tv Squawk Alley CNBC January 27, 2017 11:00am-12:01pm EST
just a quick look at the markets here before we let you go. the dow's down about 24 points, broadly holding on to some of the recent gains. s&p down 0.2%. miss on first-quarter gdp, which showed 1.6% growth for all of 2016, worst it's been in years. that could be having an impact here. that does it here for us on "squawk on the street." have a great weekend. over to you, carl, for "squawk alley." >> same to you, sara. thanks so much. good morning. it is 8:00 a.m. at microsoft headquarters in redmond, washington, 11:00 a.m. on wall street, and "squawk alley" is live. ♪ ♪ good friday morning. welcome to "squawk alley."
with me, as always, jon fortt and kayla tausche at post 9 as the dow's down about 20 points. busy day for poll kicks and business. one week since the inauguration. the president front and center on the world stage, moving one step closer, some say, to a trade war with mexico, ramping up rhetoric this morning, as the president welcomes his first foreign leader to the white house today. our john harwood is at the white house with all the latest. good morning, john. >> reporter: good morning, carl. you know, president trump did not back away from what happened yesterday when the mexican president canceled their visit next week. he came before the republican retreat and said we have mutually decided to put off this meeting, unless we are treated properly and with respect, there is no point to it. today he sent out a tweet underscoring that complaint, saying that mexico has been taking advantage of us for years on securing the border and on trade, and that has to change now, in all capital letters. but of course, in an hour, he's having a meeting, his first
meeting with a head of state here at the white house, theresa may, the british prime minister. who came to power after the brexit vote in britain, has some overtones of what happened in the united states. and she made the case yesterday to the republican retreat that she and president trump may start out by forming a bilateral trade relationship themselves. >> i'm delighted that the new administration has made a trade agreement between our countries one of its earliest prooiferts priorities. a new trade deal between britain and america must work for both sides and serve both of our national interests. it must help to grow our respective economies and to provide the high-skilled, high-paid jobs of the future for working people across america and acrosshe uk. >> reporter: now, a u.s./uk deal is only the first of bilateral agreements that this new administration may seek. republican members of congress who believe in free trade told me yesterday at the retreat they want to see what other bilateral
agreements follow. of course, he withdrew from the trans-pacific partnership. those are also potential countries and partners for the united states in new trade deals. >> john, thanks for that. keeping in line with the president's policy, the british prime minister also struck a foreign policy chord at that retreat yesterday. take a listen. >> the days of britain and america intervening in sovereign countries in attempt to remake the world in our own image are over, but nor can we afford to stand idly by where the threat is real and when it is in our own interests to intervene. we must be strong, smart and hard-headed, and we must demonstrate the resolve necessary to stand up for our interests. >> joining us, tim adams, the institute of international finance ceo, former undersecretary of treasury for international affairs. and joining us on the phone, just named today to trump's american manufacturing
initiative, alliance for american manufacturing president scott paul. guys, happy friday to both of you. thanks for being with us. scott -- >> happy friday to you, too. >> as it came out, what should the market, what should our listeners and investors be thinking about, with regards to trade, given all the rhetoric this week? >> well, i think that initial hype verventilating and policy twitter obviously treats a lot of uncertainty, but the important thing is to look at the long gain here. the fourth-quarter gdp, the deficit was a drag on it. so this is a longstanding challenge. i do think for those who thought the president's campaign rhetoric on trade was just that, it's going to be a disappointment, and that there is going to be a rebalancing. the important details are how that occurs, how orderly it is,
and look, there is tremendous up side for companies that produce in the united states on this. it's obviously, we have a lot of trade relationships that need to be managed carefully. i think the president is putting together a team that's very capable of that, but there's also a serious need for reform. >> scott, just to follow up on that, i mean, ceos of manufacturing companies are the diplomats on the ground overseas figuring out where they ca move jobs, where they should invest, and i'm wondering if you think there's a little bit of good cop-bad cop dynamic going on, where you have the president who is taking his rhetoric up a notch against mexico and against other trade partners. what position does that put ceos in? >> well, i think there's more pressure on ceos to look at the united states as a production platform as well as a sales platform, and i think that they're aware of that. you're right, global companies
have lots of relationships to manage. i mean, there are a number of companies that do business in china that face serious hurdles, serious barriers, lots of unfair trade practices. they tend to be shy about expressing these for fear of retaliation. so i think that having a government that can have your back on this as well could be mutually beneficial. again, this is a long-term process. there is lots of reform that needs to occur. and i want to see it happen in an orderly fashion but in a way where we can grow back some manufacturing jobs as well. >> tim, it seems that the stakes aren't negligible for the u.s. in a tiff with mexico. i'm looking at some stats. u.s. exports to mexico are up 468% from 1993. i mean, granted, imports from mexico up more than 600% in the same time period. but i mean, this isn't a
situation where we want china coming in and developing a better trade relationship with mexico, is it? i mean, they're right there to the south. >> right. you know, it's an important trading partner for us. depending on how you measure it, second or third largest trading partner for us. it's a friendly neighbor to the south. we need good relations. you know, the president ran on a very effective platform of capital formation, job creation, economic growth. i'm afraid, i think this is a bit of a distraction from that message and i look forward to getting back to those issues of capital formation and job creation. >> and you don't think manufacturing -- are you saying that the share of manufacturing of overall jobs means all this attention is misplaced? >> no, no. manufacturing's important, but it's only about 12% of the economy. you know, if you look at services, for example, the industry that i'm in, we actually run a $250 billion-a-year surplus in services globally and in the financial services industry
specifical specifically. so services are an important part of the u.s. economy. 8 million people employed in the service alone, almost as many as in manufacturing. so you have to look at the full sleeve of all the sectors of the economy, not just one. manufacturing is important. i don' want to take anything away from it. >> tim, ler day, of course, we will see that meeting between president trump and the uk prime minister, who on wednesday to her own parliament said that in looking for a uk/u.s. trade deal, "in doing that, we will put uk interests and uk values first." every country wants to put their own values first in seeking a bilateral trade agreement. i mean, what's the potential that we can't reach deals with these countries? >> right. well, you're right, any time you have a trade kedeal, you're givg up sovereignty. that's the nature of the agreement. we run a slight trade balance with the uk, but relative to other trading partners, they're about fifth or sixth on the list. sure, let's do a trade deal with the uk. i'm for trade deals, bilaterally
or multilaterally, the more the better. it's worth negotiating. they're a special partner, as she mentioned yesterday and will mention again today, but it's quite small relative to other trading relationships like mexico and like many of our asian trading partners. >> scott, we hope you'll come back and give us an update as the initiative meets with the president supposedly again and again. thanks for your time. and tim adams, thanks to you as well. a lot to talk about when we come back. more on trump's tough talk on trade with mexico as he prepares to sit down with theresa may. then, how the cloud is boosting bottom lines at intel and microsoft. a lot of big cap tech earnings. and google parent alphabet struggling to convince that mobile is just as valuable as desktop when "squawk alley" comes right back. >> announcer: post 9 sponsored by fidelity investments. innovative ideas for serious investors. 95." [ beep ] but you'll be glad to see it here.
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welcome back to "squawk alley." a number of tech movers to check on this morning. take a look at microsoft, posting better-than-expected results on both the top and bottom lines, partly thanks to its growing cloud business. all-time highs for that stock today rivaling the dotcom boom of the late '90s. intel also getting a bump from the cloud, the chipmaker out with better-than-expected results for its most recent quarter, helped by a strong holiday season for high-end pcs. and then there's google's parent company alphabet, missing on the bottom line but beating on the top, that thanks to mobile. alphabet's cfo says the
company's diversifying beyond just advertising. shares of that company hitting all-time highs. to discuss, blajie shereen vaasen andark maney, tech analyst at rbc capital markets. bilaji, do you see any themes emerging from the earnings we saw yesterday or is it still a story-by-story basis at these companies? >> well, i think there's a couple of really interesting things. first is that it's pretty clear that satya has turned around microsoft which is extremely hard to do at a company that size. he may not have gotten the press he deserves for that, but it's absolutely remarkable. you can kind of see it in every product. the fact that azure is now a close number two -- well, not a close, but far away from google as the number two cloud is impressive. it's been a long time since microsoft has distanced itself from google on something. the other interesting thing is to see that google is reducing
its dependence upon advertising, down from about 89% to 85% for the alphabet business. that's something people have wanted for a long time. they're starting to do that. and third is that it looks like the other bets are maybe starting to pay off where ruth prots' discipline has reduced the top line by 75%. those are three interesting things i saw, at least. >> mark, when you think about what you saw, you have microsoft becoming more and more of a cloud company by the quarter, google becoming less and less of a search company on desktop, although it's still far and away the lion's share of the earnings there, but do you think that that makes either one of them a better bet than the other? >> well, that's a tough e. look, we like google as a stock here. it's not one of our top three picks. this is pretty much the consensus long in the large-cap internet space, which means that the stock can grind higher through the balance of the year. it probably doesn't gaap higher. we thought results were very solid. look, this is 28 quarters in a row of 20% year-over-year organic revenue growth for
google. i don't think you'll find any company in history who's done that, so it says something about how sustainable this is as a playoff of secular growth. and to their enormous credit, they have these other bets that are coming in that will help them in the future -- google cloud, google play, their devices. we like the strategy of the firm. the stock is reasonably valued here. we think it can grind higher through the balance of the year. we like the setup. >> one of the things that's jumping out to me in this earnings season is that this shift to the cloud is eating into traditional business in all kinds of ways. we're seeing that in interet with their enterprise data center business not really keeping up, but the cloud data center doing well. we're seeing it in microsoft, vmware. we'll have the ceo of vmware on in just a few minutes talking about the same thing. how is that affecting the view on the ground in silicon valley and the business case that start-ups are making for investment? >> yeah, really good question. i mean, one of the things that's interesting is lots of things are talked about in silicon
valley and become sort of mainstream, and then you know, then they stop talking about it and just do it. and then the rest of the world is sort of catching pup ining . the debate over cloud is something that happened maybe 10 years ago, maybe 15 in the valley. and then with sgoogle maps and so on, what they did in the early 2000s like gmail in 2004, gmaps in 2005, sales force's rise over the course of the 2000s, the technical debate over cloud versus on-prem, folks pretty much use cloud for everything. you'll build an api and that will have all your clients work with it. now what's interesting is kind of the reverse kind of trend is just starting where folks are actually looking at the billion mobile phones as sort of the next data center. this is something that my partners and i at andreessen horowitz have written about. uber is the first to do something like this where they're actually using their millions of phones by their drivers as a backup center. so in some ways, while cloud is rising and will continue to rise, there is a trend of
decentralization that's just starting. >> mark, you did hear these companies address the incoming administration, talk a little bit about what repatriation would mean, specifically about what paypalisade, that it would make a big difference for shareholders if they could bring money back in a tax-efficient way. i mean, did you get anything to hang your hat on from these companies last night about exactly where the incoming administration will impact their bottom line? >> no, it didn't come up from google so much. i think our broad point is when people look at growth tech, they don't really buy growth tech because those companies are returning cash to shareholders. that's not the investment pitch. that said, some of these companies -- i think google is in there, i think ebay is in there -- that have relatively reasonable multiples, close-to-market multiples, i think their holders would like them to return some of that cash to shareholders, and they are doing that. it's a very positive trend. i mean, ebay's been doing that very substantially, and google didn't buy any stock in the december quarter, but they made it very clear they're going to do that in the march quarter. they already have the authorization to do that.
that's a positive thing, a sign of maturity in the sector. and another thing, kayla, the gapification of the internet. it's nice to hear google's management say that the stock-based comp is a legitimate expense and we're not going to try to adjust it out. i think that's a wonderful thing. >> quickly, if you can, i had never heard, at least on "squawk alley," somebody talk about a billion mobile phoness the next data center. what does that concept mean for the likes of qualcomm that has a lot of technology in the chips for what might be the next data center? >> great question, and i think, actually, it will amplify qualcomm's business. intel's biggest mistake, as their ceo will admit was missing mobile, and the reason why they missed mobile was they had kind of gone all in on the one laptop per child concept. then a couple years later, steve jobs came out with the iphone and they thought it would be similar to these small laptops, and of course they were wrong and it was humongous. so, qualcomm got the mold business and this concept of the
billion phones as the next data center is sort of obvious in the sense that there is an enormous amount of commute power right now. we'll be developing technologies over the next five to ten years to make use of that fallow compute time, but it may be possible relatively soon to start getting a phone which when it's passive, when you're not using it, is using its compute to do computations for other people, because it's sort of like airbnb, where you take the spare capacity of a room and so on, right? >> balaji, before we let you go, you took a meeting at trump tower earlier this month and reportedly were up for the fda job. but on the same day, you tweeted, "don't argue on twitter. build the future." can you talk about that meeting and whether your tweet was referencing a rallying cry to silicon valley or to washington? >> well, basically, you know, i briefed the president on topics related to regulation and technology. i'm really happy i'm off twitter. it was a big distraction and i've gotten a lot of work done since then.
so it's pretty awesome. >> so no chance you or andreesen are coming back? >> i'm sorry? i didn't hear that. >> no chance that you or andreesen are coming back to twitter? >> oh, probably not. maybe i'll write long-form pieces on medium and post them, but twitter itself is just -- it just takes up so much of your time. i've got much better things to do. >> we will leave it there for now. appreciate your time. mark mahaney, always good to see you as well. >> thank you. still to come, we are going to be joined by the ceo of vmware after a very strong quarter. his take on the cloud, amazon and what business might look like on a global basis under president trump. we'll be right back. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go!
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cnbc interview with s pat gelsinger, vmware's ceo. pat, good to see you. >> like always, jon, great to be on the show with you guys and thank you for having me today. >> and your stock's near two-year highs this morning, more than doubled off its lows of exactly a year ago. i want to ask you about the big picture. there's this move toward what a lot of people are calling global protectionism. that is having an effect, i'm sure, on the way people are looking at where they keep their data. i'm wondering, is that driving demand for flexibility at this point? are you seeing it in your sales process and what your customers are asking you for? >> well, there clearly is excitement about the public cloud, and that's a growing, powerful force in the marketplace and the amazon and ibm partnerships have really allowed us to capitalize on that. but we're also seeing the idea of a hybrid cloud. boy, i have so many things that might be driven by local data requirements, the new gdpr
regulations in europe. >> right. >> and it really is how do you make those two things fit together, and that's exactly where our strategy focuses on delivering that unique hybrid cloud, the best of both worlds together. and great resonance from customers globally against that strategy. >> that's really what i'm trying zero in on, that flexibility from a hybrid cloud due to local regulations. we can expect to see i guess more local regulations if the likes of brexit continues to happen. is that becoming a part of your conversation that you're having with potential customers? >> i think it always has been a conversation around cloud, because cloud has always been, is it secure there? can i trust it there? now you have the regulatory government requirements also affecting it, so it really, i think, will be perpetually -- and i published some work late last year, jon, that says 2030, we expect these private and public worlds to be 50-50. that's a long way to go to get to that point. and new areas like iot i think
will have new demands for local compute and local requirements on premise as well. >> you posted strong numbers for your network virtualization project, nsx, more than doubled the customers for that over the past year. what does that say? you know, you're baking it into a lot of your product line. what does that say about the way that networking is changing, and why has that happened perhaps at a pace a little bit faster than you expected? >> well, we are way excited about the network virtualization space and this idea of the intelligence of network moving into the software layer. we think we're still just at the beginning of that, and as excited as 2,400 customers. remember, i have over 500,000 customers, so we have a lot more customers to go. but it's even more powerful than that, jon, because in a multicloud world, to be able to say my network is common across those environments is a very powerful concept, to be able to really harness that global cloud
computing capacity, and in many cases, it's ushering in new use cases and new security models that were never before possible and now can be done in a virtual networking environment. i believe this product could be bigger for us than our core computing vsphere product was, and we're excited about how long we continue to see this growth into the future. >> speaking of which, in intel's report lasnight, they talked about their enterprise business, just selling directly to compies and governments, being really down in the data center, whereas cloud was a lot stronger. are you seeing your traditional business versus the cloud in the same kind of light? i mean, i know a lot of your cloud businesses, they're just around 8% of revenue right now, depending on how you slice it. taking a look at sas and other cloud stuff. is it more keeping the legacy business stable and feeding some of the growth areas in cloud? >> we saw strength in both areas of our business -- our private cloud business had very strong growth. you know, the compute business, we have been guiding somewhat
down. we were actually up on that in the fourth quarter. nsx, vsan, these new areas, a lot of strength there. but our cloud businesses, such as our g cloud air network, was up from q-4. so this is growing, that's growing faster on the cloud side. overall a lot of growth in our business globally. >> airwatch looking strong, too. >> absolutely. >> thanks for joining us, and yeah, stock's on quite a tear this morning. >> thank you very much. always a pleasure would be with you, jon. let's get to the european close here. mostly red arrows for the day everywhere, seema. >> although we're still trading around or at 12-month highs for most continental europe. europe wrapping up the week, but president trump's foreign policy really the big talk. the question is how will he handle his white house meeting with uk prime minister theresa may, where the focus is expected to be on trade.
both leaders are focused on managing their borders and inflow of migrants. the president and prime minister will hold a joint conference in about 90 minutes' time. keeping an eye on the pound here, slightly lower than the u.s. dollar. meanti meantime, white house press secretary sean spicer tweeting that president trump will have a phone call tomorrow separately with first germany's angela merkel, france's francois hollande, and perhaps most significant, russian leader vladimir putin, guys. analysts say putin is hoping a warm relationship with trump will result in sanctions being lifted off of russia. in exchange, trump likely will look for russia's help in the middle east. that conversation happening tomorrow. meantime in terms of stocks on the move, uk grocery giant tesco has seen earnings improve thanks in part to a large restructuring. and now you're seeing the company put money to use buying food wholesaler booker group for over $4.5 billion. shares of both companies surging on the news. tesco up 9%, booker group up
about 16%. in the banking sector, ubs falling, despite net profit falling, total operating income at its wealth management unit falling 5% in the fourth quarter. credit suisse also falling in today's trade. overall we're looking at european stocks set to end the week higher but still underperforming u.s. stocks in 2017. european stock index up 1.3%, the s&p 500 up about 2.5%. kayla? >> thanks so much, seema. straight ahead on "squawk alley," we'll speak with the head of microsoft's commercial business on the heels of an impressive quarter. his take on the business and the competition, coming up. plus, the mayor of los angeles on the record when it comes to president trump and a trade war with mexico. his take, coming up next.
i'm morgan brennan with your "cnbc news update" this hour. a senior iranian clerk is warning president trump not to make mistakes in identifying terrorists, this during friday prayer services in tehran. the cleric also called on trump to refrain from warmongering and arming terrorists. u.s. and south korean troops holding military exercises this week in the mountains of the korean peninsula. the troops trained on skis in camouflage and hand-to-hand fighting. and iraqi forces raising the iraqi flag outside mosul university. it's located in the eastern section of mosul, which has been recently liberated by the iraqi
army from isis militants. they have now begun pushing into isis-held villages north of the city. and police say two employees at a new hampshire burger king have been arrested on drug charges after they were tipped off that drive-through customers who asked for extra crispy fries got marijuana with their meal. 20-year-old garrett norris and 19-year-old megan dearborn were taken into custody. call this a half-baked scheme. and that's the "cnbc news update" for this hour. let's get back to "squawk alley." >> all right, thank you very much, morgan. as we said earlier, microsoft coming off an impressive quarter, partly thanks to growth in the cloud. shares hitting all-time highs this morning. let's get to josh lipton out at one market who has a special guest. hey, josh. >> carl, i'm with justin althoff with microsoft's worldwide commercial business. judson, thank you for being with us. >> thanks for having me.
it's great. >> so you're topping $14 billion annualized. walk me through, judson, what is driving that growth in. >> well, we're very pleased wh the sults. as you mentioned, we topped $14 billion and are on track t a $20 billion run wait in our fy '18 goals in alignment with our long-range plan. if you think about it, companies from aerospace to agriculture are placing their digital bets on the microsoft cloud. in fact, in the last six months alone, kbge, boeing, renault nissan, mars, adobe have placed their digital futures based on the microsoft cloud, so it's an investment in the future of digital that's driving growth. >> there is competition for you guys, judson, so cloud infrastructure, i know azure almost doubled, but your main rival is amazon, and they still dominate about 45% of at least the cloud infrastructure market. what is sort of the difference in strategy between how you think about it and amazon? >> well, josh, i think the first thing to note is that we're sort of two minutes into the first quarter of this game.
and just like the big game next week, when it's got to finally finish, nobody will really reflect on what the score was in the first quarter. but that stated, we're really pleased with the momentum we're seeing in enterprise. and our ferks due to the history and decades of support we've had with enterprise customers, more than 90% of the fortune 500 now using the microsoft cloud, is a key differentiator for us. when you think about digital, what it really means to transform digitally across customer engagement, employee empowerment, product transformation, our offering is differentiated from the competition. think of companies like ecolab, a company that's been in business many, many years, $14 billion company, now sort of reinventing itself to fight the battle against water scarcity. they're betting their digital future on microsoft. >> jon, i think you had a question? >> i do. good morning, judson. thanks for joining us. so, there's this wave of protectionism that's sweeping the globe. there are local rules that differ on data protection.
i'm wondering how that's changing the way you sell cloud to businesses who want to make sure their data is protected locally but available globally, how you sell cloud to governments? >> well,jon, we're very committed to local data privacy, sovereignty, regulations around the world. in fact, the scale that we have with microsoft cloud is more than double that of our two biggest competitors combined. so that puts us front and center in making sure that we support all of the regulatory concerns around the world, which helps us not only generate new business around the world, but actually with global multinational firms like boeing. so if you think about boeing's future in digital aviation, they've invested in putting their assets on our cloud and actually going to market with us to help drive the future of airline safety around the world. >> i had a question, judson, about -- >> are you wrapping up your capital spend plans -- sorry, josh. are you ramping up your capital spending plans on cloud data centers based on that trend and that advantage that you say you
have? >> so, we're investing strategically and smartly where we believe sovereign clouds are necessary. we also see strong growth in our domestic data centers, and it is really core, again, to being able to provide that scale and trust and security as well as the hybrid capabilities that customers really require. >> let me ask you. president trump is going to have a call with putin over the weekend. it does seem like microsoft's relationship with russia is a bit complicated. what i've read, moscow city, for example, is going to replace microsoft products with domestic software. can you walk me through, what is microsoft's relationship with russia right now? >> listen, we're going to support every administration, just like we have supported all of the administrations in the past. it's our mission to make sure that the federal government is successful. in fact, we've invested in digital level 5 certifications for the dod, which is something that no other cloud provider has been able to do. in addition to that and in parallel, we're very committed to our international businesses, so our customers in russia and our partners in russia are top
of mind for us. >> let me ask you about the pc. on the conference call last night, satja said the consumer pc market is stabilizing. my question's about the commercial side, windows 10. what has the adoption been like in the enterprise? >> we're seeing awesome growth for windows 10. it is actually fueled by the sort of renaissance and the consumerization of i.t. we have more than 400 million users of windows 10 on the consumer side. that's fueling demand for enterprises to adopt it for the usability features, but security is really what's driving the enterprise adoption. and our customers sort of get from those dual benefits of satisfying their employees as well as providing the most secure infrastructure that we've ever had to date. >> got it. judson, we appreciate your time today, sir. >> thanks, josh. >> carl, i'll send it back to you guys in new york. >> i'll take it, josh. thanks for bringing us that interview. and when we come back, why the mayor of los angeles says he's worried about a trade war with mexico. we will fill you in. but before that happens, "the
santelli exchange" is coming up. rick, what are you watching today? >> well, you know, all roads lead to foreign exchange. if you tweet various variables with regard to trade, there's always the issue of what happens with your currency and how that affects exports. so we're going to take a technical look at the dollar index, after the break. introducing conduent. one of the largest business process companies in the world. whether it's in health care, customer care, technology, transportation or government. we touch millions of lives every day. conduent. advancing the everyday.
of the trump administration. plus, three big names that may be offering investors an opportunity to get in today. starbucks and alphabet. and one of today's traders making a big bet on a financial stock that she believes has nothing but up side ahead. "halftime report" top of the hour, noon eastern. carl, we'll see you in about 15. >> see you then, scott. thanks so much. meantime, let's get to the cme and check in with rick for "the santelli exchange." hey, rick. >> hey, carl. you know, when it comes to the dollar index, in my opinion, it's kind of a technically based fundamental trader in my day, it's all about time! you know, time is as relevant as price when it comes to being a technician, and there used to be a technician out there that was called gan, w.d. gan, and for him time was more important than price. we can debate that, but there is plenty to learn. we're going to the whiteboard. my charts aren't necessarily
anatomically perfect, but it is really more a question of patterns. so, when we look at long term, 20-year chart on the dollar index, and pretty much this is maybe a bit higher, but that's not the point. the way the market broke out, the way it traded over 100, and the way it looks on a 20-year chart -- remember, a 20-year chart, back to the element of time, is pretty much made up of monthly closes, schnock now, it doesn't have to be that way. if you have a really big den where your office is. because if it is a monthly close, it's going to stretch out pretty wide. so, this all in all looks like it could continue to the up side. now, if you go the other way on time and shorten the time frame and go to a one-year chart, basically starting in early 2016, the pattern looks exceptionally bullish, until about the last week and a half, two weeks. because what has happened is the upside pattern has sort of been broken here, and it doesn't mean that the longer view can't also in back to affect it. but for the most part, this is
looking like a head and shoulders, which means that the short-term view -- so, let's make it the short-term view -- looks like most likely long to the up side as you fill in the right shoulder. but ultimately, ultimately a violation of 100. and by the way, we've had two big chances never close below it. on this side it was literally like 100.02. now, on the right shoulder, intraday, there was a lot of days earlier in the week where we had intraday violations, but these charts pretty much are all predicated on the close. so, if you look at what i said, short term, long, medium term, pretty much i would say it's going to come down and touch that line, so maybe short. it's the long term that has the question marks. and how we fill this in. because indeed, this could turn into some type of wedge. and consolidation's been a big deal. remember, if you're optimistic on a market, you call it consolidation. if you're pessimistic on a market, you call it flat-lining or static. so, words are powerful, but the
interesting thing about charts, i could go on and on and give you a lot of math, but it is as much art as it is science. carl, back to you. >> we love your whiteboard chart work, rick. that was good. rick santelli in chicago. when we come back, we're minutes away from the president's meeting with uk prime minister theresa may. what to e thixpect afternoon, when "squawk alley" comesback. as we go to break, starbucks' howard schultz joining us this morning on "squawk on the street" in a cnbc exclusive. his take on the president's possible trade war with mexico. >> it's not in our collective interest to have a trade war that would have such an adverse effect on both economies and citizens from both countries. so, again, i can't predict what's going to happen. i am confident that starbucks is going to be able to navigate through any storm that's going to happen, and i hope that on both sides we recognize the need
strong words from the president this morning over a possible trade war with mexico. in a tweet, "mexico has taken advantage of the u.s. for long enough. massive trade deficits and little help on the very weak border. must change now!" our julia boorstin spoke with the democratic los angeles mayor on this very issue and joins us now with what he had to say. julia? >> reporter: hey, kayla. the president's threatened trade war with mexico would absolutely
have a negative impact on los angeles, that from mayor eric garcetti, who points to the ports of los angeles and long beach as a huge economic engine responsible for one out of every nine jobs in this city and ever in this city and one out of every 200 jobs nationally. >> we want to make sure that that is a great gateway for trade, not just into the country was out of the country. and i would look forward to working with president trump on boosting our exports. within of my priorities here, only 1% of our company is export abroad. that's a great place for some common ground. trade war makes that tough to get american goods and american bsut of thatport, too. >> with present trp laying out a plan to aggressively crack down on immigration, mayor garcetti said he would not back on on protecting immigrants. if the president threat cens to withhold federal funding, garcetti said he is prepared to take legal action.
>> i think we're on very secure ground. the united states constitution says that you can't put a federal financial gun to the head of states and tell them what to do in exchange for funding. that was established by justice roberts just last year in the supreme court case on the affordable care act. we also feel that the ethical argument and the practical argument are on our side. >> despite the fact that mayor garcetti called president trump a racist, a bigot, and sexist during the campaign he told me he is still hopeful they will be able to work together and that the president will come to understand the value of immigration to economic success. you can find more on cnbc.com. guys? >> well, julia, the mood overall there in california, which has a history of immigration back and forth with mexico, what is it? i mean, because there are a lot of different californias. it's not all urban cities and cities that are democratic. >> well, i think that, you know, it's not all urban cities and centers but los angeles is a massive economy.
and garcetti yesterday pointed to the fact that i'm grants are such an important part of the economy here with the majority of businesses started by immigrants. he just rattled off a string of statistics pointing to the importance of the immigrant community here. so i think that the mood here is concerned. i hear from a lot of people that they do feel like california is a very separate entity from the rest of the country. we've seen various studies saying there are a number of people here who believe california succeed from the united states. i think there is a sense of a great disconnect between what people here believe and what president trump is saying about the role of immigrants here. it's v it will be interesting to see especially what the mayors of los angeles and san francisco take a very strong stand that they are going to stick with their immigration policies. >> yeah. they say all politics is local, julia. we've seen different reactions from the mayors from cities like miami and certainly reactions on
different topics from the mayor of philadelphia, for instance, yesterday regarding homicide rates. so as we all react to the new white house, it's certainly going to happen at a local level as well. >> yeah. and yesterday i interviewed the mayor, this big tech jobs fair here. and the mood there was very positive. there were over 13,000 people there to meet with over 275 tech companies from los angeles. when it came to the future of technology in l.a., the mood there was bullish. what happens with immigration, federal funding is soon to be seen. >> julia boorstin, you've got to watch that part of the story as well. a lot is at stake. thank you. we are moments a away from the president's first meeting at the white house with a foreign leader. all eyes continue to be on the growing rift between the administration and mexico but we will be looking for signs of potentially cooperation between the u.s. and the uk. michelle caruso cabrera, john harwood are both at the white house. curtain raise this for us. what are we expect to be some of
the early headlines later this afternoon? >> well, first of all, you saw theonor guard there right here and right behind me. symbolismwise, it's completely different. the treatment that the uk prime minister will receive come paired to the foreign minister of mexico over the last couple of days. much warmer at this point. we expect them to discuss, at least for our audience, the biggest interest is going to be what potential trade deal can be done at this point. president has made clear he wants the uk to be at the front of the cue, so to speak. it's just unclear at this point what legally can the united kingdom do at this point while they're still a member of the european union before they brexit. there's also going to be discussions about nato and fighting terrorism as well. at roughly 1:00, carl, some kind of news conference where they take the traditional two questions each. we may have the arrival soon of the prvm. if you see a convoy behind me,
that's what it is. >> seeing some headlines colliding today, michelle. one of them reminds us of what the president said in his inauguration address. it's going to be only american first, america first. one headline out of the uk quoting the prime minister may any uk/u.s. trade deal will put britain first. how will that work out? >> that's interesting, right, because ultimately every trade negotiation is exactly that, negotiation. each country wants to get the best deal that it can for its own country. what's very, very different and there you see now the arrival of the prime minister and the convoy that accompanies her. the key difference between the uk and mexico, we have much less trade with the united kingdom. in fact, we have a trade surplus. we export more to the uk than we import. that's very different from mexico. so by its faye chur, considering this white house hates trade deficit, it's going to be much warmer. >> but michelle, of course, with
brexit, with the negotiation over the single market, there are going to be questions about exactly what trade with britain lookslike. we're watching prime minister theresa may step out of her convoy greeted by president trump, walking inside the white house there. that conversation will of course be beginning momentarily. but, michelle, when you think about how important for the uk negotiating a trade deal with the u.s. with so many variables unsolved for with brexit, how important is it to the uk to have something -- and the other ressa may, so-to-have something to stand on when she goes back home? >> i think extremely important. clearly 10 downing has made it very clear that they are going to try to do a lot of trade deals. so that way once they leave the european union there's a lot more free trade, particularly with asia. so, yes, the symbolism of leafing here today with something that feels concrete,
that is symbolically very good, even if this this is just a preliminary discussion, i think is very important, kayla. >> john harwood is with us as well. john, how much interest does the president have in helping may soften the blow of a brexit given his relationship not only with her but with nigel and other politicians, some up for election this year who have similar national bets? >> well, that's the precisely the reason why. is that they -- the same well spring of nationalism that helped produce brexit also contributed to donald trump's victory. so he has an interest in nourishing that relationship, in making theresa may his partner moving forward, making the potential u.s./uk trade deal a model for how, within a national framework, you can have an advancement of trade. donald trump has always said i'm
not against free trade, i just want fair trade. well, theresa may provides a model for how he could achieve that. now, they do have divergences as well, or there are things that are concerning the other ressa may as well, which is that donald trump has raised questions about the future of nato and the commitment of the unitedtates to fulfilling its nato obligation, for example, in response to a security threat to the baltics. theresa may at her speech yesterday to the republican retreat indicated that she thought the baltics should be protected. so she's got a balancing act as well. she likes parts of donald trump's message but is concerned about other ones. >> all right. i wonder, with all of this around changing relationship, john and michelle, and maybe, michelle, i'll toss this one to you. how important is it for the trump administration to show maybe a less complicated
relationship now that the one with mexico has gotten more complicated even this week? >> i'm not sure it's that important to president trump at this point. i think -- i mean, he's made clear what he thinks about what the u.s. and uk relationship should be. it should be a special one, hence putting the bust of winston churchill back where it was before, before president obama moved it. his relationship with nigel, his desire to have a very good trade deal with them. i don't think he sees things in those terms as you describe them, complicated, less complicated. i doubt he thinks that the relationship with mexico in his mind is complicated. >> we're get that impression, that's for sure. of course, we should point out his workweek is not going to end today, guys. he's got this tonight, but already telegraphed from sean spicer that he will talk to merkel, hollande, putin over the
weekend by phone. conway was asked over the morning shows today who initiated that set-up and she said she would not divulge that but watch for details. meantime, mild market reaction. dow down two points. vix close to a multi-year low once again. good weekend to everybody. let's get over to wapner and "the half." >> all right. carl, thanks. welcome to the "halftime report." i'm swcott wapner. the trump presidency, week one. >> so help me god. >> congratulations, mr. president. >> these attempts to lessen the enthusiasm of the inauguration are shameful and wrong. >> we do expect the dow to crack 20k for the fist in its 120 year history and it is done. >> the s&p 500 traded as high as 2301. the first time it traded above 2300. >> to sit in the