tv Squawk on the Street CNBC December 12, 2016 9:00am-11:01am EST
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welcome to "squawk on the street." we wake up another tweeter bomb. a big week with a fed decision. the fed near 20k. europe is mixed. 10-year 2 1/2. oil up on the nonopec oil production. the road map with the negotiation of the president-elect and an american company. donald trump calling out the cost of the f-35. defense stocks are dropping in the premarket. >> timing, another company trump has in the cites, boeing, a deal for 80 jets. the buyer -- iran. and the market's making new records. oil prizes, as well ahead of the fed meeting which, of course, is wednesday. david with breaking news. >> we do. on a potential deal that will not happen. and that is involving viacom and cbs. right now, the national amusements, shareholder of both companies, led by sherri redstone and wanted to them to
engage in talks designed to see whether they could come to a combination has withdrawal that proposal of viacom and cbs engage in the discussions. reversing course in a sense and backing the new ceo at viacom and his plan to bring the company back to prominence and through the difficult period. and saying that she wants viacom to remain an independent company, a letter from national amusements according to people familiar with the situation is expected to be released shortly. but on both sides, sources tell me they're aware of this very event development. this after the two companies engaged in preliminary discussions and cbs yet to make a bid for viacom. mr. backus i will tell you myself speaking to investors gaining a following among those who believe he has the finger on
the pulse of what may need to be done at viacom. and so, in recent days there had been a sense perhaps not having the momentum others thought and shari redstone sent a letter indicating no more. remember that letter i sent previously saying i would like you to consider getting together and the scale beneficial? now i don't. i think viacom is better off as an independent company led by mr. backus and she believes shown promise in the early days of his reign having taken over, of course, as an interim ceo in the middle of november, i believe, guys. stocks reacting at this point. there had been a bit of a premium in viacom shares and an idea of a premium bid of cbs for the company and always remained in some question. certainly the synergies of a potential deal were significant. though some question whether you
can realize all of them but right now that's all off the table. leslie moonves to continue to pursue the independent path for cbs and now mr. backus getting the backing of his most important shareholder shari redstone. again, in this letter that should be released in the not too distant future and sent to the company saying, hey, we want you to discontinue conversations and we like the strategy you're pursuing. >> wow. i think that obviously viacom many people are hoping for something but cbs has been trading an at pretty big discount to the s&p. they have done a lot of good things. cbs radio deal. i mean, they have to sell off 15 times earnings and earning more than four bucks cbs undervalued on that story. a lot of people thought that cbs paying too much no matter what. >> it's funny because the people indicated to me any deal -- any
offer not fairly significant premium would fall on deaf ears and didn't appear to have the momentum and talk of leslie moo moonves and ms. redstone negotiating for governance and what's most significant is performance of mr. backus with confidence of the largest hair shoulder and i had conversations with viacom shareholders and see does seem to be on top of it. he will have the opportunity to per frm. >> this is the same day as fox sky and causing some people to downgrade fox and it is kind of a changing of the guard here. i fully expected people with cbs to do this deal and i think cbs if les moonves reiterates how well things are doing, why didn't i buy it under 63? that's a major story.
>> see how cbs performs today and expectation is to hear from national amusements and perhaps both companies, as well, to chime in with statements. that will now remain independent despite the story of scale, scale, scale and do you need it? >> man ves interest of running it with tepid. >> i think there was interest, carl. i do. i think there was some relu reluctance. the movie studios don't come up for sale often. it is not my belief he was reluctant that he would not have pursued it but key questions and discussion over price which they never got to. they did get management presentations from viacom and that apparently is where it's going to have ended and doesn't
mean you won't revisit this. no longer going to happen for now. >> big. >> big story. >> nice reporting on this. >> thanks. >> other big one this morning is lockheed of course down in the market after the tweet of the f-35. the program is -- and cost is out of control. billions of dollars can and will be saved after january 20th. meanwhile, boeing striking a deal to sell 80 jetliners to iran for almost $17 billion and could threatened by opposition to the nuclear accord of western leaders and that country. that would be the biggest deal going back decades but we know where the president-elect has been regarding twitter and boeing. >> yeah. look, all the appointees that are involved with defense and national security are no fans of iran. i have to tell you, i was looking at the deal of the non opec and opec and saudis and cutting back and maybe the new president tweets he doesn't
favor the technology that u.s. technology going to iran including boeing and also oil service. the lockheed martin, everyone knows that the joint strike fighter is hideously overruns for more than a decade. >> yes. >> but i don't know. no one thought that you could go back at this point and say we're paying less per plane, period, end of story sigh that a possibility? there are contracts. plenty of questions of the cost per plane and scaled up and still numbers are still extraordinary per plane. >> same thing as united technologies and pratt and whitney makes the engine. >> northrup is involved. >> okay, look. this opening bid is paying dramatically less per plane. and then what? they would -- the government sovereign. lockheed can't sue necessarily
but it is -- i think that lockheed martin ceo will have to say we have a lot of contracts with the government besides this one and we have a lot in the hopper. frankly, i'm flabbergasted. i know it's expensive and i was up at pratt & whitney last weekend and didn't think they would -- president-elect to say, listen, i won't pay for these. this is kind of etched in stone. it's etched in stone. >> no coincidence on the boeing side, the emphasis in this deal is promoting the number of u.s. jobs that would be created/protected by this kind of sale. >> i don't know if it's insulation anymore. i don't know. i know you're marilyn houston and she's terrific, low profile, looking at the book of business and not so much necessarily negotiating. maybe he's saying we're going to prosecure differently. look. yes, he could say we'll buy half
the planes we thought you were unless you renegotiate. the numbers north of -- north of 3,000. >> already put into it. i don't know the specifics of these -- how the deals work and -- >> but everybody -- >> i'm sure we'll learn more. >> 2,400 combat jets. what he has the ability to do is say we'll take 2,000, 1,500. here's the price to pay. he has that. many contracts have been cut over history. >> yes. >> how many we take of a destroyer, of an aircraft carrier. what he has -- leverage he has is not taking 2,400. we take 2,000 and you're going to -- or we're going to pay for 2,000 and you throw in 400 for free. anything's can happen. >> if the government is involved in paying any company you have to rethink what you're paying for -- >> drug stocks. the defense cut. look. i don't know if people get to grasp this. this is very serious decision already obviously through a
tweet that changes the way we procure and to bargain after the bargain's been made. this is a done deal. reopening it and say, listen, we don't have to take the planes and marilyn has to say we want you to buy 2,400. he says i won't pay that price. all through the whole supply chain, lockheed has to go to pratt & whitney -- everybody takes a hit if has the case and it's an inexpensive stock and more than i thought. i mean, all of the product. >> next week? >> if they -- look -- >> one a week. i'm assuming next week is something else. going down the list of defense contractors and things that don't look appropriate in terms of cost. >> darden? i was watching and reading articles of pepsico and salty snacks. salty snacks are bad for people.
i don't know. >> i don't think that will happen. >> it's the government nexus that matters. he kacannot be a moral leader. >> you say there's a screen -- >> i did that screen. >> government contract exposure is nil? >> you have to look at whether your company is being paid or at the trough of the government. this week, there's two kinds of risk. chief tins of tech and treats them like the media. they didn't vote for him. that's hard to swallow and then the companies -- drug manufacturers and they exist. lockheed martin won't make it up with the tristar. they got out of commercial years ago. look. i am a little flabbergasted because i know that it was an overrun and ways to make it so there's a deal. and he can call marilyn houston. why doesn't the president call people and get things done?
>> whether it's boeing, carrier, now china and the one china discussion with chris wallace over the weekend, do you believe he's using hammer where a scalpel will do? >> i think if i do business with china, i think that what he's saying is, listen, you have to take some pain here. we'll get the relationship back on even footing. and, you know, so maybe if you do business with china, just worry -- not the earnings per share of qualcomm. >> why not four planes of boeing goes to china? >> but world, man. we are underestimating the impact of the volatility to occur here. how many people -- marginal market. >> you have contracts, law. >> david, you really just throwback. >> is that what i am? a throwback? >> old media. >> old media? >> you have to get with the program. >> contract. okay.
sorry. >> yesterday against -- in the eagles where a defensive fabulous guy hit by a washington redskin and should be out of the game. a bell rung. here's a player, a bell ringer. really is. she's got a budget of how many planes to sell and suddenly it is like, you know, defenseless. defenseless. but it is! >> interesting allusion. darren sproels. i saw that. that was wrong. >> defenseless receiver hit by a tweet of a plan -- program everyone knew was an overrun. so many programs. >> hit by a tweet. >> sorry. i'm sorry. >> concussion protocol. >> oh yeah! a couple of weeks. she ain't going to make the playoffs. playoffs! regular season game. >> when we come back this morning, the buzz of rex tillerson and could be president-elect trump's choice for secretary of state.
news behind that. premarket, s&p going for seven wins in a row. hasn't done that in about three years. we are back in just a moment. ♪ ♪ ♪ oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face.
generosity is its oyou can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. exxonmobil's rick tillerson
seen as the front-runner for secretary of state. but some lawmakers on capitol hill expressing concerns of the dealings with russia and president putin. here's what president-elect trump had to say yesterday. >> he's much more than a business executive. he is a world class player. he's in charge of i guess the largest company in the world. it's been a company that's been unbelievably managed and to me a great advantage is he knows many of the players and he knows them well. he does massive deals in russia, for the company. not for himself. >> tillerson has gotten the order of friendship from russia. >> right. >> ties into the story over the weekend about the cia and their view of what the russians were trying to do in the election. >> i wonder what they're thinking. we have a special relationship under obama, better than with britain. which is a kind of united alliance against putin. it's hard to imagine tillerson
who's had so many good dealings with russia and remember where it's -- talking about oil. not talking about ukraine. >> right. >> you can bargain about oil and not a government bargain. it's a private industry bargain. rex tillerson did a great job at running exxon and exxon is a far flung company. >> although some people critici criticize some of the decisions over the last ten years. shale effectively as they might have. the players you talk about all the time at the top. >> but that's not the same as selling estonia at the top. little different. estonia, latvia versus -- this is kind of a -- again, i expressed astonishment because they're business people really business people who may have dealings overseas opposed to people overseas who happen to be business people. it's just a very different thing
to see someone like tillerson coming hat in hand with putin at times. >> right. >> yes, may be friendly, first name basis but, again, in the shoes of merkel you're thinking, all right, tillerson, not of the firment. >> you get another business person, gary cohen. i think we are anticipating any moment now appointed as the head of the national xhek council. sbree yated in '93 under frormer president clinton and first staffed by bob reuben of goldman sachs. unclear of who takes over at goldman sachs. solomon will have some role there and should become clearer, as well, very, very soon. this is expected to be announced this morning. >> a guy, a business guy an one of the things that happened is business positions filled for the most part for people of the
firmament or known and that's something i didn't think would happen in the campaign because we had an anti-business campaign with a commercial of gary cohen's boss and face in it. this is a bit of an about face and cohen is not known as a hard right wing and i wouldn't say that's not the case. so the business guys are -- economics advisers are looking like economics people. the other guys are looking like economics people, too. i remember late -- we should go back. we can't gloss over -- the hardee's labor department head. >> yes. >> when roosevelt, fdr always said that's a representative of the unions. this guy's representatives of the anti-unions. >> you saw "snl" over the white? >> walter white. >> head of the dea. >> i had walter white on to ask him when he was -- you know, brian cranston. i had him on air to ask him whether he felt that apple had
as good of a distribution business of mr. white and he felt the product was superior and apple may have a superior product but a great product and sell more of it. except if it's crystal methane not the apple phone. >> a craving for -- >> tight, tight. >> you can't take this away but i have not methane invented by the nazis in the '40s to make soldiers not fall asleep. you can pry it from me before -- that was -- things are going nuts here! >> a recent article of the nazis completely on drugs at all times. >> i ordered that book immediately. this is a different world here. >> we are. we'll get the mad dash and opening bell countdown in a moment. big week ahead. more "squawk on the street" from the nyse in a moment. or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction
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triumph over a competitor hoping to merge it it would be superior. so you see what happens. this is really when you have one shot on goal like opthotech to having a minuscule market cap. once again, regeneron was down. under fire from trump. lynch lifer said last week we have to be -- a tiff of reed from pfizer saying we have to be more representative of the price increases of the rest of the country so you've got before you get too excited about this, just hope that president-elect trump doesn't see that up 17 and question whether that drug is too expensive. it saved a lot of people's eyesight. >> opening bell here and get the s&p at the bottom of your
screen. red hat with the tenth listing anniversary. sally may with the fifth listing anniversary. s&p going for seven straight wins today. we are looking at the best december since 2004. we're about a percent away from 20k on the dow. ten times since 2012 s&p's had a 3% weekly gain, jim. every time it's been foal lowed by another weekly gain. >> obviously a gut check week. we have the tech. chieftains of tech. against that we have oil and oil historically taken the s&p. typically the way that the analysis had been is oil up feign mao ens the economy is stronger and not taking out 1.2 million opec barrels and non opec barrels but driving up the u.s. which i understand i had friday a fantastic independent
oil company. you will see the stock up very busy and they have said over and over again that the saudi umbrella is fantastic for them to lower drilling costs dramatically. they make a fortune at 53. seeing all of these independent oils, whiting, wx, whether it be anna c annadarko it's an umbrella and serious and numbers go higher. >> 24 countries. nigeria saying 60 is reasonable? >> 55, of 60. look at the five-year curve. they were thankful to see gary pruett appointed to the epa and felt it would surprise people and maybe more predictable. this industry is looking forward to tax breaks to start drilling. you have good incentives. maybe epa not so hard on them.
they deserve the premiums. i think they deserve this. this is big. >> you mentioned curve and not spoken about today is that the 10-year above 25 on the yield. i haven't taken a look at this very moment. >> right. >> and the banks are responding as you might expect. a mixed bag. 2.49 now. >> there's a big move in the housing stocks last week and seemed to have somehow accepted the fact that rates are going higher. >> it's been a couple of years since seeing that. >> above the closing high for last year. >> makes me not pine for these 3% consumer package good stocks that have been so much in vogue and sold off for a recovery last week and the speed, velocity of things happening. it amazes me. typically you would not have this level of placid let's say not ignorance but we certainly
are not factoring in things to sell off. anyone who's seen this kind of rally in rates sort to speak and traded historically shorting the market but that seems to be difficult to do other than say some tech periodically. >> number two in terms of sectors last week. >> near the end, phang rallying. and led by amd. it's an upgrade. inexpensive. hold the buy. bmo. but the inexpensive pc related tech had a very nice move. very nice. >> national amusements? >> yeah. wanted to update the news we brought you at 9:00 is now confirmed by national amusements. in a statement that just came out moments ago. saying the company no longer or
asked the boards of cbs and viacom to discontinue an exploration and quoting from the letter here, over the past few minutes after careful assessment and we have concluded this is not the right time to merge the companies. going on to say following the management changes that the viacom board put in place we've been impressed with the plan pursued under bob backus' leadership, the new ceo at viacom and not just redstone singing his praises. we'll see, of course. it is interesting days and down almost the same on a percentage basis. viacom maybe some premium thought or hoped might be there and a combination itself to bring cost savings and synergies fairly significant and right there to be captured and not going to happen. at least not now. perhaps some point in the future
but, you know, finally going to lap the colbert and comedy central comparisons and first quarter and showing growth for the first time and managed to get the viacom networks on the directv now platform and you can argue with the over the top platforms proliferating and would or not would not carry networks such as viacoms and apparently on top of the numbers. we'll see. shares are down as you would expect. another deal that does appear to happen is as you brought up earlier, fox saying we want to buy the 60% of sky we don't already own. they don't have an opportunity to communicate with the laws in the uk and can or can't talk about things. proposal accepted by the independent directors at sky but it does have to be brought to shareholders and see fox sold off on friday.
not initially. >> right. >> and, you know, speaking to a couple of shareholders, yes, it's a slow growth company and there's just a question of why now and why do they need to spend this $8 billion on this. and think near a position to not completely answer that. >> cbs which is down badly, do people feel they're going to steal -- >> yeah. some hope that the combination would be a more -- >> wow. >> a positive. a broader array of channels. maybe asset sales. more power the distributors potentially in the world where that may be something you need. >> wow. >> and there were a lot of cost savings and the question would have been, you know, again, even without shari redstone changing course and saying, no, i was hearing it would be tough and moonves not offering much of a premium and viacom expecting it
would be one. now they go off their own ways as continued separate companies controlled by the same shareholders. >> surprised. listen. without viacom, cbs is not worth owning? i don't know. there's my take. >> yeah. meanwhile, speaking of media, golden globes out today and making that count and disney "moana" is number one. disney was second best dow stock last week behind goldman. >> amazing. one of the things that iger did is saying that espn is not doing that badly and trial balloons of what happens, maybe spinning espn off. third, because of the year of good feeling, hearing of theme parks things are better and still matter for disney. you have the movie slate and $800 million movie tent poles that iger has and who's talking about espn? who's talking apt it?
it is just muted. i was with someone this weekend who made it -- very close to the technology saying, listen, this mlb deal, do not procollude the notion of disney becoming tech oriented. mlb is superior platform. merge espn with bam tech which is the baseball technology and maybe you have a story coming together of technology, of movies, of theme park saying stop listen at the month to month espn and people are doing that. they're looking through it. >> this is just a name that investors are focused on a. lot of investment bankers chasing it around. not clear to me there's anything going on except people talking about things and getting things going without there being a there there. >> chipotle quickly. steve ells -- >> this is -- i have interviewed
both gentlemen repeatedly. this reminds me of stepping down at -- because the underperforming whole foods and walter was fantastic and monty is fantastic. i think maybe the two ceo -- maybe this is ackman pressuring. you said anniversary of comparisons. they're only last year, last week was when the nova virus, the first anniversary of that terrible illness that happened in boston, every single one of these restaurant food scares taken 18 months to get through and looks like monty didn't get to the promised land. >> they did give guidance last tuesday as we recall. >> yes. >> two-year comp stacks still down. >> american people -- takes 18 months to forget. that's on average. that was the horrendous taco bell.
worst jack out box and children died and lasting illnesses and 18 months. terrible thing what happened to them. they can come back. this is obviously -- we had heard chatter that there could be a one ceo. it is not the issue. the issue is when does america forget what happened? and that does happen historically. >> take a look at alxn. both ceo and coo leave today. >> right. >> waiting on the 10q of the company after a whistle-blower raised concerns of sales practices. other than that, we won't have a lot of details right now as an independent investigation from the company moves ahead. but this was somewhat surprising. somewhat unexpected. >> somewhat surprising? you can see the stock is down a good amount. had been down a bit more prior to the open.
$30 billion company, too. >> a lot of information. ceo resigns and the cfo leaves the company. honeywell former ceo anderson whom i like very much is an old hand and become it is cfo. i am amazed this stock isn't down more to see the ceo and cfo leave the same day? they have one drug that by the way look out. look out alexion. it was at one time the most expensive in the world for pnc. but most expensive drug in the world and don't want to be there at the time of the -- >> some question whether lenny bell, still the chairman, is not stepping in as the interim ceo. i don't have the answer for you on this one. >> a rather remarkable turn about. the stock only down 15. shows great hope. >> all about oil today, jim.
top gainer somehow oil related. >> look, i know that people were surprised by the fact that opec cut back. i think that the non opec nations, when they cut back, you have a situation where it's for real. and if it's for real, then a lot of the -- you have to revalue the american companies that lowered break even 35 to 40 and also colder over the country and natural gas spiking. a lot going their way. well below where they were two years ago and people like the conoco upgrade and i thought more upgrades this morning and like multiple upgrades. everybody else has got to catch up. i urge people to look at pioneer as an example. that stock undervalued at these prices. lowered the cost by 35% and we are the winners and don't forget next president-elect trump, the people he's appointing are people who are -- every oil -- i'm in touch with i'd say five
of the largest oil expects and oil service expects in last ten days and they're cheering. >> they say we can double the production. >> what did he say? 20 million? >> yeah. yeah. >> if you got -- the -- i know that when i met with trump in 2008 he does seem to have a long memory for promises. smashing the cartel. 2008, we were still declining in production. kind of a visionary comment. don't know whether -- only the late aubry mcclendon felt to be continental independent. >> with that record high for the day, let's goat dominic chu. hey, dom. >> good morning. i want to echo the thoughts of the past few minutes because if you look at the market shaping up overall, we are seeing another day, another record high for the dow industrials and just
off the early session highs and up 26 right now. notable laggards and david farber mentioned one of them. i would point out, however, that transportation stocks and small caps two of the more outperformers of the past few weeks are not performing. if you look at the at least for right now, up by 2%. no surprise on oil prices. materials, health care also at least for right now holding on to some of the gains. tech and industrials, big etf laggards with sectors overall. if you take a look at when's happening with the oil market overall, that's a big story. down here far lot of traders, chevron and exxon over there watching for that all day today with the oil majors. taking a look at the other
companies, not just pioneer but names of anadarko, marathon oil. not necessarily majors and also steaming ahead today, as well. overall the way that some of the markets are shaping up internationally could be interesting, as well, if you take a look at what's going on with china and italy. huge moves lower in china overnight with the shanghai composite after property real estate concerns and popping up. also, a big insurance regulator there curving on the investments and stocks that some of the big insurers in china make and dragging down the stocks and the notable outperformer today in italian trading up being here after a change in the prime minister there and perhaps things moving better. moving ahead with the capitalization plans. those shares up, as well. we know how volatile they can be and domestically, internationally, the big story is oil is a very big story here
today an throughout the course of the week. see if the international markets start to -- towards the holiday. >> see you in a bit. let's get to the bonds pits, as well. rick santelli at the cme. good morning. >> yes, carl. not only auctions but the central bank two-day meeting. press conference statement. rate rise. maybe thinking it should be 50. i find it hard to believe it's more than 25. something everybody's looking at, shanghai down close to 2 1/2. you know, when you come to a tightening mode, memories are clear regarding how january after the december rate hike last year affected china. also, think about the dynamics of emerging markets and differences this time. let's look at a two-year note yield shall we? highest since april of 2010 but you can see once again from '08 how much room we may have with regard to making the curve less
steep. if you look at a two-day of 10s this morning, 252. opening the chart up, we haven't settled at these levels since september of 2014. year to date of boons, relative value trade and the linkage the other way to the upside dabbling in the low 40s and very small incremental increases to history and boon yields hovering at the highest levels since the end of january and looking at 10s minus boons and realize that the high trade is 211 is not far away. our 10s are hotter than the european 10s as the spread continues to widen and last two-day dollar index. see the high friday and today over 101.70. that's the current high close from the 23rd of november back to march of '03 and fail there had and a reason we failed is big support level for euro
just as boeing responded to trump's tweets a few days ago, today lockheed responding to trump's tweets this morning. an executive telling reuters that the company understands concerns about affordability, goes onto say they've invested millions of dollars to reduce the price of the f-35, jim, since the original price was determined. >> well, again, i mean, the president does he have the ability to say, listen, we're going to take fewer product? he does. does he have the ability to say, listen, we don't like these prices? historically that's not what the president has done. people within the pentagon have negotiated, but very high level. we're seeing a lot of
person-to-person. i think gets a call today from the president-elect, we got to sit down, this is not what i wanted. this is person-to-person. >> sure. we should point out boeing's former chief on the board a strategic advisors that includes bob iger and schwartzman. and this week is the meeting of tech ceos. the guest list could include jeff bezos and cook and others. >> wow. fly on the wall in that meeting. don't forget we've got andrew being head of the manufacturing advisory has a major deal in front of the government, the dow-dupont deal. >> yes. >> none of these things seem to play a role. that tech ceo looking at a lot of those are big contributors to another team. and it will be interesting to see if brian krzanich, remember intel going to throw a
time for cramer and stop trading. >> a lot of excitement about the offshore oil drillers here. transocean rig, my go-to guy for energy reminds me that the 2019 contract for oil is barely unchanged. even though the front month's up two right here, the out two years is up only 44 cents. that's a sign people are skeptical that the deal will hold, the opec and non-opec deal. why is that important? because transocean needs about 70, 75 before we start the process of offshore drilling, which is very expensive. if anything's ahead of itself, it would be this complex of which transocean's run now. animal spirits taken over this group, but 2019 it's barely up. and i think that the out months do matter. they show no faith in this deal. none. >> yep. that's a great point. what's tonight? >> i've got trust typically
would not think it's important, dct, why is it important? because they are one of the real estate investor trusts that does tech. remember the server farms are and where all the -- did you see that google uses like a huge amount of energy? >> incredible. >> these are about where you put your factories and where you do your distribution centers. i'm going to try to get a read on the economy. do you remember the economy? >> i do. i hope the fed kmenlt comments on it if we pay attention wednesday. >> what do we get if the president-elect tweets price-to-earnings are too low? i don't know. i was talking to david saying, listen, i don't want to be too bullish because it's like maybe tax us. listen, got carried away with what i'm saying. >> jim, we will see you tonight. "mad money"'s at 6:00 p.m. eastern time. when we come back, more on the president-elect's tweet about the f-35 weighing on shares of lockheed martin. dow's up 52.
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good monday morning. welcome back to "squawk on the street." i'm carl quintanilla with kayla tausche, david faber at the new york stock exchange. sara eisen is off today. dow's up 54 points. that's another record high as we start a big week with a fed meeting watching some of these tweets from president-elect trump, oil is soaring on this non-opec production cut. >> our road map this morning starts with president-elect trump tweeting about lockheed martin's f-35 program. defense stocks dropping after those comments. lockheed now responding to the criticism. we've got the latest. >> another company that president-elect called out, boeing, announced a big $17 billion deal to sell jetliners to iran. >> and the trump rally carries on. stocks hitting new highs and dow 20,000 in sight. the nasdaq just points away for its own record. first up though president-elect donald trump tweeting this morning about lockheed martin's f-35 program saying the f-35 and cost is out of control. billions of dollars can and will be saved on military and other purchases after january 20th. shares of lockheed martin
dropped after that tweet. a lockheed executive responded by saying the company understands the concerns but that lockheed has invested millions to reduce the f-35's price since the original pricing. john harwood's watching that and a lot more this morning. hey, john. >> hey, carl. you know, this is the most expensive military procurement project in history, so not surprising perhaps that president-elect trump has gone after it. it's reminiscent of what he did last week with boeing raising questions about the cost of the new air force one 747s that are being constructed. now, in both cases we don't know where the president-elect will take this concern, whether this is a momentary thing, a momentary expression of an intent to be tough with taxpayer money or whether he's going to try to actually change things. the boeing questions have gotten into even sharper relief after their deal last night announced with iran to sell all those airplanes to iran. question is with the iran deal that donald trump has sharply
criticized, will that sale be able to go forward? because the deal was precedent for the sale of those aircraft to take place. now, on an entirely separate matter, it does appear that after all the talk about rudy giuliani, about david petraeus, about mitt romney, that president-elect trump has settled on exxon mobile ceo rex tillerson to be his choice for secretary of state. now, rex tillerson has zero diplomatic experience, but he does have a top level global business experience. and donald trump said on fox news sunday over the weekend that that's plenty. >> in his case he's much more than a business executive. i mean, he's a world class player. he's in charge of, i guess, the largest company in the world. it's been a company that's been unbelievably managed. and to me a great advantage is he knows many of the players. and he knows them well. he does massive deals in russia. he does massive deals for the
company, not for himself. >> massive deals in russia. that could become a point of controversy not just with democrats but also with republicans. marco rubio, former rival to donald trump in the 2016 campaign tweeted yesterday that being a friend of vladimir putin is not something i'm looking for in a secretary of state. in addition, chuck schumer, the incoming democratic leader in the senate and republicans including john mccain, the 2008 republican nominee, have issued a call for a bipartisan investigation into russian interference in the u.s. presidential election. this comes on the heels of the news that the cia has concluded that russia was trying to help donald trump specifically, not simply to muck with our elections. don't know where that investigation will go, but it has a potential to be a big problem for the trump administration. >> a lot of news packed into that report, john. thank you so much. john harwood. president-elect trump certainly not shying away from criticizing
u.s. companies, as you know. signaling a new era for government-corporate relations. take a listen to this new challenge to outsourcers last night. >> we're going to have to impose a major tax on companies that leave, build their product and think they're going to sell it right through our border like we're a bunch of -- >> that's the free market, sir. >> it's not free market when they move and sell back into our country. >> but that's a free market. makes a decision that makes -- >> no, that's the dumb market, okay? i'm a big free trader, but it has to be fair. >> joining us this morning at post nine the former u.s. secretary of commerce carlos gutierrez, now the chair of the albright stoneridge group. >> good to see you. >> he's used that line before. fair trade, not free trade. we were talking with cramer this morning about how a ceo is supposed to respond to these tweets that greet you in the morning. what's the answer? >> first of all, let me just say i just heard you talk about rex
tillerson. and that president-elect trump is going with tillerson. i think it's a great choice. and i just want to say that. i know tillerson. i'm sure you all know him. he is world class. he's a diplomat. he knows how to deal with people around the world. and the fact that he's dealt successfully with the russians it would seem to me that that is an advantage. that is a benefit to the country. and i also think that this notion of saying that he's a friend of putin and therefore somehow taint i think it's very unfair to a very good man. i'm sure that when he went over and negotiated with russia he had the best interests of exxon mobil shareholders. and when he is secretary of state, he will have the best interests of the u.s. >> so you believe that making a deal regarding oil platforms or fields can be transferred to making a deal about ukraine or
nato? >> absolutely. because he understands the psyche, the idiosin crow sis. how to get what you want. he understands russian thinking. of course, that's what it takes. >> he has $230 million in exxon stock and there have been some concerns raised that say if sanctions against russia were rolled back, he would stand to benefit financially even if someone else was managing that money. do you think those concerns are overblown? >> well, there's a process for that. and i'm sure that he may have to divest his stock. but i'm sure that someone like rex tillerson would do whatever needs to be done so that there are absolutely no conflicts of interest. i have no doubt about that. this is a very good executive, a very good american, a very decent man who happens to have great skills. >> changing subjects a bit, if you were still the ceo of
kellogg, and you woke up on the morning, turned us on and you see that the president or president-elect decided that corn flakes cost too much and attacked them. you know, i mean, we can make this -- >> it's not the first time. i actually went through that but with a different administration. >> how do you react to something like that? >> look, i think that ultimately we're in this limbo period. by the way, i am not a trump surrogate. i didn't support trump. i'm just trying to be objective. >> uh-huh. >> i think eventually you have to do this in private and eventually that will happen once he becomes president. i would assume that. so, you know, this is -- i don't know if he's negotiating. i don't know him well enough to understand what he's trying to do. but we'll see. i think after january 20 we'll see what his real style's going to be with u.s. companies. the f-35 by the way is not the
first time -- >> no, of course not. that has been the focus. and in fact as they've dealt with that lockheed some of the concerns the pentagon has had about the cost of the airplane. but this does seem to be a new world in terms of the white house and its willingness to either callout and/or cozy up to business. i mean, depends how you want to look at it. >> you know what's interesting, and i think this should be recognized is he is behaving like an executive. and this is like executive basics. you have a strategy. and then you put the right skills in a job to implement your strategy. whether we agree or not with the strategy is a separate question. so he said during the campaign, he's going to go after companies who outsource and export back in. that's what he's doing. now, he's got somebody at commerce, somebody at treasury, they'll take over after january 20th. but a lot of what's happening, whether it's happening in an orderly fashion or not are things that he ran on. and he has put the skills that
he needs in the jobs that will get the strategy done. again, whether you agree or not on the strategy, he's doing what he said he would do. >> well, his strategy's also involved full repeal and replacement of obamacare, a wall, a muslim registry, things he's backed off on. how do we know what was a true strategy? >> i think you have to look at the organizational moves. and that's a great example, by the way. conventional wisdom said, hey, ben carson, who i know and is a dear friend, is going to be secretary of health. why? because he's a pediatric neurosurgeon, conventional wisdom. what he did was pick the person who knows every single word of the affordable care act. so, again, you may not agree with repealing and replacing the affordable care act, but he's putting the right skills in the right place. >> one last thing, kellogg is involved in this dust-up with
breitbart, right? they've pulled advertising from breitbart, right wing news organizations. breitbart responded with a hash tag boycott kellogg. any idea how best to respond there? >> you'd have to talk to kellogg. >> worth a shot. thank you. appreciate it. carlos gutierrez. want to get to news on the media front we first brought you at 9:00 this morning confirmed at 9:30. cbs and viacom no longer going to be a potential merger controlling shareholder national amusements run by sherri redstone releasing a letter this morning sent to boards of both companies indicating her desire or national amusement's desire that the two companies remain independent. and as you see both stocks reacting negatively, more so of course viacom which may have had a premium in there on the expectation you would get a deal. now, the two companies stwal didn't get that close to a deal. cbs never made an offer for viac viacom. there had been some management presentations by viacom to cbs a couple weeks ago.
but that was not followed up with what was anticipated to be an offer, whether it would have been a premium offer with something of a question mark in the marketplace. not going to happen anymore anyway. in a statement ms. redstone and national amusement writing over the past few months after careful assessment and meetings with the leadership of both companies we've concluded this is not the right time to merged companies, following management changes the viacom board put in place, we've been very impressed with the forward looking thinking and strategic plan being pursued under bob bakish, the new ceo having taken over for tom dooley. some backers i've spoken to also are potentially impressed with the making fact he seemed to know every single number. so there is the possibility he will gain significant confidence and already has amongst the most important shareholder he has namely his controlling shareholder, shari redstone. as for cbs of course it will
remain an independent company run by leslie moonves, but the prospect of viacom and cbs is not one certainly that can be dismissed in an industry in which it would seem scale may become more important as distributors gain more power. the question will be can these two companies remain independent and still grow in a significant way with the proliferation of over the top platforms? will their networks always be carried on them? to date it does appear to be the case. cbs an important component in any of them and viacom managed to get all of its networks on the directv now platform which was just out a couple of weeks ago. cbs and viacom though no longer going to be pursuing a merger, at least no time soon, kayla. all right. when we come back, we'll continue our conversation on the new trump era, that big boeing deal and more with former white house middle east policy advisor ambassador marc ginsberg. plus, the march to dow 20,000. about 200 points from the dow
strategist at canter. let's start with this wednesday meeting and announcement. is it going to mark some change in tone? >> i think it might. there are two things people are talking about, right? there's this meeting and then there's the inauguration. some are talking about a rally through the inauguration and i've been talking a little more in the context of this particular meeting. because my philosophy, my concept is that really fiscal policy is not a great substitute for monetary policy and conditions are tightening. and this meeting will sort of be that crystallizing moment around the fact conditions are continuing to tighten. >> right. do they need to make some overt reference to what many people believe, that is we're about to pour kerosene on as crazy as it may sound a fully employed economy? >> well, i think they may allude to the fact that the economy is at full employment and other such things, however, what i'm looking at is the big dog in the room, the ecb. the ecb right now is as important if not more important than the fed really. and the ecb in my view is really the central bank that has done a
great job despite all the headwinds at maintaining credibility in a very slow growth european environment. and frankly i think the ecb is having more of an impact on the long end of our treasury curve than our own fed is by for example allowing the bund, allowing rates that is i'm talking in terms of rates to go from negative rates to 40 basis points right now. that's provided head room for the long end of our curve. >> absolutely true. tom, what are the charts telling you at this point? >> well, you know, this fed meeting has been anticipated for about the last six months. everybody was talking this summer and this fall about how the fed didn't want to get in the way of the election. so just as the stock market investors were all waiting and anticipating the outcome of the presidential election in november, the bond market's been awaiting the outcome of this fed meeting. and i think this is finally going to shake everybody loose. once they get past the fed meeting and realize what has been done look at other things and realize that t-bonds are really, really oversold right now. and the funny thing about
t-bonds is that gold prices have fallen into an unnatural correlation with t-bonds. you're seeing oversold conditions in both of them. and day-to-day movements of both of them have been even very, very similar. so i'm looking for a relief rally in both bonds and in gold. >> so to what extent do you think that will happen, tom? because people have been focusing sort of beyond this week's meeting and what the fed will do next year, whether it has two, three hikes in the bag and whether treasuries will just keep selling off for that reason. >> well, the thing that people should understand is that the fed could hike two quarter-point rate hikes now and still be an overly accommodative posture. we like to look at the spread between the fed funds target and the two-year note yield, which is at 1.1%. the fed fund is at 0.38%, you can go all the way up to 1% and still be accommodative because of the spread to the two-year note yield.
the fed has a lot of room to raise without even taking away the punch bowl. i think once we get past it though people can start looking at other things and stop worrying about it. it's the fear of the unknown that drives everybody crazy. i think that the smart money is already positioning itself for that outcome we're seeing and the commitment of traders data. last summer we saw the commercial trader, the smart money, they were at an all-time record net short business directly anticipating the decline we saw in t-bond crisis. they are positioning themselves for a big rebound and bond prices that i think is going to come and also lift gold prices. >> yeah, tom loves that chart. he's been working with it for years. >> yes. >> it's a long-term one. >> yes. >> do you agree? a big dynamic in '17? >> i do to some extent, but i think more dynamic is if we're correct and rates come down on the long end of our curve, the curve is going to flatten again. it was flat to 75 basis points, spread wide to 125, we agree
with him. we think that's way overdone. we think the curve starts to flatten again. and that is going to mute economic activity. so i agree, but in a very low interest rate environment the dynamic is very different now than it ever has been in the past with respect to even a quarter point raise in rates because of that dynamic of flattening the curve. that spread is all important. >> what do you think the bank of england does on thursday? >> stands pat. >> again? >> again. i just think there's too much uncertainty. i think at the end of the day the ecb, again, is the mover and the ecb -- by the way, that wasn't a dovish taper. that was just simply dovish. it was $60 billion of extra accommodation. and at the end of the day the ecb will be moving all the curves, all the sovereign curves globally. >> peter, tom, good stuff. sets us up nicely for the week ahead. thanks, guys. tom mcclellan, peter at cantor fitzgerald. coming up, boeing reaching a $17 billion deal with iran. and the president-elect taking aim at lockheed martin. we're going to discuss how ceos
and companies will navigate the new trump era. much more ahead on "squawk on the street." ♪ we're drowning in information. 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.
welcome back to "squawk on the street." for more on this record breaking rally, ubs director of floor operations art cashin joins us. we're driven once again by oil and the deal over the weekend between opec's producing companies and non-opec members also oil producers, first in 15 years, but history has shown us these deals almost never go as planned. >> most people don't cooperate, don't stick to what they've agreed to, but the oil market in particular for the last six months has reacted very strongly to every hint, every rumor that some kind of deal was coming up. and i think you're seeing the tag end of that now. this is the final reaction, the non-opec people they supposedly are going to join in the deal. in morning almost at 54, i don't
know that you're going to go there. i'm almost surprised that the equity rally has the legs that it had. when we had the big rally last wednesday, the vix behaved in a very unusual manner. and the few times it's behaved like that before we've had a pullback of some significance within three days. didn't even come close. they just kept rallying. so i think the ability to draw money in on the hopes you're going to get deregulation, tax reform, et cetera, et cetera, keeping a lot of that sideline money moving. >> a lot of discussion over the weekend on whether or not it still works to favor the dow over the s&p. some believe the valuation not as excessive despite goldman and j.p. morgan and travelers and am ex. you agree? >> only partially, but i think the one you've got to take as odd man out is the russell. because they're all small to medium size companies that don't have as much international exposu
exposure, and if the president-elect picks a trade war or comes close to it, it will be the big multinationals that will suffer the most. >> what should we be thinking about 2.5 on the ten-year? how should we be viewing it overall in all the markets? >> i would agree with the previous two guests. i think we're a little overdone in the bond selling market. cocktail napkin charting says once you hit through 50 you've got almost a 50/50 chance of coming back to 2.19, 2.20, somewhere in there. and that would fit in with some of their conversation about things being oversold. so i wouldn't look to see the yield go much higher. >> treasuries potentially oversold. at what point would you say equities are overbought? >> well, they could be getting close to it, but you have -- you still have weeks to go before the inauguration. and you're not entirely sure how things are going to go. i mean, i think mr. tillerson is going to be an interesting bet
if that's the way he goes because not only will you have some of these people objecting because he's a quote/unquote friend of putin. but don't forget all the greennies have been absolutely crazy about exxon and carbon problems and whether they were lying or not and so on. misleading people. >> right. >> so that could be a real circus when he goes up. >> you don't normally think of cabinet appointments being market moving. >> no. but quite possibly. >> all right. art, thank you. art cashin. when we come back, that big $17 billion deal between boeing and iran. we'll talk to former white house middle east policy advisor ambassador marc ginsberg on that and a lot more. dow's now up 18.
to receive the first two next-generation f-35 jets that will help it preserve its military edge in the middle east. this comes though as president-elect trump tweeted that the f-35 program is out of control. and he will cut billions in costs for military purchases. egypt's president attending a state funeral for the victims of an explosion that killed 24 christians during sunday mass at a cairo chapel. he said a suicide bomber was behind that explosion. three other men and a woman were arrested. imf chief christine lagarde arriving at a paris courthouse for a high profile trial in which she's accused of negligence for allowing a huge handout to a well-connected businessman. she faces up to a year in prison if convicted. the charges date to her time as french finance minister. and yankee candle is recalling about 31,000 of its candles. the square glass jars can crack when the candle is lit. there have been 16 reports of cracking, but luckily no injuries. that's the news update this hour. let's send it back downtown.
i think, david, i'm going back to you. yes, you are. sue, thank you. >> sure. >> sue herera. well, whether it is carrier, rexnord, boeing our now lockheed martin, no business seems to be immune from donald trump's criticism. the president-elect tweeting today, quote, the f-35 program and cost is out of control. billions of dollars can and will be saved on military and other purchases after january 20th. this following similar criticism last night. take a listen. >> i just see things that -- you look at the f-35 program where the money, the hundreds of billions of dollars and it's out of control. and the people that are making these deals with the government, they should never be allowed to go to work for these companies. you know they make a deal like that and then a year later or two years later or three years later you see them working for the big companies that made the deal. i'm going to put a very -- you know, lobbyists, this is bigger than the lobbyists.
>> so just how should companies prepare for a trump attack? cnbc contributor and former economic advisor to vice president biden, jared bernstein is with us, and former rubio senior advisor alex conant. alex, let me start with you. it's true seems we can wake up every morning and you could be the ceo of a particular company and find yourself on the end of criticism from the president. right now president-elect, about a product, about who knows. how do you respond? and if you're a ceo, do you really need to be thinking about these things right now? >> well, i actually wrote something for "the wall street journal" over the weekend about this very issue because this is the new reality for american businesses. they need to accept the reality that donald trump is going to wake up in the morning and more often than not fire off a tweet about an american company. and it has real world ramifications as we're seeing with lockheed today. their stock price down almost 5%. and what i wrote in "the wall street journal" this weekend was they need to be prepared for it by first assessing their own risk. and then having tweets ready to go to respond to them.
i know lockheed martin for example still has not responded to donald trump's tweets from this morning. they need to establish back channels with the trump administration, with his team to talk about and to make sure all of the facts are on the table, that president-elect understands the issue and that they understand the core -- the crux of the president-elect's concerns with them. and then, four, they need to watch tv. because a lot of the time trump telegraphs these tweets with tv interviews as you just showed, or by he sees something on tv so they need to monitor 24/7. but be prepared, have a plan. >> so they're going to end up getting a tweet war with the president? that doesn't sound particularly productive. >> well, i think they need to -- >> sorry, go ahead. >> yeah, alex. >> i was just going to say i think they need to have a plan one way or the other. and it's not about having a tweet war. it's about making sure they're responsive, their information is out there. what is lockheed martin's defense for the cost overruns in the f-35? why aren't they out there talking about the thousands of jobs that this program creates, about how it's going to help maintain american and our allies
air superiority, it's just silence. all the people watching this program and all the tv news this morning that covered lockheed martin, all they know is the president-elect has huge problems with the cost overruns and that's why the stock price is down. they need to respond. silence is not acceptable. >> well, it would seem that boeing learned that lesson now in its $17 billion deal to sell planes to iran saying that about tens of thousands u.s. jobs will be saved in the process. but, jared, if you're a u.s. company, and you have a lucrative government contract, a long-term one, do you pick up the phone and call the president-elect directly to try negotiate whatever it is you have on the table behind the scenes or just open dialogue to avoid being in this position? or do you think he's going to use the court of public opinion regardless? >> i think what alex said is not only correct but it suggests the latter, the court of public opinion. what you described was certainly the procedure you would do with probably any other president-elect we've had in my lifetime. trump is obviously very
different. so stipulating everything that alex said let me say one other point though that's actually really important for these companies, if you take the carrier example, there's something that donald trump does or at least did in that case that ought to be noted. that is he talks sticks, but he at least in that case gave carrots. remember, this is a company that was pill ried for sending jobs overseas and he used the bully pulpit against them in that regard, but they ended up with subsidies to the tune of $7 million over ten years. so there is that dynamic as well. in terms of the cost overruns, yeah, there's definitely a lot of defense industry lobbyist who is are choking on their coffee this morning. and those overruns exist. so if donald trump can help reduce them, that's great. i don't know that it works this way, you know, through this kind of tweeting war that has been described here. >> hey, alex, you know, lockheed is down. but we'll see where it closes. boeing did not close down the day of that tweet. i just wonder, is this a
currency that loses value over time? is the victim of inflation if he does this again and again? >> well, i don't think so. i mean, the president-elect is going to have the loudest mouthpiece in the entire world, that's the power of the white house is essentially the bully pulpit. and if he decides and continues to use the bully pulpit that go after businesses he thinks are erring in some way because he doesn't like the size of government contracts or where they open new factories as he did repeatedly during the campaign, i expect he'll continue to do it and continue to be a problem for if not ceo certainly there communications teams who wake up this morning and have this huge communications problem. unless they have a plan ready to go. and that's the argument i've been making. >> you know, jared, when it comes to these -- these contracts, let's talk boeing or lockheed martin, i mean, there are long established norms for how we deal with them, how we deal with cost overruns, congress has an important role here. are you saying or do you expect we're going to revert to what
has been typical of how these kinds of things are handled? or is it really a new world? >> you know, i don't know, but i really hope it is a new world. i mean, when i worked at the white house, i ran into executives from boeing frankly kind of too often. there is such a thing as crony capitalism. and there are ways in which contract taxpayer dollars are wasted through these contracts. so scrutiny would be well placed. the problem is this purely optics just tweeting or is there something under the surface here that actually gets to the fundamental issues of greater accountability and transparency? i hope there is. i don't have a ton of hope that this is anything more than optics. oftentimes donald trump's a great showman without the substance to follow it up. >> yeah, well, i'm sure we're going to have this conversation a number of times along the way, but we'll end it right now. jared, alex, thanks to you both. >> thank you. got some breaking news on that upcoming meeting between the president-elect and those tech leaders this week. our diedre bosa has more.
>> that's right, carl. a source close to the matter has confirmed to me that amazon ceo jeff bezos will be attending that trump tech round table that's taking place later this week. other expected attendees include some of the biggest names from tech including apple's tim cook, along with many other heavy hitters in the space. of course many wanted to know especially whether jeff bezos would be attending because he had one of the most public spats with president-elect donald trump during the campaign. drump threatened that amazon would have major problems if he became president. bezos at one point offered to send him to space, but since trump's victory the rhetoric among jeff bezos as well as among silicon valley companies has been toned down. there's been more of a tone of openness. that's why everyone is watching this meeting so carefully to see what actually comes out of it and how trump is actually going
to deal with the technology space that wasn't just amazon. but he came out against other companies saying that apple for example should be manufacturing iphones in the united states. since the election though i do want to mention that jeff bezos tweeted congratulations to donald trump. i for one give him my most open mind and wish him great success in his service to the country. and the fact he will be participating in this meeting indicates that bezos along with a lot of other ceos, big ceos in this space want to move forward and work with the president-elect on issues such as immigration, especially of highly skilled workers, protection of i.p., trade with china, encryption, electronic surveillance. these are all going to be on tap on wednesday when you have some of the biggest players in silicon valley in the tech space. that's happening later this week. so we can confirm that jeff bezos will be attending. back over to you guys.
>> thanks. when we come back, former white house middle east advisor ambassador marc ginsberg will join us. as we go to break take a look at dow component j&j. barron's report says j&j could have 20% upside because cost on medical will effect customers even more. why pause a spontaneous moment? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension,
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♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? why invest in average? welcome back to "squawk on the street." i'm morgan brennan. energy stocks are the best performing sector today propelled by a surge in oil prices to their highest levels in nearly a year and a half. now, this as russia and other non-opec oil countries agree to cut their production. names lifting the sector higher include conoco phillips, s&p
leading all sectors this year up nearly 26% on pace for its best year since 2007. guys. all right, thanks so much, morgan brennan. back at headquarters. now let's get out to the cme group. rick santelli and "the santelli exchange." hey, rick. >> hey, kayla. dan, i'm holding a report you brought me, we're going to be talking about student debt. it's from the government accounting office, federal student loans education needs to improve its income driven repayment plan budget estimates. it's pretty thick. it's our prop. i drop it. what does it say? what should we look forward to with regard to change? what things should we be paying most attention to? >> so about in august i wrote a piece for "the wall street journal" that said that the federal student aid problem was a $500 billion problem facing this country. the department of education has underestimated that. low and behold two weeks ago gao
drops this report that says the department was actually underestimated to the tune of $108 billion. and they're only 24% of the way through the loan program. so my number of $500 billion is kind of looking very, very real right now. >> now, if this was a company, and this report was done, how would that effect the board, the stockholders and all the various regulators? >> this is a real black mark on the department. one analyst said either gross incompetence or deceit because they neglected to include whole classes of loans, didn't calculate interest rates correctly, they estimated people participating in sort of the most generous programs would remain flat even though programs are scheduled to increase by 2 million people. so across the board they didn't add hard cords in their models, across the board there were problems. if this were goldman sachs and had a $100 billion writeoff, you would see blood in the streets. >> media doesn't like his tweets, he gets right to the heart of the matter and maybe
not pretty, but he does. well, if i view this in his businessman approach, i can't think he's going to look favorably on this, but i haven't heard the administration talk much about student loans. >> yet the fundamental problem is college cost and eligibility around those costs and president-elect has talked about income share agreements which are instead of paying money for your college when you sit down, you actually pay a percentage of your income after you graduate. and i think if the administration's going to go in a direction that's the general direction they're going to go in. i think that would really help bend the cost curve here because right now we're paying too much for college. if you think about it, college costs have increased at two times the rate of inflation in the last 30 or so years. >> all i know is both sides of the aisle this isn't a democratic issue, it isn't republican issue, in essence trying to bring young people onboard to vote for your candidates and your party has created this dynamic. let's see if the president-elect has some new and refreshing answers. dan, thank you for being here in
chicago. kayla, back to you. >> all right, thanks so much, rick santelli. now, let's send it over to jon fortt with a look at what's coming up on "squawk alley," jon. >> kayla, tech titans from apple, amazon, alphabet and more sitting down with the president-elect this week. we're going to look at strategy on both sides and cnbc's all-america survey shows a surge in online shopping. we're going to tell you who's really winning big. all that and more coming up on "squawk alley." sometimes when brushing my gums bleed.
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boeing sealing a nearly $17 billion deal to sell 80 planes to iran, which for decades had been economically blacklisted by the united states. the company says the deal will support tens of thousands of u.s. jobs, likely a direct message to president-elect donald trump. joining us now is former white house middle east policy adviser, ambassador marc ginsberg. the iran deal was inked a year ago, but how dry is the ink on it if you're a business leader considering putting a new deal together? >> well, i certainly wouldn't be uncorking the champagne on this boeing deal. the house of representatives overwhelmingly voted to try to
kill this deal before the congress ended its session, and this deal is going to be brought before the senate and the house and god knows what's going to happen then. and as well as the fact that the president-elect has tweeted somewhat inconsistently twice about this deal. so this really comes down again to the very question about whether or not the congress is going to tolerate doing business with iran when there's such anger and resentment towards iran's policies in the middle east. >> saying that the deal to sell those planes, though, will keep tens of thousands of jobs intact, does that make it more difficult for congress to strike it down? >> well, apparently not, because the house of representatives went ahead and didn't even have a record vote on this, and it was not merely just a bunch of republican congressmen, this was a bipartisan vote. boeing has got a major amount of work to do here to try to sell the fact that jobs trumps foreign policy in the middle east. >> well, it's not just opposition here in the u.s. against the iran deal.
also israeli prime minister benjamin netanyahu discussed on 60 minutes last night relations in an interview. let's listen to that. >> we hear that you have dramatically improved your relationship with egypt. >> that's correct. >> is that correct? >> yes. >> jordan? >> yes. >> saudi arabia? >> no comment. >> i have to ask you, because it's the most fascinating of all. israel and saudi arabia. are you actually developing an anti-iran development in the middle east? >> it doesn't have to be developed. it's there anyway. >> doesn't have to be developed, it's there anyway. what's that mean for this deal? >> going to be a fascinating question, because when the israeli prime minister sits down with the president or president-elect again, they are going to discuss as the number one topic the status of this iran deal. the president-elect has indicated he wants to renegotiate parts of this, but there's a congress that more or
less may be pushing him to aggregate whole sections of this deal, much less to put severe restrictions on this boeing deal to, in effect, kick this thing down the road further. at the same time, the israelis very much concerned ability militarizing these planes, which the iranians have been doing with their existing planes, to ferry revolutionary guards to and from iran and syria, where the iranians, as you know, are supporting assad's regime on aleppo. >> what do you make of the fact the president-elect seems antideal across the border, doesn't like the iran deal, doesn't like tpp, doesn't like nafta, but seems dealing with russia and china have emerged as diplomatic priorities. where does that leave middle east relations? >> well, i think it's going to in the case of the iran deal it's going to be complicated, because not just the united states that signed this iran deal, it's also america's allies in europe that signed this deal, so we have a difficult choice to make, and the president-elect
has an extraordinarily difficult choice. he wants to make a better deal with iran. he wants to hold iran accountable for its military and terrorist activities around the world. and it's conceivable that this deal may be held up until the president and his team are, in effect, satisfied that there can be conditions put on it to restrict iran's military behavior in the middle east. >> quickly before we go, the expected secretary of state nomination is rex tillerson, the ceo of exxonmobil. we focused on the relationship he has with russia, but they also have operations in saudi arabia, in kuwait, qatar, iraq. what should we be thinking about that specifically? >> well, i think the israelis, southwesternly prime minister netanyahu is not going to be overwhelmed with the choice of rex tillerson as secretary of state. the israelis are going to be particularly concerned an incomming secretary of state has such close ties to the arab world and the sunni states the israelis themselves are
developing closer ties because of the opposition of the sunni states to iran's meddling in the middle east, as well. >> it's a fascinating conversation. we have to leave it there. ambassador marc ginsburg, appreciate your time this morning. >> good to be with you. as we head to break, a quick programming note. make sure to tune into "squawk box" tomorrow morning 8:00 a.m., when becky quick is going to sit down with an exclusive interview with bill gates. much more ahead. stay with us.
welcome back. oil prices seeing less than a $2 gain today, but overnight 5451 was the session high. moving because of the nonopec producer meeting over the weekend. they agreed to cut almost 600 barrels a day, the key player being russia. add that number to the 1.2 million barrels from opec, you get to 1.8, and consider the fact that u.s. production has come down a million barrels over the last year or so and the market is starting to get excited that the rebalance is slowly happening here, especially summer forecasting demand will go up next year also. things to consider right now, what we could see with pricing, 55 is certainly a possibility. the people on the street that are more optimistic are looking
at the $60 level. still, we have a couple of headwinds. stronger dollar is one of them. the second piece is, we're seeing u.s. recounts go up and the problem there is shale producers could start to produce more and push this price down. carl? >> jackie, thank you very much for that. it is 11:00 a.m. at lockheed martin headquarters in bethesda, maryland, 11:00 a.m. on wall street, and "squawk alley" is live. good monday morning, welcome to "squawk alley." i'm carl quintanilla with john