patients so we are responsible for their health for seven to ten years what that requires us to do is not only work about their health care but about their life-style, we focus in five areas that's really important partnering and owning, you've probably seen acquisitions we've done around primary care, around home, pharmacy, around social determinants and behavioral and we integrate that with our insurance product and we try to find ways to keep people out of hospitals, nursing homes, keep them safe at home and keep them healthy. >> >> there's a poll out, kaiser family foundation poll, 56% of the public support a single payer medicare for all option. what would that do to you and when do you think something like that is -- you know, the millennials will eventually take over everything we're doing now.

i halt to admit it but i guess that's happened before, andrew, it happens in the past like the changing of the guard. that's happened before, andrew, it happens in the past like the changing of the guard is that coming >> i don't know if it's coming >> 56% why wouldn't it? >> well, a lot of stuff has to happen let me come back to your question about what does it mean for us there's three parts within the health care system when we talk about medicare for all one is around financing, second is around coordination and the third is around the provision of care, provider side. medicare for all is talking about the financing arm. is it the employer, the exchanges, medicare? and that's where the conversation comes from. they're still going to need individuals to and companies to coordinate care and they'll still need organizations to provide care i never see the government getting into the provider and coordination of care very similar to our space, very

similar to other contracting agencies where you see private industry makes a good partnership. >> would reach people just have private insurance still. >> that could happen. >> and that the quality of care for everybody else, they'll have it but no access to it don't we know how supply and demand works >> we see this in medicare advantage where the rewards are not only around the access it's around quality so take our company, for example, 84% of our members are in four-star plans or greater and what that's telling is quality and quality is measured by scores and other measurements like that. >> we always talk about canada is that system better or worse than where we are? >> i think our system is good. i really do. i think our system has great things to it around innovation, around access, around recruiting

the best providers in care and coordinating the care across the system i think there's some budget issues that we have to deal with and some areas around who is coff covered and not. >> rand paul, one guy went up there for health care. one guy. >> i would agree with everything he said with the exception i think there's at least a question on access you can't not think there's a question on access relative -- >> but everyone will have access tot ibut no one will get it. >> we have more coming up on "squawk. we're live in davos, switzerland. minimums and fees.

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what's in your wallet? market heavy hitters are here to talk markets, the global economy, the fed and more, including morgan stanley's ceo james gorman that interview is just minutes away. plus -- ♪ it's a beautiful day >> u2 frontman and activist bono speaking to "squawk" about his work in africa, building investments and more. and the white house weighing new sanctions against venezuela's oil sector as the u.s. sends a strong message to nicolas maduro to step down. wilbur ross will join us later

in the program to talk about that and the government shutdown as the second hour of "squawk box" begins right now. >> announcer: this is a special presentation of "squawk box" live from the world economic forum in davos, switzerland. good morning and welcome back to "squawk box" on cnbc, i'm joe kernen with becky quick and andrew ross sorkin it's 1:00 here, am i right that would make it 7:00? >> yup. >> just so you know. u.s. equity futures indicated up about 23 points they've been around 10 to 30 for most of the morning on the dow after a solid session yesterday. not bad since christmas eve. that's all i'll say. fingers crossed, we don't know

it's a new year and the market started out fairly well. i don't know what happens. as january goes, so goes the year usually. southwest airlines is out with quarterly earnings in the last few minutes it looks like the company came in with earnings of $1.17 a share, 10 cents better than the street was expected. they beat on the topline as well and said they expect a strong financial performance for the current quarter. check out stock up by 3.9% vbz enezuela is breaking off diplomatic relations with the united states. that follows a white house statement recognizing opposition leader juan guaido as president of venezuela russia is accusing the united states of trying to usurp power in venezuela apple cut more than 200 employees from its autonomous vehicle project. people familiar with the matter tell cnbc that apple sees

opportunity in the market. some employees will be moved to other projects at apple. net profits have grown by 13% trade concerns and division in washington are adding uncertainty to all investors decision joining us now, bill ford, ceo of general atlantic, a growth firm with $28 billion under management you probably didn't get a chance to see any -- welcome. i don't know if you caught any of the show earlier but we were talking about private equity and where individuals are. are you planning, harvesting we heard harvesting but you have a more advantageous model and you pointed out a lot being family run you're not always in one or the other mode you can be long term family type

investors so is it different from you. >> half of our capital comes from wealthy families around the world. our whole period is more like five to eight years versus three to five years and that lines up well with our growth investing mandate. we're focused on growth companies like uber, airbnb are in our portfolio and we're doing a lot outside the u.s., quite a bit in china, india, brazil where we're constructive on emerging markets. >> your terms are solid. is that part of the reason, would you say? you don't have the same forces bearing upon you you don't use close-end funds to the same extent? >> we're leveraged against two of the more fundamental trends going on in the world, one is the move to a digital economy happening across the world and seconders and secondarily to emerging markets if you look at the growth that's happening, the creation of a large middle-class, particularly in asia, that will drive growth. if we can tap into those trends we can generate returns even

with volatility. >> you better have a long-term outlook. you're affording that benefit. >> having long-term capital. emerging markets for sure. it's a volatile place to live but if you can take a five to eight-year view. some of those longer term friends like the growth in middle-class come through. >> where are you right now are you in the -- you're always in the planning phase? >> you asked a great question about harvesting versus investing. as we look at 2018, we have $5 billion of capital from our portfolio but we invested $4 billion and half of that was outside the u.s. with a big chunk in china. >> what did you liquidate to get that >> more of our u.s. investments, we felt the u.s. was more fully valued. >> you were doing that at the beginning of the year? >> throughout the year we stay consistent through the whole year and what is the expectation for

2019 with uber potentially going public and maybe aaron bean bee as well. that gets into the harvesting part of the story. >> exactly thank you for asking that ch we thought we were going to have an ipo renaissance this year a lot of companies delayed their ipo plans. they got their governance in place to go public the shutdown was a monkey wrench in terms of timing but i think you'll see high profile ipos out of our portfolio airbnb, uber, square space is coming they'll be well received by the market. >> any issues with the volatility in the market i wouldn't guess it b with big names but other names that might be impacted? >> if we have volatility like we had in december, all bets are off. at that point it's hard to have a constructive ipo market.

moderate volatility of 15 vix is quite good for an ipo investor, 20 is not. so we should have a good market. >> when an uber goes public or airbnb for example how much do you sell at the ipo and over time >> we typically don't sell at the ipo and if we do it's a small percentage our average has been to hold two, three, four, five years after the ipo. >> so you expect to be in these stocks for a long time >> and be a constructive shareholder, hopefully continue to add value one company you've talked about, ihs market, we've that they would stock for 10 years and five years post ipo. that's our history as joe started with, it starts from having a capital base that allows us to be longer term in orientation. >> china is big for you. that was -- obviously things have changed there's an article the journal today that the hard landing

fears are getting heightened the probability of that, not from the trade but from something china is doing with shadow banking and trying to rei rein things in very real prospect of a hard landing. have things changed on your outlook? >> we're still bullish i think you have to see china in a more complex way. >> is there any other way? >> well, it's hard to know part of their economy is industrial, export, infrastructure driven. that part of the economy may well be in recession and it's growing at a slower rate the more the private sector, consumer services tech oriented economy it's still growing i've talked to a number of ceos, they're not seeing a slowdown, particularly the consumer companies, p&g had great numbers partly because of china so i think if you have to be in the right place -- if you're on the

export side you'll be hurt but on the consumer side you can do quite well. >> so the move you talked about to -- we've heard -- what's the theme this year at this thing? >> fourth industrial revolution. >> everybody that comes here talks about digitization and you said how long will it take before it pays off for you it's paying off right now? >> i think it is now take transportation. uber is transforming transportation a fundamental way. airbnb is transforming hospitality in a fundamental way. you're seeing significant change netflix transforming the entertainment industry and i think you'll find that very few industries won't be impacted by digital. financial services look what paypal has been able to do. >> is there any concern about regulation we talked about that earlier the idea that regulation is going to compton rise. this digitization is upending

industries and it's done it without regulators catching up i'm thinking airbnb and uber >> it's the biggest risk is regulation and reregulation. you've seen it with the european union. you've seen it all over the world and i don't have a great prediction of how it plays out but you can feel in the davos that regulators, government leaders are more interesting in what's going on in the s.e.c. sector than i've seen them before. >> are you bullish on the u.s. >> i am, i think people are too pessimistic, even here in davos. a 2% growth to 2.5% growth economy is very productive as you say, joe, the earnings that came out, very, very good. >> first quarter is always bad in terms of gdp and now with the shutdo shutdown when we print a .5 you're going to be like oh, my god, the

taxes. >> does that mean you're investing money ointo the unite states you think things are good for the u.s. but not enough to put your money there >> i'm more bullish on emerging markets. we didn't talk about india but one of the quiet themes here is how well india is doing and is poised to do one quick anecdote their gdp per capita right now, $1800 per person sure as we're sit hearing it's going to grow to $5,000 to $6,000 i had a great meeting with the ceo of tada group. >> when hassett -- when the administration itself says zero you'll be licking your chops it could be negative for you. >> no, we want to be -- >> party not country >> country over party. the whole point is to create enough growth to create enough of a tax base, by the way, not just to put our grandchildren into debt but he cares about investing in the country's future we could have talked about that and you need money to do that

and growth to do that. >> that's why we cut the taxes to get growth. >> you have to do it responsibly. when we come back, morgan stanley ceo james gorman will be joining us fresh off the company's resent report, then mark weinberger will be our guest. stay tuned, you are watching "squawk box" on cnbc when you retire will you or will you just be you, without the constraints of a full time job? you can grow your retirement savings with pacific life and create the future that's most meaningful to you. which means you can retire, without retiring from life. having the flexibility to retire on your terms. that's the power of pacific. ask your financial professional about pacific life today.

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simple. easy. awesome. click or visit a retail store today. welcome back to "squawk box," we are live in davos, switzerland. we've been speaking with leaders in the financial industry all week in davos and i want to show you quick what j.p. morgan ceo jamie dimon told us yesterday about the state of the economy. >> the u.s. economy is kind of like a ship that's going, going shutdown 2.5% and that will keep on going for a while then you have all this other noise. geopolitical noise, brexit noise with the fed, shutdown, trade

and they're like boy in the waters in front of that ship so that may very well cause a slowdown or recession and i don't know if it's 2020 or 2021 but the range of possibilities is broader and the range of bad outcomes is increasing. >> joining us right now is morgan stanley ceo james gorman. i want to get his thoughts on the conversations you may have been having in the hallways in davos. >> it's great to be back in davos with you guys. thanks for having us on. it's an echo chamber here. like take whatever mood is the prevailing mood coming in and obviously the prevailing mood coming in here was uncertainty we've just come off a terrible december in the markets so everybody is skittish. you talk to enough people and you express your skittishness and it echoes and keeps compounding, by the third day, everybody is depriested and i spoke at a dinner we hosted with

ceos and clients and i said i don't get it we're living in a slowdown but not a depressing economic mode so the anxiety starts to feed and the question is when does that feeding of anxiety translate into actual economic results? >> meaning we talk ourselves into this. >> ceos stop investing. >> but this is also -- davos has also been a contra indicator over the years as well, right? you look at what happened last year, the year before, you can almost make that case. when you go back to the office to do your monday-morning meeting and people say well, what do you think? what are you going to tell them? >> i think honestly what i thought before i came here which is we live in an uncertain world. for quite a long time the global economies have been very strong. look at the jobs number in december 300,000 jobs you need 80 to 100,000 jobs in

the u.s. to hold pace yet unemployment went up what does that tell you? a lot of people came back into the market so the economy, china is slowing but it's still at 6.4% global economy is still relatively strong. the political whatever is still relatively weak and it's been that crash. >> what does that mean for morgan stanley last quarter was not -- i think you might have said it -- the finest hour for the firm. >> i think i said it was really bad. let's be honest. it was disappointing. >> what are you doing to position yourself for the next quarter. >> we had a record year and i don't say that lightly we had record revenues, record pretext, record earnings, record wealth management rey knewsing record investment banking revenues and equities was number one in the world so a month and

a half things fell on the whole, the market as you guys have been talking about for weeks. there was a lot of disruption in the market the last four or five weeks. that affected our trading businesses, we did less well than we were happy with. i don't think that's the state that we're in right now. january is not like december it's interesting i said to folks the other day if the december '18 happened in january '18 and january '18 happened in december '18 the mood in davos would be completely different so you can't get too wrapped around short-term moves we're watching expenses carefully, we're focused on growth we'll be cautious until we see how this plays out look at the government shutdown. >> i was going to ask you about the government shutdown because you've been lucky to be at least named or speculated about underwriting what are likely to be the biggest ipos of the year

this year in silicon valley. how worried are you that those things are going to be delayed in any meaningful way? >> well, i personally feel it's extremely negative if this shutdown goes on much longer you have 800,000 families affected by this i hope both sides work through what seems to be a relatively straightforward problem. if it goes through months of this year it will have an extremely damaging effect. not just ipos. that's just timing it's the momentum in the economy so this needs to get resolved? >> what's the straightforward solution i think both sides think they have a straightforward solution that isn't straightforward to the other side. >> firstly, i recognize we have a wall that is 500 miles long, it's been sponsored by both

democrats and republicans for a long time. if there were some sensible additions to be made to the wall to improve border security, let's make them. at the same time we have a lot of children affected by the daca legislation. let's make some accommodations to those kids and their families that's the obvious solution. so go get it. >> that's not the answer all of us -- i agree. that's exactly what should happen but unfortunately it takes two sides to obstruct and it depends on where you're sitting but it would be very easy to end the shutdown and in the past $5 billion is a drop in the bucket that democrats have voted for so it should be possible to do it which is why to me it's disingenuous to keep talking about how much they're affected by the problems that we're seeing and they are real problems for 800,000. >> why do you think that's

disingenuous. >> because they could easily end it they don't care about those people, andrew, they're making a political point. that's to not give trump anything. >> was it disingenuous for the president to say mexico was going to pay for it. >> we're back to the same discussion >> reasonable people can come to an agreement. >> secure the border, do daca, do it but you're not seeing movement but you're seeing middle-of-the-road democrats saying come on, let's do something. >> in the middle on both sides people are saying it's ridiculous james, your cfo said that in the beginning part of january it started more favorably the market has smoothed out quite a bit but what can you give us? that was the big disappointment. >> i think the first quarter of last year held up great for the markets, obviously for morgan stanley. i think we did over $6 billion in revenue in the institutional business we had our first $10 billion quarter in history it was followed by the second quarter which was also $10 billion, by the third quarter

which was $9.8 billion so we've had three of our best four quarters in our history in the first three quarters of last year right now i'm not expecting that but the fourth quarter was in a completely different place clients have come back there's a lot of trading activity going on. there's m&a transactions you've heard a few of them announced that are huge deals. ceos want to get on with business and they're looking at stock prices and saying heck, if i'm trading at book value i'll buy back stock so everybody wants to get back to a market that reflects what's going on in the economy. the challenge, becky, is obviously the difference opinion of what the fed policy should be and given the four rate increases last year, will the fed truly be data dependent including market data in determining what to do in 2019 >> what data are they watching >> and i hope and believe it's more than pure economic data

because market sentiment, market volatility, market liquidity, the temperature of the trading rooms around the street, these things matter and i think the fed is digesting that and my expectation is we'll have a much more modest rate increase in '19. >> your sweet strategist recently said don't fear a potential recession, embrace it. i know that may not be a house view but is it yours as well >> no disrespect if to our equity -- this might have been mike wilson. >> it is. >> i come from a country -- i was born in australia that's had 27 years of economic growth and no recession i think that's better than having a recession every seven years if i have a choice that said i think what he's saying is there are recessions and recessions there are technical recessions of negative gdp growth for a couple quarters, technical bear markets of the s&p down 20%. that's different from a full blown recession of the kinds we

had in '91 through '92, complete dislocation on the employment front so what he's saying is don't fear this recession. when it comes it will come gently. >> james gorman, thank you, sir. that is a good conversation. >> 27 years. that shows you a lot of times it doesn't happen -- expansions -- they don't -- it's not like night and day where you have 12 hours of light and 12 hours of -- there's a way of managing it. >> to be fair, it's also being parked relatively close to the fastest-growing economy in the world. i joked with the australian finance minister, if chile was where australia was and australia was where chile was and you had to pull that ore over the atlantic ocean, things might be different. >> we didn't ask your view on china >> china's $11 trillion growth is never slowing

it could never maintain as it did in the double digit growth the latest reported figures were 6.4% china is slowing but mathematically it's going to slow in terms of absolute gdp growth, the u.s. and china account for 42% of global growth we didn't talk about it but the whole trade discussion has to take into account if you have a dislocation between 42% of global growth, you will have a slowdown for sure. coming up, a lot more from davos, including this guy, bono talking about the economy and his career and what keeps him up at night that could be anything,right and later goldman sachschairma and ceo david solomon joins us we'll talk markets, trade, and the global economy "squawk box" will be right back.

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♪ i wanna run, i want to hide, wanna tear down the walls ♪ ♪ that hold me inside, i want t reach out ♪ ♪ and touch the flame welcome back to "squawk box" that's a quick look at the creation of the set that we're sitting john hard-working crew putting it together. >> and the hard-working crew that doesn't get enough credit we'll get you on camera in a little bit but i want to get another guy on camera u2 frontman bono is a regular in

defense. it was here he launched the red line of products to fight aids, tb and malaria that happened in africa back in 2006. i spoke to him about his efforts in africa and the role of capitalism in combatting poverty. >> we had this wild crazy idea that capitalism is taking more people out of extreme poverty than any other "ism" and that it could perhaps be deployed to support the work i was doing trying to get people out of extreme poverty. but we also had to accept that it's a wild beast and if not tamed can and has chewed up a lot of lives. >> you've been on this journey for a long time. where do you think we are in this journey are we ever going to get to a place where there's not going to be an impact investing fund? all funds will think about it like this?

>> i'm here really because of the sustainable development goals which are a report card from the executive branch on the planet saying how are we going to get there and there's i think a $2.6 trillion shortfall annually according to the imf they've got a very interesting report about it and it's not just going to be possible with public funds we need public funds but we're going to need the private sector, too. and i think that's in line with this movement with consumerism so consumers are becoming where they've got power in their pockets. >> how much are you talking about investment themselves? >> all the time. what's been so interesting about this partnership is the ability to create co-linear priorities where you can have the social activist who's deeply interested and engaged in helping build

these companies. >> can you imagine my excitement coming across zip line drones which have brought rwanda -- rwanda has this -- >> it's mind blowing, isn't it >> -- advanced sci-fi delivery system for blood and therapeutics, you can't be -- you're not -- no more than half an hour away from an emergency service dropped by a drone everything i love comes together in that moment. >> you mention ed the need for public money for so much of. this speak to the state of public money because it also goes to the divide that seems to be taking place around the world. >> just over ten years ago we launched red here in davos which is an attempt to get companies involved in the noble fund which pays for aids drugs for people that can't afford them in the developing world and it wasn't just the money we needed we needed the heat and

excitement that these brands could create in the high street and shopping malls because that was political power and that allows us to go to lawmakers and appropriators and get them to support this aids initiative which they did, across parties just as aids is an at inflection point, greatest health crisis in 600 years, just at an inflection point of winning people are talking about closing the budgets and it's unpath thomable to me. if you're a tax payer in america, you're an aids activist people in the united states should be proud of what they've done and that disease is not done yet. >> bono speaking there really about very much the same issue you spoke to bill gates about in terms of public funding, not only the necessity of private funding and the fund-raising that goes on here that he and so many others are working on but the extra push that makes it

work which is being cut not just in the united states but across the global. >> if you're look organize private or philanthropy, that's only the seed money. it doesn't happen without government spending on at least a nine-to-one basin. >> i should mention, bill was the other person being interviewed. we got a chyron but not the proper introduction, he runs the rise fund which is a tpg fund and they created a new company called why analytics and it's the metrics with which they've been trying to use on esg issues we were having a debate about that and whether it's real or fake or phony. they're trying to make it real to use the company beyond what they're doing internally now use the metrics more broadly. >> cool. >> there you go, joe okay, cool is now the time to get

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let's get some market thoughts now from our next news make they are morning, here far is nili gilbert. nili is the co-founder and equity portfolio manager of matarin capital and moderately bullish on 2019. that's -- i think that's one step above cautiously optimistic, isn't it where does that frank? that's pretty good i'd be happy if we had a moderately bullish year, i think. >> if you think about the markets going up mid to high single digit this is year we'd all be happy. >> i think so, too are we up -- we're there right

now, i think. >> we're there right now we think we still have a ways to go and i think one of the important messages in the important context of this outlook is that there's likely to be a lot of volatility along the way. there's uncertainty on so many fronts, whether it's fiscal, trade, and importantly monetary policy that in the context of that moderately bullish outlook for the year it won't be a straight line up. >> do we get two hikes zero hikes a cut, what do you think >> we think the fed 4r6 to willo be more easy than they would like to be a big part of the debate right now in monetary policy is what is the neutral or normal rate of interest in the united states? it's kind of interesting, if you track how this has moved over the course of a long period, the natural rate of interest in the u.s. has come down by 2% so when the fed says they have to be data driven or you hear

jay powell say finding the normal rate is like walking through a dark room full of furniture, it's because at this point it's hard to say where we are but we pay a lot of attention to a model of the normal rate of interest that was developed by the new york federal reserve president john williams which suggests that it may be just about on a real basis 50 basis points, 60 basis points and when you think about it that way, we may be already about there where the federal reserve's rates are. >> what's the most important thing that determines where the neutral rate is? i always thought it was inflation and i can explain why inflation can be in a secular disinflationary -- because of technology and advances and innovation and the internet and amazon and walmart and on and on but i can explain that maybe we're not as global as we were a

year ago but when you see the rest of the world and where interest rates are there, we kind of import their disinflation as well so i can explain it that 3% is normal instead of 6%. >> and their demand for our bonds keeps our interest rates lower even as our changing demographics with more and more people entering retirement, higher demand for fixed income keeps interest rates lower in addition to the point you're making about inflation, which i agree with, i point to productivity so when you think about what defines kind of the long-term natural rate, it's productivity growth which has come down over time in the u.s and there are serious questions about -- you know, we've seen gdp numbers rise last year but is that a long-term permanent condition or where will we land in the end >> when you're investing, is your first order to try to make money or is it to have an impact

that's positive socially or can a company just in and of itself have a positive impact by doing what it does as a company without considering what the social impact is if you employ people, if you satisfy your customers, if you build market share for shareholders, is that enough >> well, i hope we have some clients watching, our first order is definitely to try to make money but the question is over what term we tend to be long-term investors at matarin and when you're a long-term investor, questions about who your corporation is in society, who it is for its customers and with its stakeholders become more important. if you're in a short-term game then questions about climate change, social change, changes in the work force, community responsibility don't matter. but if you know you're going to be in a stock for years, you have to start wondering how a

company is preparing for those themes so we think when it comes to sustainability, as a wloerm investor that's an integral part of winning in the end. >> i think for me the one where i would have no problem with is tobacco producers. i would not feel good if any stock -- if i owned it and it tripled and we were selling cigarettes i have a big problem beyond that i start having i think there's nuances in a lot of the -- whatever the social -- >> why >> because there's a lot of -- >> given your view of the world -- >> i understand that but they are -- it hurts society in terms of -- >> you know where i stand on this i'm surprised you're on the side. >> that's about the only place other things -- do you remember when we were sure red meat caused heart disease and suddenly -- we were sure that salt cause hide blood pressure

now you need a certain amount. things change over time and if you take the social whatever it is, the favor of the month and base your entire future on it -- what if exxon five or ten years ago succumbed to pressure and only did solar energy investing and there hadn't been a five-year renaissance, we didn't do any horizontal drilling or fracking, we didn't do any -- we'll leave all the hydrocarbons in the ground. people would be freezing in lesser-developed countries. >> i think that's a strawman because what you're setting up is one way or the other way and that's not the way the world works. >> i think you're also pointing this-to-this debate abou divestment with tobacco it's hard to imagine what you could do to own the stock and use that ownership to change the company's fundamental business model so maybe there's an argument for divestment there but when you talk about moving from fossils to alternative energy, maybe there's a potential to own stocks, engage

with the companies and change their practices so this is a broader conversation about active investor stewardship, about taking it to the table in proxy voting and beyond. >> it's hard because the -- and whether you blame social media or whatever it is but the tribal nature of all discourse, especially this country. you'll end up having tribal investors. it will be split like everything else we talk about. >> but isn't that what makes the market >> well, it has to be a buyer and seller, doesn't there? >> there's so much criticism about sustainable investment or esg because there are different metrics, different people have different definitions, isn't that how it is with all invest. >> there are plenty of people that roll their eyes and plenty of people that say everybody should be doing it once again it's one of those things that we can't come to any type of -- >> that's how you make a market, good point. >> someone these buy and someone has to sell. >> or else we'll all be out of a

job. when we come back, ey's ceo mark weinberger on business leadership, the trade war, and much more. also at the top of the hour, gold man sax chairman and ceo david solomon will join us for a special interview. then commerce secretary wilbur ross joins us to talk trade, what's happening with the government shutdown and much more "squawk box" will be right back. place, the xfinity xfi gateway.

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day the 34 of the government shutdown and both sides are standing their ground. business leaders are warning the longer the shutdown goes on, the bigger the economic pain on the country. in fact, there's an accelerator affect that picks up as the days tick by. joining us is ey chairman and ceo mark weinberger. we want to talk to you about a lot of things but half the time i talk to you, you're in washington business round table, whether you're there -- you're traveling all over the place but i think of you as a real washington insider. what insight do you have what do you think happens here >> no idea, no idea, no idea as much as you can be an insider, the rules are very different. the government will reopen i'm not someone who believes it has a huge effect on gdp it has a very humanitarian effect i see in the my neighbors who aren't getting paychecks and we

do a lot of files with the s.e.c. and it's slowing down ipos and tax refunds there's a real effect but as far as reducing the gdp over the long term, there's bigger issues out there. but i think it undermines the confidence people have in the government working together over the next two years. >> and that could mean what in terms of what you think washington could be and should be doing if they were working together >> you want them to compromise i won't blame either party. >> i mean the potential things they could be working on they were at least compromising. >> well, obviously it would be great if they could continue to work on regulatory deregulation is still a big boost to the economy. infrastructure is the one everybody wants them to tackle i think it will be hard. at least if they start to try to come up with ideas together it would be great still a bunch of appointments in the senate they can work through. i'm not optimistic a lot of legislation will be done.

>> there's a "new york times" story that looked at the optimism ceos still seem to be projecting in terms of earnings calls. they think the government shutdown will be resolved soon they think trade talks will be wrapped up that we won't see tariffs doubling, that we will see nafta passed by congress and that these are assumptions that everyone is betting on what if the ceos are wrong >> if they're wrong we're going to have a much slower economy than we expected and i think most ceos are still relatively optimist optimistic last year we had an excess of optimism and pessimism. businesses are still investing it's a fifth quarter in a row of double digit profit growth it's still highest -- >> is that capex >> quarterly profits capex is still up. hiring is still up, wages are rising net wealth is at an all-time

high if you're pessimistic you're looking for a problem. obviously there's more risk to the down side with the geopolitical issues but the underlying economic factors are still very strong. >> does that mean there's potential for upside, too, if these deals come to fruition you'll see more enthusiasm from ceos more money poured back into hiring, to investment. >> i think yes, they'll be cautious because of these risks on the outside we talk about the tax bill a lot. there would be more money going back into capex and more supply chain changes if it wasn't for all the uncertainty around the trade issues and everything else so decision making is slower businesses have slowed down in moving forward with things they otherwise would have maybe if these logjams get cleared you'll see more of that. i don't think there will be a flood but i don't see people stopping investment or stopping hiring because of these geopolitical issues. >> mark, thank you, always great to see you mark weinberger. coming up, goldman sachs

chairman and ceo david solomon that after view is after the break and mark wiseman of blackrock will join us plus, a news making interview with commerce secretary wilbur ross a huge hour of "squawk box" is next ♪ memories. what we deliver by delivering.

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good morning from davos. a spotlight on the markets and investing this hour with goldman sachs ceo david solomon. that interview coming up in just minutes. the ecb out with its latest interest rate decision moments ago. this hour, the latest news from central bank president mario draghi. and nearly five weeks into the government shutdown, commerce secretary wilbur ross joins us to talk about the fallout and the latest on auto tariffs 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.

good morning and welcome back to "squawk box" here on cnbc live from the world economic forum in davos and you can see it is nice i've started to like it as much as colorado. i thought for a while maybe veil a little bit more but it's not quite as nice as tell ruride bu it's got its charm where what do you think, sorkin? you've been all over. >> you don't want to be a globalist? is that what's going on? >> be what >> a globalist. >> i saw a child on the street and i realized it's so weird, this town has no children in it. it's like "indiana jones and the temple of doom" where they take the kids away. >> it might be the hotel rooms >> i like mine. >> i'm joe kernen along with becky quick and andrew ross sorkin and we've had three perfect days i will say that in terms of it's been cloudless and we haven't

had any snow or cold temperatures or wind so it's been good we've had good guests. >> great guests. >> futures are up over 30 points after a solid session yesterday. not a lot happening on the yield curve, 275 or so last week looked at the ten year it's been quiet since christmas eve, since the route which made -- thank you, day before christmas, traders any way it's come back since then. >> goldman sachs surprised the street with a strong earnings report investors are largely bullish on the stock, despite industry struggles that have been taking place. joining us is goldman sachs ceo david solomon. great to see you thank you for being here. >> thanks for having me. great to see you. >> i thought we could start big. we've had so many questions about what's happening with the economy and markets and you did

a better job thinvestors were expecting. the markets aren't as volatile now but what are you seeing? have things stabilized you think we've seen the worst of the poll tillty >>. >> it's a different first couple weeks of january than last couple weeks of december if you're looking at u.s. markets, it's been the best start for u.s. markets since 1987 but that was after a very, very bumpy december. there's a lot going on in the world. it's hard to say how the big picture things you guys have been discussing on the show will play out those can have an impact but people are get foege cussed on the forward. broadly speaking, while the trajectory of global growth has slowed, the economy is doing okay. >> we spoke with larry fink last week and he talked about how he sees it. he said it's a short term call

but he thinks we've hit the base bottom he doesn't expect heavy-duty trading issues unless one of those things pop up in a direction people aren't anticipating. >> i am not good at making short-term market calls but i said the underlying economy is okay our economists are talking about 3.5% global growth for the year, more than 2.75% in the u.s. and if you think about that as a base case, it's not as robust as people were thinking about on the forward curve last year but not bad. the issue is when you think about government shutdown, you think about the 90-day deadline on trade, the negotiations of brexit, you look at the bigger ma macro issues are out there, any one of those individually probably doesn't slow us down but a combination of things not going the right way will have an impact on market and sentiment. >> but then you other issue is

you lay on top of the people talking about recession come 2020, when you get into the board room and you talk about merging, pursuing buybacks, thinking about those things, is there a sense of let's wait and see what happens is that let's wait and see what happens, does that become a self-fulfilling professor sni. >> the big question is where are we on the cycle and it's easy to say we're closer to the end than the beginning. there could be a recession in 2020 there could. i think the chance of a recession in 2019 is relatively low. our economists put it at 15% but when you're in the board room with a ceo, ceos can't manage their business saying what if there's a recession in 2020? they have to look at the plan they have to expect there will be volatility but ceos aren't good at looking 24 months, 36 months out and saying what if. they're better at saying what are the factors i have at my

disposal today there are so many ceos we've had on this very set talking about how they need to think about their supply chain for the next ten years in a way they would have never thought 12 months ago. >> different topic i think there are macro issues affecting how and where people invest. >> and that goes to what company you can acquire, merge with. >> but i was answering the question in the context of recession. there will be a recession whether in 2020 or 2021. that's not a big factor in the context of ceos thinking about the things you're talking about, what's my three-year plan? where am i investing what markets are most accommodate fwharg i want akocoe sedatinining -- accommodating fr what i want to accomplish? >> do you think china -- you can only hold out for so long until they want to be part of the party. >> no question. >> supply chain will be act.

what about just the global debt versus global gdp which we now know is over 200%. i don't know what it is but it's bad. it's high. when i think about it, inflation and currency debasement hasn't been our big problem it's been sort of the opposite we've been worried about deflation. that's probably worse, i don't know, they're both bad can we mantle it is that looming? a little inflation wouldn't be the worst thing in the world right now i don't think. >> i personally agree with you a little bit of inflation would not be the worst thing in the world right now. when we think about big-picture concerns we're concerned about and places where there are financial imbalances and risks we're thinking about the growth of government debt all over the world so that is abissue. >> is that number one?

>> i don't know aboutnumber on but it's a one.n issue. >> is that number one? >> i don't know about number one but it's a one >> things don't die of old age we say that all the time it has to be either a policy mistake or something. >> we put out a research report that talks about if you look historically at recessions in the u.s., the five things that can lead to recession. some of them like oil shocks or industrial disruptions that were due to inventory rebalances, less prevalent given the way the economy has evolved but then get into overheating and inflation, doesn't seem like that's on the radar screen we're definitely in a tightening cycle. >> are we? has it stopped already >> they've slowed but our economists are more hawkish with respect to next year they agree we're slowing down but they'll probably say two hikes next year. >> even tightening the balance sheet is tightening.

>> 2020 the recession forecast, i don't know if that's -- if their guess is better than my guess. what do you think? do you think it's better than 50-50? >> twenty twenty i would have told you if you asked me 15% this year, 50% next year. >> 50% i think that's high. maybe it's possible. >> 50% next year being 2020 not 2019. >> yes, 2020, not 2019 but part of that is -- and i said it before -- i'm not good at predicting these things i'm better at looking at the facts we have. >> that's purely based on how long the cycle -- we're due and i don't know if that -- >> i think your point is a fair point and i wouldn't be tremendously surprised if this cycle ran longer than everybody expects and what's interesting, generally we don't worry ourselves into a recession

there's no precedent for that. serve saying we might. >> everybody comes to davos, if we stay here we'll have a recession. >> but historicallywe haven't. >> one of the reasons it's so interesting to talk to you is you're talking about this as a ceo looking at investment and other companies making investment looking at mergers and acquisition bus you are so good at risk assessment and what that means for how you play that in the market. how do you take what you can best guesstimate and play it safely in the markets? >> our whole franchise is focused on our clients so whether we're dealing with corporates or institutions we're intermedia intermediate@i yaing risks. at this time you have top down bottoms up both i think we're more cautious around risk based on where we are in the cycle it's our job to be in a position to serve our clients and our clients are active because they're trying to wrestle with

this i know we get a lot of attention around the cycle and when there will be a recession. in the short term, thinking about 2019, we're more focused on big governmental issues and whether they have the pro tensity to disappoint markets. >> i'm going to be 49/51. >> 51 no recession >> yes i have to ask you a government issue. you took half a billion dollar reser reserve against this one mdb issue. talking about assessing risk how did you come up with that number >> so when you file financial statements you work with your legal team and auditors to make an assessment of what's the appropriate reserve. we have information at our disposal and based on that information we made the assessment that we, our auditors, our legal team felt was the appropriate assessment based on the situation.

>> for investors looking at the stock, they're betting that number would be more and others are hoping the number is less. what do you tell zmem. >> what i tell investors is the same thing i said on our earnings call. this is something we're working through. we're managing through the process. i raised the point we're spending time trying to look at and understand and think about the fact that we had somebody in our organization that we hired and promoted that became a crimin criminal we have to resolve this in an appropriate way and work through in the the process. >> do prospective client asks you about it >> yes and we're very open to talking about it i don't see it affecting our client franchise but sure clients ask us about it and we talk to them about it. my job, my role in sending a

message inside the firm but also with our clients issic to take ownership of the things we're responsible for. and to let people know we're focused on resolving it and our clients, our business, our strategy and i think some of that came through in the earnings call. >> is it fair to say that -- i think of you as being conservative in terms of making sure that you'll be looking at things from the broadest perspective. i would think you'd take a big number. >> when you're dealing with financial statements, we're conservative and doing the right thing and working with our auditors and lawyers so i feel good about what we've done based on the facts we have today. >> one final one for you you've been the ceo for three months >> four months. >> biggest upside surprise and biggest down side surprise.

>> the biggest -- if you take the situation with malaysia aside, the biggest upside surprise has been i knew this was a great organization, i knew we had great people and opportunities but when you step into the position of leading the organization and you can feel the organization rallying behind the direction you want to go, that's endorsing and i'm incredibly optimistic about our firm, the things we can do for our clients, i get around with clients and listen to clients talk about the firm in a broader way. downsides pride? it's a big complicated organization and while i counseled ceos for a long time and had ceos talk to me about what it feels like to be a ceo and you feel lonely and isolated, i thought i understood that when you sit in the seat it's really different so i'm going to do the best i can --

>> when the check comes in you feel pretty good. >> we do the best we can everyday for our clients that's what we do. >> time management is that the hardest thing? i guess you aren't spending your time the way you thought you would. >> it evolved but i think any executive has to have a high level view of how you're spending your time and a third on strategy, a third on people and a third on clients and you have to evolve that based on things that are thrown at you but one of the hard things for any business leader to do is a lot is thrown at you what do you say yes and no to? you have to say no to what is not relevant for your core mission. >> think if you didn't have to do anything, it would be like what is this for you have to make a few decisions. >> i find we're making decisions everyday i feel good about the team we've had in place. >> when you got the nod you went

yes, right didn't you >> i was excited to have this opportunity. >> what do you think, sorkin >> you did the -- what was the thing you did? with the car, i owe izuzu that dates me a little bit. >> i know what you're talking about. >> you heard about it some time later in your life. >> can you do the thing that people do. >> the slide >> the floss you mean the floss. >> my son does it. >> i'm not a good dancer. >> you are a good dj. >> i am a dj. >> do beam people do the floss o your music >> i can't say i've seen them do the floss but i'll be looking more carefully the next time i dj. >> can you prepare him -- you know. >> jake prepared me for everything but not the question about the floss. that was not in my preparatory notes.

>> that was not in ours, either. >> david, thank you, great to have you here. look forward to seeing you again. coming up when we return, a lot more on "squawk box. winning in the marketplace with blackrock's global head of active equities, mark wiseman will join us after the break we'll talk to him. stay tuned you're watching quk x""sawbo live in davos switzerland from the world economic forum back in a moment i consulted with your grandmother's doctor. we can do the screening at her house. hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes. ♪

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chairman of alternative investors at blackrock i mean, i think i have an idea, active versus passive, but how do you occupy your day most of the time >> i think what we're thinking about everyday is how we invest on behalf of our clients and the whole active versus passive debate is a false dichotomy. the reality is today every decision you make as an investor is an active decision. which index you buy is an active decision the decision to seek alpha through different strategies is an active decision so what we're doing is thinking about how we combine strategies and how we can generate outcome for our clients. >> is anything non-correlated? what's your best thing for non-correlated >> bitcoin. >> that was correlated, though >> sure, 100%. >> it's an age-old answer which is the right answer which is you have to diversify. you have to diversify and today

we're thinking about three dimensions of diversifications two traditional dimensions which is diversifying across geographies, diversifying across asset classes but we think you have to start diversifying across strategies so if you'll be in squeets you have to think about using index and factors, you have to think about using systematic or quantitative strategies and good old-fashioned fundamental investing. those things combined together will create the best >> if i were a -- i'm giving up again. i thought my day had come. you have no yield, do you? is it never coming back ever >> we are in a low interest rate environment for an extended period of time so i think that's why it's tough for investors and our clients and what we're doing is trying to find ways to help them through diversification,

through different strategies to deliver the return they need whether it's an individual and a 401(k) or a multihundred billion dollar pension plan. we're seeing clients diversifying more into alternatives, more into privates, more into systematic strategies and they have to do all of those things if they're going to try to protect themselves >> do some alternatives get risky? if you're talking about things like in privates or issues along the way? that would be my concern. >> you have to balance risk so if anybody thinks there's only one side of the coin, they're wrong. there is no free lunch and if you want to have a return-seeking strategy you have to understand the risks you're take beside that. >> so the clo market, do you want to be in that >> you might want to be as part of an overall diversified strategy probably not that senior who is living on a fixed income that's probably not the right

strategy for him or her but it might be part of a diversified strategy for a large diversified fund. >> we have people who said you should have 1% of your holdings in bitcoin nobody said that lately but we used to have people telling us that i thought that was crazy for the average retail invest or i guess if you have money to burn and you're wealthy that's one thing. >> for the average retail investor you're a single individual and you have to think very differently about how you construct your portfolio than if you're running a pension fund. we have both of those types of clients at blackrock and we think the strategies they require are very different if you're sitting in a pension plan that's maybe tens of thousands or hundreds of thousands. >> they have decades. >> your approach to those issues is very different. >> i would just think that the converse of not getting any yield means by definition that

equities are probably going to perform better so you need to be permanently heavier weighted in tweets if you need diversity you need to go around the world with equity exposure. >> but you have to understand you're taking additional risk and volatility. >> then what do i do cash. >> you come to blackrock and ask us. >> that's the first thing i would do larry told know do that. >> the answer is you have to work harder. the way you product your portfolio is that much more important and if you are in equities you have to think about dividend yields. there's stocks are that are generating nice dividend yields and we expect that to continue. >> can you do some buy writes or you won't do that for me >> we won't do that but we might help you construct your portfolio to include it. >> one of the things about putting together an entire portfolio is that that portion

of the portfolio that absorbs some of the volatility and down side which would normally be either corporates or munis or governments but you can't do one and two year stuff and i don't want to do ten year. >> because you're going to be dead why not? >> bite your tongue. >> i'm still locked into the idea that yields are lower than they should be historically so i still have that mind-set >> the bottom line is you have to be thinking -- >> would you buy ten year german -- >> european insurance companies have to. >> you have to think longer term this is a huge mistake investors are making and continuing to make. >> so put a percentage in low-yielding -- >> not necessarily because the longer term you think the more volatility you can absorb in the short term so if i was 25 years old today and had 40 years of --

>> i'd do all stocks and zero in bonds. >> correct correct. if you're thinking long term and as longevity increases for individuals they have to think the same way but you should never think about two to three years. >> if you look at what just happened in december, is that a huge opportunity because prices came down? >> i think we are seeing a change in the structure of the market >> i think the fourth quarter represented a change and active strategies will pay off more than they have in the period of time we had the last five to seven years where everything has been driven by what the fed, the boj and ecb does today individual security collection and being more prudent in the way we construct portfolios >> where did you grow up. >> toronto. >> in a house in canada. >> i heard you say a-boot. >> you used to run money for the

government >> for 19 million canadian pensioners. >> beautiful city. great education, too mark wiseman from blackrock. when we come back, trade tensions with china and the latest on auto tariffs with u.s. commerce secretary wilbur ross who will join us after this break. stay tuned, u yoare watching "squawk box" live from the world economic forum everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay? cognizant is helping banks use digital technologies at scale to advance speed to market. is it because so many go after it the same way, chasing after short-term returns? instead if getting caught up with the crowd, the investment managers at pgim take a long term view.

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welcome back to "squawk box" live at the world economic forum in davos our next guest is back in the u.s. for latest on the trade tensions with cloyne and other issues, let's welcome u.s. commerce secretary wilbur ross were you originally in the group headed over before it was canceled, mr. secretary. >> yes oh, yes, for sure. >> and it had been duly noted that the united states not sending one and many, many other countries that there is a

paucity, if you will, of government officials here so we are left to our own designs and there's bloom and doom over here, wilbur, do you think it's warranted? >> well i don't think it's warranted in terms of the u.s. because our economy continues very, very strong there are some problems, economic problems, developing in europe, in china and in japan you've been seeing those in the recent statistics. >> wilbur, it was -- today is thursday you saw market selloff on the word that there were problems with the upcoming trade talks with china one of your co-workers, if you will, in the administration, mr. kudlow came on and dispelled some of those rumors can you give us the latest on where everything stands with the upcoming talks with china?

>> well, there's a very large delegation of chinese, about 30 people coming over for a couple of days 29th and 30th next week so there is a large group coming, there's been a lot of anticipatory work done but we're miles and miles from getting a resolution and that shouldn't be too surprising trade is complicated there are lots and lots of issues, not just how many soybeans and how much lng but even more importantly, structural reforms that we really think are needed in the chinese economy and then even more important than that enforcement mechanisms and penalties for failure to adhere to whatever we agree to. >> and complex enough to where anyone that's been paying

attention knew that it would be impossible to get a completely final deal wrapped up by the time we get the deadline so what is the best we can expect -- i guess portions of things can be decided on but it's going to be we're going to meet for a longer period of time and push out to another date to try to take care of other things you just talked about? is that what we should expect? >> well, remember, we have until march 1. that's when the new tariffs are supposed to go in, the increase from 10% to 25% so there's quite a little bit of time between now and then to judge where we stand. is it worth going forward or have we reached an impass?

>> i'd like that ask you about the government shutdown and i realize you're not responsible negotiating this but you're the only person we have coming from washington, anybody from the administration or either side of the aisle. this is something from the national air traffic controllers association along with the airline pilots and flight attendants that said in our risk averse industry we cannot calculate the level of risk at play nor predict the point at which the entire system will break. it's unprecedented air traffic controllers, transportation security officers, safety inspectors, air mash shls, federal law enforcement officers have been working without pay for over a month. staffing in our air traffic control facilities is at a 30 year low and controllers are only able to maintain the system's efficiency and capacity by working overtime including 10 hour days and six-day work weeks. almost 20% of the certified professional controllers are eligible to retire today there are no options to keep these professionals at work without a paycheck when they can no longer afford to support their families

when they elect to retire, the national airspace will be crippled the situation is changing at a rapid pace in a system that is deteriorating by theday. that's concerning to hear. do you worry about safe any. >> well, i do and it's kind of disappointing that the air traffic controllers are calling in sick in pretty large numbers. >> many of them can't afford to support their families, though. >> well, remember this, they are going to be paid the president signed that into law law. >> mr. secretary, many of these workers need the paycheck on a week-by-week basis they're not frankly in my shoes nor in yours, nor in yours so the question is is this battle and fight at this point in the ball game worth it? meaning is the debate over everything else that the

administration is fighting for worth more than the risk being taken on at the moment and the affect it's happening on families of federal workers? >> well, the banks and credit unions should be making credit available to them. when you think about it, these are basically government-guaranteed loans because the government has committed, these folks will get back pay once this whole thing gets settled down so there is not a good excuse why there should be a liquidity crisis now, crew the people might have to pay a little bit of interest but the idea that it's paycheck or zero is not a really valid idea there's no reason why some institution wouldn't be willing to lend and indeed we've heard tales -- >> so it should be put on the private sector

the private sector needs to step up where the public sector can't? >> there have been ads run by a number of public-sector credit unions which are member organizations of the people who work in the departments. those have announced very, very low interest rate loans to bridge people over the gap that's the kind of cooperation between financial employee that is warrant ed it's a safe loan because at the end of the day it's 100% government guarantee. >> wilbur, i don't want to make too much out of 70 or 80 points but there's the s&p. we're up 40 or 50 when we started, we're now in negative territory and at the bottom of the screen we were quoting you, miles and miles to go before we

have any type of agreement with china. did you plan to come on to temper expectations? is that a different tone than we would have been hearing from the administration over the last few days is something -- is it posturing? are we trying to extract is that a change of what we would have heard from the president? >> i don't think so, i believe china would like to make a deal. i believe we would like to make a deal but it has to be a deal that works for both parties. i'm trying to say people shouldn't think the events of next week will be the solution to all of the issues between the united states and china. it's too complicate add topic. too many issues. that's different from saying we won't get to a deal.

i think there's a fair chance we do get to a deal. >> fair chance we get to a deal or -- let me ask this way, too, the idea of tariffs doubling come march 1 or second that's what i think would surprise a lot of people would you advocate not raising the tariffs even if we don't have a completed deal if it looks like you are on track to getting towards a deal at that point? >> well, i think it's very hard to pre-judge exactly where we'll be at that point in time as that date approaches, the president and those of us helping with the trade issues will get together. we'll have a very serious discussion where we stand at that point and there will be an announcement made once the decision has occurred. to judge now weeks beforehand what may happen over the next five or six weeks, it's too hard to do that

my point is people shouldn't think next week will be the solution to all of the problems of the world hopefully we can make a good start and follow up later on. >> wilbur, many times in the past you've used some examples of how much our economy is affected by some of the moves that we've made, some of our tariffs against china, we've talked about how many pennies per aluminum can or whatever and i know that you weren't born last night obviously but now we're seeing that when china slows down it doesn't necessarily have to be what -- hui it affects the u.s. economy. we're talking about global gdp being cut off from that, for whatever reason china is slowing down there's a piece the journal that there is a real risk of a hard landing in china not just because of the trade friction but because of the shadow

banking policies of the country, et cetera. does that go into our thinking that if we do hurt china trying to extract a deal it can come back to us indirectly from a slowdown in the global economy are we ready to deal with that because of our actions >> i think there are several cross currents under way in the global economy, for one thing, a lot of companies are relocating production from china. in some cases to the u.s., in other cases to vietnam and other low-income areas there had been the beginnings of a move for that even before the trade issues because china isn't the world's cheapest place to manufacture products anymore but it's been accelerated a bit by the trade issues because that interjects a note of uncertainty into corporate decisions

so i think you're seeing with other countries some backing and filling. some good things coming out of the dispute with china, namely people relocating their sources to those countries and some bad things because a lot of what is finally assembled in china comes from other southeast asian countries. something like 60% of the value added is brought into china and only the remainder added in china so it's a complicated situation, europe is again another separate thing you have a lot of problems in a lot of countries there and that's probably why the european central bank is continuing to be so permissive in terms of its interest rate. >> mr. secretary, i wanted to come back for just a moment to the u.s. government shutdown while here in davos i

interviewed alex carp, a ceo of palantir, a major contractor working on behalf of the pentagon and the department. he said the government shutdown he believed was terribly damaging to the brand of our country. do you believe that? >> i think that's a great deal of hyperbole we've had shutdowns before, albeit for not such a long period as we've been thus far but put in the perspective you're talking about 800,000 workers and while i feel sorry for the individuals that have hardship cases, 800,000 workers if they never got their pay -- which is not the case, they will eventually get it, but if they never got it, you're talking about a thirty of a percent on gdp so it's not like it's a gigantic number overall.

>> there are reports there are some federal workers who are going to homeless shelters to get food. >> ell, i know they are and i don't understand why because as i mentioned before, the obligations that they would undertake, say borrowing from a bank or a credit union are in effect federally guaranteed so the 30 days of pay that some people will be out, there's no real reason why they shouldn't be able to get a loan against it and we've seen a number of ads from financial institutions doing that. >> wilbur, before we go. just back to china just real quickly. so there was some talk about a trade deficit deal where we'd be at zero by 2024 or something is that -- what are we looking are we looking that?

are we looking for solving intellectual property. are we looking for the way that our company or foreign companies do business in china what will take miles and miles and years and years? what's the sticking point if there was talk about having a trade deficit go to zero in six years? what's the sticking point that takes so long? there are two problems one is the so-called old economy, the economies of the world as they are today. we have an intolerably big trade deficit with china so that is one problem. the other problem is the uture that's the 2025 plan that they have to try to dominate world high tech industries we have to protect that. then the third area is american companies doing business in china should have market access,

should have a level playing field, should not be subject to disrespect for their intellectual property rights owl of that. so we need structural reforms for the longer term and we need forbearance on the present trade deficit and of those series of things the easiest parts for chinese to solve is the trade part because if they buy lng from us or someone else, there's no economic cost to them. same thing with soybeans, same thing with products. the hard things are structural reforms and most importantly making sure they live up to their agreements because the history hasn't been a good one in terms of living up to commitments. >> mr. secretary, thank you for your time, we appreciate it and

we'll -- hope things get resolved with all these issues but i don't know, miles and miles, maybe if you here in a car it's not as bad as if you're walking but that doesn't sound great but thank you mr. secretary. >> well, we are making progress. >> okay, all right, good, thank you. >> thank you, sir. we are getting headlines from the european central bank president mario draghi steve liesman has been wrapping that up and he joins us with more. >> draghi was speaking at the same time as wilbur ross and we'll be arguing about what caused this modest dropoff in the futures. was it the miles and miles comment from wilbur or comments from draghi who said significant monetary policy stimulus remains essential? while the impact of some factors are expected to fade, the near term growth will be weaker than anticipa anticipated. he says we have moved to the down side so the risks are to

the downside geopolitical factors, trade uncertainty and he said there was some speakers who talked about the need for additional stimulus but they didn't discuss it or decide it. it was an assessment meeting more than a policy decision meeting. as you know from the 7:45 a.m. eastern time announcement, they're keeping rate unchanged through the summer of 2019 and continuing reinvestment after that so we have a weaker stock market the euro was weaker as well but it was kind of weaker all morning so was it ross or draghi or the combination thereof back to you in davos. >> steve, thank you very much. joining us now to continue the conversation about our economy, where things are and where perhaps there's opportunity out there somewhere. josh freedman is here. we've been having a relatively wild debate today about where things stand

you're seeing new numbers here, you saw the markets drop and we'll debate whether that was wilbur or draghi how do you see it at the moment? >> last year when i was here i said it looked like 1994 in the sense we had the potential for interest rates to go up but the markets to be flat or down given the fed's tendency to raise rates and what that does to the way people value risk assets i'd say it's a mixed picture from the fundamentals but when you think of the bond markets where we participate and high yield leveraged loans, distressed, et cetera, there are structural infirmities that remain in the markets created by this long period of monetary easing that will make the volatility much higher than we've seen in the past. >> is it still all about the fed? if it was the fed you were focused on the fed sounds like it will be stepping back or watching to see what happens, being more patient with things is the word they

keep using, is it still all about the fed or other issues that are more important? >> a good question i think you have to look at in the three different parts. there's what is the fundamental economy doing which is what you mentioned, there's the fed and what does it have to address issues there's also the structural problems in the market that tend to make volatility much higher i would focus first on the structure. because of the fed's actions in the prior decade, rates continue to go down and down and down the result was that more and more assets that had any yield at all were swept up by index funds, etfs or mutual funds. they offer their investors daily liquidity and they're securities that can't be sold on 24 hours notice at the same time commercial banks don't really make markets. so when something causes them to sell, the floor is a lot lower

>> when you look at companies right now that have taken on a remarkable amount of debt over these past years at cheap prices, are you now starting to get worries that we're going to start talking about bankruptcy >> i don't think we're at that point in the market at all right now myself that doesn't mean we're not going to have the occasional blowup you can see what happened with pg&e recently. there's been enormous volatility in the bond prices in the oil services business. when i look at the fundamentals, i say the u.s. is pretty strong. we've had some weakness. you've definitely seen that we're later cycle. that creates a lot more fragility in the market. >> what about government debt around the world >> government debt to me is almost a big other problem than corporate debt

>> can we handle it? don't we have some room with inflation that sort of over time absorb -- because it has to have been built up after ten years of th that. >> i think the u.s. is probably better positioned to handle its debt burden than others however they're both pretty limited in their potency right now. we saw what happened the second the fed raised rates high yield bond rates dropped, leveraged loans had the biggest out flow period in the history -- they also bounce back really strongly reflecting the strength of the underlying economy. >> josh friedman, thank you. coming up, summing up the h ew here in davos wit"n york times" columnist tom friedman mom and dad got a new car.

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welcome back take a quick look at future this is morning the dow futures are down by about 40 points below fair value. it comes after we've been up by 60-70 points earlier today we did hear commerce secretary wilbur ross say there may be miles and miles to go before we get to an agreement with china

we have heard a lot about the world's biggest problems this week and some solutions. joining us we are joined by "new york times" columnist tom friedman john colter came up with his theme for this year at davos he thinks it's confusion it's hard to figure out which direction governments and mar s markets are headed what would you say your theme is >> i'm not really here reporting on davos per se. i'm just having a lot of conversations. what may explain some of that confusion is that, for me, websters every year has a word of the year. i think the word of the year for 2019 is going to be the word deep we got now deep insight, deep fake all these technologies weave been talking on this show that have been accelerating a.i., et

cetera i think they're going really really deep. what's unnerving people is privacy. if you know that much about me and they're also great opportunities. with a.i. i can now find the needle in the haystack of my data as the norm, not the exception. all these things are going really deep. one of the things that's unnerving people is where's the regulation around that, where are the opportunities as well. if there's a theme for me, it's really around that. >> what's the mood >> what i sense is a lot of disquiet president trump didn't come, president macron didn't come, president xi didn't come, theresa may is not here. all for the same reasons, because they're fighting issues around inclusivity and income gaps in their own countries. >> we haven't passed the inflection point from being excited about a.i. to dreading

a.i., have we? have we crossed over to dreading it >> no, but i think when you see some of the stuff that happened around facebook this year, that there's just a lot of people -- i think that as this stuff accelerates and goes deeper and deeper -- >> but no payoff yet there will be something. >> i think so. on your china point, what i sense and i think you could hear it in secretary ross is that there's understanding now that we're not just negotiating some trade deal we're talking about two systems that are basically approaching economic growth and development in different ways. >> and a different relationship. >> exactly and deeply embedded in their politics i think the big question is i don't think we can afford a failure. i don't think we can afford for them to come out and say sorry if i'm betting, i think you're

going to get a mini deal that will maybe involve we keep some of the tariffs on, they agree to buy more soybeans. then they say we're going to negotiate this longer. >> you know we have all of february it's not even a leap year. i just checked it doesn't seem like a lot of time. >> if we come back here five years from now, the world more integrated or less integrated? >> absolutely more >> that's what i would think except for the fact that we keep having a lot of hand bringing and big questions. >> we can't hurtle head long into globalism, but we're headed there. >> oh my god tom. >> who's that? >> we don't know >> try and get on the plane

tomorrow >> come out here. >> this is mack. >> oh my god it's a big foot sighting, or something. >> i want to thank our entire crew for all the hard work that's gone into davos great seeing everybody we'll see you tomorrow right now it's time for "squawk on the street. bye-bye. ♪ good thursday morning. welcome to squawk on the street. had a decent premarket going thanks to chips and the transports then the commerce secretary a few moments ago said there are miles and miles to go in resolving china trade. futures went red europe's a bit sluggish.