good morning welcome to ""squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernan and andrew ross sorkin. let's take a look at u.s. equity futures this hour. you look at the dow and s&p are a little under pressure. dow futures down by 18 points. s&p futures down by 2. the nasdaq up by less than a point. this is all happening after you have seen a pretty decent winning streak for all the major averages the s&p has been up for six of the last seven sessions. we are getting the fomc minutes later this morning that will give us more insight into what the fed may be thinking about the balance sheet. in the meantime, take a look at what happened overnight in asia. you'll see that the stocks were up across the board. hang seng up by just over 1% the nikkei up by about .6%

then the shanghai composite up by about .2% then in europe where you do see some active trading taking place right now, mostly green arrows the dax up by a quarter of a percentage point the cac up by just under .2% so is the ftse finally, take a look at what's been happening in the treasury market here in the united states yesterday you saw the yield close at 2.645% for the ten-year yield is even lower this morning at 2.632%. obviously, the yields signaling something very different than what we've seen in stocks lately >> we have news out of tesla overnight. it will be interesting to see how the market takes this this morning. the company reportedly launching a lease program to boost demand for its model 3 electric vehicle. the website leb trick breaking that story citing an employee sent an e-mail -- an e-mail sent to employees that e-mail reportedly said that employees, this is important, that employees, would be offered the option to lease in the next two weeks, but did not say when consumers could lease. tesla representative responded to the report saying no decision

on leasing has been made can't lease a tesla, by the way, at the moment yet. elan musk generating some buzz in a podcast interview with kathie woodseal of ark invest. she's been a big supporter of the company. he told measure that the carmake's full self-driving features will be completed by the end of this year, 2019, and we're going to talk to cathy wood who spent time with elan musk when they did that interview at 7:00 this morning the reason why i'm saying sort of hard to tell whether investors will take this as a positive or negative, you could take this as a positive in that -- >> the leasing or the self-driving >> if i was going to the leasing first. you can take the positive on the leasing in that it should spur demand, and that would be a good thing. you could take it as a negative as in maybe they're struggling to actually sell the cars that they actually have on the lot. they want to create demand what's really happening? >> my bigger question is who is going to finance it? are they, or do they have a bank lined up who will be doing the financing? >> that's a good question as

well >> it would be weird if they suddenly took on the leasing option themselves because with everything else, all the other ball that is they're jug ling at this point, it seems like it would be a lot to handle >> they've always been an all inclusive operation, sort of apple-like they've never liked to do stuff with anybody else. >> out of all the things in the world, the auto lease might be the most difficult to understand in terms of how it works and they can do all kinds of stuff with it based on residual value and what you got to pay and is it a good deal and this is a two and a half year one and -- but i get 7,500 miles. i mean, i lease. i lease for a specific reason. because if you have a nice car and something happens to it, any type of accident for a nice car that people -- you can't sell it they're worried about the frame being bent or something. i can always turn it back in, but i'm not sure if it's a good deal it immediately makes me think with tesla that the lease route -- >> what do they do with it at the end of a lease they don't have dealers that

normally it would be a dealer that would take those cars back. what do you do with them >> can they continue to extends out. >> the model 3 looks like a mazda is what the producer said. once he said that, it's like the whole tesla mystique went for me >> went for you? >> yeah. plus, you can't -- if it's cold, they don't start it takes months to get parts i don't know if all this is true >> it's self-driving by the end of 2019. >> do you want it to be -- you like self-driving. i don't want -- i mean, i would be strapped in with white knuckles if a car -- where are you taking me? don't hit that thing >> that's -- i don't want to say it's an outlandish prediction, but his predictions have been -- >> they're want going to be legally allowed do this or get jurisdiction for it. my bigger concern with that is every time there's been an accident, people say, oh, it's because people were using the auto drive function the way they're not supposed to and not paying attention when you have the founder come out and saying by the end of the year it's all going to be ready, you are going to have more

people that are allowing that car to drive the way it's not supposed to. >> do you buy yours? >> yeah. >> i'm a leaser. i'm a leaser >> i'm not worried about my frame -- >> i'm a believer -- maybe i shouldn't be -- that every year -- no, no that every year -- >> technology -- >> the technology and the safety and all of the things get better, and i figure every three years i who prefer to pick up -- >> safety features >> that's valid. >> a lot of times they come back to you and say,you know, and that's the same old thing. they want to get their sales numbers done and whatever, and you can get out early. i get a different color a lot of times, which is, you know, just fun every two or three years all right. enough about the tesla happening in the last hour wit other news to tell you about this morning because russian president vladimir putin delivering his annual state of the nation address to the parliament there he said that the country will focus on raising living standards and promised tax

breaks, lower mortgage rates, and housing subsidies for families with several children he also said that russia is not a direct threat to the usa and seeks friendly relations where. >> you mentioned his employee over here. >> which one >> ask andrew. guy at work. >> i didn't see any commentary >> you asked your buddy, mach m yesterday. anything is possible we all read the manchurian candidate. do you think trump is a russian agent? we really don't know he really said that with a straight face. this guy used to be running the fbi. these are interesting times. the former acting head of the fbi wasn't sure whether the president was a russian agent or not. >> that's what's underlying a lot of the -- >> but if you are spreading it and it turns out that there's no merit to it, it was crazy.

we'll see. wait -- >> we're all waiting >> a lot going on. the senate couldn't find it. maybe mueller has something. hope springs eternal >> it's not hope i would prefer that it not be the case >> oh, please. >> i prefer at any time to be the case >> pinocchio >> there have been a lot of other pinocchios around the president. that's why -- >> you were thrown in the 20 russians that got indicted as part of the people around him yesterday. yeah >> when your own lawyer is indicted, it's very complicated. let's put it that way. >> that has nothing to do with i in of that, though, andrew >> i don't know about the financial deal like the friend of stalin said, if you show me a man, i'll show you a crime. i'm trying to figure out what yours is, exactly. >> should we move on and maybe talk about china >> i think that's a good idea. >> i think kayla is ready. china is actually out today with a big warning for the united

states it's an editorial that's published in the estate-run global times it says that any new tariffs on china would result in what they are calling a catastrophic blow to global stock markets. kayla joins us right now with the latest on these trade tensions >> good morning, becky of course, the back drop for that opinion piece is the fact that the two sides are currently negotiating an extension for the march 1st trade truce deadline, and there is expected to be some sort of price that china would have to pay for that extension there's just a little bit more than a week before the end of that trade truce, but yesterday president trump signalled in the clearest signal yet that that date is a moving target. >> talks are going very well with china, you're referring to, and the talks are going very well our group just came back, and now they're coming here. i can't tell you exactly about timing, but the date is not a magical date a lot of things can happen the real question will be will we raise the tariffs

>> not a magical date. that is a notable break with his top negotiator robert lightheizer, who has been one of the firmest voices in the dough bait just last month at the end of january when the last chinese trade delegation came to washington lightheizer was asked about the possibility of an extension in a conversation with reporters, and he said at that time that there was none at all as far as i'm concerned. my deadline is march 1st when we get to the end of the day, the president's economic advisors will sit down and talk to the president and say what are we going to do, and he'll make a decision. of course, the president next week is going to vietnam for his second meeting with north korea's kim jong un. that happens before that march 1st deadline if the team is going to sit down, becky, with the president in person, that would need to happen this week kayla, what's your reading on this, your gauge on this just based on everything you've seen to this point? the market seems to think right now that the date is going to be extended there will be no new tariffs

come march 1st is that the read you're kind of getting? >> the market has good reason to believe that because the president himself is the one who will make that decision, and he has said at least three times in the last week that he is willing to extend that date if talks are going well the question is what is the definition of talks going well, and who is the one that gets to make that decision certainly ambassador lightheizer has a very high standard for what china needs to bring to the table to get that extension, and that is with the two sides are looking at right now what needs to happen in order for that extension to take place? yesterday there was news that currency is, again, figuring prominently in these discussions. there was news out of china overnight where they said they will not make any changes to their monetary policy, so there does appear to be a little bit of public negotiating between the two sides to try to get them to get china specifically to agree to certain points, but unclear if there's real movement behind the scenes.

we get fed minutes from last month's meeting. remember, this is the meeting where the fed made a sharp turnaround in its rate policy to patients from gradual increases. we will have full coverage of today's fed minutes at 2:00 p.m. eastern. you know, i checked things out in the morning, and i noticed on the german bund, they had to put another zero in this morning to get to 0.098 >> wow i can't believe we are this far past the financial crisis, and you are still basically paying people to hold your money. >> i'm trying to figure out what 0.098 is that's less than .1. so it's .09 -- >> less than one-hundredth >> where are we going? see, there's my extra zero they had to stick that in there and find one it's going down -- >> 95, make that

sticking with the fed, new york stead president john williams in an interview with reuters he is in his words "comfortable" with where rates are right now. >> we're seeing some, i think, effects of slowing growth, which was not a surprise 2018 had well above trend growth i think i and most people expected growth to be slower in 2019 we definitely are getting a lot of different signals about that. the data have been coming in some of the data has been really strong some less so again, that's pretty much a strong argument for taking some time, reassessing the data and getting a clearer picture of where the economy is and where it's going >> williams went on to say the fed policy isn't set for all time, which is good. it would take a surprising shift higher in growth for inflation to warrant a hike. all seems kind of logical. >> he said that inflation is even below where they want it to be at this point >> look at this. we looked at it right before

that what world is this i worry that it's not the effect of the last ten years of easy money where we can't stand the slightest bit of normalization of rates without the debt service being so high that -- i mean, there are people -- >> the debt service gets higher, we have a problem. >> people think the next one will be ten times worse than 2008 >> think about what would happen to -- think about the cost of servicing the debt in the country. >> i know. i know >> people have been saying that forever. now people on the other side are saying that the debt doesn't matter >> especially when we do free child care, free college education, free health care, and anybody unwilling to work gets paid anyway. after we do all that, the debt service is even -- >> not paying the -- >> she said no to all of that. she actually said no >> here's the thing that gets to me, and i'm actually very hurt >> just saying the other party is becoming a bigger --

>> i'm really hurt by the treatment of howard schultz. i really am. he is -- your treatment, you dropped him like a hot potato. >> no -- >> yes, you did. he is a man without a country. who does he got? the left -- >> that happens when you are an independent. you don't have a country >> anybody with money, they turn into romney. they've turned poor. the biggest liberal in the world,, howard schultz, they've turned him into mitt romney and marginalized him because he has money. he has no party. the left hates him the right never liked him. the poor guy is out there dangling, twisting in the wind you were, like -- you know how you get a baked potato whoa you dropped him like a hot -- >> the greatest challenge. look, he -- to me he is -- i think howard is right in the middle >> is he your candidate now? >> i don't have a candidate. i don't have a -- >> if you were advising the democrats, who do you think has a chance >> i would advise to try to get closer to the senator.

that would -- center i continue to be told that the center is elusive. >> did you see the friday show or hear it >> why >> because he made some progress he gave it back yesterday and then some. i thought three steps forward -- it was three steps forward, five steps back >> at the end of the show, ts your coming together, it's not going to last. >> stocks to watch in the -- >> probably because having watched for years. >> you were woke to woke now you are unwoke >> what happened to woke the woke >> you are unwoke. >> i'm very woke to the woke >> stocks to watch in the energy sector >> you need to be woke to the woke to the woke >> that's where you are. i think. i think you went back. triple negatives we're going to -- >> double secret probation >> you know that movie you can't talk about anymore >> what? >> so politically -- oh, yeah. so bad with everything that we've learned. anyway, this morning's big movers in the tragejectory of ol prices as we head to break, here's a look at the biggest premarket winners and losers in the dow. coming right back. was ahead of its time.

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in the u.k. they will be watching stocks to watch today, with all yes, we have three big movers in the energy settingor devon energy topping forecasts on the strength of its u.s. shale business the company also plans to sell or spin off some of its assets in canada and the barnett shale patch in the united states in a move will turn into an oil producer that was despite a rise in revenue, that was also shy of estimates. diamondback is trimming the high end of its capital spending outlook for the year, and its stock is down by about 3.75%

then concho resources under pressure after 9 had cents a share was posted that was 19 cents shy of estimates. revenue also falling short the shale giant is also cutting its capital spending plans by 17% for the year, and that stock is off by 4.5% let's get a check on crude prices joining us now is matt smith, director of commodity research at clifford data i would like them to focus on demand i think that oil can give us a look into like a snap shot of what's going on in europe, what's going on in china, what's going on domestically. we're strong china is maybe not as strong europe we're worried about, you know, maybe zero growth or sub-1% growth. i would like to look at that, but you're an expert on the commodity itself and on the supply we're missing some of the

heavy. we don't have enough heavy heavy is used for diesel because it's the middle, right, that -- >> middle of the barrel. >> middle of the barrel. the other stuff is used for gasoline how does that gakt the overall price? in dynamic >> well, you are right, joe, from the perspective, have this abundance of light sweet crude, the u.s. is going gang busters we're going to hit 13 million barrels a day of production next year at the moment we have opec production cuts. we have venezuelan sanctions we have our own sikzs, and those guys are producing the heavy sour stuff what you have is this issue where u.s. refiners once we get their hands on that heavy stuff because they refine as a gear towards refining the heavier gunkier lower quality stuff to get that dooels. we're getting more gasoline because the guys are running lighter crude and so we have an

excess of gasoline and we're lacking somewhat in diesel we have game-changing situation called imo 2020 where every ocean-going vessel has to suddenly consume low diesel essentially. everyone needs the sour stuff so they can get more diesel, but the abundance is in the light stuff. >> what will that do to just wti or brent what will is that do to the overall price? will it go up because of that or go down because of that? >> well, there's going to be that demand growth still coming through for that live stuff, but there's more demand for the heavier stuff. while historically we've seen lower prices for that heavier crude, you'll see that getting to parody, and in some places it going above that in some situations it's not going to go forward particularly when you have the opec

production cuts going through, and venezuela in an absolute state there. if you think they are saving the planet, they jerry rigged the emissions control, and it's not as good as a -- >> it's leveling off here in the u.s. >> what -- from what you can tell where crude is. >> absolutely. they're bringing in more crude, but they're exporting more products it's consuming that dooels, that gas leap, they're exporting more the challenge is as they put

that -- push that out to the market, then that pushing back other pieces -- other piece e people's pieces of the pie you are getting a market now you can't just focus on the crude side of things you have more diesel coming to the market and more gasoline russia is a great example as well where, yes, they're starting to cut their crude production to look as if they're in line with opec-nopec production cut deal. they're public purk out more products >> in the u.s. -- >> must be big in the u.s. with the it's a little higher, but not that great we are consuming 20 million barrels a day here in the says u.s. you know really the situation is that

we're talking about europe as well you are seeing that slowing there. particularly in germany coming through in their product demand. >> how old are you >> i'm 40 something. >> you will still be in the work force ten years from now when we don't use any oil caught naen more with aoc and. >> we have no more usage of any internal combust john or anything like that you have an idea of what you are going to do for a living you'll still be a young man. >> i will still be analyzing oil markets in ten, 15 years time because oil demand growth will -- >> you will oob -- >> gasoline demand will flatten off. >> no one will be listening to you because we're all going to be -- >> on hover boards >> what planet are we going to be in?

slowly moving towards amy. >> amy might be moving towards me >> oil demand is about 100 million barrels a day. >> that's for now. i hope you like kale because that's all we're going to be -- >> when we come back, a lot more on "squawk box" in the real here and now. a special edition of stocks to watch. we're going to talk recliners, sports, drinks next. plus, the hottest tickets in sports happens tonight, and it will cost you as much as super bowl tickets we will explain. that's when we return after this

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from aberdeen standard investments. stocks to watch this morning. la-z-boy the company saying revenue was boosted by sales of higher priced upholstery products shares of la-z-boy are up 20% after falling 11% in 2018. kind of interesting. this is not leather. separately, pepsco, it's bulking up the company buying pseudosport they make muscle milk. the undisclosed price tag. hormel bought the business for $420 million back in 2014, but it struggled because there's been a lot more competition from rival sports drinks that have invaded the muscle milk turf, if you will, in supermarkets and

convenience stores i drink the muscle milk, but not gotten the muscles as a result >> was it good tasty? >> tlds a chocolate one that's not bad. you know it not bad what do you think? no have you ever taken it take it with your medicine -- >> trying the 12-hour thing. >> intermittent fasting. >> 12 hours -- you go to sleep, wake up. we don't sleep that long >> that's the problem with this. >> that's why this is such a -- >> 16 hours is really good >> that's what you are supposed to do. the real -- >> yeah. >> you need to sleep 12 hours a day if you are going to fast for 16 hours. >> the cheapest ticket available

hitting 2,500. that's about $100 cheaper than the least expensive ticket to the super bowl 53. the game tips off -- that's what i don't like tonight at 9:00 eastern. you know, jersey high school basketball is -- i mean, these guys next year after the seniors are -- some of the guys you watch. i was at game last night >> being there, you should see my seats i'm, like, right on -- notes the good thing yeah i feel like a player i feel like spike or something i do did you see the rutgers game we lost by a horrible -- >> we had it only in the last two and a half seconds of the

game where we made an amazing three-point shot >> it was one of the top 20. >> andrew wants to move on here. >> no, no. zplu okay? >> he is amazing >> then we lost because this guy threw -- this freshman through an unbelievable shot from the corner. >> they really want to get in that conference. did anyone say you're going to play ohio state and michigan, and did they tell -- players are like, whoa, what >> ohio state did well in basketball when we come back this morning, we're going to learn what is that flashing light? there's police behind us that's what that is. i thought they were doing neon behind us on purpose when we come back, we're going to learn more about the fed's new patient outlook later today.

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welcome back you're watching "squawk box" live from the nasdaq market site in times square. >> good morning. among the stories front and center china is out with a big warning to the united states an editorial that was published in the state-run global times says that any new tariffs on china would result in what they are calling a catastrophic blow to global stock markets. the paper also warns that china will respond with fiercer counter measures if more tariffs are imposed. also, news from tesla overnight. the carmaker is reportedly preparing a new leasing program for the model three.

that comes as tesla tries to boost demand electric says that employees will be able to release a model three within the next two weeks. no word on when consumers will be able to do that as well >> can we mention, by the way, real quick this elan musk e-mail not e-mail, but tweet. >> the tweet that he put out overnight? >> first, he says there will be 500,000 cars created in 2019 then several hours later he says that actually i'm wrong. it might be about 400,000. there was a settlement about whether you were allowed tweet or not and whether thereby oversight of the tweets in advance of tlem going out. had the market been open during this period, there clearly would having a meaningful problem. overnight you could argue there's a problem in the futures that people are trading on other exchanges and things.

>> this is known as forward guidance >> he says there is not. >> it's not whether you think it's forward guidance or not it is what it is >> what was he calling the sec immediately after that in the tweet? short sellers exchange commission >> what does grimes think? >> it's enfoe i need to know >> we need to have an us magazine reporter on with us later -- >> he is the dream of an us magazine reporter and his tweets are too. >> we have an affiliation with not extra, but --

>> tmz >> no, wre, skbro remember, by the way, this is the meeting

where the fed made a sharp turnaround in its rate policy to gradual increases. check out the u.s. equity futures at this hour it looks like we are in the red across board dow futures down by 41 points. s&p futures down by four points. the nasdaq off by seven points remember, this does come after a pretty long spat of gains with the nasdaq up seven out of the last seven sessions. >> okay. joining us right now to talk trade, markets, more ryan, president of pane capital management we're going to talk about that in a second. there could be some pain to be had here juliana emmanuel derivative strategist at btig >> can he with talk about pain for a second >> do you think we're going to be in a bit of a world of hurt in different terms with this china trade deal do you think that actually goes going to be a real deal here >> i think there is -- >> i'm starting to think that actually even if there is a real deal, that it's going to be -- that we're going to get into a head fake situation where we're going to have a nice little spike if there's sort of a --

and everything, and then 72 hours later if not sooner, there's going to be a realization that maybe we're not where we want to be. >> that sounds painful no publn intended the bottom line is our economy and china's economy just don't benefit from not finding a deal, right? china's economy is slowing down. you know, trump has said that march 1st is not a manual cal date now. >> the outline of the deal will be more difficult issues ip, technology issues. those aren't going to be settled. there is a photo op aspect of it the fact is that when you come off the fourth quarter of last

year, people are underinvested people are continually nervous, and interest rates, importantly, remain low that's fuel for up side in the market >> the reality is there's a lot of value in europe howev however. >> essentially, investors are so soured on europe that nobody wants to be the first to come in >> we've got march 29th. the opportunity is developing. if you think about it, from the fourth quarter, it's been bold enough to go into the u.s. market for us when we look at the u.s.,

when we look at china and the potential for that market there's opportunity there. how much is dependent on china restimulating to help backstop europe china flowing through to europe. we do think eventually, but there is going to be timed by europe >> would you buy europe now? >> i would, totally. >> would you >> you would jump before he does >> bottom line is, right, once we know these things are settled, the opportunity is lost. hope there's no pain thank you for that to both of you thanks, guys >> coming up, we're going to be

joined by southern company ceo thomas fanning just beat on both the top and the bottom line. plus, could your tesla be completely self-driving by the end of 2019? >> elan musk told arc invest cathy wood he thinks so. we'll talk to her about that conversation stay tuned each day our planet awakens with signs of opportunity. but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward.

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zbloonchts the sec is trying to smooth the path for companies that are considering going public under a new proposal, all companies would be allowed to talk privately with potential investors before making a final decision under the current rules, only smaller companies can hold private talks like that while larger companies are expected to file offering documents before they gauge any possible investor

interest the goal is to try and boost the number of public companies the sec will be taking public comment on this idea for 60 days before holding a vote. when we come back, we will talk to the ceo of this stock southern company's tom fanning they posted a beat on the top and bottom lines we'll get his take on what happened right now as we head it a break, take a quick check of what's happening in the european markets right now. up across the board, biggest gainer, it looks look it's the dax in germany at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got near real time inventory updates. & he'll find the same shoes in your store that he found online he'll be one happy, very forgetful wide footed customer.

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welcome back, everybody. southern company out with its quarterly results this morning 2 cents better than the street was expecting. revenue also beating forecasts joining us now to talk about all

of it is tom fanning he's the ceo of southern company. great to have you here today thanks for joining us. >> always great to be with you >> explain to me why the numbers were better than the street was expecting. what lines actually outperformed >> yeah. you know, tax reform had a terrific effect for us not only in our own performance, we returned almost $2 billion of benefits to customers. we had other sharing mechanisms, the economy was better than we thought. we ended up at the very top end of our range in terms of electricity sales. so, boy. good performance all the way around >> i know that part of what's been happening is you are continuing to see migration to the south. why don't you talk a little bit about that what is happening in terms of people and companies that are coming there >> yeah. we sure are. in fact, i would say from the national averages, job creation, in georgia around 2 357b9%

alabama 2.2% national average 1.8%. the southeast has traditionally been a pro-business environment. and jobs are growing as a result our economic development numbers indicate that as well. we think that this is a sustainable kind of environment. >> what do you plan to do as a result just in terms of what you're going to be spending in capex this year? >> yeah. well, there's a lot of capex really over the next five years. we'll be talking about it on my earnings call here in an hour. but a lot of it is environmental related. and a lot of it really goes to this concept of building the portfolio. you know, i've been talking about that now -- gosh -- i bet on this show for almost a decade but the idea of taking advantage of all of oush natir nation's nl resources to build a climate that provides for clean, safe, reliable and affordable energy is something we've been able to demonstrate for years to come. our bets are decades in their

tenure i think we'll be able to make good bets over time. >> the one thing i've been thinking about is just with the polarized nation, that means politically. where one administration comes in and tries to wipe out everything the past administration does. if there's any change either in two years' time on six years' time, there could be a change again. while that may not be a big deal for some companies, i think particularly for your company given the long lead time that you need, the big projects you're undertaking, that's an issue. >> we have this green new deal coming on now. we have to run our business independent of administration. and what we have to do is argue for good policy no matter who is in the white house or who is in congress and i'm glad to say with my

background and everything else, energy policy done well is so important for the american economy. it gives us an almost unassailable advantage to grow jobs and make american lives better i think when we're able to argue on those points, it doesn't become a basket of aspirations by a group of people it becomes sound principles based on balance making sure we provide for all of clean, safe, reliable, arvedable. then also the notion of portfolio. when we make decades long bets, don't make single energy resource bets. play the field all the above. all the arrows in the quiver and therefore it gives the american economy the best amount of optionality the best amount of flexibility in facing whatever unforeseen future visits us >> tom, i want to thank you very much for your time today it's always great to see you we hope to have you back in again soon >> always great being with you

>> southern company's c eseo tom fanning. when we return, cvs shares e deprsure we'll explain why. two big hours coming up in a moment the future of technology investing lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential.

the global investment management we see eat emerson,mulating when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved. more pressure on the u.s./china trade talks china warning of a catastrophic strike to the global markets if the u.s. imposes more tariffs. how worried should investors be with the dow climbing back to 26,000 is tesla about to change

sales tactics? >> i'm not falling for this bit. no way let's go >> company may be about to offer leases plus elon musk, he's talking again. and it's in another podcast. we've got the details. and taxing wealth. millions of americans get ready to file, but we'll see more audits and is the irs prepared for tax season the second hour of "squawk box" begins right now live from the beating heart of business, new york, this is "squawk box. >> good morning, everybody welcome back to "squawk box" here on cnbc i'm becky quick along with joe kernen and andrew ross sorkin. let's take a look at the u.s. equity futures this morning. they've been under a little bit of pressure.

dow now down 25 points s&p down over two points the nasdaq down less than a point. remember yesterday the dow and the nasdaq closed at their highest levels since early november nasdaq highest level since early december here's what's making headlines at this hour couple big things on the docket. president trump appears to be easing off of a hard march 1st deadline to reach a trade agreement with china the president told reporters that march 1st is not a magical date and the question remains as to whether the u.s. will raise tariffs on china on that date. also said he's considering a meeting with china's president xi some time in the coming weeks. so if you had your calendar marked on march 1st, you might want to push that back a little bit. tesla planning to offer a leasing option for its model 3 this according to the website electric the site quoting a mem saying they could lease in the next two weeks they did not say when that would be available or whether it would

be available to consumers. also, we're going to get minutes from last month's fed meeting. remember this is the meeting where the fed made a sharp turnaround to, quote, patience from gradual increases we'll have full coverage sta starting at 2:00 p.m. eastern time let's tell you about cvs health just out with quarterly earnings it looks like they got $2.14 a share. that beat the estimates. however, revenue was below the forecast and so was the full year outlook cvs took a $2 billion good will impairment charge looking for fourth quarter pharmacy services revenue of $34.89 billion. we'll dig through more of these numbers. that stock is off by about 4.5%. let's talk about the broader markets. since hitting an intraday low on december 26th, the s&p has rallied 18%. that's near the cusp of a new bull market. joining us to discuss that,

mandy zu, and jodie just looking at some of yur comments. the fed giveth, the fed taketh away you say the fed caused the rebound. that was all fed induced is that fair to say? >> i think it's pretty fair to say. it was clear that the fed was at least a major influence in driving those markets. >> if we were up sharply historically and all the major indices up again in february, what's today the 20th? i'm glad because you say if we end february where we are, that historically when the stock market does this in january and february, it has a big year. zblit do >> it does so since 1938 there have been years where both january and february was positive.

and 29 of those years out of 30 have ended positive and big on average over 20% and what we're seeing right now is something that we've never seen before. if february continues to have the performance across the entire u.s. equity market. so that's every segment. size, style, and sector. we're there right now. we've never seen two months in a row, ever, to have every single segment of the u.s. equity market up. and i think that we could have a good year, but i think it will look a lot different than it looks right now. >> we said it was 18% from the lows so 20%, what do we measure it from what are you measuring that we're up so far for 2019 how much are we up because we got a lot of it in late december. we're up only ten. >> exactly we're up almost 11 10.9%. >> we're talking about another 10% or so for the rest of the year >> it could be >> could be.

29 out of 30 just makes me worry it's going to be 29 out of 31. just seems like too good right? >> it does it seems like it could be really good but again, i think that what will happen is that we're going to start seeing a split in sectors. because we've never seen the market move this closely together across all of the sectors and the sizes. so the strength across the board has been driven by the macro picture. then if you take what's going on with the chinese trade tensions and you think about in either case scenario whether they escalate or ease, that's going to cause a sector split. where it depends on the percentage of revenues coming from overseas. >> the gains that you're talking about, you're talking since the election two years ago? when you say everybody's moved at the same time, what's the time frame >> just in december they all went down. in january they all went up. and now they're all up again so even if it's just back-to-back january and february, we've never seen that before >> mandy, i guess our person

asked you. is it time to move any more into cash here? i just see a big no there. >> no, we don't think so fundamentally we're constructive on equities. we do think there is further upside on a risk reward basis, if you are cautious, we think it's a good tactical level to buy some protection and i don't mean buying across the board but being very selective about where you buy it i like looking at sectors that have outperformed si eed signify very sensitive to trade. very sensitive to the global growth slowdown story. could be vulnerable in the coming months. volatility has subsided a r significantly. so at this level, i think buying protection buy puts or put spreads look attractive to me. >> okay. so you're the chief equity derivative status. you like your puts so out of the money, how would you do it? >> yeah. so you can look at 5% out of the

money. so you do have a little bit of a buffer but you reduce your premium. you're protected from 5% downward >> is that different than raising cash really? it is costing you something to buy that. >> it is costing you, but you still have the upset exposure. if you sell your stocks and move into cash and the market continues to rally from here, right? you lose out on that so i do think from risk/reward perspective, there's still upside to go but with vols as cheap as they are, buying protection makes sense. >> so we had some serious volatility after no volatility for -- i don't know whether that was the fed or what that was i kind of feel like we have moved beyond what we saw in december in terms of volatility. or is that ready to re-emerge? seems kind of quiet now. >> for sure. >> but you say the volatility is back is it? >> well, i wouldn't say it's back i do think the normalization of volatility we've seen this year is fundamentally driven. it's driven by fed policy.

it's driven by better than expected earnings. and it's across asset classes. so it's not just equity market where you're seeing that we note, for example, in the bond market. interest rate volatility back to all-time lows. right? just because the fed's pivot to being patient means macro volatility should be lower going forward. so for our year outlook, we see vix averaging about 15% for the year right now it's around that average. >> you agree, volatility is back to normal. >> so now it's at 14.2%. it's actually a little bit below average. it's less than half than it was at the start of the year and it's the lowest since october. so again, this looks much more normal i would expect to see the sectors start to diverge and opportunities if the trade tension is in the industrials, materials, technology, and health care. those are the sectors that have

most impact from the international trade. if the trade tensions escalate, then the real estate utilities and financials would be where it would benefit. >> so you are watching for a slowdown in the labor market or economic weakness here in the u.s. do you need both because the labor market looks strong then we have the retail sales. i didn't know which twoun get behind >> yeah. it's mixed i don't think the market's forgotten december yet so there could be some lingering effects from the december drop so any slowdown in the labor market, any -- >> you mean the people who bought would be quick to run >> i think there is some fear still. even though we're seeing the volatility come down which could be an indicator of the market fear, i still think it's too fresh to ignore. and if there's any impact on the labor market or slowdown in the u.s. or internationally or weighing where the slowdown is coming, then there's opportunities either in mid-caps or large caps depending on where we're seeing slowdowns in the

world. >> so the most consensus trade is long emerging markets if it's a consensus trade, i don't want to be part of it usually. but you're saying it could be good until it's crowded. it's not crowded yet >> no, we watch positioning very closely. because like you said, if it's a crowded trade, you don't want to be in it and on our measures, we don't think it is a crowded trade. one of the key differences between the rally to start this year versus the rally to start last year, i'm getting questions all the time about the parallels and of course we know what happened last year it's positioning we call last year a market started at a high, investor positioning whether retail or institution are already stretched then you had a 6% rally in january people were chasing as the markets were going up. sop in options they were buying volatility as the market was rallying now, this year market started at a low, investor positioning whether retail or institutional at multi-year lows

and people haven't really gotten back in the market so on our prime platform, growth exposure, barely up since december and you see it in the hedge fund return datas average return 2% to 4%. significantly trailing the market that just tells you there's still a lot of dry powder on the sidelines. i don't think it's a crowded trade yet to be long equities or long emerging market equities. >> all right great. thank you, mandy and jodie mandy, she knows a lot about derivatives. which don't always have a bad can connotation, do they >> no. people used to hedge or express their -- exactly it's a tool. >> okay good coming up when we return, a lot more on "squawk" this morning. we've got some stocks to watch got to keep your eyes on these guys caesar's entertainment responding to carl icahn who's been pushing for a sale. we will tell you where that saga

and soap opera stands. here's a shot of the white house right now. check out the snow falling on washington already this morning. it is headed our way here in new york in just a little bit. stay tuned ghhe ocnatching "squawk box" rit ren bc ♪ it's the first day of school. yeah, he's so nervous. tom is letting him know it will be alright. i know, it's a big day. i'm so proud of him. gotta go. ♪ good luck on your first day. just as we help companies advance in the digital era,

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...now that's simple, easy, awesome. customize each line by paying for data by the gig or get unlimited. and now get $200 back when you buy and eligible smartphone. click, call, or visit a store today. ♪ welcome back to "squawk box. the futures right now indicated down 26 points or so on the dow. the nasdaq has actually now turned positive. in the green up less than a point. nasdaq -- i'm sorry, the s&p indicated down about 2.5 points right now at about 7:14 in the morning. >> okay. few stocks on the move this morning. caesar's entertainment will continue to look at all options for the company. this statement coming in an s.e.c. filing this morning a day after carl icahn urged the operator to consider a sale. now, icahn owns nearly 9.8%

stake in caesar's. call it 10% for there. separately, owens-corning beating estimates on both the top and bottom lines and cvs health is extending the earlier losses take a look at this stock. we're going to show you what's going on that stock off about 5% this morning. we told you moments ago cvs to d beat on the bottom line. but the full year fell short of estimates. shortfalls are primarily related to the long-term care unit it says it sees additional deterioration in that business in the year ahead. >> stock's gotten worse. it was down by about 4.5%. now it's down by almost 5.2% when we come back, is it time to love gold? the precious metal has been on the run for the last six months. we'll tell you why and a programming note for you next monday, warren buffett will

answer some of your questions. you can submit them on social media platforms. try twitter with the #askwarren. that is coming up next monday, quk x"ilbeig b "sawbo wl rhtag [knocking] ♪ ♪

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. gold prices are at levels we haven't seen since last april.

the run comes amid a stronger dollar which is typically bad for the precious metal what's behind it scott nations of nation shares, the president and chief investment officer there, thanks for being here today >> happy to be here, becky >> so normally when we see a run in gold prices, it's one of a couple things. it could be that people are concerned. they're worried about a bad turn coming of something that could happen so they're running to a safe haven. i guess the other thing it could be, though, is concern about treasury yields and how low they'vegotten at this point. relatively speaking, maybe gold looks like a better place. what do you think is happening >> i think it's certainly the case the federal reserve has changed its outlook considerably that certainly helps gold. if interest rates are going to be lower for longer including longer term rates if they end qt, then that's certainly going to help gold but in addition you have to look at the geopolitical landscape. it's increasing every day.

problems with china as far as trade policy don't help our economy. they certainly are helping gold. but you're right i think there are plenty of head winds for gold relative strength index. i'm not much of a technician, but this is one technical indicator i like it says gold is convincingly overbought and then if we do get some higher rates throughout the rest of the year and it now looks like the fed is going to talk about that, then that is going to be a problem for gold and also the fact that the dollar is near its 52-week high. that's also going to be a problem for gold >> let me shrink down what you just said. basically some of the rally has been warranted there are reasons for all of it, but maybe you think things have been a little overdone >> i think things have definitely been overdone again, the relative strength index indicates that but also if you look at a chart a little bit more for gold, you see it's been in a nice upward channel since the end of september. again, that all makes sense particularly in december

but we're now at the top of that trading channel. and if you wanted to sell it right here, i think that would make a fair amount of sense. i would not be long here unless i was really afraid of what was going to happen with brexit. i think that's the only reason to be long cold right now. but all of the other fundamental factors indicate that it's come too far too fast and it's had a nice run it's probably time to take some profit ifs you are long. >> $1347 an ounce. what do you think is fair price is if this is too high >> well, i think given where interest rates are right now and the outlook for the rest of the year, i think $1300 would make a lot of sense that would be value. as a trader, i'd want to be buying it given the current situation below $1250 again on a trade. and i would like to be shorted here on a trade. in fact, i am short here >> what about the dollar it's been strong too do you think that trend is going to continue?

>> listen. the ecb has said that they want the euro currency to be as weak as possible and they're about to continue doing that. actually strengthen their efforts in their regard. the dollar obviously got sidetracked in its rally by what the fed has done recently. but i think the dollar is going to do really well. remember, the federal reserve is about two or three years ahead of -- well, now probably more than that -- ahead of the ecb when it comes to tightening. so i think the dollar is going to continue to do well again, we -- head of the cleveland fed now talking about maybe we do need one rate increase this year and so that will certainly help the dollar >> scott, how much of this, everything you've just said, is predicated on getting a fairly dovish statement from the fomc today? we know what they said at the time the questions that are still remaining maybe we'll get an answer at 2:00 today really have to do with the balance sheet and

what they do with that >> you know, i have talked about the balance sheet and tweeted about it quite a bit $4 trillion is about five times what it was ten years ago. it should be higher now because of the difference in reserve requirements but ill still think $4 trillion is way too high. fed is probably going to stop right about here as far as dovish, we have to remember the minutes are backward looking i do think that they were right for the time we saw all that volatility in december but now you have to ask the question, if there's a powell put, is there also a short call that the fed is worried about? that is, is there an equity level that they don't want to see -- a level from equity price they don't want to see that is too high and if that's the case, they might put the screws to equity traders right now. i think probably given up 10% on the year, i think we're probably right there. >> thank you, scott. good to see you. >> thanks, becky okay

this story will get your blood maybe boiling, maybe not are you ready for this this is a warning about a treatment some people are using to try to gain an edge on aging. we're talking about what's known as young blood treatment you might have heard about this. this is when -- >> vampires. >> -- people get infusions of plasma from young donors as a way to treat various conditions. this includes aging, trying to prevent alzheimer's. this has been happening a lot in silicon valley amongst some of the -- >> it was on the hbo show. they mocked it >> but not only was it fictional, it's happening in real life as well. the fda says there is no scientific evidence, folks, to back up those claims and the infusions could potentially be harmful raising the risk of infection and allergic reactions. fda commissioner dr. scott gottlieb told cnbc they may pursue actions against the companies that provide the service. we will also tell you there are

a number of scientists out there trying to effectively put in pill form what the young blood sensibly is doing -- >> it is true young blood acts differently than old blood >> you're our resident scientist. >> i'm a closed system >> you're not bringing in young blood. >> i try to get things to exit like daily but nothing -- >> yes, we realize we realize. >> yeah. into my veins? are you out of your mind >> there are subscription services everyone likes a subscription business these days. you get a monthly fee. >> so gross. >> people bringing people -- bring blood packets to their home in almost an uber style fashion. >> young people who promise they're not smoking pot or doing drugs or having any infectious diseases >> this does involve needles and opening up your veins, right >> yeah. it's crazy >> there was speculation around a famed investor that he had two

other gentlemen on his payroll out of college in their early 20s. they were not allowed to drink they were not allowed to do drugs. >> have risky sex. >> right protected. anyway, we'll leave that alone but the point being they were being paid on the payroll i don't know $150,000 and their job was to provide blood on a weekly basis to their quote unquote boss now people are trying to do this in subscription. >> you know who this is but you're not going to say? >> i -- because i don't know it to be true that's why i said there's been speculation about it >> have you -- i mean, have you looked into this >> have i looked into this >> yes >> i'm very curious about it i have not looked into it for myself there is scientific -- i don't want to -- >> so looking at mice. >> i don't want to betray the fda here

there have been these -- >> i try to kill the mice. >> there have been scientific studies that is suggestive of being helpful. but clearly there's lots of problems related to it >> i tell you what, andrew >> vampires. >> we're getting targeted in a lot of things. this is like -- i mean, there's so much -- that is just such a brute force technique to try to do something why don't you wait around until we find out? do you know what i try to do red wine and that seems okay and just a little red wine. have a filet or something. but opening up my veins to put someone else's blood -- do you remember the problems of that in the past with hepatitis "a," "b," "c," "d." >> there's two other popular things going on in the valley. >> you're an expert. >> no, because there's a lot of people in the valley looking at extending life the other thing some people are doing -- and i don't recommend any of this. but there are people who take

metforeman it's a diabetes drug that reduces your sugar levels effectively. if you work out, by the way, you need to be very careful about taking this. it really has problems with lactic acid. >> what do you mean? >> it makes it much more difficult. to people who taking it and working out at the same time, there's problems the other thing that people are taking is a product called basis made by a company called alesium, i want so say what >> nothing >> i'm telling you what they're doing. there's a whole group of people taking this stuff relatively regularly. >> you said you think you'd lose a push-up contest now. did you see if you can do over 40 push-ups, there's a 93% lower rate of -- you don't cut me off after you talked for eight minutes about this ridiculous crap yeah you lower heart attack and --

>> if you can do 40? >> if you can do over 40. >> we got the music playing us out. when we come back, another guy who does a lot of interesting things elon musk. he's speaking and it's on a podcast. this time with a tesla analyst, guys we're going to speak to that analyst in the next half hour on "squawk. you don't want to miss what he had to say and the s.e.c. might want to be listening to his tweets overnight as well. we'll explain that in just a moment as we head to a break, take a look at u.s. equity futures at this hour. dow off about 23 points. nasdaq up by two pois.nt s&p 500 off by two back in a minute that's great. but right now you've got your hands full with your global supply chain. okay, france wants 50,000 front fenders by friday. that's why you work with watson. i analyzed thousands of contracts and detected a discrepancy. it works with procurement systems you already use to help speed up distribution without slowing down your team. frank, tell fred full force on those french fenders. fine. fine.

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by the gig or get unlimited. and now get $200 back when you buy and eligible smartphone. click, call, or visit a store today. ♪ still to come on "squawk box," elon musk sits down for another podcast interview. this time with kathy wood. we're going to talk to her next. taxing times for the irs the government's collection agency hit with budget cuts and staff reductions will this lower your chances for an audit we've got some statistics you need to know before you file so you can decide whether to cheat or not and the latest on the u.s./china trade talks after a big warning about possible future tariffs we will have a rort omepfr washington and much more when "squawk box" comes right back. what do you see?

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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. welcome back to "squawk box. the futures right now are down less than they were before, but all around the same kind of flatline down 17 now on the dow jones. the nasdaq was up less than a point. it's now up almost three so that's diverging from the dow and the s&p. the s&p's down about 1.25 points the s.e.c. trying to smooth the path for companies considering going public under a new proposal all companies would be allowed to talk privately with potential

investors before making a final decision about going public. now, under current rules, only smaller companies can hold such private talks while larger companies are required to publicly file documents before gauging possible investor interest the goal here is to boost the number of public companies the s.e.c. will take public comment on the idea for 60 days before holding a vote, guys. but it's one of those things that's a bit of a double edged sword. you want more people to go public so having those conversations, you think, would be valuable. on the other end of things, there's an argument to be said that the public process creates more transparency. you don't want private companies to have any advantage of understanding certain things during this private portion of the conversation we should talk to some investors about this today during our conversations. let's get a check on today's movers with our dom chu who's back at cnbc eadquarters dom, good morning. >> good morning, becky so let's take a look at some of those early morning movers these are earnings related for

the morning so far we'll kick it off with shashs of cvs health shares are down around 4% or 5%. after the health products retailer and pharmacy benefits manager posted an earnings beat. sales did come in slightly below analyst consensus estimates. cvs also gave a full year forecast that came in well below expectations it did take a $2.5 billion good will impairment charge we've also got shares of henry schein down on 4,000 shares of market volume. but sales came in below some average analyst consensus. estimates due in part to softer ends profit forecast also came in below estimates as well. those shares off by 3% then we'll end our check here with a bright note this is shares of garmin right now. you can see up 7.5% on around 15,000 shares premarket volume

it beat both profit and sales estimates thanks in part to better demand for its outdoor gear and fitness tracking products, guys some of the early morning movers on the andrew side -- on the earnings side, andrew. fwook you guys >> thank you i want to talk about elon musk he sat down with kathy wood of arc invest he talked about why tesla is making strides >> progress is because we have vastly more data this is increasing exponentially. >> joining us right now is the person on the opposite side of that conversation, kathy wood of arc invest we want to hear about this conversation before we get to the conversation, i do want to ask you about one thing which happened overnight i don't know if you followed his tweets -- >> yes >> he tweeted out that he thought the company would produce around 500,000 vehicles in the course of this calendar year and four hours later, he appeared to have, i imagine

talked to a lawyer, and corrected -- and said he was correcting those numbers that they would be delivering about 400,000 vehicles this year then explained on a month by month basis. but as an investor, and he has been sanctioned already by the s.e.c. about the -- about tweeting they were supposed to put some kind of process in place which it appears they have not put in place. do you have any concerns about what's happening at that company? putting aside the wonders of the vehicles and everything else in the investment case one way or the other. >> no. i think what we hear from elon, he's obviously got a very big idea >> right >> and he's running hard with it so they produce 240,000 or delivered 240,000 last year. their guidance is up to 400,000 officially he talks about exponential growth and how six months can make such a huge difference. >> right >> and -- >> but you also heard him on "60

minutes" say he's bad at making predictions and he shouldn't be making predictions. >> well, i think he's very good at making long-term predictions. these shorm ot-term ones, no. six months he could be off by a hundred thousand units let's put this in perspective. 240,000 delivered last year. 400 this year. so up over 50% most auto manufacturers in the world are going to be down let's just keep that in perspective. >> if he had made those comments while the market was open, would you feel differently >> you know, i think everybody is beginning to adjust for musk. you know and in this case, i would have as well. >> what does that mean that the rest of the public market -- the public -- the laws should not adjust for musk but the public should adjust for musk >> the public can do whatever it wants. i'm just telling you what i'm doing. >> right >> and i'm looking at more than 50% increase in deliveries this

year when most auto manufacturers are going to see sales down. i see a company that has 80% share of the electric vehicle market in the united states. and one of the top selling cars whether gas powered or not the point he was making earlier was, hey, we went from zero to it could be 500,000. he's trying to make a point. we're on an exponential growth here what he doesn't say is other auto manufacturers are beginning to point to tesla. >> it's at $307 right now. you believe the stock is worth what >> so our bear case is $700 in five years and that assumes that they are nothing but an electric vehicle manufacturer and they lose a lot of share from here okay >> they lose a lot of share from here who do you expect them to lose share from >> i don't know.

personally i think going from 80%, they will lose share. we're saying to get to our bear case, they go down to something like 15% share that's a global number our bull case is $4,000 in five years and that assumes autonomous mobility at the leading edge of it primarily because of their data. they have collected more data by far and they will continue to collect more data because those of us who own teslas are doing it for them every day. >> let me ask you a separate question he also made a comment i believe in the past 24 hours about the idea of autonomous vehicles. says he will have autonomous technology ready to go by the end of this year let me just also contextualize that by saying waymo the google self-driving cars which have been in development for much lon longer from what i understand use lidar and other technologies and have historically been

considered much safer when it comes to safe -- self-drives caring does not believe that they are going to be producing fully autonomous vehicles, i'm assuming what they call level five >> level four probably. >> but if you tell me it's fully self-driving, i'm thinking that we're going even further than that >> he did say on the podcast that he thought that they would be there again, adjust for, you know, exponential growth here we're talking about data as well we do think he will be -- the way he framed it for us in the podcast was we'll be there we just need to bring the regulators along with us and to do that, we need to produce the data show that this is safe so if you use autopilot today, you will be changing lanes have you used -- >> yes >> okay. so you understand. >> it's a fancy version of cruise control as far as i can tell at this point >> changing lanes is not

>> i think what kind of stuck with me on that part of the comment is all the accidents that have been involved, people weren't using it correctly they were allowing it to drive and not paying attention that has been the problem with it when you have the ceo and founder who's such a big celebrity like eamon making comments like this, it seems more people are going to listen to him and say okay i'm going to let this thing do what he says they'll do >> if you do drive in one of these cars, if you don't touch it after a certain period of time, it's going to pull over. so they're going to override -- i mean, he is trying to help people understand how the world's going to change. >> i get that. but you understand what i'm saying >> yes, i do from a manufacturing and safety point of view -- by the way, tesla has to be one of the safest cars out there. right? what's so interesting, you hear about all the problems here. but not the other cars

they happen every day. every day. >> fair point. when there's problems they say it's because people weren't using it correctly >> and therefore they have put in stricter controls they'll just disengage it. >> last time you were on here, i thought it's way too soon to predict that you're sort of aggressive about the movement and how quickly we can move on this technology. i thought about you with the new green deal you probably figure that's doable, too, right >> you know, that is not my political persuasion, shall i say. >> what did you say last time? everything will be autonomous and will be tesla and all taxicabs will be autonomous in two years? >> yeah. yeah you called me crazy, yes >> i do. that's true. but then i saw the new green deal and thought maybe you were on the spectrum of crazy over here now. >> can i ask you one more question -- >> or she can answer what i asked her before she gets to your question. >> we see an autonomous taxi future it will cost 1/10 what it costs

now in a taxicab here to go from jfk to manhattan when we scale in autonomous. >> andrew goes on a helicopter from jfk to manhattan. don't you use blade? >> i've never used it. >> it'll cost you $75, passenger drone, when they're allowed. >> i want to go back to the s.e.c. thing we started with and here's my one question to you. why can't you -- why don't you -- why couldn't you say like i believe in and i'll tell you what i believe i believe elon is a genius i think it's wonderful the things he's trying to do i love the ambition. i hope he succeeds i think it'll be great for humanity if he succeeds. at the same time -- >> he's already succeeded. he's already succeeded >> okay. >> trying to do -- he's done it. >> and at the same ime, i have to be bothered as somebody who cares about the law when he's tweeting things that are factually untrue, when there's a system that has not been put in place that he was sanctioned to

put on why was it so hard to hold those two dualties why do you you have to be? >> is this a question? >> yeah, i'm asking. it's my view but i'm just surprised >> music's playing >> so as having been a portfolio manager for many years, i know how to adjust for what different ceos say given their personalities and their, you know, and their aspirations. so i see this all the time especially with visionaries. i remember with -- the same thing was happening with amazon for years. >> right >> we were considered crazy. and yet now it seems so obvious. right? i think the same is going to be true of tesla. i really do. >> okay. thank you. >> thank you >> i appreciate it i hope you're right. i really do. thanks when we come back, taxing wealth will we see more audits this year or is the irs just overwhelmed after years of budget cuts? what you need to know about the agency before you file in case you want to cheat. "squawk box" returns in just a moment so with xfinity mobile i can customize each line

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ready to file taxing, robert frank is here to tell us what this means for -- i don't even like saying it you know what i mean >> cheaters? >> no. i don't like saying the "a" word you say it >> okay. i'll say it. >> audits. >> yeah. this will mark the first tax potential abuses the chances of getting caught by the irs are the lowest in 15 years. the irs audit rate has fallen by half since 2011. 6 in every 1,000 returns were audited in 2017. the irs did 630,000 fewer audits last year than they did in twlempb. the wealthy which are of course audited the most have seen the biggest reduction among those. about 1 in 6 used to get audited. now it's less than 1 in 20 many say budget cuts

the total bubt is down 16% since 2011 the staff has been cut by 24,000 the number of auditors known as revenue agents, that has fallen from 14,000 to 10,000. that's the lowest number since 1953 clengting revenue to fund the government many republicans say it's a blow to bureaucracy that should be cut even further add to that the lingering government shutdown, you have the agency that may be stretched during the biggest rewrite of the tax code in more than 30 years. i'm not telling people they should cheat i'm just saying if they do this year, they don't have much of a chance of getting caught >> 1 in 20. >> if you make a million or more >> okay. for more on the state of the irs, want to bring in chuck maher, director of federal tax policy at the center on budget and policy priorities. also dan mitchell, cofounder of the center for freedom and prosperity

you just heard the numbers from robert it just seems to me we're asking people to cheat, chuck is that what's happening here? >> i think exactly robert has it exactly right. as he said, for people over a million dollars, they used to be 1 in 6 now it's below 1 in 20 you just ran a headline about tax cheating and that's very disturbing unacceptable we have an irs enforcement division that's the size as it was back in the 1950s when the economy was 1/7 the size of the economy it is today. people can set up shell corporations and invest money all over the world and hide their money. it's just unacceptable we have budget cuts followed by this law and now you have honest taxpayers trying to file their taxes and if they have a question which they have minute they call the irs, they can't get the phone answered

right? so we have it backwards? we need to have honest people be able to have their questions answered we need people who may be dishonest make it clear to them. it's unaccept to believe pay the taxes they owe. >> is there any part of the tax code that could be adjusted or fixed people are looking at now saying this was missed in the rush of getting the tax reform on the books >> the tax code is a mess because politicians spent 106 years making it a mess i'm concerned about the cherry picking on the data here if you go back, say, to the 1980s, the irs budget even after adjusting for inflation is twice as big maybe it's not managed properly. maybe the internal resources should be rearranged but to me the biggest lesson of all of this is the problem is not the irs. the problem is the tax code is a mess if we had a simple, neutral, fair system like a flat tax, a

lot of these problems would disappear because you wouldn't need these big fights between rich taxpayers and the government because the system could be simple if politicians would let it >> so you're pushing a flat tax. that's your solution to this >> i'm simply pointing out that if you had a simple, fair system where everything was very clear, you didn't have any deductions and writeoffs, you had a simple cash system on -- >> the thing i don't understand is -- the cbo has said for every dollar spent on collection, you actually get six if you were running a business and you had a unit that responsibility was to collect the revenue, you would not deprive it >> exactly you guys are investment guys exactly. how many investments do you know you put down a dollar and you get six back, right? i mean, this is -- it's unbelievable that shows the money is there. needs to be collected. and what the good news is here

is that the trump administration recognizes this. right? they have said they have a proposal on the table which i hope gets dealt with later this year the non-defense spending but you're going to take an extra chunk of money outside of that framework, earmark it for enforcement. and get that payoff you're talking about. and just like that -- the president h.w. bush proposed when this whole budget structure was set up they proposed it i think you'll see democrats should be supportive of that i think you have a chance here where you get some bipartisan recognition that it is a real problem. >> i've haefrd these perpetual machine numbers. just give the irs a $5 trillion budget no let's make the tax code better, more pro growth. streamline it. not give more thumb screws to go after the american people with

>> okay. >> they just passed the most complex law -- the congress passed that. it's the congress' ability to give the right resources to implement it >> i'd much rather fix the tax code >> it's a longer debate. i know we'll have it again both we'll have back to continue thank you to both of you thanks coming up when we return, china sending a message about u.s. tariffs and how it would be catastrophic for global markets. we'll have a rorfrept om washington right after this short break.

the clock is ticking on trade. stocks riding high on optimism for a deal and president trump signaling some plexability on a key deadline softbank's latest bet. breaking news on the latest investment we have the details straight ahead. and behind the fed's u-turn. were volatility and pressure part of the reason the debate over fed independence as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. good morning and welcome back to "squawk box. live from the nasdaq market site in times square.

i'm joe kernen along with becky quick and andrew ross sorkin no change since last time. except the nasdaq is now between up one and down one. and the s&p indicated down 2.25 or so. the 10-year was below 2.65% earlier this morning we're at 2.63% let's get to some of the stories that investors will be talking about today. tesla is planning to offer a leasing option for its model 3 according to the news website. electric, the site quotes a memo saying they will be able to lease in the next two weeks to employees. it did not say when or if that option would be available to consumers. a big earnings movement this morning. cvs dropping after missing estimates on the latest quarter though the company did beat on the bottom line. also gave a weaker than expected full year outlook because of the long-term care business. that stock is down by 6.8% and this afternoon, we'll get minutes from last month's fed meeting.

this is the meeting where the fed made that sharp turnaround and the rate policy to patients from gradual increases we'll have full coverage coming up at 2:00 p.m. eastern time today. an editorial in the state run global times said any new tariffs on china will equal catastrophic blows to the global markets. kayla tausche joins us with more >> good morning. china's taken its negotiating to the press to up the pressure on the u.s. to reach a deal and in that op-ed you mentioned, china warned it would retaliate yet again. china's premier who is in d.c. negotiating said the country also would not make any changes to its monetary policy after currency markets moved yesterday based on expectations for a more stable yuan going forward. despite the tough talk moamongs those negotiating, president trump said the march 1st deadline is a moving target.

>> the talks are going very well our group just came back and now they're coming here. i can't tell you exactly about timing, but the date is not a magical date a lot of things could happen real question will be will reraise the tariffs. >> not a magical date. that is a break with his top negotiator robert lighthizer who has been firm about that deadline telling reporters in late january when he was asked about the possibility of an extension that there was, quote, none at all. as far as i'm concerned, my deadline is march 1st. the president's economic advisers will say what are we going to do and he'll make a decision and that decision is likely to happen at the end of this week before president trump heads to vietnam to meet with kim jong-un. of course we have three more full days of negotiating before then becky? >> kayla, thank you very much. let's bring in our guests. joining us now is amy saliko

she worked on trade policy under george w. bush thank you for being here today. >> great to be here. >> let's talk a little bit about this where do you think things stand as we get close to this deadline who has the upper hand >> well, i think as you're seeing from the global times editorial as well as from the president himself, you know, both sides feel that they have leverage of course, the chinese are intimating that president trump is vulnerable to global stock markets falling if a deal is not made and of course we know the president, our president has consistently said that the chinese economy is weak and weakening and so that is incentivizing china to come to the table and make a deal. so this week going into another round of negotiations and this is how trade negotiations work i think both sides are trying to lean into where they feel they have some leverage demonstrating they're in control of these

negotiations but i also think both sides are demonstrating some flexibility certainly the president is on the march 1st deadline intimating that deadline could slip in order for a more substantive deal to be finalized. and on the chinese side, even showing up here in washington again, the vice premier coming back certainly he's going to carry a message from president xi that is going to be consistent with what we heard from the president last week in beijing talking to ambassador lighthizer. president xi saying we want to have a deal that's good for both sides. and so both sides are motivated to make something positive happen the devil is in the details. and at the working level, that memorandum of understanding seems to be by reports short of substance to date. >> lighthizer says that march 1st is his deadline. but the president says it's not a magical deadline i guess we should listen to the president and think that there could be some room for on extension, right

>> certainly ambassador lighthizer's deadline is march 1st. he has to bring a deal to the president by that date i think the president is saying if it's not enough, we're not going to be beholden to a magical deadline or date of march 1st. of course the reason we are beholden to that date is because march 2nd is when the tariff rate should increase the question this week is what will we get for an extension if both sides agree that we need more time to make a more substantive deal, potentially to allow president trump and president xi to have a face-to-face meeting in march or april. what will we get for that? the u.s. side will likely give staving off raising that tariff rate on march 2nd. and so what will the chinese bring to the table of course the u.s. side continues to talk about purchase agreements not just the structural reforms that they're demanding as part of these trade talks

one possibility is we'll see some movement from the chinese side on more purchase agreements as the u.s. side says we won't raise the tariff rate on march 2nd while we continue these very intelligence negotiations. >> it's the longer issues that i think are probably a bigger deal those are the things that are going to be lingering no matter what happens and that's the transfer of intellectual property, being forced to be in these joint ventures those things do you think those are still here a year from now >> those are the challenges for the trade negotiators to n demonstrate how can they make progress on intellectual property rights? we understand the chinese are bringing more legislation to the floor to demonstrate they are stepping up enforcement measures and so that should be able to be one thing on the forced technology transfer. also the chinese are at least acknowledging that that is in the basket of items that's being discussed. in the past, china wouldn't acknowledge that was an issue. because there wasn't a specific

policy so i share your skepticism that we can actually make progress on these fundamental issues that american companies and all foreign investors have been facing in china for years. but that's what ambassador lighthizer is focused on including having enforcement mechanisms in place with a deal that if china doesn't demonstrate real progress, tariffs will snap back and be put back in place potentially at a higher rate to punish the chinese. >> amy, you're really thoughtful and you think about things from a long picture and what this all means. markets are kind of the opposite of everything you are. and that's how things are going to be trading let's say over the next several weeks at least if not the next several months. what would you be advising somebody who is looking at the markets and trying tofigure ou what to do ahead of this deadline >> well, certainly the markets want to see a de-escalation of tensions

and so i am sensitive to that, absolutely the markets want to see resolution so that we can get back to the slowing chinese economy and head winds we're facing here in the u.s what albright stonebridge group is advising to its clients is that it's got to in its own way demonstrate value that we are bringing to the china market so that chinese policy makers see a reason to have foreign investors in the market. and that reason being foreign investment actually helps china meat its policy reform goals that it has set for itself but we need to remind the chinese side of that because xi jingping has very much demonstrated his preference for state owned enterprises to be dominating the chinese economy. even if that's not good for the economy. and so companies have to continue to make that point not just our government.

that them being absent from the chinese economy won't help china grow >> what the chinese are saying today through the state-run media, that global markets will have a reckoning if there's not some truce that's met before march 1st, are they right? >> i think the global times can be quite rhetorical in its criticism of the united states i think they're just pushing on a pressure point they know is effective with president trump his concern over the markets really dipping as a result of not making an agreement and the tariff rates going up. i do think it's bad for the u.s. economy and bad for the chinese economy, bad for global market ifs these tariff rates get raised but as we're looking at advising our companies, i think there is going to be a continuation of tariffs that the u.s. applies on china and china retaliates by applying on the united states as we work things out over the coming months. and i would say up to a year

from now this isn't going to be resolved quickly, unfortunately. >> amy, thank you. coming up, news out about softbank's on-demand service you need to hear about details ahead. and are facebook and other social media giants really in need of more regulation? some uk lawmakers seem to think so we're going to talk to facebook's former chief security officer on what if anything the social media giant can do to aygain the public's trust. st tuned you're watching "squawk box" here on cnbc

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some news just in from tesla. the company's general counsel is leaving after just two months on the job. he is returning to the law firm where he worked for 30 years before he joined tesla he'll be replaced by tesla vice president of legal jonathan chang. right now let's bring in phil lebeau for some context on this story. phil >> becky, not a huge surprise here given the fact we've seeb a fair amount of turnover within the leadership ranks at tesla. you have to take this at face value. he took over at general counsel in september he's had time there to work with the tesla management team, to report directly to elon musk and decided it's not the right fit for me he's going back to his previous law firm in d.c. and then jonathan chang will

move up. i wouldn't read much more than that at this point aside from you will hear people come out and say you have more leadership turnover at tesla. that's not unusual but whether or not there is something more to this than simply dane saying, you know what it's not the right fit, i'm going back to this previous job. >> you sound like the guy selling glass in a bag to children it's fine. it's good. it's broken glass in a bag >> joe, i didn't say that. i did not say that joe, you're -- joe -- >> the guy is there for two months he's a lawyer. he got there and said oh, my god, i can't believe what i'm -- i'm a lawyer look at what i'm saying. i'm out of here. >> look. joe, what's with you today i've been watching you this morning. >> today >> you're in the most per snickty mood today >> because i'm on a diet

>> andrew put him on a diet. >> i'm not responsible >> yes, you are. >> let me ask you a different question related to this let's put aside -- look. there are people on twitter already saying there must be fraud here, something else going on here. >> yes >> put aside that piece of it. thou though, isn't it a complicated place to work? >> easily. >> and how difficult that is to then bring in new talent, keep new talent all of that. >> 100% right. but the counter to that is if you're just waking up now and saying there's a lot of management turnover, where have you been where have you been over the last couple of years this has been going on for some time >> that's the concerning thing >> you're right about that, guys

likely should and are saying to themselves why do we continually see this turnover happening at tesla? seriously, guys. this has been well documented for some time now. >> 30-year career and then he felt the -- i mean, he left for a reason, phil it only lasts two months i mean, i don't know what's going on andrew already used the "f" word i don't know you need that i wouldn't say it's a part and parcel of having management turnover at the place. >> i wouldn't say -- i didn't say this is just somebody who came in, i don't like it and i'm going to leave what i'm saying is there is no indication based on this announcement or otherreports that there's something more nefarious here. >> i don't know if we know >> we don't know that at this point, joe you came on and you were like, well, there's got to be something here >> i didn't say that i didn't use the "f" word. >> you did come on. >> i said the way -- i didn't

read the story it was after you said there's nothing here, nothing going on what i said was -- what i said is he left after two months realizing there's not the right fit. he went back to his law firm and just decided it's not the right cultural fit all i said was that. >> possible. possible i just don't know if -- i just don't know if we know. >> you mean of the worst >> i mean yob if it's just, oh, geez, i don't know if this is the right fit. >> it doesn't matter what company it is. >> saying i don't want that on my name. >> can you weigh in on this twitter situation with elon? maybe this goes to the counsel issue of establishing some kind of procedures. there was the s.e.c. censure is that said the company needed to have policies and practices ahead of tweets going out.

everyone or "60 minutes" he said he's tweeting however he wants we saw him tweet last night saying they were going to build 500,000 cars then several hours later had the market been open, i think that would have been a bigger problem. doesn't that demonstrate suggests there's a lack of discipline and the company and all of the wonderful things that it is doing and it is pulling the automobile industry forward in many ways. so i don't want to dismiss any of that. at the same time, there's this other issue and it is real >> absolutely it's real. and this also calls into question the s.e.c. settlement i mean, he basically said on "60 minutes," look, i'm going to still be tweeting. we know how this operates.

all of the communication especially with anything material such as production ragts will be checked and will be approved. why did that not happen last night? and if it was -- if it did go through some process, then you've got a far worse issue than elon deciding to send something out and not having that tweet checked but you're 100% right. this is going to be an issue that will continue to pop up and we've seen that it has continued to pop up since they signed the s.e.c. agreement >> i just don't know if you see a series of managers leave again and again and again and again and say it's to be expected. they leave -- or finding they were unable to continue at the company. that could be pointing at something that's not just business as usual. >> joe, nobody is saying it's business as usual. it is what the track record is at tesla. >> what does that mean though? >> let me finish, joe. if you go back and you listen to

most of these executives when they leave, either publicly or they say through second hand sources or you see reports come out -- look, it's not an easy environment to work with you are working with elon musk meaning you are working on his schedule with his approach to handling things. that's just not working for them he's not an easy person to work for. that doesn't excuse it doesn't mean it's business as usual. what i am saying is that is at the core of when a lot of these executives leave if you go back and look at why they're leaving, none of them are saying that elon is doing anything illegal, but he's not an easy person to work for >> stay right there. let's bring in another voice on this conversation. joining us right now on the "squawk" news line is gene munster. gene, what do you think about this point first of all, the idea that the general counsel is leaving after two months what does that say to you? >> they just can't escape this

narrative there's something that's difficult to work with elon about i was hearing part of the original conversation. my first thought was oh, no, here we go again and it's these two different worlds one world of this world's greatest product road map around ev, autonomy, renewable energy sweet spot and on the side of this drip of negative news around the difficulty it is to work with elon my initial thought was as a supporter just can't catch a break. then i just try to step back and think about the big picture. recently summed it as i would. is there something sinister going on here? i think the answer is highly unlikely some of the deeper issues. this is more elon is a difficult

person to work with. he's in a one in a billion type of person. biggest challenge the company has is retaining top talent. >> elon has been known for these self-inflicted news. the first tweet he put out where he was talking about back in 2011, tesla made zero cars today they're going to make 500,000 cars i mean, i read that as his sort of p.t. barnum showmanship showing off what we accomplished over this time he had to go back and correct it they're going to make around 100,000 cars but the rate they're getting up to would be about 10,000 a week by the end of the year again, how can you beat both of these things where you are the ceo but you're also the chief marketing officer. i guess that's where it gets a little complicated particularly when you're already under this suit with the s.e.c. where they've warned you not to do these things >> yeah. i think it comes back to the company is still running like a start-up

this is a $50 billion market cap company. this should not be run like a start-up i have always had this hope that elon would change. i think it would change and it's reiterated that he's not going to change. the marketing point maybe specifically the company doesn't market right now i think that's a scenario that why doesn't the company have traditional ad campaign? i think they're -- >> why pay for it when you can get it for free, i guess >> i think they could do both. but i think this gets back to elon wants to run the marketing message. and i think that that is just one small example. i still believe that this is -- this company is going to change the world. i'm still a believer in the curve and their advantage around battery yields and what they've

established. still despite all of these, i'm still a believer >> i want to say when phil went out very recently to the battery factory, that they have -- is it nevada >> it's nevada just outside of reno >> i was impressed i think that was telling we forget what they've accomplished, where they brought these up to gene's point on this one thing i could ask you is some of the promises i would continue do make is that elon continues to make with autonomous being something that will be delivered by the end of this year, is that something you are on board with to say yes you believe it too and you think it's going to be there >> it's not going to happen. they're not going to have autonomy at the end of the year. they could do a demo of autonomy they have a great car to fall back on which is regulators aren't going to hay low it by the end of the year. but i think this play around tesla is really important. and this comes back to trying to

take everything that elon says and have to put a strong dose of reality on top of it even after you do that, this autonomy play -- we're going to be talking a lot about tesla and autonomy there's not going to be tesla around the end of this year. despite some of the comments and the company. but they are going to be a leader in what is clearly what's going to capture >> you think it's comparable to what waymo is doing right now? >> are you talking to me yeah, i do i think they're comparable to waymo. >> they're not using -- i mean, most of their vehicles don't have nearly the same kind of on-board technology. physical hardware. >> i think if you look at vehicle per vehicle, i give waymo the advantage. if you look at the trajectory and approach to the market,

tesla has taken the approach of learn as you go and make mistakes they'll both be winners. >> so let me just go back to this i mean, watching everything that this company has done, the other news was out and by the way seems there's 15 headlines a day. the other news was the idea of will they allow leasing at some point. that took me down the path would they do it themselves since they were doing lease financing would they have somebody else lined up what do you think? >> they've been doing leasing already. the headline is that they will be looking to start up, potentially looking to start up a leasing program for the model 3. and this immediately has people saying, well, why are you doing a leasing program if you already have this backlog of reservations you wouldn't be looking to start a leasing program. first of all, we don't know where it is at this point. they kind of pooh-poohed it and said it's not important anymore.

now we're just fulfilling orders it's a black box no analyst knows for sure exactly how many reservations are true intent to buy hand raisers out there and the second question is -- and the second point is leasing in the luxury vehicle space for the entire industry, that's primarily how most people get their luxury vehicle yeah, give me $70,000 and i'll buy that vehicle many more are leasing it it's not uncommon to see it. at this point, tesla is still moving into that space further. >> thank you for dialing in da areate it when we come back, softbank's latest bet. we've got the details on the bank's latest investment we'll be back after a quick break. we see access to fresh food being the global norm, not the exception. we see homes staying cooler, without the planet getting warmer.

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welcome back to "squawk box.

some news just out about softbank's latest big bet. deirdre bosa joins us now with more good morning, deirdre. >> good morning, joe this is another real estate play i've learned that softbank's vision fund has led a funding round in on-demand storage start-up clutter it also includes sequoia values clutter at $600million. vision fund executive will join the board. we went through a normal fund raising when you talk to a partner then two and then a partner meeting. in the case of the vision fund, it gets a little unique. after that full partner meeting, you then have to go talk to

masa and that's what i did. it was a great experience. he also said it was a smaller financing round. the realized the opportunity was bigger in that way, this deal mirrors other investments. masa son as you know, he likes to pick a winner in a crowded space and inject so much money that the start-up can outlast its rivals and experiment as needed you saw this with uber, door dash, and many others. in recent months, though, that model has come under greater scrutiny high valuations of investments and son's decision making role. >> thank you we're going to talk about another silicon valley company right now. privacy concerns for faigs book. members of the house committee on emergencommerce -- complainte ftc said facebook exposed health insurgence of users in patient support groups whether the members were misled about what personal health data

could be collected from joining a closed group joining us right now, someone we wanted to have on the show for a long time. alex stamos was the company's chief security officer he's also a cybersecurity analyst for nbc news we're thrilled to have you here this morning we should say in the uk they recently described facebook and used the word gans gster. you spent a lot of time at this company. you think they're gangsters? >> that uk report has a lot of legitimate complaints. i think the uk has real concerns about the impact of social media on their political spheres when you use that language, you detract from the work that went into that. >> obviously the stock has come back people seem to be using the product. it appears they have not --

invested heavily in security procedures and all sorts of new procedures have they done those things? they have. i think what you're seeing is the separation between the business and the company having to do the right thing for society. right? wall street is reacting to the fact they still love the product. it is still probably the best way to get roi on your advertising dollars. that is reflected in the performance of the company but in the long-term, those are not the things that the executive should be focused on and i think that is actually a problem for facebook is the fact that there's so much compensation of executives, of individual employees tied up in the stock price is going to hamstring their ability to pivot >> you want employees to have skin in the game you think in this case it's problematic. >> i do. you can see that from stock bump there was no announcement of the kbruchlt on the security and

safety side. and yet, wall street reacted just to the numbers. the regulatory risk. they want to reduce their overall pr risk. and that is not measured in your stock price on that day. i do think there's a problem here facebook has announced they're moving their bonus structure to a broader basket of things but that doesn't really matter 70%, 80% of compensation is coming from stocks. >> how are employees affecting what market participants do with the stock price? i don't understand what you're saying >> the market participants are affecting the decisions. facebook's problem is not that -- in the media you read these stories that a couple people got a in room and said what's the evil thing we can do right now? that's not the problem for the tech companies or facebook >> that's google >> the problem for google, too, is you have tens of thousands of little decisions being made.

in an incentive structure that does not match people -- they want to build things that want use >> that's because it doesn't match that we all thought do no evil, all these things we're realizing, oh, no. we're the product. >> they make money from attention. and so you end up measuring all of these metrics the truth is there's all kinds of products. if somebody takes a shot of heroin, they say yes because you're not measuring is this actually good for people. that's something tech has to do is measure in the longer term whether it's good. but wall street doesn't care about that i think that's going to be a problem. >> real quick, washington. a lot of hang wringing we talk about it all the time. yet we haven't really seen regulation do you think regulation is coming >> i hope so the truth is since the 2016 election, congress has done nothing to protect the 2018 and 2020 elections they have been completely

deadlocked. >> as a security professional, do you believe that the security in place at facebook today would prevent whatever you think happened >> i think facebook has reacted well to 2016 i think the problem is we're not building houses here to building codes to prevent fires you can't just act statically to what happened in the past. you have to think about what the adversaries are going to do in the future one of the problems is the only company that's done anything around the election is facebook, google, and a little bit of twitter. because nothing has been legally required there are a thousand companies in the internet ad ecosystem so we still have systemic ecosystems so i do think we need to have regulation in d.c >> i know we have to go, but very quickly, what's your relationship with facebook at this point just given everything that's happened? >> i mean, i'm still good friends with people who work on the actual problems. >> do you get calls from mark or sheryl a text after an appearance like this and say, hey, alex.

>> i don't think so. i like to work with the people working on these problems. one thing we're trying to do is have that relationship on the real issues. >> are you going to put the is disappearance information on your facebook page >> the kids use instagram now. i'm working on my influencer rating >> alex stamos, we loved having you. come on back appreciate it very much. when we come back, we are just a few hours away from the release of the minute of last month's fomc meeting we will preview the fed minutes and dig into the concerns weigh on the central bank when skb comes right back and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances. ♪

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welcome back to "squawk box," everybody. later today, investors would be calling for the latest minutes on the fomc meeting. steve liesman joins us with a preview of what to expect. >> these will be the minutes from the meeting where the fed pivoted to a policy on rate hikes. it also revised policy on making it more sensitive to changing economic data. investors looking for clues about just what it would take for the fed to resume rate hikes or how long it's going to be on hold in a reuters interview, john williams said it would take faster growth and higher inflation to change economic outlook. and there's the question about how small the balance sheet will get, how fast it will get there, and what it will look like once it's there >> what we're looking to do is create a whole plan that will

bring us to our goal which is a balance sheet no larger than it needs to be for us to efficiently conduct monetary policy. but to do so in a way that doesn't put our goals at risk or result in unnecessary market tone >> evercore said the fed would likely go big, slow, and mostly shorp. that means a big balance sheet gets there slowly and mostly shorp inside the balance sheet she wants to see the balance sheet run up in this year. it could take longer the fed minutes might show what could be an actual plan on the balance sheet as soon as march so we're going to have the minutes today at 2:00 p.m. on another show "power lunch," yeah. >> all right let's bring in john riding, chief economist adviser. and peter boockvar

chief investment officer at bleakley is that your view of the world or is that the name of your company? peter, in keeping with what i was just joking about, fed is going to cut by the end of this year and taper its balance sheet. that would seem to indicate you have a bleak view of the economic prospects for the world, right >> well, right now i think when you look at the japanese yield negative nine basis points. the u.s. 10-year is back to where it was january 4th real rates in the u.s. back to where they were in august. the bond market is telling you they're concerned about global growth now, i'm optimistic they're going to get a trade deal. hopefully that clears up a lot of the economic cloudiness in the eyes of ceos but just looking at the message of the bonds, they're worried

about the situation. and china is slowing irrespective of a trade deal that needs to be reconciled, the direction of the stock market and what's happening in bonds. but if the slowdown overseas starts to infect the u.s. to a greater extent, the fed could cut by year end. >> riding must not be long stocks because you're mad that the fed went down so quickly and you think at full employment, we deserve more hikes, i think is that too simplistic >> i think that's probably the request. look one of the principles of policy is that changes in policy. supposed to be transparent but it's like watching a performance of language you don't understand with lots of plot twists. and you set there scratching your head trying to figure out how this is unfolded in december, the fed said this year's growth is going to be solid. inflation's going to be around 2% the unemployment is going to fall we think two more rate hikes are

going to be appropriate and the balance sheet's on automatic pilot. and now we're at weaver not willing to say whether it's an increase or a cut. and we're going to wind it sooner rather than later maybe by the end of the year and midweester joined dudley ina kind of that outlook and so -- the thing is, what's the policy here? what is driving the policy again, it's either the winds of the stock market or it's political pressure or at least that's -- >> are we stuck, do you think? unable to raise rates? did they just get scared at the market reaction and we're stuck and unable to get out of this easing period? >> i think we are until the data forces them to do something different. they're not getting ahead of the story. so as a result, i think we're going to see higher inflation.

i think policy is still accommodative. wage pressures are still rising. and so i think that will translate through to higher inflation. >> do you agree with any of this >> i listen to a lot of company conference calls and a lot of companies are trying to deal with higher transportation costs, higher labor costs. so i don't think people should be so nonchalant with this inflation story. inflation is not a worry i can afford to be flexible. my issue with the fed at this point is when we keep talking about financial conditions you can overlay a chart of the financial conditions index with the s&p 500. to where the s&p 500 goes, that's where financial conditions go. even though the fed thinks it's some externality >> john williams himself said that inflation is a little bit below where they would like to see it does that concern you given his status at the new york fed now >> the core cpi -- they like to look at cpe. a lot of it is the reimbursement

that are helping to suppress that core cpi is down two months in a row. >> it's like a half empty argument with the stock market, you either say oh they're held hostage to the stock market. all they care about is the stock market >> the only leading indicator -- that's the only leading indicator. >> they hold themselves hostage to the stock market. >> suspect that what they should do instead of lagging indicators >> you're talking about seeing the bond market. the benefit is zero or, you know, they're even worse than the stock market right? >> but how do we -- when is the position policy not out of the bond market. the stock market is up 20% now what's the next move and if you're -- >> what if the next move is

let's just wait and see the data we're not saying this is the rest of the year we're going to wait and see what happens. my guess is they're not going to do anything for three to four months >> i don't see anything before june but i do see hiking rates in june >> i hope they do. that means the data gets better. if they don't hike in june, we know why, unfortunately. >> things are worse. >> thank you, gentlemen. bleakley view of the world peter boockvar we will continue this conversation tomorrow when we're joined here on "squawk box"ly st. louis fed president james bullard. that's very exciting i just like to -- we have him on i just put my machine on reuters and i just watch what we say here comes out there it's like -- just like -- >> making headlines. big headlines coming up on

"squawk" tornl but when we come back, we'll get you ready for the opening bell the morning's biggest stock movers and what's driving the market in this holiday-shortened week it's coming up in just a moment. stay tuned you're watching "squawk" here on cnbc hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes. ♪

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and it's only from fidelity. open an account with no minimums today. welcome back to "squawk box. things have improved from where we started this morning. the dow futures are still down by ten points. s&p futures down by less than a point. and the nasdaq, which has been up for seven sessions in a row now indicated up by close to ten points let's talk more about the markets' recent rise joining us for that conversation is jim paulson, chief investment strategist at the lethal group what are you thinking? after the big comeback that we have seen since the lows of december, how are you feeling about potential future gain?

>> well, becky, i'm still positively opposed i'm not thinking, you know, we could certainly have a pullback at some time but i think we're going to continue to meander higher here over the course of this year, probably setting new all-time highs sometime yet this year there is some positive catalysts here some of the big ones are the revaluation that we had, we're still selling now at 18 times trailing earnings. we were selling a year ago at 23 the average multiple since 1990 is 19.6. so there is room valuewise i love the fact that the cavalry has come to the rescue since the collapse of december we have accelerated the money supply we have dropped yields across the curve. overall fiscal juice is a percent of gdp, 1% more than a year ago this time compared to gdp. and gas prices even at the pump are down 20% from their october highs. there is a lot of help now coming for the economy and the markets, i think, that

is under appreciated i think there is a cautious sentiment. we had this big rally, i think people are worried it has gone too far too fast, waiting for the correction or retest and maybe we'll get a little bit of that, but i also think that we might continue to decline against that negative sentiment. >> jim, you just talked about a lot of reasons for the market to be up, but tiptoed around the main fundamental reason that most people would traditionally look at and that's the economy where is is the economy headed where are corporate earnings headed >> i think, becky, the economy is still is slowing quite dramatically and i think we're going to grow probably close to 2% something in that ballpark this year maybe even a lot less than that in the first quarter and you're exactly right, i think the market is going to be bombarded here by scary bad economic numbers for much of the first half of this year. and that could lead to another 5% sell-off and talk of

recession and the like again but i think we're going to avoid recession. i think balance sheets are too good both in the business sector and the household sector i don't think that the excesses are extreme. so i think we're going to slow but not recess and the final catalyst for this market this year will be probably sometime as we approach the summer when a consensus decides that the recession is not going to happen. at that point, i think it brings in a lot more buyers again and the idea we push recession forecasts back from next year maybe to 2021. but i agree, i don't expect reports to be good. >> we'll go through the whole dance where we say that we staved off the recession and that's going to be great right around this summer and then what is it, next year at this time, we start to think, oh, no, now we're getting closer to 2021 again? >> i think that's right. i think to some degree that we probably go higher this year and get to record highs, but the problem is the economy if it does recover, we're still at sub

4% unemployment, wages are still climbing, we're going to be right back to overheat and fed will have to tighten again so i think that will come back but i think there is a window here where you could do fairly well in the equity market until some of the concerns rise again. >> when you say you think the market will hit new highs, how far from here, because we come back a long way. >> i guess i don't have a hard number there, but i could see this market getting up, breaking 3,000 maybe this year on the s&p 500. that would be about a 10% return for where we are today total return wise. i think that's reasonable. i don't expect much from earnings, becky. earnings could be flattish but the multiple if it went from where we are now at 18 to 19, it still would be below average on current earnings we have close to a 3,000 stock market so i don't think that's unreasonable and if you get optimism in there, it could even going to a little bit higher. one thing i would throw out,

becky, everyone looks at how far and how fast this january rally has occurred and with the implication that it is overextended, overdone and set up for a big pullback, but maybe what happened here wasn't the january rally's inappropriate, maybe it was the december decline that got out of control and that was inappropriate. it went way lower than it should have it was a seasonally bad period where a lot of players weren't home in december liquidity was a problem and maybe it went too long maybe the problem is not january, but december. >> you're in a great mood, jim you better hope the overseers don't hear you spewing that stuff. they're always -- who did we have on? really negative. >> we got a good debate in our shop all the time, joe >> the chief guy, chief investment guy, who's that >> that's doug doug ramsey. >> doug ramsey that's who it was. >> we always have a good debate

going. >> he had a beard too. you're all trying to get so no one recognizes you when you go out. you all got those. >> record-setting snow, with record-setting snow out here, we need some cover. >> you need warmth thanks, jim. >> thanks. coming up, 30 minutes to the open, get you ready for the trading day ahead when "squawk box" returns looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪ ♪ just hold on, i'm comin' ♪ hold on, i'm comin' ♪ hold on

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final check on the markets there is some divergence here.

the nasdaq is indicated up, about 7 points the dow is indicated down, down 20 or so and the s&p 500 is indicated down a little bit over a point the ten-year bond is about 265 the german bund is under 10 basis points 9 basis points make sure you join us tomorrow "squawk on the street" is coming up right now ♪ good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with melissa lee, david faber at the new york stock exchange. cramer is off today. the event of the day, that's fed minutes from the january meeting. 2:00 p.m. eastern time as the market looks for clarity around rates. former guidance and the balance sheet. europe enjoying a mostly green session so far ten-year 264, oil inventories pushed to tomorrow on this

holiday week