tv Squawk on the Street CNBC January 3, 2017 9:00am-11:01am EST
it's tuesday, right? have i got that right? >> tuesday. >> four days. may or may not happen this week. it was interesting. i'm going to check my twitter feed. >> go check your twitter feed. >> every morning because you never know. >> he may be directing one at you, joe. >> one of these days, we the only hope. thank you. >> you're welcome. >> there's the clock. we have to go. join us tomorrow. "squawk on the street" is coming up next. ♪ it's a beautiful day ♪ blue sky good tuesday morning. happy new year. i'm carl quintilla with joe cramer. a new year of trading begins today with a bang. futures strong ahead of a busy week of fed minutes. isms. jobs number on friday. in europe, pmi strongest in two and a half years and oil is at an 18-month high as the opec productions cuts are reportedly sticking. we begin with a new year's
bounce. 2017 off to a bright start. is the optimism already baked in? >> gm in the cross hairs. the shares are falling this morning after president-elect's latest tweets targets its mexico production of the chevy cruze. evercore says it is time to buy disney. nikki c nike is with the best ideas of 2017. >> after the dow posted the 13% gain for 2016, the seventh positive year in the past eight. then you have the s&p up 9.5%. nasdaq, 7.5% for the year. the last januarys have not been strong. >> right. >> you said a few weeks ago, it could be fraught. we'll see. >> look, a lot of money is coming in. there is an article today about the 401(k) and whether it was any good or not. the contributions are very strong at the end of the year. today, i would urge people not
necessarily to chase this. i think this is a lot of things coming up in the next couple of weeks that are, what do i call, wild cards. there is a level of uncertainty that'll happen. this big unflinflux may happen we see the uncertainty, especially of the gm tweet. there is a level of optimism out that there won't be squelched, and the optimism has to do with companies wanting to reinvest. if the republicans can agree. i think that's what i'm most concerned about. republicans seem to -- i'm not sure they line up with trump. wow, i've got to tell you, last year was good. let's celebrate it for a second, that it was much better than people thought. got a second wind when president-elect trump got the job. and people feel better about stocks. >> right. although, you guys weren't here last week. >> which was a tough week. >> it was a tougher week. clearly, a very quiet week, volumes, as you might expect,
tepid. but things did slow in terms of what you're talking about. people starting to perhaps reassess a little bit or wonder whether a lot of that benefit has already been reflected in prices. >> yeah. look, we could easily have borrowed from what happened. i mean, there's two stages of what happened post november. one was the recognition that hillary clinton and the democrats were out. okay. that caused a nice bounce. then there was a recognition that what trump is going to focus on, other than keeping jobs here, tax reform, really terrific for a lot of companies, deregulation, terrific for a lot of companies. repatriation. so that became the tripod that the second leg of the rally was built on. how far can you go on that? i think you have to -- >> yeah. certainly, strategists this morning, the journal polls like 15 strategists with average expected year end .
last 17 years, the average expectation going into a new year is 9.6%. they're not as optimistic as i think you might be. >> look, i think if you can get the agenda through, numbers go up rather radically. if you don't, we're talking, you have to cut the numbers because of the dollar. the dollar is a story that, last year at this time, we would be saying, we are about to go into a period where numbers are too high. if you go into an earnings period where numbers may not be high enough because of what washington is going to do, then you get a whole different discussion. particularly with the banks, where you know if you get four rate hikes, you have $3 billion added to jpmorgan's bottom line. >> right. and you will be working through '17 on '18 numbers. anything that occurs in '17 legislatively won't be felt until '18. >> this is a great point. when i was going through the research, try to recover from
when i was away, i was shocked at how many people talked about 2018 numbers. holy cow. we are only in 2017. that is something i am not used to. i am used to a lot of analysts saying, this quarter could be great. there's always an optimism coming in. i am not used to so many analysts saying, look, don't worry about what's going to happen now. it is going to be fabulous after a while. that is going -- that is such optimism. >> as the year goes along, and let's assume we get tax reform fairly early, at least taking shape, people are going to be focused on that, as they should be. >> yes. >> nothing is going to be more singularly important for the economy than tax reform in a broad based nature, which appears we're going to get it in some way. >> it is absolutely of the utmost -- i have not seen anything like this in terms of being able to pick up numbers. >> vice-president-elect mike pence at trump tower this morning. donald trump returned to his new york headquarters yesterday
after spending the holidays in south florida. we have robert, as the u.s. trade director. quick listen. >> at least one more attempt at an announcement in the coming days. we're also making plans and preparations to be on capitol hill tomorrow. we'll be meeting with members of the house and senate to talk about how we can move forward an agenda to make america great again. we'll focus on repealing and replacing obamacare. we'll look forward to legislation that will give us the tools to roll back the avalanche of red tape and regulation that has been stifling american jobs and growth. but the president-elect has a very clear message to capitol hill, and that is, it is time to get to work. it's time to keep our word to the american people and make this country great again. make it prosperous again. and we look forward to being on capitol hill tomorrow. say again? >> [ inaudible ]. >> we receive regular
intelligence briefings, and i'll be joining the president-elect today for a routine intelligence briefing. but i think over the course of the coming days, the president-elect will be receiving more information about that and other topics on the world stage. okay? >> has he lost confidence in the [ inaudible ]? >> the challenges america faces on the world stage are going to be met with renewed american strength and renewed american leadership. rebuilding our military, engaging leaders around the world, as the president-elect has done on a personal basis, is all part and parcel of, i think, a new season. it is 2017. we're just a few weeks away from a new administration taking office. and i think the world will see that with our president-elect taking office, america will be standing tall in the world again, engaging the world again and standing firmly for america's interests. thank you, all. >> vice-president-elect pence
discussing the week ahead. the 115th congress does begin today. a lot of discussion about that. the president-elect reportedly weighing appointments to agriculture, veterans affairs, director of national intelligence. no comment about the gm tweet today. though he walked out of a chevy suburban. >> good recognition. look, it is -- you have to think back to what obama talked about. when he came in. initially, didn't talk about the fat cats in wall street, the trips to vegas. >> he also walked into a financial cry is. >> -- crisis. >> right, yes. that was keeping with the tenor of the times. here, he speaks about deregulation immediately, which is why we keep coming back to what the stock market will do. it is a stock market oriented administration, even though we noverknow at viearious times, t said the stock market is overvalued. >> is there a way to measure when they talk about red tape
and rolling it back, how many -- you know, what is going to be the addition to gdp or earnings growth in particular to industries, or anything like that? i'd think it is a difficult thing to fully understand or appreciate, especially because you don't know how much red tape they can roll back, or how much there is in various industries. >> if you believe the banks are key to growth, as i think we'd say in europe, which has little growth, as in japan, which has little growth. china, too much growth because of corrupt banks. you'd say what really has to happen is it all starts with the banks. the bank examiners are told, okay, enough. you let jpmorgan lend enough. you let goldman do what it wants. enough. you say bank of america should make loans to houses. does it go back to 2006 when we were too aggressive? no. i think the deregulation starts with the concept of lending. if you can get money more easily, then i think more houses will be built. if you get money more easy, it changes the coloration of the market and the economy.
and that is where i see deregular realdereg playing out. >> barclay's takes the target to 262 and bank of america to 26. >> these are a big part of the stock market. they make the tape -- >> jpmorgan has a $309 billion market cap now. >> look, it is no doubt that this is the two-step process i'm talking about. first, that hill lary did not w and elizabeth warren was not more important. the second is, the federal reserve raising rates and how fabulous it is for the banks. it is fabulous. i was looking at coamerica, up the most in the s&p. banks uniquely levered to more rate hikes. rate hikes are integral, as well as deregulation. >> yeah. we'll get the fed minutes tomorrow. get more insight into that. >> this is exciting. how about that? >> it definitely is. >> when i was in hawaii, it was very, you know, mahalo, partner.
>> yeah. >> you have a nicer tan than i do. >> you were in manhattan. >> i was. >> it's not conducive to a tan. i was a giant solar panel down there. >> do this on air. >> you look healthy and rested. i'll give you a day. >> hawaii is the greatest place on earth. where they made "jurassic world," for heaven's sake. >> can't disagree with that. trump and gm. we'll talk about the tweet that hit almost two hours ago. plus, howard lutnick with his take on the markets. the trump presidency and hiring of a new president. the ftse at an all-time high. dollar on track for another closing high. "squawk on the street" is pabac in a minute. on o t
gm is the latest company to feel the wrath of the president-elect via twitter. earlier this morning, he tweeted, general motors is sending mexican made model of chevy cruze to u.s. dealers tax free across border. make in usa or pay big border tax. general motor says the vehicle is manufactured in lordstown,
ohio. all cruzes are built ain the assembly plant in lordstown, ohio. there is a small number sold in the u.s. interesting given mary barbara on his strategic forum. they're in the cross hairs today. >> ford had been in the cross hairs in terms of moving things. the gm plant has been around since 2015. this was a move from stop making cars in korea, where it is more expensive, to mexico. if you wanted to make this so it was a level playing field, you'd have to change nafta or give it a currency. when nafta was put in, the mexican peso was 4:1. now it is 20:1. there is an advantage in building cars there. without changing nafta, instead of a border tax, you have to change nafta. it's about no border tax. >> right. the issue of the border tax is certainly one we're going to be dealing with for some time. and a concern, i think, for investors in certain companies.
>> oh, yeah. >> i think you have to view everything sort of in a broader context. you're going to give tax reform to a lot of corporations. their margins are going to get better. if they are importing a lot and are going to be victim to the border tax, and either have to raise price or take the margin away because they don't want to raise the price completely, it'll be a lot of give and take. it'll be interesting to figure our way through the things when and if they happen. >> this is something i'm concerned about. nafta was joint republican and democrat. s it is not like the republicans are necessarily now going to turn on nafta. nafta is -- if you are a business republican, and if you have been susceptible to lobbying, trump can tweet all he wants. >> gm made their response quickly and made it very clear. almost all the cars built in mexico are sold in the world market, not in the u.s. >> right.
>> so -- >> look -- >> he can't stop u.s. companies from building cars they sell around the world in -- outside the u.s. >> right. this was very different from going to a ford plant, which wasn't able to move, and saying, listen, we're going to keep the jobs here. to bring the jobs back, you have to make it so that it is just punitive to make anything in mexico. that means that you have to either change the terms of nafta or scrap nafta. i'm saying if you're going to fight this battle, you're going to lose it. >> who is going to lose it? >> trump will lose it. he will not be able to change nafta overnight. nafta was a republican and democratic initiative. and i just think that this may not be something that's so easily done, as opposed to deregulation tax reform repatriation. and one of the reasons why it is easily done is because gm is making cars in mexico, so they ship them to other places. >> right. >> i mean, you know, the way to
avoid that is not send things here. if you want to do that, mexico is a place to be able to export everything. >> what about audi, which is not a u.s. company, making things in mexico and sending them here? is there going to be a border tax there, too? it would have to be fair, right, if you're doing it to u.s. manufacturers. >> in my talks behind the scenes with some people, they don't seem it believes it matters what company it is. they want nafta changed in the end. nafta -- it is going to be tougher -- if you decide nafta is at the top of the cue, a lot of things we expect are going to happen immediately will be rolled back. we don't know when the tax changes are going to be made. let's not forgot, a lot of people didn't sell because they figured the capital gains will go lower in this year. but we don't know. i'm saying this is a hard fight. it is a hard fight because you're not -- you're fighting with your party. it's just -- >> your common theme comes back to whether or not gop leadership
in congress agrees with the president. >> i think you have to. i think there is a split. i think that you can rally the people, but in the end, nafta was something the republicans loved. i don't think the republicans are going to turn on nafta because the republicans, in large part, like the businesses that they cooperate with. >> right. >> people are looking back at this new u.s. trade rep has written, free, free trade, the kind we think of, is some kind of liberal idea that has been championed by the left, not the right. that is a change in thinking. >> i actually don't disagree with that. i think the globalization has been exporting a lot of the middle class jobs. maybe that makes me -- i know that that is -- >> republicans have typically been the party of free trade. >> right. and if they're for free trade, they're not going to be able to do much with mexico. i think mexico is a currency manipulator. i don't know how it became 20:1. that's crazy. >> it is. >> you cannot compete with someone who makes $3 an hour,
who is well educated, who has no health care costs because they're paid by the government, does not have a union, no absenteeism, check the tape i have of greg hayes, and is, frankly, no pension plan. and the pollution control laws are easy there. how can you not build there? you ought to see the plants going up next to my place in mexico. i mean, you'd think it was the industrial revolution. it's incredible. germans and japanese, they've built an airport, for heaven's sake. when we come back, we'll get cramer's mad dash, take a look at the opening bell, and first trading session begins in nine and a half minutes. don't go away. oopaimime. ib ml l! y hathththways oopaimime.
♪ we've got about seven minutes before we get started. trading for 2017. also, our first mad dash of this new year. >> david, you've taught me that elliott is a company when they sink their teeth in, they tend to get what they want and they're very smart. elliott is endorsing the value sharing plan today of marathon petroleum. mpc, which is aggressively -- have more drop downs. that's to the limited partnership that is so good, i think, and represents great value. most important, conduct a full and th review of speedway. this is a big win for elliott. when i had marathon, they were
lukewarm on the elliott plan. i've got to tell ya, they have come to a conclusion here where i'm going to quote quinton. we are pleased with the addition of decisive actions. solid value creation. big win. >> the same team, remember hess, where they got what they wanted there, but things went against them. you have to regular the underlying commodity sometimes. >> i compared hess to this on ""mad money."" elliott reminded me it was mind sig -- hindsight 20/20. a win is a win. this has been a company that has been a fabulous gainer since it was spun off and it'll be better. i've been recommending it aggressively because it had the great assets and that's where the strength may be. don't forget, this is a company that ben frefits from trump and pipelines. trump and the pro-fossil fuel environment. now, you have this possible spinout of speedway. i know hess was hurt. different environment now. >> indeed.
>> congratulations. this was good. >> very active. samsung is battling there. they've been perhaps the most active of activists the last part of the year. >> they tend to be tough. >> they are. they are a tough group, led by their main man, mr. singer. five minutes till the opening bell. first day of trading for 2017. 00mimi
0heor ouava dd oioal rhtr oucktr w eattwsed! pa ts et. you're watching cnbc "squawk on the street." live from the trading capital in the world. kicking off the first trading day of 2017, think about the dynamics we'll be talking about leading up to the inauguration, brexit, french elections. china's recovery. some of the pmis weren't bad. >> i made that statement before i left. i said i think the europeans are the biggest currency manipulators. if you look at the pmis, when you look at it from germany, i mean, holy cow. they are doing very well over there. those rates are very low. they have been taking our business. i think they're going to be the next people who are going to be facing trump tweets.
that plus a fantastic tweet. you are the real carl quintilla. fantastic tweet about the downgrades today. there are so many downgrades as the analysts fight this thing tooth and nail. they fight it. >> is that what you want to see? >> possibly. >> climb the wall of worry, so to speak? >> the mexican wall of worry is something that's, let's say, in the news. and i like because if you buy into the skepticism, you would have sold so early. you would have been trampled. >> can we trade tomorrow's tweet? can we guess what it might be? >> get tomorrow's tweet today? >> yeah. >> that would be something. >> would be good. >> president's negative actor. >> i'll start a fund based on tweets. >> let's do this. we have a renovated balcony
where they're going to ring the bell here at the nyc. looks nice. the market access center. the s&p. conduent celebrating their spin-off from xerox. we'll talk about that. marie osmond and nutrisystem kicking off the resolutions of 2017. >> we're going to lose ten ugly pounds. never good looking pounds. >> we saw downgrades. an upgrade of disney. >> i love that. >> oh, what a great piece that was. basically said, okay, enough already. espn, we know. how about the other good things? david, it is clear that these analysts have decided not only is espn not an issue, but if you read between the lines, disney is going to do something.
talking about an acquisition of netflix. >> yeah, the acquisition of netflix. we've talked about it last year and will continue to this year. it is july of '18 that the tenure is up. tom staggs departing the company in 2016. he was, until he was released, the potential heir. netflix deal, it is enormous, 40%. can you really get your shareholder base there? that's a huge number. we'll continue to speculate about what they may or may not do. the bulk of the upgrade is not about that. it is about inflation, more consumer spending. >> taxes. >> lower tax rates. all the benefits that will come to disney as a result of that. >> couldn't that have been made at 93, 97, 99, going understand
wi -- going once and twice? >> i like target's potential spin of espn. the e-spin. >> john malone shared this in my interview with him. now everybody is talking about it. he doesn't say anything without first figuring out exactly, okay, is there a benefit? i don't know if liberty has interest or if they're trying to -- who knows? i don't know. i don't know that they go down the road. something they thought about in the past and decided against it. do they re-visit it now? maybe. >> take that stake in mlb. why not go more toward the machine learning and artificial intelligence side of things when it comes to sports? espn is a great outfit. i've done a lot with them over time. i think that i can't believe that iger would find that to be the thing he wants to let go. >> we'll see. >> sort of what they say about netflix. does he want to end his legacy a year ahead of his mid-2018
departure with an acquisition of something highly diluted. >> cutting numbers disney. it is funny. if apple were to buy netflix, you wouldn't really notice it. apple is not going to do that. >> they're not, are they? >> no. >> apple and google, we can talk about them all we want, about the large deal. they've never done it. >> glad you mentioned google. target is 975 from 910. talking about the other assets, which have been a drag. >> by the way, their over the top offering is coming out soon related to youtube and other things that are going to offer. curious to see how that -- what that looks like and what the price point is. hulu coming out. back to espn, that conversation, we're going to see more and more of these over the top platforms this year. they're going to be everywhere. you have to believe people are going to make the move to them perhaps with more momentum if they are priced appropriately and have what everybody feels
they need. also, people like to have them for their phone. apparently, directv, a lot of people wanted it because it is fun to watch on your phone. >> i set it up. look, watch espn. >> watch espn. >> directv now, if you're an at&t customer, you're not charged for it, additional overages. >> the idea we should look at the espn numbers as strictly as we do may be a fool's game, given what you just said. i mean, i just think there's a lot of not counted espn subs. it is a robust site that i just think should count for something. i don't think it is given its due. not the way it is used by so many people. >> disney is leading the dow. only thing stronger is nike. the worst stock for the index last year. interestingly, the biggest lager on the s&p is last year's biggest gainer, in videos.
>> remember the january effect? people sold and come back in. nike's quarter was not a great quarter, but hope springs eternal with that one. it is interesting. we saw a downgraded designer shoe in dsw. this is a lot of -- i find a lot of people saying that it was not a good apparel christmas for certain cores downgraded. not the beer kind. not a good apparel situation. >> no. we should point out, gm shares are up. this has been typical. a tweet from the president-elect, the company in the cross hairs, stock price goes down, but they tend to rebound pretty quickly. also, a separate story here is sort of the communication strategies of corporate america when they are targeted. >> yes. >> gm came out pretty forcefully and pretty quickly. you can bet a lot of companies that believe perhaps they may wake up one morning and find
themselves the subject of a tweet have thought about, how do we want to go responding? that's been a conversation going on over the last month. in this case, gm came back quickly with the facts, talking about the fact that the chevrolet cruze sedans sold in the u.s. are build in lordstown, ohio, and what's built in mexico is sold in other markets. >> right. >> that's a new thing for corporate america. rapid response to a presidential tweet. >> it is interesting that union pacific is up so much. i don't think people realize, these cars and many cars go back and forth. there's a lot of different transmissions, different parts made in mexico. union pacific and ksu have been the biggest winners. union pacific has had a fabulous mexican business. doesn't matter if it is shipped from detroit or mexico. union pacific would be down if this was for real. they'd be hurt very badly. i think a lot of people are saying, if you go on twitter, you know, the fake news thing is
very big. i just decided to dig into the fake news notion. one of the fake news notions would be that trump can get rid of nafta tomorrow. the day he is inaugurated. it is not as easy as that. >> right. >> a lot of people feel that trump can do what he wants the day that he is inaugurated. there are all these people in congress that -- i don't know why people feel the republicans necessarily are going to fall in line on issues they have expressed repeatedly that they don't feel is the case. i mean, you know, let's remember, go back to nafta. nafta was not meant to be such a subsidy for mexico. it worked because of the currency manipulation. if trump were to want to strike hard on this, it would be about the currency manipulation in mexico. i think that his trade people really get that. >> yeah. >> trade people are very sophisticated, and they really get it. currency is crazy. i've got to tell you, go to mexico regularly.
it is -- use a burger. use the mcdonald's burger. it does work from one place to another. did you do cheap down there? too cheap. they moved a plant from korea. there's so much business going from china to mexico. how can you not? they're paying people twice in china what they pay a mexican. the absentee rate, once again, is 1% on every shift in mexico. that's the average. >> robots are never absent, ever. >> you don't think they take a break? >> never. >> smoking break? >> you don't have to pay anything, in terms of them. they don't cost anything, other than, i guess, keeping them up. >> geez, they're like robots. >> yeah. and they're coming. they are coming. >> no doubt about it. i know. you see a lot of machine learning ships, on the insider selling, but it is designed to make it so we have fewer and fewer people. the big break you think that trump may have done with
carrier, do they have to literally try to find a way to mechanize, make it so robots do a lot of the work because it is a commodity business. they can't compete. can't compete with anybody in mexico. i don't think people real lize w cheap it is there. >> conduit down 3%. we'll talk to the ceo later today and the ceo of xerox tomorrow. >> the thing a lot of people forget, we forgot oil is up. it's like the old days. oil goes up big, $55, and we like it again. we like oil again. >> we do? a good thing? >> pioneers. >> aren't we in a nice spot now, sweet spot? >> i think natural gas is a sweet spot. i like these -- when you look at the performance last night, wow. >> wti, the highest since july.
2015, we were almost to $57. reportedly, kuwait is abiding by the production cuts. >> it is incredible. i think this is a place where, remember, the u.s. has cut drilling costs dramatically. the shale place, the pioneers, they're doing fabulously here. numbers are too low. number, i mean, the dakota access construction company, they will benefit if you're allowed to put pipe down. one oak is building a pipeline to the scoop, which is really stack and scoop the areas, the shales in oklahoma. remember, one oak used to be in 1980 the oklahoma natural gas company. let's not forget, oklahoma, huge natural gas. natural gas is the fuel that we are exporting dramatically to
mexico because they're out of it. paymex didn't do enough support of it. we are exporting a lot. let's not forget, that is turning into something we imported when i was in the business and now we're exporting. what a switch that's not talked about. it is the year of natural gas. thank you for putting that in my ear. >> i'll remember that all year long. >> i'm talking about -- >> i will not forget that. >> thank you. >> the year of natural gas. >> limited partnerships are big winners under this president. big. big, big, big. >> huge. >> dow is up 149, 152 or so, back to 2255 on the s&p. morning, bob. >> good morning. happy new year to everybody. we're starting the year the way we ended up pretty much, with commodities, financials, industrials, all moving to the upside. a global rally is going on.
let's look at the overseas markets. china had a good session overall. manufacturing numbers were strong. so it was in the uk, as well. so that moved nicely. france is up, as well. as i mentioned, french inflation numbers were high there. ftse did well here. the uk's pmi increased to the highest level since june 2014. the theme here is can you get this global reflation rate the global seems to be moving on? the data indicates we might be. the pmi data, improving right now. if you look at the sectors here in the u.s., looks a lot like november and december. banks, energy, industrial stocks are leading. consumer discretionary and utilities are lagging. that was the last two months of the year, the main theme. number of banks, not new highs but banks new highs, jpmorgan is out there. m&t and pnc. zions. they took off in the fourth
quarter. the regional bank index. we finally moved above the 2007 highs. people didn't think it was possible. a regional chart of the new high you see there. look at the market's trend right now. market, what it is doing today. cyclicals over defenses is still in tact. the trade happened since november. breadth is favorable. some say the sentiment is way too bullish. the headwinds, stronger dollar and the fed tightening. the big issue is what the trend is going to be for 2017 in terms of sectors. you know the business by the worst-performing sector in the last year and now the best performing. energy was the worsterer fo per in 2015 and best in 2016. with oil moving up, it is tough right now. health care, a tough bet right now to buy that. you have that affordable care act repeal exposure. you have drug pricing exposure. a lot of debate about where health care is going to go in 2017. as for big energy, remember,
huge moves by exxon and chevron we saw in 2016. exxon was up 17% alone. exxon and chevron by themselves, because of the market's cap weighted nature of the s&p were a factor in the 10% move. we have a new high for oil right now. the big debate is what is going to happen on earnings. remember, the streak is expecting a notable increase in earnings acceleration in 2017. we're seeing this now. q3 and q4 looks to be better than q3 now. not taking the numbers down that aggressively. good sign. thompson router numbers, up 13.8%. people are holding there, waiting for what's going to be happening in the next couple weeks. remember, a lot of people are anticipating companies to be a little cautious. you're going to have cfos grilled on what the tax cut implications are. the same position caterpillar
adopted, they said, you analysts have to be careful about getting too excited about 2017. i think you have a lot of people talking about cautious guidance for the full year. finally, want to point out, santa claus rally, we abandoned this but we have a shot at having the santa claus rally. remember, that's stocks to move up in the last five days and the first two days of the year. we need the s&p to go above 2263. right now, we're eight points from that. dow 20,000, just 77 points away from that right now. dow up 151 points. happy new year, everybody. back to you, carl. >> looking sharp. bob on the floor. rick santelli? >> good morning and happen any new year. whatever sort of funk the markets were in the last couple days of 2016 with regard to extending their post-election trends, they have their mojo back. look at a two-day of booms.
we start overseas. they had a ten bases point range. 16 loan crawled up to 26 basis points. that's a low yield but it really depicts the direction that everything seems to be moving this morning. looking at our ten, 243. up 4% on the day. 30s, you can see the options behind me. there's a lot of interest, of course. price goes down, yield goes up. 30s, 305 to 313. also 8 basis point range. the dollar index is, by far, the winner. if you look at this chart, it is up about 7/8s of a cent on a day basis. what is noteworthy here, it sits at 103.35. it would be a new high close from last week, 103.30. a 14-year high. we're extending it. if you look at the euro verse the dollar, the euro currency had a snap to the movement here
from 103 to 104. you can see it is giving back a lot of friday's pop. if you look at one week of the dollar, it puts it in p perspecti perspective. a lot of uncertainty for 2017. one thing is certain, the markets when they go guns hot is to the youpside and find an easr path. let's see if today is the day to break the milestones i won't mention. back to you. >> rick, thanks a lot, from chicago. when we come back, chairman and ceo howard lutnick. a lot to talk about, including trumps, the markets and hiring form eer deutsche ceo as the current president. dow 20 k is in sight. 94 points away. we're back in a minute.
jim, you talked about that. >> look, i think the u.s. shale plays must be going over again and again. this weekend, they're been able to take advantage of the stock market. and be able to make a lot of money. uniquely u.s. these companies are making -- some of the companies lowered the rate to $35, $30. pioneer has been one on ""mad money,"" talking about it, making a huge amount of money. i think that people have to recognize that we have lowered our break even but, at the same time, we could flood the world with oil. it could backfire. we could be the country that moves things so we're out of whack. and supply, again, is too heavy. it's not going to happen yet. >> not yet. >> not yet, no. not this year. too hard to -- >> what was the high? were we at ten and down to -- in terms of the high in domestic production. >> yeah.
come down a lot. you have to add 1 million to get near to where we were. that's going to be too hard. >> finally, the syscos and the utilities of the world, ceos are the lagers today. >> i was thinking maybe some people would feel rates have peeked but, obviously, the stocks today are stocks that benefit from rates going higher. >> yeah. we'll get fed minutes tomorrow. ism services, jobs on friday. >> very good. >> yup. we'll get stop trading with jim in a moment. dow is up 124.
first edition of stop trading for the year. >> i'll tell you, we can't overlook the citi group upgrade of verizon from whole dubai. starting to talk about perhaps these acquisitions verizon is making. could be good. this is out of whack if interest rates go higher. talk about the stock reaching 69. this is rather amazing to see -- well, a stock i've been recommending for a time. i think it is a great, great stock. it is nice to see starting to talk about the idea. i do believe the yahoo! deal will go through. >> you do? >> i do.
>> you're probably right. >> at a good price. >> we'll see. we have to check in on that and see where things stand in terms of all the hacking that took place at hacking. >> true. i don't know the answer there. i do think they're talking about the average potential benefit of $9 of trump tax. this is, again, hidden money that could be unlocked. verizon, you didn't think they'd be a huge winner because they're a domestic company. this is a compelling report. i agree with it. >> for sure. >> what's on "mad" tonight? >> i'll review which stocks did great in 2016 and which ones can repeat. some question about whether this is the broncos versus the panthers. >> ouch. >> no playoffs. a couple companies are going to get to the playoffs. >> who will make the playoffs? >> stay tuned. >> instead of worrying about the new dog of yours. >> love you, scoop. >> very nice. jim, see you tonight. >> great to be back, guys. thank you. >> 6:00 p.m. eastern time.
♪ come up in the spot looking extra fly ♪ before the day i die, i'm going to touch the sky ♪ welcome back to "squawk on the street." i'm carl quintilla. sarah is off today. moments from now, we'll be joined by canton fitzgerald's chairman and ceo, howard lutnick, after announcing his hiring of former deutsche ceo, anshu jain. that's ahead. in the meantime, look at stocks and oil on the first trader day of the year. dow is up 125. s&p up 16. >> all right. we start with economic data that is crossing the tape at this hour. rick santelli has the numbers. rick? >> yes. november on construction spending up 0.9%, better than expected. la up 0.9 equals june. up to go back to march for a higher number. let's look at december ism,
shall we? 54.7, strong number. looking for a bit under 54. that follows 53.2. so 54.7 is, that's actually the best number of 2016. best number since 2016. to find a higher number, we have to go all the way back -- this is way back -- we have to go back to december of '14. so this is a two-year high number. let's go through the internals, shall we? 65.5 on new orders. that is a huge jump from 54.5. i'm sorry. excuse me. that's prices paid. maybe even more important, that's the inflation. back to new orders. it jumped to 60 but only to 60.2 following 53. the employment index, which is quite important, considering what we're looking at coming down on the fundamental calendar, 53.1 following 52.3. so the data is pretty good for the start of the year.
rates are hugging close to the highs of the range, about four basis points higher versus the 2016 close. happy new year and back to you. >> thank you very much, mr. santelli. back at ya. president-elect donald trump tweeting this morning about general motors. he writes, general motors is sending mexican made models of chevy cruze to u.s. car dealers tax free across border. make in u.s. or pay big border tax. gm responded to the tweet. pretty quickly. phil lebeau joins us with more. phil? >> and emphatically. general motors sending a response about an hour after donald trump's initial tweet regarding chevy cruze production. they wanted to clarify specifically where the cruze models sold in the u.s. come from. gm manufactures the cruze sedan in lordstown, ohio. all sold in the u.s. are build in gm's assembly plant in lordstown, ohio.
gm builds the hatchback for global markets in moex c in mex small number sold in the u.s. how many from mexico in terms of the hatchbacks were sold in u.s. dealerships? according to general motors, it says 2.4% of the cruze models sold in the u.s. last year came from mexico. so you're talking about a very small percentage. they sold 190,000 cruzes of all. in terms of what general motors gets from mexico, approximately 400,000 vehicles sold last year in the u.s. came from mexico plants. this is one of them right here. we're talking about the chevy silverado, as well as a sierra. pickup trus are a large part of the production in mexico. overall, when you look at mexico auto production, this is what has donald trump's ire right now. not just gm and ford, but all car production. in 2017, it'll be close to 4 million vehicles exported by the auto industry out of mexico.
that's what's bothering donald trump. many of them are heading from here in the united states. look at shares of general motors since the election. up about 10%. like a lot of stocks, guys, s s since the election. still unclear whether gm ceo has had a conversation today with president-elect donald trump. i'd love to hear the conversation when it takes place. back to you. >> all the stocks looking past it. thanks, phil. phil lebeau in chicago. form eer deutsche bank ceo anshu jain lands now as president of canton fitzgerald. we have cantor fitzgerald's ceo and chairman joining us now, howard lutnick. you've known each other a long time, right? >> we have. >> you've been longing for a partner of sorts. what is his mandate? >> i mean, he's already run deutsche bank so he has been there and done that. we're looking for a new way to
do business. where a sales and trading organization, a primary dealer with the u.s. government, a great firm. lots of banks can't do the business they used to do because of the regulatory costs. they're forced to put up capital when takes risks. they can't do the business they used to with the clients, and the clients need to find a great firm. cantor fitzgerald is a place where we're growing like fire, things are going well and it is important and brought jain to us. >> what expertise does he have running a bulky institution, whereas expertise, you can say, was in things that don't pertain to what cantor does on a daily basis. >> once upon a time, anshu jain was the greatest manager of sales trading organization in the world. right? he -- think about it, he went to deutsche bank when they were kind of a sleepy company and built them into the greatest sales and trading company in the world. then leveraged that to the executive suite and had to suffer with all the regulatories
and all the rest. he is going back to his roots. he is a great, great, financial sales and trading executive. he is the best i've ever known. i think he is just a great friend of mine. i've been friends with him. we spent new year's eve together last year. just with our families. great guy. the press is tough on guys who run banks. you know. you guys say it all the time. >> it's not necessarily the press but the government. i mean, the sales and trading business is the part that's not without blemish. >> that's really fair. it is really the government that is beating the guys. in the end, the human beings who are running these banks, you know, are first class people. they tend to take the brunt of being called a bank. so anshu jain is really a super guy. i mean, i think of it this way, it is like bono joining your rock band. we are a great band. we're spectacular. but, i mean, he is really one of the great executives in the financial service world. i am -- i can't be more excited to start the new year with him as my partner.
>> bono is used to being a rock star, right, the star. is he going to be okay being number two to obviously a strong-willed exec? we're going to be partners. someone asked me the other day, is this your succession plan in i said, i'm 55 and he is 53. you don't pick the two years younger guy. i think we're going to have fun working together. you know? and when you've already been the co-ceo of deutsche bank, you're looking for something different. we're not going to try to rebuild. people ask me, are you going to rebuild and take on deutsche bank? how silly that? they have $60 billion in capital. jp more dan, $200 billion. you go a different way. do something different. we're going to have fun together. we're friends so that helps. we trust each other and like each other and from tremendous respect for each other. it'll go great. that's why i can say i know he is a great guy. i know he is a great guy. >> to the extent you've benefitted at cantor over the last few years as a result of banks withdrawing from risk markets and taking risk, and then we can assume there will be
less regulation, perhaps roll backs of dodd/frank, is that a competitive concern for you? >> the pond is getting bigger. dodd/frank will roll back. if they had the money to do trades, to do trades. another example which no one really talks about, in january of last year, remember when oil fell off the map? all hell was breaking loose. the controller of the currency of the obama administration changed the rating for energy companies in america and made money center banks unable to lend to energy companies. can you imagine, they couldn't lend to energy companies because they raised the risk rating and made it they had to put so much capital up. all of that nonsense is going to go away. so if the banks got the proper amount of money to put up to take the risk, they can take the risk. if it is a good energy company, let them lend to it. it'll be better business for banks, period. for us, banks still have to put
up capital for the risk they have to take. it's not going to change. what you're going to continue to read is banks are going to continue to re-examine who they're doing business with. right? and the smaller firms who aren't institutionally important to the bank, they're not going to put up the capital for them. those firms are going to look for another great firm to do business. imagine you were doing business with jpmorgan, morgan stanley, goldman sachs and they say, sorry, you're not big enough for us. >> that's been going on the last few years already. >> it is going to continue. they continue to have to put up capital. that's going to continue to happen. that's why cantor fitzgerald is going to be in a sweet spot of the world. we're not trying to compete with the banks. we're trying to work our way and be successful. that's what finds anshu jain coming to us. we're kind of in a sweet spot in the world going forward, as long as you're not trying to be deutsche bank, goldman sachs, morgan stanley. look, if iherited $100
billion, i'd do it. since i don't have it, we're not going there. >> you say in the world. jain will be based in london with oversight in asia, particularly. so how does the profile of cantor worldwide get raised? >> he's going to be in new york and london. spending maybe 15%, 20% of his time in asia. he is going to be my international head. you know, look, i'm american. i spend too much time here. i lived in london for the summers for many, many years. before 9/11, i would spend june, july and august in london to be more international. but he is maybe 40% in new york, 40% in london and 20% asia. you're going to see us build the asian business dramatically. our european business will get much, much better. america, are donald trump as the president, you know america is a great place to be in business these days. our economy is growing. our interest rates are beginning to rise because we have an economy. you're not going to see interest rates going up in europe. every time i come here, i tell you i love the dollar.
i came here last time on the floor with you guys, i said i love the dollar. you have to still love the dollar. through parody against the euro, really, right? probably get to 90 cents. >> realreally? >> 96. >> our interest rates will go up because we have a good economy. couple of bumps in europe, cut. stay zero. you have to like the dollar. people will park their money when they can get interest rates. the tenure note, 2.5%. not bad. >> not bad, going higher according to you. >> great time to talk about interest rates. the two-year note is 1.75%. the bond is 3%. all the numbers are even. it is a nice time. >> valuation on u.s. equities, what is your thought going to 2017? >> you have to like u.s. ek with i -- equities. >> what don't you like? you love everything now. >> europe's economy is in a tough spot, right?
i don't see europe coming back. i think everyone would agree america is the number one opportunity for growth in the big economies. asia is number two. europe is number three. i don't think -- i haven't found anybody to disagree with me yet, so i don't think i'm saying anything bold. our economy is nicely growing. you'll see a couple of bumps from the fed this year. we knew the fed was going to bump in december. you'll see at least a couple bumps thiss year. our economy isn't so great it'll be bumps. when we were all talking, if we got to a 1% interest rate, really, is that an interest rate in wow, we're at 1%. we have plenty of room to grow. the u.s. is in good shape. asia is in good shape. europe, not as good. >> howard, good seeing you. thanks for coming? >> we're excited for the new year. mr. jain joining us is exciting. >> have a nice time. >> thanks for having me. appreciate it. happy new year. >> howard lutnick joining us. president-elect donald trump tweeting a few seconds ago.
for that, we'll go to washington. >> good morning. donald trump tweeting this morning over the past couple minutes here about this controversial move by republicans in the house of representatives to reign in the office of congressional ethics. here's what donald trump said in a tweet. a tweet storm that began five or six minutes ago. with all congress has to work on, do they have to make the weakening of the independent ethics watchdog, as unfair as it may be, the number one act and priority? focus on tax reform, health care and so many other things of far greater importance. what donald trump is talking about here is an effort here for republicans to reign in the ethics watchdog on shricapitol and rebrand it under a different name with more limited functions as the office of complaint review, as opposed to the office of ethics up on capitol hill. trump, interestingly, with the politics here, going against what republicans are doing and defending this morning on capitol hill. saying they have other things to
work on. this might not be an important first step for this new congress. interesting to see a division here between donald trump and republicans on capitol hill, carl. >> i'll take it from there. an update from the president-elect. when we come back, xerox spinning off its conduit unit. we'll speak with the director and ceo next. taking a look at stocks on this first trading day of the year. after trading down the last day of 2016, the dow up triple digits. much more ahead on "squawk on the street." xerox complet t
separation into two companies. conduit opened earlier under cndt. joining us first is the new ceo of conduit. nice to have you. >> happy new year. >> a look at the notes this morning, analysts picking up coverage of the company. a number of them talk about i guess what they say is opportunities but also still restructuring that still needs to happen. let me quote here and have you respond. undergoing a drawn out restructuring needs to change its culture, fix operational issues, which is a difficult task and a people-based bi ed business. that's a note from jpmorgan. is that difficult and how are you doing it? >> it is a task. it is a task in front of us and definitely not a difficult task. now that we are a stand alone
services company, we have the opportunity to focus on things that are important for a services company, than being in the construct of a hardware or manufacturing or document technology company. $260 billion market adding $250 billion every year. if we stood still, we'd generate a lot of business. spinning off, we are the largest services provider. we have scale, we have size and we have a management team that has been experienced. we may be new to the exchange and new as a public company but we've been in business over 30 years. >> and a large recurring revenue stream. some analysts believe you could expand your margins by as much as 250 basis points through 2019. is that achievable? >> difficult to say at this minute. we're taking stock of our business. taking a portfolio approach. clearly, again, as we move into a services company, the dna and the way we go to market, how we sell, how we price will change, as compared to when we were a
part of xerox. i'm definitely hopeful that will boost our bottom line performance. >> yeah. a lot of change, of course, comes when you are a public company. you may be doing the same thing but there are different responsibilities. including for you. >> yeah. >> are you confident that the management team that's in place now can execute on those new responsibilities as a public company with a shareholder base is and a customer base that you previously had? >> yeah, i am pretty confident about that. in the last six months we've spun off from xerox, which is not a trivial task by itself. we stored up a new company. this is a milestone for us in terms of being listed. and the team has pulled it together so far. we are attracting a lot of talent and interest from the marketplace, as well, and i think as we build out the company and show results, we will attract the right talent. >> is your base of business going to continue to be, i think it is as much as 80% of it is recurring, much higher than some of your competitors. is that something you want to do, or is there benefit of
having repricing coming more quickly on your contracts? >> we are extremely happy about our renewal rates. over 80%. clients trust us to do the same thing for them again. we have to get better at monetizing some of the technology assets that we have. our business model is also different from our competitors. 80% of our business is not only renewal but also transaction based pricing. it is more dependent on technology rather than on the back of labor. that allows us to make the business much more scapab scale predictable and allows us to drive a higher mix of business services. >> you work with 18 different industries, many about to be upsended by the rewriting of regulation. you work with 2200 hospitals. does your transaction volume increase when companies and organizations need to understand better how changes will affect them? or does that basically just flatten out because there's so
much uncertainty? >> well, the two elements two the businesses. one is run the business and the other is change it. when we run the business, we're doing a lot more of the transaction processing. doing a lot more of the routine work. changing the business is bringing analytics capability, bring more automation, bringing more of our innovative platforms to play because of the disruptions the industry may be having. take the example of hospitals. we work with over half the hospitals in the u.s. on our plan. we do things like e-discovery, health records, et cetera, which makes the hospitals be much more flexible and much more agile in service to their patients. >> what's the propensity to spend on new business or contracts when there is not really clarity on what the bottom line will look like after the regulations are rewritten? >> we think some of the overhang will reduce from what we're hearing. we're obviously watching out for that. that'll probably drive more dollars. technology is changing the way processes are consumed. for example, we work with a
bank, which is only a mobile bank. provides services on a mobile. we create virtual agents that helps this bank's new set of millennial consumers actually consume more of their services, rather than, let's say, mortar >> what component is ai? >> it is very big and will be bigger as we go forward. at this point, we have innovative platforms on it. not a huge percentage of our revenue at this point, but a bet we're taking for the future. >> when you could benefit from modernizing the technology platforms, is that what we're talking about? >> yes. it is an investment we have to make. we have to keep pace with the way the consumers are spending. we have to make it digital and seamless and more personalized in order for the consumer to consume the services. >> congrats on being a publicly traded company. >> thank you. >> the ceo of conduit.
welcome back. the chairman and ceo of bridgewater responding to a recent wall street journal profile of him this morning. titled, the fake and distorted news epidemic and bridgewater's recent experience with the wall street journal. he writes, you are left to question what is true based on the scant evidence in front of you. rather than worry about what is true about bridgewater which probably won't have an effect on your life, you worry about the systemic risks arising from fake and distorted media. talking about the journalists, how they approach the firm, the kinds of questions they had, the kinds of things he argues they'd already made up their mind about in the story about the radical transparency of the culture
behind the firm. >> it makes you wonder what the future of anonymous sourcing will be, which many reputable news outlets rely on to actually do their reporting. but there are more outlets than ever for people who are the subject of news articles to respond in whichever way they prefer. >> he argues there is no other industry that has sort of -- once the product is out, people who are the subject of the story basically have no recourse except for things like this. >> it is a long post and you can check it out for yourself if you'd like. it is the first trading day of 2017. markets are surging while inv t investors wait for the president-elect to take office. joining us is the capital markets chief investor strategist and barclay's editor and head of research. welcome to both of you. the s&p 500 year-end target of an average of, i want to say, 2536 or 2356 is about 5% gains, which is the least optimistic in
a decade. how should we read that? >> well, we had a very strong fourth quarter. at the end of the day, we robbed peter to pay paul in a pit in terms of the momentum rush and rush to perform in the fourth quarter. remember, the majority of institutional portfolio managers centric only to the u.s. dramatically underperformed in 2016. so the momentum we saw in the fourth quarter was a race to kind of re-engage with respect to stocks again. remember, too, that stocks are rarely linear for long. we are going to get some sort of respite at some point. january and february could be a bit rocky, especially given the fact that mutual funds have to reallocate stocks back to the u.s. to begin the year. and we have the noise and notions with respect to how the platforms will be put into work. it'll be bumpier than people can anticipate. the fourth quarter was strong
and that was more about chasing stocks. >> i'm wondering when you think the volatility will happen. there was an expectation at the end of last year that the first couple weeks of january would be volatile because of the tax base selling. of course, on the first day, we're not seeing that. >> well, i think this is the race to be non-consensus, right? the consensus has been wrong here around markets for a while. at the end of the day, it is kind of just a race to own u.s. equities again. the best thing that's occurred through the rally in the fourth quarter is to really believe in the notion of investing in equities again. especially investing in equities with respect to the largest economy in the world. so we would not be surprised to see 3% to 5% corrections along the way that are going to be spiky. remember, too, the longer term perspective is highly correlated with interest rates. as rates head higher and the yield curve steepening, we think the vicks will pick up and it's all about ak active investing.
>> morgan stanley's parker has a note out this morning saying you should have bought the election but sell inauguration. we can't help but think the republican sweep has created a more uncertain and volatile outlook for the economy and corporate earnings growth. that seems to be a contrarian take compared to the bullishness we've heard so far. >> i have sympathy for that view, and in terms of the non-consensus aspect of this, the markets were trading, i think, what they wanted to see in the fourth quarter. parts of the president-elect's policies that they liked and ignored the other parts. with the tweet this morning from the president-elect about gm and tariffs on the automotive industry, for example, it is a reminder that there's potential disruptive policies out there, particularly in terms of anti-trade. we do assume that you get anti-trade legislation in the first half of this year. we're assuming it comes in the form of tariffs on products from
mexico and china, but it could come through border adjustment as part of larger corporate tax reform, or it could come with respect to particular industries. so i am sympathetic to the idea we could have bouts of volatility along the way as unexpected policy proposals come forward. >> the transition team will be on capitol hill this week. our thanks to both of you. >> thank you. when we come back, a company in the crosshairs. president-elect donald trump, as you heard, tweeting about gm this morning. we'll have the latest and we'll talk to cnbc contributor larry about that and much more ahead. stay with us.
the first time following the msz kerr that left 39 people dead. the islamic state group claimed responsibility for the attack, saying it was to avenge turkish military operations against isis in northern syria. the government releasing a selfie video of the man they say is the gunman in the attack. it shows him filming himself with a cell phone at the square. it is not clear if the video was filmed before or after the attack. he is still on the loose. a 12-second time lapse video shows the moment smog engulfed beijing in its latest bout with air pollution. the smog is expected until thursday, and an alert is in effect until at least tomorrow. and a new study by visa suggests 2017 could see a rise in mobile payments. 26% of consumers say they plan to try mobile payments this year. an increase of 8%. the majority of purchases were more food and parking. you're up to date. that is the news update this hour. carl, back to you. >> sue, thanks so much.
president-elect trump sending out a fire storm of tweets this morning. for that, we'll go to john harwood, outside of trump tower. >> morning, carl. we're fighting the elements out here. if i fly away like mary poppins with the umbrella, you'll find me on fifth avenue. a few significant things. personnel announcement, robert lig lighthizer, former reagan adviser, a trade lawyer, is his united states trade representative. lighthizer is significant because he shares some of donald trump's views about trade that diverge from the purest republican orthodoxy on the issue. the second thing that we've seen is in the tweets not just about general motors but about house republicans, that donald trump is not going to be a creature of
his party. there are uncertain consequences for that. he has tweeted out criticism of the decision of the house republicans to make their first order of business weakening ethics oversight from the independent office of congressional ethics on capitol hill. he has tweeted out saying, why did they make this their top priority? is this the most important thing they can do? now, we'll have to watch about the interplay between the president-elect and the republican majority. how do they react to being called out by him? do they increase scrutiny or criticism of his potential business/ethical conflicts? we don't know that. they have not shown much interest in that so far. but this is the story to watch, carl. >> john harwood outside of trump tower, good set up for us. we appreciate it. joining us to talk more about it, veteran democratic strategist, senior adviser steve mcmahon and contributor larry
cudlow. good to see you, gentlemen. >> thanks, carl. >> now that he tweeted about it, what is your take on it? >> to which? >> the ethics office. >> i don't get it. i don't know everything about it there is to know, but it looks like a mistake to me. it also looks like a revolve. house troops revolved against the leadership. leadership didn't want this. i wouldn't start the new year taking down the ethics requirements, but that's just me. play by the rules, thank you very much. i don't know. i don't like it. >> steve, does it feel to you like there is something there? are we going to stop talking a about the this by the end of the day? >> i mean, symbols matter. i agree with larry completely. i don't know why in your first act in the new congress, when republicans are in charge, they'd take down the independent office of congressional ethics and basically silence it. say it can't communicate publicly with the press or with anybody else. put it under the control of the congress. it is crazy to me. >> you know, first of all, good
to agree on the new year with my friend. there are bigger fish to fry. not to demote ethics, but for heaven's sakes, it is a lousy symbol. the big issue down there, i mean, the congress reconvenes and the big issue is what to do about budget resolutions and reconciliation packages with respect to two gigantic issues. one is reforming or rewriting health care, obamacare, and the other is tax reform, especially business tax reform. these are huge issues. and the house has to make key decisions along with the senate very soon. and the administration or the transition, there may notuni h -- agreeing on the topics. >> what would you do first? >> business tax reform. if you delay it to the end of the year or next year, people will delay decisions in the economy. that'll make 2017 a much worse
year than people want. now, you could also combine stuff. there's a lot of tax and spending in obamacare. a lot. tax hikes, whatever spending increases. put that together, maybe leave the personal income tax reforms for later. do the business tax cuts first. the great thing about reconciliation, steve may disagree but we've both been around this block, reconciliation rules are whatever you want them to be. okay? and if the senate parliamentarian doesn't happen to like your rules, you know what you do? get a different senate parliamentarian. >> yeah. >> that is -- dave and i did reconciliation over 30 years ago, steve. i may be stretching the truth here, my friend, but i don'tgui shifting on reconciliation. >> listen, again, i'm going to agree with larry just about down the line. >> oh, boy. >> i didn't support the trump agenda, bobviously, but it is what he promised. promised business tax reform and
some other things he promised that democrats would work with him on. for instance, a big infrastructure bill that would create millions of new jobs. i think that is something democrats will work with him on. there have been a lot of democrats who support some sort of adjustment to the corporate tax rate because they want to create an environment in which companies are creating more jobs. there are things he could do today and things he could do in the next six months that democrats will join him on. some of the more divisive things he'll find a big fight about. i think larry is right, start with the things you promised that are easy to get done, or at least easy to get democrats on and for. take a stand on ethics, which is great he did it today. and start this off right and not on a partisan war footing. >> steve, is it realistic though to think that some of the bigger fish would get fried before you have confirmation hearings or before you have confirmation at all of the dez knee signees to running the agencies tasked with
the legislation? >> the house ways and means committee will be deeply involved in whatever happens on the tax side. there is no reason they have to be repealing ethics laws instead of working on the tax code change that might create jobs and give businesses an incentive to do that. so i don't think there is any reason for congress to wait. they take office today. the president-elect doesn't take office for another two and a half weeks. there's work to be done, and they can start right now. >> larry, i want to follow up on that with you. because tax reform, certainly for our audience, it has the potential to transform certain industries. >> it does. >> and change incentives in different ways. where should we be looking when we get down to it finally in terms of the specifics? who is going to carry the weight of the debate here? is it ryan's office? is it going to be the oval -- is it out of the white house? where is it sort of really going to gain momentum? >> it'll be a three legged stool. you have very powerful forces here. you have speaker ryan, you've
got leader mitch mcconnell. you have chuck schumer on the other side. i don't think ms. pelosi has as much clout anymore. but then the president on down. it's not going to be easy. when i talk about merging some obamacare reform, which is incidentally something that may go on three or four years before that is finished, with business tax reform, i'm still talking about a mayor piejor piece of legislationme legislation. you have to create a budget resolution, which has to go house, senate and it'll have reconciliation instructions. only needs 50 votes in the senate. people on wall street are ahead of them themselves here. going to cut corporate tax rates and i'll sell bonds and stocks. it may be true but it'll take a while. i went through this a while back. this one is even more complicated. >> is this you speaking as a
former informal adviser to the trump campaign or the future head of the economic adviser. >> did you say formal? >> former. >> there you go. i like that a lot. hang on to that as best i can. can i put one in to tease everybody? on vacation where we were last week, trump said something i love. i agree on taxes and health care but he said he'd go back and really study john f. kennedy and ronald reagan's inauguration speeches. i love that. >> if only someone had written a book. >> thank you. >> tying the two together. >> that's why i love you, carl. there was a book put out this fall that called jfk and the reagan revolution. brian and kudlow put that out. what trump said is interesting. he is looking for leadership and tone and big picture, you know, for the american people. of course, if you're talking jfk
and reagan, you're talking tax cuts and supply side, which means economic growth and jobs and america first. >> like old times. like the kudlow report right there. >> you're an alum ninis. >> yes, yes. >> happy new year. >> you, too. >> take care. as we head to a quick break, take a look at shares of revlon, up 4% after the company announced restructuring measures that include job cuts of 350. much more ahead on "squawk on the street." ♪ slap along if you feel that happiness is the truth ♪
exchange. we'll get down to rick santelli. rick? >> thanks, david. for all you viewers, happy 2017. first exchange of the year. my guest, peter, thanks for taking time. >> happy 2017, as well. >> all right. you know, when we went through the last administration and we went through the process of 2012 and 2016 elections, i couldn't help but notice that there was a feeling out there that the middle class wasn't connected to many of the positives that were purported, whether it was job creation or how banks grew, especially the big banks. i think 2017 is going to be the year investors trust their feelings more. what are your thoughts? >> well, that's the hope. because we have a, certainly, more business-friendly administration. both from a tax perspective and regulatory perspective. what you mention about the middle class, as of a couple years ago, the profit pie was given to employees of the smallest pay since world war ii. now, we're beginning to see some
of the profits shift more to employees, which would certainly benefit those in the middle class that you talked about. but yes, a lot is phycology. but we need to see what actually gets passed. there's no free lunch here. because of the massive debts and deficits we have for every tax cut, they need to find a way to pay for it in some other fashion. >> now, you bring up an exple excellent point. many of us trading during the reagan administration remember before things got better, deficits were bigger. i think deficits, if you look at the last administration, deficits weren't a friendly thing for the republican party. they fought against deficits. are there a difference in any of the deficits we may be creating that will take a different tact by some of the republicans, like the freedom party, aka the tea party? are they going to be more deferential to growing deficits, if it looks as though they'll impact growth more directly? >> i think a lot will depend on how the market, the bond market
responds to those debts and deficits. for 35 years, when the bond market was in this bull market, debts and deficits didn't matter because the trend was your friend in terms of the bull market. well, if, and i emphasize if, the bull market is emphasize if that bull market is over and the july low in yields we may not see for a long, long time. the market may take a different attitude. they respond differently. and markets will force the hands of politicians and how much of a rising deficit they may tolerate. >> i like where you're going with this. let's, with our last 30 seconds here, basically you're saying if the bond market yields keep rising and equities are not diminished by that, it could give us a longer time line for the administration? >> yes, but equities will succumb to the rise in interest rates.
we have to remember what got us here. we had a lot of zero interest rates and quantitative easing. thinking the stock market will be immune to rising interest rates is not realistic. >> it will be about the size of the window, i agree, david back to you. >> thank you, let's go over now to john ford who gives us a look at what is coming up on "squawk alley." >> we're continuing to take temperature of the markets, where do they go from here. following donald trump's latest tweets about gm, mexico, congress, and ethics. finally the mna outlook for the year. that is all coming up on "squawk alley."
tough 2016. here is three things to watch in the coming year. >> regulation rollback. president-elect trump promising to repeal most of obama care, consult regulation, and suppress the federal minimum wage. >> the restaurant industry should benefit from lest costs. mcdonald's chipotle will benefit more over franchises like yum and restaurant brands. >> tax cut triumph. cup that with lower corporate taxes and you can expect the tax policy to help the restaurant industry's bottom line. >> can you say kabob. the national association of restaurants sir vaif-- surveyin chefs and said the new thing
will be new cuts of meat. >> fast food executive is trump's pick as labor secretary, so you can bet there will be a more industry friendly environment in the beginning of the year. a total u.s. restaurant visits will not grow in 2017. but fastfood restaurants should actually see a uptick. >> after people get over their healthy new year's resolutions. much more "squawk on the street," stay with us.
welcome back to "squawk on the street." not only the whole energy complex is higher, but energy stocks as well. crude oil trading at 5524. the highest we have seen since july of 2015. the first trading day of the year. opec right now, the theory out there is that it doesn't matter if people cheat as long as 70% stick to the agreement. the market is going to be happy from here. some people are saying once they
see it settle at $60 it could be the next stop. in the meantime we're watching the rest of the space. gasoline is lightly lower and natural gas at moment as well. >> thank you so much, jackie. good morning, it is 11:00 a.m. at gm headquarters in detroit. ♪ oh, mexico, it sounds so simple, i've just got to go ♪ ♪ the sun's so hot i forgot to go home ♪ ♪ guess i'll have to go now ♪ sleep is in good tuesday morning, happy new year to you. welcome to "squawk