life from new york this is "squawk box. good morning 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 joe kernan and mike san tolltolli. u.s. equities futures are doing better after a lackluster day. the dow up by 14 points. the s&p and the nasdaq were both down just slightly are dow still down by 1.5% needs to make that up in the next few trading days. the dow futures let's take a

look at what happened overnight in asia. stocks in japan up by 2.1% the hang seng was up by about .1%. shanghai composite down once again. down by 1.5% after steep gains earlier in the week. right now green arrows across the board the biggest advancer is the cac in france which is up by .4% also, treasury yields here in the united states, which were solidly below 2.5% for the ten-year yesterday still there. ten-year yielding a 2.446% uber buying at this time middle east rival careem at a gamble joining us now from dubai with more good to see you often. good morning >> it's the biggest acquisition of its kind for uber, but also the biggest acquisition of its kind for the middle east tech start-up scene ever.

this also plays into a much larger question for the region of what's going to happen next saudi arabia, the big winner here of course, they are big investors. not just in uber, but also in careem this is a company that operates in 90 cities across the middle east and pakistan as well, and it's a company that is really doing far and away better than its nearest rooefl uber when it comes to dealing with regulators a big thing for uber ahead of its planned ipo, and also a big win for the start-up scene here as well. careem, of course, is going to be operating on its own as a fully owned subsidiary it's going to continue its brand and also to copy its management. the company has been straight away from uber, and also, of cour course, one question going into the ipo, questions about how they were going to tie up all of the loose ends ahead of the weekend, but today a major announcement coming from $3.1

billion of uber, and a note from the ceo of uber saying, quote, "this acquisition is subject still to regulatory approval in various countries, which we don't expect before q12020 until then nothing changes since both companies will continue to largely operate separately after the acquisition. very little will change in either team's day to day operations post-close, a lot of celebration. not just here in the uae, but specifically for these guys. this is a company started by two former mckenzie consultants because they were consistently late for meetings whether they were in saudi arabia or egypt or right here in the uae. a lot of celebration in the tech start-up scene >> thanks so -- >> there's cash involved >> cash. $1.4 billion in cash the convertible rrks prices at $55 a share. >> convertible has an underlying equity value of what's for uber.

>> $120 billion valuation, but, i mean, if it was all stock, they're all convertibles, i would say, they're using their own. i don't know whether they're inflad $120 billion sounds like a lot >> it also says something about the business this is not one where i have a magic app and some software, and i'm going to take over the world. it's eh local business you have local regulations and local franchises that matter, and you have to piece it together around the world. it's not just that uber can go around, you know, anticipating -- >> which gets back to the point. are there room for two of them the lyft ipo coming first.

can they make money if there are multiple players >> that is a question, and also the question is will the public market kind of symptom -- stomach the business model we're going to get that down to a scale. >> and it is careem. i guess yesterday it said careen with an n. to hurdle swiftly in an uncontrolled way >> wildly. >> a bad name. you would never want to -- >> that would be -- you would have to say, no, let's change it to -- maybe -- >> swerve. >> anyway, that was my -- we have all that cash some big acquisitions. >> yeah. absolutely >> yeah. i think back to mike's point, it goes to the importance of making sure you are locking up all of these local markets because it is going to come down to who is biggest, who can work off of

billions >> you know how that works in the old days? a 10% coupon, or -- >> a coupon. >> well, it's -- that could be it >> it probably isn't 10% we'll get to the story we called this a new low yield >> yeah, we're back to, like, january of last year, right? >> we have to go back to the last year. >> it's like 14, 15 months >> 2.4 you know, someone was yanking my chain yesterday because, remember last night shri was on, and he will be in, and we'll be at 3.5%, and he will go, we're going under two. you are crazy. here we are. you have to give him props, though would you have even bet a year later we would be here >> no, i would not have.

that's why people are bringing it up. lock down. >> good for them for bringing it up we remember all the people who were wrong we should have remembered those who were right >> we have march of last year. >> yeah. maybe we were at 2.7 check back in request thwith th. it's not going down from here, is it? >> people are looking nearby at 2.35 or something like that is maybe a little bit of a floor. 2.23 in november >> here we are half empty, half full. stocks are great because the multiples should go up with lower yields nothing else to invest in. then it's, like, god, what is it saying about a slowdown? we don't know. you don't know >> it says both those things, actually supports valuations and also could mean a slowdown. >> exactly >> all right new this morning, samsung electronics warning that its

first quarter profit will probably miss market expectations because of falling chip prices and slowing demand for display panels it was a rare statement that comes ahead of samsung's scheduled earnings guidance. samsung cautioned last week that slowing global growth and softer demand for memory chips would weigh on operations. also, shares of nintendo soaring overnight. the stocks surged after a wall street journal report yesterday said that the company would launch two new versions of its switch vaed video game console as early as this summer. shares of electronics maker sharp also rose on expectation that is it would provide liquid crystal displays for those new models you can see that stock up by 4%. wework said that revenue doubled, and so did the losses they reached $2 billion. the monthly users went to 400,000. the occupancy rate fell to 80% at the end of the year the company continues to be dependent on private equity

investments as it rebrands the new company and expands into residential living communities even schools as well still no word on plans for an ipo. remember, when we had sam zell here and asked him about this. look, i have seen stuff like this before. it never works out even things that can stay afloat in a strong economy get crushed when you start to see a downturn because the first ones who lose tenants when something like that happens. >> they depend on tight occupancy rates. >> a lot of them are short-term leases, too. >> we world war i as such a high concept. talk about how it's culture and it's subscription. lifestyle. it's not just -- >> beer in the office. >> it's not just a place to work >> what are the things called? what is a meme does it have audio >> it doesn't have to. >> what is it where you just have -- you can bring up a free word

>> i would like that to be able to hit how cramer can hit. >> yeah. >> because i -- every day there's a time when i am looking -- >> fry fly your -- >> i'm looking for the -- that's a crock of button. what do you think? can we -- is that possible to get that on -- or -- >> on loop >> what do we have -- we could bleep out the. [ buzzer ] >> we could bleep out the s-word itself let's get to apple we're phrasing this, is it a netflix killer apple streaming video service is finally here joining us to discuss its impact on rivals, especially netflix, bring in daniel flack, senior analyst.

dplo could it be an apple killer if they don't have something to replace the iphone with, and this is not it >> i view this as actually more of an evolution rather than an apple killer or dramatic shift in the model, and i say that because -- >> netflix killer? >> i don't think it's a netflix killer, assuming netflix continues to do a good job with creating unique content, and they have direct relationship with their users i think netflix remains well positioned with apple, though, if we look at the history, this is a company, if you go back to the ipod, nearly two decades ago, they really reinvented themselves, and they took a market music in that case and really recreated the experience, made it fun, made it easy to use, and then you go back over a decade with the iphone that did something similar, and really what was powerful with the iphone and i think someone underappreciated is their ability to bring along developers the numbers are they paid out over $120 billion to developers.

if we look forward to the world of video and gaming, the opportunity is working with creative luminaries like oprah, like steven speilberg, if they're able to pull together unique content, we think they can help strengthen the ecosystem. it's going to take a while, though at the same time they have to continue to execute on the iphone >> they were a great hardware company with all the great gadgets, stuff that everyone had to have across the world everyone has the stupid airpods. i even have them now they're going to go from that to producing content and news and things that they have to beat other well-heeled rivals that are also producing content it just seems like it might work >> unless it's an extra stream that comes in. >> their service revenues are gr growing quicker than anything else >> if you look at the products, they're an integration of the hardware and software and services i don't view it as just

hardware >> what they're going to pull together is they're going to pull together different sources, and they're going to really deliver to the user something that has been curated, if you will >> i going to be high margin business >> well, the news, i don't think it's going to necessarily be high margin. there is the potential for them to be able to -- >> they're cure ating. they're not doing anything it's money right off the top >> they have to invest in the technology platform behind it to bring it all together. this is part of a longer term move, if you will. i don't think this is just about making money in the short-term >> hardware sales or is it to make money >> it's both it's both because users who see reasons to stay within the apple ecosystem are going to continue to replace their devices over time you'll see the fact that they can attract new users because of what they're able to do. i don't view any single device or service as the silver or magic bullet here. >> yesterday i was very

skeptical, and i was thinking what companies would say, okay, i'm going to let you be a person who charges me and taste takes part of my subscription money and the news companies that are getting involved and content companies. i heard a statistic this morning that shocked me. i didn't realize that they have five times as many users as hulu, amazon prime, and netflix combined i mean, forget about wal-mart. you are big giant if you have that sort of a setup >> with an active install base of about over 900 million with the iphone itself, what this is giving to apple's partners and the producers, it's really access to their customer base and being part of a community that ultimately the users find powerful and they have reasons to stay there. if apple doesn't ino vat, ayoy d they can't create new things, users could leave open e over time want everything apple does is going to be successful >> if i wanted to compete against netflix, i would want to be on that platform. >> here's the thing about

netflix. $15 billion in revenue apple it $265 billion in revenue. it's not this massive pool of intangible revenue with 140 million global customer relations. i wonder what would you consider the metric for success whether it's how many subscribers or how big the revenue stream is. >> just to look at music as an example. they reinvented apple music, and now they have over 50 million subscribers. we would look for a metric in the tens of millions over the next several years i would say this is a much bigger story this is not a zero sum game. this is a transformation of the video market to a mobile experience

there's the opportunity here in the u.s. and then, of course, in the markets overseas both companies, netflix, needs to continue to innovate. apple essential has to apple obviously has to execute on their key product businesses, but this is an avenue of growth, and we've seen in other things like they've done with music they can create revenue streams here and make their users more appreciative of the platform and make the ecosystem stronger, which is critical to creating -- >> apple, they're very, very focused. they're not trying -- >> they're not focused right now. >> well -- >> that's what this was my point at the very beginning. they should be more focused. if they do anything -- >> they could have gotten netflix at $60 billion

it's massively diluted its lower margin if you think of the amount of drama and complaint that went into apple for $3 billion, is that somehow going to destroy the culture? i mean, i just think that -- i understand >> they couldn't have. someone could have prps the organization wasn't that the point at scale. >> buffett said the same thing he knew. they were coming to him asking him advice about things, the founders, and he passed on it.

>> got -- >> alphabet? >> thanks. >> thank you >> when we come back, mcdobld's is upgrading its drive-thru menu we'll tell you about the $300 million acquisition that may change the way you order right now, though, as we head to a break, let's take a look at the premarket winers and losers. the futures are trading near the highs of the morning visa leading the way obvious. sometimes, they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances.

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mcdonald's buying dynamic yields sources close to the company tell cnbc the purchase price is greater than $approximate00 million. mcdonald's will use dynamic yields technology to change its digital drive-through menu display to show food based on the time of day, weather, current restaurant traffic, and trending menu items. >> i think if it's a heat wave, they'll show you the blizzards it's milk shakes >> for me it's about when you can get the fries. when you can't if you go too early, it's possible you might get shut out. >> i thought they were doing fries all day. >> the breakfast they do now

hash browns. >> i don't know what happened to the predecessor. didn't -- it wasn't sailing smoothly at that time, and they were trying a bunch of new things they had all this weird stuff. this guy got back and said i'm going to make the hamburgers fresher. i'm going to make the bathrooms cleaner. i'm going to make the drive-threw faster, and everything hotter. the quality better, and the stock tripled. that might be exaggerate, but back on track, right this seems to be part of that. >> unclog the indoor experience. i know the franchisees didn't like this. starbucks clogging up the whole -- logistics of the store. >> you have a lot of menu items, you can't get stuff out as quickly. >> what about the rib things they put them in a mold. >> mcrib >> there's like a mold, and they poor somethi pour something >> you like the fish fillet. >> that's the fish that are like

this on the bottom they have both eyes moving >> flounder. >> it is okay. >> instead of all these -- then they had the -- they said, gosh, maybe we shouldn't be mcdonald's anymore. people politically incorrect no one over -- it is classy or vein and everything else as they are in europe, mcdonald's, you can barely get in there the lines are so long. >> the ex-pats >> by the way, i don't know if this acquisition has to do with this, but the dream for a long time has been are you in the car and you want to rnl where the next mcdonald's is we take your order >> we already know how to do that don't know anything about technology we know how do do that >> l.a., i was near l.a. hoping to get something from my son. i hit the nearest mcdonald's

it said 432 feet i went what? it was right -- i looked over, and it was right there i love that. >> i have to say, that says and about us oh, i can do that now. >> 432 feet? >> it's great to see you if you aren't driving to a mcdonnell's, you probably have noticed in the car that you have caution aid lot more to fill up that gasoline tanks of yours because that surge in oil prices has been driving a lot of the energy trade as we take a look at the macromikt every picture for oil prices, we are off to one of the best starts. you can see wti crude over the course of the year-to-date period about 31% or so, and that's been driving a huge move in gasoline prices as well rbob gasoline prices translates

into prices at the pump as well. this move in rbob gas mean futures, by the way, guys, the best start to a year since the inception of the rbob futures contract going back to 2005. just to give you an idea of how stark and dramatic that move to the up side has been of course, that's translating into more prices and higher prices for consumers as well what's driving the bullish oil trade? well, they've had a number of different things we'll boil it down to a few handfuls opec plus, opec and friends. whatever you want to call them the production cuts, will they work will they stick to them? that will drive prices higher. sanctions on iran and venezuela also less pessimism about the global economy all of those are factors in that oil trade you've seen so far as for the other side, take a flip side of the coin. the bearish drivers, we've got record u.s. oil production it's expected that the u.s. will continue to pump at these levels for quite some time. slower progress.

then less -- a little bit more pessimism about the global economy. driving some of the bearish trade. prices are up today, but that dynamic has led to one of the best starts to the year for oil and gasoline in a long time. someone just said it's pole lack >> my wife is a chicken nugget person speaking of molds. >> i didn't want to say the nuggets. >> they're important because i also have a small child at home, and she tends to kind of like chicken nuggets and french fries. >> it's good get something in them, right >> yes, it is. i wanted to key on something you said about the timing of the frenk fries thing. i want to be a little bit more nuanced about that it also goes to when you get the french fries when they're available because when they're fresh out of the fryer, much different than when they are kind of sitting there for about

five minutes or so >> also, as we've said, the worst mcdonald's french fries -- >> better than a wendy's >> people have debates about what the best burger is. in and out, shake shack. i would say that there is no debate in my mind that the number one best french fry available around the world is a mcdonald's french fry. >> you know, it may be one of those seinfeld it's not the yogurt that didn't have any calories. there's no -- they said they fixed the saturated fat. did they really? i mean, it tastes -- they are geniuses if they did that's where the nobel prize should go. >> to mike's point, right, if i could find an in car or some kind of an app that would tell me when the french fries were going to be the optimal fresh french fries, i would find a way to get to that 432 feet away >> when you are done with the french fries, and then you find a couple that fell out at the bottom of the bag. oh, hello.

>> part of it prepares for brexit what's next right after this break? futures are pretty good this morning. 170 points in terms of up side momentum on the dow. 16 on the s&p. almost 40 on the nasdaq. we are coming right back i consulted with your grandmother's doctor.

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this is banking reimagined. what's in your wallet? >> lawmaker advisory voted rip control of the brexit process away from theresa may's government the vote will allow the house of commons to hold a series of votes on different outcomes for brexit and while the votes will be nonbinding, it could indicate which e.u. exit deal could actually pass in parliament if any, and also signals a deep division in theresa may's party. three of the ministers voted against their own party. >> this is what happens when the dog catches the bus.

because there's no consensus as to anything that kwoo happen in this entire deal >> yeah. might not even happen. >> yeah. >> three-would i stalemate, but parliament is trying to say, look, figure a way out >> figure something. when we come back, a big red flag in the bond market as treasuries and stocks diverge. we're going to talk about the signals in the market and what they mean for your portfolio the ten-year yielding 2.446% today. >> as we head to a break right now, let's take a look at yesterday's s&p 500 winners and losers

welcome back you're watching "squawk box" flooif the nasdaq market site? times square >> welcome back. been watching the u.s. equity futures, and after a mixed to flat day for the markets yesterday, you are going to see that things are looking quite a bit stronger today dow futures indicated up by 175 points s&p futures up by 16 then the nasdaq up by 41 >> stocks and bond yeeds are moving in opposite directions. ten-year yield trading at the lowest level since january of 2018 while stocks are off to the best start for a year since 2012.

what is the messable of it, and just equity investors have be to concerned about this is this kind of a false signal >> well, the signal will be important if it's sustained. i think the move is certainly consequential. any time we release the funding cost in the short-term rates to a level higher than we can invest longer term, with slow financial activity, full stop. floebl growth has really rolled over, and we think that's likely we also think that the problem that you alluded to is indicative of what's happening in the bunds market. we have negative yields. their ten-year is back to the negative territory i think the yield curve is signaling slow dourn no inflation risk asset prices are valuable >> they'll remain vulnerable >> the bond market is not just telling us what we've already

known about a slowdown overseas and we have to kind of wade through the soft patch you think that there's more down side for risk assets >> i think the fact that german yields are negative. that always spooks me. any time we are paying somebody to hold your money, that's showing you that risk appetite is almost nonexist ebt i think they're on the right track. i think the bond market is basically saying the next move it lower, not higher on short-term rates >> the way we did the coronation is backwards anyway. you don't do yields versus stocks you do bonds versus stocks, and instead of being inversely correlated, they would be positively correlated, which is more usually what happens anyway bonds and stocks go up at the same time.

right now i actually don't think that there's much signal in the noise. largely because we don't really care about the three-month verz the ten-year that really is saying something. right now i think there are too many fundamental factors driven by the fact that ten-year yields have kol apts for relatively few fundamental reasons. 325 so 240 in the span of about five or six months in the face of very welltively little fundamental news except for the federal reserve. if the market got away with it, it got carried away, bobd prices got carried away to the upside way too much momentum. technically overbought now that's absolutely a market i would be in. i would be shorting bond prices. >> you think tactically right now that move has become stretched and that's why we're seeing a little bit of relief in the equity futures this morning?

the relative futures say they are technically overbought we see a little bit of that coming out today i would be shorting the ten-year right now as a trade because 240 in the face of the fundamentals we have right now doesn't make too much sense to me >> james, as a fixed income investor, does it seem as if sentiment is a little too bullish on bonds right now really, how would you play it at the moment as scott mentioned, november three and a quarter on the ten-year the three-month and ten-year spread was almost a full percentage point if that wasn't telling you that the economy was going to be strong in the subsequent five years, can we still get that weakness message out of the setup right now? >> well, i think you had the message -- the mixed message back in november as we spoke back in that time. we were having calls for 4% ten-year 5% ten-year for super pretty prominent wall street leaders.

i think that was also way consequential to the federal reserve's complete misspeak in october to the economy and it was on all cylinders, nowhere near normal. i would just make one point about the two's and ten's, versus the three's and ten's, and it may be a bit of a semantic, but hedge funds, private equity, levered investors fund off live more than three months. when they get spooked, their funding costs are going higher they did he leave. that's a big thing that we saw in december. it wasn't the economy. it was that people extrapolated the funds rate going significantly higher, and they better sell financial assets and that creates volatility. i think that's here because funding costs have moved higher. i think that's the take-away from the yield curve

>> it has been one of the triggers for the action. guys, have to leave it there appreciate it. james and scott. coming up, tesla model 3 production continues to be a thorn in the company's side, but a new legal ruling just went in elan musk's favor. a roughsession again yesterday then, later, we're going to discuss winners and losers from yesterday's apple event and the company's transition from making devices to bundling subscriptions. i'm working to keep the fire going for another 150 years. ♪ to inspire confidence through style. ♪ i'm working to make connections of a different kind. ♪

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welcome back a federal judge in san francisco dismissed a securities fraud lawsuit brought by tesla shareholders that allege that the company made misleading comments about the production status of its model three. the suit had been dismissed once, but the judge allowed it to be amended and refiled. the judge said tesla had repeatedly warned shareholders about model three production risks. that stock up by 1.5%. when we come back with summer just around the corner, sunscreen is sure to be on your shopping list. you will not want to miss our next segment with fda commissioner scott gottlieb. new regulations for sunscreen products are being proposed, and he will tell us why next let's take a quick check of what's happening in the yurp even market. green arrows across the board,

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the fda is going after your sun screen a new proposal by the fda would raise the spf labeling on products and provide specific information about what's actually in your sun block joining us now to talk more about it is fda commissioner dr. scott gottlieb thank you for being here today what spurred this? >> we advanced a new framework to try to make it easier to get new innovations on the market.

there are a lot of ingredients on sun screen that could be in sun screens that might offer better protection. some of the available ingredients. we want to make it easier to bring these things to market so we created a framework that allows manufacturers with some testing requirements to prove that the products are safe to put new ingredients into sunscreen products >> i am somebody who has severe allergic reactions to sun block. i can only count on titanium dioxide and the zinc ox side how do i know which is going to give me a allergic reaction or not? >> we've cleared titanium dioxide and zinc oxide there's 12 other ingredients that are currently marketed in the u.s. in some form that we're gathering more information on.

we've asked the manufacturers to submit more information. some long-term toxicology studies because of the changing way that consumers use sunscreen. they use it more often, put it on more parts of their bodies. we see parents putting it on young children we're getting information we never had. that doesn't mean we think the ingredients aren't safe. we think many are safe and effective, but we're trying to gather all the information we will continue to market these -- >> how'd that stuff wind up on the market in the first place if it never went through approvals? >> it was a very old process that really made it difficult to gather all the information we'd want to determine the long-term safety and effectiveness of the products we like to have information about the long-term toxicology especially given the changing way that consumers are using sun screen we're going back and gathering it now under this new framework. we think a lot of these other ingredients and there's 12 in all, we think most of them are

going to be cleared for marketing under the requirements of this framework. >> a lot or most doesn't include all. >> well, we don't think they're going to be bad for you. we need to look at the relative effectiveness of them. there's probably going to be some more effective than others. that doesn't mean they're not effective. but we want people to make informed choices going to provide better protection we want consumers to know that if you want to state that your sun screen provides broad spectrum coverage -- >> that doesn't mean that right now? >> not necessarily have a minimum spf of 15 we've created more standardized requirements for different nomenclatu nomenclature so consumers can more easily identify wh they're getting. >> the stuff you spray on, do you have any concerns at all about that >> no, because it turns out that the way these things have been formulated, they've been

formulated in particle sizes that are large enough they don't get into the small airways we would be concerned if they created a small particle sizes that got into small airways and could potentially create some irritation or damage to the lungs. but when we looked at these different ingredients, the ones currently marketed through this new framework, the new framework allows us to take a harder look at the products. we feel pretty confident that most of them are formulated in a responsible matter >> your last day as the commissioner is on sunday, correct? >> no, two weeks from now. we have a lot of stuff to do between now and then including testifying twice before congress. i packed in a busy two weeks >> so this is not the last time we're going to see you >> no. hopefully not. >> you couldn't schedule that before the testimony, scott? >> they kept me around to testify on the budget. >> too late. i can't talk yeah i'd get the heck out of there. scott, i'd just think about -- i

have gingers for kids. it's scary there's basal cell i guess i got too much sun right? is any of that a precursor to melanoma or in sight of melanoma if you have basal cell all the time, does that indicate you've got too much sun >> it certainly indicates there's too much sun it's an indication you have sun damage >> yeah. it's tough i mean, you don't even know it half the time. it's something you go outside, you should have a good brand on the exposed areas. it's just common sense >> and reapply after being in water. >> and reapply, okay all right. doctor, thank you. think about what i said. congress yikes. think of the questions you're going to get like the one i just had. coming up, our guest host for the rest of the show is mohamed el-erian, allianz chief

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is the bond market signaling a recession is coming? allianz's mohamed el-erian joins us to discuss. apple joins the streaming war. what it means for netflix and other streaming players is straight ahead plus corporate buybacks in focus on capitol hill. senator pat toomey is here to defend corporate america as the second hour of "squawk box" begins right now ♪ live from the beating heart of business, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc i'm joe kernen with becky quick and mike santoli andr andrew's still -- i guess this is not a safe space still at this point today but we are expecting him at some

point, right >> friday. >> when things blow over >> he'll be in on friday >> we won't be talking about it at all by then joining us mohamed el-erian, allianz's chief economic adviser. u.s. equities at this hour are sharply higher 48 points on the nasdaq and the s&p indicated up 18.75 >> keeps climbing all morning. here's what's making headlines at this hour boeing has formed a committee to review the process for the 737 max jet. following two fatal crashes involving the jet. however, most of the members have yet to be named and no timeline has been set for this assignment we'll have more on that story in a few minutes. mcdonald's is buying israeli marketing firm dynamic yield reportedly for more than $300 million. the biggest acquisition in two decades will allow it to

modernize its displays and upgrade mobile ordering. and two key pieces of housing data are ahead this morning. the government will be out with february housing starts at 8:30 eastern time which are expected to register a 1.6% decline half an hour later, it's the shiller report for home prices for january. economists think that that number will be up by 3.9% compared to a year earlier we have a few stocks on the move this morning. bed bath & beyond, with cora advisers have a combined 5% stake in the retailer and plan to have a proxy fight. see that stock reacting up 14% that was a $40 stock two years ago. that's how badly it has done nike shares remain on watch after a volatile monday session in which attorney michael avenatti said he will be announcing a scandal following that announcement,

avenatti was arrested on charges of alleged extortion nike stock settled down over the day. bouncing 1% this morning. >> that was a story. >> got to find a new candidate for 2020 anyway, is a recession -- can you believe that but i di gress, he was on cnn and they were like, michael what would your platform be i mean, they took him totally serious in his 170 appearances on >> i've read the transcript of -- >> this is a business story. what he was trying to do with nike i just read it too did you see how many "f" words were in there? he is a dirty, dirty dude. >> well, and part of it is he was using funds from all over the place, misappropriating them i read through the court tri transcripts that he was just involved in a week and a half ago in l.a >> and this dude -- >> charlie munger's people wrote it up. >> i just was watching him on

"finding neverland," geragos and now he was she jussie smollett guy too there was something going on with him with avenatti >> separate charges, yes that's where it's back to the idea of him taking money and misappropriating them. zblec >> even stormy's unhappy with him now. she said she fired him a month ago. let's discuss this and much more with today's guest host mohamed el-erian chief economic adviser with allianz and as i always do, i just urge you people at home, sit back and just the way that you are able to put together these thoughts and make your case for your economic views, it's almost like

mozart or something. it's soothing. all the notes fit together they harmonize they go to crescendos. >> don't you remember the scene in armedeus? too many notes >> i'm looking at the most recent place in the past, there have been times there have been a harbinger of things not to great. but you say if anything does happen, it would be successful fulfilling people looking at the yield curve caused the slowdown. this time it's probably an exception to the rule impressaging a near term recession. >> yes i understand why people worry about it when something happens for the first time since 2007, people pay attention. and that's what happened on friday when you go -- and also when you look at the

determinants of the yield curve shape and move, this is not signaling recession. this signals some very peculiar technicals in the market that have to do with what's happening in europe, that has to do with what's happening in the fed and the economy. this economy unless it gets disrupted by major policy mistake, 2 1/2% growth this year >> a lot of that you base on the strength of the labor market which you don't necessarily see weakening any time soon. >> this is a strong labor market we have monthly job creation well above what you would expect at this time of the cycle. you're having real wage growth and people are coming back into the market business investment is picking up that's good news for this year and next year. and yes, the effects of the tax cuts are eroding, but against that, government spending is increasing so put it all together this still has momentum. this economy still has momentum

for this year. there's no way you're going to get a recession. >> you make the point that fed miscues and the government shoutdown both resulted in the inverted yield curve or partly are responsible for the long end yields going down? how do you make the connection >> meanwhile, a year ago -- >> so it's pessimism on growth >> yeah. a year ago, people were in love with this concept of a synchronized global economy. i came on air and said there's nothing synchronized about it. it's four unrelated things and it doesn't have legs we are in a divergent growth era. and therefore the global growth outlook is uncertain now, out of that are self-inflicted wounds and people start worrying about growth in the u.s. >> hey, you make the point that you don't think there's any way we face a recession this year. but the market's been looking for that recession just around

the corner for a long time now how far out can you see and i just wonder because we don't hit a recession this year, does that necessarily mean the market trades higher? >> i say absent a policy mistake. we should talk about the fed's dramatic u-turn. i mean, it's really dramatic what it's done in three months absence of policy mistake, it's hard to see a recession this year and next year now, i understand people will say this is already the second longest expansion. it's going to be the first in a i while. but it hasn't been a great expansion. so no, i don't -- >> so that stretches it out. >> yeah. >> what would qualify as a policy mistake in this scenario when the fed has aligned itself for 2019 look, the market is billing in some kind of expectation of probabilities of a cut this year >> yeah, give the market something. the bond market in particular it celebrates for more. that's exactly what happened last week. it got surprised by how dovish the fed was.

and said to make it more dovish after that my concern, mike, is that we swung too much in one direction last year. when the fed guided towards four rate hikes and delivered four rate hikes, i always felt to stop and watch now we've swung the other way. i wouldn't give up policy optionality so early in the year i just wouldn't do it. there's lots of uncertainty. it's not clear how this divergent growth is going to play out it's not clear how the fed would reconcile a stronger u.s. economy that says hike versus a weaker global economy that says don't. and i certainly wouldn't have given up the optionality both on rates and on the balance sheet so early in the year >> i guess we should say that at least on paper, the consensus is for perhaps one more rate hike this year, right maybe the fed would say we haven't fully given up optionality. >> no. but the dots migrated south enough to make the market comfortable not just with the notion of nothing this year, but you may

even get a rate cut. >> something spiked yesterday to a 60% rate cut >> yeah. the euro dollar. >> yeah. you're above the consensus on gdp growth for this year well above 2.5% to 3% i guess everyone is -- we always look around us to see what the future looks like. they're sort of extrapolating this weak first quarter to the whole year and the narrative is a sugar high what do we do this quarter and how do we accelerate to get somewhere 2.5% to 3%? >> i think we grew it just over 3% >> i'm paying -- look. i got to go to dinner with austan goolsbee. so i'm paying because he says it didn't hit 3%. you just said over 3%.

>> we're going to see the revisions. >> should i not pay off in. >> you're looking to him for an excuse -- >> i don't want to eat vegan food i don't know what to order on the menu with goolsbee at this point. but seriously, how are we going to get back? you think 2.5% is the lowest we'll do this year >> i think we'll do 2.5% to 3% the offers of the tax is wearing off. other things are coming into play and the consumer is still -- >> why is it wearing off just like the same store sales being flat or something? because what helped businesses keep more of their, you know, after-tax dollars, it's happening again this year. >> you have two effects. business investment will go up but those are the consumer effect now, again, you're measuring the dell too over the previous year. when you move to a higher level,

you don't get the delta year over year. that's why it wears off. >> all right but you wouldn't be surprised if we had a back-to-back gdp growth >> somewhere between 2.5% and 3% >> next year and the year after as well? >> so we need and i was with you a month ago. we need a little bit more to stimulate both demand and supply at the same time and nothing does that better than the modernization >> but you're not a new monetary theorist you said the waning benefit from the tax cut is being offset by increased government spending which has us running deficits at record levels. you don't think that matters you're not a new monetary theorist >> that has insights it has insights. and the biggest insight is it's the different interest rate pair

dime -- paradigm going forward >> you sound like the new democrats saying it's aspirational i voted for it because we need to have that conversation. it's bonkers it's unworkable and it's insane to put that forward. but mainstream democrats say, well, i think we need to have -- is that what you're saying you think there's merit to that deal even larry summers thinks it's crazy. >> if 10-year interest rates are 2.44%, right the return on certain infrastructure investments is well above that. and i'm saying that not to take advantage of that window is bad economics. that's what i'm saying i am not going all the way to say there is no limit, we should keep pressing and we should wait until we see the whites in the eyes of inflation. i'm not saying that at all i'm just saying that -- take advantage of what the world is giving you the only reason in my view we

are 2.44% on the 10-year is because germany is negative. why not take advantage of that situation? >> if that's the case, when do you see that turning around? europe's got a long haul of problems >> we don't spend enough time on europe we don't spend enough time on the ecb. if you think the fed has challenges, multiply that by ten and you get to the ecb and the ecbis important. >> you add on all the debt because it's good times right now, it goes up. then you're partying like that's 1999. >> no, joe why do you worry about debt sustainability it's a fraction. on the top is debt and debt service. >> debt service was a big issue. >> i'm just saying, infrastructure modernization is part of a pro-growth policy. >> agree good luck getting any of that past congress. >> wow so you don't dismiss the new monetary theory? >> you like putting me in corners, okay? and i'll tell you, you know what

the most important thing is be open to some insights. but it doesn't mean you embrace the whole thing. >> you think we should try socialism again? >> here we go. >> i don't know. i'm trying to just -- >> here we go. >> -- figure out where you're coming from. >> keep an open mind >> poke, poke, poke. fortunately we have you for two hours for more poking. when we come back, we have a new panel set up by the department of transportation that will be independently reviewing the faa's certification of the boeing 737 max. we're going to hear more from former airline ceo bob crandall. stay tuned you're watching "squawk box" on cnbc the latest innovation from xfinity

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department of transportation setting up a special committee to look at the boeing 737 max. it is the latest fallout from the plane's malfunction. we'll speak to bob crandall after the break about boeing's woes and the airline industry. and later, it's on apple's quest to become a force to reckon with in the streaming space has begun. "squawk box" will be right back.

welcome back, everybody. the department of transportation is setting up a committee to look at the way the faa approves new aircraft this is part of the fallout from the boeing 737 max aircraft. let's welcome former american airlines president and chairman bob crandall this is such a confusing story there are so many different places we're getting information. but you are somebody who was in the middle of things like this all the time, who would understand how to read the tea leaves what do you think has happened here >> i think what's happened, becky, is that we created

unknowingly created a mismatch between the machine and the capabilities of the people operating the machine. and the consequence is that everybody concerns at the airline, boeing, faa is turning over every rock to figure out where did the process go wrong this process you have to keep in mind has produced an impeccable safety record. and the public deserves an impeccable safety record so now we've got a lot of confusion about exactly what went wrong i think that's what this new committee is going to try and sort out >> what do you think went wrong along the way? was there a point where -- >> becky, i honestly don't know. i think as you point out, there's been a lot of speculation out there. and in all aviation accidents, what we eventually find out is that the first conclusion we

leaped to is wrong and in this case, i don't know whether the authorization of the faa allowing boeing's people to handle certification is any part of this problem or not boeing's people are highly qualified. boeing of course has many resources that the faa does not have in some sense, when they subcontract the work out to boeing, they're subcontracting it out to people that are likely to understand the subject better than the individuals involved at the faa. like wise if you say you have not produced the resources the faa would need to better understand somewhere along the way, we're going to find out just exactly

what we should have done to make sure that this process didn't go off the rails. and hopefully at that point, we will not do it again >> bob, let me back up and be a little more specific about the plane itself and some of the processes that have come out you're right we've heard a lot of speculation. let me tell you about a couple of the pieces of the speculation that concern me more than others the first would be that this seemed like it was a very different jet. engines were placed in a different location it did not go to -- the airlines were not told to retrain pilots on that. was that a mistake >> i don't know. i spoke to a number of pilots all of whom said to me that they think virtually any pilot flying for a u.s. airline would have managed their way out of the crisis and not had a crash

now, i don't know whether that's accurate or not. but i do know that that's what pilots have said to me and i also know and when boeing had some pilots last week, they found their way through this process. >> right >> and i also know and i think everybody else knows as well that training for pilots in the united states is considerably more rigorous than is true in other countries. >> right >> now, so one of the questions people thinking about this are going to have to consider is whether or not boeing made some assumptions of the skill set of pilots that were unjustified with respect to all pilots everywhere >> sure. >> and that may be part of the process of what went wrong here. that we have to make some assumptions. about pilot experience that a different from what has been true in the past >> that's a really good point. it's not one i've heard raised

this week to that point. >> and let me just add this thought, you know, for -- we still force pilots to stop flying when they're 65 so we are driving thousands of very experienced people out of the cockpit on terms that i think are completely unreasonable i think you can certainly allow people to fly well beyond 65 you know, i'm 83 these days and i still feel pretty good >> i mean, is there a mainstream democratic candidate that's not 78 i mean, i don't understand that, bob. it's very important for a pilot. but it seems like -- >> it'd be important for the president too. >> the president is an important job. >> look, i don't -- of course i agree with you i think the -- >> or republican for that matter president trump's 71 or 72, i think, right >> i think moving towards younger people in senior leadership positions is important. and i think -- but i also think

that allowing experienced people to continue to work is a good thing. >> bob, let me ask you a counterfactual if you were the ceo of american again, what would you need to bring back the 737 max into service? what would you need in terms of hearing from boeing, hearing from the authorities, and also hearing from your customers. what would ut take to bring it back >> well, what it would take -- the first thing it would take, the very first thing i would take is i would have to have the senior pilot of american airlines and the senior pilots that are -- that run the union in america, i want them to walk into my office and say, we individually and collectively believe this airplane is safe to fly. i would also simultaneously, i'd want to have that same assurance from the faa and from boeing and when those -- when all of those three groups came into my

office and said to me, we believe this airplane is safe to fly, then i would say, fine, i'm persuaded. >> and your customers, would you worry about -- >> i think to some extent, i think to a considerable extent, our customers have got to depend on the faa, the manufacturer, and the airline to tell them -- they are an individual customer isn't able to determine whether an airplane is safe. you have to depend on us we have to be reliable for them. >> bob, thank you. it's great to talk to you. we hope to see you in person some time soon bob crandall >> thanks, becky >> good to talk to you coming up, senator pat toomey taking on the left and the battle over corporate buybacks he'll be our guest in just a couple of minutes. as we head to break, take a look at u.s. equity futures strong in the premarket session. 185 on the dow, 18 on the s&p. wel bndat u50 'lbeack. the future of technology investing lies beyond the tech sector.

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still to come this morning, what apple's announcement of a streaming service means for other players in the space including netflix and amazon and later, a vote on the controversial green new deal could happen this afternoon. john barasso will join us ahead of that vote and key housing data expected to be released by the government at 8:30 a.m. eastern time we've got the numbers and the market reaction coming up. "squawk box" will be right back. ♪ you should be mad they gave this guy a promotion. 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 and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis. ♪ just hold on, i'm comin'

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senators tammy baldwin and deb dbie stabenow are talking about reining in corporate buybacks joining us now is one lawmaker that has opposed this. senator pat toomey is here thanks for being here with us today. >> good to be back >> there's a lot of talk about corporate buybacks from people saying it's a bad idea what do you say to that? >> it's ridiculous stock buy kbak is a perfectly reasonable and sensible way for people to turn some money to investors. and if a company runs out of viable investments to make and has cash above and beyond what they can successfully deploy, then they've got a

responsibility to return it to investors. they can do it by a special dividend but a stock buyback sometimes is better because you can decide as an investor whether or not to participate. so this is just a completely normal sensible way that capital gets recycled in our economy right? the money comes back to investors. what are they going to do with that majority of the time it comes back to those that need the capital. stock buyback is normal and healthy and this assault on investors and share ownership, that's what's dangerous. >> you're preaching to the choir here i think we all agree with you -- >> it's not a close call. >> what do you hear from your colleagues when you say that what are you getting in response >> there's not a cogent argument for this some will suggest that somehow a stock buyback prohibits expenditures that's not true at all the stock buyback is done with

money after all the capital expenditures have been made. we've seen record stock buybacks at the same time we've seen records of kcapital expenditures >> nobody -- senator, this is a joe. it's just, nobody's had a course in this, i don't think okay buybacks are bad maybe we should legitimate that you issue a bunch of more stock. if buybacks are bad, then the opposite there should be mandatory issuances of -- we should dilute we should issue double the amount of outstanding shares or all private companies need to go public or a public company can't buyback stock and eventually go private? it's all just commerce and capitalism and it's what corporate managers decide to do to god forbid maximize profits and take on their competitors which are now global >> exactly >> and in the process creating jobs and paying taxes. >> exactly

and if you're going to do this, obviously people will shift to paying dividends, larger dividends, special dividends so then what are you going to ban dividends too? >> seriously can you legitimaslate that you to buy more stock? it makes no sense. >> that proposal might very well be on the way, joe >> it's fwh the new green deal, i think. how are you going to vote on that i'm very concerned >> i'm going to wrest wl that one. >> really? i'm worried. >> seriously the only thing that's amazing about this is this lurch towards socialism, record low unemployment rates really finally some strong growth in wanls, capex continues to be strong what is the problem we're trying to fix here? >> go back to the source of the catalyst if you like which is this notion that companies have been treated better, they got a cash win fall

of some sort and there's the thought it hasn't been invested in enough. if that is the issue, what else could you offer to encourage businesses to invest more? what does it take? >> so, you know, we've seen a huge surge in business investment i think it's a response largely to a much better treatment of capital expenditure under our tax code you can fully expense that that has clearly lowered the after-tax cost of investing capital. we've already lowered the tax on the return on capital. and we have seen exactly what we hope for an investment-led recovery a huge surge in capex. america's a really attractive place to invest. and as a result, we've got more job openings than people looking for work and we've got wages growing at the fastest rate in a decade so this is working >> so how many people see things your way in the senate and the

house. and how popular is this perspective coming >> it's hard to say. we haven't had a vote on a specific policy, so with don't know for sure. i'm sure the vast majority of my republican colleagues understand that investors need to have ways to get their money back from an investment and they don't want the government to ruin that. on the other side of the aisle, i imagine they're mixed and divided. but clearly there's been this increasing appeal of socialist populism that is leading to these kind of proposals. >> senator, you just mentioned that, you know, the tax code had fostered at least greater incentives for capital investment by a company. so therefore, we do use the tax code and regulation to try and encourage certain types of activities and discourage others from companies so short of any kind of a ban on a buyback, i wonder what you think about people saying, look. if a company has an underfunded pension fund, maybe they shouldn't be able to repurchase stock. maybe look at executive

compensation, how it might be linked to things that could be helped by buybacks so obviously we did at one point effectively have a ban on buybacks before 1982 or so so it's not unprecedented. even short of a ban, are there ways to look at corporate behavior >> i think our tax code should strive for neutrality. i think expensing of capex is a step in the direction of neutrality other than what could be arbitrary depreciation schedules. when you allow full -- you raise one issue that i do think ought to be thought of as a separate matter and that is underfunded pension liabilities. that's because there's a contention liability on the taxpayer there's this fact or in pensions that is not associated with executive compensation or order of doing business. >> i mean, that does make sense. would you support that

>> i think we have to take a hard look at that. if there's a company that is an underfunded pension and their liability is backed up by the pensi pension, that's a liability that we have to say if you're going to participate in that arrangement for the benefit of your workers, you owe it to taxpayers to make sure you're minimizing the risk that that ticket's going to be punched i do think that's a separate category >> we've had that conversation with a few senators. i don't know that anyone has actually gone about proposing it would you? >> it's something worth looking at and i'm not aware of specific legislative proposal but we ought to be thinking about that >> senator, in terms of the people who are coming before your committee, people who are going to be brought forth, is there anything we should look at i've been impressed by the questions of people who have come before your committees.

>> well, this morning we've got a banking committee hearing on housing finance. and i'm hoping that that'll be an interesting discussion. because as you know, the giant unfinished business of the financial crisis as far as i'm concerned is the fact that we still have this bigger than ever duopoly. we've got a terrific new director of the regulator of those two entities mark and we need to have a discussion about how we move away from the model we're in now >> fannie and freddie, you mean? >> correct >> that's a conversation that's been taking place over a decade at this point. >> yeah. but we got somebody who wants to move the ball forward. i think the trump administration generally and mark particularly and members on the banking committee, i agree it's a really hard nut to crack. but you asked about an interesting hearing. i think it's going to be a good one. >> i remember a few years ago,

they were still -- those two and what's the third sallie may i think made up of 90% of all mortgages taking place. you think the private sector is up to the task >> totally ultimately it's private capital that ends up, you know, making the investment the u.s. capital markets can finance mortgages in america i'm not at all comfortable with the model we have right now. but transition to a more competitive, more private market-driven approach that's tricky. so clearly that's been part of the reason we haven't made much progress >> senator, you know, probably a good week for prospects for the gop in 2020. some of the events that have occurred it's been pointed out that now the trump administration, the justice department is siding with the appeals court on the obamacare, the entire act of the aca being unconstitutional it's been pointed out that that

was in some people's view a losing argument in 2018 and what caused a lot of the republican losses health care concerns you have this great victory and now the administration is back to something that could cause people to be, you know, you're snatching defeat from the jaws of victory again or can you work with zrdemocrat? will democrats work with you on fixing health care >> on the big parts of obamacare, that's pretty tough but i have to challenge the premise, joe it's the case that health care was a big issue in the last election and i do believe it didn't work well for republicans i don't think that's because we've opposed obamacare. i think it's because many republicans didn't have a good answer to how you're going to deal with the very real problem of people with pre-existing health problems. pre-existing conditions. and so conflating those two people think well, obamacare is the solution for that problem.

that gave a lot of political strength to democratic arguments. but of course it's not the case. there are better ways to help people dealing with pre-existing conditions rather than this, you know, ginormous takeover of a big part of health care. we've got to do a better job articulating alternative ways to people keeping the freedom and flexibility and ownership of their own health insurance policy, lower costs because you've got more options, can buy what you wish, and not what is mandated those kind of things together with the backstop on pre-existing conditions, i think that's a better approach and i don't think the recognition that obamacare is unconstitutional is inherently a problem. >> i'll go as quickly as i can with china, some people are speculating they might be more willing to deal with the president if maybe he's in a strengthened position. nancy and chuck, are they more or less willing at this point to

find some common ground after this has become -- you know, maybe "fast" off the table now can can you do anything in the next two years >> you would hope. we've got a test in front of us. we have not agreed on total spending lels for this fiscal year without an agreement -- well, we got statutory agreement at low levels nobody thinks you can pass any appropriation bills so we need an agreement to just do the funding of the government this is something that has to be bipartisan we'll see if our democratic colleagues want to work and get a solution so that we can fund the government >> we're really out of time so i'll ask for a quick response but back to stock buybacks i want to read this tweet that came back. it's not that buybacks are bad it's that cutting corporate taxes leads to rising inequal y inequality then says maybe we should have our driver's license revoked because clearly we don't drive clearly. but it's a valid point it's what you're hearing from the other side what do you respond to that?

that the tax cut wlled to this. >> i think tax cuts did contribute to this we're getting capital more rationally allocated which means more growth. which is part of the reason why wages are growing at a ten-year record high. one of the ways you reduce income inequality is you have an acceleration of wage growth which is exactly what's happening right now and it's fastest in the lowest earning categories so i just disagree with that analysis >> it sounds to me like, you know, the government let these guys have more money let them keep more of their own money. you know and it's like, the government daned to allow them to have a little bit more. it was done for competitive reasons around the globe so we can compete. >> and it's working. and it's working >> repatriation and everything else >> yes >> so i think i drive fine actually, i think in the next segment, i'm a dam good -- >> we're going to show -- >> i'm an excellent driver >> thank you, senator. >> thank you all right. coming up, apple streaming video service is finally here.

we'll find out what it means for other players in the space after the break. and take a look at the futures at this hour set up for a positive open you see the dow up 181 at this hour "squawk box" will be right bk.ac sfx: [phone ringing] you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here not you. right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by using machine learning and analytics to automate claims, cognizant is helping insurance companies advance how they serve even the hardest-to-reach customers. cool ♪

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>> well, becky, apple's betting big on premium apple services with apple tv plus, arcade and plus we still don't know two major pieces of information. how much will apple tv plus and apple arcade cost when they launch in the fall and will consumers think it's worth playing for a small amount of exclusive but unfamiliar content? apple tv plus and apple arcade won't have library content the likes netflix was built on munster predicting apple tv and its channels will generate $15 billion of revenue saying it will take a long time for apple to establish an association with content that netflix has but the company's serious about original content jpmorgan is more skeptical saying apple might be challenged in monetizing its own original content with users given its limited scope relative to large providers like netflix, amazon prime, and hbo

goldman sachs saying this will have small calculated impacts but it will return to the iphone business >> all right, julia. thank you very much. so should media companies be worried at about all apple's push in this direction we'll talk about to roger about this roger with everything happen l does is in the context of the hoe the hardware ecosystem is, of course. what do you think apple's ambitions are with regard to the amazon, net flick, and is it a threat >> for apple, obviously this is the company trying to diversify its revenue stream sees the writing on the wall with iphones in particular so it needs its services business to fuel the next stage of growth. in terms of the competitive set, they need to establish themselves there are a lot of questions from yesterday's event they don't know how much the service will cost. we just got a lot of

presentations from celebrities so there's still a lot of questions about whether or not people will want to pay extra for this service >> and, you know, a lot of people say there's so many apps, every provider, every network has a different service. somebody out there should be able to rebundle them. in a smart way is apple staking a claim on that >> refreshed apple tv app and channels makes a lot of sense. it's not ground breaking amazon already does this with their channels package bundles together hbo and all these premium services that are already streaming, i think that's the business model that makes the most sense >> speak to the bigger issue even apple tries to self-disrupt, apple has a space that's already crowded already what does that tell you about the sector >> i mean, it tells you that the market particularly for smartphones is mature and, again, they see the writing on the wall they see things slowing down the competitive set is getting fiercer around the world

you've got companies like huawei really making a dent in the market and apple knows and needs to find a new area of growth. >> is it taking the reputation al -- >> they need to tap into new areas. apple has a very established brand. it's got a cult following. if there's anyone who can make success out of this, it's apple. >> credit card a lot of times that's a little bit of a yellow flag when a company does that. >> yeah. it's unclear exactly how this stacks up with some of the other cards right now. we haven't had a chance to fully analyze it although there is no sign-up bonus. >> privacy argument. that's what they're selling it on >> a lot of our readers were more interested in the credit card than the service. because it was tangible. we actually had some details around that thing. >> it seemed like a good deal at least on first blush thanks a lot when we come back, senorat

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apple strengthens its streaming game fame tech investor ann winblad weighs in on all of it data in the house. a key read on home construction coming up this hour. and warning signs for the green new deal john barrasso joins us to talk about the economics of the controversial idea ahead of a key vote the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york this is "squawk box." good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square, i'm joe kernen along with becky quick and mike santoli. andrew is off. i wouldn't want to leave this out. our guest host, mohamed el-erian

of allianz he's been looking around quarters in a multi-speed universe >> divergent, i believe. >> with a new new normal, i think. >> you may have called it -- i did not call it that >> what is it? it's a new new normal, isn't it? the hold new normal is gone. >> in my view, there was always a time limit on the new normal because there's only so much you can do >> we're back to normal then >> we're not back to normal. >> it's a quasi-new normal >> don't put it in -- >> put i don't go u in a corner again. >> i kind of like new new normal we should trademark that >> i made a mistake of not doing the other one. >> you didn't trademark that and everybody uses that. >> i know. it came into politics. there was a tv show. >> you got totally ripped off. quick, do it for new new normal. >> you do that

>> like he needs more dough. >> went through tipping point. >> that was a saying before. mohamed actually coined the new normal that was legit him >> he's fine >> joe's going to get out his cup and beg for money. >> the futures right now indicated sharply higher the best levels i think we've seen 190 points on the dow. and the s&p indicated up almost 19 points. are we comfortably -- no see? did we get through 2800? not yet, right >> well, we got through. >> then we turned back down. >> yeah. i don't know what the -- >> did it count? did we breach? did we break out >> well, we did. it's a matter of whether it's real or fake >> but we're still figuring it out. >> it's always the issue >> all right

treasury yields are 2.45% or so. nailed it. 2.45% this morning on the 10-year. here's what's making headline at this hour. there's been more scrutiny of the process after two fatal crashes involving the 737 max jet. ethiopia's transport ministry says a preliminary report on the crash in that country will be released this week meantime, more than 200 airline pilots, technical experts, and regulators are expected to travel to washington state to get an update on software and training for the max planes. mcdonald's is buying dynamic yield reportedly for more than $300 million the restaurant chain's biggest acquisition in twodecades will allow it to upgrade mobile ordering and modernize its drive-thru displays. for instance, customers could see different offerings based on the time of day, the weather, or the level of restaurant traffic and trending menu items.

two key pieces of housing data this morning. february housing starts in half an hour's time they're expected to register a 1.6% decline then 9:00 a.m. eastern time, the s&psh shiller report will be ou. congress gets back to work i use that in the loosest possible way >> from a person also working in the loosest possible way >> exactly from somebody who knows. the weekend dominated by the mueller report the next fights are expected to center around key democratic and gop priorities it's a question we keep asking, ylan whether this is gridlock for two more years and what the events of the weekend really mean in terms of going one way or another, people will get something to do something. >> there is certainly a lot

that's going to be happening today and waiting until the middle of the action on capitol hill will be president trump himself. he's going to have lunch with senate republicans as they try to move on from the mueller investigation and tryto pivot to a policy agenda instead republicans are refocusing talking about reducing the deficit. they're also going after the green new deal the senate could hold a procedural vote on that as early as the afternoon the goal is to force democrats on the record for or against it. but chuck schumer is accusing republicans of just playing politics >> they're saying let's debate it let's not do a sham vote that's meant to embarrass one person or another. this is too serious an issue for that republicans owe the american public some real answers not games. >> the green new deal calls for a 100% renewable energy, dramatic reduction in greenhouse

gases and guaranteed jobs within ten years. even democrats who support this call it principles with not prescriptions. expect awe makers to pickup truck on this issue. in the host they're looking at the new health care bill coming out this afternoon they'll also try to overturn the president's first veto and block his declaration of an emergency declaration at the border. both of those measures are long shots. back to you. >> okay. thank you. as ylan mentioned, a vote is expected as early as this afternoon on the controversial green new deal proposal to completely transition to renewable energy by the year 2030 joins us now, john barrasso chairman of the environment and public works committee it's funny, senator, because i understand what ocasio is saying she says you're doing this to

sort of out that it's not going anywhere you weren't serious in the first place, i guess but it can't do anywhere so why do it just to out people as to whether they vote yes on this? >> i think it's important to have a vote today on the deal. the more people learn about it but so many democrats running for president have endorsed it and have cosponsored it that i think it's important to put them on the record. now it's looking like they're trying to duck it, dodge it, distance themselves from something that's going to cost $93 trillion $650,000 for every family in america. $65,000 a year in energy costs are going to go up $3,800 per family per year even the afl cio is against it because of the impact it would have on our strong, healthy,

growing economy and how bad it would be for jobs. >> you realize, though, that you just said it you're going to out the people that voted for it and really sort of shamed them or at least make them look bad it's not going to pass it's not relegislation it's going to spend a day doing this and it's meaningless, right? >> i think it's meaningful when people are running for president and say this is part of their agenda, these are things they're cosponsoring with the election coming up and putting their name out there as a presidential candidate a part of the sharp left turn so many democrats are taking i think it's important for the american people to see just where they are, where they stand on things. the democrats have proposed it the vote today is to get on it, debate it. talk about what we need to do with a world with a changing environment. how we need to deal with that in a responsible way and republicans have responsible solutions to deal with climate

change that is occurring but to propose something as they have done which is so expensive, so unworkable, immediate unilateral reduction in the united states. the united states is only accounting for 13% of the emissions worldwide. china and india alone are at 34%. they say we need to get all renewables wind and solar right now in the united states, it's only 8% of our energy mix do we need more? yes. but do we exist between the r y reliable energy we need every day and the renewable energy not with this green new deal >> but we're talking about it, aren't we? and you're moving the center of the discussion which most people think republicans are way too far in the denier. you might even get e communicated but you're in the denier camp. and i've seen klobuchar, for example. when they ask why they'd support

it, because it's aspirational. we need to have that discussion. that's the way they phrase it. who's going to fault them for saying it's aspirational to prevent all of museumty from dying in 12 years? would you deny that's something we want to try to prevent? we can always fall back on it. here wier talking about it giving the vote even to that extent, it's the whole notion that there is a promise something needs to be done >> we're talking about how extreme the liberal democrats who are running for president have become and the direction they're trying to take the country's really careening off of a liberal cliff they're so far outside of the american mainstream that it is scary that they would promote this sort of a thing which is unworkable, unpopular, unaffordable and would shift the economy from the united states and send it over to china.

it is the wrong direction. to me, these are climate alarmists. they want to do things that's immediate, that would be very detrimental to the united states doing it unilaterally in a sense that we would be the only one doing it there are solutions in terms of new technology >> i see why they're mad i can't wait for it. you know, i was doing a little devil's at vo cat. i slow down on the highway too i can't wait to see this today this is just so beyond the pail. and you really -- what's funny is watching steny or other leaders of the democratic party. they keep saying the same thing. we got all these new people come in here and you keep talking about these three. stop i mean, they're sensitive to talking about those three new congress people that get all the press and all the attention. this is i think the most famous one. how many followers does he have on instagram now >> millions. >> and this is her deal and you're just going to make it

totally embarrassing for them, senator. which as i saz i don't know whether you should do it i shouldn't say i'm going to be enjoying it, but have fun today. >> the chairman of the committee actually coming up with responsible ideas and a bipartisan way working together, you know, advanced nuclear reactors, things that are going to be safer, more efficient around the world that would have an impact and are scapable the other is carbon capture. >> okay. all right. don't capture too much carbon. it's the $93 trillion that i like because mohamed says that's fine because of the new monetary theory we can do $93 trillion >> skrjoe, joe, joe. >> oh. that's too much. we don't have $93 trillion to blow on this, do we? >> the country can't afford it it's not -- look this is a big green bomb

and i can expect the democrats to try to duck the vote on this today. >> yeah. they may not show. are you allowed to say president? thank you. thanks, senator. >> thanks for having me. when we come back, a huge week for technology is just kicking off. apple announcing an expanded push on services like video and news meanwhile, lyftis on the road to a hotly anticipated ipo and uber is spending more than $3 billion on a middle eastern rival. we'll break down what all the developments mean for technology and your portfolio with investor ann winblad. stay tuned you're watching "squawk x"n cn bcbo o this is my headquarters. this is where i trade and manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities - trade confirmed - and i have global access 24/7.

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welcome back to "squawk box. the futures right now are indicated up 190 points. the s&p almost up 20 and the nasdaq now up 55 solid premarket session for the averages so far. coming up, uber making a big play for ride sharing dominance in the middle east as rival lyft getting set to go public we're going to ask noted tech voice ann winblad what the deal means for investors up and down

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it's just complicated. step-by-step options trading support from td ameritrade welcome back to "squawk box," everybody. a big technology deal to tell you about this morning uber is buying middle east rival careem for $3.1 billion. careem is more dominant in the

middle east. uber ceo called that deal an important moment for the company. joining us now to talk about that and much more is ann winblad, founder and managing partner. it's great to see you today. >> good morning. >> we tricked you by saying we were just going to ask you about ipos, but we've got this news out with uber and that does relate to the lyft ipo we're expecting. what do you think of the lyft ipo and what that tells us about the competition between the two? >> well, definitely it's more of a david and goliath story especially after the announcement of careem for lyft. i think that some investors like investing in the david versus the goliath, but uber's certainly becoming more of a goliath in the ride sharing sector uber also is a much broader platform company and is competitive for us in all sorts

of areas for lyft. in technology, all the mobility spaces you know, autonomous vehicles, they're way further ahead. i think lyft is going to be easier for investors to get their arms around. but uber is going to be a much more sensational ipo >> just in terms of those two, i don't know if you know the details on this or not again, i'm sorry for springing this on you. we were trying to figure out the convertible notes in value uber shares >> i haven't had time since this broke early this morning so really look at the full value of the deal well, i think mobility is still the wild west. defendant these are companies where it's pretty mushy on when

they'll achieve profitability. but definitely ride sharing and ubering has become part of our vernacular i don't think uber is ever going to go away i think it will be well supported by shareholders. and i think it will be a stock that you'll have to hold for awhile to really see the company reach its full potential even though it's so highly valued today >> so it seems to me that the uber big bet is that it becomes a natural monopoly that it becomes so large that it becomes dominant and scares off any new entrant in the middle east does that make sense does uber have the ability to become a natural monopoly and will regulators tolerate natural monopoly of that size? >> i think regulators are worried about other issues than monopolies here. if you look at mobility as a broader platform and you look at items like autonomous vehicles, we look at even the smaller versions of mobility like the scooter businesses there certainly are more than a dozen start-ups already out

there. some that have achieved scale around the world whether a monopoly in a particular region is regulated differently than a global monopoly, that is a different story. i think all in all, the tech business is having increasing regulation and uber and lyft are in a heavily regulated sector. >> one of the things going on with all the big ipos have these unicorns, multi-billion-dollar valuation companies, you're getting a look at the appetite for some of these business models that are not necessarily pure software and network effects. and all these other things that we came to think of as this kind of magical value creating things it's real world moving people around, delivery basis, things like that. do you think there's a lot of risk here? because it seems it's the private investors that are dictating the timing of when these companies are going public so there is maybe a little bit

of a -- who knows. maybe a mismatch in terms of what the public is willing to pay for these? >> yeah. that's a very good point i think that traditional software business which is done extremely well especially enterprise software like microsoft, new companies like okta, these companies have been easy to understand, they have routes to profitability. they have large tams that also scale. but we're talking about different animals with uber, lyft, and b&b. i do think that it will be challenging for investors to determine whether these are -- these companies are making real progress if you also look at the timelines for profitability, they're very hazy for uber and for lyft i don't know about airbnb. they haven't gone out with theirs yet you look at other offerings such

as pinterest that company is pretty much more like a traditional advertising content company. it has the same metrics we've seen in previous companies it has a route to profitability, it's a tidier company for investors. but at the same time, retail investors like the brands that they use and retailers are using uber and lyft in classifying those companies as a set almost. i think investors will invest in both versus just one and i think it is a question of how much patience they have with those companies. and expectations over time of what the business models will turn out to be >> what did you think of apple's display yesterday? some loved it. others said wall street panned the whole thing. what did you take? >> and a hundred hollywood people on a three-day cruise to try to mix and match hollywood

with silicon valley. and the announcement really reminding me of that cruise. it felt like hollywood visits silicon valley i think it was a well done announcement, but it didn't have much surround sound in how this affects apple's business i would say it is probably the beginning of a drum beat of services that apple will continue to announce and march across other vert kells of health care, for example with similar events. >> ann, thank you. it's great to see you. we'll talk to you again soon >> great thanks coming up, breaking economic data the latest read on housing starts is out in just minutes. we'll bring you the number when icbrk. abox" returns after quk ea

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welcome back to "squawk box. we're just seconds away from data on february housing starts. the futures are strong 183 on the dow the s&p up 18 and the nasdaq

indicated up 50 and change the 10-year note is around 2.44% this morning rick santelli is standing by at the cme in chicago still cold here, rick. but i can feel it. i can feel it's going to change. probably cold where you are, but what about the numbers >> all right well, let's hope the numbers are better than the weather. our february read on starts, 1.162 million seasonally adjusted analyzed units. that's definitely a miss we were looking for a number above 1.2 million. there was a nice revision last month. that popped the number from 1.23 to 1.27. but this is still down close to 9% let's look at permits. 1.296. that's a miss, but just barely looking for a number around 1.3. we did not have a positive revision the last month. it went the other way on

permits. from 1.345 to 1.347. well, you know, we had a much weaker number at the end of last year just over a million units. so from a comp perspective, it isn't bad. we had a number under a million about five months ago. yes, rates are up a little bit and listen, joe. you understand markets as well as anybody one gets out of whack, it moves. then they relink as if nothing has happened yields have moved down but i really like some of the intraday lows on the treasury complex. especially at 237 in tens. this is an area to pay attention to and it doesn't surprise me that with this little bounce, we're kind of relinking with stocks who seem a little less depressed

today about the fact that falling rates have interpretations. few give equity traders joy at this point especially considering the global slowdown. >> el-erian's here, rick i wonder if all the millennials want to live in the cities and rebt, we heard they were going to start having families but do you want a family with climate change, mohamed? >> you know, joe yobt get it, though. i don't get it why are you worried about housing? why is anybody worried about debt you know, some of the new representatives in congress like aoc, they say we have a dozen years left >> i know. >> a dozen years against mother nature, it should be party like it's 1999. what could we possibly do about it >> we ought to party we're all going to be dead anyway, right? >> i want to ask you a question -- >> besides the gray matter of some of these comments where they come from, yeah, i agree. >> okay. but i want to ask you a question because it matters for people out there looking at the market and the economy.

are the housing numbers telling you it's not a question of interest rates it's a question of affordability. are you willing to go that far or is that too many things moves that we can't draw conclusions >> i would have said that in 2012 and would continue to say it in '13, '14 all the way up to today. it's not only preferences as joe pointed out, but it is affordabili affordability. housing has had some improvements since the crisis. but in certain ways, not really. so i would completely agree with that that and i would also stress that every generation has its own timeline and its own -- as i said, its own taste. and i think that maybe the delayed timeline joe referred to on millennials and that's their choice creating families. i think there will be a catch-up period but i do also worry that what

the demographics of the country and certain states like illinois that are just in, you know, insolvency waters so to speak, there's going to be a lot of houses available over time who could afford the taxes we all know about happy feet, don't we people like to move to areas where their wallets don't get pinched as much. >> hard to create a family when you're, you know, on your screen you know what i mean it's like -- i know. i'll be with you in a second, dear i don't know i don't know if it's ever going to happen, rick. but i should talk. >> i think it will >> i spend nine hours a day -- >> i have daughters that are millennials. they're looking at houses. over time, i think they'll come around home ownership is a great feeling. but that doesn't mean people can't live in apartments i just think it's much tougher with the dogs. >> one question for you.

where are you on the notion did the fed give up too early or is it right to go as far as it did? >> mohamed, i think they did pretty well all things considered we needed to grab as much rate insurance and portfolio insurance that they need to make their balance sheet larger and i think that if you compare us on a curve to other central banks, we purchased a whole lot more insurance than they did i think at this point, we need to start getting some of the nervousness about disinflation, inflation. prices have been stable. i don't know how they would define stable in any other way i'm very impressed with jay powell >> rick, thank you joining us now for more on the data, we have diana olick and steve liesman. diana, give us your interpretation >> this is a huge down on every

front. single family housing starts were down. over 10% year over year. 17% month to month and this after we saw an increase in the spec builders. that's homes that have not been sold yet but builders expect them to be sold. we're at a six-month supply there. they likely did this because mortgage rates are at close to 4% today they are not seeing robust sales. this may be why we see this big dropoff in housing starts. builders concerned they thought they were going to see a bump up in sales they thought affordability was going to be great. we saw builder sentiment go up in january and february. then they saw this dropoff that could be a big reason for the huge dropoff in the single family housing starts. >> steve, what do you think happened >> well, couple things first of all, people were looking for a bit of a falloff in this month because of the big surge in january which actually surged more. most of the economists i'm

reading expect a decent housing rebound and they basically look at the fundamentals. they think about unemployment being lower. they think about mortgage rates being down they think housing rates could be a surprising factor this year i continue to be somewhat befuddled by the economics of the housing industry which is essentially a full employment idea for diana olick who does a great job of explaining the economics. i do wonder if the decline in the northeast, 20% decline in the west we had soas well as mortgage interest that would tend to hit hardest. i wouldn't jump off of -- >> that's a very small percentage, though, steve. you're talking about new york, new jersey, parts of california. and we did actually see california have better sales on the existing home sales side

>> california sales have stunk overall for awhile >> that was because affordability. they went off the charts when mortgage rates popped up last year, nobody could afford a home they dropped off dramatic. people think california is an indicator of the rest of the country. we see home sales popping up in texas more because affordability is improving we're also likely going to see price cuts on the builders so if you're out shopping for a new home, now could be a good time >> guys, i need to pivot quickly. i want to talk about a development in the fed funds futures markets. if you look at what's happened, nearly every contact in september is showing a greater than 50% chance of a cut this was only true for january now you've had this multi-day

down rate. and now that's shown in the futures market really bringing forward the possibility of a cut maybe it's commentary from charles evans in hong kong i don't think the statement did that much to change the structure. >> as i said earlier, give the markets something beyond the expectation. and i think that's what you're seeing steve, does the market force the hand of the fed or not that's the basic question. >> i'm sorry i missed that. >> does it force the fed to revisit? >> i don't think at this point it does. i think the fed has given the market all it can give it for now. remember, it's stopped the balance sheet reduction. it has moved to a policy of

essentially neutral or patient right now. and i think a lot has to change here you should not be out there rooting for this rate cut. because if this rate cut happens, it means things have gotten -- i would say -- substantially worse. you come in below the gdp rate inflation is rising. i don't think as an investor or an american, you're really rooting for this rate cut to happen >> you're right about that with the housing sentiment as well. what you just said is exactly in the housing market right now, great rates are lower. you feel better about that but if you don't feel good about the economy and don't feel good about your wallet, you don't want to make what likely will be the biggest investment in your life which is to buy a house >> that's an important point let me ask you both. there's two interpretation one is it's uncertainty, it's supply the other one is about affordability. and affordability speaks to that bigger issue which is there's a limit to how far you can push asset prices as a way to promote

economic growth. where do you come on this? how much is this telling us about the limit to pushing asset prices the limit to the asset channels to stimulate the economy is housing a leading indicator of that or is it something else? >> well, i would say housing prices now, the gains are shrinking dramatically they're coming down from 7% annual gains they're in the 3% to 2% range. and they're not predicted to be -- they're not going to go negative but home price gains had been very high. you're not going to see those gains over the next couple of yoo years. >> i'm more concerned about the salt effects than diana is >> because you live there. >> well, i live in the middle of it i hear people talking about it all the time we've seen some studies that show there have been declines in home values from 4% to 6% at certain levels now, of course, that increases affordability. so there's an upside on that my point is there's a shock to

the system here and that shock has to be worked through and i think as a result of that, you may have some decline in housing starts i hope i'm wrong about this. as we figure out what the right equilibrium is for the supply relative to the downdraft in prices >> i think to play off of rick's point on that, just the idea of taxes, look. that's a situation where we still have yet to see a day of reckoning in terms of what is to come to try and make some of these state s whole again. he pointed out illinois. there are others like new jersey and others where it's a bad situation. there's going to have to be some major changes to come. and what buffett pointed out to us, he'd be concerned if he was a business looking to relocate to those places. you'll have to go to a few places to raise that money >> right i've long maintained that this is probably a smart move from an economics point of view. getting rid of the interest deduction which benefitted the wealthy is a smart move. my point is that you shouldn't have shocked the system with a one-year change. it should have been fazed in

>> and there's the question of grandfathering when any of this gets changed but there is going to have to be something to reconcile this by the changes in the tax law all right. guys, thank you very much for joining us good to see you all. and coming up, the s&p 500 is on track for its biggest quarterly gain in seven years. but that doesn't mean volatility is off the table we're going to explain and talk markets as the end of the first quarter -- is it approaching >> yeah. >> friday. >> sunday is the last day. >> april fool's day is coming. i love that. anyway, "squawk box" will be right back they have the investment expertise to unlock opportunities other advisers might not see. learn what a cfa charterholder can do for you, at therightquestion.org

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welcome back to "squawk box," everybody. we've been watching the futures this morning right now it looks like the dow is indicated up by about 163 points we've been a little higher than this, but we have been steadily building through the morning s&p futures up by 16 points. nasdaq up by 46. shares of nintendo soaring over sniegt. after "the wall street journal" said that the company would launch two new versions of its switch video game console as early as this summer check it out shares up by more than 4.5%. then shares of electronics maker sharp also rose on expectations that it would be providing the liquid crystal displays for the new models as well that stock up by 4%. just under an hour now, actually about 45 minutes to the opening bell on wall street. dom chu joins us now with a look

at some of the biggest premarket movers from this morning other than -- we always look at the averages good to see some individual names, dom >> they are. they're on the move. we're going to start with the semiconductors nvidia stock is up just around 2.5% maybe almost 3% at this point. roughly 150,000 shares of premarket volume you can see there thanks in part to analysts at piper jaffray they enlisted an overweight price target 200 bucks there they like the gaming prospects in the second half of the year also the longer term prospects for the data center and automotive sectors for that particular company we'll watch those shares also soaring, bed bath & beyond shares over 2.3 million shares traded at premarket a slate of activist hedge funds looking to replace the entire board of directors analysts at raymond james are upgrading the stock to a strong

buy from a market perform. they cite an increasing probability it goes prooit which may lead to a big rush to cover short bets against the stock that short squeeze, so to speak. maybe something happening as we speak. we'll end on mcdonald's. it's up 0.50% on just around 1,000 shares of premarket volume thin trade buying israeli dynamic yield for $300 million dynamic yield specializes in marketing technology which makes mcdonald's more in favor of its mobile displays and interfaces getting an upgrade those shares up decently big as well >> yeah. three big names all to the green right now. our next guest is giving the decidedly dovish fed but expects volatility to continue joining us is head at bank of

america merrill lynch. great to see you >> great to be here. >> so this market, we have u.s. equities up 12% or something for the first quarter. at the same time, there's a bit of a mini growth scare going on. right? and you have compressed treasury yields a defensive tone in -- >> inverted yield curve. that's the latest shock to the system >> where does that leave you in -- either it's a warning or an opportunity or both >> yeah. i think it's both. it's got a long lead time. and the market generally does pretty well in the -- let's call it 12 months following an inversion of the yield curve you know, what i think is interesting is the fed's tone has shifted so aggressively to a dovish stance, that i think the real opportunity today is in consumer discretionary stocks. in fact, we just upgraded the sector from overweight to underweight this morning what's interesting is that consumer discretionary has been left for dead. what i mean is the average mutual fund has a lower weight

exposure in consumer discretionary stocks than they have since the financial crisis. the sector has been forgotten. it worries about the fed tightening, the cost of capital increasing and i think today the fed talkir rhetoric, this is a great opportunity to buy consumer stocks you know, the other reason i think that consumer discretionary looks good is that if you look at the health of the consumer balance sheet in the u.s., financial obligations ratios are sitting at close to record lows, consumers are healthier than one would expect at this point of the cycle they haven't necessarily levered up as much as one would expect so i see a real opportunity there. and then the other sector that is surprisingly attractive despite the inversion of the yield curve is financials. i think that there is this fear of financials under an inverted yield curve scenario but little known fact, financials outperform at markets

in the 12 months following a yield curve inversion on average. so i think there is a real opportunity in some of the more cyclical sectors that everybody has shed with, you know, fears of a recession or global growth shocks, i think the world is defensively positioned and it is time to go cyclical. >> that does suggest you don't think that the treasury yield curve is saying bad things about the u.s. economy you think financials and consumer discretion ary can do well why do you think volatility would remain elevated. >> i think volatility on a more secular basis is slated to rise. for the last 30 years we have seen the cost of capital come down we have seen bond yields fall. we have seen the fed ease. we have seen policymakers ease central bankers across the globe have eased and today we're starting to reverse all of that liquidity and generally what we found is that as liquidity flows into capital markets, volatility tends to come down, which is what we have enjoyed for quite a while.

but as liquidity has withdrawn, we tend to see volatility come back up. so i don't think it is necessarily bearish for the s&p 500. the volatility rises but i do think it is time to position a maybe larger higher quality area of the market. >> so given your sector calls, i'm trying to figure out, is this about valuation or is this about you don't -- you don't buy the tug of war between a very supportive fed and concerns about growth, that you think the concerns about growth are overstated. >> i think the concerns about growth are a little bit overstated, especially with respect to the u.s. and in particular the u.s. consumer because i think that normally this late in the cycle, the u.s. consumer would look very different, but this time around, consumers haven't taken on as much leverage, again if you look at all of the balance sheet measures for consumers, they look really unusually healthy at this point, relative to where they ought to be given how much the government has tried to encourage us to take on more and more debt so it is interesting

it is not your typical late cycle call but i think that this is one area that has been sort of neglected, valuations are attractive, not necessarily, you know, at rock bottom levels, but it is more about positioning and changes in the tone of the fed. >> that tilt in positioning you mentioned somewhat cautious, seems to encompass large cap growth stocks. seems like they're in a way considered a new defensive or safety trigger do you think those are overdone at this point or -- >> i do. one of our underweights is communication services and i worry a lot about faang because, you know, one key point, faang stocks are looking a lot like financials in 2007 for one reason, governance over the last year or two we have seen governance characteristics for faang companies really deteriorate same thing we saw for financials companies in the two years leading up to the financial crisis and this means stock compensation, you know, the spread in salaries of the top

guy versus the bottom guy. there are a lot of governance issues as well as data privacy this is an unregulated sector that is about to potentially see a regulatory smackdown. >> and a little crowded trade. thank you very much. >> thank you. >> mohammad, thank you for being with us today. it has been a pleasure >> what? >> he has somewhere he has to go. >> it is a half hour to teterboro. >> you know he flies commercial. >> can't you call and say -- >> if you follow my tweet, you would have seen not only -- >> jetblue >> no, i was really happy to see in united economy, they put something where you can put your phone. >> you're just -- okay anyway, thank you, mohammad. good to have you on. let's get down to the new york stock exchange and jim cramer joins us now jim, we had a -- i don't know. it is a new normal in housing, i think. it is owed to mohammad here. but should we be disappointed with housing or is there so many different things that --

>> i don't know. >> you love brooklyn, right? >> there is -- you guys are right, mohammad is right, there is an affordability issue. people are staying with their parents longer it is not supposed to happen it is a brand-new world for us we have a lot of people who live in the house they grew up in and i think the housing -- i think the prices have to come down they're too expensive. there is no bargain. look, housing is -- it is no longer the american dream. particularly by the way when they change the tax laws those of us in the sold area, we're drowning in morton salt, like the dead sea. it is really expensive. >> in your view, where the averages are now, 2800 on the s&p, what is the next data point that you think is going to give us a clue as to which way this finally breaks out

is it growth -- >> i think the banks will prove to be better the banks will prove to be better we're going to see they made some earnings, also have the ipos they're right now pitiful, helpless giants. i think the banks could be the leaders they report first. if they do a good job, i think it will be an inspiration for a lot of people. since having coined the term faang, i took it very personally i'm trying to look the other way. your interview, by the way, i'll miss gottlieb. how much are we going to miss gottlieb how does he like juul. we didn't get to ask him about the watermelon cigarettes? could we get a juicy fruit juul so that, you know, young children, maybe 8 or 9 can get someone to pay for them. >> agree thank you, jim. >> love them watermelon

watermelon. >> see you in a few minutes. coming up later on "closing bell," exclusive interview with carnival cruise ceo arnold donald that company has earnings out in a few minutes this morning quk x"uned "sawbo is coming back after a quick break. ♪ just hold on, i'm comin' ♪ hold on, i'm comin' ♪ hold on ♪ don't you worry, i'm comin' ♪ here i come

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that does it for us today. mike, thank you for being here we'll see you on thursday. we'll see all of you here tomorrow right now it is time for "squawk on the street. ♪ good morning and welcome to "squawk on the street. i'm david faber with jim cramer. we're live from the new york stock exchange carl has the morning off let's give you a look at futures. we get started with trading half hour from now. and by the way, the january s&p case-shiller report just out showing a 4.3% year over year increase in home prices. mortgage rates are down now too. so activity seems to be picking up a bit even talked housing a little bit. maybe later. let's get to our road map this morning. more questions than answers. apple unveiling a series of new services that includes streaming and original star studded content. but wall street's re