live from new york where business never sleepsz this is ""squawk box." good morning welcome to "squawk box" right here on cnbc we're live at the nasdaq market site in times square the boys are back in town. i'm andrew ross sorkin along with joe kernan, and another boy wi wilfred frost. there's so much news to tote go this morning the dow looks like it would open up much higher 1 of 0 points higher the nasdaq looking higher as well 50 points higher s&p 500 up about 16 points let's show you stocks in asia. also trading higher overnight. the nikkei up over 11% the shanghai composite close to 2% higher. getting a boost after index giant msci dramatically raised china's weighting within the benchmark index. we'll have more on that story in the next hour. then european equities at this

hour we flip the board around, and you are roog at green arrows across the board as well, and then finally, a quick look at treasury yields. the gap spinning off old navy the company will also close back 30 of its struggling gap brand stores over the next two years, cutting the brand's locations nearly in half share price jumping after hour 22 parking lot 5%. >> you know what month it is, unfortunately? >> march >> women's history month >> march 1st >> women's history month >> and it's us three >> we're scrambling. >> it's snowing. >> becky would normally be here, right? this is not intentional. we're doing -- >> women's history month

>> i know. we're doing our best maybe we'll have -- international women's day is actually next friday >> okay. thank god it's not women's history month and sbrnt women's day today with this boys club. >> but people get it >> yeah. we don't -- you know, once in a while. >> once in a while we didn't do this deliberately we're scrambling >> let's talk about a boys club that's getting broken up this morning. long-time hbo executive richard plepler leaving the network after 27 years this comes as at&t is restructuring its media assets following big-time warner merger let's talk about the people who wrote the story for the "new york times." ed lee, media reporter and cnbc contributor. this is a monumental move. >> it's huge yeah >> when randall stevenson acquired time warner, he said that hbo was really a crown jewel. it was something they wanted to

build upon or something they wanted to use to compete against netflix, and he at the time praised richard plepler in many, many ways. what went wrong? >> i think he still -- he still praises richard plepler. i don't think that respect has gone away by any means this from what we've gathered is richard's decision he is leaving of hits own accord because the job is different, and when we say different, it's become -- hbo has been so much more brought into the fray within the whole turner, which is tnt and the other network at time warner. it used to be a separate enterprise they're going to collapse a lot of the back end operations, and on the top of trk the strategy is more out of his hands now it falls to john, who is the executive in chashlg of warner media. this is an old at&t executive. speak to the news that he was about to to be layered in the

business >> ear thawing to bob long-time nns executive. he could come in at this sort of higher level, right? where you have a richard plepler report into him. you know, if if you know richard, that's not likely to happen he is not the type of guy to report -- >> he is going to get -- have a lot. more than just plepler, right? being layered means everybody gets demoted who wants to be in that situation? it's more than just the who reports to whom? there's less ought onme my or control over the thing that you are supposed to be controlling >> to a gray that might be

happening. they need more volume ultimately not just out of hbo, but all the other properties that they're part of, including warner brothers they need to find a way to super charge and have a streaming service coming up at the end of the year >> can we talk about -- this is a true business model challenge/question, right? you have hbo on one hand, and if you are trying to build something that loots looks likes netflix, can hbo look like netflix? >> and still be hbo and compete with netflix >> it sounds like john stanke and randall made a decision at some point long the line that actually the hbo brand was a premium brand. they wanted that we talked about it on stage with john stanke, and we covered it on cnbc at the time. this idea of is hbo the puzzle and everything else is a piece of that hbo puzzle or is hbo a small piece of a larger puzzle >> i think the way randall sees it, i think the way john stanke satisfies it, it's the centerpiece of this going forward plan

it's the best brand. it's the best consumer facing brand, and that's something at&t understands. people buy into hbo. the consumer backlash when we reported on the tawn hall meeting with hbo, when they closed the deal last june. consumer backlash was really intense. don't mess with my h had bo. that is the thing thoer still having to navigate, which is you want at&t to be bigger and broader, but it can't be so big and broad that it turns off the consumers. >> that said, this stack grabbed me overnight. >> it's hard to identify a

netflix show the way they produce things, they're licensing things, but they have different types of production companies in terms of the things they produce. hbo has a really specific model where a lot of things sort of, you know, they rely on the same creatives, and so you can identify an hbo show when you see it, and it's part of the brand and appeal zoo we've had some experiences it could be anywhere are from minus a half a billion to plus a half a billion we're not sure ge was, like, what i am just wondering whether you get the same sort of reaction? now, do you look at at&t as a big sugar daddy that has so much money that they can do whatever they -- are they going to be watching every penny and thinking about debt? >> that's the question >> at&t has -- >> $170 billion of debt. >> do they not pay -- >> warner is not going to get

more money than they have been for at least another year plus, right? >> that was always the promise of the transaction, though the balance sheet isn't a position where they can be a sugar daddy to warner now, and it's going to take at least a year before they can deleverage to the point where an hbo can see the real benefits >> yes, hbo makes really quality shows, but they do documentaries, sports, and politics they do game of thrones, and they do entourage, which is a comedy does that really matter? >> i think that's what richard pl epa r was game to do.

>> the cnn thing is fascinating too. now we have the latest data point that they just kicked the justice department's ass >> you know, they beat the government back, and that's their -- >> but even if they wanted to change cnn or they really can't because they're still mad at trump, i think, for -- >> also, there's every indication that at&t will not mess with them in terms of the editorial product, necessarily i think there's going to be more of a sort of consolidation on the operation. >> people are from texas they would love to mess with cnn and the product they're turning out right now. >> let me ask you a separate question, though, about the perp nell at hbo. i should say i worked with richard. you're tight friends with richard. they were a fabulous group of people in truth. they really were he had so many relationship with so many people in new york and los angeles. the influencer group, if you will, and he was as a result of

these relationships able to acquire lots of different theme that wanted to do business with him, and how critical in this new age do you think that is one of the things that the netflix model did up end is, you know, there used to be a view that you needed to have this relationship and this network, and then all of a sudden it became clearer that if you had a checkbook and apple is proving this as well, if you have the money to -- >> they may come as well where do you see the distinction there? >> i don't think it's simply a function of having the money, though, right? you are a great example. i think richard plepler, one of the things he helped pioneer is finding people outside the box, right? hey, let's turn that into a show or into a documentary or movie or -- and, like, those kinds of -- because richard really loves the -- he has a -- i think he liked to convene creative types at all different levels and all different sort of areas, and that's what made hbo unique. i think that we haven't seen --

it's not just about handing out money. >> is there a lot of demand for him elsewhere? >> that's a good question. he had the job he wanted, right? i think that job doesn't exist anymore. >> you don't think that an amazon or netflix or a hulu would say, you know what, if i could pull richard pleple in -- >> snag him some. >> could he recreate that magic? maybe not. he is not going to take over ted's job, but would you make him a vice chairman of the company? or the chairman of the company even? >> he reached out and said he yomtd that job >> i'm getting hammered with the creeping takeover of "squawk box" by the "new york times. they're saying it's right now at 50 50%. is krugman come in

>> i say it's 3-it >> he is not out of the box. he is part of the box. >> he is in the box. >> what we don't really know >> it's called "squawk box." >> we want to thank you. >> is he really -- >> tesla with him. >> krugman with him. >> did you see, by the way, talking about not krugman, but aoc and this whole amazon thing? did you see the full page ad in the "new york times" today >> that you got to see >> do you think i saw something in the "new york times"? do you think i read the "new york times"? >> we're going to talk about that in a little bit >> it's on your doorstep every morning. >> i don't even read the salmon colored "new york times. >> becky is better at sorting this out i don't wa i don't know what to say >> i got to read my hor scope to you. it says don't even try anymore someone is not going to listen to you listen to this "stop trying chances are they simply don't want to hear what you have to say. it's their choice. i'm just going to -- >> don't look at me. >> that's who i'm -- you are in

between. quit trying to convince someone of something they don't listen to you >> you are a pisces. >> that's a good one, isn't it >> he has been good. >> isn't that good >> it's an old joke to me. he uses it every other day >> give me -- give us the horoscope. >> you go call me an old joke a lot. keep telling yourself as one door closes so another door opens. you may be disappointed that something you had high hopes for is coming to an end. this gig, i think. and -- >> wow >> there will be other opportunities. remember, life is a journey, not a destination. that's pisces. >> pisces. >> i thought you were on the bubble >> we should do a horoscope section every day here >> we have three hours we should. >> it could impact the markets because everybody would want to know their horoscope and how

they should be -- >> what -- i'm going to check that out it is the first friday of march. oh, it's not jobs friday i'm not ready for that it just happened for the econ nerds, that's because of the way that the reference week fell last month in february. we'll get the jobs report next friday today, though, we will get personal income and spending data for january at 8:30 a.m. as well as manufacturing and consumer sentiment data later this morning still to come, elan musk ace big announcement three big headlines moving tesla stock this morning we'll bring you the news and instant analysis next. as we head to break, here's a look the biggest premarket winners and losers in the dow. don't go anywhere. back in a minute obvious.

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i can customize each line for each family member? yup. and since it comes with your internet, you can switch wireless carriers and save hundreds of dollars a year. are you pullin' my leg? nope. you sure you're not pullin' my leg? i think it's your dog. oh it's him. good call. get the data options you need and still save hundreds of dollars. do you guys sell, other dogs? now that's simple, easy, awesome. customize each line by paying for data by the gig or get unlimited. get $250 back when you pre-order a new samsung galaxy. click, call, or visit a store today. welcome back to "squawk box. tesla out with three very big announcements after yesterday's closing bell, and it is moving the stock this morning phil lebeau joins us now with all of the details >> andrew, let's start with the first one. for a lot of investors, the one that's getting the most attention.

it is what elan musk had to say about the company not being profitable on the first quarter. remember, the company turned a small profit in the fourth quarter of last year during a call with reporters to discuss a $35,000 roll-out of the model three. he said that the company won't turn a profit in the first quarter. why? they've got some one-time charges. remember, they dismiss about 7% of the work force. they announced that last month that's going to be a hefty charge in the first quarter, and also the challenges of exporting cars to china and europe and the lag effect of some of the revenue that will come with the expected sales there snoo here's the other news that came out last night. they are now selling a $35,000 model three. this is the base level he says they are not going to be lower than $35,000 it will have a lower range than the current version that's being sold the range on this one will be

220 miles. the question is how much is this going to goose sales for the model three?s have increased steadily over the last fiveor six quarters, you can see that they ended the fourth quarter delivering about 63,000 model threes. i asked him on the call last night, i said how many do you expect to sell this year remember, this is not just in the united states. this is worldwide. he said we think we could sell a half million i said what's that based on? he said it's just a gut feeling. not based on reservations or based on them saying we know for sure that there are a half million buyers out there that's what elan musk is projecting at this point also, keep in mind that they have a $209 million bond payment that is due today. elan musk did not discuss that during the call with reporters last night it remains to be seeb when they will make that payment today they ended with just under $3.7 billion in cash and liquidity, guys there's no question that they probably -- they've got the money. it's not like they're going to default on this bobd payment, but the cash crunch in the first quarter and then heading into

the second quarter, which, by the way, elan musk said on the call last night, he expects them to turn a small profit that's going to be in focus today. >> i just had one very quick question, which this is a technical question when you walk into a showroom today to buy a vehicle, do you buy it in the showroom, or do you still technically buy it on-line?

snoo if you are going to sell vehicles in the state, you have got to are have some type of physical presence. we went to some hearings in pennsylvania where this was at the heart of the debate over on-line sales. the reason this is important, andrew, is because if you allow tesla to say no stores at all, if you live in state indiana or ohio, wherever it might be, and you do not have to have any type of a store at all that's where the arguments begin because the dealership groups, as well know, they are the most politically involved in every state legislature? terms of contributions and their influence. >> phil, isn't the bigger question, yeah, they need to get their overheads down, but can this not hurt? are people going to hand over $35,000 on-line without even seeing the car?

>> there have been moerch a few reports. there are people who have put in reservations or have gone for refunds and it's not a simple process. it's not like, okay, well, we're going to send that back and wire it to your account, and it will be there in a couple of days that may be happening with some buyers there are also many reports out there about other buyers saying it's not that simple, and it takes a lot longer >> can you see a day, phil, not just for tesla, but it's making me think, actually, whether you would ever see the elimination of showrooms and dealerships and actually, it would turn into an

on demand showroom meaning, you're in the market for a car, you would call up tesla, and they would bring you a car to your home someone would sit there. you get in the car you drive around the block five times, and they would drive it away it feels like actual given all the real estate and overhead, might actually be the long-term model. >> yeah. i think you're right it could be the long-term model. not just for tesla, but for other automakers as well again, it gets into this other question, the dealership model that has been so embedded in the business of selling vehicles for more than 100 years. that's at the heart of this. if you are going to allow tesla to go completely on-line with no physical presence or a very limited physical presence, you will start to see the dealership groups fight back and say, wait a second, you can't allow them

to do that because that opens the door for everybody else to start thinking about doing the same thing >> "mad money. phil, stick around just for a minute the "new york times" ed lee is still with us. >> here. >> wanted to get your take you know, there is this debt overhang the question, i think, is very difficult to ponder here the fact that they hit this $35,000 -- that's a huge milestone for the company. right? if you -- by the way, elan muvg's brother was on twitter saying this is one of these great days for the company, and yet, stockholders are not so sure >> well, it's -- i don't think it's the you're offering a $35,000 car like we don't like that it's can you deliver can you deliver the demand, right? $35,000, if you are -- it's going to ep on the floodgates. a lot of people say i can afford that who want an electric car. i heard tesla is pretty good can you meet the demand? when all these orders start coming in, are they going to be sitting around six months to get their car and say, you know what, i want my money back that's going to be the bigger

issue, i think i don't think it's simply a matter of, you know, closing the dealerships. that's a huge thing. they haven't proven they can meet production demands, and that's ultimately the thing that -- they say -- >> by the way, they say the car will be available in two to four weeks. do you believe that? >> yeah, right i don't know >> i haven't seen evidence of that >> inl foo question, you can weigh in on it i'm curious what phil thinks the fact that they have now upwardly reviewsed the number of vehicles that they planl to deliver by the end of the year to 600,000, so now we're not only up over the original tweet of $500,000. >> you mean at the rate -- >> that's a key difference that was what he got tagged for. you are not delivering 500,000 or 600,000 vehicles. you are going to write a rate of that amount. >> does that change at all this case in any meaningful way, guys >> i think phil might know that better >> do you have a take on that? >> i don't think so, andrew. i was on the call, and i heard him say that he laid out the numbers and on the low end it could be 420,000,

and this is not just model threes it's 3s and x. anywhere from 420,000, i should say, all the way up to 600,000 look, i think that that whole side story about the s.e.c. will play out relative to the whole question of were these tweets vetted i think that's what this comes down to. i'm not sure there are any analysts or investors who look at the commentary in terms have whether the rate is 500,000 or the rate ends up being 420,000 whether that changes their outlook when they look at tesla. >> your exposure could have more exposure to china. plus, we'll tell you about a big change at youtube that will affect tens of millions of videos "squawk box" will be right back. minimums and fees.

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>> you are watching "squawk box" here on times square >> welcome back. indexing giant msci is dramatically raising china's weighting within its benchmark index. if you didn't think you had a lot of china exposure before, you just might later this year it's quad ruping the weighting of china's mainland shares in its global benchmarks and adding chinese midcap stocks to its emerging market benchmark in november the additions are likely to boost investor sent meant and fund flows into china. the latest results of the cnbc-cfo council survey are in, and i can't believe this is what it takes to get frank holland to join us now on "squawk box" with the details. how often can we expect to see

you with this, frank how often do we do the survey? >> quarterly, joe. it will be another one coming up in may maybe i'll be back results are in global cfos are expecting growth in the world's two biggest economies to slow down the outlook was downgraded from improving to stable. that ends a streak of ten consecutive quarters where it was viewed as improving. china's economy downgrade from stable to declining. united kingdom getting a downgrade from stable to decl e declining while the rest of the world, the eight other regions, viewed as stable important to note, the survey was taken before february 22nd respondents did not have the latest information on brexit, but they did have indications that president trump let his march 1st dedsline on tariffs slide, which he have do. there's the talk about a recession talk in the u.s. as can you see, more than 85% much global cfos say they don't see that happening in 2019 more than 90% of u.s. cfo's, they said the exact same thing they did not have quite the same

confidence in the euro zone. still, about 75% of cfo's said they were either unsure, did not foresee a recession there. a lot of that may have to do with the uncertainty over brexit more than 40% expected a no deal brexit that number more than doubling from q4. today still no definitive answers on how the u.k. will leave the e.u. back over to you >> all right thank you, frank holland here to talk about global risks. the markets and the economy. tim quinlan, vice president and economist at wells fargo greg hans, cio of win tlop capital management greg, i'm going to look to you for a lot of stock market advice, but you're mostly talking economics too. that's the back drop that you are using, i guess, to make decisions about investments. we had the gdp number yesterday in this country, which was above expectations, but in general, you say global gdp growth was below where we thought we would be >> we have a top-down look at how we invest in fixed income

and equity, and we are expecting a global slowdown, and the seeds have been planted. first quarter is going to surprise on the down side. domestically we see that with the government shutdown we see that with brexit. obviously the trade issues not only with china, but with europe >> all right based on that back drop, we had valuations in december a lot more reasonable. now that 20% above we're back to where we were in the third quarter. look at the bond market. the bond market with ten years up to 275. we actually think -- credit spreads are wider where they were they haven't tightened all the way to the tight levels in the foult quarter. we think there's opportunity in both investment grade and in high yield >> short straw this morning, joe. >> yeah. you have the strort straw. what do you think as an

economist we had a better number yesterday with gdp than where a lot of people were after that retail sales number. a pretty solid year, you know, depending which metric you rook at either 2.9 or fourth quarter over fourth quarter 3.1. one of the best years we had in the past decade or so. what do you really think for 2019 that's a tough call here the first quarter -- give me a first quarter estimate, and then do we diesecelerate or accelera from the first quarter >> you're right. you have full year growth that comes in depending in the metric. you call this round numbers 3% about as fast a pace of economic growth as we have seen in the late stages of this expansion. that probably marks your high water mark we don't have the quarterly rate of gdp growth. rising above 3% at any point throughout the course of 2019. that's not to say you don't get a big inventory swing or one-off contribution that temporarily gets you there, but on a sustained basis, i think you

have to get used to the idea of potential gdp growth being closer to the fed's estimates and more likely 1.9% >> i just remember in the past there was some -- actually, they weren't completely false narratives that i used to hear from guys like austin goldsby would come on, and i would say, look, why isn't the u.s. growing faster, and is it overregulation or obama care? he would say look at the rest of the world. we're a global economy, and we're doing better than everyone else it's not anything we're doing here it's that we're in a global economy. now i'm hearing the same type of people say, well, trump's stufr, the tax cuts didn't work, and, you know, this economic miracle that we're always hearing about isn't happening. we didn't get 4% or 5%, and we didn't hit 3%. those are the same people that used to talk about the global economy.

the global economy is slowing. to at least some degree, we're being slowed by the global economy, are we not? >> yeah. i think there's a couple of things to unpack maybe i'll take the ease why i pa are the first, which is the global economy i agree with your other guests i think that there are a lot of indications that the global growth is slowing. whether you look at global export volumes, which typically average year-over-year growth in the order of, say, 5%, are now less than 1% on a year-over-year basis or if you look at a canary in the coal mine south korea in terms of exports is pretty big. it had its biggest year-over-year drop in export volumes since 2014 there are signs that global growth is slowing. as to your epic battles of austin goldsby, i caught many of those when they were happening >> it's a twitter fight. >> it's not -- it's -- actually, we're going to dinner. we're just going to work it out together i think that's what everybody needs to hear. >> glad to hear that i think a big part of what's at stake is just the factors that

create potential gdp growth are not what they used to be the best example of that is labor force growth >> would you be buying or selling here you didn't soubd too optimistic. >> on stocks it's back to levels where we're overvalued >> you think so? >> small cap, i think there's opportunities because we're seeing bank lending. >> we think it will have credit issues, but it's not it's not a problem from -- it's a downgrade to single a. >> all right, guys thanks i will treat you, austin, because like many americans, i have never felt more positive

about my financial future, and can i easily afford to pay >> later, i slew of news yesterday. tesla, included the long-awaited cheaper mogds three.

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the top three very big stories. gap announcing plans to split into two companies the retail giant spinning off old navy while keeping the other brands like gap and banana republic in a yet to be named company. gap shares are up more than 25% in the premarket we can have a lot more on that story in a couple of minutes

hoping to give them a little more focus given the variety of brands that they now have on hand separately, the other big news of the morning, tesla announcing a long-awaited $35,000 version of its model three electric vehicle. it's also, though, going to stop selling its vehicles at physical retail stores. shifting all of its sales on-line, and elan musk says tesla does not expect to turn a profit in the first quarter. it says it has to get rid of all of those showrooms in large part to be able to allow the price to get down to $35,000 because of the margins there. then a very big shake-up in the c suite. hbo ceo richard plepler stepping down this comes amid a broad restrurgting of the cable giant under its new parent a & t, and huge implications in the world of hollywood and entertainment as a result. take a quick look at u.s. equity futures at this hour dow looks like it who ep on up much higher. nasdaq up 52 points. s&p 500 looking to open up about 17 points higher

coming up, we're going to dig into the big retail news gap spinning off its old navy brand finally. investors were warning of that move gain in the stock. as we head to break, a quick check on what's happening in european markets as of right now. at&t provides edge-to-edge intelligence, covering virtually every part of your finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy. at&t provides edge-to-edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when this happens you'll know how to quickly react...

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retailer gap making a big splash with the decision to split into two companies gap shares soaring late last night.

siemian siegel joins us. so what's your take on this spinoff? surprised by it? or it's been in the works for many years as a question mark. >> you have this old navy which in netheory is a discounter it's everything you'd want but it's saddled with this larger institution. they've had to do something to get the stock higher this feels like that's something to get the stock higher. this is about the stock. this is not about the company. this is not thinking about the improvement. those companies, the concepts, they make sense together they're synergistic. >> they are? i was going to say, to me, if you could get the right people in place and i feel like part of the problem is they have struggled to get the right people in place. if you could give them real focus on banana republic which is to me one of the -- during my childhood, banana was a great

brand which has fallen into the -- i don't want to get it into and get it focused separately on old navy not just in terms of the stock but in ternms of the actual company. >> it's a great point. you can have those leaders and still be in the same entity where you can leverage the business think about in this area of conglomerates, think of amazon one company doing 18,000 different things even beyond other retailers, the gap customer knows that they're all owned by the same business because they cross-shop them they have cross-loyalty program. that's very rare think about an urban outfitters. >> they do with banana republic and -- >> go on the website, they're all there. you can use those cards. more than any other one, there are these synergies. geographicively, it's off mall

but the reality is they appeal to similar demographics, maybe different age points >> is your point this morning that the 20% jump in share price is overdone? >> i think the reality is if we're thinking about retail and what's going on in the world, financial engineering matters. depending what you're looking for as a management team and that's what you care about, this is a way to unlock value we've spoken a lot about the off pricers. they command better multiples. if they could convince the world old navy is off price. they get a better multiple personally, i don't think it is off price. that's the idea here and the premise you can get old navy with gap for free -- >> it's strange engineering. >> i think you have scale and opportunities. i don't think they're looking at an old navy margin that's 50%. i don't know that old navy is 50%. >> what happens to the other brands do they get reinvigorated or has

that been the really dead stock. because you've taken the best bet out of it. >> we have old navy and newco. i think that tells you what they're thinking at the end of the day we've segmented old navy out what's interesting is that athleta is grouped into that bunch. if we think about what works in retail today, it's offprice and athletic the fact athleta is in there, probably starts surfacing as a larger name. >> could they have -- athleta is in the same physical store as a gap. is that why they don't have their own? >> think about old navy being totally different. strip centers. athletic can be in different areas. but athleta has been one of the other lulus. so you've had this move where there's series of other

athleisure brands to capitalize on this has been one of those but they haven't made as much noise. perhaps this is an opportunity for them to step up. >> thank you for joining us. siemian siegel from nomura >> what you got? >> i might invite you over tonight. i found out what penelope is making for dinner. >> what's that >> beet loaf >> i'm not a beet guy. >> you don't like beets? >> beets are tough for me. i'd love to come over. >> i know. but i thought -- >> i'm feeling left out. >> you can come over too it's like meat loaf but it's -- >> has she done this before? >> i'm kidding no it's in my no-meat a oc. we're having beet loaf tonight i liked that have you ever heard? i think it's such a thing. >> not on my list. >> things you learn on a friday morning. coming up here on "squawk box," two big hours ahead.

the next big fiscal fight in washington back on the clock we'll talk to congressman patrick mchenry about what it means. we'll do that next then later, global consulting firm mckinsey's new boss. and now he hopes to change it. you're watching "squawk x" ghhe ocnbcbo

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don't get mad. get e*trade and start trading today. can the weekly winning streak continue? markets look to end the week in the black and extend its best two-month start to a year since 1987 we'll run you through what's moving this morning. what it means for your investments. meet the new mckinsey. after a year of bad press, the company's looking to clean up its image. kevin sneeder is here to share that change is coming. and new york city telling amazon we're sorry why the big apple is offering an olive branch as the second hour of "squawk box" begins right now. ♪

live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc i'm andrew ross sorkin along with joe kernen and wilfred frost. take a look at u.s. equity futures at this hour dow would close 175 points higher nasdaq up 52 points and s&p 500 up 16 points shares of gap surging in the premarket. separating old navy from the gap and banana republic. up some 24% if had the premarket. earnings just out from athletic footwear and retailer foot locker.

earned $1.56 per share above estimates. comparable store sales up 9.7% more than double the 4.6% estimate so those comps very strong, indeed stock is up 13%. it's a somewhat unusual morning for economic data. the government releasing personal income and consumer spending numbers for both december and january at 8:30 a.m. eastern time. the earlier report was delayed from the shutdown. the government about to reset the clock on the debt ceiling. ylan mui joins us from washington with more >> we are headed for a budget battle royale. starting tomorrow the treasury secretary expects to use extraordinary measures to pay the nation's bills starting the countdown clock until a default on the nation's debt now, the risk for investors is no one knows what day treasury

is going to run out of cash. the cbo said this week the date is in early fy 2020. that would put it in the middle of two other fiscal fights the deadline to prevent another shutdown and the deadline for avoiding automatic spending cuts that would chop $125 billion out of the federal budget. now, the only way out of this mess is that congress has to act. in a letter to lawmakers, steven mnuchin said honoring the full faith and credit of the united states is a critical commitment and he urged congress to raise the debt limit as of right now, guys, there is no plan just yet for making that happen back over to you >> all right we may come up with one right now. let's bring in our guest we're in a problem solving mode today. congressman patrick mchenry. ranking member on the finance

services committee andrew is here he can represent the other side. let's just -- >> i represent the truth that's what i'm representing >> right democracy dies in the darkness okay he's the truth or "the new york times. >> i feel i can call you joe but i must call him andrew ross sorkin >> just call me andrew >> i love the soft entry here. budget battle royale and then you follow down the line and we have a decision 0.6 months from now. we had the fed chair come in and testify. that wasn't the hearing that got covered. >> we covered that. >> we covered it >> and i appreciate that and that's why i'm here. the big news of the week is we had analyzed growth over last year with all the head winds and all the politics of last year. american growth is happening it's real. even with the head winds internationally. and we're seeing wage growth we're seeing wage growth with blue collar workers and middle

class for the first time in a sustained way since we've had 3% growth which was early 2000s so the economic data is fantastic. the head winds are obviously eu and uk, china. the trade negotiations yes, all those things are head winds. but the fundamentals are fantastic and that sthouhould ry be a big driver of this conversation >> we're at a kind of weird point. and an important point where we're hearing again and i'm not blaming either party because i wonder whether republicans care about deficits either, but the democrats at this point, i'm hearing things like, yeah, it would cost $94 trillion, but it's an investment, not a cost i heard that about, you know, whatever we want to do throw in -- you know, everything's in there. the whole kitchen sink is in some of these proposals. so for republicans, i would think they'd want to focus on

spending and if we did raise taxes, it should go toward deficit reduction. i mean, democrats are running on expanding the entitlement state l however you want to characterize it they're not talking about spending which is why we had such a deficit. they're talking about expanding how much we spend. >> a big driver of our debt and deficit is health care that was the work left from last congress >> they want to go singer payer which would -- >> they want to go the opposite direction which is to double the income to government, double all of taxes in order to create medicare for all and eliminate private sector insurance. >> hold on >> when they're ramping up defense spending, how do republicans ever try to not spend more how do you -- in this environment, how -- >> in the house, we attempted to deal with our spending issues and to deal with the fundamentals of health care. the senate fell flat on their face attempting to do this i'm not proud of it, but there's

a fact i acted and i've acted with fiscal restraint and better health care choices for individuals to be in charge of their health care rather than have the government -- >> and then what we're paying on the $22 trillion, isn't it >> it is not as big as health care >> that's even bigger. >> okay. but can we just have a -- we can all hold hands on this i'm going to absolutely give it to you that we have increased wages, that we have low unemployment, all of those great things but i would also suggest to you that they have come at a cost. and that is called the deficit we will have a big debate about the debt and i appreciate that long-term we do have to deal with these costs in a meaningful way. but at the same time, i think there has to be some semblance of a recognition that the plan put in place that effectively reduced the amount of money that we were taking in as a government has put us in a more

complicated place than before and is not a -- and is not classically, at least, been supported by the republican party. because the republican party has historically pushed for lower debt and deficits. >> that didn't reduce what we were taking away we took in a record -- >> true. but we have both -- >> didn't reduce what we took in >> we have income and outgoes. >> let's talk about income we've got record low unemployment we've got wage growth as a result of tax reform and tax reduction. we just lived through the first year of it with over 3% growth >> you don't think we should be taking in -- at a time of such great economic growth and what you describe as stability, i hope it's stable you don't think we should have been in a better place when it comes to how much revenue we're bringing in? >> what we did with republican tax policy, normalize for the 50-year range. between 17% and 18% of our economy. i think the federal government should live within those

constraints of the federal government taking in less than 20% of our economy in order to make the funding situation work. we still have a massive spending problem. it is a biggest issue on my plate, i think, and a generational and multigenerational issue at this point because of the size of the debt i think debt and deficits have a fundamental challenge in the economic head winds. i still believe in economic reality. >> but most of your peers and especially your peers in the senate and including the president have not wanted to take on the cost issue >> well, the president's not a traditional republican i don't really have to tell you that but the fundamentals of what we do with tax reform just normalized and that's what it is we have 17.1% of the economy came in as a result of our tax policies last year and i think on a going forward basis, we're going to be between 17% and 18%. now we've got to reconcile what we're spending and how we're spending it and prioritize >> even if the total tax take is

big enough, what about the balance? is it fair at the moment or do you see in the next couple years that being a slight increase however it comes about >> in terms of the mix in terms of the mix of how you're collecting that revenue and from whom. >> last week you had a discussion about the state and local tax deduction and complaints among some jurisdictions around the country that they didn't get a fair share out of tax cuts. so there is a class of folks that didn't see a tax reduction. so we made a choice to focus tax relief on the middle class and that's what we've done i think it's successful. i think we'll see the run here is going to be a very successful tax policy >> we're not mad but out of all the people in the whole country, he's got agent fees we can no longer deduct huge agent fees. how much did your taxes go up, sorkin >> putting that aside -- >> he won't write a check. >> one of the things so

fascinating in this country right now is not yus just on the democratic side. to want to tax the wealthy in a meaningful way than before clearly there are plans i would argue are confiscatory if any part of the party thinks they need to -- we talked about closing loopholes. really just as a sensible way -- >> we've closed loopholes. >> oh, no, no, no. not in terms of carrying interest in a meaningful way not in terms of what's going on in the real estate world >> people aren't happy about the carried interest compromise. i think it went too far. >> you think it went too far >> absolutely. >> explain that. >> why are we going to tax the very people that are making money for our pension plans we most desperately need and good returns?

so backing out here, though -- >> hold on hold on. on carried interest, i just want to understand this the way i see carried interest, i see an executive working at a capitalist firm, real estate firm, let's call it all of those. it's unfair to pick just one they are getting paid a salary then they get paid effectively a bonus, okay? there's no -- the risk is in the same risk that a banker who's working on a deal for five years that may collapse or not would get. there's no skin in the game. if they have their own skin in the game, they should get a capital gains streemt treatment. but they don't have skin in the game when it comes to these investments. why do you want to tax them on an -- why do you want to tax them on a capital gains basis? >> why do you want to tax wealth creation that's my fundamental question >> then change the whole scheme. >> i don't want to punish the -- >> i don't want capital gains on my salary then

they're not using it on capital. zblinds. we could have a whole debate about this but we have had long-term structures that the tax man in washington that doesn't like the action, so therefore they want to go take action. it is a wealth creation. >> the company that makes investment, the boss has to pay more tax which is fair. >> by the way, there is no study that would suggest they would change the incentives for the actual people working in these firms. anyway, longer conversation. thrilled to have him >> patrick mchenry, congressman ranking member of -- thank you for being here today >> back in a couple minus.te 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.

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lots of names on the move this morning dom chu joins us now with more good morning, dom. >> good morning and happy friday, joe. we're going to start our look off with shares of l brands. the retailer behind brands like victoria's secret and bath &

body works are subjects of duelling analyst calls this morning. don't think stabilization is likely this year meanwhile, barclays upped it from equal weight citing more positivity of victoria's secret. then you've got airlines on the move delta and american both getting downgraded by deutsche bank to analysts those shares off by about 0.5% now. at least for delta and capri holdings cited an unvaluing of the brands. this is the parent company, andrew, behind michael kors and versace. >> thank you for that. tesla announcing several changes yesterday including a cheaper model 3 and shifting exclusively to online sales. elon musk also said he does not expect the company to turn a

profit in the first quarter. joining us on the phone now to talk about this, senior research analyst at oppenheimer colin rusch. this is going to come at a price and a cost to the company and the shares are moving lower as a result what's your take >> first off, the profit warning they announced yesterday was part of what was moving the stock was, you know, well indicated in the conference call i don't think anybody is going to be confused about the loss that they're going to post in the first quarter. secondly, you know, i think they teased in an announcement and $35,000 car was largely expected and so i think there is a bet of news going on with the stock this morning but certainly i think this is a very big milestone for the industry and for tesla to reach a vehicle that's hitting this price point. part of what's happening here as they close stores is that they're just maturing into what

looks like a -- the rest of the auto supply chain in tells of having more service centers and areas where folks can interact with the car rather than having these stores that really are more of a branding and marketing exercise >> why does everyone say it's a milestone to get the price at this point the price is just an arbitrary change to the tag. surely the milestone is when they actually deliver a certain amount of these and they're profitable at doing that >> so i would disagree that it's arbitrary. getting down to the cost structure for the industry has been, you know, decades in the making and certainly what we've seen the last three to four years is a dramatic decrease in the cost of the botry which is really the largest component of the materials here so to have a vehicle that's simple enough and to have the battery cost that's low enough to be able to be processable at $35,000, they will not be making each car over several quarters at a loss. it's a big milestone for the industry and for this company. >> colin, in terms of the

outlook for the company, we've talked about the big debt payment that's going to come due right about now and it seems like they'll be through that okay but do you have any anxiety at all about this idea of no showrooms? the idea everything is going to be bought online it could be a revolutionary model or it could not work >> we're not super concerned about it so far there's been so much awareness of the company and you've helped in terms of covering the stock so aggressively that folks really are reading a lot about vehicles online we're seeing any number of web platforms where people can buy things online and then go see the cars and the return policy they're talking about in terms of driving the car for a thousand miles and then being able to return it gives consumers comfort they can make a purchase and then not be on the hook for the vehicle if they're not happy with it. >> colin, finally real quick, what would happen if a judge said elon musk has to be called

the creative director of the company? >> you know, i'm not convinced people would be super concerned. he's still going to have a massive amount of influence even if he changed titles in terms of however this organization gets run. and certainly, i think if they brought in someone else to help with operations, provided that person has commensurate experience, i think people would be supportive. as long as he's involved with influence over the organization. i think tesla's fine >> fair enough thanks for jumping on the phone. appreciate it. >> thank you >> so does the service guy come to your house or something how does that work >> no, you would bring it to the service. they may pick it up. >> so there's a service center but not a showroom. >> so it gives the local connection that's the idea at least >> all right see? you know all this stuff. that's why -- >> you're going to get a tesla now because of the air pods. >> oh, because of the air pods they fall out.

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welcome back to "squawk box. yesterday's fourth quarter gdp data coming in better than expected at 2.6% sounds good, right well, not if you're watching the fed and where rates may go steve liesman joining us with the numbers -- >> are you worried about the fed, andrew? >> no. but i think you may be

>> i'm not worried it matters how we get there. and we got there in a pretty good way let me show you what was sort of a surprise here. gdp obviously surprising to the upside but the consumer doing pretty well business investment doing well that would auger if it all works out well for better productivity in the years ahead housing has taken it on the chin probably from higher interest rate increases and other things like that. that was not a good mark there government not really pushing it now let's take a look at the quarter quarterly trajectory of things the estimate for the first quarter are cnbc rapid update forecast no tracking it, no data yet. down to 1. 9 that would be back down to trend. one more way to look at this is the infamous q4 gdp. let's go back to 2015. we did a 2%. we did a 1.9%. we did a 5%. then a 3.1%. that's the expectation of the

fed there. how'd the fed do let's look at how the fed did this year. well, it forecast 2.5% gdp, 0.6% higher unplamt on target. core pce, right on target. i don't see what's happened today affecting the fed traje trajectory at all. it's pretty much stable. 75% saying no change january 2020 >> steve, if you were able to ask the fed what they missed in the growth because we already knew about the tax cuts, for example, by them but what surprise to the upside from what the fed was thinking a year ago >> i guess it would be the tax cuts and the business investment spending they brought it down -- 2.3% would be for 2019. i honestly don't -- we don't get the detail on that forecast. but that's something we might be able to ask them in upcoming interviews. >> let's continue the discussion joining us to discuss whether the fed means you can be buying

stocks again good morning to you both isabella, do you feel all the good news from the fed pivot is priced in already? and that we can't really get much further upside from that? >> yes i would tend to agree with that and possibly when more good news than there really is out there i mean, the market seems to assume now the fed is going to be on pause forever and as far as the eye can see we're not so sure about that as steve pointed out, the u.s. economy is strong. and if the u.s. economy is strong and, you know, inflation is where it is, at some point the fed may need to get back into the saddle and start talking about rate hikes again right now the market isn't pricing that >> cliff, i guess the crucial thing for the equity environment is company earnings. what's your outlook there for the year ahead >> slowing down, yeah. not falling off a cliff. but we had the artificial puff from the tax cuts. we're expecting them to come down to a more normal 5% level

nothing really to look in terms of the equity market but in terms of pricing it in a bond market, it's fully priced right now in terms of the rally we've had come back. >> in terms of where you'd put the assets, rest of the world, though, is that attract ieven if the valuations are the outlook's not so good? >> it depends what part of the rest of the world. to be fair, we still like u.s. equities more than the rest of dm the question is, you know, is it still time to go into emerging markets in particular china and here our answer is yes although perhaps less enthusiastically back in december when pricing was far more attractive. but there's still some room to go there and so our preference right now in terms of equity allocation is between the u.s. and emerging markets. >> i think you may have the best of both worlds when it comes to the fed. i don't mean the best of both worlds on the economy. the economy slows, the fed's out of the game. we're hearing more and more a

federal reserve that's willing to let it ride that's not going to preemptively hike rates anymore to ward off concern about inflation. there's a sense of the linkage between tight unemployment, higher wages, and inflation. it's not severed, but it's broken to a point where they're -- and they're not putting it back together remember they're doing this whole rethink on policy. so i wouldn't -- i think the fed could be back in the game, but i think you'd have to have a really clear inflationary sign that would be like the market would be screaming for a hike before the fed was giving you one. >> cliff, i guess another possible boost to the equity market would be a china trade deal would that change what is relatively caution for you on u.s. equities. >> again, i would argue that a lot of positive news is priced in i don't think we have a lot of margin for error i agree that the fed i think got the message on the market and got the markets back and the one thing that i think is lost on the market around the

fed is it does take 12 months give or take there's a lag between tightenings and when it impacts the economy. we haven't really seen the impact of last year's tightenings fully hitting markets at this point. >> worth pointing out we don't have yet the plan for stopping the balance sheet. we know that's coming. powell confirmed it in his testimony this week. i don't know, isabel maybe you say it's priced in but is there another event to come that is going to be to end the balance sheet this year. >> you're right. i think market is not expecting it it's some time second half of the year when we have a date i think the other thing the market may not be fully pricing in is if you look at linkers, tips you know, it may not be -- it's not clear in the price that market is expecting higher inflation whereas the logical consequence of this new patient fed posture will be you're likely to see it priced into the market >> guys, we'll leave it there.

thank you very much, isabel and cliff. still to come here on "squawk box," mckinsey global managing partner kevin sneader is here. here is what futures are doing at this hour triple digits, 185 points to be ece. s&p up 17. nasdaq up 52 we're back in a couple minutes at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved.

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welcome back to "squawk box. a big interview right now. one of the world's most storied management firms is in the subject of critical media scrutiny coming from "the new york times." mckinsey has faced a slew of negative press in the past year. potentially profiting on the puerto rico debt crisis, taking heat for its work with saudi arabia, at one point the firm was called the new facebook. and it was likely not intended as a compliment. why the sudden scrutiny and what is the company going to do about it joining us right now is mckinsey global managing partner kevin sneader. we're happy to have you here let's go through these headlines, though, and try to understand what's happened because it does feel like there is something rotten going on when you hear about these massive corruption scandals going on in south korea -- i'm sorry. not south korea, south africa.

the situation with saudi where you're identifyingdissidents which were targeted by the government the fine by the justice department over on the bankruptcy front i mean, do you think there's a problem here >> well, here's the thing. i am one of the people at mckinsey who i think has three thinged to do. one is look very hard at what's happening, learn from it, and act. that's what i'm determined to do behind each of those stories, of course there's more to it than meets the eye. i could spend a lot of time explaining to you the whys and how really to think about those headlines. but what's important in all of this and i certainly recognize this as one of the great strengths of our firm in the past was the sense of mystery. i remember one of the first articles that covered us when i joined the firm was the mckinsey mystique i think there was a period of time when mystique was a good thing. it's not a good thing anymore. people don't like secrecy. we have to change with that. i grew up in glasgow i understand why people feel it's time to change and i sense

that our firm senses that too. >> what does that mean for example, you have done business with aug-- >> let's take issue with what you just said. i think one of the things we have done is to make sure that we work on the kind of topics that i think are positive for the world. and even in saudi arabia where clearly there's lots of concern on the part of many political leaders. the whole world is focusing on that not everyone is running from saudi arabia far from it. what we do in saudi arabia, i think we make a positive contribution we have, for example, we're one of the largest employers of professional women in the country. that makes a difference. we've done work in education, economic development, the kind of things that give hope that youth will be employed in that country. and where it gets really tough

in a nasty way >> can't change things if you're not there, sorkin. do you think that "the new york times" has treated you fairly? >> i've thought hard about that question regr regretbly, i think no. that doesn't mean i don't respect and welcome the scrutiny >> you saw jill's book where she said the entire coverage of the -- >> joseph, i don't want to do a referendum on paper. >> doesn't matter whether you want it or not he's here to talk about it. >> the point you can't help make changes on education or women's rights in the workplace in saudi arabia if you're not there doing it does that justify taking fees from an otherwise bad actor in other areas? >> i don't think i look at that in terms of taking fees from a bad actor. the work we do and we think hard about the work we do, needs to be work that makes a positive difference that's what i'm focused on >> but doing business with a murderer is okay by you?

>> it's not. >> when you find out your client is a murderer, you do what >> you walk. >> you walk? >> if your client is a murderer. that's why -- >> all right let's talk about saudi arabia. what happened? >> what we've been doing is talking about the kind of work we take. and the kind of work we take, we put some careful boundaries around it. let's be clear we don't work for the ministry of defense we don't work for the interior ministry the sad thing about all of this and you referenced it in the opening with the identification of dissidents, that isn't what we were doing. we were doing, i think, mistakeningly an attempt to -- >> kim jong-un murdered anyone has putin? has president xi has anyone in iran we did a nuclear deal with iran. >> the question going on in the world right now for business executives across the world about the new boundaries -- >> he's asking a black and white question -- >> that is the question we're all wrestling with

we're wrestling with that. but we're not alone. >> and let's live in the real world, too, and think about what our interests are long-term in the real world versus some type of utopian virtue signaling -- >> but that's a fair point >> grow up >> in which point -- >> okay. then don't deal with xi. >> fine. i'm not saying that. but then the pushback -- >> don't deal with iran. don't have contact with any count country that have connection with murder. they have different laws, different values >> that's a fair point then the pushback shouldn't be to say that we think -- >> who's cut off -- >> -- work with the bad actor? >> has any company lived up to your virtuous -- how you would handle it, andrew? >> let me ask our guest a separate question. a large part of your business, at least the operations of your business has long been about recruiting and hiring young

people from some of the best universities around the world to come work there oftentimes for several years before they go off to business school that is a huge part of the model. and given that millennials frankly actually seem to care about some of these issues in a way you may not. >> yeah. they've taken us down some great paths. the path to hell >> i wonder how this has affected your ability to recruit young people who care about these issues about purpose, care about whether you're working with murderers >> and i care too. let's be crystal clear we recruit about 8,000 people every year and we receive 800,000 applications for those 8,000 jobs so it does matter how they see us of course we want people with strong views how do you operate in this world? i often call recruits and often talk to them when they've got opportunities to go to other places i recently called a young woman who had a resume -- she thought we were the peace corps.

it was pristine in terms of all the causes you could support and the conversation began and said i want to know why i'm going to take your offer it's because you're actually talking about the issues you're debating them you're trying to understand how to navigate them we're not alone in trying to navigate this set of topics. but what she was convinced and i'm convinced is that we're going to do it very thoughtfully and get to a good answer that's why when i think about places in the world where it is difficult to operate, you have a choice of course you can declare everything offsite and offlimits. or you can get in there and think about how do we navigate -- >> let me ask you a navigation question there was a recent store in "the times" about an investment fund mckinsey has you would argue separate from the firm. >> completely separate. >> but by default, by having an investment fund at the same time you consult with so many different businesses, at he least it creates a perception issue that there is a conflict why have that fund

why don't you say to yourself we can use an outside firm like blackrock or some other firm that can manage money on behalf of mckinsey partners >> let me remind you what we had in the first place partners cannot invest in individual stocks. it's there to ensure there's no risk of anyone profiting from the advise we give and that's why the fund was set up way back when now we have to look at perception that's one of the considerations to take as well. >> why do you think going back to the point you said earlier, kevin, that others are having similar battles? the focus is so much on mckinsey at the moment when as we all know a lot of people pulled out of the saudi arabia conference last year but a lot still do bond issuance, still take fees but the focus is on you. do you think there has been a little bit more that you've done that warrants that or you're in the eye of the storm at the moment? >> i think it's a bit of

everything there's a bit of mystique that people want to burst and we made some mistakes. i think we're being less open about who we are, it's thought i wanted to say mckinsey is full of people with humble backgrounds at mckinsey because they want to serve others. if you think about what we do and one of the things i always say to our recruits, if you want to be the star quarterback and be in the sunshine, go to wall street if you want to be the coach who helps other people succeed, who doesn't take the glory, come to us full of people like that >> over the next 12 months, what are the big changes we'll see? i know you're thinking about different things, but in terms of hard and fast things people will point to ands say this firm has changed -- >> they're going to see three things one is see us be quite thoughtful around who we serve and don't serve. some choices there we're working through. soon we'll be in a place where we make choices.

i want us to be engaging with the outside world. frankly, i think that is part of why it's so easy to write about us because we're a sitting target is we don't talk about what we do and we don't ask our clients to talk about what we do yet every day of the week 5,5 urkz,000 go out there and do great work and the third thing, i'd like us to be explicit about the full impact of our work i've been there for 30 years, over that time we've created jobs, brought innovation, made change happen. >> where do you think you went wrong though and the reason is, i think it's hard to not look, though, at the situation and say when you get fined by the justice department for $15 million and you get -- you know, you get called out for lack of disclosure around certain things, that's an issue. especially when the business is -- you're in the judgment business that is the business. >> let me be crystal clear i haven't denied we've made mistakes i don't take issue with the notion we made some mistakes

what i believe is at the heart of that is this notion of being even more thoughtful about who we serve when you're in a firm like ours, our desire to help people is absolutely what motivates it. >> are there certain clients you think you're going to drop >> i think over time we will have to rethink what we do the particular topics we work on and some of the clients we serve. but we serve thousands of clients. can i just make one obvious point? a lot of what's been written is actually about work that was done literally decades ago decades ago. and in that context, if you think about the sheer number of clients we serve, i think perspective is important and context matters too. that doesn't mean i don't take the mistakes we made seriously doesn't mean we're not listening and learning we are i'm determined to act and make the most of this the one thing i can tell you, we've been around since 1926 we created a profession that didn't exist. >> if we have a majority of millennials that think socialism is the right way to govern, do i

need to consider how they feel on every decision i make i've seen mckinsey stories from "the new york times" actually disparaging you because you're trying to help companies maximize profits and that would be -- that would make sense if i take the millennial view of forms of government and where suddenly i believe that socialism -- just because they feel that way, andrew, i don't feel the need to take their feelings into account if it's something i believe strongly in in terms of capitalism so i'm not going to sit here and walk on egg -- okay -- >> hire thousands of young people every year, you have to take their views into account to some degree. >> i also hope you would be fair that media at large would be more fair in covering a lot of things rather than being written by people who believe in socialism. >> look. >> that's a tough one, i know, for you. >> no, no. >> just one thought on that. i grew up in glasgow it's actually a socialist town in many, many ways one of the first memories i have

of mckinsey because i want to make sure we understand of who we are is some work we did which is about to help my city that was on its knees shipbuilding had closed, coal mines had gone and the work we did was how do we regenerate the inner city it was a genuine effort to coalesce a view as to how to regenerate a city. that regenerated my city it changed the destiny of a whole lot of people. we do good work. that's lost in this conversation i am very able to look millennials in the eye you talk about as to why our recruiting so going fine, thank you, and say to them we make a huge difference one client at a time. we need to get it right, stop the mistakes, of course. but it's stuff to do that completely but we will try and at the same time show people that business is an important contributor to society

>> what are the biggest changes you have planned to make >> we've made a number of changes. one of the things if you take that issue clients at their most desperate hour wanted help from people like us. and we did it with lots of advice that said if you disclose this way, it's appropriate and it's okay. we stuck to that advice. if it's now the case that no longer holds true, of course we change and we respond. that's what we're going to do. so we are not going to fly in the face of advice as to what we need to do we will comply but let me be clear. we didn't go in naively. we're determined to be on the right side of these issues >> you spent three hours of this world on amazon friday and had to walk the walk on one day on what a lot of your high minded ideals actually lead to. and then you immediately have regressed to -- >> i'm not regressing. i think there are fair questions that should be asked >> i'm fine with a lot of what you said >> and i think he thinks that --

i would ask you, were those fair questions? >> these are the questions my people are asking. so my people as in mckinsey employees. so of course >> kevin sneader, global managing partner of mckinsey come on back i appreciate it. thank you. >> i have even greater respect of becky quick still to come this morning, we are watching shares of -- well, you're a millennial from europe anyway, shares of tesla this morning after the company announced they will not make a profit this year and introduced a cheaper model 3 we'll be right back.

♪ th♪ let me be by myselfat i lovein the evenin' breeze, ♪ ♪ listen to the murmur of the tall concrete, ♪ ♪ send me off forever, but i ask you please ♪ ♪ don't fence me in.

♪ don't fence me in. tesla's drive to go mainstream slashes prices on the model 3 but musk says first quarter profit will be a no show a second chance for amazon business and government leaders make a pitch to woo the company back to new york even as opposition mounts for the proposed virginia headquarters and "game of thrones" at hbo. richard pepler is out. but will the next leader keep competition at bay 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" here on cnbc i'm joe kernen along with andrew ross sorkin and the last time wilfred frost will be sitting in becky -- by choice >> this is stating the obvious, i guess, but it's the first time i've sat in with both of you at once usually i'm in with one of you wow. >> it's easier for you though. >> do you know what would be a unbelievable show would be joe and andrew during the breaks >> primetime oh, during the breaks. >> it would be pay per view. >> but the premium would be -- >> in this country now there's a

continuum of ideology and political thought. and there's a way way out here where andrew is and there's a place in the middle where i try to be. treasury yields at this hour about -- there's the dow up 180. s&p's going to be back i think above 2,800 which not a lot of people -- i think. i haven't looked at it this morning. but a lot of people didn't think we were going to get back there any time soon. that'll put us above 2,800 that's 2.73% that was a big move because we were at 2.67% layesterday. tesla making an effort to get its model 3 into the hands of more customers. >> we'll talk about the model 3 in just a little bit one of the reasons the shares of tesla moved lower after hours after they made this announcement is also because yesterday afternoon tesla announced it will not -- it's

not planning to be profitable in the first quarter. elon musk announcing during a conference call with reporters, he did say that the company expects to turn a slight profit in the second quarter. that conference call was to talk about the new price and the new model 3 that the company says it plans to deliver over the next two to four weeks depending if you order one. the range is being brought down from 260 miles down to 220 and the price will be starting at 35,000 that's the base price. here's a key important point $2500 deposit. why does that matter remember this is a company that is facing tighter liquidity. and that is expected in the eyes of some analysts to bring in some cash. is it going to make a huge difference over the next couple of months? maybe not. but every little bit helps when you have a company that right now as it continues to ramp up deliveries of model 3s, it needs

as much liquidity as possible. last year the company sold just over 145,000 model 3s. i asked him yesterday, at $35,000, how many do you think you're going to be delivering this year? he thinks, look. we can deliver a half million annually not just this year but annually. that's based on his gut feeling. he didn't say how many reservations, how many hand raisers are out there looking to buy a model 3 right now. remember, this is the deadline -- today is the deadline for the company to make $920 million on a convertible note we have not seen a filing with the s.e.c. or any indication for tesla that it has made that payment yet. the liquidity at the end of last year, $3.7 billion so they've got the money but we're in that tight period here at least for the first two quarters where liquidity is going to be in focus

>> all right, phil stick around for more on tesla's announcement and the broader car industry we're joined by bob lutz former gm vice chairman and a cnbc contributor today let's promise to say what you really mean. and don't sugar coat it about tesla. i'm kidding. because in the past, you're pretty outspoken with all you're seeing, $35,000, i don't know about production bottle necks or what we might foresee, where do you think tesla is at this point in time they've made some great strides in the past that maybe you didn't really think were going to be possible >> i think they're facing a great deal of difficulty because it's obvious they had to cost reduce in order to have some sort of margin on it at $35,000 a piece. and at $35,000, i doubt that there is much in the way of

profitability in there and if your costs are almost as high as your revenue, then it doesn't really add to cash availability so i think it's extremely -- it's an extremely difficult situation and if they do need liquidity through a capital raise, elon musk's ongoing problems with the s.e.c. isn't going to help. if he's formally under investigation, they could very easily make an investment to raise capital. i don't think the prospects of the company are that great and by the way, i doubt that 500,000 of anything could be sold globally or nationally. it's just -- for a sedan these days, it's an almost impossible figure so i could take that one with a grain of salt.

>> in college debate you could be given either side i think i could do that with tesla. people that are bullish on it, they point to things the way this gentleman is changing the whole way we think about cars. and think about how we make cars and everything and sell cars. and it's pretty incredible then i think about where you might be in terms of, you know, the legacy auto makers that should be -- have lots of cash and lots of expertise. why can't -- there's no moat around tesla at this point >> all of this says tesla is reinventing the car. i challenge that it's an automobile it's an automobile that happens to be fueled with batteries rather than gasoline everybody's doing that now so there's nothing unique. manufacturing operations, they have 9,000 people at the

freemont plant producing the worst ratio in history and as for the so-called distribution model, musk just announced that they're back tracking on that i always said it was ridiculous to own your own dealerships. you own the real estate, you own the people, you own the new car inventory, you own the used car inventory. massi ivive misallocation of coy capital. now they're getting out of that. they're going to close stores. they're going to try to do all the sales online i don't see how that's going to work who's going to take the trade in who's going to take the used car? who's going to provide service with no stores there i mean, franchise dealers have been the -- nothing works with those retailers. >> i want to ask -- maybe we're not ready for it yet but this

could revolutionize the way all cars and vehicles get sold there's now services at a company called honky and drop car. people show up at your home, you test drive it. they bring another car that is the future of how this will operate >> i think ride sharing, cars on demand, all those things are possible but if we think of the traditional model which is still the preponderant one first they research it online. when they've made their selection, they go to a dealer and they have to negotiate the value of the trade in that they've got. the dealer takes the trade in, delivers the new car, continues to perform service and then remarkets the used car.

who's going to make sure it's checked and meets requirements the idea you can treat sales of automobiles liked ordering cosmetic items online is just not going to work. >> it's amazing. to get a tesla bull on -- i guess it's like everything nowadays in the country. every debate we talk about people really believe one side or the other as fervently as -- >> no. >> we're done, thank you i appreciate it. but you know what i mean, phil you hear both sides? >> what's that >> i said i know what you mean i just want to say, i'm glad that bob came on and sugar coated his views we love when bob does that >> i asked him not to do that this time. just give us the straight scoop this time. bob lutz, thank you. appreciate it. phil, thanks a lot more to come on "squawk box. and more trouble or not for

amazon's hq2 project the tech giant already pulled the plug on the new york headquarters now there's activists trying to scuttle a second base of operations in virginia details on that straight ahead plus an attempt to bring them back to new york also be joined by new york deputy mayor alicia glen to talk about what went wrong in theig b apple. stay tuned you're watching "squawk box" on cnbc sfx: [phone ringing] you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here not you. right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by using machine learning and analytics to automate claims, cognizant is helping insurance companies advance

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welcome back to "squawk box. futures pointing higher to a decent open. up almost 200 points 180 points on the dow. 70 on the st&p we're essentially flat but of course gained nicely for the month of february. up 3.5% for the s&p 500. joseph >> thanks, andrew. ebay announced the strategic review of portfolio of assets with elliot management -- two of them actually. and starboard, it would result in a spinoff division like stubhub and ebay >> there's stubhub

although ebay said they have added two new directors to the board. amazon's hq2 project may not be the sure fire job creator that's what some people are saying and the ambitious plans are hitting more bumps today beyond the public breakup with new york scott cohn is in silicon valley. he's got the latest on this developing story >> reporter: new york has not given up on amazon as you're going to talk about in a moment. but for now the company seems to be going ahead with its plan "b" as it were for hq2 that involves facilities like this this is one of amazon's main research and development facilities out here in silicon valley remember the plan was that after new york, they would take those jobs and spread sthem around even that is not a sure thing. amazon confirming to cnbc that

it is now shelving plans to occupy some 700,000 square feet of office space it had already leased at a tower under construction near its downtown seattle headquarters a spokesperson telling cnbc amazon is always evaluating its space requirements and intends to sublease that on current plans. the company still has more than 9,000 open positions in seattle. but that was the case before hq2. and then there is this arlington, virginia, yesterday protesters crashing an event with local business leaders and amazon's head of economic development. we want a public hearing today pay to play is not okay. that's what they're chanting the leader of one group not involved in that protest but protesting in crystal city they said they are emboldened by new york >> david hit goliath and goliath ran out of new york. and so down here, we might be

david or a lot of little davids. we think we've got a chance. >> reporter: that group is pushing for more affordable housing. amazon is not saying whether it's changed its community engagement practices in the way wake of new york or whether it's scaling back plans all together. >> scott, thank you for that and new york governor andrew cuomo has spoken with amazon officials including jeff bezos but hasn't heard anything yet to indicate they might be changing their decision to abandon that headquarters offering to guide amazon through the government red tape. and today's paper, we have it right here, featured an ad that's an open letter calling for amazon to reconsider pulling out. it is signed by dozens of government labor and business leaders including the ceos of morgan stanley, mastercard, and union leaders as well.

our next guest oversaw the deal to bring amazon to new york city alicia glen is here. whose last day as deputy mayor is today she can speak even more openly than ever before so just help us understand this. let's stasrt here. do you think there's a meaningful chance to bring amazon back to long island city? >> i think the situation a fluid. i think the bottom line is the fundamental reasons amazon wanted to be here remains the same it's a spectacular opportunity to build a world class headquarters on a fantastic neighborhood and basically the reason why they wanted to be here was for the diversity of talent and other business opportunities. nothing has changed with regard to that. right? the fundamentals remain the same. >> just bring us behind the scenes to the extent you can are there real talks, meaningful talks taking place >> i think everything that's been reported in the paper is true i believe the governor's had conversations. we are not at the table

renegotiating the transaction. the same commitments that we made to the people and to the company remain we're going to invest in infrastructure we're going to invest in workforce training and that is still the basics >> when they decided not to come, everything was the same too. but there were all those other things that, in fact, the pushback that also still are the same they're not welcome. there's a lot of people that -- i mean, for -- after trying so hard to bring them in and have so much pushback from certain sectors. >> in fairness as you know, the vast majority were in favor of the deal and that hasn't changed either >> let me tell you about one constituent who did change his mind that is your boss up until tomorrow which is to say that the mayor was a huge proponent of bringing amazon here. >> correct >> i thought that he did this in good faith >> and he did. >> it was a shock i think to many people in the business community both in new york and around the country to see the

mayor go from a proponent of this transaction and a fan of amazon's, if you will, to say hey amazon don't let the door hit you on the way out. >> i think that's a mischaracterization of the petition the mayor has always been in favor of bringingamazon here because of the basic fact that we need to grow the economy. what really matters here is that the same deal remains on the table. what we really need to be thinking about is whether or not amazon decides to come back or doesn't. it's a referendum on doing business in new york city. while all this has been going on, large companies like google and spotify and salesforce and other big innovation technology companies have been doubling down on new york city. that's what we need to focus on. >> tell me why i would ever want to negotiate with this mayor ever again if the mayor said to me and i'm running a big company, i will help you and i watched this situation play out and this sort of complete -- it felt like -- 180

to even a progressive stand where he seemed to almost take a political view -- >> i disagree with that. it's not been a 180. the mayor has continued to say that we would like amazon to come here under the original terms of engagement. which is making investments in the community, hiring new yorkers, and providing great tech jobs. but you're overstating what this alleged 180 is our position has remained the same and will continue to remain the same if the company decides to come back and take another look what we should be doing is thinking about how we are trying to grow our companies. maybe if we didn't have all men with this, we would have better results. i would like to see a generation of companies that are started and grown by women then we'd be having a different conversation in five years, quite frankly. >> so the decision might have been different if there was a leader of amazon who is a female >> i think if there were more women running large companies,

there would be a different way in which people engage with communities. a different way in which people started to threaten to leave, et cetera. >> sounds kind of sexist >> i don't think it's sex igs at all. >> i feel bad about being a man. >> oh, i'm sorry i don't think that's true. >> i'm not a man i'm a boy. >> the way in which companies engage with communities -- >> men might be able to do that, too, right >> some. but there's so many fortune 500 companies in new york city and only one is run by a woman >> given that different cities and states are able to make oneoff promises with a tax cut and tax break, should that be changed? in doing that, you would only ever make that promise to the biggest company. the one that would bring the most jobs. and one of the criticisms is why does amazon get that in the first place? >> but that is where the mischaracterization and misinformation about the basic deal continues to be in the ether. the incentives that amazon were

given were being given to them as of right any other company. whether it was a five-person company or a 50,000-person company. would have gotten the same benefits from the city of new york that is complete misinformation and that continues to be one of the challenges about how we talk about this deal. whether or not cities and states -- that was from the state. that is a separate decision made by the state >> let's accept that was a true incentive for amazon >> correct but with respect to new york city's policy, any company that chose to locate in long island city would be able to avail themselves to those incentives is that a topic of discussion? i think it is. and those will change and evolve >> we need to thank you, alicia glen and also thank you for your great service to the city of new york and come on back >> thanks have for much. >> you are an enigma wrapped in a riddle you're a sociopath it doesn't matter which size >> those are fighting words. >> you can argue and now you're

back with me i don't -- it's so bizarre how you do this. and you're capitalist again. coming up, big changes at hbo. influential executive richard plepler says he's resigning from the cable powerhouse as new owner at&t looks to make its mark we'll talk about who could take charge at hbo and whether it can keep minting emmys without the longtime power player. stay tuned you're watching "squawk box" on cnbc to full-blown production. ♪ ♪ let's go from being on-call... ♪ ♪ to being on-line. american express can help move your business forward with loans, vendor payments and buying power. chat with one of our 4000 specialists and let's make it happen. the powerful backing of american express. don't do business without it.

coming up, a lot more on "squawk box. the morning's breaking economic numbers coming up in just a couple of minutes. personal income and spending just minutes away. you don't want to miss the mb and the analysis. "squawk" returns in a moment [knocking] ♪ ♪ memories.

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personal income and spending the futures have been solid all morning long up triple digits on the dow. 164. s&p up almost 16 points and the nasdaq indicated up 46 january and february, strongest opening two months since 1987. rick santelli standing by in chicago. how about these numbers? >> yes, let's see. income, a miss down 0.1%. spending down 0.5% these aren't good numbers. on the income side, we're following a 1% on the spending side, we're following an upwardly revised 0.6% so we gained a couple of tenths there. it really wasn't worth the deflator about as expecting you could argue a tenth cooler than we were looking at our last look yeah, these aren't good numbers.

but again, december had a bit of a funk to it as we see what i can tell you is the high yield close of the year is right arou around 2.78% listen, i'm on old bond guy. that has been steepen about a week it's hovering just under 40 base points we've always looked at this on the trading floor. gives you a glimpse on tread trend. higher rates, higher stocks. any questions? andrew, back to you. >> okay, rick. thank you for that steve liesman is now back on set and joins us now with more reaction >> we have a big problem here. for the first time in my career, americans are not spending all of what they have and then some. these numbers make no sense to me i got income up 1% wage and salaries up 0.5%.

okay i've got consumption down 0.5% people on set can do the math. i don't know when this was last highest. i got the savings rate up to 7.6% i believe it's been a very long time since the seven handle has been on the savings rate i don't believe these numbers. it's just not the way consumers -- they got more money in their pockets, they spend it. unless they're deathly afraid of some apocalypse happening tomorrow wages still good up 03. did rick tell us the inflation numbers in here? the other thing you want to know these numbers were also in the gdp. together with the consumption numbers in the gdp report. they seem to be at strong.

i'm going to look up when that was the record >> john, given this extra insight, what was your take or is your take on the q4 gdp >> the take is that it was strong we should stop focusing on the numbers and look at the year over year gains. gdp growth of last year was the strongest since 2005 so the economy has been steadily picking up and that's with these bad spending numbers i don't think anybody really believes that online sales fell in december. so the fourth quarter was probably stronger. so we have an economy that through last year picked up momentum can we grow sustainably at 3% plus i'm not sure but there is to me here clear

evidence that not only the actual g.o.a.rowth rate of the economy has picked up in the wake of tax cuts 2017. >> so we buy u.s. economic link stocks >> we do i like cyclicals quite a bit earnings growth were better and yet the best performing sectors were utilities a lot of that happened in the fourth quarter i'm very much of the view like john that first of all, i know for a fact that fiscal stimulus will be greater this year than last year. in my opinion, that's a false narrative. i also think that the market has not largely factored in the supply side potential of the tax cuts to the extent to which trade reseeds as an issue, business confidence could pick up and you could have the capital spending boom that was really provided for really created incentives in

the tax cut that was passed at the end of 2015. >> i want to get to the bottom of the consumer numbers with john over here the consumption number was strong december retail sales were lousy. what happened? >> we don't know what happened we don't actually know not why it happened. we still don't know what happened remember these data were collected, the government was under partial shutdown we don't know if that has messed up numbers we're either going to see those numbers revised and an even stronger fourth quarter. or they're going to get measured in january you don't believe consumers saved 7.6% so they didn't >> the highest is 2016 >> they don't measure savings as a number they measure as a gap between spending so the problem is we don't know what happened because spending was probably stronger. >> so john, could the fed tighten again at some point this year earlier than people expect

after the pivot? >> the next move from the fed might be a cut which makes little sense i think the fed will raise rates twice this year. because we're still set up the fed's garden against all these downside risks the cross currents they talked about with the government shutdown which is over, right? the cross currents were trade problems which may be close to a resolution we heard some optimistic take on that from our former friend at cnbc, larry kudlow who's now in washington you know, other cross current was brexit brexit maybe kicked into 2019. so they're all disappearing. i think the fed will have to adjust rates higher. >> to the trade point, do you think that helps china as well as and the global growth can surprise to the upside this year >> i do.

and that's mainly -- it's not because of trade but i think china is throwing everything but the kitchen sink at growth there. every two years, it looks like china is going to go through a hard landing then they dust off the playbook and do the same thing. which is essentially spend money they don't have. or they spend our money and they create another philadelphia that no one lives in or they do dopey things with it but the bottom line is i wouldn't fade chinese economic growth this year stronger chinese economic growth will help europe i do think i would say with john, i would respectfully debate i think it's going to be hard for the fed to tighten meaningfully this year we have maybe one. but the hard part is if the rest of the world central banks are mired close to zero, it gets tough for the fed to get too far out ahead without creating other problems >> it's important to sort of think what is underlying john's argument which is the same thing underlying yours which is growth is and will be

stronger this year john, you think the market essentially has this wrong this slowdown. >> i don't see the slowdown. i do expect the economy to slow a bit in 2020. but potential growth, right? the rate at which the economy can grow, maybe that's crept up to 2.5%. but we're growing more than a half point faster than that. that's going to keep pushing that down. china' throwing everything including the kitchen sink in there. we have the fed which in december was still comfortable with two rate hikes this year going to no rate hikes, i'm going to start winding down the balance sheet soon there is plenty of stimulus. and what will it force the fed to do? eventually it's going to be higher inflation numbers we can let it run higher >> and underpinning this argument, guys, we have a participation rate in the back we made for john here. is that prime aged people are coming into the workforce. and your point would be when

that runs out, that's when you get to the old inflation rate. >> that's relatively new though. there may be a little more slack in the labor market than people had sought i would argue as my opinion, there's no risk in waiting inflationary expectations for the moment are well anchored i just don't want to repeat what we did in december i'd rather stay away from that and let it play out a little bit more >> quickly on a different topic, i want to touch on his do you think we see a big rush of those ipos that have been on hold and would you buy those? or do you think they're going to be -- >> this is a great question. the answer is you will see a rush of ipos the difference is that amazon went public at a $400 million valuation. uber is going to go public around $80 billion if not more so the answer is you're going to see the rush of ipos i would be careful as an individual investor.

because companies are way -- you're not getting the bargains you were in the past >> thank you very much jason and john coming up, hbo and the battle for premium content supremacy from netflix and amazon has never been stronger now hbo's longtime chief executive is leaving we'll talk about what richard plepler's departure means when "squawk x"om rhtac alpha seems more elusive today. is it because so many go after it the same way, chasing after short-term returns? instead if getting caught up with the crowd, the investment managers at pgim take a long term view. uncovering opportunities for alpha across public and private markets, while anticipating unforeseen risk, has powered our rise to a top ten global asset manager. partner with pgim. the global investment management businesses of

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welcome back 20 "squawk box. want to take a check on the gap. shares are surging in the premarket. stock's up 20% gap's old navy division, this is what's going to happen here, is going to become a stand alone publicly traded company. it's separating itself from the gap. and banana republic clothing brands old navy has out performed the other two brands for years we'll see whether this will create some focus on the gap and banana republic brands to allow them to flourish we should also say athletica is the -- is it -- i think i bungled. nonetheless, earnings also out from athletic footwear retailer

foot locker. earned $1.56 a share 16 cents above estimates revenue also beating comparable store sales up more than double the estimate that stock up 13%. boy, are people maybe buying all the retro air jordans last quarter. i don't know what happened let's get a check in on other movers with dom chu. >> we're going to start off with shares of capri holdings the company formerly known as michael kors it also owned brands like versace and jimmy choo it's unchanged right now adding to their picks list saying the market is undervaluing its portfolio of brands saying shares can get up to 89 bucks. so we're also going to go with shars of hertz also higher by around 2% on a little over 2,000 shares of premarket volume analysts at barclays are

upgradiupgrad ing from a prior underweight a ls up 18 bucks from 14 citing better trends in used car prices and rental car rates and then shares of l brands are higher by around just call it 1.5% or so the retailer behind victoria's secret and bath & body works is getting upgraded to overweight by barclays but downgraded by bernstein on conflicting views on victoria's secret back over to you guys. all right. let's get to a story getting a lot of attention this morning. a long-time hbo executive richard plepler is leaving the network after 27 years comes as at&t is restructuring its media assets following the time warner deal and following the victory with the justice department this weekend. plepler said in his words, hard to think about leaving the company i love and the people i

love in it it's the right time for me to do so joining us now is the reporting who first broke the story. want to get a look at joe. we've grown old together >> yes very old. >> no. you were with "the wall street journal. used to come on "squawk box" all the time when you were based here then you left for greener pastur pastures i read at "the l.a. times. now you're back. >> and came back to the journal. little early for me out here, but glad to be back. >> yeah. so i think i -- i rarely believe when someone says it was my decision but things are changing so much with the job i think plepler decided they won't have the freedom the used to have. that probably is what happened, right? >> i think it is it's one of these things if someone points a gun at me and i give them all my money, well i

gave it to them. they didn't take it from me. richard plepler made clear to john stanke his new boss he didn't think he would be there for the long haul. many people thought of this. that the major executives there, plepler might be the first to leave. as you mentioned, the level of autonomy he'd been accustomed to the island that hbo was allowed to exist on in time warner and that stuff just wasn't going to be the case anymore with a new own per. >> looks a lot like people i know from nbc. looks like it may end up there kevin raleigh was here and greenblatt looks like -- what do you know do you know for sure that that's going to happen? they're in final -- the final stretch of putting that together or what? >> they're in the final stretch.

they're in talks but anything can happen, of course but going back to your point, there are a lot of e nbc universal executives at a t at&t if bob goes there. maybe brian roberts should lock up steve burke just to be safe i think greenblatt, if he does come, obviously he does bring a vast resume of programming experience you know, he ran showtime for a lot of years he he's been a producer. that doesn't mean there's a lot of concern at hbo about what's going to happen. that place does not take to change well. i want to say the same about turner i don't want to forget about david leavy who's been there for longer than richard was at hbo >> joe, it's great to see you. let me ask you know, given richard

plepler's departure, there are so many people who have been loyal to him and even beyond him the culture of hbo as you know so well is -- i don't want to say it's an insular culture, but there is a real culture there. i wonder if you think everybody is going to ultimately stick around >> well, i think insular might be a good word for it, actually. it is a very insular culture they've been allowed to exist that way under previous regimes. and i think there will be -- look just like any other place, you get new bosses you start to pull out your resume and dust it off just in case you need it and i think with richard leaving, that, you know, some of the other folks are going to be doing that i know that hbo programming executives were working the phone all day yesterday with agents and producers reassuring them, hey, don't worry i'm not going anywhere but we're really just at day one of at&t warner media now i know the deal closed last year, but all these things are really going to start happening

now that all the legal hurdles are over of course those legal challenges sort of had at&t working with one hand tied behind its back. >> joe, does this now mean hbo is going to be pushed mass market to massively increase the size of its content library? >> well, that's one of the concerns it is interesting, both richard plepler and john stienke were on the same page about investing more in programming for hbo. there is one thing i think it is safe to say plepler wasn't thrilled with under the previous management, hbo was relied on very heavily to boost time warner's bottom line and he felt there wasn't enough investment in the content there so agreement that they needed more money for programming, but having said that, i do think there is a concern, if you look at what richard plepler said to us in an interview and other people, you would say, you know, more is not better, only better is better. he wanted more programming, but he doesn't want -- he didn't want it to be sort of like netflix, which does a lot of great programming, but there is also a lot of i might call it

filler programming i'm sure the producers would disagree, but i think hbo with its marketing machine and everything else likes to take certain shots and not throw a ton of stuff at the wall and see what sticks. >> do you think plepler will be replaced or will casey bloise, the one green lighting so much of the program, stay in place? what happens >> i don't think richard or david levy will be replaced. if they cut a deal with bob greenblatt or some other executive to come in, that person would sort of serve as a chief content officer, kind of the same way david nevins now has that job at cbs. but, you know, the casey question is a good one for now, my understanding is casey is staying put i don't think -- if i'm at&t right now, i'm trying to reassure casey bloise, kevin riley, other key executives at

those companies, hey, guys, stick with us, believe in what we're doing here, this is about ultimately running a better ship. >> do we know whether casey, for example, shares the same view of building out the hbo franchise in a more -- if you believe -- if the view is that it is going to be more middle market, did he share that view? >> i can't speak for casey i know i'm sure he would love to have more programming and more of an arsenal to make it to the question of what kind of programming, that's hard to say. i know hbo and this is sort of hbo's own spin too, they like to portray themselves as an art museum and they're curators but they always made plenty of populous type shows as well and comedies and movies. and maybe they, one could argue maybe they should do more of that not everything needs to be considered for emmys and peabodies versus just good funny

shows that get viewers in. so we may see a slight change in the programming strategy but, again, we'll just all have to keep our eyes open and see what happens >> thanks, joe good to see you again. hope to see you again soon a lot of -- if you hear something, let us know before you actually, i guess you to print it like -- >> i got to tell my bosses first, but then give me a call. >> i know. >> good to see you, joe. thank you for waking up early for us. >> in the meantime, down to new york stock exchange right now, jim cramer joins us now, lots to talk about, curious where you land on the gap and what that means, that stock popping. i don't know if it is a financial engineering situation or you change the company and i'm also curious where you land on tesla this morning. >> look, i think that actually it is not just financial engineering because the two split. you get old navy, bad last quarter, 3% comp for 2018. and then what you get with this

newco is the possibility of closing all the bad stores and renaming it, don't think it will be gap that's one of the reasons they're calling it newco right now. you close the bad stores, if you emphasize athletia, you come up with a fast grower it feels like it is more than just financial engineering meanwhile, tech shows you, we don't want -- we want growth and by the way, mickey drexler, that stock went from 50 cents to 51 during his period so we want growth and they're going to be able to give us growth with this engineering, so to speak and then we got real growth last night from incredible number of companies that worked out a great quarter vm, great quarter, only one weak was nutanix, so overall a great night. >> and what do you say to elon musk this friday morning >> musk, well, i like morgan stanley note which says there is

more bearish than bullish, but i want one of the $30,000 cars >> you want one? >> i thought you just got a lamborghini, jim. >> i test drove a lamborghini. that's really my wife wants a lamborghini. those are $400,000, will we'll have to do a ride share. >> wait a minute what is your excuse for not satisfying her dreams? >> no, it's not -- did i say we weren't going to buy >> but, jim -- >> the suv i think i can get for 150. right down the road in paramus if you want to go with me. >> i'll come test drive. >> andrew you got a growing family why not get the lamborghini suv? what's your reluctance >> he's got an suv coming out,

jim. >> point a to point b, you know. >> you really need that. you need that more than ever they made five cars the day i was there. five five lamborghinis. that was considered a good day. >> i have children does it have three rows? >> no. >> doesn't even have three seats. >> only has one row. one row? it is your toy car, andrew come on! you need a toy car for weekends up at the -- in connecticut in your weekend house. >> i'm still working on the weekend house. >> he doesn't have one >> wilfred frost wants an aston martin. >> it won't be like the -- >> uber and lyft >> jim cramer, see you in a couple of minutes. you do not want to miss this interview. former new jersey governor chris christie is going to be on monday, he's going to join us for a full hour here on the set starting at 7:00 a.m. eastern time he's got a lot to say about

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final check on the markets, the futures are indicated up 160

points this morning, premarket the nasdaq solid up 46 just heard some of the companies that jim was talking about, and then the s&p, if it were to open right there, i think we would be back above 2800. and 273 on the ten-year. thank you, will. we'll see which andrew shows up next week. join us. "squawk on the street" is coming up next. ♪ good morning and welcome to "squawk on the street. i'm david faber along with jim cramer we are live from the new york stock exchange carl is on assignment this morning. let's give you a look at futures as we get ready to wrap up the week of trading. we are set up for a higher open on all the major averages. and now to our road map, it starts with, well, it is march