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tv   Squawk on the Street  CNBC  February 15, 2018 9:00am-11:00am EST

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equities can grind higher. i said earlier, you can make money on fixed income and funds making good money on fixed income, where do you own it and how much do you own it relative to where you own equities is the thing going forward. >> we should note the president will be making a statement at 11:00 a.m. on the florida shooting. >> make sure you join us tomorrow "squawk on the street" is righting up right now. >> good morning and welcome to "squawk on the street. i'm david faber along with jim cramer carl quintanilla is at the winter olympics in pyeongchang we have two special interviews ceo of dow components boeing, dennis mulen berg and chuck robbins as well. earnings news released after the bell yesterday let's give a look at future for
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the opening 20 minutes or so from now we are positioned for a higher stock market at that 9:30 mark europe has been open for some time and over there it is also been largely a positive day so far. you can see germany's dax of course and france the best performer. the 10-year note yield so much of a focus yesterday as it same close to the 2.9 not sure we ever got there we're above it now thousand. yesterday we flowed 2.89, 2.915 and stocks don't see particularly concerned wti is down though, higher than it was this time yesterday this morning stocks are looking to extend their daily winning streak, five all three indexes gained more than 1% yesterday shrugging off the stronger than expected cpi after what was a sharp decline early in the session and inflation data out this morning shows producer prices rose .4% in january.
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that was matching forecast now the core rate minus food and understand also up 4%. that was twice what many economists had been expecting. what a difference a day makes. suddenly we're not worried about inflation. >> yesterday -- after about an hour or so trading. >> the vix collapsed and people are now saying, everyone is in on the vix, surprising number of people multiple hundreds -- the volatility might have been triggered by the 10-year going up in yield but what was the tail wag the dog tremendously because yesterday was a terrible day for interest rates and it didn't matter. the vix collapsed and the market went up. at a certain point it's going to play a role. >> how do you trade in this environment? >> in other words, the fear of higher rates, we're getting -- when you look at that and go okay -- >> three is not far away
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to be the obvious and stocks suddenly don't seem to be as concerned. >> i think that for first time i saw a genuine issue being raised with what the cpi was really made of. how much of it is short term food i say short term because we know you get a good harvest, food goes down. it does. yesterday, there's a protein shortage in some parts of it but how much of a parl and how much just because the inventory was lean for christmas, they can turn on the jets for apparel any given minute listen to the tang eer factory, there's a glut of apparel in the system gasoline, oil has come down quite a bit. that's one of those things we should say wait a second, should that be included then we look at amazon and look at amazon and there's a note today about walgreen's, what is that to defend margins against amazon if amazon is putting pressure on margins in so many different
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industries, is there really core inflation? >> i don't know. you've got people like peter -- a frequent guest of rick santelli saying we're on the cusp of a sicyclical upturn and weaker dollar, supply pressures, costs in particular. >> transportation is real, shortage of truckers. >> all culprits, five-year inflation point up after 8.5% basis rise yesterday, now the highest level in 11 months. >> economic expansion, you'll have shortages. >> we want endless slack in the system >> no, we don't. if you go to the big steel companies, there's gigantic slack in the system. if you go to -- a shulman, there is not a lot of slack in the plastics business but had to do with the storms and big spike and curting in margin for a lot
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of companies, were the storms and we're finding out where does waste management benefit it's far more fluid. i'm not denying interest rates have gone higher i'm saying that the possibility of interest rates actually retreating has to be put on the table. >> okay. >> let's talk a little boeing here because of course we've talk the about that stock so often because it has been a high flyer -- >> i like that. >> thank you. >> dennis mulen berg joined us at post nine a short time ago and i asked him, what his reaction has been to that continued rise in his stock price. here's what he told us the market is responding toss what fundamentally a strong aerospace market and we deliver on our commitment. we promised production ramp up and now delivering on the ramp up, you can see the
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profitability as well. it's efficiency in our production lines and efficiency in our supply chain and top line growth at the market bottom line growth -- >> it was just the investment community catching up to a certain extent >> i think part of it is the recognition that this really has changed from being a high cycle business in the past to a long-term sustained growth business i think that's changed the attitude and perspective on the street >> you've talked a lot about that higher multiple when you can show you have sustained growth as opposed to the ups and downs of highly cyclical business. >> we all remember the days when you would have fabulous growth and boeing would be a leading performer in the dow then just whorrendous and boeing would be the worst performer in the dow and it changed because some of the points that moilenberg raises have to do with middle classification, 100 million people he was mentioning, new people fly every year and
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ecommerce. there are trends that are co-is a lessing and shortage of planes and the multi-year backlog cannot be denied and you can't get a plane if you're a major airline. you can't get a plane and that's from boeing or airbus. >> still talked about 80% of the world's population never yet to fly. >> i love the long-term story and you can look at a day like today. what happens if interest rates trade at 3.2 you can still buy boeing, even though you need financing to a buy a plane. what you need is somebody to let you ahead in the queue to get your plane >> even with a stock price up over 100% over the past 12 months. >> look, when the vix spikes, whatever somebody does, get the dow down 1,000 points, it's a big part of the dow and buy it then it's going to 400, that would be night reasoning, december 7th. 279 now reiterate i was using 18-month time frame.
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that may have been too pessimistic. >> it appears that that may have been the case. we got a lot more for mr. muilenberg we had a long ranging conversation with the boeing ceo. for now let's bring in carl at the winter olympicsin pyeongchang, south korea lots of action overnight take it away. >> reporter: busy morning. mick kay la shiffrin, coming in fifth in sochi, very big story here incredible run and emotion at the very end all of the success we've had this week in snowboarding and alpine sports, driving some sales of olympic related revenue. our friends at fanatic are saying demand 80% ahead of this time in sochi. $300 nike jacket, a big burton jacket and top selling category is hockey merchandise. snowboarding has gone into the
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number two position replacing curling. keep an eye on that. tyler george, a u.s. curler, nice story about how he was once shopping for shoes in duluth, minnesota, found a pair of xechers he loved and turned those into curling shoes that's become a big story among the fanatics of curling down here at the olympics and later on this morning, we'll check in with a korean-american, famous chef, david chang, you might know his franchise. what it's like scaling a business like the one he has korean food and guys his new netflix docu series which debuts next week i think, which is unlike anything netflix has done regarding food we know the kinds of investments they've announced over the past couple of days busy day today >> okay, so carl, last night before we go to sleep, my wife lisa says, have you seen carl's instagram today it is unbelievable and shows me where you must have been -- i don't know, 10 yards from the demilitarized zone and
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looking at north korea, frightening, scary or just status quo >> chilling. very chilling. you'll see some of that tape tomorrow we got well into the dmz and right up to what they call the military demarkation line, stepped into north korea for a few moments then stepped back. it's an unbelievably tense part of the world and hopefully the stuff we show you tomorrow will help relate what it was like being there >> well, the reason -- one of the reasons there was a moment where the south korea soldiers standing erect but everyone was wearing sunglasses and seemed to degree almost like at the bucking ham palace is it really like it was in 1953 except they have more modern garb >> yeah, i mean it's like the armistice was signed in some ways last week we were actually told when the soldiers were escorting us up to
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that point, they said whatever you do, do not reach out or wave or try to communicate with the north korean guards. you'll see across the way for fear they might think you're somehow mocking them fairly tense but definitely something that all of our crew and producers are educated having seen. >> well, carl, i mean the coverage has been amazing by you. your instagram is dynamite and people are watching it all over the place. congratulations, we'll talk to you soon >> last night cisco was out with strong earnings and revenue growth and actually huge revenue growth, announcing plans for the overseas cache and i would say kind of becoming what we used to remember about cisco, a great growth engine chuck, congratulations on a great quarter. i'm trying to figure out the best story, accelerated revenue
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growth and $67 billion repatriation or acquisitions really coming in i want to settle on the fact you have recurring revenue that is dramatically up in ten quarters because i think that is the story some journalists are missing. isn't that the goal to have that huge recurring revenue to be like adobe and not a hardware company? >> first of all, jim and david, thank you for having me. it's great to be here again. we're really proud of what our teams have accomplished. we had a great quarter as you sted we're at a point where we have a phenomenal innovation pipeline, we have the strength and flexibility of our balance sheet and we have a very excited team who's executing really well. you know, when i took this job ten quarters ago there were two big things we wanted to do we wanted to reaccelerate the innovation in our core franchises and wanted to begin to execute on this transition to
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more software higher degrees of recurring revenue. if you look at what happened in this quarter our new catalyst 9,000, our networking portfolio, 3100 customers in a seconds full quarter of shipments and it's the fastest ramping product in the history of the company so that's the first piece in our core then the second relative to this software transition, 33% of our business is now recurring. we have 5.5 billion now on our balance sheet in deferred software and prescription revenue up 36% if you look at our product revenue, ten quarter ago, 6% was from recurring offers and this past quarter it was at 13% and that grew 34% as well. so we're very pleased with what we did very happy with the execution as the team delivered and we're optimistic about where we are right now. >> so chuck, let's say i'm a sales person for cisco and had
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switches and routers to sell 11 quarters ago you're giving people everything from a tie into microsoft, tie in to google cloud i was struck by the 20 million strong user base of broad soft are people selling that too? and cyber security amazing alliance here with alliance, aeon and apple for risk management is that all in the tool box and that's one of the reasons you're having such electric subscription growth? >> jim, if you look first of all on the core platforms we launched our subscription on a network switch which people didn't think we could do and incredible uptake on advanced version of that. we have customers in that space who spends $5 on operating the network for every one dollar they spend on the equipment. if we can help them lower the operational costs what we're doing through the automation
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platform in the security business, our recurring subscription business deferred grew by i think it was 34% again this quarter so we saw continued move there you talk about broad soft where we just close that acquisition and they have 20 million users where we can expand our clouds based subscription business and collaboration. we have a lot of areas and then also, the work we've done with apple on the secure connector for ios, you mentioned the cyber xur security alliance we built and work with google and microsoft on helping customers navigate this complicated multicloud world they live in we have -- we have a lot of areas that our teams can have real rich conversations with our customers. >> i'd like you to take me through the capital allocation decisions you've made in part given the decision to bring back 67 billion in cash from overseas, you increased the buy back to $31 billion, a $25 billion increase and increased
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the dividend why are these the right moves? take me through your thinking here in terms of how you're allocating capital given the benefits from tax reform >> well, david, thanks for the question we talked about this in the past we're not an incredibly capital intensive business if you look at our total cap ex we spend on an annual basis. there's several options we have. we always talked about the fact that we would leverage this capital for -- to reduce our share count which we announced yid, obviously to continue our capital strategy of returning cash to our shareholders and increased our dividend yet again yesterday and think we have left plenty of capacity to deliver m and a that aligns with our strategy that we've laid out over the last two and a half years. from a -- from the strength of our operating model right now, gives us the opportunity to also do the things we're doing relative to compensation for our employees which we launched
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yesterday and we're also working on lots of efforts around major issues in our country and around the world, some of the social issues whether it's homelessness or hunger, we're working on a global basis and educating refugees in germany, spending a lot of time not only evolving our employee programs and employee compensation but also ensuring we're giving back to the community, working on skills gaps around the world. so i think it's a combination of returning our capital but also leveraging the strength of our business to make sure we're also giving back. >> chuck, there had been a big thesis going on that kept cisc ooxt back, i don't need cisco, i can put it together. you know the risk has benefited from that and you've been complimentary of what they do. it's almost as if things have
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gotten too complicated and only a couple of clients that can do white box. is that the story the complexity and how you need cisco because you can't do it yourself anymore? >> there's really two places where this discussion is relevant, jim. first in the major web skill community, where they frankly wanted white box solutions because they built ought automation platforms that they needed technology that fits within that. to the extent we can take our technology and have it operate within their automation environments and at a very cost effective price point, then they are quite happy to operate with us in the enterprise, the issues are much different if you look at what our customers dealing with, again, it's $5 per year on -- $3 per year on operating these networks versus the dollar they spend if a product has a five-year life sicycle. they will spend $15 managing it.
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the issue is not about how do i save 10 cents on the dollar, the issue is how do we lower the cost of operating it and that's a big part of what we launched with a network intuitive, where we deliver a layer of automat n automation. >> okay, chuck, i just want to thank you so much for coming on our show and also want to say that i think that the tar heels are peaking at the right time. that's important for you. >> con gratd lagratulations on eagles. >> thank you very much congratulations to you. >> great to be here. >> david >> always good to hear from chuck robbins, interesting in the allocation. >> this is 67 billion repatri e repatriated. the quarter looks messy because of the charges and deem repatriation and tax they are paying now on the cash that comes back, jim. over all the stock price going up. >> one of survivors, my microsoft, qualcomm. >> we haven't even started
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talking about qualcomm we had to end with mr. robbins because we're going to have a moment of silence at the new york stock exchange as well at the nasdaq also of course, going to observe these moments of licenli silence to remember the school shooting in florida.
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visit esd.ny.gov we are set up for what would appear to be a higher open this morning. volatile days continue to a
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we've got a little more than three minutes until we gets started for trading on this thursday at the nyc. time for a mad dash. >> last night we got the new -- the i think there's too much emphasis put on frankly because a lot of these people can trade in and out but one -- >> not to mention a lot of them have terrible track records. why do we care >> we care about one only. >> which is? >> warren buffett. >> because he does not flee with the wind or fly with the wind. he makes judgments and increases apple's stake by 23% and does not care about the so-called super cycle of the ten not working well i know he does care tremendously that it's a great consumer product with the terrific revenue stream versus ibm buying back a lot of stock. he liked that but prefer apple buying back a lot of stock with
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a service revenue. katy uberty out with an interesting note, something she interpreted as negative, china, and maybe the comeback of the chinese players to try to take the share that apple has picked up and picked up january, maybe a little bit not off the chart but she's thinking about the grow thesis she's been right. you have buffett and uberty. >> the lead is fewer android switchers limits unit growth this cycle share gains accelerated by chinese vendors regained some share against older discounted iphones. >> you can read it both ways but when you sit down with morgan stanley, what you come back with, it's on schedule to grow versus decline and there's a lot of the bears who at this level when we were at 170 said the best days are behind them and they'll have
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decline. i look at the note and say apple is not a source of funds for a lot of the big institutions anymore. it's a longer term story that is starting to become less cyclical because of the service revenue but also because of the share take in china. >> price target does remain $203 a share to your point -- >> we can trifle with her all we want but she's been right. >> and the minute or so until we get an opening bell here, anything else catching your attention this morning a key to what we see for the day? >> there's a company that my charitable trust owns we think the world of, sicyclical related to our company, waste management, beneficiary of the new tax code but waste management is a proxy on construction also, on debris cleanup in texas but construction is strong and great way to read it is slow growth and better way to read it is waste management and it's good, it's real good
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>> hear the applause building at the nyc for the opening of trade which will begin two seconds from now here's a look back at the -- >> you can see those -- there's going to be a strong open here here's the big board by the way. celebrating its first listing anniversary. at the nasdaq, a biocompany focused on the treatment of aging related diseases there are a lot of those. >> yeah. >> in fact, aging itself could considered a disease. >> it's amazing these inability of drug companies to win in alz himer's. >> that continues to be a very difficult field but one that we know has incredible potential. >> they can get it right -- >> it would immediately become the largest selling drug in the world. >> you know what warren buffett
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invested in in teva. >> i regard teva as being a second rate generic company that's trying to be better run i was trying to get the high end develop a thesis among buffett, jamie dimon and jeff bezos putting together the coalition so important that's a coalition that rely on generics to bring down pricing i don't think the tie-in necessarily fits but it's amazing warren buffett goes with what i regard the worst of the worst. reopen that file maybe they have more than we thought because buffett does not approach any large by lightly. >> no, he doesn't. they have gone through years of difficulty. >> years. >> management changes galore credit rating down, grades terrible source of sales of allergan -- i should say the purchase of the generics business from allergan
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none has gone right for a long time. >> absolutely nothing. >> an important component of the israeli economy and employment, cut a lot of jobs in that country. all right, maybe it's turning a little. >> those are the two buys and they are resonating in the market today our interview with cisco, united technologies is up and er -- >> cisco not up nearly as much as indicated in the premarket. up 3 or 4%. >> mr. rob bins was up as much as 7 or 8%. >> in the end you don't have the vix trade powering things. applied materials with a remarkable material was up a couple of bucks and that one has come in. i think there are sellers coming in and i also feel that in the end it -- we just aren't focused on on the 10-year like we were three weeks ago. >> i don't quite know why since it seems to be moving towards
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3%. >> the end of the world, now a weigh station, whatever. and i think the narrative changing over and over again is making it so people are a little queesy and we don't care about the 10-year, we care about the vix. the moment we are caring about the vix, we'll go back to the 10-year is my thinking the moment we stop caring about the vix, which might be soon because vix being crushed. >> a name you brought up yesterday but then we ran out of time to really discuss or i didn't have an opportunity to share it all with you, kraft hines, heinz. >> they did this strange thing that a lot of analysts were writing about this morning after the close yesterday kraft heinz said this afternoon it will release a management slide cast to update the progress since the merger between kraft and hooirnz in 2015. i can't tell you how many of these notes out this morning, jp morgue on ar barclay's which said they never seen anything
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like this or goldman sachs why? because they are putting this presentation out tonight -- >> before earnings. >> why would they do that? >> we don't know >> they have something up their sleeves. >> based on their conversation this evening, the majority of investors seem to interpret the announcement negativively and told they have to wait and see what the presentation is actually about they think it's going to be a prerecorded video and audio presentation that features a number of different managers or stake holders that is designed or intended to put kraft heinz in a positive light. >> that's shocking. >> good luck with that barclay's for its point says likely to be initially viewed negative, backdrop of weaker than anticipated fundamentals through 2017 and likely suggest thoer insufficient to prove a catalyst for the shares. we'll see what we get from them. interesting story a couple of
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days all in the wall street journal when they seemed to have opened up. 3g is very resist aeant to shara great deal the key for the company is doing the next deal because i pointed out time and again after their huge failure with unilever, they suffered a blow this they yet to fully recover from in the ability to do that given they can't make it unsolicited or unfriendly in any sort of way. it has to be companies that will encourage if not say okay, we're open to it so they got to kind of change their image a little bit. >> there's been a change in the guard -- general mills people are liking more and kellogg people like that quarter i didn't think that those quarters were all that special i thought that pepsico's quarter on the frito lay side was special. analysts said it was one of the biggest decliners. i watched that group closely but they have been miserable
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by the way, what is that all about? also aided by the fact that amazon buys whole foods and people feel the margins will be squeezed there that's one of the narratives that brought down -- treehouse that was an alternative for supermarket white label. that's doing terribly. i watch kraft heinz, they need to make a deal cure ig got the deal to do dr. pepper. >> dr. pepper was flat, volumes were flat but that stock obviously up a great deal on the deal itself. nestle also since we're talking about it -- >> that was not a great quarter. >> continues to be a significant holder there their ceo still relatively new in the job, talking about a reacceleration of growth both here and abroad and not yet seeing it in the numbers but they were indicated down i think they were down in european trading as you might expect as much as 21/2 percent after the earnings came out. >> we're also in the grips of a
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kind of a sea change in what does animal does very well by the way, i keep waiting lily did not have a good number in their animal health. people think they are going to sell that. their money is still going cyclical the caterpillar on table works still see back and forth in social media, facebook can be up five then the profit takers come in fang just doing okay i'm watching applied materials closely because i love that conference call. people are not crazy about the stock. it is a very choppy market after yesterday. we have a couple of days that are up and people don't know where to place their bets. applied material being down is very negative for -- a big upgrade yesterday, this morning, very negative for lam research up 8 yesterday the areas doing the best, you'll love this, where m and a was,
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west rock buys capstone and paper stocks go up al shulman and the consolidation in paper and chemicals is unabated, no one cares, no antitrust action, they care far more about antitrust with an at&t time warner all companies that are the bedrock. no one seems to care and the mergers are -- extraordinary. >> speaking of mergers, let's come back to our favorite topic, broadcom and qualcomm. there was a meeting that took place around 2:00. they spent about two hours talking hock tan and his opposite and all of their advisers as well in the midtown offices of their law firm there. not getting a lot out of it but expectation that i have is you'll hear something from qualcomm, not today, perhaps early as tomorrow the board needs to weigh in. the bulk of the meeting i
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believe was spent on talking about the regulatory i mpedimens to the deal. they did talk about value as you might expect but it does seem the bulk of the time was spent more on regulatory and basically the broad come side saying what can we do and it's not clear how much they engage on exactly telling them what they can do and i'm getting piecemeal sense as to what went on given the reluck tans to front run what the announcement will be from qualcomm but we will see i think the expectation would be that nothing is going to change in terms of thirl resistance to the deal. >> the stock that reacted the worst to it was nxp. >> nxp. >> what is going on there that nxp is giving -- it's a 110 bid. >> 115 stock price, well below where it had been recently we're waiting on the chinese approval and i'll give you more
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clarity. tell me when china is coming and i'll tell you with more certainty what's going to happen. >> if they walk away, i still believe that the stock can go higher. >> i know you do we've got to get to bertha because we need more time to share with our audience from our interview with boeing ceo. take it away. >> thanks very much, david, we're watching the markets rising pretty much in tandem we did get that hot number in terms of whole sale and ppi yesterday, that made the market skittish, not so much today. the yield up to 2.94 overnight and it has since come in from there despite the fact we did get a hotter number this morning, it's not as much of a shock right now. we've now gotten three strong data points. people starting to factor in maybe the fed will have to raise rates here more than we thought. earnings this morning, refocusing on the fundamental drivers, it's not just the fact that things are rising but earnings are rising.
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yesterday we saw the volatility index fall below 20. that helped provide a bit of a tail wind to stocks. we're still below that today that should give us some atrib w buted to the expiration of options, we'll see if that continues this morning earnings very much the driver particularly with big cap tech cisco driving the bus this morning. not just the bottom line beat but the first year over year revenue growth at more than two years from the networking giant. trip adviser also had a top line beat as well that's helping online players. overall fourth quarter s&p is on pace for 8% revenue growth that's the highest since 2011. big cap tech like amazon, all out of correction at this point. and chip stocks which have been the big drag have now recovered about 10% from their lows last week so that is helping move things lower. also want to mention right now halliburton, we're watching those shares, they have been halted for news pending. we'll bring that to you as soon as it crosses.
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david? >> okay. thank you, bertha. >> say again >> baker hughes maybe sell some of baker hughes -- i don't know, that industry just $10 decline over the course of one week. the group has been acting poorly but we know ge has to do a deal. >> ge -- we've got to talk more about that and what's going to come before the end of the quarter. >> you have insight? >> not yet give me time let's head to the bond pits now. rick, what are you working on this morning >> you know, just trying to factor in how today's ppi in many ways every bit as hot as yesterday's cpi but cpi seemed to have broken the veil with response to market response. note yields are up two basis points and that makes sense with the march meeting and the fed and back to back rather warm ppi/cpi data points but the 10-year at 290 as you see on the next chart, it is unchanged. we have been up to a 294 yield
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and as jim referred to earlier, is it that we're ignoring tens or have we factored in the realities of the situation and vas late between what's moving it and how it affects the equity markets. remember, what happened with the equity markets and reversal of some of the trades that were triggered by the one dot in the solar universe that so many issues of the portfolio to volatility, maybe that's behind us but one thing that sntd behind us, the ongoing firmness and very measured pace in many ways outside much a few sessions of 2018, it's been orderly. we go all the way back here on bunds to september 2015. they are getting close to 80 basis points and if you look at the difference between the two, it's broken out a bit as you see on this one year chart as we sit at 213 i continue to say, mario draghi, you're in the box here, we're pressuring your markets higher in the world global correlation trade and it's going to make you
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have to back into different policy look at the two-day of the dollar indlex, spongy, spongy, it is just a whisker from testing the lowest level since the end of 2014. back to you. >> thanks, rick, rick santelli when we come back, we're going to have more of our exclusive interview with boeing's chairman dennis muilenburg. "squawk on the street" will be right back ♪ feel that? that's the beat of global markets,
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let's get back to our exclusive interview with dennis muilenburg, jim and i asked him as well about the impact of tax reform and the potential of a trade war with china here's what he told us >> this is one of the best things that's happened in the last few months, the passage of tax reform frankly i'd like to thank the administration for getting that
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done we said this was the biggest thing we can do to unleash economic energy and we're seeing it it's allowing us to reinvest in our product lines and helping us compete effectively around the world. >> i'm glad you mentioned that there's a perception that companies such as yours would use the money for buy back and you have a great buy back for dividend but i see building a huge number of planes which means planting equipment and putting people to work. >> we're reinventing the business right after tax reform is passed we announced a $3 million in our business and advanced digital training and advancement in veterans in our community and investment in innovation, factories and plants and growing our production lines, future products, future services. >> but on the conference call and this is often the case in these things in this debate preent recently, people say you were going to do that anyway?
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as a result of revenues it might increase given the benefit of the business people want to know how much more incrementally are you spending >> this is billions of dollars over the next several years, additional billions of investment you're right, we're already ramping up as a percent of revenue. when we think of future product lines, our ability to ramp the 737 production rate and make the capital investments to do that we made a decision to take the 787 dream liner program from 12 a month to 14 a month. our ability to capitalize that to ramp up production and invest in the next generation product lines, it's all enabled by tax reform i can tell you the number one thing we're doing with tax reform benefit, we're investing in innovation and growth that's going to create manufacturing jobs in the country. >> i wonder if you're concerned about the increasing rhetoric between the u.s. and china and the real possibility of a trade skirmish if not an all out trade war. it would seem to me were that to occur it would not be
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particularly good for your business. >> some worth keeping a close eye on we had good die alog with the administration and chinese government it's foreign we have a balanced approach to trade with china we need fair trade and fair competition. if you look at the china market from an airplane standpoint, those 41,000 new airplanes, more than 7,000 are in china it's becoming the world's biggest airplane market. >> and you expect that to continue, i would think? >> we do about one-third of our 737s that we roll out of our u.s. production lines today go to china. so we have a big expert business the aerospace sector creates about a $90 billion trade surplus for the u.s. every year. but a big part of that is china. so it's important that we have a productive relationship with china, and free and fair trade is important and a balanced approach to it >> so fair to say it's something you watch closely. >> something we're keeping a close eye on >> chaurm and irman and ceo of .
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we perhaps don't talk enough about china. it's a risk that needs to be watched closely. he's watching it closely but the continued relationship we have with china, what this administration does in terms of trade, what their response will be, one-third of all 737s, jim, go to china. one-third of them. >> i think you're absolutely right to focus on it one of the better moments in the terrific call was the idea, listen, we see a steady ramp of spending in china, which is positive because of our strong and growing market share in china. high service penetration you don't want to lose that edge >> no. it is one of those geopolitical stories, those macro stories we have to keep a close eye on. the question is, if there's a skirmish, will it really lead to an all-out war, or will it be contained? >> we're still waiting on some sort of steel news >> we are. >> steel is a very small industry in our country.
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in the meantime, those who are chartists are looking at the stock of boeing and saying, you know, here we are. we are just nine points away from the high. will this take it out? still yields almost 2% so i have to tell you, david, it is still this market's leader. nothing has changed. nothing. >> nothing it is worth mentioning when you say leaders, before we head to break, apple is up almost 2.5% this morning >> you know, the buffett halo. i don't think people felt he was going to buy more. the correct interpretation of the note if you go back in time to where it was 171, there were a lot of people burying it. it was a free fire zone. once again telling you you've got to trade apple you can't just sit there now, where are those people? they're in hiding until the next down drift i love them. they're really nice. >> okay. we're going to have your stop trading.
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get ready. get yourself together here >> you mind if i stick around? >> i'd like you to, that extra half hour. that's a bonus i can't get enough of. >> well, curling is also great bonus. >> i do love curling >> my wife likes curling >> we have stop trading with jim coming up next make something for dinner.
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all right. let's get a little stop trading with jim what do we got >> guess who's back, david >> who >> bristol-myers is back morgan stanley talking about optionalty for m&a bristol-myers is so back that i have to resort to, yes, my time honored way of saying it, because it is back, it is bigger than ever. bristol-myers! >> stock's up 10% already for this year. it has been a big move m&a continues to sort of be one of, as you point out, the many different things people talk about with that stock. coming up, we got a lot more of our exclusive interview with ng ceo dennis muilenburg keep it right here
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all right. good morning welcome to "squawk on the
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street." we're live from post nine at the new york stock exchange. carl quintanilla is with us from the winter olympics in pyeongchang, south korea and sara eisen is off today. let's give you a quick look at markets. higher on all the major averages one half hour into trading on this thursday. that, in fact, is where our coverage begins this morning ready to rally, stocks shrugging off inflation jitters. all three indices in the green >> and it's not just today stocks are recovering back in positive territory for the year. we're going to tell you where you should be putting your money to work straight ahead >> and more from our exclusive interview with the ceo of boeing what he had to say about his company's stock, growth, m&a, and a lot more but first, let's get to economic data that we have crossing the tape for that, we go to diana olick who has the numbers. >> home builder sentiment unchanged in february at 72 according to the national association of home builders
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hmi monthly index unchanged but up from 65 one year ago. interesting in this morning, no mention of fast-rising mortgage rates. instead, the chairman of the naahb says builders are excited about pro business political climate that will support the housing market apparently tax cuts are a much bigger deal to builders than the concern over mortgage rates. what's driving the sentiment future sales kppexpectations upw points to 80 that's a post-recession high buyer traffic unchanged at 54. current sales, though, down 1.78 expectations high but actual sales a little lower confidence is highest in the west and lowest in the northeast. again, unchanged at 72 anything above 50, though, is considered positive sentiment. back to you. >> yeah, still very strong thanks so much, diana. let's turn to the markets here all three indices in the green, adding to yesterday's strong gains. stocks are on the rise for a fifth straight session, climbing back from the correction levels
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we hit last week markets are now in positive territory for the year we had technicians tell us back in the height of the craziness a couple weeks ago that the markets had to retest the lows then they did. now we have people saying, oh, that was too textbook, it was too easy they're still nervous. >> we got the most oversold we've been since a period in 2016 where we bounced tremendously that did matter. we ended up with really good earnings during this period. then we realized that the vix was in charge, not the ten year. i think it took people by surprise you saw 100 million shares trading. these things were all so obscure. yet, that had been the trade we didn't know that. what's happening as we skcome back, we say, geez, kind of went down because of the ten year we rationalize the bottom line is we shook out a lot of people. >> but you don't seem to trust this rally completely.
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>> well, i don't trust it because i'm still a believer that the ten year does matter. it's great to see the vix people wiped off the face of the earth. that was just something that was an aberration from people playing a game of no volatility. it's back to looking at earnings just so happens the earnings are pretty good. >> where are we on the ten year, 2.91 >> 2.89 right now. >> i think -- look, i speak to a lot of people who trade treasuries obviously not as sophisticated as rick. it's a crowded chain, to be sure >> i bet >> so the possibility of a 2.7 is -- would create the rip-snorter rally, the rip your face off, whatever these people call it. when i look at the numbers of the earnings, i come back on a cisco and say -- hilton. i say, listen, those are pretty good, so i want to buy them. >> is there still the core question of if interest rates
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are going up, and we don't know, what do you pay for those future earnings we don't know yet. >> yesterday i mentioned tanger factory. the call was okay, but it's still a read it's a free-fire zone. anything that's 3.5 that was pent to be a bond market equivalent is being executed here they've taken a sector and decided that sector is just bad news you got to avoid it. real estate investment, if you own those and own some preferreds, this has been a disaster disaster >> yeah, yeah. all right. let's get it over to carl, who's of course at the winter olympics in pyeongchang, south korea. >> hey, david. busy day we've paid so much attention to snowboarding and skiing the last couple days, but continue to
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have some trouble being as successful on sports that require a skate. the women's 1000 meter speed skate. women have not won a speed skating medal since salt lake city back in 2002. brittany bowe had a good chance but comes in fourth. heather bergsma finished eighth. we continue to try to put together some medals in the speed skating realm. meanwhile, we continue to also watch the athletes it's not just about watching the olympians, but also asking them, in this case, what they are binge watching take a listen. ♪ >> my wife when i watch "the crown. >> "shameless. >> either "homeland" or "suits."
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>> "top gear," "vikings," "game of thrones." >> i like "suits". >> had a lot of fun binge watching "breaking bad." >> i just finished "stranger things." >> "gossip girl" right now >> "arrested development" or "rick & mohrty." >> a lot of american titles from americans around the world norway continues to pull ahead in total medals. u.s. has about eight we hope to change that in the days ahead coming up this hour and next, we'll talk to david chang, the creator and founder of momofuku. we went to lunch here in korea, talked about the cuisine, the culture, the olympics, and of course what it's like building a business and trying to get a culture to scale that's coming up later on this hour >> i love his restaurants. i'm excited about that >> a little pricey but fabulous. >> very, very delicious.
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your report highlights, carl, how international american content, media content has become, right. >> absolutely. i mean, it ties right into the netflix theme. they're doing this with david. we saw what they are doing with ryan murphy and what they're paying letterman and jerry seinfeld and chris rock. then their ability to, as you guys -- we talk about this all the time -- their ability to refine the product for individual markets no big surprise that international subs are the story every quarter. >> yeah, i think their budget for what they spent on food-related programming is higher than many other media companies' overall budget. which is incredible. but apparently there's an audience for it. carl, we'll check you out in a little bit thank you. >> we all love to eat. >> we do we love to eat when we come back, boeing is among the leaders of the dow of course, the stock -- well, it's been on one heck of a tear. it's up 19% this year.
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we spoke exclusively with boeing ceo dennis muilenburg. what he told us about mergers and acquisitions, taxes, defense, and a lot more. and let's give you another look at stocks as we are about 37 minutes into trading this morning. you can see all the major averages higher. we're back right after this. obvious. sometimes, they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group - how the world advances. ♪ with its high-tech the cameras and radar, contemporary cockpit, 360 degree network of driver-assist technologies,
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this is like at green show here shares of boeing continuing to
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soar coe dennis muilenburg joined us here this morning and talked about the company's growth the stock price has been remarkable and yes, the race to space against a particular gentleman who's fabulous in telling you the story. take a listen. >> you've seen that change just over the last few years as air traffic has become more global in nature. we see air traffic growing, passenger traffic growing about 6% to 7% a year. that's feeding airplane growth throughout the world we see over the next 20 years the world needs 41,000 new airplanes. the global fleets are going to double in size all of that is going to create top-line growth for boeing and our entire supply chain. >> you're making how many planes this month, how many planes this month, last year, and how many do you need to be making next year at this time? just trying to get near that demand >> last year we produced a record 763 commercial aircraft
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this year we've guided to 810 to 815 aircraft by the end of the decade, we'll be building more than 900 airplanes a year you can see a significant top line growth. passenger traffic around the world, we see new passengers entering that's going to drive that growth every year we have 100 million people that travel for the first time in asia >> what is the cash flow as you go on? because the leverage of being able to build three a month to five a month must be extraordinary. >> it is just to give you an example, our 737 production line this year we're at 47 a month. we're going to be taking it up to 52 a month. next year we'll be going up to 57 a month all of that is driving top line cash flow. so last year our operating cash flow was a little over 13 billion. this year we're guiding to 15 billion of operating cash flow so you can see this is a year-over-year cash growth business i think your fundamental point on this business is no longer a
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high cycle business. this is a long-term, sustained growth business. >> which i guess deserves a higher multiple. >> you know what i'm thinking. m >> what was your reaction, though, watching your stock price move up parabolically were you surprised >> i don't think i was surprised. the market is responding to what is fundamentally a strong airplane market, aerospace market globally. the fact we're delivering on our commitments -- we had promised production ramp-up we're now delivering on that ramp-up. you can see the profitability that's hitting the bottom line as well. it's efficiency in our production lines, efficiency in our supply chain you have top-line growth at the market, bottom-line growth -- >> so it the investment community catching up? >> i think that's part of it and part of it is the recognition that this has changed from being a high-cycle business in the past to a long-term, sustained growth business i think that's changed the attitude and perspective on the
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street >> we talk a lot about commercial, but defense also important part here. i'm curious, given the increased expenditures on defense from the budget that was just passed, what does that mean? >> the defense business is a very important part of our portfolio. about a third of our business is in the defense arena we're encouraged by the strengthening of the u.s. defense budget international defense is strong as well. about 35% to 40% of our defense business is now outside of the u.s. but domestically with the increase in defense budget, we see favorable outcomes for a lot of our programs, things like the new tanker program, the p-8 surveillance aircraft, our fighter business, space, satellites all of those have upside as a result >> on your january 31st conference call i believe was the last time we got comments on the potential deal where you're continuing to work with brazilian regulators can you give us any update there in terms of progress you may have made? >> we're continuing to make progress we do see that as a great strategic fit.
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we've got complementary product lines, complementary services. embraer has vertical capabilities that fit with our strategy going forward it's a nice strategic combination. we're respectful of the concerns the brazilian government has raised around sovereignty and their national defense we believe we've structured a deal concept that will satisfy the needs of everybody involved. so we're making progress still work to do i'm hopeful we can bring that deal to a successful conclusion. >> sounds as though you're getting closer >> we are getting closer we're making progress. we're not done yet we have some work to do, but we're making clear progress. >> last night airbus put up some great numbers. it had always been, well, zero sum. they're doing well you must be doing badly. that's another misconception >> yeah, yeah, this is not a fixed pie business where we're trying to take share from each other. we're very competitive airbus is a strong, respected competitor of ours we have strong respected competitors in the defense
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business as well but aerospace and defense is a growing sector it's outpacing global gdp. i would argue that industrial sectors, aerospace and defense is perhaps the strongest sector in the world while we see airbus growing, we're growing as well. we're going to compete and win, and we're going to all grow as this industry grows. >> i just got to ask about mars because i asked about it last time we got an interesting dichotomy here i think musk may be the greatest promoter of our time boeing may be the greatest operator of our time is the narrative such that he gets -- he's always there with the best pictures. always there with the most excitement, especially right before he reports his quarter. is boeing too silent on the space race >> well, i'd say that, one, elon and the spacex team, they're adding energy to the space market we like the attention that's generating i think it's good for the country. i prefer to put our focus on
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performing, operating, delivering for our customers we are building that first rocket to mars as i told you, it's about 36 stories tall >> 36 stories. >> we're going first flight, test flight in 2019. i still firmly believe first person that gets to mars is going to get there on a boeing rocket >> final question for me, i guess, this out there as well. autonomous airplanes we can all remember -- i mean, there's auto pilot for as long as we can remember is that something you think will ever occur will there always need to be -- i assume there will always need to be somebody in the cockpit, regardless of whether the plane can land and takeoff on its own. >> that technology is moving fast the technology availability is there. we provide autonomous airplanes to our defense customers today you see the energy that's going into autonomous cars today all of that capital investment, you'll eventually get to autonomous airplanes i think the biggest hurdle is the regulatory steps and the acceptance by the public but the technology is there.
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this is going to unleash new efficiencies we're investing in awn to utono, artificial intelligence. the amount of innovation going into aerospace today is greater than it's ever been. >> when he speaks, i always think there is a reason why this is the leading stock in the dow. they've got a great secular, long-term theme that's not caught up with the ten year. it's not caught up with interest rates. y who else has that demand i don't know anyone. >> plus, exciting businesses like the space race. he was very positive when it came to elon musk and charmingly understated. i like the energy he brings, but we're getting to space first >> when we were growing up, science fiction. science fiction story. >> it's rocket science >> right >> it really is. >> you need a rocket scientist >> you don't want to go to mars.
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>> it's hot, i hear. >> it's a couple years you can't really get back. >> i want to be the first man on the sun. >> this is such a good news story. i find myself listening scenand saying, all right, there's got to be something bad happening here >> trade war with china would be bad. then airbus has a better story but he did say he works very closely with the president the president does not seem inclined to want to go against boeing salesperson for boeing >> very eager to see what happens in brazil. we've got a new president there who's under a lot of pressure because he's also under investigation, but much more pro free markets there's still legacy people there who have those old socialist tendencies they wanted to be the national jewel, but the company would be far better off if it had more capital. >> if you look at his comments from the january 31st conference call after earnings and what he told us this morning, continued progress it does sound like they're getting closer to that deal.
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by the way, not a large dollar deal, but to your point, a very big deal for brazil. >> it would signal a big, big change -- i would argue a much-needed change in brazil >> part of the evergreen story you bothered to mention the president is under investigation. is that not a requirement in brazil >> it feels like it when nearly 50% of congress is under investigation. the corruption levels there are beyond the pail. >> you're on those stories >> it's warm there >> there's three cramer cousins there i've not been able to identify >> you've got eyes everywhere. >> it's my job don't forget, i also curl at 6:00 6:00 to 7:00 i curl into my bed with my dog >> yes, curls tonight on "mad money. don't miss it. >> when we come back, a look at
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the state of financials, valuations, and your money the president of the institute of international finance, tim adams, is going to join us and getting a look at where we stand this hour stocks are still higher. dow industrial higher by 157 points s&p higher by 11 the nasdaq higher by 48 points "squawk on the street" is back right after this feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow. today, innovation in the finger lakes is helping build the new new york. once home to the world's image center, new york state is now a leader in optics, photonics and imaging.
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markets are up again this morning, as stocks are coming back from that correction low we saw not too long ago mike santoli is with us to look at some of the sectors leading this recent rally. >> sectors and strategies, david. one of the things a correction and a comeback doo is ki is kin reveal the leadership of the market, test it. once you have that comeback, you see what might be the leadership going ahead. here's an etf i thought we'd highlight under the ticker fv. it basically uses relative strength analysis to pick other etfs in certain sectors that are the leaders. this one happens to be entirely in financials, tech, and industrials. it's outperformed on a one,
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two-year basis before the correction, also since it's well up toward the highs, has much smaller losses in the broader market. this is essentially a fund meant to find the leadership it seems to be doing a decent job. then of course the soxx, the philly semiconductor etf very familiar in terms of its story about semis leading. this one is done very well it's basically about the same amount down from its highs of january 26th, but it was up so much more that it's actually outperforming very nice. i would point out nvidia and texas instruments together make up 18% of this because their performance has obviously made them that much bigger over the last year or so. finally, the social media etf, it's small it's also global though. it's kind of an interesting take on social media. it's actually at new highs i would say that it's obviously niche. twitter and ten cent are a quarter of this fund facebook and snap get you to 40%. if you're sifting around and saying what has kind of held up
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better or seems like it might be able to outperform going ahead, these are some of the funds you might surface. >> exposure to ten cent, which doesn't trade well >> there you go. >> that first one is an etf made up of etfs >> five other etfs, which are sector etfs it's says, i want to see what's working in the market, stay with what's strong. >> do you have to worry about all the -- just like you have to worry with the fund to funds, the costs associated with that >> certainly not like a hedge fund in terms of cost. i guess there's probably some layering of fees in there. >> okay. >> all right etfs on etfs >> i believe in single-stock risk the etf is a very good market. >> mike, thanks. >> all right well, cisco reported an earnings beat after the bell yesterday. that saw the company post its first year-over-year rise in revenue in more than two years the company also planning to raise its buy back by $25 billion. that will go to 31 billion
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it's going to repatriate 67 billion in cash held overseas. that's pretty much all its money overseas cisco ceo chuck robbins joined us earlier to talk about the impact of tax reform on the quarter. >> we talked about this in the past we're not an incredibly capital intensive business if you look at our total capx we spend on an annual basis, there's several options we have. we've always talked about the fact we would leverage this capital to reduce our share count, which we announced yesterday. obviously to continue our capital strategy of returning cash to our shareholders, we increased our dividend yet again yesterday. we also think we've left ourselves plenty of capacity to continue deliver m&a that aligns with our strategy that we've laid out over the last 2 1/2 years. >> jim, this would seem to be a see the scenario where the tax reform is
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being delivered back to shareholders in the form of buy back he said he doesn't need a lot of cash >> i do think the more they buy software, the less they are reliant on hardware. there's an article in the "new york times" today -- sorry, "the wall street journal" that talked about how they're still dependent upon a particular kind of switch. now, in the interim, they've worked hard to be dependent, try to move that, not unlike what ibm has had to do. so if they see something strategic, they will buy it. they certainly have a lot of fire power is the stock up enough versus the quarter? i think this is one of those stocks that is -- it's not going to be like service now it's not going to be like workday. it's not going to be like red hat. it's not going to be like sales force. it is not that kind of company it has low single digit growth, but the fact is it almost had no growth it's an easier compare not only trip adviser, by the way. you want easier compare, not that i want chuck to even feel i'm putting them in the same --
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i'm just saying what happens is you look at cisco, look at some of the companies doing well, and they're companies we didn't think have a lot of growth, and it turned out they do have growth that's a very, very good story for the market >> and this stock has fully recovered from the recent selloff compared to the rest of the market definitely outperformed here in the last couple days >> yeah, good growth in the u.s., good growth in europe. they are as much relevant as they've ever been because they play a key role in on board for google cloud and for microsoft azure. really important this is the data center, the story, internet of things, driving a lot of what's happening in tech. i got to tell you, i'm a believer in chuck. i think he's good. >> you do? >> i'm a believer in muilenburg. >> it is empirical >> qualcomm. do you believe in qualcomm
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>> do you believe in magic i don't know it's a song. >> good song >> the loving spoonful oh, god, great >> jim, thanks for sticking around, giving me that extra half hour. >> it's the least i can do i just -- my dog has to take out its all-time high, then i'm done for the day. >> for those who may not watch a the this time, your dog is nvidia we don't have the 9:00 audience. they're saying, what is he talking about. >> and you have a real dog named nvidia >> doesn't everyone? >> they should >> see you at curling. >> let's send it over to sue herrera. >> good morning, michelle. good morning, everyone here's what's happening at this hour broward county jail releasing a photo of 19-year-old florida high schooler and the shooter nikolas jacob cruz, who has been charged with 17 counts of premeditated murder. president trump will address the nation at 11:00 a.m. eastern time on the massacre and cnbc will carry that live secretary of state rex
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tillerson arriving in lebanon, the most senior trump administration official to visit that country he's expected to meet with top lebanese leaders and discuss lebanon's border dispute with israel cyril ramaphosa has been elected the new president of south africa he's the fifth president since majority ruled started after the end of apartheid in 1994 google chrome is rolling out a new plan to limit advertisements the company says new controls based on better standards will focus on pulling 12 types of ads. it's designed to pressure publishers into dropping annoying advertisements. that is the news update this hour we'll send it over to jackie for the eia inventory report >> good morning to you, sue. you can see this drawdown of 194 billion cubic feet in natural gas stocks turn that gas prices from negative this morning, trading around 257, into positive territory. that's because it's almost
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double the draw that we saw this time last year, more than the three-year average, and also a little more than the five-year average as well. we had a cold snap that's why demand was a little bit more robust than expected. but if you look at the ten-day forecast, traders are expecting to see a little warmer weather that's going to bring demand down remember, nat gas prices were trading around 3.50 in late january. now we're looking at 2.50. we've come a long way to the downside it all depends on what mother nature is going to give us >> us a, jackie. i know the traders don't like it, but i like the warmer weather. >> i do too. >> thanks. when we come back, an interview you won't want to miss restaurateur david chang sat down with carl in pyeongchang. we're going to get an inside look at his new netflix show and also much more and taking a look at stocks at this hour the dow is up 150 points "squawk on the street" back after this we took legendary,
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let's take another look at the markets here all three indices holding on to yesterday's strong gains the dow has now recovered nearly 60% of its peak point loss as stocks look to trade higher for a fifth consecutive session. the dow higher by 132 points s&p higher by nearly a third of a percent. nasdaq higher by 47 points in terms of percentage gains, that's the biggest for a look at the state of financials and valuations, we're joined by the institute of international finance president and ceo tim adams. good to see you, mr. adams >> hey, michelle good to see you today. >> first, let me ask you about some of these volatility products that were sold, some have been shut down. they've been offered by institutions that are members of your organization. does your organization take a position on all those products that some would argue caused a lot of the volatility here >> no, in fact, it's really
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outside our remit. as a personal investor, i shun those things i stay with plain vanilla investments myself >> what do you think of the overall volatility we have seen in the markets over the last couple of weeks? and do you think there's anything nefarious out there related to what's happening with trading? >> i don't think nefarious look, the markets were priced at perfection for a long time we didn't have volatility. i think markets are now pricing in a different economic trajectory for the global economy. we have broad-based expansion, capital flows picking up i think markets are just now paying attention to the details and they weren't necessarily two to three, four months ago. >> when you talk to the institutions that are members of your group, what are they saying about the future of interest rates? and what do you think? ten-year yields seem to be one of the sparks that set off all that volatility and selling. >> well, i think it's reflecting a better assessment of global growth again, we've seen broad-based
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economic expansion, and almost every major part of the global economy, our own flows report shows we see flows flowing to the fron fetier markets it's a good news story i think we're at a fairly sweet spot, actually almost a goldilocks-like set of conditions >> you don't get nervous when you say that >> no, well, you know, you always have to hedge just a little bit, but i think we're pricing in three rate hikes this ye year there may be some one-off components the economy is actually in good shape. so i think we should celebrate >> although, you are concerned a bit, i believe, about the build up in debt my god, we've printed an awful lot of money around the world these last, what, eight years, haven't we >> oh, absolutely. david, i refer to it as a termite in a foundation. it's more of a medium-term concern. global debt to gdp is about
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320% whether it's sovereign, household, or corporates, we've seen a huge explosion of debt throughout the global economy. and i am concerned about that over the medium term >> are you concerned at all about the growing deficits right here at home given what we've seen, of course, with both the cost of tax reform and the new budget that we got last week >> i am. if you look at cbo projections by 2027, debt to gdp will be above the levels we saw at the end of world war ii. some of those tax cuts will go to support capital formation and actually help on the supply side and help on growth but i do worry about the trajectory the key is to invest in the productive capacity of the country. some of that will happen, i hope more than we're currently expecting. >> great expectations of deregulation from this administration from the institutions that belong to your group. how much of that have you gotten already? has it met your expectations how much more do you expect? and do you think it's already starting to play into the stock prices of these companies? >> sure. it's a great question.
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actually, we don't expect much deregulation at all with respect to the large institutions. i do think small community banks need regulatory relief i think we're going to get that. there's legislation moving on the hill i think what we're seeing for larger institutions is just a rebalancing, a better understanding of cost benefit. but we're not asking for it, nor do we expect major deregulation for large financial institutions >> okay. because i think there are a lot of investors out there who are hoping that, in fact, in addition to the steepening yield curve that that's actually going to add to the bottom line and at least increase return of hurricamoney to shareholders. >> i think what's been good for banks is an upward sloping yield curve. i think the tax cut has been good for banks the demand side, more lending to productive parts of the global economy, locally, and the real economy is what matters. if the real economy is doing better, the financial sector will do better too >> hey, tim, time question from me given your experience in dealing across borders, certainly from your previous positions, we
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haven't talked a lot about brexit in a long time and its impact on the financial system certainly as it relates to the uk and london as a financial center and/or europe do you have any thoughts there, given things are moving along? >> sure. in fact, i'm going to spend my entire next week in london on these very topics. look, our member firms have been actively planning for a hard or soft brexit. the conversation continues in fits and starts. i think we'll end up with an appropriate exit that allows for a transition period. there's a lot of downside risk i do watch it very closely more from london next week >> all right >> take an umbrella. it's always rainy. see you later. thanks, tim. >> thank you, michelle thank you, david >> all right thank you. let's go now to carl it's not raining there, but i bet it's still very cold that's my guess. in pyeongchang, south korea. >> a little chilly tonight that's okay. we can take it, david. david chang, for those who don't know, is a korean-american chef,
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five time james beard award winner, who started momofuku in 2004 he's got restaurants in toronto, australia, vegas, and l.a. and now he's launching a new docuseries on netflix. we asked him what it's like helping the streaming giant start a new genre. ♪ >> the best way to describe netflix is they want you to define the sand box. they're still trying to figure out what's right or what's wrong. it's allowed us to create a show that i think is an honest representation of what we think is worthy of talking about right now. so they've been incredibly support i have, their whole team it's not like i've done this before, so i don't really -- i can't tell you anything else >> how can you not worry about sort of just getting lost in that content snchb >> it's the same question i have and present to my team at
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momofuku there are more restaurants than ever before. i think you can only worry about making the best quality product possible and hope that's still going to win out through word of mouth or however. that's the same way i think i feel about the variety of content that's on netflix. you hope someone watches it, and just like a great restaurant where you're getting a recommendation, you hope that someone that eats or watches it is like, hey, you have to watch this, you have to eat this that kind of enthusiasm is infectious so if we were eating in like another area that was beef rich, this would be like short ribs. but seeing we're right off the coast, this is as good as it gets if you want to eat great seafood. you can assemble this in any which way possible what i love about korean food and why i think it's so perfect for the era we live in right now, it's communal dining, but you can still customize it how you want to do it.
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>> so it's group and individual. >> absolutely. we've brought on a president to help run the business end. we have a board, all of these things i think for us to do it right, we're going to have to become corporate. we're going to have to be as corporate as any great corporation has ever been, but simultaneously, we have to be like the craziest anarchist possible i'm not sure how that will all wind up, but i do know that i have to be a better manager, i have to delegate better, and these are new challenges >> you know, i live in a world of sports analogies. it's easy to hate on the patriots or the spurs. i love the fact that they have the same access of talent to everyone else, for the most part they just have a winning organization it's something that's widely attractive to me to foresee things that other people don't, i think that paranoia is definitely a positive that's what i look at, how do you build a winning organization where people want to be there.
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>> cheers. thank you so much. >> thank you, sir. >> that was great. >> guys, coming up in the next hour, we'll talk more with david about the consumer and real estate and the degree to which restaurants are now actually becoming anchor tenants, something that had never been the case in his early career i'll tell you, michelle, david, jim, having a meal with him here in korea, talking to him about the cuisine that helped inspire not just his restaurants but obviously was a big piece of his childhood, one of the big perks of covering these games this time >> i will bet. i mean, everybody in the control room is, one, jealous, two, really, really hungry after watching the segment, first of all. and it was very cool for him -- the way he described the way netflix is trying to do its programming. i thought his metaphors worked really well there in a new kind of insightful way. >> yeah, i think the parallels are definitely there we're swimming in content, and increasingly, we're swimming in
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restaurants and concepts of food the word of mouth, as he says, have you seen this show, have you tried this restaurant, are two very similar conversations that chefs are going to rely on if they're going to break out. >> the old word of mouth, as they say >> yeah. >> thanks, carl. always great >> all right, michelle >> see you next hour >> my stomach is really rumbling >> yeah, uh-huh. have an apple. >> that's not going to quite do it as we go to break, shares of apple moving higher this morning after it finally showed it is now berkshire hathaway's largest holding. the firm purchased more shares during the first quarter that's being well received amongst investors. we got a lot more "sawquk on the street." don't go anywhere. ♪ slap on some cologne ♪ i'm 85 and i wanna go home ♪ ♪ just got a job ♪ as a lifeguard in savannah ♪ ♪ i'm 85 and i wanna go home ♪
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with treasury yeelz on the rise, could your portfolio get caught offside we'll talk about what rising rates mean for the market and your money at
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tradingnation.cnbc.com more "squawk on the street" coming up.
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let's get to the cme group in chicago rick santelli with the santelli exchange hey, rick. >> good morning, michelle. i'd like to welcome my guest this morning, jim karen. thanks for taking the time you know, jim, you're at the epicenter. i focus on theepicenter. what's going on in the credit markets has been a key focus point for the last two or three weeks. a lot of volatility in the market how much of this, in your opinion, has been caused by rising ten-year rates? i don't know why it's so shocking most analysts have been wrong the last half dozen years looking for it >> well, you know, rick, i think it's a good point because what the market is trying to determine right now is that yields are rising because things are going better but sometimes you can have too much of a good thing, and where's that tipping point between it's a good thing when rates rise because it represents a stronger economy, but if they rise too much, then it becomes a tipping point where it can actually hurt other assets what we're trying to do is
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figure out where that is the way we're doing that at morgan stanley investment management is looking at ten-year break evens when yields rise and break evens widen and ten-year break evens right now are around 211 basis points, then that basis points, then that means the economy is frothy, we can still grow, thing are good, we're building inflation pressures it's also telling you real rates are, even though they're rising, they're staying relatively low such that they're not choking off economic growth. and that's important, because lower relative real rates is still a symbol of accommodation. but we hit that tipping point when real rates start to rise faster than nominals and when we have good economic data and rates are rising but real rates are rising faster than no, ma'am malls and tips break-even start to narrow, that's when i think we're at the tipping point so rick, rates have gone up, but -- >> jim, let me stop you one minute there jim, let me stop you one minute there. let's do like a scientific control variable experiment. let's say, let's put inflation
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on hold right about where it is, quasi 2%-plus area you talk about a real rate in 10s is at 80 basis points, so with the break-evens, i get it but if you freeze the level of pricing pressures and you just consider central bank balance sheets, which by the way, hit a new record high, about 16.5 trillion, just that dynamic alone and the notion of it potentially disappearing, meaning all these bids are going to disappear from central banks and all these auctions, isn't that alone enough to potentially create a dynamic of higher rates over the next eight, nine quarters >> yeah, absolutely. and if the economic growth doesn't keep up with that, then higher rates are going to choke off some of the other asset price movements, and it's going to increase risk premium for lots of different assets, and that could create problems in equities, spread products and everything else. we're not yet there. >> so you brought up a good point. to trade rates correctly in this
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very strange financial environment, you need to calibrate what normally drives it and then what is being -- what effects of things like balance sheets are having, and that isn't easy. finish this up real quickly here, jim. >> yeah, no, that's correct. there's a manufactured portion of why rates are so low, and we're moving away from that manufactured portion and getting back to the good old days of real markets, and hopefully, good news means good news, which generally brings higher yields >> excellent you said it, jim the biggest problem we have is that central banks' timing, whether intentionally or not, is happening when other issues are causing rates to rise as well. thank you very much, jim caron david faber, back to you. >> okay. thank you, rick santelli we he lot reava mo ahead for you on "squawk on the street." don't go away. experience lexus safety system plus standard.
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welcome back i'm dominic chu. check out what's happening with stocks up this morning technology standing out as one of the best-performing sectors, up around 4% so far. among the leaders, cisco systems on earnings, trading at levels not seen since 2000 of december. you've also got salesforce, autodesk and advanced micro devices all up by around 2.5% at this point so michelle, technology's going
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to be a big driver in today's trade. we'll see if it sticks that way into the afternoon back to you. >> we will watch for that. thank you, dom. warren buffett's longtime business partner, charlie munger, says it's time for regulators to ease up on wells fargo. he says the bank will end up "better off" as it corrects a series of mistakes in treating customers. speaking yesterday at the annual meeting of "the daily journal" newspaper that he chairs, munger also blasted bitcoin, calling it a noxious poison >> i detested it the moment it was raised, and the more popular it got, the more i hated it. [ laughter ] on the other hand, i expect the world to do insane things from time to time, because everybody wants easy money and of course, the people who are peddling things and taking moneyoff the top for promoting the investment, they like it, too. so, these crazes, they keep coming and coming and coming, but who would want their children to grow up buying things like bitcoin?
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>> detested it from the moment he saw it. all right, checking bitcoin. 20,000 in december right now trading below 10 thousand to, 9,840 when you look at the bitcoin futures. >> it's been a little while since we mentioned bitcoin. >> i know. >> yeah, there it is, coming back a bit we're going to show you a live shot here. we're awaiting president trump's statement on yesterday's school shooting in florida. we will go there as soon as that begins "squawk alley's" coming up next. it's absolute confidence in 30,000 precision parts.
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to grow your business with us in new york state, visit esd.ny.gov. good morning, and welcome to "squawk alley" with me at post nine, and our mike santoli and courtney reagan joining us carl quintanilla is at the olympics in pyeongchang, south korea. we'll go out there in a few minutes. we are awaiting the president set to address yesterday's school shooting in florida, and we will bring you that live when we get it. markets right now well off their session highs as stocks hope to extend their daily winning streak to five we have recovered about 60% or more of the

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