tv Squawk Alley CNBC January 3, 2017 11:00am-12:01pm EST
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 alley."
we're back at post nine to start the new year. between the markets and donald trump, a busy morning ahead. >> dow 20,000 is back within striking distance after a rough end to 2016. oil and the dollar also moving higher after bullish factory data. joining me now is a market strategist, and brian jacobson. the chief portfolio strategist. good morning, guys. brian, i want to start with you. you're looking at emerging markets as a potential bright spot going into the year. you think the president-elect's tough trade talk is likely mostly just talk. anywhere in particular in emerging markets that is a particularly strong bet, and where do you see the potential for downside?
something that might happen that might change your view there? >> sure, let's start with the downside that is president-elect trump making good on some of his campaign pledges to get tough on mexico and china, perhaps running the risk to get us into a trade war. >> yeah, i just put that as a very low probability event that that could happen. any policies would have to make their way through congress, and i don't think he has enough support to really get tough on trade. maybe clean up some of the trade arrangements, things like that that could be beneficial. i just think he will not be as tough on trade. where are some of the bright spots? i think there are two specific areas. one is in the emerging area economies. they have favorable demographics, countries like india that i this will rebound from some of the areas, and then we have to go over to the other
side of the global and go to emerging europe. i think that is a high beta plaf on faster growth coming out of europe. lending data coming out of the bank, you see surprising upsides for places in europe. >> and you say that government policies will have a big impact here, you know, certain investments likely to be a beneficiary of expansionist policy, but at the same time you're hedging thinking the whole model falls apart if the government doesn't act fast enough. what is the time table you're looking at for the strategy to playout? >> at least in the u.s. right now the markets are going on on what is fairly robust economic global basis. i think the hope alone can carry the markets through the middle of the year.
as we approach the end of the year, you need a fair bit of evidence and the risks rise significantly. we're going to be facing a combination of rising rates and wages and stagnating profits. outside of the u.s., particularly in the developed markets, i think opportunities are better given their earlier in the business cycle and have more run room for the improvement. >> all right, i believe we have some breaking news out of detroit on ford, let's get over to phil. >> they are cancelling plans for a new $1.6 billion plant that was to be fwhilt mexico. remember that was the small vehicle plant that it planned to build all along and to move production from michigan down there. ford says they're cancelling their plans. the focus, they will be
expanding at an existing plant in mexico. they're also investing $700 million in their current plant in flat rock, michigan, expanding that plant. as part of the expansion, they're adding 700 direct new jobs creating a factory capable of producing a high-tech electrified autonomous vehicles. it includes a hybrid f-150, and a hybrid mustang. ford, for months, back to when donald trump started campaigning for pttoday, ford is saying the are cancelling plans to build that $1.6 billion plant in mexico. you can bet president-elect
trump will be claiming a victory here in getting ford to cancel production, or building of that plant. guys, back to you. >> ford obviously already has infrastructure in this country. will people look at the headline numbers and say they were going to spend $1.6 billion on the mexico plant, but they're only plugging $700 million of that back into the u.s., what do you make of that. >> there are two kinds of people that will look at that, some will cheer him stopping the building of another plant in mexico. investors will say that makes sense financially because you were exporting to the u.s. and around the world from that small vehicle plant in mexico. now that it's not being build, you will do the production at a different plant in mexico, but you're not going to be as
productive as you would have been. the stock is not doing a whole lot since the announcement came out. that's the two reactions that you're going to hear there. you will definitely have people in the u.s. that say fantastic, they're not building that plan doubt there. we're building more in the mexico plant. >> there is the trade story, the hybrid, electrifying vehicles. >> yes, mark fields is not slowing down on the plan to move forward toward elect trin and autonomous drive vehicles. this ends, potentially, this whole mexico plant thing ends a long drawn out battle that hi has been leading between ford and the trump administration. we're going to talk with mark fields first on cnbc on the halftime report at noon. from the plant in michigan,
we'll get his thoughts on finally deciding to throw in the towel. we will not mess with mexico and build a new plant any more, whether or not this finally gets ford gets him completely off of donald trump's radar. >> thank you very much, don't go too far. let's bring in an analyst on the phone with us. how does this, how do you plug this new development into your model, if at all. >> there is aulsz a cost related -- when you manufacture it, it is small in the scheme of things, it is not something that we necessarily plug in as a game changer, but we review and analyze it. >> the headline is that president-elect trump will be a factor in yrgs vehicles will be
produced. do we want to investigate domestically or internationally. >> the line that investors and workers have been sold over the years is that to be competitive, we have to move production of these vehicles to countries where labor costs less. if this doesn't effect your model at all, what are we to make of that whole explanation from big companies about why they move manufacturing outside of the country. could it be the start of a new wave, or is there an expectation of tax breaks or something else to counter balance the lack of cost savings here? >> it doesn't not effect it at all, but it may have to be factored in differently. if you're being penalized by the president, if you can do that, for moving plants over, you may save on the cost of production and labor, you will pay out on
the tax thing -- that changing the equation. that has to be factored in. there is a risk when the president intervenes in this manner that there is a dos it. >> quick question, you talk about kcompetitiveness. we saw fiat crystler say they're throwing in the towel for production in the u.s. is it only a matter of time before they follow their route and say we're not going to build them, we're not going to make money on them, we're not going to build them. >> they have to factor in the long run. right now everything is great with the trucks and they're making a ton of money with the high profit margins of the vehicles, but we have seen the cyclicals shift back and forth. i don't see it shifting to be
dominant or resir resurgent. >> do you expect consumers to see higher price tags on those vehicles when they try to buy them here? >> if the costs are higher, then there will be pressure on the margins for the manufacturers. there has to be a change, one way or the other, someone pays that price. >> either way, 2016 was so strong for auto sales and we're going to get more figures for this week. are we in a pattern now where north american sounds flatten out, and in will be the year we have to start watching for greater incentives. >> we're expecting that when we fish 2016 numbers, probably a slight increase, but next year i expect the market volume to go
down by 1.5% to 2%. so you have to take it from incentives. >> phil, i'm wondering how this will play out through detroit and the car industry in general. is it signaling something about what will be politically possible or not possible in a trump administration. maybe your question on if small cars are viable going forward leading to this. >> i think there is a lot of concern in the auto industry, look at the part suppliers, so many of them have plants in mexico. at the end of the day, if there is a tax put in so vehicles build in mexico, sold in the united states, throw out an extra $3,000, someone will pay for that. fewer vehicles will be sold,
consumers will say instead of paying $19,000 for the base model of the chevy cruz i have to pay $22,000? no, i'm not going to do that. for so many years we were building and planning for mexico because we could sit there and say this is what we will be able to sell based on the demand and the fact that there was nafta in plasz. you put that border tax in, and you will hear experts expect fewer sales, and that also ultimately brings up the question how do you altar your global production plans. >> watch the parts makers and the rails today. kansas city southern, phil, in a hurry. down 3% on an intraday low here. thank you so much.
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. it is the first trading day of 2017. julia borstein has more on what to expect from the media sector. with the rise of cord cutting, streaming video, and entertainment alternatives, throwing the media industry into upheavel expect major shakeups. first, media mergers. now that viacom and cbs are no longer looking to merge, they could be involved in mergers. we're seeing more vertical integration. to disting witch themselves from rivals. china will double down on hollywood. from alibaba to wanda, to ten
cent will pay out for a piece of studios and looking to capitalize on american intellectual property. first, cracks in the tv bundle, lower cost digital alternatives will go down. expect goog toll jump into tv and we'll see if apple can finally ink their content deals. a perfect example of the third one, dish unleashing air tv. it has local tv through an antenna, also netflix. disney is starting off the year on top. it was up graded to buy from hold, sending disney shares up about 2%. now this also coming on the
heels of "rogue one" continuing to be number one in the box office. it is the second biggest film of 2016 and gives disney six of the top ten movies of last year. julia, it is quite a showing for disney, but the stock price direction has not always correlated with how well the films have done. there was a sell the news effect on the last starwars movie. i wonder what analysts think is likely to happen as go into a blockbuster year. >> i think what is interesting, john, is that disney is a company able to use the studio to drive success on other platforms. they can use success to drive more people to the theme parks. they have a "star wars" themed land in the california and
florida parks. i think one reason we have seen the stock move up since the last earnings report is that during that last earnings call, bob is very clear they have issues with espn but they believe they will overcome them. they are seeing growth ahead. they're talking about how they're going through a transition year and this year bhiegt a transition year because there is intellectual property. we'll see how they mine it, and on which platforms. i think that is where a lot of optimism about disney is coming from. >> the target 120 does not dismiss a spin of espn outright. >> yeah, there is a lot of speck la -- speculation about what could happen. part of the investment is it
gave them the opportunity to buy the whole streaming tech company outright. they can own this technology company that is really key for putting espn into consumer's homes, into consumers hands an in overthe top ways. should disney decide to take espn over the top direct to consumers, it will be key to that, and if they decide to spin espn off, we'll see where that technology plays into that. but i think that it will be really interesting to see how espn plays into the future of disney whether it is part of it or a separate entity. thank you, julia. still to come, the brain drain at twitter continues. and counting down to the close across the pond in europe. more "squawk alley" in just a moment. m therwhat'sto m
major markets there that were open on monday unlike hours, london kicking off their market today with the ftse hitting a high. we also have data showing u.k. manufacturering expanding in december at the fastest pace in 2 1/2 years. this coming after the release of a upbeat euro report. also chinese factory activity gives a list to some of the miners today. glenncore up 2 1/2%. take a look where the stox 600 bank index is trading, usually up close to 3%, carl. possible red flags over the pick for the next trade chief. and deutsche's global head of equity capital markets is up
hi, everybody, i'm sue herara. south korea's president is refusing to testify in a case that will decide her future if forces the constitutional court to delay the start of oral arguments. the court asked her to testify on thursday even though it cannot force her to appear. five suicide bombers attacked two police stations
north of baghdad on monday night. two police officers and the five attackers died. a fiery crash on the 110 freeway caught on camera there. an suv was stalled in a northbound lane early sunday morning when a passing vehicle flamed into it. the photographer was able to pull the unconcious driver to safety. the cardinals say they were not consulted. there is more to that story, we'll keep you posted, that's the news update this hour. the trade representative's office but questions remain
about what policies and positions he has backed in the past. if you look at his bio you will see traditional republican positions there. he was the national treasurerer in dole in 1996, he is now a partner at skadden, arps, and now he is chairman of opec in washington. if you look at his op-ed. he is not necessarily or not at all a traditional republican free trader. take a look at two op-eds, one in 2008, he said under a headline grand old protectionists, he said free trade has long been popular with liberals and it remains to with liberal elites today from
alexander hamilton to ronald reagan understood that was just a tool for building a strong prosperous middle class. and then go back a decade ear earlier to 1999, he cited a strikingly similar theme here understood the headline conceding free trade flaws. he said if it is to intend it's purpose, we have to make sure it does not result in a race to the bottom or lead to global government or threaten our sovereignty. there has been question of whether or not he would be in charge of trade policy, or if it would will wilbur ross, but i'm to the that donald trump will be in charge of trade. so they will be implementing trump's vision here. we're seeing that here this morning.
trade a major story of the day, thank you for that. speaking of trade, ford announcing today they are cancelling a $1.6 billion mexico plant and will invest $700 million into a facility in michigan. part of an announcement where they spoke about new electricfied gelectricfi electricfied vehicles coming. it has been a rough year for the ipo market. global volume down 31%. many hoping for a rebound this year. companies like spotify and snap expected to hit the public markets. hear is idina friedman sharing her opinion. >> everyone said it was a different environment, and it was, but the companies that went public on nasdaq had 24% increase on their market
valuation in general. that is generally a prediction. in the u.s. it was 20%. if companies do well, that is usually a prediction of a healthy ipo environment for the next year. we have seen companies really pick up the pace and we expect the first quart tore be a strange quarter assuming the backdrop stays this inviting. mark, you have been joining us here for the last couple years and telling us don't hold your breath, this will not be the holdout year. i won't take credit for that, but i will say that it really is something that regardless of the new administration coming in, we expect to have a great deal of activity, across the board. i shared with you some data that suggests there will be a thousand ipos in the next few years. you have been on the bandwagon today of optimism and we're on
that bandwagon also. strength from the u.s., or coming from the global economy. >> it is the global economy, but i think it will be the largest benefactor of that. we think that two thirds of that activity will be here in the u.s. that's by deals -- by volume the asian market needs a lot of capital, and no doubt that volume will be very large in asia as in europe, but by deal flow, the u.s. will be very busy and you're all going to be extremely busy. >> even though there has not been as many ipos, the market was on a tear, the dow closing up 13.5%. how does that valuation complicate your job when you're advising companies where to price their ipos. you want people buying the stock, but you want the investors to make money, too. there is a very positive
momentum coming into 2016. the class of 2017, there was stock that's didn't do so well, but on balance, a great year. the volumes were down considerably. the second lowest we ever had in volumes. that sets us up nicely for the class of 2017 and 2018, a class that is very mature in their businesses. they have been private a long time, not taking business plans a long time, but taking companies public that have real tr tax records, so having the sustainability of the ipo market, it will be a time we look back and say wow, what great period of time. >> they have been private for awhile, but why the surge in the next couple years? are they cash burn an issue for them? something about the window? the macro growth window?
>> they had access in the private markets, and you reported on it very well, in ways that we have never seen before. staying private has been a very good thing. they can build their companies, they can change their strategies as they go along. ultimately at some point there will be reason that's are strategic to be public. i think that confluence and the rotation back into equities, you will sigh a big surge of equity volumes coming back into the class. that will be the second time we have had positive cash flows coming into the regulatory class. >> where does it factor in here? is it a wait and see what congress does? to see if the water gets warmer for ipos? or will people jump in regardless? >> i don't think it is regardless. i think they have to come. many of them can time it, but it is a market window. that is the more certainty that
they need to know this window is where their values are sustainable. there is judgment around that. we're very optimistic about the pro business, but our view is there will be a real big growth initiative that will take place with the infrastructure projects coming on. again throes be longer term. i think the market will really be applauding it and give the capital today for the future. >> we heard about all of these flashy names set to to go public. sp spotify, and reuter's says there be a host of unicorns. if you're talking to your broker about where to buy in, would you rather be in the mid-cap class or the splashier names? >> i don't think it is either
or. i know that is a cop out, but it is really a question of framing an opportunity with where their market position is. i think we will see smaller ipos in the tech world, the snapchat, a spotify, it might be later in the 2018 window. i do think they have access to capital. plenty of capital, and they may time it later in this wave. but i do think that we're going to see as you rarely point out, a lot of singles and doubles, sub $500 million ipos come out in the tech world before the others come out. >> come back and join us often. >> no problem, thank you. the twitter brain drain continues, we'll talk about the latest executive to leave the company, rick santelli, what are you watching? >> you're looking at the twitter brain drain and i'm looking at the numbers. 100 senators, 435
the market, and two bold calls on disney today, moving the stock, what side of the trade are you on? it is all coming up, we'll see you in 20 minutes or so. >> another executive is leaving twitter, announcing departure after only nine months, cathy chen says they will keep their hong kong office open saying it is the right time for her to leave. they always say it is the right time for them to leave, and the company is awesome, but so many out the door. jack dorsey working there part time, what gives? a rough 2016, but it's not the first rough year. >> football is so actively trying to gain a food hold in china, and for her to say we
connected advertisers to the platform, saying i did my job, it is time to leave. >> hey, rick. >> hi, thank you, carl. you know 100 senators, 435 in the house. the story today about trump's tweets and the effect it may have welcome many will say why is he getting involved in industrial policy, there is something under the surface that can be explored. and this is i'll trade you a vowel. when they're talking to businesses, the economics for the most part, many ways are
labor costs and benefits, right? . there is not a whole lot that we can do about that. we can trade vowels for consonants. lowering regulations, that s like a scale. there are things that we can't do much about in regard to the living standards and the various positives that u.s. workers get. but there is also positives for the change agenda under the incoming administration. and that scale is, in my opinion, what the tweets are the precursor of. they are bargaining chips here. i think the big news continues to be that the president-elect has a cozy relationship with millions of twitter followers and a very transparent
communicative fashion. what i'm really getting at here, his relationship with congress, setting their agenda and their docket, will be huge. and the way he tweets will define a new era of working relationship with congress. and this is what i think the markets will pay attention to, and i think they will give him a leash. with fx, the big area they think you need to pay attention to. we all know about multinationals, i get it, there are other issues, but i will sup it up with this comment. it is volatility for exchange. finally, key levels. . i love it, it is easy. it is the close of 2015, where the breakout really identified higher rates wraen it stuck. and as you look at that chart,
there was a boat load of important talks. 262, from september of '14, a high close on this cycle, and finally 303, the yield that always comes back to haunt you. and that occurred on the last trading day of 2013, kayla, back to you. rick,ly take if from you, more about the house oversight ethics. >> yes, they have a surprise meeting for 11:50 a.m. this is following up on the news they made an ethics change yesterday, and changing the policies of the republican congress for how the complaints would be investigated. now we're told we have the reaction on the hill to donald trump's tweets and that should
not be the house republican's first priority. so they have a surprise meeting coming up. it is possible they will do an about face on this issue in the way of trump's tweet and the enormous pressure their under now. we'll wait and see what they will do now. >> that is in just a few minutes time. meanwhile, the market came off of the highs of the morning. we'll keep you posted on that when "squawk alley" returns. au d , orep
dry bash is pushing to innovate beyond just a nice hair service. they send branded products to looking to expand beyond the u.s. with plans to open even more salons. john hefner is the ceo of drybar. ali webb is cofounder and they both joins now from l.a. good morning. >> good morning. happy new year. >> hi. >> same to you. i imagine, john, you are coming off what is the busiest time of year for the company with so many holiday get togethers and so many people wanting to look their best. what was business like for you? >> it was absolutely incredible. we were so pleased. we're going to finish the year up 40%. we've got a compound annual growth rate of 40% difference is inception and we're nooking on the door of $100 million in retail this year. >> ally, how are the plans to scale the business going since the company that you founded so many years ago, i mean, is it
wild to see how big it's growing and how many people use the service? >> it's crazy. i mean, we never would have imagined in our wildest dreams that drybar would grow this big. we have over 3,000 stylists, we have 70 locations. and really only started seven years ago, so it's pretty amazing and humbling to us all that it's grown this far and like you said, women everywhere love it and are using it. so we are extremely proud of how far we've come. >> alli, they say that imitation is the best form of flattery. there are no fewer than half a dozen companies that are trying to do exactly what you do. how do you think about competition and how do you try and differentiate your product? >> well, i think, you know, first and foremost, the competition really raises awareness in the market and i think when we came on the scene seven years ago women just weren't getting blowouts the way they are today. so i think we're leading the pack and we have so many drybars in so many cities but we also
keep nn an eye on what's going on with the competition be stay focus and what we're doing and i think the competition kind of keeps us on our toes and makes sure that we are being the best we can do but also stay focus and what we're doing and i do believe there's a secret sauce to what we do, that it's not easily duplicatable so we just keep our eye on the prize. >> john, you know, as the product gets more popular and more and more people come in to the salon, how hard is it to keep customer service up to snuff because i've heard people in new york say they've had to wait for a scheduled appointment over an hour. >> well, kayla, those are clearly the exceptions. if you ask what's the one thing that keeps us up at night it's to make sure as we scale we maintain the high level of quality our customers have come to expect. clearly they come to drybar because they love the exceptional service and the extraordinary experience that we offer. >> and now as of january 1st in california they can get wine and champagne, complimentary at the
salons, too. >> that's right. >> a lot to like. john and alli from drybar, appreciate your time this morning. >> thank you so much. and your hair looks great, by the way. >> thank you. i can't take any credit for that. >> john is not a customer but maybe one day. >> it's been a long time since i had a blowout. maybe it's time. as we've been talking the ceo of samsung warning of lagging growth and upcoming reforms in his speech to his staff on monday saying, quote, growth in our target markets is lagging, and political and economic uncertainties have increased due to changes in policies and exchange rates. same reforms will be in place to avoid a repeat of the samsung galaxy note 7 recall goes on to say it was, quote, an expensive lesson. that's probably as specific as they will be. we know it was bad. >> it was bad. and samsung is also wrapped up in this presidential scandal over in korea right now being pressured apparently to give money to certain causes in that
case. so there are a lot of distractions for samsung's employees potentially. the important thing is how do they rebound from that scandal. we'll certainly be watching them out of ces this week. i'm going to head there tomorrow for our coverage. samsung's booth is always packed. not only with people wanting to see the product but also with samsung employeeing, showing not just phones but also their computer, their washer, dryers. remember, this is a huge electronics company, something to sell for every room in the house. >> anything to make in the timing of the announcement, right before ces where all of these gadgets and bells and whistles are going to be stealing the press attention? >> trying to rally the troops with a clean slate. we'll see if they have the products to back that up. >> yeah. big week is still to come as you point out. when we come back, a lot more on trump, gm, and ford as the inauguration draws closer. dow is up 42 as oil is really fallen out of bed, down almost a buck. back in a minute.
and regulatory reforms are critically. important to boost u.s. competitiveness and, of course, drive a resurgence in american manufacturing and high-tech innovation. >> that wasford ceo mark fields a few momenting ago during an important an founsn't and big win for the incoming trump administration. ford announcing canceling plans to build a new plant in mexico investing instead in u.s. operations. mark fields will join the "halftime" in just a few minutes for an interview at 12:00 noon eastern. fields going on to say the call the trump campaign, about the decision earlier today, a lot of the plans to cancel the mexico element was due, according to fields, to the lack of small car demand. so we'll see how it develops this afternoon. >> there seems to be a little bit of a crunch here because notice how he pointed out the expected tax and regulatory reforms. you wonder what happens to this if congress doesn't deliver.
>> but interesting to see that some of this news coincided with the market pairing its gains earlier tht show we had michael saying he expects anti-trade legislation in the first half of the year. and there is some concern about how this affects company margins and potentially consumer demand for the goods at the end of the day. >> shorter term, of course, it was that turn around in oil that really took the wind out of the sails. dow was up 150 points earlier today but some concerns about these production cuts sticking, of course the dollar at 14-year high. and maybe some technical levels. jackie deangeles pointing out caused oil to pull back. and then as far as ces goes, john, jobs number on friday, isms. what are you seeing in terms of tech out there? >> well, the media announcements have come early. over the top is expected to be a big deal this year. also, expect to see a lot of virtual reality and meat on the bone when it comes to expanding that in 2017. it was the first big holiday
season for it potentially. we don't have the numbers yet. we don't know how sony and oculus and others did. i expect a lot of people will be trying to jump on a bandwagon. >> it's going to be big. first year automation and voices in your house are sort of household words, right? >> car tattoo for sure. >> so let's get over to the half mark fields back at hq. ♪ >> and, carl, thank you. welcome to the california halftime report." i'm scott wapner. we begin with breaking news. major announcement from ford motor company which says it will no longer build an assembly plant in mexico. the stunning news coming on the very same day that president-elect donald trump called out general motors for its own mexico business. our phil lebeau is live with mark fields with a new at noon interview. >> scott, let's bring in mark fields right now. ceo of ford motor company. mark, we're going to talk abo