good morning welcome on "squawk box" here on cnbc where are esh we are live from the u.s. market site in times square i'm becky quick. let's take a look at the u.s. equity futures you'll see right now that there are some red arrows. dow futures indicated down by about 24 points. s&p futures down by about three points, and then the nasdaq is hovering right around the flat line right now this all comes after declines yesterday. you saw the dow and the s&p 500, they've now been down for five of the last six sessions the nasdaq has been down for three of the last four days, and then check out the dow transports down yesterday once again. they've been down for eight sessions in a row. losing streak that's actually seeing the dow transports back in correction territory and it's the longest losing streak we've seen since 2011. it's a little bit of an anomaly

here >> to some degree, yeah. i mean, it's the airlines largely right now, and some of the more kind of aggressive cyclical groups, they kind of shot off the lows, and they have rolled over, right the russell 2,000 has been under performing i think it's a little bit part of that right now. people talk about jet fuel price. a little bit of a squeeze for airlines rails being strong within that i think a lot of folks are trying to minimize the economic message of it. >> i think it's one of those things you put on the dashboard, and you pay attention to it. by the way, fedex and ups have been really weak for quite a long time, and they are very heavy weights in there that's because loofr the business -- all the stuff direct to consumer is much more expensive than taking things like they did before >> the tell on the markets in terms of transport theory, i would say maybe it's big tech

that's more worth watching in terms of where the markets go at this point it's more of the fang trade and the semis, btechnology stocks. >> let's take a look at what happened overnight in asia you're going to see that if you are looking at the nikkei it was down by .6%. stocks were higher in china. shanghai composite up by 1.5%, and the hang seng up by a quarter percent. if you look at what's happening in some of the early trading in europe this morning, at this point a little bit of a mixed picture. the cac is off by about .2%. so is the dax. ftse is flat, and then stocks in italy and spain are a little bit higher finally, if you check out the treasury market, you are going to see that the ten-year at this point is yielding 2.715% >> let's get to our breaking news this morning. after more than three months behind bars, former nissan chairman carlos ghosn is out of jail he was released from a japanese prison overnight after posting bail this was the scene take a look. outside the japanese jail where he was being held since november he was wearing a workman's uniform, face mask, blue cap,

glasses. walked out of the detention center and into a waiting car. the auto exec put up nearly $9 million in bail for his release. it's one of the biggest amounts of bail ever in japanese history. he must remain in japan, surrender his passport, and agree to extensive surveillance. he has even installed cameras at the entrances and exits of his residence. carlos ghosn was arrested back in november for allegedly underreporting his compensation. ghosn calls those charges meritless. we will, of course, continue to follow the latest developments on this story, bring you more as we get it. you know, the success rate of the japanese criminal justice system is 99.9%. >> that's because people actually confess to these things you almost don't go -- you rarely go to trial in a lot of these situations >> it's staggering >> so is the bar for an indictment that high is that what we assume that an indictment is tantamount to a conviction they don't bring the charges until they have the goods.

>> this is it, yeah. joining us right now to talk a little bit more about that is matoko ridge the tokyo bureau chief for the "new york times. help us understand this a little bit. with a high conviction rate like this, with such a rarity that someone actually gets out on bail, what does all of this mean >> well, it is unusual that it got out on bail before trial especially as he didn't confess, as you rightly point out in japan. prosecutors work their hardest to get confessions, and part of the reason why they detained suspects for so long is basically in the hopes of breaking them down so that they will make a confession and in this case carlos ghosn did not do that. he is protesting his innocence, and so it's very rare. usually the rate of someone getting out on bail having not confessed is about one in 13 he is kind of a rare case. analysts are sort of saying in tokyo that part of the reason may well have been in the 108 days that he spent behind bars in tokyo, japan came under quite a considerable international scrutiny for its criminal

justice system he was questioned by interrogators without being allowed to have his lawyer present. he was kept in detention not allowed to see his family until he was indicted. he has been indicted on two separate cases i think it may well have been the international pressure that led to his release >> i'm sorry to put you on the spot like this i'm not sure if you know this, but we've talked about that high conviction rate of 99.9% how high is the conviction rate once you actually go to trial if most of these are actually pled out or people will sign a confession beforehand? >> well, i think those conviction -- that 99% conviction rate is based on trial, so the defendants will be put on trial, but there will be a confession the prosecutors and former prosecutors that we spoke to said that it's not just a confession that leads to the conviction there has to be other supporting evidence and part of the reason that the prosecutors would have kept mr. ghosn or any other

defendant in detention as long as they do is to allow them to build a case, to ask as many questions as possible, to gather documentation. during this whole time that he has been incarcerated, he has had no access to anybody who might have been able to help him build a case he has -- his lawyers have not been able to do the kind of discovery that, say, american lawyers would have been doing during this period >> how does it work? is this a jury of his peers who would be hearing this? is this a judge who decides, makes this decision? >> predom independently these cases will go just before a judge. there are some rare cases, i believe, that go before juries, but generally speaking, there are injuries or a panel of judges and so -- but he has a new lawyer now who has a reputation for getting acquittals for his clients, so this guy is known in japan as the razor for his sharp wit, i suppose, and his ability to get his clients off. for the first nearly three months before ghosn had a different legal team, and then they were excused, and you heard

this new lawyer who has a reputation for gaining acquittals in very high stakes cases. >> i know that this is also just us kind of speculating from here, but if it's the international pressure that we all think probably led to him being allowed to be out on bail, is there any reason to think that that would also put pressure on what a judge might decide, or is this just kind of the show before international pressure is not going to be working in a courtroom past that >> right that's a really good question. i mean, generally speaking, when i've talked to former judges, i haven't been able to get to current judges, but former judges have said some of them have complained that the judicial system is too political in japan that they feel that there is pressure to bring convictions, but others have talked to me about how when it comes right down to it, the judiciary may be very bureaucratic, they may take a long time to make these cases, but they are independent-minded. it's not clear whether the

international pressure will actually affect the verdict. i mean, there is a case the prosecutors believe they have a case up until the very last minute they were still trying to keep mr. ghosn incarcerated up until yesterday when the court approved his release on bail the prosecutors appealed that, and then late last night they were denied that appeal. so then he was allowed to come out today. it was a little bit of drama because, as you said, his bail was set at a high rate of $1 billion yen, dhs about $9 million, and he had to offer that bail in cash. it docktook a bit of time to geh cash together to pay it. after we heard that the bail had been paid, we were still waiting and waiting for him to be released, and there was a huge scrum of mediaat the gates of the detention center he managed to sort of evade them a bit by coming out in disguise wearing a mask and looking like kind of a construction worker or a crossing guard >> what's the biggest bill in japan? if you have how many billion yen did you say he had to pay in cash

>> 1 billion yen in cash we were talking about that i personally have never seen a bill larger than 100,000 yen we were talking about it today and trying to do the math on how much -- i can't remember off the top of my head there was some talk -- >> it doesn't fit in a breech case >> it will be heavy just to carry this cash around >> you mentioned the political pressure in terms of convictions in japan how much of this is going to be making carlos ghosn an example to sort of say corporate greed here in japan, it's not okay, and you will face the fullest punishment of the law? >> well, there is a lot of talk and speculation along that line, and it's very cultural, the divide i think if you talk to foreign ex-pats here they will say this was clearly an opportunity or an effort to kind of frame the foreigner, but there are many cases in which japanese defendants have also been -- have also underwent similar

treatment where they've been incarcerated for many, many months, even longer than carlos ghosn was. he is not the -- it's not the highest level of bail that's ever been set. it's not totally clear how much this was about let's get the foreigner. in terms of your point about greed, culturally in corporate culture in japan, it's definitely not the case that ceos would be asking for the kind of levels of pay that he was going after, and i think there's definitely been a sense here that he has been described as having been greedy here, that he wanted more than was typical in japan he was certainly much higher paid than most ceos in japan >> what about the future for nissan, for the partnership with mitsubishi and renault how is that all working out in the meantime >> that is basically in total chaos. i mean, if you talk to people who are interested in the rights of shareholders, they're very upset. this is the worst possible situation for shareholders of course, the largest shareholder in nissan is

renault, and there have been reports that part of the motivation perhaps for the nissan management to have moved against mr. ghosn or to have disclosed some of the bad corporate governance practices on his part are because of talk of a merger rather than just having renault own a large stake in nissan. it sounded like mr. ghosn may have been cooperating with renault to try to develop a merger two between the two, which the japanese side did not want there's a huge question about what's going to happen he still technically remains on the board of all three of the companies, but he has been stripped of the chairmanship of all three companies. nissan itself has to have an annual -- a special shareholders meeting to vote mr. ghosn off the board. there was a question that we were talking about today about whether he is still -- because he is on the board, if he is going to show up at a board meeting before the shareholders meeting to try to make some kind of motion or face his accusers one of the conditions of his bail is that he is not supposed

to be in touch with anybody kicked with the case, so i don't know how that affects his ability to show up at a board meeting. >> thank you we appreciate your time today. >> thanks so much. in pharma news, the fd aapproving a new controversial drug to treat depression the drug is a treatment for depression with blockbuster potential and johnson & johnson. it's a nasal spray that's chemically similar to ketamine, better known as special k as a street drug. it's considered the first advance in treating depression in 30 years and designed for patients who have not benefitted from two or more anti-depressants j & j said it could help 30% or 40% of patients who do not respond to anti-depressants. the reason why this is so revolutionary really is that it's fast-acting and a lot of these anti-depressants take days, weeks to actually set in >> it's a different mechanism. it's a different mechanism too >> that makes it faster acting >> all the other stuff that's out there works on one mechanism.

this is an entirely different way of kind of coming at it. if you are somebody who has never responded to these other classes of drugs, this is a new hope you've got to go to a doctor's office to have it administered you can't have it at home. you can't do it themselves they have to watch these things. it is hope for people who have never responded to these things. >> if you are suicidal, this could immediately, almost immediately, alleviate those urges, those tendencies. that's why it's considered so important in terms of development of anti-depressants. >> you have to go to a doctor's office because of the fact that, i guess, they think recreational use and abuse is the hazard. you know, when things work, that's what happens, to be honest let's give you more news sticking with the fda, fda commissioner dr. scott gottlieb resigning. dr. gottliewb who has been charged with underprivileged vaping says he is resigning to spend more time with his family. he plans to stay on at the agency for another month his successor hasn't yet been

named. several tobacco stocks actually traded higher on this news after that announcement came as this resignation creates some uncertainty around the agency's crackdown on e-cigarettes. scott gottlieb has been very aggressive going after cigarette sales to minors. we had him on yesterday. the vaping issues and a lot of other things that he has moved to try and create more competition for drugs out there, too, as a way of bringing down drug prices. >> it was interesting to see the reflex reaction when the news hit. now, altria took a big spike up, and then it came mostly down, but not all the way. i think to some of the street commentary today is this was actually kind of a personal priority of gotlieb's that he really wanted the hard line of tobacco and other nicotine products, and maybe there will be some wiggle room around there, but even biotech stocks seemed to get a little bit of a slight hit on the perception that perhaps his willingness to look for -- >> fast-tracking allowing

things it seemed to me that he was really realigning that agency and making things move like he hadn't seen before from a very smart perspective of how he was looking at some of these things. probably celebrating at jules headquarters because he is raided the offices there >> that's why you are seeing tobacco stocks higher. the thing that's unknown is the path to approval in terms of regulation for cbd products as well as cannabis, the fda had just, like, literally last week said in april we're going to have public hearings for cbd products who knows what's going to happen at that point? >> very quickly, these are live pictures of carlos ghosn's car arriving, i guess, at his -- oh, is he in the car, and this is -- i guess just leaving at this point, or is he on his way this is still at the courthouse or at the jail these are live pictures of carlos ghosn's car, which we'll continue to follow >> presumably he is inside has he taken off his face mask the face masks are gone. i guess people are waiting for the first snap shot of carlos

gho ghosn sans face mask. >> i was trying to figure out was it a flu or something going around the bureau chief said it was a situation where he was trying to disguise himself >> everybody is wearing a face mask >> you can see the camera now focussing in on him. it's the first time he has really been seen since he was taken in to custody, was it, november when he first went in on all of these charges. he hadn't been able to talk to his family hadn't even been able to talk to his own american lawyer. at this point he has changed lawyers. he has a new japanese lawyer who has been representing him who, again, is known as the razor because he is somebody who has won cases in the past. it's pretty difficult to do when you have a conviction rate of 99.9%. again, carlos ghosn winning his bid to be released on bail very high bail $9 million 1 billion yen. it had been to be paid in cash we'll continue to follow this because the conviction rate in japan is so high that once

charges are brought, it almost universally leads to conviction. the court case still has to be brought to bear. not sure it's going to be happening. >> obviously, a matter of intense interest in japan. you can see by the swarm around his car as he leaves >> here, too again, that's carlos ghosn's car. the first glimpse as we've really seen of him since he was remanded to custody back in november earlier this year coming up, stocks to watch including more red flags from the retail sector in the form of disappointing guide yabs that story is next plus, a potential tesla rival getting crushed in the overnight trade after a weak earnings report as we head to break, take a look at some of the biggest premarket winners and losers in the dow.

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stock is down 2 2.5% ross stores reporting better than expected fourth quarter revenues the company sees challenges and is forecasting sales growth just 1% to 2% that stook down a little more than 3% after reporting last night. shares of nio are plunging they had a wider than expected fourth quarter loss as the flagship suv sales slowed the company blaming the shortfall on the line ar new year, and accelerated deliveries at the end of 2018 because of expiring electrical subsidies grab just locked in a huge round of funding the company securing nearly a 1.5 billion dollar check from the softbank vision fund the latest round now values grab at $14 billion that's smaller than ft's expected valuation and pales in comparison to uber's rumored $10 billion valuation. grab, i believe, has a smaller

market, so it's a smaller valuation, but there's a premium embedded into all of the ride-sharing services. >> when there's no sign of being able to take a profit any time soon >> exactly barron's reporting that the electric carmaker's shareholder would be open to a different role for elan musk at the company. james anderson is head of global equities at valley gifford and company, which owns 7.7% of tesla's stock. that's second only to elan musk's 19.7% stake in the company. anderson said musk is essential to tesla and said that he did not need to remain as ceo, suggesting, instead, that musk could be seen in another role. something like chief idealogue >> chief idealogue that's someone uncompromising and dogmatic >> chief innovator >> i think actually bill gates took a title like that at some point at microsoft >> yeah. he did the difference with this is when i first saw it, i thought, okay,

the headline said their largest shareholder outside of elan musk thought he didn't need to be ceo, which sounds, wow, he could be leaving the company that's not what they said. they said he is still essential to the company he needs to be there this could be laying the ground work for something if the s.e.c. actually forces him to no longer have that title. musk himself has made it pretty clear. >> when they were doing this -- >> last summer >> how much would the stock go down if he were removed? >> elan musk in his own conversations with "60 minutes" has said that he doesn't care what his title is. he will still be running things. he doesn't see it as anything that's going to change how he does business. >> with a chairman like larry ellison, even -- he would effectively be -- have control of the company >> he does own almost 20% of the stock. >> when we come back, g e-tra e-trading back $10 a share we'll tell you what larry said yesterday that drove down that stock price. $9

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general electric chairman and ceo larry making comments about the company's cash flow while speaking with analyst steven tussa at a jp morgan conference yesterday the stock dropped sharply. >> with respect to cash, you

see, we were at 4.5 billion last year i think as we come into 19 for the year, we're going to be in negative territory this will be a year where we'll have both operating and non-operating pressures on our free cash. >> ge's industrial free cash flow is a key measure that's watched by investors the stock was actually down by more than 5% on the news before closing down by 4.7% $9.82 is the last tick on that he said this should pick up in 2020 and 2021. >> that's a long ways out. >> yes a long way to see, and you have to have faith that it's actually going to happen. >> what's so different is that just in january he is the free cash flow would be -- to now say it's negative free cash flow from 4.5 billion to negative, that's aa huge difference in just the span of a few months, and so i'm sure investors are thinking is this another -- i don't want to make the comparison necessarily, but is this another john flannery moment where you have the guy

coming out and giving forecasts and just months later sort of taking that down again what can you belief? >> it's hard to get your arms exactly how quickly things are eroding and, i mean, it also comes after they do this sale of part of the health care business it seems like -- you see clear operating performance pulling up behind it and getting better >> the stock was up tremendously >> it was. >> recently he had said he thought things would get a little worse he has been right on just about everything he said on that he was joking around yesterday up during this call and actually -- or during this conference and said people asked me all the time if you hate me or not anything you want to say on thathat culp responded, no, we're friends, as i told my daughter tuss has been right on seeing things coming. >> it's a concern that the stock

is down in response to this, but it's more of a concern that the bonds are down, particularly ge capital. right now the bonds are three notches above junk could this be a fallen angel if things get worse and worse that's the question. fallen angel meaning investment grade to jump. ge sharlds and bond holders -- that's why it came as such a surprise >> we're going to talk more about the story with analyst nick heymann he is joining us in the 7:00 hour >> coming up, trade war winners and losers we got investment ideas to consider today based on the trade talks between the u.s. and china as we head to break, a look at yesterday's s&p 500 winners and losers

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welcome back you're watching ""squawk box." live from the nasdaq market site in times square.

>> we've been watching u.s. equity futures, and thief been mixed. the dow futures are still indicated down by just under 14 points s&p futures down by two points, and then the nasdaq has indicated higher by just under two points right now it's time for the squawk planner the countdown to jobs friday is on today at 8:15 a.m. we'll be getting a read on private sector payrolls from ap we'll also get the shutdown delayed international trade data for december today's quarterly reports include brown, dollar tree, and abercrombie, and in washington some of the nation's top executives are headed to the white house today. they are taking part in a work force advisory meeting being co-chaired by ivanka trump and wilbur ross, commerce secretary. it's not exactly clear who will be in attendance, but we will have full coverage throughout the day here on cnbc recapping today's top story here after more than three months behind bars, former nissan chairman carlos ghosn is out of

jail he was released from a japanese prison overnight after posting jail of this the scene outside the japanese jail where ghosn was being held since november. the auto executive put up nearly $9 million in cash for bail for his release. he must remain in japan, surrender his passport, and agree to extensive surveillance. in beijing the annual people's congress meeting continued overnight. let's get out to eunice yoon joining us from the meeting. >> well, the message out of the congress is that foreign investors are welcome in china at a news conference the top state planner reiterated and talked up the new foreign investment law saying that one of the problems that the u.s. trade negotiators have, it is forced technology transfers in exchange for market access, would no longer be allowed keep in mind, chinese officials still don't acknowledge that this is a widespread problem separately, huawei cfo is expected to appear in court in

vancouver today. xi is going to get a date for her extradition hearing. however, that probably won't happen for several months. even so, beijing has repeatedly said that it wants her immediate release, and this is a political decision, and just to give you a better sense -- a better understanding of why beijing seems to be so extreme in its position, i spoke to one business consultant who said that it's -- it would probably be better to think of her as china's equivalent to ivanka trump. not because huawei is government, because it definitely says that it's not, but it is a national champion, so sometimes that line is blurred in china what would the trump administration do to try to ivanka trump back? this is a question that a lot of lawyers were saying to me. the lawyers have said that the options for beijing in order to try to influence the proceedings is to pressure canada to dismiss

the extradition request or convince president trump to get an extradition request withdrawn. just this week we've seen some amping up of pressure on the canadians. the communist party commission has accused two detained canadians of gathering secrets of china also, customs authorities here have revoked an export permit for canadian canola oil -- for a canadian canola firm also, expectations are high now that president xi is going to ask president trump to have huawei's cfo released as part of a trade deal the third option is that china could just allow the proceedings to continue without any comment. that is what huawei is actually doing, saying that the cfo hasn't done anything wrong, and they believed in the u.s. court system, but there are several people here within the public who think, in fact, that the government is undermining huawei's position, that it has nothing to do with the government because of its extreme reaction

>> eunice, thank you let's talk now about sect ors that could wane. joining us door -- head of resh and synergy at global x funds. great to have you with us. i'll start off with you. you're concerned about where the u.s. stock market is in terms of levels right now you're looking at the credit markets. what is that telling you >> am i concerned about the levels of the market >> about whether or not we can advance. >> about whether we can advance. i think we can i think, you know, industrials are sold off as of late, and everyone is concerned about that they also had the biggest rise over the last couple of months probably a little profit taking and a little concerned about what's going on in china, but there's plenty of room to run with this economy and the stock market >> why would you say that things are a little long in the tooth and why would you take profits, and where are you taking profits at this point? >> i think in select areas you know, the markets have sold

off quite a bit in december. when you look at the lows, you know, banking has gone up. technology has gone up industrials have gone up >> jay, which sect or do you like here as we are looking at the cusp of some sort of trade deal you are seeing chinese stocks advance sharply. we had the national congress we had the premier outline a lot of big stimulus measures for the economy, which theoretically wouldn't take effect in the economy for another six months at least. >> yeah. when we look here at the u.s., we think most of this has already been priced in the u.s. stock market has already taken back about three-quarters of what it gave up since the peak of last year we don't see a ton of upside here if you go over to china, though, you see really aggressive price action particularly in the technology sector in china. that's been one of the best performing segments in the whole market this year we think that's just getting started. valuations in china are still quite low. the pe's at 11 the market globally is still

discounting china pretty aggressively, but you see stimulus measures. you see a trade deal hopefully in the future. i think that could be providing a lot to run in. >> i mean, if the market is -- aggressively, then they must be really discounting europe. a boost in china could really help europe whose valuations have been very depressed >> europe has had no returns for three years in the stock market. you know, anything that can accelerate growth in europe is going to be very welcomed by the market we expect in a few months for the b to be out and revise growth expectations lower. >> so it's waening >> yeah, unfortunately corporate bond spreads have been improved you have this kind of -- is that just telling us that we're in a goldilocks world and that it's a sweet spot for both the fed and a moderate growth economy, or is that a divergence you have to worry about? >> it's interesting that you bring that up of goldilocks because it is fed does seem a

little bit more tame right now it gives the markets a little bit of room to run in those high yield spreads, it's key especially as they get tighter. there's a definite correlation of small caps. you look at 30% of the small cap market it doesn't bring money, so it depends on high yield market, low yields for funding that small cap area they've done really well i think if we see high yield spreads widen, it could be a little bit tougher on small caps >> your trimming small caps as well >> i'm trying to look for profitable companies that don't need a lot of capital that are self-funding and that are showing a little bit more growth at a reasonable price. >> okay. we're going to leave it there. dori and jay, thank you. coming up, elan musk's boring company is working on ventures on both coasts and chicago. up next, why its first fully finished project could be in las vegas, and, later, our guest host starting at 7:00, sam,

equity group investments what assets he bought this year for the first time ever. stay tuned you're watching "squawk box" on cnbc

>> the boring company on the verge of launching a new project in las vegas

contessa brewer joins us for the first look at the proposal hi, contessa >> hi, melissa yeah, this could be a win-win. boring in sin city las vegas would launch a transportation revolution. the boring company would get its first fully completed project. the company spent $10 million to roll out a test tunnel in l.a. it's also proposing projects in l.a., chicago, maryland, but nevada could be the first place to get a loop up and running at a cost of between $35 million and $55 million. all right. the las vegas convention and visitors association is spending $1.4 billion to expand and renovate two miles of conference space. it needs a way to move people more efficiently over 200 acres. unlike other regions dealing with complex layers of bureaucracy or not in my backyard opponents, the lvcva board only has to work with clark county for approval. the ceo sees it as crucial to competing with other cities

globally for these mega conferences. >> we've been the top city for trade shows 24 years in a row. we certainly aim to keep that tit title. it's an attraction in and of itself >> the lvc skr a board will get a formal recommendation next week if it's approved, as expected, the project could be up and running by the end of next year. city leaders and casino executives, by the way, already excited about the potential to connect the las vegas strip entirely to the airport. maybe even to los angeles. whether i spoke with boring company president steve davis, he told me they're hoping that people will be excited to ride this, that they'll like it, and he says the boring company just wants to be useful that's a direct quote, melissa >> sounds like it's just going to be a tourist attraction, contessa >> i also think when you have these mega conference spaces, trying to get people from one seminar, one showroom, one

exhibit to another become really problematic. las vegas is intent on keeping this crown -- this is big business for las vegas, and not only that, but the idea that you could alleviate some of the congestion in a longer term way for the las vegas strip could mean big bucks to the bottom line of these casinos. >> i understand why it makes sense for las vegas. i'm just trying to extrapolate if it would be an example of a project that could then be scaleable for actual urban areas where they're looking to do some of these things. the las vegas monorail may push back against this because they were hoping to connect the whole strip. on that point, the boring company is running into problems in chicago, maryland, and l.a. with all this complex bureaucracy and they don't believe in eminent domain, and so they have to convince all these landowners to give them

permission to tunnel under here there's only one owner. they think if they can get the city officials on the loop and see how efficiently it works, it may be a big selling factor and moving the bureaucracy out of the way. >> also, it's a huge marketing opportunity for the boring company to say here's where we can actually get things done and what itlooks like. there's what we could do you're right it's a different scenario than what they'll face anywhere else. >> exactly contessa, thank you. when we come back, we're going to tell you what media company is behind this mystery chart. take a look. and why it's one of three stocks that are next guest says can power the s&p to new record highs. as we head to a break, let's take a check of what's been happening in the european markets this morning right now it looks like both the cac and dax are indicated a little bit down. dax down by just over .2%. the ftse is higher up by .2%.

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looking for discounts and what's left behind. what are the names now that seem appealing? >> great, yeah we are we are value we're looking for value. we think that's where you need to go. it's been a such a long stretch where it hasn't worked well. we mentioned three stocks. discovery communications we think is incredibly attractive right now. has an amazing moat around it we like amgen. >> so discovery arguably walgreens too. one of the reasons presumably for them trading cheaper than the market at this point is concerns about big structural issues they're kind of caught maybe on the wrong side of an industry. how do you get around that idea when it comes to discovery >> yeah. well, that's a great observation. that is the wet blanket on the stocks which has caused someone like us to be able to wake up and buy them at a -- like,

discovery at eight times forward multiple and it's 16% free cash flow yield, for example how do we get around it? the answer is discovery communications you know, if you listen to what they say, 45% of the stuff that gets watched out there is nonscripted television programming. right? so there's a whole slew of people out there disney, netflix, amazon. spending all the money they can on hollywood scripted programming. but 45% of what gets watched is non-scripted television programming. and discovery owns that segment. and it's incredibly profitable as well. they don't have to pay the actors and actresses to do it. and they have passion channelling. they have, you know, things that people tune into we think they have a substantial moat around what they're doing they generate $3 billion a year with the new combined company.

we think they're on track to do extremely well. >> do want to get to amgen, too, here what's the quick premise there and does the changing of leadership of the fda have any implications for it? >> yeah. amgen is just way too cheap for what it is what it is is one of the world's best biotechnology companies who've had a history of trading at glamour-type multiples. right now you can trade it at 14 times forward multiple the quick story there is they've got six or so, seven legacy drugs out of their 15-plus branded pharmaceutical products out there that are coming off patent and having generic competition coming their way so they've got to replace that they are doing a good job of that it's going to take a little while to really get some top line revenue growth going. but things like repatha has had

double digit growth since they launched that drug and the amazing migraine drug is doing extremely well they've got good stuff on their pipeline they spend 20 cents out of every top line dollar they spend >> tony, we're going to have to leave it there appreciate you running through those for us coming up, our guest host for the next two hours is sam zell we'll hear on what he likes now, the future of the real estate industry, and much more. stay tuned when you look at the critical issues facing our world, what do you see? we see breakthrough medicines getting to patients in record time. we see harnessing natural gas unleashing the promise of clean energy. we see engineers simulating the future to improve today. at emerson, when issues become inspiration, focusing core strengths to create a better world isn't just a result, it's a responsibility. emerson. consider it solved.

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businesses of prudential. trade, taxes, and investing ideas from sam zell. we'll get his thoughts straight ahead. why larry culp is warning the turn around may take longer than expected at ge. we'll have the latest. and budget shortfall debate. why wall street could be to blame. we'll discuss. the second hour of "squawk box" begins right now live from the beating heart of business, new york, this is "squawk box.

good morning and welcome back to "squawk box" here on cnbc i'm melissa lee with becky quick and mike santoli let's take a look at how we are opening up slightly lower for the s&p 500 down about 1.5 nasdaq looking to be up 1.5. we're a little over an hour away from a key economic report. february adp report out at 8:15 eastern time 185,000 new private sector jobs expected last month. the federal reserve could be a factor in today's trading. the central bank will release its beige book at 2:00 p.m. eastern time additionally, john williams and cleveland president loretta mester will both have public appearances. and the takeover battle between barrick and newmont could have a new conclusion.

the ceos had a dinner meeting last night they also said the two companies could strike a deal involving their nevada operations. breaking news overnight. after more than three months behind bars, carlos ghosn is out of jail. he was released from a japanese prison overnight after posting bail this was the scene outside that japanese jail where ghosn had been being held since november he was wearing a workman's uniform, face mask, blue cap, and glasses. he walked out of the detention center and into a waiting car. carlos ghosn, the auto executive put up nearly $9 million in bail for his release. he must remain in japan, surrender his passport, and agree to extensive surveillance. he was arrested in november for underreporting his compensation. he calls those charges meritless and we will continue to follow the latest on this story, bring you more as we get it. our guest host today, by the

way, is sam zell he is the chairman of equity investments. great to see you this morning. >> thank you pleasure to be here. >> a lot's changed since you were here. for a quick note now, what do you think about though entire environment just based on that change >> well, first of all, it's encouraging to think that we don't jump on a train and ride it into a box canyon no matter what's going on. so the fact that powell was able to adjust his thinking as he digested information is pretty encouraging. and in the past, we've had fed chairmans that have adopted the philosophy and then carried it through until it wasn't a success. i think the willingness to shift

in the middle of the road is a very -- >> before we get to that, we want to tell you about something else happening today the white house is hosting ceos who joined a trump administration advisory board on workman issues eamon javers joins us now. he has a preview >> reporter: this is a newly created advisory we'll see something today we haven't seen since the days of the comments around charlottesville after his comments on white supremacists there led a lot of ceos to abandon a number of advisory councils the president had set up early in the administration today, though, ceos who were on some of those councils will be back today take a look at some of the members of this new workforce advisory council that's going to talk to the president about all the issues in developing the american workforce including things like ai and technology.

tim cook of apple will be there. tom donohue of the u.s. chamber of commerce. and of course there you see visa, walmart, and on and on a number of companies will be represented at this event today. also at the event, members of labor unions and also universities the idea here is workforce training and innovation, one of ivanka trump's issues that she's been pushing throughout this entire administration is the idea of apprenticeships wher workers can be connected to large corporations that are hiring and get those opposed to out in the educational sphere and making sure that universities and companies are working closer together on apprentice ships we'll see all of that today at 4:00 p.m. at the white house any of the ceos we can get a microphone in front of, we'll do that >> thank you, eamon javers

let's get back to our guest host for the rest of the show. sam zell is here with us sam, we turn to you about a lot of things. because, look. you've been around you've seen this stuff happen you're an expert who's been in and out of all of these issues let's talk about what eamon was discussing and the ceos coming back to the white house. this is the first time since those other two advisory committees were disbanded after ceos came under pressure for supporting the president or coming to the white house. this is a new step what's your take on this what should the business community be doing >> well, i think the dfefinitio of patriotism says you have an obligation to your country and whether you particularly agree or not agree with this president, i think it's the country that we all need to serve.

when asked i certainly wouldn't hesitate i would expect all these guys and gals would show up today and participate because they're patriots and they recognize how important leadership is in our country. >> i will admit there is a different environment. at this point you get blowback from our customers and consumers if they disagree with you on some of these issues it seems it is such a divided nation at this point is this going to be something that ends up costing my company or not and do i offend half of my customers no matter what i do? >> i mean, you're asking the ultimate dilemma question. i think that our country and its future is very much dependent on its ethics and its principles. and we've had various leaders in the past

they've had various impacts both plus and minus i think the current leader has had a lot of pluses and a lot of minuses. but in the end, the objective is what's good for the country and what obligation do you as a leader have to help the country do better? >> i want to say just for everyone else's information on this, you're not necessarily someone -- we talked to you before bloomberg making his decision not to run. and you said you'd support him if he had run. >> well, i think mike bloomberg is a wonderful asset of our country. whether it be republican or democrat, we're going to have to find some middle ground for this country to go forward. i don't think we can continue to

go from one extreme to the other. so whether it be mike bloomberg or other potential centrist candidates of either party, i think that's what this country needs at this time and hopefully we'll get it. >> what if that's not what captures the public's imagination though howard schultz is running as an independent, not a democrat. bloomberg has bowed out. he's definitely a centrist and the fire brands of the democratic party right now tend to be the ones who veer towards socialism. >> allow me to remind you the last time we were in this situation, the democratic party elected george mcgovern and i was the only person that voted for richard nixon. couldn't find another person who admitted to that so i guess what i would say to you is that our country, you know, went way extreme with gold

water. another landslide followed the history of this country to its credit has been a central history. and i don't think that this country will adopt extremist views on either side nor has it shown any indication that it would in the past. >> a centrist, this sort of imaginary centrist that could get elected right now -- >> first of all, a centrist by definition is someone who's like a mix master, okay so you put in some of this and some of that and some of it is dead centrist. some of it is over here. some of it is over here. mix the bowl up and you get a coherent policy that the majority can support >> right >> there is no policy that everybody can support. >> i was going to ask what would that person have as his or her

top priorities what are the kind of core problems that you think people are wishing for some consensus and solution for that some kind of a centrist could bring right now? it seems we're getting off on different issues on both sides of things that don't address core problems. >> yeah. i think that everything starts with growth. i think everything starts with the fact that this country has historically been the center of growth in the world and has been the engine of growth when the u.s. has been growing and had a definitive direction, we led the world and led the world very effectively so growth to me is the most important thing. economic policy must tie together with that to produce positive results

i think on a foreign basis, i think we have to do a better job of clarifying our relations with our allies and with our non-allies i think we danced to too many songs. i think we have to narrow who we are and what we're willing to do and make it as clear as possible >> sam, inequality is the big issue that has been -- >> i deliberately didn't mention that >> well, it's something that came after the great recession the fed did what it needed to do, i think, to probably prop up to make sure that the entire ship didn't sink, but as a result the wealthy got wealthier and people look at that and think, it's not fair where's my cut of this and that anger is why i think you've seen the big turn that you've seen in politics to this point. >> but what's the reason for it?

see, i would argue with you that when you had eight years of redistributive policy in this country. >> we did. >> and that redistributive policy had little impact on the billionaires and had enormous impact on the general public which would suggest that redistributive policies don't work and in fact, have very negative side effects >> household income has actually been rising. app lot of it is taking care of itself but i don't think the anger goes away. i think that is something -- >> well, i mean, i think there have been numerous times over the years where we've moved one way or the other i think since the election in 2016 and the stoppage of all of these redistributive policies, i think we're slowly starting to go back the other direction.

which i think would be healthy >> you think the center line is? forget about the noise on the far left and far right, you think the pendulum is swinging the other direction? >> well, you know wi, it's the economic pendulum. the inequality issue, redistributive policy leads to inequality just the opposite of what you think -- >> the inequality trend goes back to 1980 and it's global i don't think you can say -- look bill clinton got elected saying if you work hard and play by your rules and not getting your fair share, we'll try to change that this has been a message for a long time. >> inequality exists all over the world. we talk about it and you people talk about it as though we just found it under a rock last week. the reality is -- i mean, i do business all over the world. the u.s. is one of the most equal economies in the world

now, by our standards maybe we'd like it to be better >> but the problem is that it resonates with the politicians who are picking it up from their bases and that's why you get all kinds of bills being proposed right now to take on the wealthy in terms of taxes. it goes from everything from a wealth tax to raising rates for anybody who's making over a million or $5 million or $10 million depending where you're looking on these things. it goes to the idea of telling companies they can no longer make share buyback purchases there are so many of those proposals out there right now. and whatever your perception of any of these, those are politicians moving that direction and for anybody not affected by that, they think it's a good idea take from somebody else -- >> the war on wealth we're witnessing in this country >> hey when i was 10 years old, i went to my father and i said, dad, i don't understand something i just learned about one man, one vote

there are more poor people than rich people. why don't the poor people just vote the rich people out and take everything they have? and his answer was because everybody in america wants to be rich everybody in america wants to succeed. and everybody in america doesn't want to do anything that would, quote, screw up his chance to make the next move forward and that's, by the way, what's made america great because everybody wants to move forward. everybody wants to contribute. everybody wants a piece of the pie rather than wants it given to them. >> so that ethos is the thing you think ultimately decides and why all ofthose proposals will not be brought on? >> well, i mean, the united states is 200 years old.

have the conditions changed dramatically in 200 years? i think there was as much inequality in george washington's day as there is today. so somehow or other -- and by the way, william jennings brian, you know, went on the silver cross in 1896. so we've had periods of in and out, but the basic premise of america is we all want to be part of the solution and the majority of people want to participate and want to benefit from achievement >> sam, thank you very much. sam is our guest host. sam zell he's going to be with us for the rest of the program. >> my pleasure coming up, general electric trimming expectations for a swift turnaround the stock getting hammered midday yesterday and finishing

the session with one of its worst one-day performances since december we'll discuss in a few minutes and later, senator rick scott joins us to discuss the potential u.s. trade deal with china and what the final deal may or may not look like stayun u' watching "squawk box" on cnbc ♪

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welcome back to "squawk box. a few stocks on the move this morning. urban outfitters reporting 4 cents above estimates with revenue essentially in line. however, the clothing retailer said 2019 has gotten off to a slower than expected start due to colder weather and mistakes in fashion lines logitech gave an upbeat outlook. and when we return, we'll take a closer look at ge. "squawk box" will be right back.

general electric chairman and ceo larry culp making comments that made the stock hit hard yesterday. >> with respect to cash, we were at 4.5 billionlast year. as we come into '19, we're going to be in negative territory. this will be a year where we'll have operating and non-operating pressures on our free cash >> culp making those comments at the aviation and transportation and industrials conference stock fell more than 5% at one point. right now you can see it's down

another 2% in the premarket. for more on ge and what this all means, let's bring in nick heymann. good to see you this morning. >> good morning. >> how much of a surprise is it to say culp is saying negative cash flow for this year and how to fit this in with the overall picture of ge in its attempted turnaround >> i think we'll get the details here in the conference call for '19. but the key thing to understand here is this number compared to the 45 is going to have a lot of costs associated with ending in inventory finance, getting rid of inter-company receivable f t factoring. the renewable energy decline now, we estimated these costs to be $6 billion to $9 billion. will they all hit in '19 we have an operating free cash

of 46. so we've got organic growth, smaller company. we've got margins improving. okay there's operating cash flow from continuing then all these legacy issues and those issues will still some be there in 2020 but they'll come down. >> this seems like it's not necessarily saying that the existing industrial businesses have missed contracts or they're doing poorly >> there's legacy projects that came as a part of the obligations you got to meet and burn off but, you know, there's nothing here that has shown any evidence that they veered off course with their current core businesses. >> are we going to get a kitchen sink forecast from larry culp? i think the thinking was when he first took over there would be a kitchen sink it seems to be coming out in drips when it comes to the ge story. >> i think that's one of the

good things to think about in terms of what are the hierarchy of relevance of key metrics for investors today. so the first thing he's done is put the pedal to the metal on increasing liquidity of this company. you got $75 billion in net debt the end of '18 we need to reduce that by $50 billion. last week he announced the sale of biopharma and you made $21 billion. one of the most interesting things that he said was that the health care business remaining, he's retaining his optionality now, you can't do what originally was planned by his predecess predecessor, the ipo, until he finished the biopharma sale. but we clearly believe there's a lot more levers that he has to pull on different assets which are non-core or targeted

>> so you don't think this outweighs what the company has done >> we have taken all the debt, $75 billion net. >> that includes the pension underfunding >> resolution cost and, you know, the $6 billion no $9 billion we pulled for the midpoint of that put that in and then offset it with cash. okay that is coming in from asset sales. and we come out with $20 billion to $25 billion of net cash versus all liabilities and legacy so let's think for a second about what he's really trying to do here. how can we be in a position with too much cash? one of the clues and it's a very

important clue is you saw an inversion in the debt that's on the industrial balance sheet at year end from the end of the third quarter. 70% is now industrial instead of, i think it was33%. and there's much less associated with the finance subsidiary. >> you're still talking about something where we don't have -- >> you're going to see answers quickly in terms of where all the cash is. >> when he has all the cash, what will he do? they'll find somebody to write an insurance contract for the another 20 that's what they're going to go through tomorrow and help us understand the assumptions and get you to understand $10 billion is it. if i couldn't find somebody for $18 billion to write me an re-insurance contract to drop it

down a mine shaft with no recourse then what i could do is put $10 billion down there and then when i put that down there because i've got so much cash, i'm down to $25 billion. 2 2.5 times for the industrial i'm in the process now of taking an unshackling valuable asset. and if i can -- that's there to help if you will run the sump pumps through 2023 but if i can move that back -- he clearly went down two paths do i sell biopharma to my old firm or sell g-cast? it's in the best shape in 20 years. they've been marking all these gains up on selling assets to support the earnings actually, they got out of the older wide bodies. way ahead. they did this before the values of those came down

>> all right i assume that all that calculus leads you to a higher stock price valuation? >> this is a company worth $14 to $16 a share with nothing for power. >> bottom line, is this your highest conviction outperform in your group >> excellent question. if you want to not have to take, you know, sleep well at night, it's right that's our number one pick curtis wright. >> thank you very much coming up, senator rick scott on trade talks with china. and later, carlos ghosn free on bail after nearly four months in a japanese prison. jeff sonnenfeld joins us to scs ats xtdiuswh ine for the ex-nissan chief and more "squawk box" will be right back. at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3,

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zbrmplg welcome back, everybody. here's what's still to come. senator rick scott will join us to talk trade talks with china and later a read on the jobs with adp private payroll data released this morning at 8:15 eastern time also this morning, the first

pictures of carlos ghosn being released from jail we'll have much more on "squawk box" and our guest host sam zell when we come right back. when you look at the critical issues facing our world, what do you see? we see a billion more people breathing free. we see access to fresh food being the global norm, not the exception. we see homes staying cooler, without the planet getting warmer. at emerson, when issues become inspiration, focusing core strengths to create a better world isn't just a result, it's a responsibility. emerson. consider it solved.

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presidents trump and xi moving closer to a trade deal but that doesn't mean an immediate end to the tariffs joining us now is senator rick scott. it's great to see you. >> good morning. >> what do you think about the trade talks as they've progre progressed to this point where do you think things are important or what are you hoping we get out of this >> first of all, i want to thank president trump and lighthizer for what they're doing somebody's got to stand up to china. they're stealing our trade secrets saying we want to come into your market but restrict your ability to come into our market so i want free trade but it's got to be fair. i'd love to get rid of all the tariffs, but we've got to make sure they're not stealing our trade secrets. we've got to say we're going to do a deal with you, but we're going to make sure -- and we're not releasing these sanctions unless you can prove to us that you're going to stop stealing trade secrets. remember, they're sitting there supporting a thug like maduro down in venezuela who we have

all these children dying down there and they're a bad actor worldwide. they are the -- the chinese government is not our friend so we've got to stand up and that's what president trump and bob lighthizer are doing >> they're not our friend, but we need their support especially on issues like north korea they're the only ones that can put enough pressure after the talks ended last week. so where do you come down on that should we give on the trade talks in order to get their help on a national security issue >> i would not give in on the trade talks. look they've not helped us with north korea. they've not helped us with maduro in venezuela. look at all the information out there right now about what they're doing with their military they're building a military to compete with us and they're doing it with profits they make off of stealing our trade

secrets in measuring and not t letting us compete there i want them to stand firm. if you want to be a world class player, then you're going to have free trade where both countries -- or companies can do well and you're going to stop stealing trade secrets and stop supporting thugs like kim jong-un and north korea and maduro in venezuela. >> president trump did walk away from the talks with north korea. you think he should do the same with china if they don't come down and agree to all of those things you laid out? >> i'm a business guy. almost every big deal you do, you have to walk away some time. people have to know you're serious. i think he did the right thing on north korea i can't imagine you can get a deal done with china easily. i hope he gets something done this month but then they've got to comply with it. we can't continue to give in, give in, and give in which is what we've done in the past >> and yet, senator scott, there seems to be already a date set

for a signing of accord in mar-a-lago a trade deal is easy to get done and you might be able to have the chinese gra to some things would you back a trade agreement that was signed by the president if it didn't include enforcement if we didn't know that china really intended on getting in on these very important issues that you outlined >> of course not i mean, this is what reagan said trust but verify they can say all they want, but if they're not going to prove that they're going to be a fair player, they're going to stop stealing our trade secrets, they're goingto stop doing all these horrible acts by helping people like maduro and kim jong-un. why would we believe that we should do this when ultimately we're going down the same path, lose american jobs allow them to build up their military we've got to understand, this is the right time to do it. and i hope president trump and bob lighthizer continue to do that >> our guest host today is sam

zell what do you think about that that's a harder line than we hear from most of the business leaders we talk to on the program. >> i think that senator scott has got the right direction. i think that one of the things that, you know, needs to be added to what he said is the fact that china doesn't do anything that it doesn't view in its own interests. we have a reason to want china to help us in north korea. they're going to help us in north korea if they see a benefit coming from it i just think we need to be totally realistic they're operating for their own benefit, and we need to operate for our benefit. and that creates balance >> is there -- i mean, if we feel like we've been getting the short end of the stick for a lot of years, if we feel like we've been on the --

>> we haven't been getting the short end of the stick we've been giving the short end of the stick we bent over -- i mean, what, did we make five deals with north korea? they didn't live up to one >> we feel like we have been at the disadvantage how do we come to some sort of agreement if we feel like they owe us everything? what do we end up giving in this or is there no agreement that could be reached at this point >> i think there's lots of opportunity to reach an agreement. in the end, both countries have one goal in mind and that's to create prosperity. for their people and the question is, do you do it together? or do you do it on the back of one of the other history says the only methodologies that really work are ones that are done together. >> senator scott, to that point, a lot of the back and forth have been over what enforcement we

could possibly have with this. i would guess given the stance we've heard to this point with you, that you are in favor of pretty stringent enforcement procedures be put in place do you think of the idea of tariffs being rolled off is that something you think should happen immediately? or do you think that should be a reward for proof that the agreement is being adhered to? >> sure. i think what sam would agree is good deals with deals where both sides win. there ought to be prosperity for americans and china but it's got to be for both i don't think we ought to release the anxiouses until we know that they're going to stop stealing our trade secrets and everything that happens at the front end if you could trust them but if you're doing a deal and you don't trust the other side, it's very difficult to give, you know, give in until you know they're going to do their job. >> you also have to operate off the same set of rules. i mean, one of the issues that hasn't been mentioned is that

the chinese government has set objectives for 2025 basically underwritten by chinese-owned, state-owned companies. so in effect you're creating incentives to attack our companies that are not state owned and don't have unlimited resources behind them. it's got to be a fair fight. it's got to be fair trade. >> senator scott, i want to thank you for your time today. it's good to see you. >> nice seeing you nice seeing you, sam >> sam zell is our guest host. he's going to be with us for the rest of the program. when we come back, tax shortfalls in some states have lawmakers and governors pointing fingers and looking for who to blame. congressman greg meeks joins us next why he does not support the wall street tax act all that's next.

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it's switch and save days at comcast business. right now, get fast, reliable internet for $49.95 a month and save $600 a year. just one more way we take your business beyond. but hurry, switch and save days ends april 7th. i can't wait to go home and tell everyone about it. i just wanna get it right now. guess what i'm gonna do. (laughing) call today. comcast business. beyond fast. some states are starting to see massive tax shortfalls but for different reasons. robert frank joins us with more. >> last month andrew cuomo blamed a $2.3 billion revenue shortfall on the new tax law and rich people moving out of new york >> tax the rich, tax the rich, tax the rich we did now god forbid the rich leave. >> but tax experts and accountants tell me there's a

different reason the stock market fall in december look at california, connecticut, new jersey, massachusetts. they all reported major shortfalls in december and january compared with their forecasts. california's tax receipts came in $3.4 billion light. now, the biggest short of the shortfalls was the estimated payments now, those are tax payments for non-wage income mostly from investments or businesses. tax advisers say wealthy investors sold to get the tax losses that lowered their overall tax bills but created a shortfall for the states moody's saying in a report that the revenue decline was owed in part to a volatile stock market's impact on that capital gains income now the markets are back which bodes well for this year, but states are bracing for a lot more surprises once we see the effects of the tax law. >> so this is just temporary, basically. this is what happens in down years. >> it is it's what happens in a major

down quarter but there's another big lump that we don't know about which is that a lot of companies in 2017 paid double bonuses before the tax law took effect because there's a weird accounting change or rule that took effect. states look at 2017 revenue and say that's normal and budget against that in 2018 we're headed to a big cliff. it's not going to repeat >> the other piece is you can use those losses to offset in future years >> for a long time investors had substantial losses that they could take so they took it. >> let's bring in our next guest greg meeks great to have you with us. >> good to be with you. >> are you concerned about these

shortfalls is there something congress should do, in your view? >> absolutely i'm concerned. just listening to your last segment. when we think of what took place in december and january, market volatility is a big uncertainty on the financial markets you think of the shtdown you think of the tariffs and the trade war that the president was in you think of the fact that there was the president undermining the fed, you know, with reference to his independence. all of that had to do with it on top of what was discussed. and so therefore that severely hurts states on the things we're doing in new york. >> you mentioned the uncertainty on wall street, congressman. it sounds like you are amenable or open to the idea of the wall street transaction tax which would create another uncertainty on wall street >> well, you're right. i am concerned and i'm not in favor of the transaction tax for that reason. you know, it will

disproportionately hurt new york it will reduce incomes of many of our businesses and the incomes of others. the money will go directly to the federal government the states then will be taxing less we will be losing more in new york so if you add the salt tax with the transaction tax and the fact that, you know, probably what we'll be doing, you know, democrats would want to move out, i'm sure, the pension funds, et cetera, so that we can make sure our pensioners won't lose money then that takes money out of it also so it just changes the value, the assets it makes more uncertainty in the market and given we don't know what the president is going to do in the future also. i just think it's a bad move at this point in europe, you know, it's still a question mark. you know, some of my colleagues talk about doing it overseas but everyone i talk to from europe, it's still a big question mark and i think that what we need to do in new york is make sure that

we have some stability >> part of the problem is that these states in particular, new york, california, massachusetts, connecticut, they are so dependent now on a small group of taxpayers the 1% pay 46% of the income taxes in new york state. those wealthy taxpayers are derive a lot of their income from the stock market. and that income is very volatile how do you solve that in the long-term. has the federal government solved that even at the federal level they pay 40% how do you smooth out those trends or how do you either broaden the base or somehow change the revenue planning structure to better adapt? >> well, i think you have to broaden the base you have to get more individuals into the -- to lower and close some of the financial discrepancies. we've got to figure that out we've got to make sure -- >> what does that mean how do you broaden the base but also make sure inequality is

not -- >> here's what i think we need more public/private partnerships i think you can get some of the businesses to do greater investments like we were talking about with amazon would have done in the city of new york you know, putting investments in neighborhoods and schools. >> congressman, you were part of the team that was trying to renegotiate with amazon which is part of the reason they left i remember having you here on set and talking about this, and you were on your way to a meeting with amazon back in washington that day. you wanted to renegotiate the deal >> no. what i wanted -- no, no, no. you got that wrong i was a big proponent of amazon. >> you were a proponent, but you were not a proponent of the deal on the table you wanted to adjust the deal. you wanted a say on that >> what i wanted to do was to make sure that when we talked about inclusion, i wanted to make sure that minorities and women, et cetera, would be included in the deal >> but there was a deal on the table. you wanted to change that deal and that is part of the reason amazon walked away >> that is incorrect i was a sign on with everyone else i worked very closely with the

governor a lot of individuals and part of the deal wasn't a deal that was signed and said this is it and that's period. the deal was something where amazon was talking and trying to engage folks in the community like me to say what they would do and how they was going to do it and what we were looking for. there was dialogue and conversation that takes place in any and every deal so that's what we were doing we were having dialogue and conversation to make sure that individuals like folks from the urban league was talking -- and amazon was very -- >> so what do you think about them walking away? >> well, i think -- >> what happened what went wrong? >> well, i think that they were uncertain what would take place in the state legislature particularly with the commission that had some oversight on the deal and i think that there was a few people -- because most new yorkers favored the deal there were a few people that made a lot of noise and they decided they were going to pull away from the deal as a result of that. i do wish that amazon had stayed in the deal and had a little tougher skin in that regards,

because that's what happens in new york there's a back and forth in that regards. overwhelmingly, the people of new york and the elected officials especially those of us from queens county was very supportive of the deal we wanted them here. we thought the creating of the 25,000 tech jobs plus some was a very good thing. we thought that the investments that they were looking to put into some of our schools and whether it was public schools or four-year colleges was something we needed to look forward to so we were very much a part of that we do believe and i do believe that all of the indices, when you talk about financial services, those doors have to be open i need more minority asset managers managing money. >> congressman meeks, we've got our guest host sam zell on set he wanted to make a comment here. >> i just think congressman meeks, that what you're describing is tyranny of the minority i think this deal with amazon is going to go down in history as

one of the great mistakes that politicians made in their own interests and disregarding the interests of the state of new york i think that the idea, you know, from amazon's point of view, there was never an end to the negotiations they thought they had a deal and then you're basically saying you're going to new york, going to washington to improve the deal i do deals far living. certainty is the most important issue in any transaction that's what builds confidence. i think amazon walked away because they saw a never-ending strew of people and no leadership saying this is the price we pay for progress. and this progress is very important to our city. >> let me say this though. i think there was a minority of individuals that were against the deal there was a lot of voices like the governor and the mayor and number of elected officials if you go down the people of the

district i was for the deal kathy noland, she was for the deal you look at the borough president, they were for the deal and that's why we've been trying to get the deal back on the table. >> sure. >> i do believe -- >> i believe that you should take whatever deal >> i believe we have to be inclusive in deals. >> same here >> thank you, congressman meeks. good to see you. coming up after 3.5 months and two bail rejections, carlos ghosn is free on bail. what's next for the auto boss. and yeah, that was a hot mike, sam. will there be changes to japan's judicial system? and later, bill gale will join us "squawk box" where anything can happen will be right back.

carlos ghosn free on bail. he walked out of a tokyo prison overnight after more than three months behind bars breaking news on february hiring adp payroll report coming your way in a few minutes and do deficits matter

that debate resurfacing as projects are looked into. 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, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with mike santoli and melissa lee. our guest host today sam zell who's the chairman of equity group investments. he's got a lot to say, as you've heard. we're going to get to him in a moment in the meantime, let's look at the futures. it looks like the dow futures are down by 30 points. the nasdaq down by 11. if you look at what's been happening in the treasury, at least the 10-year is indicating 2.708%

sam, real quickly, have you changed any of your perspectives on whether you think the market is a good place to be, real estate is a good place to be now that the fed looks like it's on hold >> i actually viewed the fed raising rates as a positive. and i'm not sure that it's backward notion here is a positive thing for the economy >> you said in the past you wanted the fed to raise rates -- >> we needed to create a sense of urgency i think we have an environment right now where things are pretty pricey. and the prospects of future growth are undetermined at this point. if we had a more determined future growth, we'd have higher interest rates >> we're going to dig into this deeper with sam and see what he thinks about real estate that's coming up in a bit. >> and gold. i want to hear what you have to say about gold >> not a lot

a few stocks on the move this morning check out general electric this after ge ceo larry culp said they would be bearish this year in light of the information presented by culp yesterday at the investment conference. this morning shares are down another 3.5% early earningings out from abercrombie & fitch. adjusted of $1.35. also revenue beat forecasts. comp saelz rose 3% doubling the consensus estimate of analysts and dollar tree jumping on earnings this morning as well. the dollar store operator came in ahead of a profit of 1.$1.93 per share. stock's up 6%. carlos ghosn has been released from jail in tokyo after being held for over a

hundred days he posted bail of almost $9 million and walked out wearing a mask, a blue cap his detention is raising questions for japan about its justice system joining us now is jeff sonnenfeld from the yale school of management. jeff, what do you think? it was probably global pressure that allowed him to walk out on bail but what happened next >> i think there was global pressure the scrutiny of international media and the business community really mattered. you know, if my friend sam zell there were to weigh in, he might again refer to this again as a steaming crock of -- i couldn't hear >> bleep bleep >> porridge maybe. or oatmeal that this is a gross injustice it was ridiculous to arrest this guy on such specious charges and there's a compensation issue of money he never received that was going before the board to perhaps equalize him with other

global automakers. he's done a remarkable job and this federation he put together as they rescued nissan from near-collapse nissan kind of resents it. they got a 44% stake, renault did in neeson -- nissan did. that the ceo of nissan resented. and this was sort of a coup. it's a distortion of japan inc you know, this title of going going gone in terms of japan inc. >> if carlos ghosn were japanese, jeff, this might not have happened to the degree it's happened >> michelle, i couldn't -- >> melissa >> scream out more how right you are. the west gets used to it this is just the japanese system how it functions and shame on us for not understanding their 99.9% conviction rate which is the same as russia or china's. well, there's more to it

the tokyo electric power company executives who were being held responsible for failure to prepare for that horrendous meltdown, 100,000 people relocated, 44 people died. even now they haven't been sentenced. eight years later and they're not held they're still denying their culpability. they're not being held hostage like a roach motel justice system check in, you can't check out. they've been let out carlos ghosn up until now has been held in solitary confinement. the one time he went into court, he had to have a rope around his neck and ankle bracelets or handcuffs on who did he murder? what product safety issues were there with -- nothing. this is absolutely ridiculous. and i'm not saying that maybe he didn't make some mistakes. there's some questions about houses that the company owned and he was benefitting from. but who -- you know, this is not

the way you deal with a business investigation. meanwhile, their partner renault has not been able to see any of the evidence that somehow the japanese government were working in collaboration with nissan has kept hidden away they resented the 44% ownership and the french -- that renault is about 15% owned by the government and frankly nissan has recovered so well that they're making 2 million more cars a year, selling 2 million more cars a year than renault. they probably resented some of this people are very worried in the business community in terms of what this meant. the damage to nissan is considerable hard attracting people in there. they haven't replaced ghosn in terms of the nissan/renault relationship and ghosn was released from his ceo position, sadly. >> i think that, you know, frankly a much bigger question

and i think that much bigger question is the one that i responded to and i said to myself, gee. would i want to be an american businessman going into japan today? what about the two canadians that were arrested in china? you know, how are we going to end up with globalized trade if executives are afraid to transact the whole story and the car companies is interesting, but the really bigger question is are we materially reducing everybody's willingness to travel you know, if you were canadian today, would you go to china >> no. >> neither would i neither would i. >> sam and i are the only ones perhaps old enough on the show to remember that in the late '70s, early '80s you couldn't go

into a business or business classroom without reading the art of japanese management and all these books celebrating the brilliance of the japanese business government collaboration for japan inc. here's the downside of it. the financial times actually released and reviewed the documents showing that the company was working with the government on this takedown, on this private conspiracy. 75% of ceos tell us now they are more nervous about their international travel and it's not just perhaps canada detaining the executives china detaining the executives and we have quite a number of u.s. citizens, perhaps, dual citizens, unable to return to the u.s. from china. that's what we saw that the u.s. state department put out a travel advisory and an escalated level too. warning people it does put a damper on commerce

a lot more than trade issues and tariff issues if you're afraid to even travel there to work out deals. and it's really worrisome. >> but isn't there even a bigger ethics issue and that ethics issue is that, i mean, should you sit there and be afraid of going to japan and being afraid of going to iran? it seems as though the standards -- >> i would say yes >> -- are the same in both places go ahead >> it's funny, sam you were saying in the earlier block about something we need to work on as business leaders now re-engaged with this administration is how we do a good job of separating out our relationships with friends and enemies. i agreed with that until we talked about carlos ghosn. we thought japan was our friend. and look at how they're treating the west >> i want to thank you for your time today, jeff sonnenfeld. great to see you

sam zell is staying with us. coming up, a look at february hiring just minutes away we'll have the adp payroll number after this break. stay tuned

welcome back to "squawk box. let's take a look on future right now. i like sam talks during the breaks and sometimes continues when the mikes are hot dow looking to lose 33 out of the open either that or get the bleeps open for the censorship. it's a family program at this time of day. >> right >> looking to lower by eight points >> 133,000, the adp february payrolls close to the estimate for the first time in several months 185 is the estimate for this number among economists. and the number for friday is 180. so not being above consensus this time around january payrolls were revised 85,000 higher

the goods sector, that's a good number services, maybe a dip below where it's been. taking a look at companies by business size. need mum doing well up 95,000. and then this new feature of the last six months or so is we get it by construction for the month of february with a storm i'll take 25,000 right there manufacturing strong again 17,000 trade transport 14,000 and let's bring in our guest the guy who puts it all together mark zandi, chief economist at moody's you've done a good job maybe not nailing the number but telling us it's going to be higher does this tell you we're back to a trend here

>> i think it's slowing. i think the economy has throttled back was about 4% in the second quarter. so q4 last year was in the mid-2s that looks like it's going to get revised down that was pumped up by an increase in inventory. q1 is now tracking 1% or less. we've seen a very sharp -- >> it may actually be below that our cnbc rapid update is 1%. but not everybody in that survey has come down or at least adjusted we have some people north of two. it looks like q1 will be a weak one. >> our number is 0.3 we're barely over zero so it's really slowed. it's going to start showing up in the payroll numbers payroll growth is going to slow. i think businesses are going to hang tough and continue to hire and look through this slowdown unless the economy should continue to expand but it has significantly

throttled back it will show up in the payroll data >> what impact does the shutdown have on the numbers you're describing >> you can ask that more to mark i don't think much. >> it will have no impact on the payroll numbers. it would affect the unemployment rate the unemployment rate last month popped up a little bit it went to 4%. that'll come back in we'll be 3.8%, 3.9% on friday. >> let me probe that a little bit more maybe sam has a good point here which is that one thing we did not tally in the government shutdown or in the jobs numbers from the government shutdown was private sector right? there were private sector contractors. we did not see much in the way of layoffs or hits to that part. maybe that's something that would show up in february. >> well, i mean, you would expect if it would show up, it'd show up in january and january was 300k >> i think you guys are both wrong. we're in an environment today where the item we're shortest of

is people. >> absolutely. >> and therefore, nobody is going to lay off anybody because they think there's going to be a shutdown they eat it because they don't want to go hire those people again. so i don't think the employment numbers show it. but i do know from my own experience that the private sector was very much affected by the shutdown whether that was a permanent adjustment or deferral, remains to be seen you can't tell me it wasn't affected >> i totally agree with you that because the labor market is so tight, i think businesses look through this, right? they know the economy revs back up and shuts down the resource function, it's going to be hard. and they're holding on as strong as they can to these payrolls. so i agree with you. that's why i think the -- >> that's what makes me nervous about the economy. when things slow down, i'm worried that business will be slow to adjust on the labor side

of things. i think they're hoarding labor right now. >> it's one of those things that helps you out until it doesn't help you out that's like late '99 in the tech boom right? we had these growth slowdowns. but ultimately, it was a bust. >> thank you very much coming up, we'll talk hedging using gold with sam zell why gold because he recently bought it for the first time in his life sam will weigh in as the precious metal sits at its lowest level in over aon mth stay tuned you're watching "squawk box" on cnbc

welcome back to "squawk box. mark bristow and gary goldberg, both ceos, had a meeting last night. and let's take a look at these

stocks here. just slight movements. but in terms of the price of gold, we're seeing it higher by just a quarter of a percent. this on the back of the adp number released. the precious metal has dipped after a strong end to 2018 a good start to this year. we saw a peak this year in the second week of february. our guest host this morning sam zell, in a january interview he said he bought gold for the first time in his life you've been on this planet for awhile, so what prompted you to buy gold finally >> well, first of all, as you know there's almost a mini industry of gold bugs. i am for sure not one of them. when i went to the university of michigan and i took ckocon -- e 101, the professor had written on the wall supply and demand. well, my attitude about gold is

no more complex than supply and demand capital expenditures in gold mining worldwide are near their lowest ever. and yet the ongoing demand for gold whether it be for security or jewelry or electronics continues forward. and the lack of capex in the gold industry, its impact is affected four or five years from now. not now. >> figuring out the demand for gold, it's not industrial metal so the big part of demand is it's an inflation hedge, the fact that banks want to diversify their holdings, you have to get a grip on all of that do you believe in what gold bugs have typically espoused in the past

it's a hedge against inflation >> i think the answer is it is a hedge. i'm not sure if you look over a long period of time that it's been a very effective hedge. i think there have been short-term periods where it's been a very effective hedge, but i'm not sure on the long line it would qualify as a -- you know, a perfect hedge. i think the other thing is that there is a growing worldwide skepticism about fiat currencies >> are you going to say you like bitcoin or cryptocurrencies? >> no. >> okay. >> first of all, i don't understand them. >> you said just trust the fiat currencies >> to some extent, the creation of crypto and all the stuff is a result of the fact that, you know, that we as a world have

created but i don't think man e managed our currencies as well as we should have. one of the subject matter you want to talk about later is do deficits matter. >> yeah. >> well, you know, as far as i'm concerned if there's a single issue that i would be most concerned about, it would be what's the future of the u.s. dollar being the reserve currency of the world is an extraordinary privilege. one that probably i'm guessing and i don't know, but probably amounts to nearly 25% of our standard of living if the dollar were no longer the world reserve currency so i think these are very important issues >> in fact, that's what we will be discussing when we come back. deficits were once one of the biggest concerns in washington that's just a few short years ago. but with the national debt at $22 trillion and climbing, d.c.

deficit doomsdayers are suddenly much harder to find. we'll debate that when we meco back "squawk box" back after a quick break. see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

welcome back to "squawk box. this is cnbc and we are live from the nasdaq market site in times square we are just seconds away from key international trade data futures this morning a little weaker let's get right to rick santelli for those numbers. rick >> wow these numbers continue to get very large taking out that large number that we had in october, $59.8 billion deficit, red ink minus sign expecting a number the the $57.5 billion. of course this is larger and last month, we were a bit under $50 billion. not anymore. we're now over a $50 billion deficit. and, of course, this couldn't be more to the point of what's going on today with trade

negotiations trade balance is the real issue, but it's the issue that was used to crack into trade aspects that need to be changed in this administration's opinion you know, we had that big revision on adp though the number was a little bit light. we're looking at another failure for 10-year and undermaturities to challenge their close the way 30-year bonds did. we're now failing to get up to that 277 area. and of course we continue to monitor how the jobs friday will fair many call it a lagging indicator. but there's little doubt it looms large with respect to one of the aspects of the economy that still depicts ongoing strength back to you. >> thank you very much, rick santelli we want to get to steve santelli on taxes just in terms of these numbers, you were mentioning something about the possible impact to fourth quarter gdp

>> i don't know how much of that was really incorporated in the advance of trade i have to go back and look plus there's an adjustment but a bigger trade deficit would tend to reduce q4 gdp. again, another depending on inventory. i'll be back later today when i see how they work into the models there's a new report out from the cbo, folks finds that tax cuts will only generate enough growth to offset 20% of their costs the blog post from keith hall says the tax cuts will generate -- here's the math, folks. $2.5 trillion extra growth over a ten-year period. that's good. but it boosts the deficit by $2.3 trillion. the added growth on the left side of the screen there will generate enough revenue for the federal government to add $0.46 trillion or $461 billion after accounting for higher inflation and interest rates and deaf

service. so the additional revenue equals just 20% of the added deficit cost okay that's the revenue divided by the added growth a serious word of caution. these are estimates based on model summaries many of which can be proven wrong over time. we contacted the independent penn wharton folks and they are in line with the cbo's 20% estimate there the trump administration, however, disagrees kevin hassett is the charnl of the council on economic advisers, they show a bigger part on the corporate side and costs. the cbo, you can see it here it's the growth outlook. the growth administration forecasting about a percentage point higher gdp why? result of bigger tax cut effects yielding a much lower cost you guys get all this now? >> i think so. >> there it is the administration at 3% over the budget forecasting horizon the cbo has a couple years above

potential and then come back down to potential. everybody good on that okay for the moment, the private sector economist projects in the blue chip survey, they're closer to the cbo than the administration kevin has a little work to do in convincing wall street that he's right. so far so good for the administration with 3% growth in 2018 if that holds up in round two of this forecasting bout, the judges may have to adjust their score card if this kind of growth continues got it >> that's well put together for a very complex issue >> i hope you understand i spent three days on this i want to jump off the cliff >> stay right here for a deeper look at the u.s. deficit and the questions do deficits matter art laffer is here he's now laffer associates founder and chairman he's the author of "trumponomics. also bill gale is now a

brookings fellow and author of "fiscal therapy. gentlemen, let's have at this bill do deficits matter >> of course deficits matter sometimes they can be helpful. for example, when the economy needs a boost or a stimulus, sometimes they can be harmful if we build up increasing amounts of debt over time. the short answer, yes deficits do matter. >> let me be more specific art, does the deficit we're looking at right now matter? >> yes, of course it does. i agree with bill 100% but net deficits matter in the sense they increase total debt i think it's really debt that you want to talk about that matters here and, you know, debt's a big issue. when you add that $22 trillion number on the screen, you know, that's not a good number that includes intragovernmental debt that shouldn't be included. the number is really about $16

trillion which is still a huge, huge number. but that shouldn't be used either frankly when a country is very wealthy, they can afford to have more debt than countries that are poor or small just like a person with a big house can have a bigger mortgage than someone with a smaller house when you look at these things, i like to look at debt compare to wealth and i like to look at those. those numbers are not rising they're staying about level and have been for awhile >> bill, what do you think is that how you would look at it >> i agree with a lot of what art just said. in particular, i think the $22 trillion number should be banished from public discussion. >> agreed. >> and use the $16 trillion number i do think the concern is not so much the current level of interest payments in the current debt, but where we're headed if you look at the next 10, 20, 30 years, everything's going

haywire. net interest rate, net interest payments are rising dramatically, the debt and the deficit are rising dramatically. i think that's the real concern. i don't think that we need to cut the deficit right now. but we need to put into place a gradual faze in of spending cuts >> hey, art. steve liesman. >> hi, steve by the way, good segment >> thank you so much it was really hard to do >> i've been working on that stuff a lot with you and you presented it nicely. >> i want to ask you a question. i have corporate taxes down 21%. year over year >> yes >> so i just want to know where you stand on the issue of are these tax cuts paying for themselves >> yeah, the corporate tax cuts -- taxes are down a lot more than that, steve, if you really look at a quarter over quarter moving average it's down 30%. we always thought they would be down non-corporate taxes are rising dramatically they're the highest increase in

probably five years. so when you add the two together, total federal taxes. no, i use the national income and product account numbers which you should use you find total taxes are up nicely year over year on the moving average it's a good number best in four or five years >> art, let's talk offline about what numbers you're using. i have individual income taxes down -- >> i can send you my paper >> i've got the individual down -- >> this is for -- i think there are -- those numbers i think you're talking about, steve, are the numbers for the first four months of this year, right >> no. i'm using year over year data. >> but treasury numbers which are cash flow. you've got to use accruals you really do. you have to use accruals >> let's let william gale come in on this >> i think the main point is everybody except kevin hassett and the cea thinks that the tax cut reduced revenues you've got consulting firms, cbo and joint tax committee, you've

got various think tanks, tax policy center, tax foundation. it really shouldn't be a debate about whether the tax cut reduced revenues it's clear that it did it did some other things, too, but in terms of the revenue front, i just don't think it's a debate >> honestly, we're way above the baseline for both the tax foundation and the joint committee on taxation and the congressional budget office. we're way above baseline on revenues coming in we really are. and we had about a quarter of a trillion dollars coming in and repatriated funds taxes. so that was in the fourth quarter of 2017. which you've got to include in this as well because that's part of the tax bill as the repatriation of funds. when you look at it, i just don't think you're right i'd be glad to go through the numbers with you >> can i say one thing about debt >> yeah. >> one thing when you look at debt, you know,

debt depends upon the interest spread if you can borrow all you want on 1% and lend all you want at 10% risk free. how much should you borrow everything in the world. reverse those numbers. borrow all you want at 10% and lenld all you want at 1% how much should you borrow nothing. debt is a tool it's a tool to get a spread to returns. when we came into office in '81, we took on a lot of debt with the reagan administration but look at what we did with it. we created enormous economic prosperity which was well worth taking on the debt the key issue here is what do you do with the money you borrow do you create more growth or just pay people not to work? that's where you really should look is what we do with the dollars we use not whether it's debt or not >> art and bill, sam zell is our guest host today i think he has a view on this as well >> i think what art is saying is exactly right. the big concern that i've had is that we're spending tax revenue

in a manner that is not productive to the economy creating new jobs, creating new assets instead, we're spending it on, you know, you want a job you can have it. and if you don't want a job, we'll pay you anyway stuff like that is just -- you heard of the last crock? >> i looked at the numbers for the last four months and part of the reason the debt is up for this first four months is we're spending more on defense our interest payments have gone up >> the federal government is a big retirement and health care program with the biggest military in world history. that's all it is it's paying retirees and medicare and medicaid. it's not that complicated. >> it's not. and i think the thing that people forget and the thing that makes me so angry about is when people say the government should be more like business. guess what, folks. the government is the government

because it's not business. we give stuff to the government to do that business doesn't want to do and aren't otherwise productive for the government. and here's an example slightly related here which is that we might cut the corporate tax and it may not pay for itself, but we may have another bunch of reasons to -- now, that doesn't mean everything is a free lunch and that's the problem and i want to -- sorry, becky. there are social functions involved in why we do things i personally like the idea of cutting the corporate taxes. i think over loopholes should have been removed to make it more revenue neutral on the corporate side i don't think it should have ended up being such a huge increase for the deficit >> bill, go ahead and respond to that i'd like to come back to those as well. but respond to steve's point >> the tax cut i felt was largely the wrong thing at the wrong time it fails a long-term growth test it makes the distribution of

income less equal. it loses revenues by every conventional measure i think if you ask yourself, if you had $1.5 trillion or $2 trillion, what would you have done to make the economy better to help people i don't think the tax cut could have been the answer >> let me throw out just -- >> can i interrupt one second? >> go ahead. >> nancy pelosi in 2008 had a trillion dollars to spend. the opportunity to create enormous growth shovel ready for that trillion dollars was there. and what do they spend it on nonproductive increments to social programs. you do that, the trillion dollars is going to be there to be paid back some day. that's where debt matters. >> sam, you're my hero >> can i just quickly bring this up and we're out of time the interest rates

the idea that higher payments on our debt, on the interest on that was one of the three big issues that really pushed us in a tougher direction. this came at a time when interest rates were really maintained low what happens if we actually see much higher rates? >> the share of the government spending that goes towards interest rates will rise and rise sharply. >> but these are going to get harder and harder to do. >> this is the question of our time and it's a question of investment it's a question of policy. which is the extent to which we should rely upon low interest rates for the foreseeable future if you're sam zell, you can go to the bank and say give me money for ten years and you're set. that's not true for the federal government which can sort of term its stuff out it's a question for federal reserve policy, budget policy, investment policy. and closely related to that is where is the right growth rate can we do 3% sustained or is 2% the right speed limit. zblu answer those questions, you will be rich

>> great to see you. >> thank you >> sam's staying here. when we come back, sam zell on the record as he has been he weighs in on investment opportunities and whatever else he'd like. as we head to break, take a look at carlos ghosn's first seconds of freedom after being released on bail overnight. "squawk box" will be right back. what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last?

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box," everybody. our guest host is sam zell sam, we haven't dug into your thoughts on real estate that's why so many of us listen to what you have to say. has the picture changed with the fed suddenly being on hold for the foreseeable future >> i don't think so. i think that real estate is in a period of expansion. almost every class of real estate except retail has had significant increase in square footage in the last few years. and which raises the supply/demand question and how it's going to background returns in the real estate sector. one of the most interesting things has been the olt ration between single family houses and multi-family and the single family is, i think, current number 750.

for 25 years it was a million a year or more and yet apartments are being built at record levels you know, years like 1971 conve converting then we went down for a long time in areas of real estate supply is becoming dominant and will affect prices particularly in areas with no barriers to entry. so dallas, atlanta, raleigh, markets, they have lots of land and opportunity for development. they're going to oversupply

their markets. >> if you look at real estate investment trusts right now, it's a sector of the s&p, if you look inside that, 12% of that index or so is cell phone towers infrastructure, we're calling it real estate. it is really a tremendous amount of capitalization. should we be thinking about those things in real estate terms or just kind of semantics thing at this point, an attractive area to you in. >> let's take cell towers. in many respects a cell tower has very similar characteristics to an office building. it has got a core. and then if you're in the first floor and second floor and third floor the building becomes more valuable so having that being part of the reit world is very logical and makes a lot of sense

any assemblage of multiple similar assets operated as a network fall into the category of real estate and i think that they represent good reflection of real estate, assets and how they appreciate. >> what is better for business in your view, rising interest rates or where they are? in that rising interest rates mean a better economy, but they also mean a higher cost of capital. >> well, if you guarantee me a better economy, then i'm in favor of higher interest rates if for no other reason than interest rates have been artificially, you know, submerged for a long time. at some point, that's going to cause a problem. >> where are we now then in terms of the economy and whether or not interest rates are --

>> inflation right now is below the cost of capital. but not very much. and there are times over the last, you know, years where inflation has been higher than the interest rate. that's not a formula that ever works. >> what do you think about the president job owning this past weekend at the federal reserve and complaining about them tightening with quantitative tightening is what he calls it it is not enough to get them to stop on interest rates, he wants them to stop tightening on any front. >> well, there is no difference between raising interest rates and shrinking the capital that is in the market so if you left interest rates alone, and you doubled instead of $50 billion a month, $100 billion a month, guess what, interest rates would go up it is supply and demand. so they're basically the same thing. >> you've been in favor of the fed raising rates for quite a while. >> i have.

i felt that the level at which they were maintained took the entire sense of urgency out of the investment scenario and any time there is no price for delay, then by definition you have no pricing system. >> all right, let's get down to the new york stock exchange. jim cramer is getting ready for his show that comes up in a few minutes' time. what do you want to talk about this morning what is top of mind for you? >> i'm looking at retail and thinking, listening to sam talk -- we forgot there was a government shutdown and it caused weakness. i think we have to see through that and recognize that there is a resurgence and maybe a good spring coming for retail and i'm kind of -- on that end of things. i prefer to stay on real estate entirely but i think better times are coming when it comes to retail and people feel like

we had a letdown i'm looking at it the other way. we have a deal in china, we get rid of a little bit of the gloom, we get a stronger retail in the spring, i think we would be pretty happy. >> sam, part of what you look at with retail is the square footage that is out there. retail space just the supply and demand again. >> by definition i don't disagree with jim. i think retail is probably going to do better but better compared to what? leprosy versus cancer? and, you know, the problem is we have too much space, we have an online methodology that has for sure taken 13%, 14% out of the market very top is doing well the very bottom is doing well. and everything in between is subject to obsalesence. >> i know better than to suggest that jim is wrong. >> looking at shares of ge, down again this morning, i haven't

seen any reason why. >> that was when people really sorting out what happened yesterday, jpmorgan and coming out and saying it was much more negative than we thought and i read through the notes that tusa put out, jpmorgan and he was right and things aren't as good as a lot of people felt going into that meeting the stock can go back. will it go to 6 like steve says? i think better than that it was sobering. the industrial cash flow is not good. >> thank you we'll see you in a few minutes >> i love listening to sam >> me too. don't miss a big interview tonight on "mad money," the ceo of bristol-myers squibb is going to be joining jim at 6:00 p.m. eastern time to talk about his coanmpy's proposed deal for celgene. stay tuned "squawk box" will be right back. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts

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welcome back to "squawk box. we have been talking with sam zell and sam, sam, we have been talking about real estate. when you get down to it with housing, there is still some weakness taking place there. prices may have stabilized, but it is hard to understand what do you think is really happening? >> if you look at the historic of housing, it was always kind of super charged by the first guy, you know. the guy buying the house

that guy today has student debt. and a lot of other issues. and basically is not in the market or nowhere near the world that they used to play and it is having a kind of an effect going up the clock. and at the same time, multifamily is increasing because family formations are still increasing, but not with the emphasis on the single family home which was the definition -- >> not just the demographics are changing and people are changing, they can afford to get there. >> part of it is the affordability for sure part of it is the deferral of marriage your whole when we have children, when you need more space, when is the back card relevant changed from 23 to 33 at the same time, the couples income changed dramatically.

so changed the definition of what the housing should be. >> it is always a pleasure having you here. we really appreciate your time and we look forward to having you back again soon. sam zell melissa, mike, thank you for being here today too that does it for us today. join us back here tomorrow right now, time for "squawk on the street." ♪ everybody good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer at post nine at the new york stock exchange. faber at one market in san francisco. futures suggest another close call at the open a tight range here this morning after five losses in six days for the dow and the s&p. europe is mixed as well. ten-year 271, adp was in line. the trade deficit for the last year coming in at a ten-year high watching the trade tea leaves. researchers looking for clarity.