inquirer over blackmail. it is monday, february 11th, 2019 it's valentine's week, isn't it? "squawk box" begins right now. ♪ >> announcer: live from new york, where business never sleeps, this is "squawk box. good morning, everybody, welcome to "squawk box." live from market site in times square i'm trying to sing as fast as the song goes here u.s. equity futures at this hour let's take a look. they are looking positive before the open dow futures indicated up by about 87 points. s&p futures up by almost 10 and nasdaq by up by 31 points coming after a strong market for the weeks last week. first time we've seen a seven-week winning streak for the dow since november of 2017

first time you've seen a seven-week winning streak for nasdaq since august of 2016. the nasdaq is still in correction territory a few earnings coming in today also, overnight in asia, japan's market was closed for national founding day. stocks in hong kong and mainland china were high across the board. then if you take look at what's happening with europe and some of the early trading that's taking place, at this hour, it looks like also up across the board gains of 1% or better for most of the major averages with the cac up by over 1%. the dac sitting just there and stocks in italy up by 1.6% the treasury market and the yields you're seeing there, ten year 6.67% it's a very busy week ahead for the markets and your money as we mentioned, china reopening today after a week-long holiday for the lunar new year and plus we'll get earnings from a whole

list of them, burger king restaurant brands tomorrow we get the jolt survey and earnings from nissan and underarmour and thursday, earnings from coke and cbs and brexit vote in the uk that everyone will be watching on friday, earnings from pepsi and johndeere. watching new developments on trade negotiations resuming today on beijing leading up to high level talks at the end of the week include steven mnuchin and robert lighthizer. over to eunice eun in beijing this morning eunice >> thanks so much, andrew. the trade talks as you said are here under wap in beijing. the lower level pisofficials hae arrived and are setting the table for discussions later in the week with mnuchin and lighthizer not only do we expect to see some action towards the end of

the week, but it's really important because after that the next two weeks are going to be held up probably with the trump administration involved with the trump/kim summit and president trump already said that he doesn't expect to meet president xi this month. so because of that, all eyes are on this week and the expectation is that the big topic is going to be whether or not the chinese agree to concede on issues that are important to the united states that is structural issues like ending forced technology transfers or state subsidies and so far the chinese haven't shown that they plan to move very much the prevailing opinion is they don't want to because they don't want to be dictated to they also see that these issues are critical and core to their economic agenda, but the other opinion, which is the trump

administration point of view is that if you squeeze beijing hard enough, especially when the economy is down that the chinese will come to the table so, on that front we did see some evidence that the economy is struggling because the latest data for the lunar new year sales came out showing that the chinese consumer isn't so confident. in fact, the numbers show that lunar new year sales grew at the slowest pace in more than a decade the sales, of course, are a gauge of the chinese consumer and the retail sales and domestic travel dropped to the single digits to break it down further, people weren't going to the malls or to the movies over the holidays, but they were shopping online and they did go to shanghai disney land. shanghai disney land was popular over the lunar new year holiday. the theme park saw a lot of visitors from rural china. overall, these numbers weren't looking very good and will likely pressure the goerkers on the chinese side.

>> we hear similar things here, people are vopshopping online and difficult to try to figure out is consumer spending really down or consumers spending things differently what's the answer from what's happening in china right now >> i think it's a very mixed picture from the numbers we had from the lunar year holiday. shopping numbers were down, retail and food and beverage down however on the online side, it was looking really good. jd's numbers were quite good over 40% also there was a food delivery app which reported it had 100% growth just of orders on the day of lunar's new year's eve and alibaba jumped in and a lot of companies trying to bump up the numbers in consumption by having these lucky draws or different promotions and alibaba actually offered to pay for whatever is in your shopping cart you could buy in one minute for one winner, for one minute and they would pay up

to $150,000 worth of stuff so there was a factory worker who actually won this, got the lucky draw she ended up with 85,000 worth of stuff the first thing she bought, iphones, she bought gold, she bought watches and camera equipment and apparently her husband wanted her to buy a fishing rod, but she didn't have the time so he wasn't able to get it and so she said that she's probably going to sell the gold and sell a lot of the other stuff in order to buy him the fishing rod but wanted to keep her hands on her iphone. >> iphone is like gold, i guess, a little bit that would make sense. the fishing rod, i don't know, sticking out of the shopping card or something. get something you can use to buy the fishing rod, i think i was trying to think of what i would get. i don't know depends on what you had. the smallest stuff worth the most and pack the cart to get up to 150 eunice, got to think about that.

get what, caviar bitcoin. >> cram the entire shopping cart. all right. but that guy had -- i don't know bitcoin, where sit today 3,000? >> $3,500. >> eunice yoon, the clock on this next shutdown is ticking and it's kind of inscrutable for normal people to figure out what's going on. maybe ylan mui can help us they have midnight friday night to pass a new spending bill. ylan, so it's about these beds there's overall cap of 40, 520 democrats want to cap it at 16,500 the white house is saying in terms of wall funding that it's nowhere near even 2 billion when president trump wanted more than 5 billion. but then i read john tester, who is in a red state, big time, so i don't know whether he sort of

has to act like he's trying here he says something is going to happen between now and when the shutdown is going to happen. do you think they get a deal is it about the beds now is it about the funding? what is it >> well, those are two issues that are tied together what tester said is that he is not positive they're going to reach a deal, but she is certainly hopeful. there was a wlot of hope from lawmakers that they could reach a deal well before that february 15th deadline, but it does now look like this is going to come down to the wire once again, joe. president trump jumped back into the fray on twitter this weekend. he called the offers from democrats on the border committee, quote, terrible and he said, i actually believe they want a shutdown now, as you mentioned, a source does tell me that democrat's latest offer did allocate money for a physical barrier between 1.3 and $2 billion but in exchange, they wanted to cap the number of immigration detention beds at 16,500 that's for undocumented immigrants who are picked up inside the u.s. and not at the

border republicans say that would force them to release thousands of undocumented immigrants, many of whom have been convicted of a crime. on "meet the press" mick mulvaney says he cannot rule out another shutdown. >> you cannot take 5.7 off the table and another shutdown off the table. you end up in the middle, what you'll see the president say, yeah, okay and then i'll go find the money someplace else. >> both sides are pointing fingers the ceos of big companies like walmart, amazon, google and gm are speaking out, calling for comprehensive immigration reform and support for dreamers but that might be wishful thinking because just keeping the government open may prove more than lawmakers can handle back over to you >> all right. >> what does he mean find the money someplace else find it in other places of the budget and push it through >> the bed issue they want to prioritize who they -- >> that's the democratic argument, joe. democrats say that by capping

the number then it forces the administration to focus on criminals rather than people they say whose only crime is crossing the border illegally. however, republicans say it's very difficult to determine who has done what and that majority of people they hold in detention facilities are people who have convicted crimes in addition to crossing the border illegally. so that's why they say this is a dangerous situation. and the two are connected because one is a tradeoff for the money for the physical barrier. so these issues are becoming interconnected and that's why it's become so difficult to find a way out of this. i had heard as late as friday, late afternoonish that these i.c.e. detention beds were becoming one of the log jams in this discussion and now it look like it's become the log jam the roadblock to a deal. >> okay. >> is there still a fear factor about shutting down the government again i would think both sides of the aisle are a little concerned about having that happen >> absolutely. you hear lawmakers start to bring up the idea of another

short-term stopgap measure to keep the government open i'm told that they are very close to coming up with some sort of agreement on the other appropriations and spending bills that need to be passed in order to open up the rest of the government besides the department of homeland security. could there be a way forward that just isolates this problem? perhaps. but right now lawmakers are more focussed on trying to salvage whatever they can from these negotiations they're going to pull those hat tricks out at the last minute. >> ylan, thank you fear factor. you think we could ever bring that back. >> sure. >> the program >> eating worms. >> just dipping people head first into like a big barrel of maggots and stuff and leave them in. >> i never wanted to be a contestant but i watched. >> feels like to be in washington >> we are going to talk about that i love this story so much about -- if you look at the charts, everything is back to

sort of these key levels, you know, 200-day moving average january was unbelievable everybody went to 2750 on the s&p. we're at 2707 -- >> for the year-long targs. >> i like it all these bullish signals. they say that the ones they're looking at, these are technical measures that mostly amount to various observations that stocks have gone up >> i notice something bullish. >> we can use fundamentals, which are nine months behind they don't tell you what's going to happen or use technicals which just measure what's already -- >> just look at the averages. >> it is just we have no idea. it's very profound but any way, we are at -- maybe the easy work has been done bouncing off the christmas eve lows. >> that would be the argument. sort of nasdaq in correction territory, just barely. >> we have a few stragglers in earnings, but now we're back to shutdowns. >> then you have all sorts of people claiming there's a

recession. >> you saw the jobs number >> i'm just suggesting to you there is other smart people. >> you mean around the world, not here here what's indicating here >> you have the potential for an earnings recession here which i think earnings expectations went to basically 0. >> i thought we were back to 4 or 5. >> i read something last week -- >> you cannot possibly use her as a forecaster. she had that 100 economist -- >> i'm suggesting she made the point. i believe improvement over the weekend. >> oh my god stop, stop now i've got to -- i got to draw the line at that >> takes two sides to make a market somebody has to be selling and somebody else -- >> that's too bad. noble prize on 1980 something totally unrelated to what you're talking about now. now he is a hack for your paper. >> oh, stop. let's go to commercial break. >> okay. mwhen we come back, dan lobe's dropping positions in

well known technology companies. that story next. plus, new details on tesla's latest round of job cuts we'll tell you where the layoffs hit hardest and the message it's sending to investors right now, let's look at the biggest premarket winners and losers in the dow looks like jp morgan chase leading the way up by .6%, visa right behind. ♪ the future of technology investing

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♪ welcome back, everybody. corporate news, third point dissolving its stakes in big names in technology. according to a regulatory filing out late friday, dan lobe's fund dropped its positions in alibab alibaba, microsoft and netflix moves following a difficult year for third point. sources telling cnbc the fund lost roughly 11% in 2018 obviously those technology names pretty high fliers, though. >> yeah. >> last month's layoffs at tesla hitting one department harder than others this time it's the delivery department responsible for delivering cars to its north american customers reuters report saying that the division was more than halved around 150 of the team's 230 employees were let go, that's sparking some fears that the company expects the pace of

deliveries to slow in the near term and interesting article over the weekend that the only challenge they're having now is on the servicing side they delivered all these cars and now a lot of owners are calling in with little issues here and there. >> takes three months to get parts for a fender bender. >> and that's a true conundrum for a luxury oriented car service because part of the sale is not just the vehicle but the service and the idea that there are people that are going to be there for you. >> if it gets cold, might not be able to start your car, some of them, right? >> like how cold >> battery power is tough in the cold by the way, battery power can be tough in the heat, but i don't know if that's been there. >> that was last week or the week before. >> polar vortex, did you name that storm this time >> coming up when we return, it's valentine's week, joe >> it is. >> not just valentine's day all week. >> we'll celebrate love, love.

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welcome back to "squawk box. here is a look at an all-new episode of "the profit" premieres tomorrow night on cnbc >> it's how not to wear a hair net. okay so it doesn't look like the pills bury dough boy wore a hair net and poof on my head. >> i'm cool, too. >> you have to roll it back and pull it down push back, pull down say it with me now should we make that a song push back, pull down if i ever go into a food manufacturing facility, i'll sing this song, push back, pull down remember that next time you go into a kitchen >> you can see a lot more of marcus and his hair net malfunctions catch two new episodes of "the profit" tuesday airing at 9 and 10:00 p.m. eastern time right here on cnbc. valentine's day is thursday and spending is expected to rise millennials age 23 to 29 expect to spend $266 each on

valentine's day this year. according to a new study by bank rate.com generation xers have similar spending expectations by the average for other groups are $100 lower valentine's day spending will set a new record this year, topping $20 billion for the first time ever. got to spend more when you're ever before you're married >> yeah. still in the game. >> pretty much. >> everybody is stuck. any way, coming up the pain trade versus the flight to safety investors are buying stocks and bonds at the same time we'll talk about the signals in the markets and what it could mean for what to do with your money and portfolio. that's next. as we head to break, that's a look at friday's s&p 500s winners and losers ♪ ♪ love is in the air ♪ love stinks, yeah

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>> announcer: welcome back you're watching "squawk box," live from the nasdaq market site in times square. ♪ good morning, everybody. u.s. equity futures this morning have been higher ahead of the opening bell check things right now, you'll see the dow futures are up by 64 points, down 20 points from half hour ago s&p futures up by 6 and nasdaq up by 22 and this does come after a strong weak of gains for the markets. markets have been up for seven weeks in a row if you're looking at the dow or the nasdaq that's first time that that's happened since november of 2017. november of 2017 for the nasdaq. continue to keep an eye on things as we get a little closer to the opening bell. also take a look at crude oil prices crude oil last week down by about 2.5 dollars for wti. this morning wti is down another 44 cents to 5 2.28 and the countdown to another government shutdown is on. lawmakers have just until friday to pass a new funding bill

but republican senator richard shelby said yesterday that talks have stalled over immigrant detention policy the senator estimated that the odds of a deal before the start of next week are just 50/50. >> and china striking an up beat tone overnight as the trade talks resume with the u.s. the two sides will hold working-level discussioning until we understand and then higher level taux on thursday and friday which will includes treasury secretary steven mnuchin and trade representative robert lighthizer. no deal is reached by march 1st, u.s. tariffs on chinese imports will increase from 10% to 25%. julianna tatelbaum is going to join us in london good morning >> good morning. yes, so that positive tone you just mentioned coming out of asia has filtered through to the european session here. as you can see beside me, it's shaping up to be a positive day for european stocks across the board. we are seeing gains. here in the uk the ftse 100 is

up about 50 basis points at the moment another big week for brexit. theresa may is preparing to address parliament on wednesday where she will discuss progress she's made on her deal now, i want to take you to italy where italian stocks are outperforming this morning the ftse mib is up 1.6%. we're seeing a pretty strong bounce in the italian banking sector this came after the european central bank set capital requirements for 2019 that investors received well. we are seeing a good bid for those italian banking stocks now look at the broader sectors here in europe of course, u.s./china trade also firmly in focus. investors looking for any fresh headlines there. but as you can see behind me, it is definitely a positive picture here in europe the top of the leader board those banks, as i just mentioned, in particular italian banks. down at the bottom, we have health care. still in positive territory. there we have news from smith and nephew, the uk medical technology company the ft has

reported that they are in talks to bid for the u.s. health care company nuvasive for more than $3 billion investors have not reacted well to those reports that's the picture here in europe definitely one of positivity as we start the new week. back the you, guys. >> thank you, julianna let's bring in ed campbell, manager at q&, and alec young. russell, last week we were up but thursday and friday it just seemed things were getting tired as we were hitting 200-day moving averages. both of you think that the december i guess the christmas eve lows set up what you guys are calling a tactical rally at least a snapback, but are we any closer to knowing which way this resolves itself now that we snapped back a little? >> what a difference seven weeks makes. we were just so oversold

sentiment, valuation, not surprising to see a snapback, but i think here, all you have to do is look at the huge gap between the fourth quarter earnings which we know were great, low double digits first quarter is flat. this year is running at 5% and it's back end loaded which always makes investors nervous because we know analysts tend to cut the numbers as the year goes on fourth quarter is at 10. if you just took the first three quarters of the year, we probably would be about 2.5. so, you know, i think it's not so much that the market is looking terrible here, it's just the risk/reward doesn't look that great. >> maybe we've stolen from the rest of the year's returns might be one way that we're looking at it. >> if everyone went to 27.50 you make some interesting points about what i would call the fed call people know about the fed put. they stopped when the market is going down because they can't help themselves because traders, you know, are so spoiled the markets go down so suddenly they get very dovish but then when good things happen, we get a china deal or

anything positive happens, then they're back on schedule maybe we will raise. so they start feeling good about things they're going to raise they feel bad. they're not going to raise. >> yeah. the trade might wind up being a catch 22 obviously if we don't get a meaningful deal it's negative. if we get a deal people believes in, it brings the fed tightening back into the mix. we don't think the risk/reward is as interesting as it was a couple months ago. it's rare to see so much change in seven week. >> did you get bullish in december at the lows >> we were buying back to neutral. we had gotten somewhat defensive in the fourth quarter buying back to neutral at the end of the year to get back thinking that we could have this bounce back in january. then moving toward a moderate position across risky assets. >> speaks to me. i feel moderately overweight i don't feel like i'm total fat disgusting but close sort of a -- >> right.

>> do you ever feel underweight. >> i do after i finish those horrible diets that the doctor up in scarsdale -- >> no longer alive. >> i know. someone killed him because of that diet. i really think so. when i'm on that thing, i want to kill someone. >> i don't think you want to be wildly bullish here. i think you want to -- >> what's your year-end target give me an idea. >> i don't have one. >> 28, 29, 30? >> i do think it's very -- given the valuation starting point we had this year, i think in a best case scenario it's very easy to foresee returns of about 15% this year. you can make very reasonable assumptions about earnings growth, which we think will be probably zero for 2019 but all you really need is the p.e. ratio to go from 14.5 where it ended the year to 16 and you're looking at a 14% total return if it goes to 17, then you're looking at a 19% total return. so, i think in a base case, equity markets are going to do

very well this year. assuming that we don't get derailed by a lot of well-known risks that are out there. >> butit was better december 24th. >> better than it is today. >> no, but it was better to buy -- you had 15% in the cards at that point. are you saying another 15 from where we are right here? >> well, i'm saying 15 for the calendar year, so we're at about 8 or 9. >> for the calendar year. >> still a fair amount of upside on the table now, i do think, you know, given the move we've had in january we need some time to consolidate some of these gains, but i think if we're looking between now and the end of the calendar year, it's still justifies an overweight -- >> consolidates gaining doesn't mean we go back below the christmas eve lows. >> that's a fair assumption. we're ten years into this recovery the average draw down in a recession on earnings is 25% >> yep. >> so that takes you from 1.70, consensus on the s&p this year to about 1.30.

recession multiples drop to 12 or 13. if you do that, you get an s&p with a one handle on it, like 17, 1,800. so, again, who knows when the next recession comes, but when it comes, we will have a major draw down. you have to ask yourself, my up sides 5% i think you just laid out. potential downside of 40 or 50 the risk reward late cycle is just not great i think december was a prelude people need to think back to how they felt and this notion that earnings just keep grinding higher and the economy just keeps growing in uninterrupted even flow central banks stayed dovish it just seems all a little too good to be true. so we would just adopt a little more of some late cycle caution. >> you think that's akey judgment that we need to make, right, as investors. what is the probability of a recession within the next 12 or 18 months? and when we look at the high frequency indicators that we monitor to gauge recession risk,

you know, i'm not really seeing a lot of -- i'm not really seeing any red or yellow lights at that point. whether it's the yield curve or initial unemployment claims, the conference board leading indicator or credit spreads, you know, in the absence of an economic downturn, i think p.e. ratios more likely to go up than down. >> you're not seeing it now, but it's a bit of a game of chicken. >> yeah. >> you're trying to squeeze out that last little bit of return betting you'll be able to get out in time. so i agree, we don't see it now, but investors need to understand where they are in the cycle. >> absolutely. >> keep plucking that chicken. i just say that to show you that i can. >> well done you thought long and hard before you did it. >> i did because we had that unfortunate incident -- >> not we. someone else did. >> someone on tv back here so i do it -- it's almost like high wire, you know. you do it just to see if you can. you're not going to do it, are you? it's monday morning. >> plucking a chicken.

>> i got nervous that time all right. good job >> i had my own run-ins. i'm keeping my mouth shut. >> yeah, you have, reeses penis. if the globe doesn't recover, their interest rates stay low. >> anyone else seen a nice -- >> that's supportive of equity valuations i think as well the fact that we've seen interest rates come down a bit that's been driven by the dovish turn in the fed. >> could we have inflation here if the rest of the planet doesn't have any from wage push inflation because the job market is so strong is that possible >> we could eventually have it. >> i think it's on our list of things that could get people more hawkish about the fed, but this idea that tech disruption is kind of inherently inflationary -- >> don't you think that's true

>> i think it is it's been the dog that doesn't hunt for a long time. >> even though the internet was supposed to be no more important than the fax machine, according to that noble laureate. >> what qma. >> quantitative market analysis. >> qma. >> what's it stand for >> it's no longer an acronym. >> it just is. >> you pick three letters? >> like out of a scrabble hing let's see. i need a name. qma. huh? really >> if we go back to the full name, our branding people will be upset with me >> oh, you don't want that. >> is there is lawsuit >> how much did you pay for qma, next time you need another one, i can help you out there you know how many permutations there are with 26 letters? >> the history is quantitative management associates. you're right

>> okay. and alec young of ftse russell. >> ftse russell. >> all right thanks. when we come back, jeff bezos versus the national inquirer we have the latest on the blackmail claims and what the legal claims will mean for amazon's business. later the war on wealth. new proposals by democratic lawmakers include a tax on the ultra wealthy of up to 70% crack down on buybacks and dividends. we'll talk about the proposals and potential consequences in the next hour. stay tuned, you are watching "squawk box" right here on cnbc. ♪ (clock ticking) (bell ringing) it's time. time for a new kind of cloud. the ibm cloud. the cloud that proactively protects your business from threats, instead of just reacting to them. that lets you modernize and move more of your apps without re-writing. that unlocks insights from all your data

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welcome back to "squawk box. this morning, noble prize winning economist paul krugman is warning that the world economy could be headed for a recession this year. speaking in dubai over the weekend, krugman blamed a range of economic head winds for increasing the likelihood of a slow down including a tech bubble deflating and also what he described as president trump's ineffective tax cut stimulus and krugman warned the policymakers aren't prepared with effective responses in case of a slow down he did admit that he and other economists have had a bad track record on predicting recessions

before, but nonetheless, continuing to sound the alarm. >> yeah. for continuing is the right word because it's started with election night and here two years later with 300,000 jobs being added most jobs fridays. >> look, he's in the same place that ray dalio is in >> no, he's more in the same place that larry summers is of having said it for two years in the face of a rip roaring economy. so you know, thest the broken clock. sooner or later he could be right. but it would be about the last person i would listen to in terms of prognosticating anything, like the internet, which will be no more important than i said as the fax machine which is maybe his best prediction the lego movie 2 topping the weekend box office that sequel brought in 35 million dollars in its debut weekend, well short of what warner brothers had expected in second place, "what men want" the gender swapped remake of the

year 2000 mel gibson movie "what women want" this stars terra ji p henson as a woman who can suddenly hear men's thoughts. >> what am i thinking? you don't have -- >> monday. i'm thinking about gas prices. >> no. because i saw this and it ruined my day gas prices rose by a penny well, a penny a gallon. >> and you noticed >> i noticed because i read it for our taxi cab no did i take too long? is that what happened? >> yes, you did. that's what you get. >> the national average is up to 2.34 a gallon, 32 cents lower than a year ago which is good. coming up, jeff bezos public battle with the "national enquirer" sparking shareholder concerns about a ceo whose focus may be drawn away from his company's business i would direct you to "the wall street journal" piece on it. hollywood apparently he lost his

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welcome back, everybody. amazon ceo jeff bezos is under pressure as the public battle with the "national enquirer" continues. this weekend ceo david pecker

denied the allegations that the publisher blackmailed bezos. >> it is absolutely not extortion and not blackmail. what happened is that the story was given to the "national enquirer" by a reliable source who had given information no the "national enquirer" for seven years prior to this story. it is a source that was well known to both mr. bezos and ms. sanchez. >> joining us is the yale school of management for leadership studies jeff sonfield, and i don't want to read into this, but it seems like he was saying that he knew who the source was, and then jeff bezos was trying to stop them from releasing more. >> well, it was and it is clearly extortion. i'm no lawyer and not safe to play it on tv, but those who do could not be more wrong. the cases of extortion in the

public discourse where people have been convicted of this are just like this. you remember david letterman had that person who very much came clean to the cbs producer who was shaking him down, and he came clean about the affairs that he was ashamed of instead it leaking out. and j.lo and cameron diaz who had scandalous pictures or stories and pure extortion, and that is what happened here. i don't know what legal definition this guy is trying, but it is clearly the way anybody in the court of law or webster's dictionary defines extortion. >> do you believe there is a case to be made in terms of the prosecutable case of the "national enquirer" and david pecker >> yes, he is shaken down by threats to do damage to him. and there is some lawyers who argue it has to be property damage, and reputation is considered property damage. so, yeah, i believe it is very strong and clear case on that

ground. i do think that the board has some homework to do. >> and let's talk about this, because you are a management expert and somebody who is look agent the looking at these thing, and your take is that it is a mistake that got to this position, but he is getting a pass, because he has handled it well since. >> well, it is incredibly embarrassing, and he is a incredibly private guy. and he does not want to have a relationship of any way, and same of bill gates. when i would be in the room, and on the stage, he would be hiding behind. he has not wanted to be on the stage, and he had three tortuous hours where the humor was not working. he does not accept awards, and he has been low key except for some of the outside interests obviously, but people with human trail ti frailties whether it is church,

universitiesor corporations an you have a misstep. >> as members of the board, what do you do? you are saying the misstep of the misjudgment of sending these things online? >> yes, this is something that larry ellison doesn't not understand as he screams to mark herd who he hired and misstepped at h.p. and was not honest with the board, and larry has given them a chance at oracle, and he was a great leader. >> but this is a relationship of somebody in the company. >> no, it was an outside vendor. >> and contractor. >> and she was a b-level porn star and i don't know whether it is a-level or b-level porn star. >> and it was a financial interest in the case >> well, i would argue that it is somewhat similar, because it is related to blue origin, but it is a private company. >> and it is a private company and maybe she was working for videos for that, but how he

recovered is straight forward and straight with the board, and that transparency is what receives is almost a pulitzer prize of courage. and so it is begging who is lined up on deck as to ceos into the later decades and you worry about the succession process, but here, i do believe they have very good people lined up, but they are not announced or fully an noinlted. and for almost 20 years he hassed a ceo jeff wilkes who has been there for 22 year, and also andrew chassey and a ceo who has been there since about this time in cnbc in that time 1999, and those folks, they are loyal, smaf smart and know the business so the board does not have to worry, but members of the public may worry what is in the backup squad. but i don't understand the

headlines of that lawyer yesterday that abc made such a big deal out of it. what is the lawyer going to say? he didn't do anything, so he is going to distract and deflect and deny and anything that the lawyer would do when you don't have the facts or the law on your side. >> thank you, jeff sonnenfeld, for coming in who is a management profes soort yale and also ethics expefrmt. our talk for later in the week, steven mnuchin and we will have a update on the progress and what is at stake for american consumers next. and the headwinds for the markets. we will get you with reports coming up from cisco and pepsi and others. "squawk" continues with two big hours straight ahead.

futures pointing to the higher wall street open in part because of sparks with hopes of a china deal. what it could mean for your money coming up. markets at an inflection point. and with the bonds rising, what

could be happening and a war of the people hoping to become president of the united states, and a war of the equality and whether raising taxes on the wealthy is the answer. second hour of "squawk box" starts right now. ♪ i'd go from rags to riches live from the hearting beat of business. new york, this is "squawk box. good morning, everybody. welcome back the "squawk box" here on cnbc. u.s. equity futures are indicated high ther morning and the dow is up by 62 points, and s&p up by 26, and nasdaq up by one. and so that is seven weeks in a row that you have seen with a big run over those seven weeks rising. morgan stanley is looking

upward for the fourth acquisition. they are announcing a deal to buy a canada-based manager of stock employee plans. the stock deal is $900 million in cash, and amounts to $915 per share in canadian dollars compared to the close of $13.36 and the biggest acquisition from morgan stanley since the acquisition. and so, now going to the "china morning post" they are citing a report from idc insider. and huawei which is embroiled in a controversy here with the u.s. is the top smartphone seller. we are watching a couple of shares, but looking at restaurant international, and the owner of tim horton's and burger king and popeyes is looking for better than expected comparable store sales, and that is back up marginally right now. >> and other stocks making news,

activision blizzard is going to announce thousands of job cuts due to slowing sales. this report is coming after a 10% drop in the stock after disappointing results from competitors, electronic arts and take 2 interactive. and meanwhile, tesla is going from buy to hold after guidance of the first quarter have removed significant concerns for both production capability and profitability. the critical model 3, and the new price target is $450 a share which would be like a 40% gain almost it looks like. >> and let's talk about the story that i imagine may drive the week if not for the shutdown, it is going to be u.s./china trade talks. i want to welcome in leland miller, and it is great to see you. i want to put in your mouth what sounds like a pessimistic view of a deal, and you believe a deal is going to be had, but a

terrible one. >> well, you don't allow yourself enough time when you 90 days to negotiate. the president has priorities, and so the headlines around soybeans being second, and there is no team on earth who could get together and force the chinese into structural reform in 90 days. so you are left with walking away from the table or threatening again to walk away or take what the chinese will give you which is top level changes on the ip protection, but the things that can be easily reversed if tensions go south. that is where we are headed. >> we are headed towards a deal, but a lousy one? >> yes. >> and what is the chance of no deal >> i think it is possible. >> and what are the chances that president trump got into this because i got into this, because i wanted to get something and i am not getting what i want, so i am taking my ball and going home. >> well, what is likely they will push back the march 1

tariff, because xi and trump knows that the real deal is face-to-face. >> we have no meeting on the calendar for that. >> that is right. so a lot of this is going to be a memoranda of understanding in place this week with the framework of the deal so they can set up a xi/trump meeting at mar-a-lago and get this done, but any time you trump, you have the x-factor that he could change his mind. that said, i think that they want to move on, and i think that trump's head is get me the best deal possible so that it would take a lot the change it around, but it is possible. >> and there are a lot of reports out of china about how slow their economy is, and so you to assume. i'm assuming that we would be in a better place to make a deal. >> we are, and i think that the published reports of the chinese weakness are nowhere near what we are seeing in the beige data. we are seeing substantial

weakness across the chinese economy. they have a little bit of the blind area here, because january and february is lunar new year, and so you don't get good data out of those months. the chinese economy is weaker and they are in a push to make a deal and in a bad state, but at the same time if president trump does not want to hold them to the fire, then he is sort of rushing into this, and we have more leverage, but we are headed to a quick deal anyways. >> and how much deep ser the pa, deeper is the pain, because you hear 6.6% growth does not sound that bad. >> it is noting a regra ing a a and so we will see it possibly 2.2, and so there going the be more stimulus and more than 2019 first half, but you will not get a indication of looking at the

pmi of a dip below 50 which is what people are missing right now. >> what is built into the u.s. equity market right now? meaning an expectation that the deal is being done, and a good deal or just anything? >> anything that gets it off of the table. there is a real question of whether a u.s./china deal is a sell signal, because the price is already baked in, but there is a suspicion that it is out, there and there is a question of whether this is all good news going forward or once a deal is signed, yes, trade is off of the table for 2019 between u.s./china, but you have other things on the radar and a weak chinese economy, so big question. >> as you are looking into the weekend, low level meetings this weekend and mnuchin and lig lightheiser is going to be over, there and what should you be listening for as an investor >> well, lightheiser knows that the president wants a deal, so

they want to build in something of an disarmament pact, and so you will have auto or other parts. and so what the hawks are trying to do is to document the noncompliance, because nobody in the administration believes that china will adhere to a deal for long, and so as a result they will have a record of why they gave china a chance, and then they can snap it back. >> what does that mean if they can snap it back any moment? okay, we have cleared this hurdle, but it is back in three months or six months' time >> well, off of the table for all or most of 2019, but it is difficult to build in legal provisions that do snap back the tariffs and it would not help president trump either, but when the political winds change and that is certainly going to happen in 2020 then the potential for trump to say, i have given them a chance and i will bring back the tariffs and things will be nasty again. >> thank you very much leland miller, china beige book

international ceo. thank you, sir. and now, the investment trend that could indicate that markets are near an inflection point. we will talk about the bond invig ration in minutes. and also, the earnings season rolling on. we will look at companies and ayw they are faring. st tuned. you are watching "squawk box" on cnbc. 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. a cfp professional is trained, knowledgeable, and committed to financial planning in your best interest. find your certified financial planner™ professional at letsmakeaplan.org.

welcome back to "squawk box" and the futures have been kind of moderating the gain since we began but back to 64 points on the dow, and all green at least. the s&p is indicated up 6.75 and so, meanwhile, the government is suing lockheed martin for false claims and kickbacks. and lockheed is accused of paying to win a contract of cleanup at a nuclear site, and it denies the charges and says it will contest them vigorously. meanwhile, the judge has dismissed a suit against walmart and six other retailers and plaintiffs accusing them of extortion to have shoplifters who are forced to pay money. >> and they were shoplifters who they said pay for the stuff or

we will prosecute you, and we will turn you over to the police, and prosecute you for it. it seems like, hey, that is more than fair. pay for the stuff that you were trying to steal or we will arrest for what you were stealing and that are saying it is blackmail and a conspiracy between the retailers. >> i feel like somebody is breaking through the house in a skylight and injures himself and sues the homeowner. and coming up monetary nirvana as our next guest says that it there is a trend to extend the recovery. so we will find out where perhaps you should be putting your money to work. and a new poll showing the voters to be raised on top earners and believe that the wealthiest need to pay more in taxes, and it is a growing call from the left. we will talk about the issue in a little bit from aei's michael strain and former white house council of economic advisers

jason furman. "squawk box" will back in a moment. ...while helping plan, invest and protect for the future. so they'll be okay... without me? um... and when we knock out this wall... imagine the closet space. yes! oh hey, son. yeah, i think they'll be fine. voya. helping you to and through retirement.

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move higher together robert michael is head of the global fixed income strategy at jpmorgan asset management. thank you for coming in, robert. >> thank you for having me. >> people say when you have stocks and bonds moving up at the same time it is inflection point, but you think something else is at play, and it is monetary nirvana. >> i feel like i should take jay powell and the fed a thank you note for taking the foot off of the brake, and supplying liquidity is going to be good for all asset classes. what we need to see on the follow-through is a brake somewhere else, because we can't have a another government shutdown or the trade talks with china fall through and we can't have a no deal brexit. >> when the fed takes the foot off of the brake there, and saying it is not going to yank all of the liquidity that the market anticipated, and why is that a perfect situation, and the goldilocks situation >> well, when they tighten, that

means they are trying to reach into the incipient inflation pressure. so we haven't seen inflation, so they are slowing growth. and look at the other issues stirring the waters, it was a toxic cocktail, and we saw it before in 2016 when the central banks simultaneously injected additional liquidity into the system which created another bull market in all asset prices. >> so it is a strange situation, because we were at emergency levels. we had created new tools to kind of work with things that we had never used before like the balance sheet being inflated so much. so should the fed not be talking about those issues of ever changing things without seeing inflation coming first >> no, the fed has to accept they have two legitimate tools, and is it not just about targeting the interest rate, but it is about the size of the balance sheet. you can't just ignore it, and say it is going to be running on autopilot whether you are building it or running it down. and jay powell has become more sensitive to it. there are a lot of things they

can do with it. thinking of the upcoming march meeting and if they raised the rates 25 basis points but began to taper the balance sheet from $50 billion runoff to say $25 billion. >> if they raised the rates by 25 basis points you don't believe that the reaction would be immediate knee-jerk reaction, because everybody beliefs they are on stop. >> how about if they stopped the balance sheet stop there. >> why not let the balance sheets run down, because it is emergency measures and we don't see inflation and leave the rates where they are >> well, they are still low on the per yield basis and they are not normal to what normal is looking looking like at around 3%. >> but the interest rates impact housing, too, and that one of the problems of the economy to this part. if you continue to raise the

interest rates you are affecting the mortgage rates. >> and that is true. and our expectation is that they will pause for three to six months, and they will also start to address the balance sheet runoff and my point is that they have two tools now, and they can be a little bit more creative in how they use them. >> and so that is a tool that is never going to go away the big inflated balance sheet >> without question. >> and what does this mean longer term? the "times" laying out what you have in terms of how this is impacting the market, and from every market, around corporate bonds have fallen in line, and concerns about that with emerging markets calming as the fed is on hold. and what is going to happen next where is the next concern in the markets? >> i think that the concern in the markets is that one, you have to see the fed willing to follow through on the rhetoric. so you to actually see a pause in the raising rates. you do need to see some sort of the timetable of when they will begin to stop the balance sheet

runoff and then as i said, you need some sort of settlement on the trade front. you will need a compromise between the u.s. and china. it can't continue to escalate. a government shutdown doesn't help, and of course, brexit would still be a problem. >> if we don't get a government shutdown at the end of the week, and if we do see a china trade deal at the end of the month, then what happens to the markets? >> well, i think that the markets continue. i think that they are still going have good momentum, and a lot of the concern of how companies are going to react to policy gets put on the back burner, and i think that then you start to focus on what is going to look like a strong healthy employment market with low unemployment and wage gains. >> i am shocked to see the 10-year at below 2.64%, and what are you telling people to do in terms of the u.s. treasuries >> well, a number of things.

one, you have to understand why it is here and it is not just u.s. policy, because we have negative rates in europe and japan. so there is a lot of capital exported from those regions into the u.s. market. so that is always going to stabilize the rates, and if the fed is truly fwards the end of the tightening cycle, then this is about as high as we are going to get for the time being. >> so what are you telling the investors in terms of all of the markets, where would you be telling them to put the money? >> don't be afraid of the bond market right now. we have gone through three years of tightening and fed is telling us that they are coming to the end of the it. look at the credit sectors and the high yield and the emerging markets, and what is happening to the local emerging debt if the dollar is coming off a little bit further. >> okay. robert, i want to thank you for coming in today. it is good to see you. >> thank you for inviting me. >> robert michael is with jpmorgan asset management. when we return stocks on the move monday morning and what you can expect in terms of earnings

in the week ahead. look at the u.s. equity futures. and it is looking line it is going to open up higher about 66 points for the dow. and the nasdaq up as well as the s&p 500. ♪ ♪ exciting, everything that i'm gonna do in my life ♪ ♪ ♪ never let a day go by where i don't try ♪ ♪ and i've been dreaming ♪ ♪ dreaming bout places and things in my mind ♪ ♪ 'cause i've been ♪ growing wings now i'm ready to fly ♪ ♪ and i know i'm always ready for whatever ♪ ♪ i could take over the world believe that ♪ ♪ ooh yeah ♪ ♪ i'mma still shine right now ♪ ♪

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still to come on "squawk box" this morning, the war on the wealthy. a look at the decline in tax rates for the wealthy and how it relates to income equality. plus, a look at this morning's movers and what you need to watch as we are getting into the earning season winding down this week. also, the countdown to shutdown. could another fight in washington put a damper on the market rally congressman meeks will join us to talk about that. "squawk box" will be right back. ♪ just hold on, i'm comin'

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welcome back to "squawk box." i want to go over to dom chu who has a list of the market movers and the names you need to watch this week. there is a lot on tap, dom >> yes, a lot is going on and a lot of it is earnings analyst driven and market driven. and a lot of them are up or down based on the analyst actions. starting with shares of tesla up premarket, and 70,000 shares of sheer volume and the stock is upgraded to a buy rating from a prior hold. they cited among other things a

more stable 2019 after relieving the production concerns from last year. the shares are up there. and now, shares of electronic arts are moving to the upside this morning after b of a analysts announced that the shares of fortnite killer are up. and nvidia shares are downgraded to a market perform after their guidance is lowered as well. and also, we are in the waning hours of earning season, and the/3 of the s&p 500 have report the earnings results so far, and as result, we are seeing a move to the upside and a number of the companiesare outperforming but if we get all earnings growth coming in as expected for the rest of the one-third that has not reported, we will have earnings estimates of per share

growth, and if sales comes in as expected it is 6% revenue growth. >> thank you, dom. halfway through the earnings and so far it has not been pretty. there have been fewer beats and more misses compared to last quarter according to the next guest, the earnings scout, and also, also author mark santoli. and so you have earnings missing and the average is 15%, but the nominal numbers may be on the relative basis not what they were, but they are still positive, so i don't understand exactly if you can call it a horrible season, nick? >> well, it is not a horrible earnings season. if we have to give out a grade, it is a "d" and the quarter is "c" and it was "f" in late 2018.

so this is better than expected. we are seeing a greater number of the companies lowering the estimates after they report as well and by a wider margin than normal and what happened last quarter, but the market was pricing in the numbers to significantly fall, but they are falling. so that is better than fear that the market prices are resegt higher as we are pricing in growth in 2019 and not a recession in growth. >> and so you think in the first quarter, we will see the earnings down 1%, but that is less than what people were forecasting a few months ago >> that is correct. in some service providers are already seeing the growth as minus one percent for first quarter, and the market at the end of 2018 were expecting the estimates to fall between 4 to minus 7 percent because you would see the earnings beat by 4 to 7%, so to get negative earnings estimates in the first

quarter of the 2019 that is how much they would have to fall, but they have not come down that fall. so they have fallen, but not as much as feared. >> is that your take, mike >> well, the spread, in other words, the amount that is by which the companies have beat is narrower than the one in five years, and so they have essentially cleared a lower bar and that is true. the first half of the year in terms of the formal estimates trending to the flat profits and low growth and slight decline, but as nick said, the companies as matter of routine beat the final estimate by 3% to 4 percentage point, then you are going to have a slight growth. and that is what the market is closing for. the s&p 500 is still where it is in the close of 2018. >> and the tax funds are down in

the wake of the trump tax cuts and looking at the tax refunds starting at the beginning of this year, and the total number of returns ending february 1st were 16 million and down significantly, and is that going to have an impact? >> well, it is virtually the first week. >> first week. >> so it is hard to project from that if that is what the season is going to be looking like. usually, where the swing factor might come in this tax season is with the higher earnings who file later and might have to pay, that is where you might see the difference. so, you know, obviously the trend is lower and you had a shutdown and i don't know if people filed as much it is not great, but i do think that one week's worth of data, i don't know what to make of it. >> and it is not a shock to anybody who lives in new jersey or new york. >> and if you live in a salt state. >> and rushing to file or expecting a refund. >> and expecting a big refund. >> typically. >> and the question is whether

you have built that into -- the question is if the families are budgeting for the refund >> the former ceo of h&r block said that for our customers the tax refund is the largest single financial event of their year, and the single lump sum they will look forward to and get and that doesn't mean they budget for it, but it means to pay down the debt and make purchases. >> nick, the bottom line is what the investors should be doing, and everything that you are saying seems to say bad, but not as bad as expected, so doesn't that mean that you should not necessarily sell on this, because it might be an opportunity to continue to add to positions >> no, that is right. as the market resets higher to reflect that growth is going to occur in 2019 and not a recession, we don't believe that is fully reflected in the prices yet. but to go higher from here, we need to start seeing the earnings estimates which are getting cut, and going to continue to fall begin to stabilize in terms of the magnitude downward.

so we want to see the estimates could fall, but not as nearly as much as they have been falling in the last month or two, and now that the fed is on hold now in 2019, we are seeing the estimates cuts occurring not as severe that is a good sign. the overhang coming from the fed to tightening the screws too much on the economy with raising the rates, we will get that overhang off. if we can get some sort of resolution with trade, that is another overhang to allow nor the expectations to improve and maybe some real acceleration of growth in 2019 that is built in right now, because we have very low growth expectations in the first half of 2019 by the fourth quarter of this year, and the growth expectations for the s&p 500 are back to 11% and 12% and we will see if that occurs. >> nick, how much of this is driven by apple and the mega caps >> well, it is a market cap-weighted index of the s&p 500, and that is the largest caps to impact the earnings

more, and this is broad based in the earnings here, and all 11 sectors are seeing the first quarter '19 earnings go higher, and so where apple resides is one of the largest down, and energy is also driving the numbers down. and those are the two greatest cuts to the sector and such as real estate and utilities are seeing the least, and all other 11 sectors are higher. >> and it is reflecting overseas earnings that are pressured more than u.s., and so technology is the most global in eterms of the greatest global yields down, and the global expectations going down and it is pressure of the multi national companies more than global growth. >> that is right. if you are long u.s. stocks you

want to see the china economy stabilize and see the earnings stabilize. we would say win the trade war by a field goal and not seven touchdowns so if it is too far, starbucks are going to be selling less coffee and night selling less shoes. so we want to see tom s&p profits stabilize as well. >> thank you both. >> thank you. okay. and separately nobel prize winning paul krugman is warning that the world economy could be heading for a recession. he spoke in dubai and blamed a range of economic headwinds in what he said could be a likely slowdown including a tech bubble deflating and described president trump's ineffective tax cut stimulus as proposing a problem. and krugman warned that policy makers are not prepared for effective responses in case of a

slowdown that. an argument we have heard before. he admitted that he and other economists have had a bad record of predicting the recessions. we shall see. >> and gas prizes rose over a penny the last week, but down 32 cents from last year. you can see that. okay. they will try to put my angry driving in. we have said it. no i am done with the sh, i am do $2.34 a gallon and 32 cents lower than last year. that car i was driving there got four miles to the gallon. it is like a 12 cylinder 800. there is traffic, mike. traffic. >> and what are you supposed to do when people won't get out of your way >> go around them, i guess. there is a "lego movie 2." >> and another lord movie. >> i have not seen it yet. >> new villain. >> and this time, the "lego

movie 2" did top the box office but the sequel brought in $34 million which is well short of what warner brothers expected. second place is "what men want" and a gender swap of mel gibson's movie of "what women want." it is starring taraji j. henson and a woman who can suddenly hear men's thoughts. >> when we come up -- >> were you listening to us, anthony? >> talking to paul krugman >> i will tell you about it afterwards. a war on money and conversation debate about inequality, and we will talk about that right here on "squawk box," and recent polls showing that the voters want to level the playing field and they want the lawmakers to raise taxes on the wealthy we will debate it after the break if that is really what america wants. and gregory meeks is also going to join us for the possibility

of another government shutdown. that is coming up. who says our bank isn't tech enough? 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.

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you need decision tech. i found a companyeans to who believes in me.rt. they look out for me. and they help me grow my career. at comcast it's my job to constantly monitor our network, prevent problems, and to help provide the most reliable service possible. my name is tanya, i work at the network operations center for comcast. we're working to make things simple, easy and awesome. it's the race to tax the race. the democrats are proposing steep tax hikes for millionaires and billionaires and getting surprising support from voters. is that surprising ryan frank explains. >> it is surprising with the

proposals that are called radical socialist and extreme by even some democrats. but the brackets that are being proposed have a long history. and of course, alexandria ocasio cortez is the leader of the tax cuts. bernie sanders tax exempt would lower it from $3.5 billion to 1.5 billion which is the exemption in 2009 and while that proposal which is radical sounds from 11 to 3 is actually the rate in 2009. which is why a ma jority of the people polled support a increase

of taxes on the rich. and fox news poll found that a majority of the republicans back higher taxes of those making more than $10 million and what the candidates don't mention and a number i havet no seent a all is that the top 1% pay among the highest share of federal income taxes in history which is close to 40%. >> yeah. that is pretty progressive, but still. >> and so we have heard these rates before, and it is high as 91%, but what is actually? >> well, looking at the 50s and the 60s, they paid 40% which is the effective tax rate, and the -- >> federal. >> yes, correct. federal. and the effective tax rate today is around 26%. so we went from effective of about 40, 42 to 26. >> and why can't we find a way to close the loopholes and say, this is what you are paying. >> because the loopholes are charitable deductions and other things. >> less or more deductions

>> well, less. everything except for charitable deductions have gone away. >> and how did we go down, oh, that is right, the reagan miracle. and that is how we did it. >> and the other side is that we have had strong growth when the taxes went up in the clinton year, and the taxes went up and strong growth. >> so leftover from reagan >> and the deductions for the normal people to take, and all kinds of loopholes of paying 5% or 8% tax break and 245 is a different story. >> and a number of those relate no the capital gain, and the private ownership of company, and so those are the things that are really the preserve of those at atop. >> and robert, the right pushes some thing, and the left pushes free dumb. >> and yes, he has made this point for several years that the crisis that we still don't appreciate the larger impacts of the crisis. i think that we all think it is

over, and recovered and one of the remnants of that is this populism that the economy is unfair, and the way that people are taxed is unfair, and i think that did not have a chance to express itself, because hillary was so wealthy she could not talk about it. >> and the fact is that, robert, the organic hopefully wage income increases that we are starting to see with the faster gdp growth which i am hoping to say has replaced zero percent interest rates and in a very active fed in the obama years where all assets got on purpose, the wealth effect was being engendered by the fed to make people feel bet sore that people who had assets obviously had the assets to have quality. >> and the quality has come down from the high levels and the focus -- >> and it is, you know, it is counter intuitive to what you would think. >> it is. >> because you would think that, you know, obama and always talked about trying to help a certain group of people, and a lot of the policies which kept

us at zero and ended up hurting the people that he was designing to help. so if you can get the higher gdp growth permanently and you would hope that the jobs are skwars, and people switch jobs to ask for more money and benefits and it is going to start happening that way. >> and unless you think that you are robinhooding it, and then the government gets it into the hands and the fortunes of the people that they are going to try to help and they don't do that. >> and that is why there is a civil war within the democratic party of the focus on helping those in the middle instead of just taking from the top. >> the tax on the millionaires is stupid, because i want to make everyone a millionaire. >> i know how you feel. >> look, 70% is making no sense. >> unless the top bracket is $10 million. >> and you will like that unless you start to make it. >> and 50% is compensatory. >> and how about a wealth tax.

>> and how about you say to somebody i won't say who, but we are okay with the wealth tax, because it does not affect any of us. >> and the wealth tax is very complicated to enact. >> they don't work >> and however, by the way, i would not be against an estate tax which by the way is to come degree a wealth tax that you can actually execute on, because part of it is that you can only tax people at a transfer moment. that is why a wealth tax does not work. >> and estate tax down to $3.4 million from whatever it is? >> well, the rate is going to 77%. >> nobody, no wealthy person who is paying is paying the estate tax is paying it. >> that is the problem. get rid of all of the things that hide it. >> and get rid of all of the trusts and so if you are actually going to want to deal with this in a meaningful way that is where you to deal with it. >> and so like gary said, only

morons have that. >> and the question is you trying to raise money or are you trying to redistribute and punish, right? and where do those two things intersect or not. so i think that is where the conversation has to be and by the way, one of the things that nobody talks about, and look, aim all fi am all for charity and philanthropy, and if you are talking about straight power, and what this is about, it is a view that somehow people have too much power, it is that most of the money of the great wealth is not ever taxed in any way, because in part, it is given away, and so warren buffett's great wealth for the most part is not going to be taxed in any meaningful way, and it is not given away in a philanthropic way, and bill gates. >> and the same thing in nebraska when his wife passed away. >> and i don't know if anybody wants to tax philanthropy, because you want the money to go

to the good deeds, but then a question of one individual or the certain types of the individuals to have that much more control over where the money goes than others. and that is a different discussion, but we have two guests, and who i know want to weigh in on the conversation. we want the bring in former council of economics advise james furman who is economic professor at harvard kennedy school of business, and also doy you they is comcompensatory. >> well, i think that we can raise the rate, and broaden the base. when you talked about the reagan miracle, we had a 50% tax rate on the reagan set, and so the

higher rate, but not all of the way to the 70%. >> and what is going on in the democratic party and what about elizabeth warren who used to teach at harvard with you. >> the income tax on households has gone down, and the income up, and you saw a radical tax cut that made the problems worse. so you are seeing a reaction in the other direction. so it is good that we are having this debate, and it is aspiration ally in the right direction, but it is not going to end up in the numbers talked about now. so i think that it is not. >> and so is this an anchoring technique in a grander negotiation? >> i think it is some of what is going on, and president obama raised the top rate to 1996, and we were told that it would destroy the economy and penalize the rich people and stop them in their tracks and none of that happened and maybe pick a higher number, and people will be using the same talking points.

>> and michael strain? >> well, i agree with jason that we need to use the tax code to raise revenue and not punish people. and i agree with jason that broadening the tax base is the place to start when thinking of raising revenues, but there is a lot of loopholes and deductions left, and we have a generous mortgage deduction left, and generous state and local tax deductions left. not as before the tax law. >> you are thinking that the tax law is generous? >> well, up to $10,000, and that is not nothing. again, less generous than it was before, the 2017 tax law, but it is still there, and it is still quite a bit of money, and the same thing with the mortgage interest deduction and you can deduct $750,000 of a mortgage and 245 is a huge house. >> and michael, i don't believe that the debate that is being held is not about those numbers, but the conversation of the

people making $20, $50 or more millionaires, and so why we are not talk about, and well, we could talk about a capital gains tax, but we have not talked about the private equity in forever, the carried interest. >> carried interest. >> carried interest situation, and this a conversationf more of the kushner family, and not p y paying taxes and the number is close to zero and people are saying that it does not make sense. that is what the debate is more about? >> well, it is more of the debate and i would defer to jason of what the democratic party members are thinking, but it is more of punishing the rich and punishing the success and our vision of society that does not involve all of the rich people, and how to use the tax policy in order to how to get there and that debate is fundamentally misguided. >> reagan did not stay at 50 for long, because in 1986 we went to

28. >> i know, but somebody talked about the reagan boom, but when you were talking about the reagan boom, you were talking about the early to the mid-'80s. >> and the '90s, too, which came about from the 1986. >> that is booming debt. >> that when we were defeating the soviet union and winning the cold war. >> and talk about this century >> and on spending and not revenue. >> and what you are thinking of spending on defense. >> when you are trying to correlate. >> you were not there and you have no idea, because you have no idea. and so when you are growing at 4 and 5 -- >> it was not there. >> and when you have a new york times revised narrative of what was happening, i was there working and i saw what happened. and the debt was spending on the defense spending to win the cold war. >> can we talk about this century? >> that is a speech that is -- >> and we were growing at 3% to 4% per year. >> and the argument is that we have a huge amount of debt that is piling up as literally as we speak and that is not propelling

the economy at all that is intellectually dishonest argument. >> and i never heard a word from you in the whole obama presidency. and now, listen, michael strain, do you ever just talk philosophically if someone spends an entire life paying taxes and then accrues a certain amount of wealth, and okay to say, okay, you have been taxed, but i will tax you again, because you can't spend what you have and you don't deserve it? isn't philosophically that is something that we just don't do in this country? >> i will have answer it for you. >> it seems that -- >> okay. >> it seems word to take a guy who works hard his whole life and builds a business and then sells it. one guy spends all of the money, and the other guy wants to give it to the children tashgs and guy who wants to give it to the children other than the guy who wants to buy the yachts or the private jets takes the tax hit.

so when you are thinking of the wealth taxes and going after the high income people in a punitive way, you are immediately going to confront the ethical issues and common sense issues. >> jason, talk about the charity again. because a lot of people who are good people, and good individuals who are in a position to be philanthropic seem to prefer a charity or the private sector solution or approach to the world's problems rather than government it is almost like, it is almost like the limousine liberals suddenly realized that what they were talking about for their entire lives and when they have a chance to give it to the government, they realize as much as anybody else, that the government is ineffectual in the bottom line with the capital. >> and a 70% top tax rate, you will get a lot more giving to charity. but i think that we need to get back to the problem that there is a lot of income that is not being taxed now. it describes itself as wealth or capital income.

and it is delayed taxes. >> and that is stuff like carried interest. >> and if it has never been taxed, i can site, but most of it was taxed as they were accruing it. >> it is an awful lot of people in the high standard of living for a long period of time paying no taxes, and that something that you want to do something about. >> and you could. you could write legislation affecting just that and t noa 70% nominal rate. >> we will be back with gregory meeks later in the program. it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. investment opportunities beyfirsthand, like biotech.ne

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shutdown deja vu. we are less than a week away from what could be the second closure in two months. what are the odds that we will get a deal by friday >> deal or no deal. the u.s./china trade talks are under way in beijing and leading to the make or break meetings later in the week. billions of tariffs are on the line. and the war on wealth. what is the true role of the rich in america? facebook co-founder chris hughes and art laugher, the father of supply side economics will debate that in the final hour, as "squawk box" continues right now. live from the most powerful city in the world, new york, this is "squawk box"."

good morning. and welcome back to "squawk box" here on cnbc from times square. i'm joe kernen and along with betty quick, and unfortunately the richer people are getting richer. up 92 points on the dow, and the nasdaq is up about 36, and the s&p is up 9, and maybe by the open we can get it do go down. treasury yields are at this point about 264, or 265 or something around there, which is -- 265. why not at 325 >> because the fed is not raising the rates and because you have lower rates overseas. >> i thought they could not control the 10-year. >> well, they seem to in the past few weeks. >> yes. and the latest round of u.s.-china talks getting under way in beijing. the negotiations are on the lower level discussions by a

deputy u.s. treasury representative and then thursday and friday, it is stepped up as the secretary treasury steven mnuchin and robert liteheiser is going to join the talks. and 200 billion of chinese tariffs are to be increasing, but president trump and president xi do not have a scheduled meeting on thele ka en dar yet which could become a challenge. joe? >> less than a week before the government shuts down possibly for the second time in two months. and now, yulan is going to join us now. what do you see? >> it is the potential government shutdown friday. and the negotiations broke down and the issue this time is the number of immigration bids a tdz

democrats want to cap it, and the republicans are saying it would force them to release thousands of undocumented immigrants and many of whom hav. and so senator richard shelby said that we are not in a good place. and so yesterday on "meet the press" nick mulvaney would not rule out the possibility of another shutdown. >> you can't take shutdown off of the table or the 5.7 off of the table, but if you are ending up in the middle, then the president will say, yeah, okay, and i will find the money some place else. >> president trump had stayed out of the fight at the request of the republicans and the democrats, but he vented the frustration on twitter. he called the democrats irrational. and he is headed for the meeting and it is a good bet that he is going to be making the case for

the border wall. >> thank you, yulan mui. >> to talk about this more is congressman gregory meeks. thank you for coming in. >> good to be with you. >> and let's talk about the likelihood of another government shutdown at the end of the week? >> well, it is 50-50. and we are at the impasse which is not unusual in thesenegotiat been watching closely and i happened to speak to one of my colleagues who said that they will be going back to the table today and having further conversation, but there is room there to come up with the deal. >> 50% odds of us going back into the government shutdown is unimaginable to me. i would think that both sides would be really reluctant after having watching how damaging that was. >> i should not say 50% of the shutdown, but 50% of the agreement, and it could be at the end of the day, there is another continuing resolution

that is what i am talking about is 50% chance of agreement, but i would think that i agree with you that i hope that there is not a shutdown, but it might mean another continuing resolution so that we can continue to have the debate and move forward to try to figure this out. >> that is sound morgue reasinge reasonable if you cannot come to an agreement, add more time. and what do you think that the deal looks like? >> we are getting close to it. you are looking at the experts, and number one talking about the promise that the president made in the campaign and forget the campaign promise, but the expert to talk about what we really need to do to have our borders secure. so we have that aspect, and then also on our side, we have to look at the immigration issue which is what we have been talking about that we don't want the individuals already here to be put in jail basically, and that is what we are talking about and why we have the cap. many of them may have committed a minor offense or something of

that nature. >> and an ad in "the new york times" that 100 ceos have signed off including the ceos of general motors and apple and many of the companies that we talk about, and they say they would like to see permanent protection for the dreamers, and why is that conversation away? >> at some point we have to have the comprehensive immigration debate. what we trying to do now is that we have a manufactured issue that the president, and that is why we are here now that the president put on to try to keep the campaign promise of building a wall. if it weren't for that, we should be having, and we thought that we had the agreementt a one time in that regards, and the president agreed at one point, and then the next day decided to take the deal off of the table. >> it seemed a month ago you were talking about the democratic party looking at this saying that we won't give a penny for any wall or any border issues of the physical barrier, because it is a winning political point, and more room for the actual conversation on both sides at this point >> well, it is not that we said

that we want to abide by what the experts said that would secure the border. and the democrats have always said they want secure borders, but they do not want to be a part of what is basically a campaign promise that the president made. and the president also now begging the american people for the money, and remember at that time that he made this campaign promise, he said that mexico was going to pay for it. so we don't want to be part of the campaign promise, but we are experts. >> and you don't think that presidents should keep campaign promises >> well, just democrats? >> and not that he said that mexico would pay for it, and not the americans. >> and let's talk about news closer to home. and that is that amazon is considering pulling the potential headquarters here in long island and if the political back and forths continue, and they thought that they had a deal with the democratic mayor

and democratic governor and now a lot of people want to change the deal or retrofit it, and amazon is saying that it is going to pick up the ball and go home. >> i don't think that amazon is going to do that, and what we need to do is to make sure that the community it is in is that there are benefits throughout the boro boroughs of queens wo have a chance to fix it here, and use it as an example of what we are doing in kenedy airport in my district where the community is involved. we have a community advisory council, as a part of the renovations which is not as big as amazon, but it is a $13 billion deal. we need to work together. >> and how much of this is about hurt feelings?

can i just suggest to you that i think that what has happened here is that because this was a negotiation of cuomo undertook frankly confidentially with the mayor in new york as opposed to bringing in everybody else, there were a lot of people, and democrats in particular who were hurt because they were not part of the discussion and now they want to rewrite the deal isn't that what is really happening? because the numbers straight on the numbers when you are thinking of the idea to bring 25 to $25 billion and $25 billion so some-odd number of revenue to new york which is ultimately going to cost $3 billion and i told you that i give you $25 billion and ate it is going to you $3 billion, and most people would take it in a heartbeat and yet there is a massive fight. >> that why i used the jfk, because it is $13 billion in a district, but the key is to make sure that everybody has benefits. for example, it is important

that amazon agrees when you come into the community, there are certain things that you can do in the community, and certain people that you could put to work in the community, and also make sure that when there is for example local and minority professionals and attorneys and accountants and engineers and make sure that those are in the deal. the governor has done a good job at that for kennedy airport, and so the community is feeling included in that and not that the somebody from the outside is coming into the area, and the facility, and they are pushed out. >> do you believe it is malpractice if amazon leaves >> that is what cuomo called it. >> we want amazon and we want new york to be the tech center of the world, and we are starting it. >> and your colleague does not want it. and she tweeted out very vocally how happy she was. >> and cal maloney represents the area, and many democrats want it in congress, and et

cetera. we won't get 100% of the individuals agreeing on everything 100% of the time, and there is a difference of the opinion, but there is a lot of folks who did not want to renovate jfk, but we are doing it, because the overwhelming numbers of individuals want it, because they understand the progress and the benefit. >> according to the polls, the majority of the new yorkers do want them. >> that is correct. >> do you feel that amazon is responsive and have you spoken to them? >> i am due to speak to amazon today in fact. when iley here, i am going to washington, d.c. and we will have a dialogue and conversation with them. that is what it takes. and along with a number of others. so there is continued conversation and as i sent out a letter and public letter at one point to amazon saying that we welcome you to new york. let's sit down and figure out the small nuances so that everybody can feel included. >> did you sign on the new green deal >> well, the one that was just,

the resolution that was passed, i did sign on the resolution which was different than what was propose ed previously talkig about a bill to put a committee in place. the resolution as i looked at it is what i want to do and how to be moving in the future to save this planet is important and we will do it in incremental stages, and not something to be done in my estimation in one fell swoop. >> congressman meeks, i want to thank you for being here today. representative greg meeks, we thank you for your time. >> all right. and we have talked about the politics around the amazon proposed headquarters in new york, and what is the danger of the amazon stock from the backlash of the company's so-called hq2. and so what is jeff bezos' fight with the "national enquirer" and pecker we will talk to a top analyst about both of the developmen.

ay tuned. you are watching "squawk box" on cnbc. we see a billion more people breathing free. we see access to fresh food being the global norm, not the exception. we see homes staying cooler, without the planet getting warmer. at emerson, when issues become inspiration, focusing core strengths to create a better world isn't just a result, it's a responsibility. emerson. consider it solved.

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welcome back to "squawk box," and we have been watching the futures and in positive territory all morning long and they are picking up.

the dow is looking like it is going to open up 112 points. the nasdaq is up about 37 and 10 for the s&p. >> and now, jeff bezos' remarks are causing questions about what is going to happen with amazon. and now joining us is the managing coordinator of ingenuity. and so, this is the tabloid sensati sensation, and the family man created a family man image until a foray into hollywood. so would this switch, if you think it is a switch would affect his ability to manage the company? >> the unfortunate thing for the amazon shareholders is that it is a business that doesn't have as much of an impact from these types of headlines as say a business where you are trying to court the advertisers all of the

time. this is a business driven by minions and mime yon -- millions and millions of consumers around the world to manage their lives. so it is a business that can withstand this scrutiny. the bigger question is what is the impact on the amazon leadership, and will mr. bezos be able to stay as focussed as he has been over the last couple of decades, and that is the bigger question. >> did you see this switch is there a switch? >> i think that the move into hollywood was a calculated one. it was in part a response to netflix, but also consistent with the theme that amazon had been pursuing for a long time which is create more and more services that it could bundle into the amazon prime to lock the households into purchasing on amazon. it made a lot of sense in that context. it is not clear that it is going to work. it is not clear it is going to be a high r and y type of thing. >> does it fundamentally change

the culture of amazon which has been cheaped dare i say in how the company likes to operate. if everybody is flying coach and nobody is flying the business class, so it is a different kind of the approach, and the question is whether you think that by going to this hollywood direction, and whether you think it is changing jeff bezos and changing the company. >> i think that, you know, it is possible to pursue both the frugal ecommerce amazon and the higher spending hollywood amazon. keep in mind that one of the criticisms that amazon had as a content producer relative to netflix is that it is not as free spending and not as sort of the catering to the artist vision as netflix has been. so i do think that from the perspective of the employees at amazon and any inequities, i am not sure that the employees working on the hollywood business in general are treated any different than the amazon employees, but trying to succeed

in that world. >> and so, what about the board governance and there is somebody that you see today if something were to unfortunately happen to somehow the jeff and of course we would hope that nothing happens to him, and is there a successor, you believe in place? >> i think that there is -- >> how much does it matter to you? >> i think that there is a strong executive team at amazon. there are a bunch of executives there who have come up through the ranks at the company, and proven themselves to be highly effective. one of the things that we will see with amazon that we saw with apple and netflix and google and facebook is that they are found founder-led and founder-controlled businesses, and they need the vision of the leader to be in place. >> i want to be clear, that you don't have any concerns about his leadership, his judgment because, look, i am sympathetic to what has happened to him. i consider him a victim in this case, and actually the way he has approached this is about as

good as you could, i mean, it is bravo to him in terms of coming out against the "national enquir enquirer" at his own expense, but with that, people look and say, look, there is a judgment issue to be sending images like that. >> you think >> i am just raising the question. >> i mean, he is running the business with issues that have popped up, but i don't think it is going to impact his ability to run the company. he is doing a good job and running a good business and a lot of loyalty among the employee base and the executives working for him. it is unfortunate as an analyst sort of looking at the biz answer and the stock, it biznes and the stock, it is not a concern for me. >> thank you, michael graham. >> what is that? >> nothing. >> i am just asking the questions. >> i heard you. >> and you think that he is

comporting himself well which is -- >> well, i think that given the circumstances he is doing about as good as -- >> he put himself in those circumstances in the most bizarre fashion that you could. >> i recognize that, and i imagine that he would agree that if you could take it back, i would imagine that he would, i would think. >> i don't think so. i think that he is like -- >> oh, i do. i totally do >> and maybe with that, but i don't think that he would go back to his wife. >> and i think that sending, using and sending the phone the way that -- >> all right. you just don't get all squeamish. we are all adults here. >> i have covered too many trials over the years where i have seen the impact of what a bad -- >> pictures like that? >> no, a bad e-mail and three or four, and frank patron's trial, because of the mistrial in the first one and six words in the sentence is why we sat through

that for that long and so i can see how damaging it is. >> and you were watching it, and ignoring the reagan revolution is what happened is that what you are saying, distracted >> no, i was watching the patron trial, and living through the dot-com bubble bursting. >> and now, coming up, we are calling it the wealth debate, and 70% tax rates being floated on the top earners and reporting last week that the ultra rich are getting richer, and the wealthy are permanently in the spotlight or the crosshairs, and so we will debate the rich and how much they should be contributing in taxes. we will talk to chris hughes and art laffer. he was there for reagan. stay tuned. you are watching "squawk box" on cnbc.

welcome back to "squawk box," and the futures right now, we have green arrows and it looks like the dow would open up 110 points higher and the nasdaq about 36 points higher and the s&p up as well. >> what should companies be doing with the excess cash we will be joined by facebook co-founder chris hughes and art laffer the founder of supply side economics. "squawk box" will be back in a moment.

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welcome back to "squawk box," everybody. we are live from times square, and let's get to the stories that investors are going to be talking about today. morgan stanley has announced the biggest acquisition since the financial crisis. it is buying solium capital.

it represents 43% up a share. and revenue is coming up above street for cast w. the comparable store sales were higher at tim horton and burger king, but at popeye the stock up just 2%. and at the box office, the "leg go movie 2" did top the box office, but it fell short of the $50 million that the watchers were expecting. >> and now, there is a debate throughout the country of how much the rich should pay in taxes, and steve liesman is going to join us with one key angle of the story that is unexplored which is the buybacks which is raised into the discussion last week with bernie sanders. >> off of the rails a little bit, and andy, a lot of talk and

misconception of the buybacks. i spoke on friday with the national head of the economic research and john graham, who is a financial economist at duke university, and i went through at thereof misconceptions. first, talk about one of them. buybacks enrich the wealthy. it is wrong. it is an equal exchange of shares for cash inside of the company. i can give you an example if you want, but it is really not getting them any richer than they were. and second, the buybacks are good for the economy. it depends. the cash for the buybacks can be used for consumption or savings or investment. the cash from the buybacks may have a good idea for how to invest it or spend it. and buybacks can come at the expense of the worker salaries, but that is depending, because that is based on the labor market and expected returns. it may be that the executives

have incentive for buybacks to result in more short-term thinking which is a criticism of the buyback, but the result of the buyback is that the market should punish those not investing in the long term. economists thinking of the buybacks as a more efficient way to distribute the dividends and more tax efficient way, and so people have this wrong. >> and one thing that i would like to throw into the mix which becky made which is interesting, how do you feel about the companies who pursue the buybacks when they have underfunded pension liabilities? >> i think that is an interesting idea that the one thing that schumer and sanders may have been on to which is that you have a legal nexus to oversee that in the sense that pension liability funding is something based on the law out there that governs it. you could imagine that then again the idea of funding the pensions is based on a sort of

inexact science of expected future returns, and so you want to be careful. but what you don't want to do in any way is to supplant the corporate decision making for government decision making. i just don't think that the government is going to be a better decider of what the company should do with the money. you be careful that there are not incentives for the company to do things based on the tax laws or other laws that distort their own decision making. >> all right. we are going to be needing a lot of time, and i think that we have it. so let's debate inequality and buyback taxes. joining us is art laffer and former trump campaign adviser and also an economic adviser to ronald reagan as i bow my head. and also known as the father of supply side economics. kidding around with chris. chris hughes is the co-founder of facebook, and co-chair. and i want to frame it like

this, arthur. i always had the notion that things were different in the united states, because people were accruing wealth, and hopefully some at least because of the ameritocracy and i don't want to have a feudal system or a system where, you know, the titles and the wealth is passed down just by the birth right, and there is no upward mobility, but a rigid class structure. i thought that it was different here. but now that we are in the period, what is wrong when a person has accrued so much wealth that they cannot possibly use it all, and nobody deserves and chris is probably in that position, but nobody deserves this much wealth. they don't. what is wrong with rescinding property rights and everything else that we have put into the rule of law and confiscating it, because they can't use it and people are in need. what is wrong with that idea,

and why should it stay with the people who earned it in the first place when they should not be able to pass it on to their children, because they should start from scratch anyway, shouldn't they >> well, if it were one-off, you may be right, but frankly doing the wealth taxes or the death taxes, it does change the incentives. for example, i'm 78 years old, and i'm working full time and i love it. i have 13 grandchildren and that is why i am working. if you stop me from giving to the grandchildren or reduce the incentives i would reduce the amount of time i work if not altogether. >> and arthur, talk about the fairness, and why should anybody have 100 billion or $10 billion and other people can't put food on the table. so why not for fairness to just take that and move from one side of the ledger over to the other. and it seems that is the compassionate thing to do, lafr. >> well, you know, if you don't, and why should some people with taller than others, and i am not

very tall. and why should some people be handsome er or uglier than others. >> you aare talking about me now >> and now, this is a ridiculous system if you try to recalibrate everything, because you will get nothing in return. whenever you redistribute income in any shape or form, you reduce total income. >> and in all seriousness, chris, that is my biggest problem to make sure that people here don't get there anymore. that is one thing, but don't trust the government to take the robinhood proceeds to do anything effecttive to it to bring the bottom up, so organically, you need the growth the make the bottom growth. and i was talking to chris. >> and to the previous point about the fairness, you are dead on. two numbers that i want to give to you. right now the 0.1% pay 3.2% of the wealth in taxes.

the bottom 99% pays 7.2% of their wealth in taxes. the wealth tax that elizabeth warren has put forward is a step towards evening the scales and it is not about redistribution, but about basic tax fairness, and to the second point of what is that going to fund? we have a number of government programs that work well. you can start with the eti, kc r the child care or the other programs that have been working and there are a number of places to invest, and we have gone through a period of disinvestment which is why we are stagnant. >> and is there a bottom of the existent taxes to be paid. >> paying property tax, income tax, and oil tax and sales tax and -- >> yes. >> those are a good thing, because they fund the public

sphere and make america peaceful and prosperous, but we have a rider problem of the 0.1% and those with household wealths among $50 million is not paying their fair share and that is to bring it back in. >> and so one man or one woman's fairness is another unfairness that there is 1% is shouldering 42% of the burden of the tax revenue. >> and the overall revenue, but i am saying -- >> well, back to thinking that they have so much more they can afford more. >> no, i am saying that the folks that are part of the 0.1% should not -- >> well, you are saying they should because they are accruing more capital. >> and the problem is with poor people and not rich people. the problem is they that are

poor, and they should rise up and not pull other people down. whenever we have raised the highest marginal income tax in the country, and the revenues of those people have dropped and the cut the marginal tax rate from harding to coolidge, the revenues from the top one percent skyrocketed. when we did it with kennedy in the 70s the top one percent skyrocketed and the same with reagan and documented there. it is the facts. and the problem is the poor. the poor benefit from economic growth and jobs, and kennedy put it the best, the best form of welfare is high paying job. and if we had a flat tax, then warren buffett would pay what he earns. >> i agree that we have to lift the bottom, but right now if you have a child under 5 in new york sta state, you are paying $14,000 in child care expenses, so talking

about lifting the bottom, the expenses because the government has not provided much needed services, and increase the labor force participation, et cetera, the bottom is trying very, very hard. you need the tax revenue to do that and we have historically, and let's be clear about where the rates are, because they are historically low, and much lower for the 40 years after the world war ii, and as a member of the one percent and i can tell you that i can afford the pay more taxes and it would make my taxes higher. >> and it is a few decimals that you left out. >> 0.1. >> no, it is 0.001. say it loud and clear. >> the point is that my taxes should be higher, clearly. >> and if you want to pay them, pay them. i have no problem with you sending a check no the government if that is what you want to do with your money. >> and so eventually, we will run out of the rich people's

money, and we can't solve thefrg that we need to solve. maybe the people -- >> we are a long way from running out of the rich people. >> okay. what is the wealth tax rate. >> i want to go back to the issue, and the point is not necessarily how much money you can technically raise. we are at a -- >> excuse me >> why not >> well, the conversation in america today is not about that for better or worse. i think that the -- >> andrew, i think that it might be for worse, andrew, because we want to grow quicker and that would solve the debt problems, and if there is a problem that you raise the taxes and the unintended consequence is that growth slows. >> as you know, i am not. >> and that would be bad. >> and i am not for a 70% tax -- >> and you are saying about the discussion is about the tone. >> and to his point. >> and he is suggesting that

there is a general sense of unfairness about this. >> it does not mean that you are right or your feelings are correct, just because you can conflate different income levels and social security. >> and jim paulson sent in something that we did see a massive drop in the household income in 2008 with the financial crisis and pick back up, and he says that the medium rail household income plunged in 2008 and by the end of 2019, it is rising sharply and back above the trend line significantly. and does that tamp down some of the reason for this conversation to begin with or not >> look at what we just did with the trump tax bill. reducing the corporations, excuse me, taxes massively on the corporations one percent and independent analyses say that two to one, the benefits went to the rich, and americans don't approve of that, and looking at the polls -- >> that is just patently false,

chris. >> this tax bill cost one trillion of buybacks and the rich got richer and the americans are tired of it and there is a sense it is not about economic populism, but it is funding the public sphere in a way that is more on line. >> you can't be in a place where you don't see the numbers and the gdp is growing and you can't be in a place where you are seeing the wage gains are finally starting to happen. and when you have a corporate tax rate that was not competitive with the rest of the world. the private sector jobs come from the corporations. >> i would like to debate that corporate tax issue. >> fine. and talk to chris, because you have just heard that you don't think that the corporate tax cut was helpful to the economic growth in the united states? >> no, i think it is something that would be more helpful is something like an eitc, and get more people in the workforce and something that the folks in the government tend to believe >> and competitively globally,

because that is where the private sector job, and where we are seeing the wage gains. the unemployment rate is lower than it has been in eight years. >> it is something to celebrate. >> that is all there is. >> all we can control is the gdp and the unemployment. >> nothing by irresponsible when two-thirds of the gains went to the wealthy. >> chris, just dividing a pie more equally does not help. art. >> and so, he should have listened to steve liesman on the buyback, because it was an excellent report, and number two, 14 countries that the oecd studies saidthat the wealth taxes were working so badly that we are down to much smaller, and the tax rates matter and matter a lot. when you have a lower rate and broad-based flat tax, economic growth ensues and the minorities and the disenfranchised and those getting jobs now, and etch

jason furman in the piece of "the wall street journal" and his piece was very good on, you and it showed that the growth rates are higher in part because of the tax rate reductions on corporations and individuals. it is working the way we dreamt it would. revenues are up, and the federal tax revenues are up as a result, and here, i am hearing this other stuff that is not factually based. you have to know the stuff, and you have to know the numbers and it is not democratic or republican or yelling or screaming. >> and art, talk about the estate tax for a second. i don't know where you are landing on that, but as gary cohn likes to say, if you are a wealthy person in america, you don't pay the estate tax. >> of course you don't. >> and between the trusts and the stepped up basis issue on capital gains, nobody is really paying the estate tax. is that somewhere that you can look and say, okay, ki negotiate there, and work on that? >> well, i can surely negotiate

anywhere to get things, but in tes state t the estate taxes, you can take that money to go to vegas and gamble and carouse and smoke, and not give it to the children, because they would spend it. that is wrong. and we need taxes for day care and other things. >> flat tax. >> i call it a net tax, but if you want to ul ka call it is a tax, fine. >> can you do it where it is not regressive >> yes. >> i have a naive way to think about it. >> and jerry brown's tax, that idea was mine, and we got rid of all of the taxes. and we went to net sales from the first to the last dollar, and personal adjusted income, and no personal exclusions, and there 13%, and much more than

revenue neutral and it would have raised a lot of money, and led to enormous economic expansion and this is jerry brown eighth in the race of the democratic primary and to second in the race, and if he had not chosen the vice presidential candidate wrong, we would have won the presidency and we barely lost to bill clinton, but that is the way to go. >> art laffer, thank you. you get the last word. chris hughes, thank you for coming in on set. okay. >> all right. when we come back, just under an hour the go until the opening bell and what the dow and the nasdaq coming off of the seventh week of gains. a far cry from where we ended last year. we will get you ahead of the trading day and the market analysis that you need. stayun t tedo "squawk box." it looks like the future is up 103. what do you see? we see breakthrough medicines getting to patients in record time. we see harnessing natural gas unleashing the promise of clean energy. we see engineers simulating the future to improve today.

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welcome back to "squawk box." this morning we want to look at the futures. it looks like we will open up higher at 103 points we will call it on the nasdaq which is 32, and s&p 500 about 9 points higher. >> and joining us to talk about the market ahead of the open is richard bernstein who is the head of the richard bernstein advisers and a cnbc contributor. and we have made a lot of progress from where we were seven weeks ago in both the dow and the nasdaq and how does that leave you feeling of where we

stand right now, andwhether yo would like to buy stocks >> well, becky, this is a recalibration, and the fourth quarter volatility is wildly disproportional to the fundamentals and the markets isl the issues you've been arguing about all morning, there is one certainty. the one certainty is that profits growth is going to slow during 2019. i think that's the only thing that people should be worrying about with respect to positioning portfolios looking forward. that's a big issue by our reckoning profits growth, from 25% to about 0 to 5%. >> if that's the case, it still begs the question where should you put your money if not in stocks >> a ton of disagreement about that you hear people talking about financials, you hear people talking about technology. >> i don't think there is agreement you necessarily shouldn't put them in stocks lay out your argument for why stocks is not the place to put it. >> we're still slightly

overweight stocks. you can't be as bullish when you thought profits were going from minus 20 to plus 20 as from plus 20 to 0. >> even with profits up 25%, you saw a big sell-off in lots of big name stocks. we're still talking about the nasdaq being more than 10% below where we were from its peak. >> sure. >> so people were already looking ahead and realizing the profits were -- >> absolutely. that's a big point what you said is two -- if you think about the sectors that people like to talk about, technology and financials, those are two of the three worst performing sectors when profits decelerate. the worst is commodity stocks. after that, it is financials and then technology. so i think that whenever you hear people talking about growth and value, that's a technology and financial argument they're not thinking about what works when profits slow. that's stable growth, not fast growth and quality, strong balance sheets, those are the things you want to look for. >> what specifically are the types of sectors and stocks you look for >> look, it is large over small. that's the textbook.

it is staples and health care instead of cyclicals it is very textbook stuff. but people don't want to play that it is not -- >> do you see anything, anywhere either here or globally that makes you think recession is six months away, a year away, a year and a half away. >> if you want to look -- talk about europe or maybe japan or places like that, yeah, but here in the united states -- >> what over there even? >> very, very weak profits, they're on their way -- >> demographics and -- >> just think cyclically for a second the profits are so weak in europe now and getting weaker. that's going to affect employment there is going to be a negative -- >> why doesn't it feed back here domestically we can still do it among our own? we can do it here? we need to sell to them, we need to sell to china, can we keep growing just within our borders? >> it is pretty tough. think about everybody talks about -- >> you do see some problem in the future possibly? >> oh, yeah, no, no.

>> when do you forecast a recession is possible, what year >> i would say 2020. i would say beginning first half 2020 is when you could see -- >> that's soon >> it is reasonably soon, sure >> and it will import it -- >> that remains to be seen i would argue that -- >> what would cause it here? >> just the standard that causes it >> the standard stuff is that the fed tightens too much. >> exactly i think that could happen here too. the fed all of a sudden is on hold, the market had hole wildt. volatility. >> then it is a fed call they do it again. >> go back where they were. >> great they're not influenced by the market. >> but they're a lagging indicator, they always have been i think -- look, this cycle, the weirdness of the cycle has been elongated, a very long cycle, but what happened at each stage has been quite normal. there has been little things that have changed it, of course. but the way it played out has

been pretty normal. >> rich, thank you >> sure. >> rich bernstein. >> of -- where do you work >> richard bernstein and voss. >> i wanted you to say that. down to -- that's you. that would be weird. it is not impossible you could be working for some other guy named richard bernstein. >> like john smith. >> to the new york stock exchange jim cramer, jim cramer, cramer, jim, what -- i've been watching your twitter i feel like i haven't talked to you in a week. >> two of them i'll tell you, that pebble beach stuff was amazing. and your interview with chuck, you know, chuck robins, he seemed pretty confident. maybe good 18 after. >> jimmy dunn was funny too. >> he was great. >> wasn't he yeah >> he was great. >> so you heard the discussion with rich, you know. we got krugman today and andrew brings up dalios, a list of

people calling for a recession >> i'm seeing it there i'm not saying it is my view just happens to be. >> we all have our own biases. can you name ten guys that don't think there will be -- anyway what is going to cause it, jim >> three tightenings and fail trade, no trade agreement. maybe we get one a trade agreement, which i don't -- look, i think both camps want a trade agreement one wants it on the united states' turf, that's where i am. united states terms and we'll have up profits this year and this whole slowdown of profits will mean another thing that people will say i -- i had been more bullish. >> can we be an island unto ourself in this country regardless of, you know, maybe weakness in europe or slowdowns in japan or china slowing? >> i think the better way to put it is we have a substantial number of companies that are immune from those areas.

and a bunch of others you can't -- that where earnings aren't going to come down. we have coca-cola this week. they're going to be hurt on the strong dollar because we are in that larry kudlow king dollar moment i'm not as bearish as the people coming on or what people said at the end of december. you got to believe that those people are going to have to come back and say maybe i was too negative. >> do you think the tax cut is helping companies and will continue to help companies be more competitive you do >> absolutely. not even a doubt you're worried about a big budget deficit want to cure it from having growth but i don't know maybe we have to take capital gains to be a little ordinary income i think that -- i'm in the 53% tax bracket. i don't want to write any more checks to the government 53 is very high. and i start making money in august and i'm not crazy about it i want to -- i want to help get the budget deficit lower i think we all kind of want that for our kids

don't know how to do it though, joe. >> i know. we're not talking about medicare and everything else. anyway, thanks thanks, jim. we'll see you in a few minutes we know, want you to know we got a big show tonight jim, look at those ceos on, ceos of hasbro, s&p global. eet guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

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quick final check on the markets, dow looks like it opens up 100 points higher now

the nasdaq looking to open 31 points higher. the s&p 500 looking to open about nine points higher big show, fun debate >> i need to take a nap. >> it was a good debate, though. >> tired and need some soup. >> tired. >> lots of big numbers coming out. join us tomorrow, "squawk on the street" begins right now ♪ new york i think i know what dreams are made of ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. green open on this monday as there is optimism over u.s./china trade midlevel talks in beijing. m&a, upgraded tesla and more we'll get a fair amount of fed speak this week with inflation data, ten year around 266. road map begins with u.s./china trade talks taking place while the clock ticks. if no deal is reached by march 1, we may see another major increase in tariffs. >> racing against the