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tv   Squawk Alley  CNBC  November 30, 2016 11:00am-12:01pm EST

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microsoft, facebook, a lot of these big technology names which have underperformed since the election and for the month are getting hit today. there's the story of the day, wti oil prices up almost 7%, biggest move higher since february, above $48 a barrel, brent just below $50 a barrel on word of a deal in vienna for opec. we await formal confirmation of that. we await the jobs report on friday, and we're looking at the best month, carl, since back in march for s&p and dow. send it to you for "squawk alley." >> sara, thank you. good morning. it is 4:00 a.m. at netflix headquarters in los gatos, california. it is 11:00 on wall street, and "squawk alley" is live. ♪ ♪
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>> good wednesday morning. welcome to "squawk alley." carl quintanilla with kayla tausche at post 9, and mark santoli. donald trump making two key cabinet nominations they morning. let's get right to our john harwood outside trump tower with all the details. john? >> reporter: carl, these are two of the big ones. steve mnunchin has been selected by donald trump to be his nominee for secretary of the treasury. he, of course, is a former goldman sachs partner who was the fund-raising chief for donald trump's campaign. also, wilbur ross, who is going to be the commerce secretary, billionaire investor, well known to viewers of cnbc, neighborhood of donald trump's in florida where he has his marioa lago estate 37 and he moderated the trump economic message in a few
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ways. instead of talking about outright scrapping dodd/frank, as donald trump did during the campaign, steve mnunchin talked about modifying parts of the law that discourage lending. that's one signal. secondly, donald trump said during the campaign his goal was 4% economic growth. when steve mnunchin was asked what was a realistic target, he said 3% to 4%, softer target. finally, on taxes, donald trump's tax plan when scored by all the analysts who took a look at it gave disproportionate benefits to people at the top. steve mnunchin said, no, we're not going to do that. we're going to offset any tax rate cuts for people at the top end by cushing their deductions so that they would not get a net tax cut. there was one other way in which steve mnunchin moderated trump's message, and that was when he talked about janet yellen. she, of course, was described as political by donald trump during the campaign. here's what steve mnunchin told us on "squawk box" this morning. >> are you a fan of janet
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yellen, steven? >> you know, look, i think she's done a good job at the fed and -- >> she should continue to serve out her term? >> i'm not going to comment on whether she should or she shouldn't. >> well, she should or shouldn't -- >> janet yellen, are you a fan? >> well, i think that she dealt with a very difficult situation and did a reasonably good job. >> she may serve out her term. would she be nominated? >> that's a question for her and the president, not for us. >> reporter: now, if you're somebody who has been fearing radical changes in economic policy from donald trump, and a lot of democrats did, all of those ways in which steve mnunchin and wilbur ross expressed a somewhat softer message have to come as some reassurance, carl. >> definitely a big day as we watch the transition, john harwood in trump tower. thank you, john. along with news out of the trump team, the dow and s&p setting new record highs this morning. oil, of course, inching closer to $50 on news that opec has reached a deal on production cuts. for all of this, we turn to mike
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santoli, talk about closing out november for the fourth year in a row with all three on the up side. >> it's actually been a rare november in a certain sense, which means we actually went lower in november than we did in october but ended up with a gain. it basically is not the usual pattern. usually strong novembers historically give way to further follow-through on the up side in december. the issue is the first half of december often not as strong. i think the other thing traders are watching is some measure of trader sentiment, investor sentiment, have gotten happy, they've chased the rally up here. seems to me like after we had the rebound following the brexit vote, you had about 8% in three weeks to the up side. that's what we've had since the intraday lows on election note and then you moderate, go sideways for a while now. >> the investing piece, though, have been too simple for the month. you have the idea that yields and stocks can rise at the same time that the economy is strengthening, that you should buy health care and financials, because not only will yields be rising, but also there will be
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this rollback of regulation. but there's been a lot of talk this week about treasury prices bouncing off the 200-week average and whether we might have a near-term treasury bounce and what volatility that could bring. >> it's interesting. you're right, kayla. basically, the thesis has been play checkers, not chess. the obvious stuff you think will happen policywise, just chase that. and yes, you're right, yields are in a zone people say where they're not yet impinging on equity valuations. what's interesting is all the news flow on the economy showing that we're running pretty high, right? even today, when you've got incremental news on adp and chicago -- >> spending, yeah. >> all of this says wow, the economy has a head of steam right now. and the incoming treasury secretary most likely saying we're going to produce more long-term treasury supply because we're going to lengthen the treasury, and we're going to grow faster and inflation expectations are not a concern. all that stuff not very friendly to bonds, even if we do get a near-term bid. >> everyone's wondering if cramer's going to get his 40-year duration. we'll find out.
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let's get over to steve liesman who has a very important guest. >> carl, thank you. i am here with dallas fed president robert kaplan. we were talking second biggest state economy in the country, and like the ninth or tenth biggest country in the world, impact on foreign policy. a lot has changed since the election. stocks are much higher, yields are substantially higher, the dollar has appreciated. the market seems to have changed its outlook since the election. have you changed your outlook? >> i've been saying for two or three months that i thought we're at the point we ought to remove some out of accommodation. i felt that way in september, felt that way in november and still feel that way. as we look ahead to 2017, as we continue to make progress on employment and inflation, i would expect we will remove some further amount of accommodation. >> my question is whether or not you've changed your outlook for growth, for inflation -- >> not yet. so, here's why.
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we were calling for it even before the prospect of new economic policies, 2%-plus economic growth in 2017, and i believed that we're moving toward meeting our 2% inflation objective. we'll see how the new policies evolve and develop, and we'll be analyzing them. but if they help accelerate that, then that will give the fed more operating room, and we'll have to adjust our stance and our path to future rates accordingly. >> i want to get to that specifically, but i want to ask this question -- the market interest rates are already higher. and as you say, nothing has happened yet. do you have to change your outlook to somehow adjust to the ni new realities created by the market? >> so, you'll remember, i'm someone who's spent the last 30 years in the market, and one thing i've learned, sometimes painfully, is markets move in anticipation of future events, and sometimes they move again,
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sometimes in a reverse fashion, depending on what actually unfolds. so, no, for me, i focus more on development of economic conditions. if financial conditions change to where they actually foster even better economic conditions, i take that into account. if there's a tightening, take that into account. but no, i don't think the market changes in and of themselves should drive my policy until it's demonstrated that they're actually reflective of changes in underlying economic conditions. >> going to throw it to the anchors in just a second. i just want to ask you one more question. you said fed policy could adjust to the fiscal side -- >> should adjust to those. >> should adjust. does that mean that if there's a big stimulus package, if there's a big tax cut, that the fed would raise faster than is currently forecast? >> i don't want to prejudge what we might or might not do, because i don't know exactly what's going to happen. there are some policies that have been discussed that would be stimulative to gdp. there are some policies discussed that may actually retard gdp or diminish it.
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and i just want to wait and see what's actually enacted and react to that as it unfolds. i don't want to prejudge it, and i think that's a better way to approach this. >> kayla tausche has a question for you. >> thank you so much, steven. and thanks, mr. kaplan, for joining us. i want to ask about the dollar, which has been strengthening at a time that our trade relationships have come into closer focus, namely with china, whose currency has been weakening. and there's talk that maybe an accord needs to be reached to put a lid on dollar strength. what's your view? >> so, i'll speak, again, as someone who represents the 11th district. texas is the largest exporting state in the country, so obviously, a stronger dollar creates headwinds for our exports. the other impact of the dollar is i'm very mindful of stabilization going on in emerging markets, particularly china. we saw the first quarter this
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year currency in china rapidly depreciated. they had a rapid market sell-off, and it transmitted to a global tightening in financial conditio conditions, which if allowed to persist would have slowed the u.s. economy. so, my comment would be i'll stay away from what other parts of the government might do, but i think watching the strength of the dollar needs to be something on my radar, on our radar, and i'll be watching it very, very carefully for those two reasons. >> mr. kaplan, it's carl. a lot of viewers interested in the effects of would-be infrastructure program and other kinds of fiscal stimulus. but given where labor is right now and where some believe slack is in labor, is that going to be meaningful to growth, or is it more meaningful to inflation in the long term? >> well, we'll have to wait and see. i've been someone who has said that we need economic policy beyond simply monetary policy. having said that, whatever policies we adopt, we need to
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take into account the fact that while we're not at full employment, i actually think we're making great progress toward reaching full employment, and there is more limited amount of slack. a lot of that is driven by demographics. a key thing going on is our labor force is aging. and what's happening is that's going to go on for the next several years. and as it does, i expect the labor participation rate to actually decline further in the next ten years. our economic policies broadly need to take that into account. >> so, one of the keys to this, robert, is the idea of potential growth. the new administration talks about ratcheting up growth, potential growth, to 3% to 4%. is that possible? >> i'll put it this way, there are two or three big secular drivers that are going on in this country. one is aging demographics here and in most developed countries.
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number two is disruption of most industries, globalization and high levels of debt to gdp. disruption is a factor, but aging demographics is the most significant one. and i think that, ultimately, in order to get much higher levels and sustainable levels of gdp growth, we need to address the size of the workforce and its productivity. >> that means more open immigration? >> i'll leave it to policymakers, but the facts are, and our analysis shows that if the workforce is declining or demographics are declining, that creates a headwind. so, vocational training, improving educational attainment, and yes, the size of the workforce are going to be key drivers of future gdp growth. >> you worked at goldman sachs when steve mnunchin was there. what can you tell us about the new treasury secretary designee? >> i'll decline to comment about
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political appointees other than to say i know steve and got along with him and worked with him for many years. >> do you think he'll make a good secretary? >> he's an outstanding person and i've always thought highly of him. >> kayla? >> as the fed raises interest rates, it obviously becomes more expensive for the country to issue and service its debt. as congress begins to consider and write new policy, new spending programs, what should it consider when trying to budget for our own interest in this country? >> i will not be so presumptuous as to advise congress on what they should consider, but i would say that in thinking about it, what i think about is the big secular drivers again. they should think about the workforce and the fact that it's impacting the dependency ratio, meaning 30 years ago workers were here, dependents were here. today it's shifting. as we age, there are a diminishing number of workers to support an increasing number of dependents. so the present value of future,
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unfunded entitlements is now $46 trillion, and u.s. government debt-to-gdp held by the public's about 76%. that needs to be taken into account in any economic policy, because what you don't want is a short-term bump, and then we revert back to the trend of labor growth and productivity growth, and we're left with higher levels of debt to gdp. so, congress and all of us as policymakers need to be mindful of it. >> robert, it's extraordinary to have you on, in part because of the brief that you had being in the texas district, and one of those is energy. >> yeah. >> opec is meeting right now. how critical is some form of agreement in opec to the health of the texas energy industry? >> so, even before this discussion or explicit discussion of opec coming to agreement, we thought that global supply and demand, the energy, oil supply and demand was going to get into balance by mid-2017. it's not because supply is
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declining. it's still growing, but demand is growing at 1.3 million barrels a day on average and is catching up with supply. obviously, if there's an explicit agreement, that would accelerate that balancing. and so, the faster we get into balance, the more you'll see prices firm. ric count is already inching up and will probably take prices between $55 and $65 for that to accelerate dramatically. but to the extent there's an explicit agreement, that will move us closer to the point that that could happen. >> the equally brilliant carl quintanilla has another question for you. >> on a slightly longer time horizon, we talk about robotics and ai automation on assembly lines. i'm reading now that by 2020 -- this is according to "harvard business review" -- customers will manage 85% of their relationship with the firm without interacting with a human. are we framing the future
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correctly in looking at ai and robotics? >> well, so, we spent a lot of time at the fed and i spent a lot of time on this. the broad category called the future of work. there's no question that disruption, technology-enabled disruption is affecting businesses, affecting business models. it's one of the reasons why i think capex is sluggish, but it's also affecting workers, and it means that increasingly, workers are going to have to move industries, get retrained, and that's why, again, educational attainment levels improving and vocational training and beefing up vocational training is going to be critical, because more and more in our future, workers are going to have to adapt to changes in industries which will cause them to need to change jobs and move to new industries. we're behind the curve on that, in my opinion, and we need to rapidly catch up. >> robert, i'm going to get severely disciplined for asking you one more question, but give us your best guest for the funds
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rate at the end of next year. >> okay, well, you know i'm not going to do that, but i'd say the following. i'd say -- i've said up to now, the path of future rates is going to be somewhat shallower than we've experienced historically. if there's new economic policies, we'll have to revisit -- i'll have to revisit that statement and that assumption. i don't want to predict where the path-to-funds rate will be. all i can tell you is we make path on employment, inflation, and we see higher rates of gdp growth. you'll see us respond accordingly with the future fed fund rate actions. and i don't want to prejudge it, but we're going to have to adapt to it. >> robert, thank you so much for joining us. >> thanks, steve. >> robert kaplan, president of the dallas federal reserve, aka, the second largest state economy, maybe the ninth or tenth biggest country in the world, carl. >> steve, thanks for bringing that to us. steve liesman with kaplan. when we come back, market reaction to the dallas fed president and those earlier comments from treasury secretary designate steve mnunchin.
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dow and s&p at record highs. a lot more "squawk alley" is back in a minute. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley.
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our most important priority is to sustain economic growth and i think we can get to 3% to 4% sustained gdp, and that is absolutely critical for the country. to get there, our number one priority is tax reform. this will be the largest tax change since reagan. we've talked about this during the campaign. wilbur and i have worked very
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closely together on the campaign. we're going to cut corporate taxes, which will bring huge amounts of jobs back to the united states. >> former goldman exec steven mnunchin, pick for treasury secretary, on "squawk box" this morning. mike santoli is here joining us along with ubs director of floor operations art cashin. guys, we've got mnunchin/ross and opec with the headlines officially crossing, 1.2 million barrels a day effective january. do you believe this is actually happening? >> i believe that that's what they're going to announce. whether it sticks or not is a completely different thing. 1.2 million a day. half of that will come from opec, half of that from the non-opec sources. we'll have to see what the russians actually do about it. we have a history over the last two years of these phenomenal short squeezes in the pits and they tend to overtread very heavily. so, i think that's where we are
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right now. we're a little bit ahead of ourselves. in my preopening comments, i had said the s&p would face some resistance at 22.12 to 22.15. we got up to 22.14 and stopped, so i think that's going to wrap things up. you may try it again today, but i think the riskance may hold. >> it's hard to deny the relief rally of 9% in crude. what devil is in the details for that agreement? what sticking point do you think there could be, once we see the full text, that could give people pause? >> i think you want to see if they really deliver. mr. sechin in russia has right up until this week said he didn't think he was going to be cutting back. and now, while he's not the oil minister, he runs one of the largest oil companies that they have there, and he is reputed to be the best friend forever of mr. putin. so we'll see. i had my thoughts. they have come before the public again and again and announced,
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we've got it all worked out this time. and then when nobody can see what's going on, the cheating begins almost immediately. >> interesting impact. just even if crude stays at this level, let's say it goes up to what everyone feels as if it's a near-term cap of $50, $55, whatever it is. on a year over year basis, you're getting into the zone of where it's a big increase, and it just goes into a lot of other indicators that are feeding into building inflation expectations. i think what you're really seeing in the markets is ratcheting up the idea of nominal growth going higher, whether it's real growth or inflation on top of it or not. that seems to be the easy trade with wage growth going the direction it is. and to me, the key word in steve mnunchin's comments was sustained. we were at 3% to 4% in the third quarter. we're probably there in the fourth quarter. sustained is the question, and what do you have to do to get there. >> one last thought on that, art. the 3% to 4% -- while rates stay low over the next couple of years, they said. >> yeah, no, i think they're beginning to move in the right direction. the question is can they pull it
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all together? i was interested in mnunchin's idea that they're going to cap some of the deductibles and whatever. that will probably make it easier to get through congress because you will have the people there who are worried about increasing the deficit, so that will be helpful. the first couple of initiatives sound like moves in the right direction. >> not too clear that the math works at the very upper end in terms of capping the deductions, but maybe cosmetically, that's how you get it done. >> right. >> thank you, art cashin. nice christmas tea. kayla. still to come, a busy hour on "squawk alley." we'll talk with banking committee member senator jeff merkley. why he thinks steve mnunchin's nomination for treasury is bad for the country. as we head to break, take a look at shares of netflix. the company announcing a new feature this morning that allows users to download select shows and movies that can then be watched offline. netflix shares up more than 1%.
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alley," everyone. check out where europe stands as we head to the close over there, really a sea of green. stocks, in fact, trading at three-week highs, helped by that strong move that we're seeing in the price of oil with the cartel commentary out of opec that they have reached a deal. a big win, of course, for those nations in europe that are heavily dependent on the commodity. just take a look at norway, which is the world's third largest exporter. russia, the world's biggest oil producer. it's no coincidence that these markets are trading higher in today's trade. looking at the big movers in the energy space, enbridge, bp and royal dutch shell, strong moves, royal dutch shell up. and in the industry space, linde shares up after a new bid. they had dissolved months ago. the merger of these two companies would create a $60 billion industrial gas giant. meantime in england, bank of
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england's mark carney talking about the threat to the world economy under a trump presidency. royal bank of scotland shares falling after failing the bank of england's stress test. the bank saying it will cut costs and sell assets to boost capital. take a look at the bund in the bond market after the european central bank president, mario draghi, confirming that the bank will decide on whether to extend quantitative easing next week at their thursday ecb meeting. the moves could lead to an even sharper divergence in yields between the german 10-year and the u.s. 10-year. that's something that economists had been writing about this morning. carl, back to you. >> all right. thank you very much, seema. getting more granularity on the opec cut. oil is moving today. according to an opec official, russia is agreeing to cut 300,000 barrels a day. the overall cut 1.2 million per day effective in january. and then some of the movers individually, kayla, within the space.
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marathon's up almost 20% today alone, transocean 14%, devon 13%, murphy 13%. huge swings. as cramer said this morning, if you're buying at these levels, you're buying off the backs of shorts who are panicking, as he side. >> and there have been a lot of false alarms when it's come to these types of agreement. this would be the first coordinated production cut in close to a decade. and as art cashin said, we'll believe it when we see it, for the most part. all right, when we come back, we'll speak with senator jeff merkley, member of the senate banking committee about president-elect trump's picks for treasury and commerce. merkley says mnunchin in particular is a bad choice. find out why, next. and later, trump says he's cutting ties with his company, but it's not all black and white when it comes to his business dealings. we'll break it down when "squawk alley" returns.
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good morning once again, everybody. i'm sue herera. here's your "cnbc news update" at this hour. thousands of striking workers gathered in seoul, calling for south korean president park geun-hye to resign. the protests come after park offered her conditional resignation on tuesday. massive street rallies calling for her ouster because of corruption charges. iraqi forces continuing their offensive towards mosul, advancing on nearby villages. it's all part of an operation to retake iraq's second largest city from isis militants. a fire erupted last night when a gas pipeline ruptured north of kansas city, missouri. no one was injured, thankfully, and the fire was later
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extinguished, but the cause of the rupture is unclear. houston-based enterprise products partners is the owner of that pipeline. and pope francis met film director martin skcorsese aftera screening of "silence," about jesuit missionaries in 17th-century japan. the meeting is years after church members condemned scorsese's film "the last temptation of christ." that is the news update this hour. back downtown to "squawk alley." kayla, back to you. >> thanks so much, sue. back to the big political news of the day, president-elect donald trump tapping former goldman sachs banker steve mnunchin to take charge of treasury. the new treasury secretary will have far-reaching influence on everything from the nation's international economic agenda to tax and banking regulatory reforms. take a listen to the treasury designee on the future of dodd/frank from "squawk box" this morning. >> we've been in the business of regional banking, and we understand what it is to make
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loans, and that's the engine of growth to small and medium-sized businesses. so as we look at dodd/frank, the number one problem with dodd/frank is it's way too complicated, and it cuts back lending. so we want to strip back parts of dodd/frank that prevent banks from lending, and that will be the number one priority on the regulatory side. >> joining us now is senate banking committee member jeff merkley, a democrat from oregon. senator, it's great to have you here. >> good to be with you. >> you tweeted "mnunchin for treasury. does donald trump really think voters wanted to put a wall street banker in charge of wall street?" how is this different than hank paulson in charge of treasury or secretary lew who came from citigroup? >> well, you heard him say he wants to deregulate wall street and allow predatory lending, something he is an expert in because his bank did it and they had quick, fast foreclosures on
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families. if you want somebody to dismantle the protections for consumers, he's just the guy to do it. but that is, in fact, the opposite of what trump campaigned on. >> but there are some banking executives who would acknowledge that regulation has been helpful, who say they don't necessarily want to roll it back entirely. they would keep a heavy capital cushion so they stay safe during the tough time, but maybe release some of the lending regulations so they can lend to some of the underbanked communities. why is that wrong? >> well, actually, when you engage in teaser rate mortgages with exploding interest rates, they are designed to fail. when you engage in liar loans, they are designed to fail. they destroy the dream of home ownership for families, rather than establishing the dream of home ownership. we've learned this in the most cruel and unforgiving way. it's a place we don't want to go back to. this man is an expert on how to make money in predatory lending, and putting him in charge, it is
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absolutely the opposite of draining the swamp. it is filling the swamp with a swamp monster number one, who is an expert on how to take it to low-income families. and so, it really is the opposite of what trump said he was going to do. >> but why not spin the conversation forward, senator, and instead of litigating the last financial crisis, think about what new ways you could edit dodd/frank, perhaps in a lighter way to make both wall street and main street happy. is there a way to do that? >> well, certainly senate democrats have put forward a whole list of reasonable ways to make things work more efficiently, and those things were rejected because the republicans wanted to use reasonable adjustments as a wedge to restore predatory activities, really to restore the wall street casino that set the stage for taking down our economy, and that is what's going on here once again.
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you're an expert on how to drive the wedge, to set up a strategy that works great for wall street and really hurts main street and really hurts our families who are struggling. >> there's been some discussion in the wake of his confirmed nomination now about his background in goldman sachs, especially in mortgage-backed securities, the way he profited off the sale of indymac, which was, of course, a subprime lender. do you think he'll face any real opposition in a senate confirmation, though? >> absolutely. >> every nominee has issues, but what will the opposition level look like? >> well, you're looking at somebody who bought a bank that specialized in predatory activities, proceeding to foreclose on thousands and thousands of families, rather than kind of giving them a fair chance to retain ownership of their loans, and he then proceeded to sell it at enormous profit. he had subsidiaries that repaid his primary company right before
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they went bankrupt, so basically took and stole money from the other people the company owed money to, to enrich himself. it's a real insider trading type of structure. there's a lot of material here about why this person is not a champion of homeowners, not a champion of struggling working families, not someone who's going to make america work for working families. this is someone who's going to make america work well for wall street, and,why he's the wrong choice. >> we'll be poring through the financial disclosure forms for all of these nominees. for now, we appreciate your time, senator. >> you're welcome. some news out of the epa, which is going to disappoint some automakers, but perhaps only for now. phil lebeau has that story in chicago. >> carl, this is a proposal from the epa, the administrator proposing that they leave in place the greenhouse gas emissions standards that were adopted in 2012, but this impacts years 2022 through 225 as far as the greenhouse gas emissions that are expected.
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by keeping this in place, this ultimately has an impact on the cafe standards or the fuel economy standards. and we've put this graph up to show you just what's expected out of automakers as we go to 2025. and the expectation is that the fleet average -- not every vehicle, but the fleet savage 54.5 miles per gallon by then. for a frame of reference, it's 36.6 miles per gallon for next year. right now we're at 33.1 miles per gallon. so, guys, that is the proposal from the epa. remember, by april is when these have to be locked in place and we know what happens in january when a new administration comes into place. we'll see if the standards change then. >> good to note for now. phil lebeau. when we come back, president-elect donald trump says he's cutting ties with his business, handing it over to his kids. easier said than done, though. we're going to break down the details on that. dow's up 80 with goldman adding about 60 of that. ♪ ♪
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let's get to the cme group, rick santelli on trump's economic cabinet picks. hey, rick. >> absolutely! you know, normally the picks of the day, i've been looking is it going to be treasury, oil, equities? but the picks of the day today, steve mnunchin, treasury secretary, wilbur ross, commerce secretary. why are they important? and why is there going to be some controversy? you heard our last guest. listen, i get it. i get it. you know, the whole drain the swamp, wall street, all of that relates to many. it strikes chords, especially when we think about the bailouts
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and the stimulus plans and everything that went wrong between '08 and '10. however, i just can't imagine, i can't imagine that we're going to have a strong economy without a strong banking system, without bringing up some of the smaller, midsized banks, without lending to the smaller, midsized companies. i can't imagine trying to get the economy going if we can't create a fertile atmosphere businesswise, a landscape that companies want to stay in, thrive in and not leave. i think those two picks really address those issues. so, how does all this play in on the big picture? believe me, there's going to be moguls. it isn't going to be as easy as it's been, but i look at it quite simply. we have an antigridlock dividend. i remember. i traded in times in the '80s and early '90s when gridlock was king, but the economies were much more stable. you can't have gridlock with a stale economy. you need to make change! and i think antigridlock dividend is a real issue. i also think that this
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administration, for even what few facts we have, is going to have much more visibility. i think that it's going to be much more carrot versus stick regarding the landscape that is fertile for business. but most of all, and this might shock people, i think that this administration will, without a doubt, be the most transparent in history. why? because of what's facing me right now, the camera, the blogs, the websites, the news media. believe me, everything that this guy does is going to be under a press media microscope. i'm not saying it's a bad thing. i'm saying it's kind of a new thing, but i don't think that there's going to be any question or mystery in any direction they go. and actually, i think all of those things could be a bigger dividend than the gridlock dividend, but we can't put the cart in front of the horse. kayla, back to you. >> all right. thanks so much, rick. still to come on "squawk alley," treasury secretary
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designee steve mnunchin says the majority of trump tax cuts will be focused on the middle class, but will they translate into economic growth? we'll discuss that, up next.
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some breaking news on capitol hill. nancy pelosi has been re-elected as house democratic leader in a closed-door caucus meeting. 63 votes, though, went to tim ryan, which by some accounts is a significant defection. she did say, though, that she would win about two-thirds of
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the caucus and 134 votes for pelosi is about that. so we will keep our eye on minority leader pelosi. meantime, president-elect donald trump's treasury pick promising the nation's largest tax overhaul since reagan. steven mnunchin telling "squawk box" this morning that reforms will include both corporate and individual tax cuts, but any changes will not result in cuts for the wealthy. take a listen. >> any reductions we have in upper income taxes will be offset by less deductions so that there will be no tax, absolute tax cut for the upper class. there will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it. >> joining us this morning, cnbc contributors jared bernstein, former economic adviser to vice president biden and economic policy analyst jim pethakoukis. how are you taking mnunchin's comments this morning and comparing them to the campaign
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rhetoric? >> it's not just rhetoric. there are a number of groups in town that have scored the trump tax plan, and they look absolutely nothing like what we heard from the treasury secretary designee. and in fact, they did, even some of these estimates factored in some dynamic it. >> $1,000 less than the double fifth. the percent of tax break for the top 1% is about 14%. for the middle fifth, about 1.5%. i don't mean to flood you with numbers. i'm just saying that these are the scores that nonpartisan groups have done and they completely contradict what was being said. i want to give the guy a chance, but that didn't make sense to me. >> jim, can mortgage deductions make up for all of this at the top? >> if the eventual plan is
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anything like sort of the latest version of the trump campaign plan, this is going to be a big tax cut for wealthier americans. they'ren going to be able to get rid of enough deductions. if you get that top rate from 40% to 33%, they will get a tax. an absolute tax cut. if the final plan ends up looking a lot like the house plan, if you do include the dynamic scoring, and i don't think the dynamic scoring is magic, but i think it's a real effect, but you could have a total plan that might not lose any money or much money. it's still going to lose money, but it won't lose $3 trillion, $4 trillion. right now on a static basis, not counting economic feedback, both the house plan and the trump plan would lose anywhere from $2 trillion to $6 trillion. given that deficits are going to be going up a lot over the next few years anyways, that's a big number. they need to avoid that where. >> the tax policy center says three-quarters of the federal revenue loss will come from a cut in the corporate tax rate.
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the house plan cuts it to 20%. trump's plan cuts it to 15%. you think it should be even higher than 20 to plug that hole. still get companies to bring jobs back. >> look, yes, you know, the corporate side, both the rate cut and doing the immediate expensing, that loses a lot of money on a static basis. if you think there are some dynamic effects. static scores almost certainly is wrong. the issue is how big are the dynamic effects. if you do include those, then all of a sudden the bang for the buck on the corporate side starts to look much better. the part of this tax cut that's going to lose a lot of money and not give as much growth as all on the individual side. if i was trying to make these numbers work, i would focus a lot more on the business side and i would leave that top tax rate right where it is. >> jared, i assume you agree? >> well, i think that the dynamic affects can be gained and probably will be gained to an extent that i would hope jimmy and i would find
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misleading in terms of the kinds of revenue losses. that is if you look at the congressional budget office or the tax policy side, any nonpart zbloon groups, they actually find the dynamic effects are relatively small. what you have to worry about here is trickle down magic elixir that you lower your tax rates and all kinds of wonderful things happen on the growth side. the historical record for that is really, really poor. now, i definitely agree with jimmy and, in fact, with the obama administration and the trump administration that the top corporate rate should come down. the only way to do that without really driving a huge hole into the revenue coughers of the treasury is to close a bunch of the deductions and, you know, so-called loopholes. now you're invoking the wrath of every lobbyist in this town, and that's why this kind of tax reform has always been so difficult. now, if they can find a way to thread that needle, fine. revenue neutrality is actually a very low bar. it's the lowst bar i've had. what i'm afraid we're going to
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see is big revenue losses. i don't like hear the new treasury secretary basically proposing a plan that's going to blow a hole in the treasury. >> right. and, jimmy krks to jared's point, i mean, the stock market at least has been responding to the promise of all of this as jared alludes, but when it gets to the finer points and the blow-up of special interests in washington, is this going to get a lot more difficult? >> listen, you know, there's -- we've all been talking about tax reform for a while, and there seems to be a general broad consensus jared mentioned. people across the bank spectrum certainly agree we need corporate tax reform. but it hasn't happened. one reason our traditional sort of partisan differences, obama administration wanted it to be not necessarily be revenue-neutral, but there's also lobbying groups, interest groups, getting rid of these deductions. that's all really hard stuff, and, again, there's a reason we haven't seen this reform. to immediately start just plugging in the numbers thinking, great, we're going to have a 15% tax rate or a 33% income tax rate. there's going to be a very messy
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road getting there. >> yeah. and markets will have fun watching that. guys, we'll be talking a lot in the days to come. good to see you, jared bernstein and jim. when we come back, trump making an announcement this morning about his own business interests. we'll get to that after a short break. ict the market. but through good times and bad... t. rowe price... ...we've helped our investors stay confident for over 75 years. call us or your advisor. t. rowe price. invest with confidence. if you're on medicare, remember, the open enrollment period is here. the time to choose your medicare coverage begins october 15th and ends december 7th. so call unitedhealthcare to enroll... in a plan that could give you the benefits and stability you're looking for, an aarp medicarecomplete plan insured through unitedhealthcare. what makes it complete? it can combine medicare parts a and b, which is your hospital and doctor coverage with
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>> hey, robert. >> carl, trump tweeting out this morning that on december 15th he is going to announce that he is officially stepping away from the trump organization. his quote "while i am not mandated to do this under the law, i feel it's visually important as president to in no way have a conflict of interest with my various businesses. hence, legal documents are being crafted which take me completely out of business operations." now, he is referring, of course, to the fact that the ethics rules that apply to cabinet members and other government officials do not apply to the presidency. there has been a wave of publicity in the past week about his meetings after the election with his business partners overseas in talks with politicians in countries where he and the trump organization do business. now, the trump organization does business in more than 20 countries, and, of course, they
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had that lease with the federal government on the old post office building in washington d.c., now a trump hotel. there were no details in the tweets this morning about exactly how he plans to step away. the fact is his children will be at the president, and he used the word operations, not ownership. it implies he may stick to his original plan of putting his ownership into a trust and letting three of his children, ivanka, eric, and don jr., run that business. given that ivanka has already been sitting in on some of trump's meetings with foreign officials and her husband jared will be a trump advisor, the questions about trump's conflicts of interest will likely continue well after december 15 th and, guys, probably well after january 20th when he is inaugurated. the story is not over, guys. back to you. >> still a chance out there, robert, though, that on the 15th he could come up with some solution that we haven't yet thought of. i'm thinking of andrew ross sorkin's piece where he talked about bringing in feinberg. >> corporate monitor. that's one idea out there. lots of proposals out there to
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truly separate them, and, you are right, trump has been known to surprise us. we will await that press conference. >> huge gains in oil related stocks. now let's get over to headquarters and "the half." >> thanks so much. i'm scott wapner. yes, the trump rally stocks hitting another new record today. with the dow and the s&p now on pace for their best month since march. even as some question just how long the good times can last, some sectors appear primed to continue their post-election run. with us for the hour today, josh brown, steve weiss, sarat, the brothers najarian, and the -- chief investment officer at dell tech international group. also joining us from washington d.c. is michael


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