tv Squawk on the Street CNBC October 23, 2017 9:00am-11:00am EDT
>> you think it's done by the end of the year? >> no, but i don't know, i'm not in charge. >> you're running again? >> i am, yeah. >> is it 18? >> yeah. fun, fun, fun in the sun >> it's great to be here. >> what's the most common expression up there in fargo >> we're going to continue this conversation here. we'll see you guys tomorrow. time for "squawk on the street." ♪ good monday morning, welcome to "squawk on the street." i'm carl quintanilla along with jim cramer nearly a third of the s&p reports this week and europe is up, the president goes to capitol hill to pitch tax cuts
let's begin with the record run for stocks, wall street eyeing new highs as we cook off the busiest week of the quarter. >> president trump standing by the 401(k), this is considering contribution caps as i away to ease the tax plan -- >> chuck robins will join us live to talk about the deal. >> stocks are looking to make more history after the s&p closed at a record high every day last week, marking it the first so-called perfect week in almost 20 years. meantime, nearly 190 members of the s&p are out this week, including amazon, microsoft. thursday night will be a barn burner jim, what's important? >> i think one thing people have to know, we're coming in hot it's very rare we come in this hot to the biggest week there is what's going to happen, there are going to be some that do not hold up under close scrutiny this morning, the ones that did
come out are setting the tone to make it so there's a way to be able to justify it, whether it be a little thing like or big thing like a t-mobile. i come back and say this is a market that's charmed and i don't agree with the -- this is earnings it's earnings. every day we think about tax and this week we wake up and find out it's a 401(k) and president spikes the 401(k). >> you don't agree with th treasury secretary either? >> not at all. >> seemed to indicate last week a lot of the premium in the stock market was a result of expectations for tax reform? >> ill advised comments but that's okay. >> he's actually very close by. >> my wife has seen it three times now. what matters here is the quarter. quarters were very good last week i think the quarters can be very good this week. >> the blended growth rate of s&p earnings in q1 was 14. then in the second quarter it was 10 and so far it's -- why isn't
sentiment being dampened by the slowdown. >> i think what you saw last week, johnson & johnson as the classic. you had the dollar no longer as a headwind turning into a tailwind, they were year over year, not quarter over quarter this week is the determinative week it can go the other way -- when stocks moved up this much, people will be saying, you know what i'm not go to do anything about reiterate buys my charitable trust owns alphabet there's talk that alphabet doesn't have a blowout quarter when you have talk that's good the only thing about tax reform, if you get repatriation cut you'll see many more deals like this morning like ciscoe it does matter. >> and i think of all of the things that people expect will come out of this effort, there is still a belief that you will
end up with some sort of cut and repatriation deal. been saying the same thing now -- >> you're a broken record but you're a a right broken record i don't mind if you were a broken record wrong it would be very difficult for me. >> it would be but we don't really know i may be wrong. >> i think you're right. >> we probably won't know the answer -- they keep talking about moving it very quickly it's almost the end of october now. >> calendar supposedly looks like this. house budget vote this week. next week it gets some legislative text, we can actually read then markup the following week in ways and means and potentially floor consideration on november 13th. >> that would be extraordinary that's the dream scenario. >> i find if it is as big as president trump says it's going to be, that's too quickly. when you still get something like 401(k) and the possibility that could be tampered with -- the president shot it down, this thing is far earlier than you think. the senate resolution was a
senate resolution to have a resolution i think that there is a sense that something has to happen from congress and we can't just have 2017 to be year nothing is done i also think you can do a small plan but a big plan -- i think people do not understand corporate tax. i studied corporate tax really hard wait a second there's corporate tax, tax on the dividend, isn't that double taxation these are not -- areas that take a little time to find where the revenue is going to come from to do that cut. >> that's -- you said the key thing, maybe nobody even cares anymore where the revenue comes from. >> it's goingto be short term. >> don't you think it's going that way >> yes i do. >> mcconnell over the weekend said we have not given up hope on a revenue neutral bill. >> i thought we were going to repeal and replace it's easier to have tax cuts than it is repeal and replace. but the senate is way ahead of the house in terms of not caring as much about where the money comes from. >> one way to close the deficit
would be thee receiptically limit deductions on 401(k), they did mull this proposal to cap contributions to 2400, that was floated last week. there will be no change to your 401(k), this has always been a great and popular middle tax cut that works and stays jim on the "today" talking about just that. >> the one thing we have done right is the 401(k), people embraced it and took away the money and pay taxes on the way out, much later. this has been something that government has done that's great. >> do you believe it's dead? >> i think it is i would rather change it from a trial balloon to the hindenberg, a new jerseyaccident by the way. that was the zeppelin that went down so quickly, you couldn't believe that was a form of
transit. and it wasn't after that but -- i like the fact that the president tweeted that not that long after i spoke that would make my head so big that it would be like togetherness. >> we know he is watching a lot of tv. back to this idea of revenue raising, it's not the 401(k), it's unclear whether it would be the lack of deductibility of state and local income taxes because of the potential opposition from republicans in so-called blue states such as new york, new jersey, california, with very high tax local and state tax rates. so where is it going to come from if nowhere, do the deficit hawks vote for something >> no, they don't. that's really my point the tea party deficit hawks -- remember that term they are not going to go for something that says we're going to cut corporate taxes because there's going to be a trickle down effect to individuals because historically there's not been. >> may get yourself involved in the debate who is benefitting,
the owners of capital or those that provide the labor. >> our viewers who get dividends and buybacks maybe there's so much left that they'll be able to hire some workers but frankly, it's a fantastic thing for people who own stocks 55 million people do own 401(k), that does not necessarily mean it's just for rich people. >> certainly kingdom holding has done well this year, according to prince ali this morning, holding things up with citi at 48, several billion dollars in the words of the prince and said things about the future of oil, citi going to 100 and tax expectations and bitcoin take a listen. >> i just don't this bitcoin thing, i think it's going to implode one day. i think this is enron in the making. >> really? >> yes, i don't believe in it completely. >> because >> it doesn't make sense it's not regulated or until control or not under the
supervision of any united states federal reserve or any other central bank i don't believe this whole thing at all i'm in agreement with jp morgan, mr. dimon. >> sending more like dimon on bit coin. >> i think in the end what people are trying to distinguish between the price of bitcoin and the actual technology of bitcoin, a lot of people have gotten behind the technology but the prices had a gigantic wrong. i don't want to say i agree with the prince if it goes to 7,000, play the tape -- >> you're a reigning expert on bitcoin. we know that from the good wife episode. >> $250 i said it was a phenomenal buy and very real technology i'm the only one on tape other than -- >> on the stand, you were on the stand. >> julianna margulies was asking you. >> every time they hit me on twitter, where were you at 250 that was written in part with my
friend bob who on -- so brilliant. on the stand grilled me. and i kept my ground because there was a teleprompter >> when we come back, as jim says we're going to talk to ciscoe's chuck robins on the deal and maybe taxes and a lot more s&p will break the record for the longest stretch without a 3% drawdown, 242 days that's had a 23% gain in that time. we're back in a moment with advanced safety.
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company broadsoft for $1.9 billion. and joining us exclusively on the phone, chuck robins, thanks so much for joining us this morning. >> good morning, jim, thanks for having me. >> all right, chuck, i look at broadsoft and say this could be the ideal single entity that could jump start what something you and i have talked about many times, this service revenue that you need from the big carriers is that the real plan, call
center business onward to cloud? when i look at your second share, their first share, it could be monumental in trying to get service providers to really start doing more business with cisco. >> i think first thing to consider is every customer when they think about their digital strategies, they think about how they interact with their customers and trying to drive greater intimacy through their collaboration portfolio. this acquisition of broadsoft actually gives us the most comprehensive set of collaboration solutionsfor our customers across enterprise and small medium business on premise and through the cloud. and the reality is, most of the small businesses where broadsoft played, they preferred to procure the services from service providers. >> but, chuck, on the last quarter in the august conference call, broadsoft talked about how they wanted a very big t-1 customer i know they have deutsche bank and t-mobile reported a great
quarter. are we talking about that area too? big t-1 customer would be f fabulous for cisco to sell others goods in that channel >> that's exactly right. when you talk about the synergies we have between our current businesses and what broadsoft has traditionally sold to their customers think about opportunity for those customers to take advantage. our security portfolio, there's a great deal of opportunity to continue to expand what we sell to those customers >> chuck, let me ask you a question about equifax, everybody is a big customer when it comes to cyber security you put out what i thought was a very easy to understand patch, basically said, this is what you have to do, what do you do with customers who you absolutely have told them everything they need to do and they don't do it? >> well, i think that's a challenge we face with the technology in the cyber world today, jim, that these threats are moving in a very rapid pace.
the defensiveness that we can provide and others can provide is clearly moving in a very rapid pace the real issue that companies have to work through is the process and the methodology about which you keep up with it. it's a complicated thing to address and creates more opportunity for many of us in the industry to really help our customers do this. it is a challenge and we need to help our customers continue to do that more effectively >> chuck, it's david i can remember talking to you a number of months ago about upgrades and changes to your network that you say were designed to be able to allow your customer to be aware of threats much earlier than might have otherwise been the case or identify through artificial intelligence and deal with them. is that the case is that starting to get rolled out in a more significant way so we might see some improvements >> yeah, david, it's a great point. we have obviously always used
both m and a as well as partnerships in our internal r and d. this summer we announced the network intuitive strategy -- there's two big things it does to help with the security issue, number one is, it -- we announced the ability to determine when there's malware inside encrypted traffic without decrypting it. the other thing we announced an automation layer to actually automate the infrastructure dynamically and quickly than they can today you're exactly right that particular launch this summer combined with the increasing visibility into the threat landscape gives us an ability to help our customers much more quickly. >> chuck, it does give us a chance to ask you whether or not the prospect of tax cuts or tax reform had any bearing on this decision or the timing of this
decision >> no, carl, to date we have not had any deal that we've considered that we've delayed or put on hold because of you know, the waiting on repatriation. obviously we remain very optimistic about tax reform and hopeful that something will happen late this year, early in 2018 >> there you go. i mean, that's kind of -- we've been thinking, thanks for joining us sorry about last night with the falc falcons, that could be a surprise game, don't you think >> it's been a disappointing season for the niners and falcons, i think i'll have to root for the eagles. >> we'll see you tonight we have a long game. the ceo of cisco, great to talk to you, sir. >> what are we doing next? >> i was waiting for him to say good-bye we'll get cramer's mad dash and count down to the opening bell n e re" uawk othstet straight ahead i think it's terrific.
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we're going to get to the opening bell about nine inuts from now you like to do sea gate a lot. >> i think it would be probably largest gainer in the s&p 500 this morning because surprisingly with very few backers these days, they reported a very large upside surprise to give -- 96 cents people are looking for 86 cents. remember, this is disk drives not a so fphisticated as flash memory or so fifty indicated as
drams, but it says it's entirely possible that demand for pcs, to your actual pc, could be stronger it's not really much play on data center but it is going to cause a short squeeze in the following names, western digital which has disk drive that's been hampered by the toshiba, apple, short squeeze in micron and lam research, a battle ground stock. it ended up going down and back up applied materials very inexpensive stock, not necessarily related but people like to use it as a cohort don't forget tech reports later this week, people might even read through this. this is why you want to figure out that this market is going to go down with 19 holds and four sells people expect a short for seagate. >> your point is it's a larger
tell beyond seagate for the overall health of the broader pc -- >> absolutely. look at this, disappointment short fall down here people are saying forget this company is finished it's back and people are going to say you know what, i've got to buy western digital and lam research, maybe 110 and this is a group a lot of people were short and this was the heavy -- heavily shorted name that's why you see such a big increase before the bell. >> we're going to keep an eye on a lot of names that jim mentioned as we get that opening bell a few minutes from now. more "squawk on the street" right after this
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takes a long-term view i know every time you mention bitcoin it becomes hot and go back and forth with jamie dimon's people, i think they kind of wish they had not stuck the proverbial fork into it. bitcoin has a tremendous constituently among ransomware people i saw a series of e-mails from people who were told, here's your 1-800 desk. if you do not want this information to come out, happened to be something that some people i know who are frankly were surprised who were involved in things that were not what you would want to disclose, and it was very simple, series of bitcoin desks and you can choose which desk you want and pay the ransomware and that's integ ral to what's going on. >> i thought andrew's interview with the saudi aramco ceo is something being watched closely
at this very spot in terms of where will this enormous company list if and when he indicated it's not if it is when it comes public in the second half of 2018. as i mentioned a number of times, it's more than just taking a company public, it is really taking a country public that is how important saudi aramco is and how enormous it is but it was interesting listening to mr. nasr discuss the prospects why they are thinking about it, their play on diverse fiction, which led them at the overall to -- to make investments outside of oil and gas, not to mention the kingdom itself and enormous investments in the likes of the vision fund over at softbank, in for 45 billion. >> we have to hope the question will china be in the deal? i can't think of a worse deal we
do not need right now. >> why is that >> this group -- this is the worst group other than brick and mortar nobody wants this group and oil never seems to get beyond 52 when you go over the ge quarter, much to go over, almost biblical in proportions, john flannery said good things about baker hughes ge but it's all relative. oil needs to go much higher. >> when you look at what the prince said about the long term viability of oil, at least in transportation, maybe now is the time you want to go public. >> yeah, got to get something done now it's interesting that tesla has problems with the model 3 and bingo got their own factory in china. i do feel the whole orientation in china is to go away from carbon except for president trump, he seems to really being into carbon he's a carbon guy. >> he loves carbon, yes.
>> prince was asked about that and also said tesla was too exuber rant for me. >> tesla is a cold stock i think that the -- [ bell ringing ] >> there's the bell at the s&p this morning at the big board. it is 3m, winner of the discovery education, 3m young scientist challenges congratulations, over at the nasdaq, operator of fat burger celebrating its ipo today. >> there you go. i think that when i look at what areas that need to come back, mention brick and mortar and food, consumer product doing quite poorly the product ter acter & gamble , nothing that people are excited about. i don't know if you caught that? >> on friday i was doing other things you discussed it and i was listening. >> did it great exposition at the beginning on china and how great china is doing but what they left out is that the costs
aren't that great for the company and they continue to talk about the millennials, don't worry about the millennials, but the group is challenging and they made the point the group is challenging i thought had that quarter come out before the election, that mr. peltz would have won it. >> interesting well, by the way it's still not clear, p&g has claimed victory in the proxy fight, the margin of victory extraordinarily thin and there is a belief on the trian side they would like to see everything because there count may be different. >> yes. >> victory is what it may well be when it comes to this idea of packaged food, amazon continue to hear about and walmart and to a certain extent and this whole idea of private label and what that's going to mean, there are a number of notes out i believe on packaged food and amazon and this debate about grocery. and the impact it will have on the providers of those goods
over time as amazon starts to potentially present its own private label under the whole foods label. and take up its own shelf space. >> well, look. >> replacing those who provide a lot of that -- >> we're hoping for some clarity this week on what the strategy will be. it's not been availed but i know that everybody in that industry, particularly the super values and kroger's are shaking you have to and also of course, some of the branded companies. i think there was a moment in the procter call that was a little naive where they were talking about how the millennials haven't switched they are still buying, they like experience shal but they are still going to shampoo and shave. what product ter is doing, they want to shampoo and shave and use the amazon channel immediately they said we're doing great in the amazon channel. the issue is the margins the margins in the channel tend not to be that good.
i think people have to focus on that no one wants to focus on fact when you deal with amazon, i saw a documentary once where amazon does everything it can to take the gross margin away. that is not talked about other than you why? >> i don't know. they do it over time and it's a -- becomes a drug for a lot of these companies to a certain extent because the channel is so effective. but eventually they will take the margin or they'll simply take it for themselves. >> i think it's going to accelerate under whole foods. >> and they've already got private labeling at amazon you can buy amazon batteries and a lot of different things. walmart also trying to move into that area. >> i'm thinking back to what fred smith said recently about grocery maybe being a bit different because of the difficulty in delivering it fresh every time. >> that's one of the reasons why i liked the walmart method, i think is good. brad jacobs comes out today says they are going to high more people that is for e commerce or sorry
last mile. e commerce, to get these goods to the last mile is going to be a major undertaking for the holiday vacation i don't mean to differ too far more and talk about whole foods but the momentum continues. >> your point about pipelines and holidays is key because has bro is the biggest loser, they guide down q4 on toys "r" us, the i am pablmpact, 9% of inven >> i made a mistake last year, did a piece about golf, golf will get hurt by sports authority closing and things did not bounce back. this channel is a key channel. the brick and mortar channel has not been abandoned fast enough i'll have brian on tonight to talk about hasbro. but toys "r" us was a shocker to people people thought that wouldn't happen to after the holiday. so that was quite a surprise we'll get to the bottom of it
because hasbro has a lot of good things going the brick and mortar shambles continues. target is doing some special freebie stuff and walmart is doing great. a lot of companies are being squeezed one of the through that has come through this okay was vf corp. a lot of people fell they could not deliver because of the under arm or but they are a sub ssidiary of international. anyone who has been to europe knows -- north face, they deliver a lot of people short that look at the breakout, congratulations to the team. >> want to get to earnings from t-mobile of course and john ledger as he always does, addressing all of us on twitter and saying surprisingly -- i'm kidding, how strong they were and they were good no doubt about it. the only area some people might complain about is post paid phone subs, thought to be a little light but it was a beat
q3 adds, may have been hampered to a extent by iphoned delayed launch they updated their guidance in a positive way they are looking for now -- branded ads of 3.3 to 3.6 million. also guidance is now 10.8 to $11 billion that is both higher than many analysts had been anticipating service revenues were the only one, he says, he's having service revenue growth, $7.62 billion. you can see the stock is up -- whoa -- nobody tells you about your hair, look at that. >> never been an issue with me. >> that's better thank you. one of the things people are focused on is potential deal with sprint. we talked about it and people who fougbrought you the potentif that deal occurring. should have reported last week on new details that did seem to at least be delaying the
potential for the deal due diligence simply taking a long time. particularly on the t-mobile side of things sprin sprint wants to look very closely through it this does not mean it is going to not going to happen but it does have the impact of originally they had been hoping to get something announced prior to these earnings reports and they couldn't do it. they koncouldn't get there they are now targeting early to mid november on both sides and it depends who you talk to in terms of that exchange ratio and for my part i'm not going to get into it right now. but suffice to say, they continue to move along in due diligence with the expectations still being that they will get something done early to mid november, guys, neither company having a call. t-mobile not having a conference call in part because it didn't want to sit there and simply answer questions. >> that was a great report i was reading the faux conference call that ledger had
and it was devoid of substance i felt in ternms of the big issue elephant in the room, which is sprint term was good but all i cared about was the sprint deal. >> for obvious reasons it is the key for this company my last real full report on this remember i talked about some disappointment on the part of t-mobile shareholders with the exchange ratio and the idea being that the business that they thought they owned was performing so much better than sprint and t-mobile perhaps giving up too much we'll see where it all ends up but that due diligence again continues. they are taking their time. >> look, it was a good quarter i don't mean to slight john. it was a good quarter. you keep getting a million ads, this is 1.3 million adds, the last three straight quarters and talks about the netflix bundle
there's a bundle that's working. >> sprint is wednesday and i don't know if they have a call either. >> i believe they are not planning on having a call as well, sprint that again, that probably makes sense from their perspective they had hoped -- remember my first report was they were targeting third week of october, hoping to get this thing done prior to earnings and then you've got to give time from earnings to let things go. we're probably look at early to mid november for a deal announcement if and when we get it i did want to come back to ge for obvious reasons -- >> can i say before you do, that was an unbelievable interview by you. >> thank you. >> i told my executive producer, this just stopped trading, you had to listen to every word. >> thank you it was interesting listening to flannery the stock the incredible turnaround at 9:00 it looked down as much as 9 or 10% loss and today --
>> you have to get people a little less excited about it. >> they are going to cut that dividend i don't know anything other than what you heard him say it's not like i got anything behind the scenes. >> it's a question of whether they do it before the analyst meeting or not david, one of the things that -- reason why i think the stock went up, the repud yags during your interview was extraordinary as i've ever seen a ceo say -- how many times when you would mention something, that was disappointing, new broom sweeping clean, just really -- the problem is the cash flow from operations, if you just use the kind of honeywell accounting, yeah, you've got a pension problem there that the previous administration really didn't address you've got the actual cash flow is not nearly as bountiful in terms of being able to give it to the dividend. but steve to his credit has been the biggest bear, frankly just said, here's the deal. the bears have all they are
going to get if you're in this for a dividend, for the size of the dividend you should sell it right now. >> two downgrade, ubs and morgan stanley. >> the downgrades were really trying to get ahead of the dividend cut, i think. but the fact is, flannery is cut of a different cloth did not impress me as one of these globalist. i don't expect to see him at davos. >> no, all signs are he's a real straight shooter he has the benefit of not being defensive because this is not his -- it's his now but all of the stuff that he's talking about was not really his so to speak. >> could be like when dave cody came into honeywell and say honeywell is just awful. the people who got passed over from ge for the predecessor were quite good. >> it's interesting, jim, looking at the company and following it as long as we have, i was well aware and talked so often about overpaying for certain aspects and selling
other assets at lows and buildup of leverage of perhaps overplaying for flows of cash flow that weren't what they appeared to be that ended up to really not good things but the lack of execution in certain areas of the company was harder to get a handle on and showed itself in power this last quarter. >> he basically -- it was like -- he just basically said that everyone in power will now. power was just terrible. if you had to criticize the call it would be that all of the other divisions as well because transportation was horrendous. but that really is end market. distinguish -- he was saying that it was their fault, they totally misjudged the turbine market and went in when it slowed and talking about the way the u.s. was working i thought it was a co-jent defense of the fact there were other businesses including health care and aero space and we'll talk about ar conic later. that was not what the call was
about. it was about we're mortgage fied and embarrassed and it's going to end it won't be in time to be able to save this sizable dividend. it can't it's unfortunate but it can't. >> stocks down 3% and worse performer on the dow for the moment record highs across the board. let's get to bob pisani on the floor. >> good morning, carl, happy monday, everybody. record highs, a good start today but even better in japan that electoral victory of shinzo abe pushed it to record levels, 21,000, 15 updays in a road. in 1990 the nikkei was over 38,000 over 38,000. so a long way to any kind of record there here in the u.s. still market leaders semiconductors and materials, great month overall they are leading banks are slightly on the weak side and look is the industrials now, ge, 3% down again you heard from the guys talking about that
we're in the hurt eart of earnis season and people are remarking there's a little dip this quarter. we had double digit gains and expected to do that, 4.2 br%. people are saying maybe this is the beginning of the end and i don't think so there's two obvious reasons. first what happened with the hurricanes, look at the financials that are going to be reporting and the estimates here for the financials here. banks are going to do perfectly well, up 11% on their earnings overall. but the insurance companies are getting killed because of the hurricanes, that's not a typo, 63% decline in earnings for insurance companies even big guys like berkshire going to be a bit down if you take that out we would be up more than 7%, not 4%. the other thing is we're starting to get -- well don't know if this is a regular oil market or not. when oil started to turn around in the third quarter we had this complete historic cratering of energy earnings and in first quarter things started to get better and fourth quarter really of last year.
those aren't typos, 563% because oil turned around in the third quarter of last year a bit the earnings got a little better the comparisons are tougher for the energy group and hopefully you'll see things get more normal and won't see crazy numbers you're seeing for these energy companies this crazy weakness in the last few years. elsewhere, president trump has shot down republican trial balloons to limit pretax contributions to the 401 1(k)s u this is a good opportunity to talk about how pathetic the savings rate is for americans. even 401(k) people who have advantages over others vanguard surveys 4.5 401(k) accounts every year. you don't want to look at averages there are people who have 3 and $4 million in their accounts and drag it out. you want to look at the median savings in a 401(k), look at this at 35 to 44
43,000 but 65 and over only has 60,000. folks, that means that half of the people who are 401(k) accounts over 65 years old have less than $60,000 in it. think about that, if you're going to live to say 85, that's a good guess, you're going to live another 20 years, do the math on $60,000 in savings with 20 years in your life. it's pretty pathetic, folks. the bottom line is, americans even those who have 401(k), maybe a little better income than average people are not saving nearly enough for retirement we need to do the opposite and make it easier for people to save more or we'll have a lot of people that will be outliving their money in the next 10 to 20 years, that's a big issue. back to you. >> thank you for that, bob let's get to the bond pits as well and check in with rick santelli at the cme. >> good morning, we see that yields have held most of the gains and they did jump a bit on friday we've eased back maybe a base
point or two depending which part of the curve. shorten end, back two base poins but still on the highest levels since the third week in july 2008 let's look at what's going on in the one week of 10-year, we extended darn close to the 2.40 level on friday. we backed away a bit at 2.36, 2.37, open the chart up to may, you can see we 2.40 is so important several failures we've had slightly above and slightly below 2.40 are failures because 2.44 was where we settled the end of last year, very important level. one week of bund yields of course everybody moves and marches in the same direction before the same time they shot up in yields on friday but they haven't quite broken through as you see on this july 1st, 2017 chart. finally the dollar index, up a fifth of a cent right now. you see the one week chart that 94 is like 93.99 high it keeps coming back if you open chart up to july of
'17, you can see why 94 is important. we keep knocking on the door this is really a third attempt many times technicians say third attempts succeed we'll have to see. it certainly seems the equitiable response to the dollar index given the move in higher rates when we have the ecb meeting this week and march row draghi, guidance on what's going to happen with the stimulus policies. carl, jim, david, back to you. >> when we return, a lot more from andrew sorkin's exclusive with prince alwaweed she's nationally recognized for her compassion and care. he spent decades fighting to give families a second chance. but to help others, they first had to protect themselves. i have afib.
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we are very optimistic about it. it's not going to be easy because there are some difficulties, but our entry point was very reasonable. right now, it's holding our break even point any good news from mr. jack dorsey and his team at twitter, i think this will be reflected very much on twitter >> we'll find out when twitter has earnings on thursday, jim. >> yeah, look, i think that the crown prince has been a remarkable investor. he does have a long-term view. >> i'll never forget interviewing him many, many years ago. he said he'll never sell, when i was talking to him about citi, which went from wherever it was down to virtually nothing. >> and he didn't quit. >> he'll never sell. >> the problem with twitter is this you're dealing with some of the smartest companies in the world that are taking advertising. facebook, i see facebook, google, they're down today they can't go up every day, but there's just a limited pool of
advertising, and twitter still has not figured out a lot of how to do it it's interesting jack dorsey runs two companies he runs twitter which has been unchanged, and let's give him credit for square. square has been amazing. those of us who use square think that it's really pretty terrific recognize, it's not going to be paypal not even a son of paypal, but he's done a great job with square i felt like i should say that because i have been somewhat tough on him >> okay. all right. >> square, up 140% for the year. we'll get "stop trading" with jim in a minute. dow up 23.
trading. >> i was mentioning the company with the new ceo that looks good, but that stock is getting hit. i also take a hard look at some of these companies the focus for me is kimberly clark. that's an example of what happens when you have expectations so unbelievably low that it delivers a low number and it doesn't go down there was not the kind of hoopla about procter when it came to kimberly kimberly's best line, by the way, is adult incontinence pants, doing incredibly well >> much bigger sells in japan of those than they are for children >> you're talking about a baby
boomer product that is selling incredibly well. >> hasbro tonight. >> we'll have to talk about brick and mortar every time a brick and mortar goes under, you end up having a lot of inventory on the ebays of the world. then they had a very big win today. a particular vaccine a smaller cap stock. i don't want to get too crazy, but i do feel very strongly, by the way, that when you get vf corp being good, and kimberly clark being good, t. mobile, you get another lease on life until tomorrow >> see you tonight, jim. fly, eagles, fly >> fly, gl, eaesfly. >> dow up 27 we're back in a minute they don't invest in alternatives or municipal strategies. what people really invest in is what they hope to get out of life. but helping them get there means you can't approach investing from just one point of view. because it's only when you collaborate and cross-pollinate many points of view that something wonderful can happen.
good monday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber. markets once again stringing together three record highs in a row after the s&p did it every single day last week for the first time since '95 >> our road map for the hour begins with no change to your 401(k) that's the message from president trump this morning as
republicans consider limiting pre-tax retirement contributions to help pay for their tax overhaul >> then, enron in the making saudi's prince joins jamie dimond and others with new criticism of bitcoin >> and finally, coming off a perfect week, stocks continue their record run we have fresh eyes on the dow and the s&p this morning as we kick off the busiest week of earning season >> first up this morning, speaking of stocks, record highs for the dow, s&p, and nasdaq this morning as wall street speculates over the president's fed appointment and that long awaited tax reform plan. joining us, samir, wells fargo quantitative strategist, david leave ovits is their market strategist sentiment obviously extremely positive here. all through october, despite an earnings season that is shaping up to be less of a barn burner than q-2 or q-1. why is that happening? >> a big issue this earning season has been with the financials obviously, we saw the financial sector in aggregate take a bit of a hit due to the severe
weather at the end of the summer, but what i would say is looking more broadly across the sectors of the s&p 500, our expectation is still for relatively healthy earnings growth this quarter. a handful of industrial names reporting this week. we thing in particular, those more globally exposed sectors are benefitting from what we're referring to as a synchronized global economic expansion along with a 10% depreciation in the dollar so far this year. although there are some pain points thus far early in the earning season, we think things will shape out okay and give the market room to push higher >> samir, are you that positive on earnings season as a corollary, do you believe that the real drivers here remain earnings and not something regarding what tax may become >> you know, we do like the economic funnel backdrop, but the tricky part is sentiment is starting to get a little more exuberant. you are starting to at least begin to bake in something on taxes. again, very early days, and it's not the market's leading necessarily in that direction, but we think from a fundamental
standpoint, the valuation standpoint, the market leads us up to a negative surprise, don't know what that can be, but we would be more hesitant and wouldn't be rebalancing into this >> could it be the appointment of a new fed chair, samir? where do the risks lie in that major decision by president trump, which we are expecting soon >> probably the big items, the biggest risk would be geopolitics. if there were anything around north korea or iran, that would be a fly in the ointment what's going on in europe, catalonia, and even the italian elections, there's some risk across the pond as well. you're moving pass the chinese party congress if they were to go back to reforms post the congress, that would be something else, something to watch where growth might slow after that, so again, there's a lot of good news baked in. >> i was asking about the fed. >> sure. >> the decision on that. >> taylor is probably the only real risk. if you get a yellen reappointment or a powell, you're kind of swapping one for the other.
taylor would be a risk, but again, he's talked about how you can't apply his rule mechanically he would be more dovish than his rule would suggest >> we asked you about this a few weeks ago. you said at the time you thought yellen remained the call i wonder if you think that's still the case >> i think there's still about a 50% chance that yellen gets renominated. to my mind, it's really between yellen and powell at this point. i think they're relatively known quantities powell is a tad more hawkish than chair yellen. she's obviously on the more dovish end of the spectrum from where we're sitting, the possibility of a gary cohn or john taylor seems relatively remote i think the continuity will be important as the decision is made and we'll likely end up with someone who we're familiar with and has a background with the federal reserve up to this point. >> samir, we're going to get earnings, a lot of earnings, as carl mentioned, this week. among them, amazon, alphabet, microsoft, and twitter is this trade crowded or is this
really the place to be in the earning seasons where you're looking for signs of earnings growth and revenue growth and this kind of sluggish environment? >> you know, probably is a little crowded, but they've scaled that wall of worry or expectations, if you will. still, we would kind of go back and think about areas like financials consumer discretionary david mentioned industrial health care is still growing thanks to a lot of the demographics we wouldn't crowd into those fang names it sounds like we think it's a bubble, but we would take a more broud approach where there are a lot of names doing well, but they have kind of been neglected. >> when i heard you say rebalancing earlier, do you mean rebalancing out of u.s. and into other parts of the world, europe, for instance >> exactly, that would be one way to do it, going from the u.s. to the international side also, again, don't forget your stocks to bonds mix. a lot of our clients, for them, it really does come back to risk tolerance and what they want to do for the long term, so they're
probably a little over they skis into equities and we want them to pull back and make sure their fixed income allocations are full >> do you agree, david, with samir's take on technology and the fang stocks are a little overdone, or do you think some of the recent politics and negative headlines that have affected them might fly in the face of their ability to make money and post growth this season >> i think it's been a very smooth sail for a lot of these large technology names over the past couple of years not only have you had the tailwind of better revenue growth and better earnings growth, but you had this investor behavior which has actually preferred these names as being relatively defensive and stable stocks. we have seen the correlation between inter 10-year yields and treasury turn negative in the last 10 to 18 months, and what you're seeing is kind of a perfect storm where the unchings and revenue growth are there, but also because the earnings and revenue growth are there in
a low macroeconomic growth, we think there's a risk for a little disappointment going forward, but we think the earnings growth trajectory should continue and over the long run, that's what tends to drive stock prices >> one last one here, samir. we have a table of year-end s&p targets, and the market is starting to blow through a lot of targets that seemed aggressive early on. i'm thinking back to goldman saying flat was the new up i don't think we're that far from goldman's year-end '18 target and i'm wondering if we're going to start seeing a bunch of revisions. >> we'll see we're kind of in that same camp. our year-end target for 2018 is 2450 to 2550 we're kind of in the same neighborhood, and at least for now, we're holding the line because again, when we put on our optimistic hats and start to think about what's going to happen next year, we're a little skeptical about tax reform we think the market is a little ahead of itself. we would, again, exercise that caution, sticking to our guns. we have that 2500 target for
year end 18. >> we'll see what the last few weeks of the year shape up like. we'll see you next time. >> thanks for having us. saudi's ceo sitting down with andrew sorkin saudi aramco is set to go public in 2018, with nasir saying that is still on track. >> we have always said we will be listing in 2018 and to be more specific in the second half of 2018. the ipo is on track. and the listing venue, we will be discussed and shared. >> he also commented on the role of china in the process. he batted down speculation that the chinese were playing a part in the ipo >> saudi aramco are not talking to the chinese or others we did prepare our books and
streamlined all the necessary work that is not necessary for listing. we evaluated and analyzed the different venues, stock exchange and different countries. there were so many of them all of that analysis is being reviewed in detail to make a decision at a certain stage. >> for saudi aramco is giant when it comes to oil and gas we're talking sustained capacity of 12 million barrels. refining capacity, 5 million barrels. and this initial public offering, as i have said many times, is almost hard to conceive how large it is going to be, although people are trying to understand, what will it point to? a trillion dollar value, more than that, those are numbers you actually hear given we don't know the underlying business yet, but we will eventually see it in print. >> that's one of the big questions. infocus has been on the sheer size and where it's going to actually ipo besides - >> where it will trade
and he didn't answer those questions, will it be here, in london, where will it list >> also a question of what kind of investment it's going to be and what the reserves will look like and how much they will reveal about what it actually is, right? >> going to be a great risk factors line in the s-1, whatever it says what they see as the two things to worry about >> and of course, they're going to be selling a small percentage, but even that will be a large number given the overall value of the company, wherever it may end up >> and the prince telling andrew this morning that makes total sense. this is an economy that is in transition saudi arabia, they're going to raise a lot of money all part of the 2030 plan to transition out of, you know, what these lower costs of oil, to get the economy more diversified and grow business and grow investment. >> yeah, something to keep an eye on when we come back, republicans are moving forward with tax reform this week as we get this trial balloon on the would-be changes to your 401(k) president says no change, and we will tell you what to expect out
of washington and more >> and more from andrew sorkin and saudi arabia with his exclusive with the prince of kingdom holdings more "squawk on the street" in a moment unmanned aerial systems, we're attracting the world's best talent to central new york. and turning the airport into a first-class transportation hub. all while growing urban areas into vibrant places to live and work. across new york state, we're building the new new york. to grow your business with us in new york state, visit esd.ny.gov. you know win control? be ss with us in new york state, this guy. check it out! self-appendectomy! oh, that's really attached. that's why i rent from national. where i get the control to choose any car in the aisle i want, not some car they choose for me. which makes me one smooth operator.
he discussed the upcoming saudi aramco ipo, and what going public will mean for the kingdom. >> i call the nuclear weapon really of going public with ipo of aramco. this is safe for saudi arabia because saudi arabia right now is living on how, on oil and investing some of the money coming from oil and by going down from reserves and debt, but that's very important, this 5% of going public, because this will give the government, depending on the valuation, somewhere between $75 and $1 billion. locally giving more growth and jobs in the market this is a very good idea no one talks about this idea that if you go 5%, there's nothing to plateau you go another 5% the next year
and the third year and fourth year, depending on the situation. >> where do you think the market is do you say to yourself, this is going to continue? do you think there's going to be a hiccup along the way as an investor, how do you think about it right now >> they said if there's no tax reform, then the market will tank >> will tank >> yes, he said that i'm just quoting him >> is that what you believe? >> all the bet on tax reform right now, clearly because you reduce tax reform from 35% to 20%, the valuation could go up also so i think there is a big bet on that, but clearly, there's a lot of optimism in the united states >> we really haven't had a conversation about currencies. one of the conversations in the united states all the time these days is about not the currencies we know, really, but new currencies like bitcoin, and there seems to be a raging debate about it. where do you land on it? jamie dimond says it is a fraud. yet goldman sachs may be
pursuing working with the currency >> yeah, you know, i just don't believe in this bitcoin thing. i think this is going to implode one day. i think this is enron in the making >> really? enron in the making? >> i don't believe in bitcoin completely >> uz? >> it doesn't make sense it's not under control it's not under the supervision of any federal -- any united states federal reserve or any other central bank i don't believe in this whole thing at all i'm in agreement with jpmorgan jamie dimond >> that's going to continue the ongoing debate about this crypto currency >> it's such a sound bite, and obviously, he is a prolific investors, and with all due respect, i just think it confuses the issue there's one thing to say that bitcoin as a crypto currency, currency alternative, is a speculative investment that's fair. a lot of people think it's going to crash, it may be built on
nothing. the underlying technology, he should listen to mike korbut, one of his favorite bankers. he likes citigroup, who said we're not going to comment on the actual price, but the underlying technology is valuable i don't think you can dispute the fact that it could change the payment game to get a cheaper alternative to pay online and that's what's been growing aside from the price so there are two issues there. >> yeah. >> eventhone the enron thing gets the headline. listen to christine lagarde. she said it's disruptive technology of the imf. >> you know i always have thoughts >> i was waiting for you to unleash. >> target unveiling its holiday strategy this morning as it prepares for the busiest quarter in retail. we're joined next to talk target and the state of retail as we head into that all-important q-4, and let's check on where we stand in the markets record highs all around again. well, looks like we're backing off. still, the s&p holding its gain.
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target unveiling its holiday strategy this morning as the company prepares for its busiest quarter. our courtney reagan joins us now with more. morning. >> good morning, sara. target revealing some of its holiday strategy today didn't get all of it, but that dut include 1700 gift ideas under $15. they need a bull's eye this season to sort of mark forward movement in the multi-year strategy target's chief marketing officer says the team is going into the holiday quarter with a lot of optimism and a lot of confidence they expect comp sales to be down between 1.3% and up 1.3%. wide range, but not entirely bullish. target will offer free shipping, instead of ten days of deals
which the retailer said failed to inspire shoppers, they will offer weekend deals inside there's a new gift option where gift givers can send an e-gift, so they can exchange it before it ships toys are big, of course, as they are every year in fact, target gets more than half of its annual toy sales in the fourth quarter they have 1400 exclusive toys with a big star wars collection. again, this year hgtv's fixer upper couple, chip and joanna gaines new line launches november 5th. that's a key new brand for target chief merchandising officer expects it will drive additional shopping trips and boost traffic to both the sites and website. he says so far, the response has been, quote, exponential target said shoppers have asked for some separation between thanksgiving and christmas so they're holding back a little on the big holiday marketing splash until after turkey day. >> an interesting early peek at
one of the biggest big box retailers' plans for more on retail, let's bring in oliver chen, senior retail analyst, and dana, chief research officer at the telsy advisory group dana, where does target stand against the competition going into the all-important holiday season not to mention halloween, when it really starts to ramp up. >> we see a holiday season that's more extended today than it's ever been in the past you certainly have seen walmart go out there with all guns blazing for this upcoming holiday season and now target with their under $15 price points, they're there, too. i think that it's all about value. it's all about experience. and being able to be in stock. and let's not forget, we'll have another competitive factor this holiday season the iphone is coming out with their new iphone, too, so consumers have a lot of choice in terms of where to spend their dollars. >> yeah, who wins from that? which store from the new iphone? >> i think - >> is that a target buy?
>> it's not necessarily a target play it's an apple play, and it easily could be a best buy play also that's what's going to win for the holiday season the other thing we see this holiday season, we're seeing more creative marketing than ever before. i think you'll see some of the luxury goods players do well i think coach and their newness they have, it will be interesting to see what kohl's does with the amazon returns being tested in their stores so i think there's more newness that kohl's features this year than what they have seen in the past >> do you agree, oliver? a lot of the surveys point to more optimistic expectations for holiday shopping this season are the retailers getting smarter about it and at what cost to margins on the lower values >> yes, sara, the retailers are getting smarter about it the name of the game is offering great value, so there's a lot of competition with free shipping and also making sure you're sorting into the entry level price points the big problem here is also
amazon about 87% of shoppers at target also shop at amazon. about 83% shop at walmart. so we will see this intense battle as we think about retailers trying to gain share against each other what's also special about target, which is worth noting, is there's a lot of proprietary product this season. they have a lot of new lines out, including cat and jack, a very successful line project 62, good fellow, men's product, kids' product, baby, home, and it will be up to retailers to have unique product. target will have that in their proprietary brands we prefer walmart. >> dana, you got an upside surprise in skechers last week today, it's vfc. i wonder how much the shorts are on alert here, and do you expect that pressure to lessen as we get further into the holidays? >> i think it will i think overall, we're comparing against a holiday season that wasn't as challenging last year. there definitely is more consumer confidence out there.
inventory levels are leaner. product innovation is greater than what it's been in the past. whether it comes from apparel, whether it comes from electronics, and overall, it's easier for consumers to shop, and they do have a choice in terms of pricing and let's not forget the experience component also that more retailers are offering. i think it will be a more optimistic and better holiday season, and it always comes later. >> what about this push for private label? we got news that walmart's jet.com is going to go into its own private label, oliver. and we know that amazon has been working on building this business is this the idea that millennials don't care about brands and they just want value, or is it not the same threat to retail as it was, say, in the household products and food and beverage space >> sara, i think it's a huge threat and an opportunity. everybody is moving into private labels because it's very important to have specialized product. as we think about the jet.com private label product, that's also going to appeal to
millennials. we're seeing a revolution in products and brands. we're also seeing a revolution where smaller brands are taking share from larger brands because what's important is thinking about millennials, generation z, and millennials really care a lot about authenticity authenticity and aspirations and co-creating. so the future of the world is about new brands, special brands, and really rethinking loyalty. that will be an ongoing topic. keep in mind, promotions and competing on the same product is a very strong risk factor. and getting people to stores, as dana mentioned, it's a lot about experiencing and driving culture and social it's been very hard to get footsteps in stores. we see numbers from negative one to negative eight. it's going to be a tough traffic environment. on the other hand, the silver lining for holiday is one, inventories are under better control. retailers are selling more with less, and second, we have a better weather comparison. so we're hopeful, but we're
cautious, and we're cautiously optimistic >> final word to you, dana, on this growing trend toward private label. and just how you square that the theme of last earnings season were big brands are where it's at. the coach, and people are still loving designers you see that all over the streets. why then are the wall marts and amazons so focused on private label for retail >> i think you need a mix of both i think the private labels certainly can hit value at a price point. it could be trend right. you need the halo of higher priced brands and being able to adapt some of the private label items. it certainly makes it compelling i don't think it's either/or i think it's both and it gives you a margin, but you is to be careful in your inventory investment in private label because it could lead to higher markdowns. also with new private label brands, being able to manage them so they can build a platform that's as oliver mentioned, you need social media marketing to engage that consumer in order to get them to try it today >> a lot of changes going on in
retail never too early to talk about holiday shopping, thoe guys, thank you. >> getting some guidance on the president's upcoming trip to china. let's get over to kayla this morning. >> good morning, carl. everything just wrapped regarding the president's forthcoming trip to asia, which will be his longest foreign trip to date. a senior white house official said to expect the president to reaffirm alliances with japan and korea, and to recognize the recent consolidation of power of leaders in japan and china the president is expected to visit an air force base in japan as well as camp humphreys in souk humphries in sou south korea could potentially be a scheduling difficulty to prevent him from going to the demilitarized zone that's been reported, whether he would decide to go to the buffer zone between north and south korea. he said it's still undecided but security is not the concern
there. on trade, interestingly, there are trade talks going on between the u.s. and japan, korea, and china. on japan, there have been bilateral trade talks ongoing, but the senior white house official did not say there would be any conclusion, announcement, or result discussed when the president visits prime minister abe in japan in korea, the senior white house official said that he was opt firstic that the two countries would find some way to address that free trade agreement between korea and the u.s. that has been disputed by the u.s. and where the u.s. has found some issues with enforcement there. the china situation, guys, as we know, is going to be quite nuanced. of course, the president is going to want to ramp up pressure on north korea, and this official said that you could see even some announcements of sanctions that go well beyond the u.n. sanctions that are in place. we'll be closely watching that he also said there would be a very in depth discussion with president xi jinping about the economic relationship between the u.s. and china that will
address what he called, a quote, colossal deficit, and that the president will seek to get china's commitment to rebalance economic relations a refocus on reciprocal trade and a discussion on barriers to companies operating in china he'll make some speeches and visits alt two economic conferences in vietnam and the philippines, but certainly, the bilateral trade talks with those three countries, and of course, the national security specter that looms large, are going to be in close focus. back to you. >> that's a lot of information about an important trip that's upcoming thank you for that >> let's get over to michelle caric caruso-cabre caruso-cabrera >> i'm michelle caruso-cabrera and here's your news update. >> secretary of state rex tillerson arriving at afghanistan's babroom air base today in an unannounced visit. over the weekend, tillerson met with qatar's foreign minister, calling for a quick resolution to the ongoing crisis between that country and its arab
neighbors. >> army sergeant bowe bergdahl is scheduled to appear before a judge on wednesday he's facing life in prison for endangered comrades by walking off his post in afghanistan. he was supposed to be in court today. >> lloyd's of london estimating net claims for hrk maria, $900 million. meanwhile, lloyds revising down its net claims for hurricanes harvey and irma to $3.9 billion from initial estimatesfor $4.5 billion. >> and to dlebt wedding crasher, look at this video katy perry hitting the dance floor at a couple's wedding at the four seasons in st. louis. the singer, who was in town for a concert over the weekend, ripped up the dance floor with guests for about ten minutes i bet they allowed her a free drink or two at well back to you guys >> no invitation needed on that one. >> exactly >> when we come back, the president promising no changes to 401(k) plans.
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changes to 401(k) plans this morning as republicans consider massive changes to retirement savings as part of the tax code overhaul ylan has been following the stories and joinis nous with more does the president shutting it down mean it's out of the question >> i think what it shows is the political hurdles are extremely high for republicans as they try to find ways to pay for the tax cut. the debate is all about how much workers should be able to contribute to their 401(k)s without paying the taxes up front. you still have to pay them when you withdraw the money you get to at least put in the money tax-free now, right now, the limit on the contributions is $18,000 but a source on capitol hill
told me that republicans were considering lowering that limit to just $2,400 the upside for lawmakers is that they could shift all that deferred tax money from the future into the present. that would help them offset the big tax cuts that they promised, but for workers, the fear is that the move will discourage them from saving for retirement. so president trump waded into all of this this morning he tweeted, quote, there will be mow change to your 401(k). this has always been a great and popular middle-class tax break that works, and it stays now, according to fidelity, 401(k) balances are at a record high thanks to the rally in the markets. the average amount that workers have socked away is nearly $98,000. and of course, fidelity and other big players in the financial industry have been lobbying against any change to this current system. the american retirement association, they came out today against using 401(k)s as a way of, quote, raising revenue for other tax objectives
now, republicans on the house ways and means committee have been silent so far, but in the past, they have said that they want to, quote, encourage and support retirement savings for all americans. guys, democrats are going to be all over this one. congressman richie neal, who is a top democrat on the ways and means committee, he said he wants to hold president trump to his word on this one back over to you >> ylan, thank you very much for setting that up. for more on the ongoing debate about tax reform, especially in light of the 401(k) debate, we're joined by jared bernstein, former economic adviser to vice president biden and senior fellow at the center on budget and policy priorities. also joining us, jimmy, american enterprise institute analyst and cnbc contributor good morning to both of you. >> good morning. >> good morning. >> there's a lot here to debate, just in this trial balloon, jimmy. why -- don't we have a savings crisis in this country already why float this idea of getting rid of a key incentive marginalizing a key incentive that would allow americans to
save more? >> well, i don't think we have a savings crisis it would be great if we saved more and the problem for republicans is that they had an idea to pay for these tax cuts it was the border adjustment that went down then they're like, okay, we're going to deal with the state and local tax deduction. that idea also looks like it's gone down. this is now the third swing here to try to find a way to pay for these tax cuts and now they're going to try the 401(k) i'm kind of surprised they have given up on it this quickly. you second have maybe reworked it so it would affect middle-class people less but they're running out of ideas now to pay for the massive tax cuts that they want. >> crisis or not, jared bernstein, ray, hedge fund legend of bridgewater writing in his linkedin post, only a third of the bottom 60% saves any of its income in cash or financial assets as a result, according to a federal reserve study, most people in the group would struggle to raise $400 in an emergency. that sounds like a problem
and i'm not sure getting rid of some of these tax incentives would make it any better >> jimmy is talking in the aggregate, and he's correct, but if you look distributionally, as you just did, there are tons of people who are very underprepared for retirement that has something to do with the wage stagnation of people who are nearing their retirement and again, i think i'm underscoring something jimmy just said. it's not that -- capping this tax deduction is actually not a bad idea but it depends on where it hits. wealthy people have been shown to save enough for retirement whether or not we give them a tax break to do it so in that sense, you are wasting revenue with this tax break, but once you go down to $2,400, you're whacking the heck out of the middle class, and there's very litting in the plan to help the middle class, despite what you're hearing from the administration they kind of blew this idea, and the idea that they're lurching around, looking for pay-fors at
this late date is not very promising for legislative success. now, from my perspective, that's a feature, but i'll leave it at that >> well, jim, in your list, you didn't even mention mortgage interest, which got annihilated quickly by the realtors. what other deep pools might there be that haven't been tapped >> i'm sorry, so we're at strike four rather than strike three well, what we have, the mystery bracket, the mystery fourth bracket, which they're talking about for wealthier americans. something between 35% and 39.6%. that's a possible way to reduce the revenue loss is it beyond comprehension that we take another look at the border adjustment? >> border tax. >> yes, it is beyond comp rehence. >> that's far more politically paletat palatable. >> is that a not starter as well >> i think that is a nonstarter
as well. yeah, i don't think that's happening. they're trying to maybe combine that with the mortgage interest and let you pick which one you want to take but the -- listen, they're all worried about the optics on the border adjustment. the optic on state and local taxes, mortgages, and 401(k), are far, far worse >> can i - >> jared, hold on. let me ask a question and you can say whatever you want, because i know you will. >> sorry >> no, i mean, you know, do you think they're going to be able to pass a bill that basically doesn't raise any revenue to address the deficits that will be generated as a result of the tax codes. >> that's exactly where i was going. >> okay. >> i think that's precisely the challenge here basically, the question you want to be asking yourself, if you're watching this show trying to figure out whether tax cuts are going to be legislated, is will republicans, will a majority of republicans in the house and the senate accept the deficit and debt imp
debtlications that we're looking at, the fiscal hawkry that these guys sometimes spout, how real is that? if they're willing to put $1.5 trillion, $2 trillion on the deficit. >> they're not going to do that. >> to the extent they're not willing to do that, the plan is in strubl. >> we'll leave it there, guys, as we continue to game out the chances for tax reform at this point, and how much is priced into the market. jared bernstein, james, thanks to both of you >> is there a changing of the guard in the market bellwethers? dom chu is back at hq watching that >> if you look at trends in the stock market, we know they change overtime, so do the bellwethers or indicators or leaders of the market. in today's environment, it is easy to see apple as a bellwether that's what michael roark says not only is it the biggest company out there, it's also a blenld of a tech and retail company, which means it could be viewed as an indicator of the consumer overall as well that's why northern trust chief
investment strategist jim mcdonald said he would pick walmart as his bellwether. he said the u.s. is a consumer led economy and walmart is a good measure of consumer spending some estimates have over two thirds of our economy driven by the consumer spending picture, so perhaps walmart a good indicator or bellwether there. wonderlic security says their bellwether is fedex. he feels like it's impossible to hide any economicactivity in our country from transportation companies like fedex so it acts as a good indicator or bellwether, and then when it comes to a conglomerate type, maybe not as much ge these days, but look no further than berkshire hathaway that's what john agustin thinks. he said warren buffett's company has a set of businesses that are like a smaller set of the american economy everyone has a different view, of course, on what companies are the best indicators of the market or economy right now.
but one thing is for certain, guys america and its top companies will always have to evolve with the times and the bellwethers will change, too, sara back over to you guys. >> i grew up in an era where it was the company who rang the bell this morning. 3m ia look at the sheer number of skus remember that, when their earnings came out? it was a big macropicture. >> it continues to be to a certain extent without a doubt >> i feel like you need a technology bellwether, a consumer bellwether, an industrial economy bellwether. you can't just have one blanket bellwether with your report, it also makes me wonder whether ge deserves its spot in the dow and whether that's the point of the dow jon jones. >> there was a time not too long ago, when cisco, many people said was the bellwether. the bagbone of the internet and everything with communications, had to run on cisco router switches, that kiengd of thing maybe they belong in there as well but it's also a dow component. it's like ge, not recovered its
dotcom era highs so maybe it's not as indicative for the market picture overall, but some of these companies, and carl had a great point 3m is one of those industrial giants with so many different product codes, those skus, that you could say maybe they're a good indecter. that leads to a broader discussion on whether the dow, the s&p, the russell, all these indices are truer capturers of the essence of bellwethers in the overall market >> i can't believe given the hard time ge's had, you're now trying to get them kicked out of the dow, sara. >> i'm not that was a discussion we had friday off your interview. and at one point when the stock was tanking -- >> his toeical torically, it wod mean price appreciation. >> the stock down over 4.5% today, after that really rather remarkable rebound on friday as it looked to be heading to potentially double-digit losses only to actually end the day higher a lot of concern about the
dividend here, as is justified we'll see what -- where and what they cut it to, but i think many people believe it will be and has to be cut. >> you know there's only one bellwether of the global economy and global markets, right? >> that is >> the japanese yen. it is. if things are going well in the global economy and global markets, the yen is weak >> excuse me, i just fell asleep, but thank you. >> well, it happens. i mean, that's the bellwether. sorry, guys. coming up, longtime critic of silicon valley barry lynn will join "squawk alley" with why he believes google had him fired from his think tank. very timely topic on the power of big tech. stay with us
exchange good morning, rick >> thanks, carl. good morning gm to ira harris we had so much going on. we had elections in japan, check toon a giant step to the right where do you want to start today? >> the world doesn't matter. the equities do what the what t equities do, and more importantly, if you look at the european bond market today, catalonia is back certainly on the front burner, italians made noises about lombardi and vinetto having votes for nonbinding referendum, and which yields have gone lower today spanish yields on the ten-year spanish and italian yields >> so what does that tell you about the ecb and their levers >> like the fed, they've broken whatever is of a bond saving mechanism, broken. just look at it. if we were to go back five or six years when there was this much political turmoil those yields would have gone up dramatically you can say, see, this works,
but not from a market standpoint, and we need markets to reassert themselves the central banks cannot keep controlling this because they wind up with, you know, a colin powell moment where you own it, once you break it, you own it. and they've broken it. >> now, with respect to what's going on with mr. kuroda, certainly looks 2018 abe will pick him again this is like trump and janet yellen as a matter of fact, you said on friday you thought janet yellen was trying to coax her way into being reappointed by keeping rates low. >> she made a speech friday night and i thought it was the most political of all her speeches, and i have a lot of respect for janet yellen she's -- far more than i have for others and she was saying that the rates will not go as high as people would think that we won't get there, and they are not removing qe from the tool box. >> well, the latter is very
impressi depressing to me, but also depressing the president's message has gotten out he likes low rates trying to link policy to the equity markets, kind of like a tarp, but i personally think the whole tarp experience was a nightmare in many ways, and to think that the market has gone unchallenged in many ways on legislation that hasn't crossed the finish line, may that change in the future? >> they might. but if you're a president whose barometer of success is the equity market, he starts every conversation, he interrupts foreign press conferences so yellen's comments on friday should have been music to his ears oh, this is somebody i could definitely live with i think her status may have raised, even though on friday -- >> let's get into what makes the world go round, trade. the euro/yen skyrocketing in favorite of euro the euro currency, obviously, still holding its own more or less against the dollar, so the
japanese are really looking for their auto industry to probably hit another year higher. >> euro/yen hit 134 overnight with the election results. this is one election where the currency went lower when they've got -- and he had a stupendous result >> we could almost end there he gets re-elected, currency goes lower not only are they not putting tools away, they said they are aiming heavier into the equity markets. >> if you look at it, 1.34, this has a huge impact on japanese autos versus german autos and it will have a bite for europe. >> certainly will. always a pleasure. david faber, back to you >> i will take it. thank you. let's send it out to john fortt and look at what's coming up on "squawk alley. >> prince of saudi arabia has a take on tech we're going to dig into that not just the social media upstarts, but also the impact of the tech giants. that's coming up on "squawk alley"
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with health care by a fairly wide margin. winners include align technology, intuitive surgical, and baxter international around 2% all of this as a big week of earnings kicks off overall the health care sector up 3% this month certainly, a sector to watch now back downtown to the start of "squawk alley." back over to you >> thank you very much morning, it's 8:00 a.m. at cisco headquarters in san jose, 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪ good monday morning, welcome to "squawk alley," i'm carl quintanilla with