tv Squawk on the Street CNBC January 7, 2019 9:00am-11:00am EST
welcome back final check of the markets you see things have barely budged dow futures slightly positive. s&p 500 futures down by less than three points. nasdaq off by 14 make sure you join us tomorrow right now, time for "squawk on the street." see you later. ♪ sometimes i get a good feeling ♪ ♪ i get a feeling i never, never, never had before ♪ >> good morning, welcome to "squawk on the street. i'm carl keequintnilla with dav faber. we'll have exclusives with the ceos of bristol-myers, celgene, glaxo this morning good news flow on m&a and china trade today. prices soft in europe and oil is near 49. road map begins with the rally pause. futures pointing to a relatively muted open as the street waits for developments from renewed
china trade talks in beijing >> eli lilly announcing it will play loxo oncology the price, $8 billion in cash. that's $235 a share. shares of loxo surging ahead of the open. >> inside the blockbuster biotech deal, jim will sit down with the ceos of bristol-myers squibb and celgene later this hour no surprise the squawk guys were talking about that game last night because as you said, what a win, and is it destiny what's going to happen >> i don't know. first we have to acknowledge that one of the eagles did touch it it is not like cody parkay should feel totally bad. great game last night. great coverage by our network. it is the kind of thing we see out here here we go i remember when we cut cody parkay, right after he missed about 40 of those. but, you know, look, it is
football is amazing game and that's a miracle and we're going to -- we're going to interview a lot of ceos who are creating miracles out here. >> did you get a chance to watch? >> i watched it, my son and i were both, like everybody else, just -- i'm not an eagles fan. i felt terrible, sorry sorry, jim >> i watched it. i cried. >> i'm sure you did. >> it is not supposed to happen. the kicker is not supposed to happen. >> is god an eagles fan? that's what went through my head okay >> had his hat on, an eagles hat. what are you going to say? >> we'll keep our eye on ratings to dallas seahawks from last weekend got 30 million viewers, well above the wild card action from last year so congratulations on this one, jim. still alive. in the meantime, stocks are poised for a modest open as we begin first full trading week of
the year wall street paying close attention to u.s./china trade discussions. friday's rally, of course, recouped losses from thursday's sell-off in which the dow it tumbled. you got your pivot in a sense from powell. you got some m&a in biotech, got them talking in beijing. what else do you want? >> well, look, i am looking at things like this, small thing, but should be not ignored, the qep deal with elliott and looking at the deal with loxo. a lot of the real companies and a lot of real investors are saying, you know what, we fell, we had a bear market, it looks like we're over with the bear market, let's start doing some buying loxo up 190 to 130 qep crushed, cut in half david, let me throw this to you, i think there is a lot of companies saying, bristol-myers celgene, stocks came down because of etf, because of
mindless selling by just about everybody, hedge funds or redemptions, whether it be individuals pulling money out. individual companies now saying, you know what, i can't avoid celgene at six times earnings. i have to buy qep now that it is down a lot loxo, i have to start buying biotech. david, the companies are stepping up because the etfs have brought things down >> it is an interesting point you make and the companies, i mean, that -- if you want an arbiter for real value, there it is, right, active m&a, jim as we have reported, of course, celgene and bristol-myers had talked for years off and on, two to three years, it only really became a true possibility for bristol-myers to buy it over the last four or five months in september when they first made their foray in part because of what you're talking about. and the fact that there are value buyers out there, seeing as you say, six times earnings for celgene, where it was traded prior to the deal or other deals, you mentioned qep as
well, which we got some news out on this morning also from elliott stepping up there. small deal but nonetheless saying we want to buy it at 45% premium we'll see if this continues, jim. it certainly is, you could argue, a positive sign i guess that's what you are arguing, right >> yes look, let's talk about celgene i'll be interviewing both the ceos of celgene and bristol-myers. celgene was at 93 before they reported a subpar quarter. where they recognized they maybe paid too much for receptos and then it falls because of biotech, the whole etf pressure. it goes to six times earnings. it is immediately added to br e bristol-myers. bristol-myers was very, very conscious that they could get this thing for a little more than 100 and believed that their chief drug for celgene might be able to generate more cash, more in the pipe. david, things got too bearish and what you're seeing are companies saying i am done
i have to step up now before the stocks come back >> well, that's conceivably what is happening we're all looking forward to that interview with mr. caforio not long from now. one of many you got this morning. certainly want to hear about some of the things i know you'll ask him a bit about bristol-myers as well and i'm sure and sort of its own history in terms of potential acquisition. some don't want to give up hope there. my reporting indicates that's not part of the story here, jim. it is about bristol-myers and celgene, not about somebody else having interest in bristol-myers or any talks, nothing that i've been aware of that took place. >> thank you for saying that, david. because there is a lot of people who think, wait a second, now that bristol is down so low, pfizer will buy them there were multiple buyers of celgene. it is all phony. your reporting puts the end to this notion that what you're going to see is bristol being bought for 60 by pfizer. i want to cut that stuff out we're back doing m&a and thank
you for telling the truth because the number of lies i got this weekend were extraordinary. it is almost like if cody parkay were to hit the uprights twice and -- oh, sorry, that actually did happen >> certainly the jpmorgan health care conference is one of most influential conferences we get all year long. we're glad to have jim there today. the other news is on china and u.s. trade talks in beijing. and then the commerce secretary wilbur ross talking about that apple warning from last week and whether or not it was truly due to conditions in china take a listen to that. >> well, i don't think apple's earnings miss had anything to do with the present trade talks think about it there had been no tariffs put on apple products so that's not it >> that raised eyebrows this morning, jim, considering that apple did specifically cite conditions in china. >> yeah. i love wilbur ross he's super here's the problem if you're a chinese consumer, it
is really conspicuous to buy an american phone right now i think that just like we have america first from our president, there is a china first. the chinese phones aren't that bad. i think it has to do with cyclical and the idea of when i show up at a store, i want to show pride, showing pride does not mean buying apple products i just wish that it were so simple as to say, you know what, there are no tariffs it has to do with being conspicuous buyer of an american product at a time when there is a real trade war i don't think the communist party wants to see that. >> of course, the other news on apple, the deal with samsung, in which they will add an app to their smart televisions that allow owners to watch content that they bought on itunes and given the history with those two companies, jim, some saying it is a bit of a landmark. >> i think you're so right i've been pondering this all night and thinking to myself,
well, wait a second, apple has been going it alone, samsung, android, for so long and now they're number five in china maybe something's happening to say that the apple universe wants to be a little bit more open i think that it needs to do that if they're going to be able to regain earnings momentum >> will they really be able to regain earnings momentum, jim? >> you know, david, it doesn't trade like an earnings momentum stock. it doesn't trade like amazon doesn't trade like netflix it trades as if it is a consumer product stock except for it sells at half the multiple of clorox clorox grows 1% to 2%, maybe 3% in a good year if this company were followed by a consumer products company, i think that what you would -- analysts, i think you see a substantially higher stock it has been a value stock forever because people feel it has no growth. i think it has tremendous innovation i'm really tired of hearing it is just left behind. the china issues are real. but the idea that apple is
somehow an also ran worldwide is preposterous great numbers in america it is just that the stock trades like a value play. it should be trading like a growth stock and as long as it is this cheap, i think it is fine >> all right we're going to watch that, jim a lot more still to come this morning, by the way. we'll talk to former fed chair alan greenspan we'll get his reactions to the comments by current chair powell that helped fuel the rally on friday, of course tons of research today on micron, ge, ralph lauren, bwend. more "squawk on the street" in a minute (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches
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my name is tito, and i'm a tech-house manager at comcast. we're working to make things simple, easy and awesome. welcome back to "squawk on the street." one feature this morning for the market, certainly a focus is going to be pacific gas and electric shares. pcg the symbol there you may recall, of course, we have visited this story previously it comes back to the liability and the potential for enormous liability having to do with fires that took place in california both in 2017, but of course more recently the devastating campfires for which pg&e may be deemed responsible in terms of some of its equipment and failing and sparking those fires. a number of reports over the weekend, friday after the close, reuters reporting on the potential for a bankruptcy
filing as one of many different options. "the new york times" devoting a good deal of its front business page this morning to a discussion of pg&e and the future and its potential attempts to try to continue to lobby the state government for some form of relief. as we watch the stock potentially opening down as much as 20%, let me give you a few other points i've been able to pick up from some reporting over the last week or so. namely the potential liability for the companies dealing with here people familiar with the situation tell me it has seen in likely to be in excess of $30 billion. that being the liability from both the 2017 fires and, of course, the campfires in 2018. that number does not include penalties, fines, or punitive damages, all of which are certainly possible here in terms of pg&e and its potential
responsibility remember, under something called inverse condemnation, they don't even need to prove negligence on pg&e's part in order to make it responsible for the fires and therefore the damages that were caused as a result of those fires. they did get relief for the 2017 fires from the california legislature. and a bill, senate 901 that passed the legislature or passed in late september. pg&e was able or given the right to securitize essentially the potential for meeting the losses associated with the 2017 fires as a part of that bill, by the way, important to note, they also have to notify everybody 15 days, everybody meaning employees of the company, 15 days previous to any change in control. this was language from that 901
bill why do i bring it up here? well, in the case of a potential bankruptcy filing, it would appear we're going to get least 15 days notice from the company, not clear that we're going to get that, but it is something to keep in mind as they are forced to at least acknowledge 15 days prior to any change in control, which would include a bankruptcy now, one question, of course, is they have yet to report their fourth quarter numbers but can they get an opinion from the auditors if they see liabilities in excess of $30 billion certainly a key question for pg&e at this point and a lot of other ones surrounding the company. there does seem to be and the reason you see so much equity value still, this belief that ultimately california's going to somehow come to its rescue, either by including the 18 fires and their liability in the overall ability to securitize and issue bonds to meet those, and therefore increase rates for
certain consumers in california as well in order to do so. but very much unclear. so a situation, guys, we're going to follow very closely, important not only for equity and bond holders of pg&e but important for those who are provided electricity in the largest state in the nation, some 40 million people, what do they have three different providers in the state, pg&e among the most important ones out there. so not insignificant story, carl, for us to keep a close eye on. >> so much scrutiny on utilities after every wildfire season, but this feels more serious than past years >> and their claim is, of course, climate change changed everything for us. can we really be in the business of dealing with towers that are in mountains that we are going to have to keep a close eye on when you've got changes as a result of climate change that have made for incredibly conducive areas for fire, unfortunately. >> incredible. >> jim, i know you're out there
right now. don't know if you have any thoughts specific to the geography you're in for this story as well. >> well, look, i always think that what happens is when you have gigantic, say, overruns that are the fault of the company, we have seen rate payers end up with just tremendous increase in their electric bill. david, why is it not being discussed that the rate payers just have to say, you know, the customers have to say, listen, you know what, we need the power, and we're not going to rely on the government and if they want to charge us more, they can charge us more. why is the government stepping in or is it because they think that pcg could go to zero if the government doesn't step in >> right i mean, what happens if they do declare bankruptcy, jim, does that make it any easier for rate payers does the state have to take it over they have three providers there. at least a third of overall gas and electric in the state. i don't know the answers i'm not sure they do
but interestingly, they got a new governor coming in, gavin newsom, this is a crisis he met with immediately upon taking office >> david, could this be general public utilities with three mile island >> i don't know. you know, i do know that it is viewed very seriously that these liabilities are such a large number that the idea that they can get it going, an opinion from their auditors, seems unlikely what that will mean or whether this is going to move the state legislature to once again revisit this and figure out some sort of solution that keeps pg&e out of bankruptcy is unclear, jim. but we're going to be following it closely and keep an eye on it from the capital markets as well, given the bonds, given the equity, given conceivably if they were to do this, they would need to raise debtor possession financing. a lot of different areas to
watch right now. >> big big story. >> yeah. all right, let's head to the bond pits now. rick santelli joins us at the cme group. >> good morning. rates are drifting south again if you look at a two day of 2-year note yields, we have fallen a bit we're above some of the lower levels with we traded on friday. so we're down a basis point. to the far end of the curve, look at two day of 30s, we're down you're seeing flattening in the yield curve, something to pay attention to dollar index and foreign exchange, lots of movement one week of the dollar index, realize that now we're trading around 95.75 we haven't closed below 96 since the 22nd, 23rd of october. so this is a big level and if you keep that october 1st start, and ponder, let's look at the next chart, this is an april start of the dollar yen. weakness there, dollar side. let's look at october start of the euro versus the dollar, primarily an inverse of what is
going on with the dollar index you can see the euro is ready to break out to levels we haven't seen since the end of october. and finally, the pound versus the dollar we know that may's agreement for brexit will get voted on in about a week many think it will pass this time around. and even with all the pressures and questions on the pound, we see that the dollar is moving in the wrong direction. so we want to watch, especially now that the market and equities have stabilized. carl, jim, david, back to you. >> rick, thank you very much we'll get cramer's mad dash after a short break. and then, of course, stay tuned for jim's exclusive with the ceos of bristol-myers squibb and celgene. just about eight minutes, more "squawk on the street" from the nyse straight ahead. alerts -- wouldn't you like one from the market
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all right, six minutes to go before we get started with trading here time for a cross country mad dash, send it over to jim in california >> okay. one of my themes out here, david, there are many stocks that were in bear market mode that really got crushed. one of the worst stocks micron, cut in half, sells at four times 2019 estimates and bmo capital upgrades the stock saying, listen, just too
cheap, 1.1 times book. that is the bottom, not nearly as bad as people thought micron was instrumental in the decline of tech. this stock is the key to this market if it can sustain this increase, then you can start buying texas instruments and analog devices you can continue to buy intel which is good. and, david, i'm telling you, nvidia at the ces conference really blew people away. semiconductors are bottoming off this call. it has been the worst group. remember, celgene, six times earnings micron, four times earnings. these are bear market valuations and analysts and companies are taking advantage of them >> all right key to this market, we'll be keeping an eye on it a few minutes from now when we get started with trading by the way, the opening bell will be followed by jim's exclusive with the ceos of bristol-myers squibb and ayituse. st wh
♪ ♪ ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals. u.s. bank -- the power of possible. you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in 90 seconds busy monday morning ahead of a big week not only the fed minutes, david,
on wednesday, we'll get powell again on thursday. ecb decision, cpi for december on friday. got ces, got this health care conference that jim's at a lot to chew on this week. >> a lot of news that hit us this morning too, which will get to around the bell as well keeping an eye on crude oil, carl as goes crude, seemingly does the market of late at least last week that certainly seemed to hold with wti up another 63 cents right now, going to want to keep an eye on the energy complex as well. >> yes getting awfully close, back to 49 once again today. in about half an hour, we'll get factory orders, durables and ism services after some of the conflicting data of last week, weak ism, blockbuster jobs number, we'll be looking for some confirmation in either direction from that. empire or some of the other fed surveys in the coming weeks. let's get to the opening bell at the nyse, look at the s&p 500,
cnbc real time exchange at the big board. etfs highlighting the listing. at the nasdaq, microstrategy, a provider of enterprise analytics and mobility software celebrating 20th listing anniversary. so, jim, given that micron upgrade you mentioned before the break, bmo to outperform they take their target from 32 to 50. i guess not a bad idea to keep semis on your radar today. >> look, semis have been, i would say, the achilles heel of the market they were the leader for probably two years and they just have been in free fall a lot of people that could be cyclical i think that the real problem with the semis is that there were inventory gluts throughout the system the upgrade indicates that the glut is running its course i like it. it is a challenge to be able to go from 60 to 30 and come back mai yoicron is coming back
the smh comes back, all the semis come back, everything is linked by etfs until we break the linkage, that's what's goi ing to happen. >> we'll watch micron. >> dollar tree receiving a slate of nominees from starboard to take control of its board of directors. seven nominees overall they only own relatively small percentage 1.7% of the shares to starboard of dollar tree it is a company that has been under siege to a certain extent in part because of what is seen as a failure to appropriately or at least properly integrate that acquisition of family dollar from a couple of years back. that was a deal we followed so closely. may remember at the time, family dollar itself, the subject of activists including carl icahn, who pushed it to sell itself there was an auction dollar general was potentially involved but ultimately was forced out as
a result of antitrust concerns and perhaps happy that that was the case starboard, which we do know is a fairly rigorous firm, jim, comes out with a fairly large report here, nothing on the likes of its darden research from years ago, where it went into actually telling them how to formulate the menu and make certain things but basically they want to potentially consider selling family dollar. i'm curious, given -- you followed this sector quite closely, jim, what your thoughts are. >> well, look, i -- look, with all due respect to starboard, i got to tell you, gary philbin is really doing a remarkable job. the last quarter was the beginning of what i regard as being the changeover of family dollar yes, maybe they did overpay. yes, there were problems at family dollar. yes, they were held up by the ftc for a year this is an outrage the man has finally got it right. i think the stock can get to 120 on its own do you know these guys want them to break the buck.
that starboard says they not only get rid of family dollar, but start charging more. are you kidding me they source so well, whether from procter & gamble or from china. starboard does not know what it is doing >> okay. they would, i'm sure, take opposition to that point of view, jim. but they do come out and say they'refocused on ensuring their brands and the premiere shopping destination for value and convenience. not a particularly nasty response from dollar tree to starboard. and, again, i think it is important to point out, they're not just trying to put a couple of directors on, influence strategy at the company, perhaps get them to consider this idea of selling something they bought only a few years ago for less than they bought it for, jim, they're trying to take over the company essentially. seven directors would give them majority of seats. >> look, i wasn't emphatic last time when i spoke about this
i have been holding back, a little gandhi-like listen, gary philbin, a thousand family dollars that he's going to do this year. every time he redoes one, the stores have much better productivity family dollar was a poorly run company, now 8,000 family dollars. yes, he has his work cut out for him. when he was on mad money recently, he explained that their finally getting a turn around why would you sell family dollar now. gary philbin, he's a gentleman, but i have to tell you, the idea that after all the work he's done, and with all the source, including china, 10% tariff, this is when they come in? where were they when the stock was much lower i think starboard should be attacking a lot of other companies. i think they do great work but why should philbin be thrown out? that's what's going to happen, philbin is for real. the company is for real. they're catching up with dollar general, poor timing i suggest that starboard go after other companies that are not well run, philbin is a hero of mine. this deal is going to be
terrific it is finally coming together. and this is when they come in? you know what, they should go after 5 below. 5 below is talking about having to do 5.25 because they recognize that china is a problem. procter & gamble unloads their stuff on starboard, family dollar, that's why family dollar is going to end up doing well. dollar tree, you can eat off the floor of my dollar tree out in the hamptons and i'm going to take you to that dollar tree and you're going to be blown away. >> i'm looking forward to that >> i have five pairs of sunglasses for $5. they look like ray-bans. i fooled everybody. >> we get to have that field trip, carl so many different stories. >> i'm well aware. >> got to go to burlington coat factory, to kohl's, to dollar tree we got a lot to do, jim. >> david, david, they dropped coat, it is just burlington, and raises numbers today i'll take you to my brooklyn
burlington, david, the line is through the door because they have got t-shirts for less than a dollar >> feels like a primetime special. jim takes david to the store we'll work on that with our prim time team. you mentioned five and they're upgraded over at morgan stanley. ge, that bmo upgrade today, having some impact shares of the highest level since before thanksgiving. >> i think larry culp is doing a lot of different things. i don't like the fact that people think that if you got 40 billion for aircraft leasing, somehow it doesn't move the needle steve, i think tusa is beginning to warm up i love the guy, but it is time for him to move up to 7 or 8 the 5 below upgrade say good one. i think 5 below is re wevery we run. lots of room, big runway, 5 below is loved by the tweens i think that's a great upgrade >> couple of deals to mention
this morning, one also, jim, get to you on the lilly deal as well, get your thoughts. let me get these out of the way. you mentioned at the top, qep, worth getting to elliott, again, saying it wants to buy something and this case it has got the shares of this company almost up 40% right now. 875 a share, it is a 44% premium to where it was trading. they say it really isn't work agency a public company investment stock they believe continues to trade well below intrinsic value. they are significant in the permian, where they believe they have the right acreage in terms of scale, in terms of where it is located, how it is located. contiguous to other companies they also own. does have $2.4 billion worth of debt at qep, they have plans to sell assets including i think some assets in shale and balkan.
but significant foray for elliott, not on activism, but straight ahead takeover. and also did want to mention x luxoft, 59 bucks a share there as a take-out. dxc technology is the buyer of luxoft, you can see, you're happy, if you woke up this morning and owned luxoft. >> that is good. before we go to pisani, i know you're watching tesla and some of the comments that elon musk made earlier this morning about this, breaking ground on the gigafactory in shanghai. >> i have to appreciate elon answered one of my tweet, talking about, listen, you got to make it in china in order to sell it in china elon, i think, is conscious of the trade wars i like what he's doing qep, once they get rid of hainesville, it will be majority oil, which is terrific i wish they were in the delaware
basin. dxc needed to do that deal it doesn't matter, they can do anything and it is better than what they have been doing. >> yeah, interesting comments out of elon about automobiles need to be made in the country in which they're sold to consumers. taking an early spill, dow down 71 to bob pisani on the floor. >> happy monday, everybody good start, 2 to 1 advancing to declining stocks, went negative. let's talk it a mixed market look at sectors, consumer discretionary doing well early on retailer was better. also you see flat to down on energy industrials, tech, and the banks. i've been away for a few days, but remarkable how much the sentiment has changed in the last five or six days here so just take a look here at what's been going on six of my nine indicators are generally much more positive so on fed in the rates, greater clarity from the fed that certainly has been helpful. china trade, the talks are resuming the vice premier showed up in china to par take in that. that's a positive sign on the china economy overall
here, they loosened liquidity. more stimulus out there. that's for sure. that's a different issue but that's positive. u.s. inflation is tame look at that, four positive things i want to note gas prices down 20%. we don't talk about that enough. that's a major tax cut for the american consumer. that's good news the recession risk, i think, is a lot lower thanks to the powell comments on flexibility and the strong jobs report lower expectations on earnings out there. and i think what side are you on zero or 5%, still much lower political risk still, murky in europe, still very real in the united states. are we at a bottom or not here friday we had a 90% upside day advancing issues were 91% of total volume that means intense buying, followed on first 90% upside day on december 26th finally want to note here, announcement of a new exchange today. this is very interesting morgan stanley, fidelity, five others planning a new stock exchange those seeking lower costs, no
word on when this might happen, but whether it is going to be a good thing or not, more complex ties certainly, that's a big issue. we'll talk more about that in the next few hours jim, back to you >> thank you so much so excited about this. we have the big deal, we're going to flush it out. dr. giovanni caforio, the head of bristol-myers and mark alles of celgene this is a gigantic deal. and i got to go right to you, giovanni, what did you see in celgene that the market didn't given the fact that celgene was selling at six times earnings before you made the move >> good morning. this is a great deal and i'm excited. it is the right deal at the right time we are creating an extraordinary company with a focus on science and innovation, three areas, immune diseases, cardiovascular diseases, these are areas we know well. we diversify our pipeline. we can launch six medicines in the next 24 months and we got 50 more medicines that we can accelerate to
patients this is a deal that creates value for share holders from day one. >> i completely agree. i thought it was rid ridiculousr stock was down bup but, mark, a lot of people feel all you have is revlimid can thering anything moe i thern about your company >> just before the end of the year, we submitted one of those five for fibrosis. this conference a year ago we licensed it from impact and in one year we had submitted it to the fda for approval in a rare but important blood cancer called mylofibrosis. >> a lot of people feel you did this, i'll use the term, they're going to be wrong, you did it out of desperation because you needed to do something this is something, but it is all you did was double down on oncology to me, i think you took advantage of the fact that the stock was at 90 and fell to 58
but tell me, why you had to do this given the fact that optiva has so many things in the pipeline, many tests, people are starting to doubt it. >> i couldn't be more proud of what we're doing with optiva we have 17 indications in the u.s. alone we have transformed lung cancer, kidney cancer, melanoma. we had a great 2018. we have leading shares in all approved indications we have 20 trials coming actually the reason why we did the deal because we have two strong franchises with optiva this was the right time to add more value drivers, diversify and in areas we know well, we can add value from day one. >> fda approval of three late stage drugs could help with the contingent value zanamid, people thought bob paid too much these all seem like long shots,
but perhaps they could come in and get to nine bucks. >> i think the first thing is they're derisked assets, not long shots bb 2121 is the most advanced drug in myeloma in the car-t space. we advanced it to first in class, best of class lycocel has its pivotal face two data and lymphoma done and ash last year, in december, we presented data in cel, another indication for lycocel we're working on the boa as we speak. we expect to submit it the first of the year. and then zenomid, we had a regulatory misstep we fixed all of the application related deficiencies and we look forward to submitting it later this quarter. >> i have to tell you, we have to go over this, i know that nadem hamed on your call, he said we learned a listen of humility when you do an
acquisition. you wouldn't have submitted the application. has it hurt, has it hurt what they brought to you because you did make that misstep? >> i think that we need to step back from blame. i don't think that matters at all. i think what happens in regulatory dossiers often is we take a view that the clinical data and the data for zenomid are profoundly good in relapsing multiple sclerosis and in the application had some missing pieces to it, but that's not a problem, that's a judgment question we have corrected, we'll submit in march. >> one of the things we do really well at bristol-myers squibb is launching new medicines. we got six medicines potentially to launch, we can't wait to start working on this. we're going to do a really great job with those launches. >> a lot of people tell me, giovanni, your science is fabulous, you did a deep dive, you kicked the tires on all the drugs that are supposed to take -- supposed to take the place if revlamid goes off
patent earlier he put mad money in many different companies, have you analyzed all the farm team companies, is there something there we don't know about? >> we have done a lot of due diligence, of course the company has been talking for a long time in the last few months we have been deep at work together there are a lot of exciting science platforms. we have done business development at bristol-myers squibb all our life as part of our strategy we know how to work with biotech companies. we are just going to have many more opportunities to bring forward, really exciting science. >> mark, why doesn't tesla come up enough? there is incredible demand and yet people say, look, forget that, it is all about revlamid. >> it is mostly about revlamid, it is our biggest product. the street looked at the ip situation on revlamid and said can we continue this run 2018 was a record year for the company. fourth quarter will be a record year for the company and the quarter.
but it is a revlamid story otesla is part of that story revlamid will be above 10 billion. on a relative basis, i understand why the focus has been on revlamid. >> you think play open hand, you're in summit, summit, new jersey, menendez in the campaign against bob yugen kept saying the reason why you should not vote for bob yugan is price increases for revlamid what do you say about that >> what i say about price increases across the board, different companies have their own strategies the other thing i would say is that in the last two years, if you look at the industry across the board, we're talking about inflation adjusted pricing that is less than 1% for the entire industry so it gets a lot of headline and a lot of headline risk, but the reality is drug pricing is attenuating and coming down year
on year on a net basis. >> okay. i want to talk about something you're doing giovanni, i'm hearing kidney cancer, i'm hearing indications that we shouldn't just say, okay, keytruda will beat them. i hear it will be a huge year for the drug, 2019. >> it will be a great year, 2019 as i said, the product is going to grow. the medicine is going to grow. we already issued guidance for '19. we got over 20 clinical trials, studies ongoing. there are studies in lung cancer what is exciting also, we have a very large program, what is called adulent disease we'll bring immune oncology to earlier stages when we can have an impact that is very significant on patients. so this is a journey in immune oncology and we're in the beginning and we're doing really well. >> one last question i know politics do play a role these days are you able to raise price with
immunity in other words, a lot of companies, drug companies put prices through in 2019 but a lot of drug companies, they fail. they fail at some drugs. someone has to pay for that. are you comfortable with the price increases or do you think this political environment will be too tough >> we are going to continue to be as we have always been very responsible with drug pricing. we are drielivering innovative medicines that make a difference for patients that's what we do. what is important is that patients have access to medicines. that's our focus it needs to be affordable. we need it align the incentives in the market. i'm confident that innovation will continue to be rewarded we're creating a science leader here it is really important and that's going to be our focus. >> i'm confident you took advantage of an unbelievably good price in the combination is going to be sensational. i love this deal dr. giovanni caforio, thank you so much. mark alles, chairman and ceo of celgene, congratulations to both of you for a fantastic deal. right back to you, carl.
>> all right, jim, thank you jim's not done he'll have more big interviews from the jpmorgan health care conference later on this morning including eli lilly's ceo david ricks. his company agreeing to buy loxo oncology and ricks and glaxo's ceo emma walmsley. a relatively quiet start given the action past few sessions. the tow is down 70 we're back in a minute at leaf b. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.
tune in today at 1:00 eastern time for the debut of "the exchange" with kelly evans. kelly's special guest, legendary value investor bill miller we'll get his take on the recent market volatility and where he sees opportunities now that's tayod at 1:00 eastern i'm on "the exchange" with kelly evans. jim, what's on "mad" tonight
at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. jim, what is on "mad money" tonight? >> okay. we've got joe papa looks like they are guiding up numbers, novartis and amgen, holy cow they do not to tv. cannot wait. >> busy week from jim. amazing bookings out of jpmorgan healthcare conference. jim, we'll see you tonight "mad money" at 6:00 p.m., and a lot more from the healthcare conference we'll be back with eli lilly's david ricks.
welcome back to "squawk on the street." i'm carl quintanilla and sara icen and david faber at the new york stock exchange. markets down 82 points on the dow to start this monday expecting some data in a moment. normally we would get factory orders and durables and instead we'll have to settle for ism services because of day 17 of the partial government shutdown. let's get to rick santelli in chicago. >> reporter: expecting our december release for ism non-manufacturing. expecting 59 and it's out at 57.6 57.6 so it's a miss both in expectations and sequentially following unrevised 60.7 57.6 is the lightest level since july when it was 57. -- 55.7, and do remember in september we hit 61.6 which was the second highest reading ever for the series that began in august of 1997 sara, back to you. >> so coming off the highs not terrible on services
rick, thanks our road map for the alley starts with age major deal in pharma eli lilly buys loxo. >> after a year of volatility, the street watching trade talks in beijing the dow is negative to start the week. >> and is an interest rate cut now in the cards for 2019? we're going to be joined by former fed chairman alan green man is to get his outlook on the market and the economy. >> let's start with the market volatile end to 2018 and a volatile start to 2019 a strong jobs report and fed chair powell's message of patience all helping sentiment take a listen to what chairman jerome powell said friday about the ongoing market volatility. >> we're listening carefully to that we're listening, you know, sensitivelily to the message that markets are sending, and we're going to be taking the downside risks into account as we make policy going forward
>> joining us now in a cnbc exclusive interview is former five-term fed chairman alan greenspan. also out with a new book called "capitalism in america, a history. co-authored with adrianne wooldridge thanks for joining us this morning. nice to see you again. >> welcome, good morning. >> good morning. should the federal reserve be paying closer attention to the message in the markets right now about growth and inflation >> well, i don't think they are watching the proper statistics as far as i'm concerned, monetary policy is interesting but not relevant to what the long-term -- to what the longer term or even medium outlook is going to be. as i've argued for quite a while, i think the issue of entitlements which is -- there's just rising with the population and the aging of the population,
but the data show unequivocally that it's crowding out capital investment dollar for dollar, and that's been true since 1965. that says basically that productivity growth is going to be less than we suspect, and a result of that a lower gdp, so it's a somewhat different outlook than i think is the conventional wisdom at this time >> so you think the fed should be paying more attention to that should they have not raised interest rates in december >> no. i think the fed is doing fine. i'm just saying that fiscal policy is the critical issue monetary policy is not at this stage. >> got it. >> at some points it's critical, but this is not one of them. >> a few weeks ago you warned -- you made some headlines warning that investors should run for cover. is that the -- is that the risk you were looking at, the
slowdown in productivity and the rise of entitlement spending >> well, pretty much the same story as i'm now indicating, but i remember the run for cover i think i was trying to get out of the rain. >> what about the markets right now? how do they look to you? i mean, we're 14% off the highs on the s&p 500 it's been a turbulent few months. >> well, we have a complex system and my office is trying to evaluation price earnings ratio, and what our data system shows is that the market is still a bit too high not a great deal but somewhat. >> based on what's happening in the real economy >> well, it's basically what's -- what we do is we take
price earnings ratios and turn them upside down so you get earnings price relationships, and we can attribute that the sum -- the total of earnings price directly related to the current data on the rate of return on a lot of different assets but mainly it's real long-term interest rates which drive the numbers. >> mr. chairman. i want to ask you about taxes today because one of the debates brewing this morning is whether or not marginal rates in a dream world for some, especially in the democratic party, should be up to 70% in tax brackets say of 10million or more in annual income would that make sense given your concerns about fiscal policy >> well, if you're willing to take a significant drop in
economic activity i would suggest that or maybe i better make myself clear. i think it would be a terrible mistake. >> to raise rates -- to raise marginal rates to that level >> i think -- i thought the recent tax cut which was really crafted after ireland in the early 1990s which essentially brought ireland from an average economy up to one or two, number one or two in the world depending on how you look at it, but we replicated i assume with maybe some cog fisa nce in the past what the irish method was and that was an excellent tax cut bill what i didn't agree with was showing no means of how we're
going to fund it because unless we fund some of these things this year we're going to almost surely run a trillion dollar deficit, fiscal deficit, and it's going up from there, and the factors that are driving it are demographic mainly, and they are built into law in other words, social security, medicare, medicaid are all statutorily required expenditures, and when we factor those numbers in with the sort of modest recovery in the economy that we're look at, which is essentially somewhat below the consensus, we get results that we would prefer to be otherwise >> right so chairman, you come back to the deficit, of course interesting to remember that when the original tax bill was crafted it did include a border adjustment tax that would have
been a significant producers of revenue. of course, that was not part of the final bill that was passed you mentioned the deficit. your expectations for at least trillion dollar deficits perhaps, the fact that you can't necessarily touch entitlements, but when do you believe, if ever, the market is going to be focused on the deficit and perhaps some of our creditors are going to be focused on the deficit? >> nobody cares in a political system or not until you ultimately get the impact of what is currently going on which will be a rise in inflation, and this is the typical pattern we see where we're in the early stages that looks benevolent, and nobody cares about the deficit until it grips the economy in an inflationary way, and the book that you just commented on that i wrote as a
co-author grants -- estimates essentially that we're going back to stagflation. that's an economy which is reminiscent of the 1970s which was a period of inflation and economic slowdown, so that's the type of system we're dealing with unless we can confront the issue of entitlements. in the book i basically go into the issue of looking at sweden as the optimum model they had the very similar type of problems we have now with respect to entitlements, and they are now after having their interest rates go up to 500%, they reshuffled the whole
economy and they now have a program which is stable. they are funding their budgets correctly. they have cut their deficit relative to gdp by half. >> not many plans out there in the u.s. for that. on the slowdown piece of the stagflationary forecast, mr. greenspan, what do you see for 2019 because actually 2018 is shaping up to be a pretty solid one for growth overall, best in about a decade what happens this year >> well, if you look at the rate of credit chal statistics and that's output per hour it's not the level of gdp. it's productivity which tells you the soundness of your economy. output per hour last year, the calendar year, grew 1.3% of a decidedly subnormal number the reason it locks better in
the second half is the first half was negative. the second half was positive, and people are projecting the third and fourth quarter results into subsequent years, and i think that that's not appropriate. >> the government shutdown is in day 17, mr. greenspan. we beef spent a lot of time at this desk talking about how the impacts of shutdowns are often overstated, but there's been a lot of discussion, especially in the past week about potentials for delays in tax refunds is this one more serious than in years past >> i don't think it's critical, but it's going to become politically unsustainable sooner rather than later. >> i also want to ask you about trade which is front and center. the administration, chairman greenspan, appears to be posturing that the u.s. has the winning hand because the chinese economy is suffering a lot worse
than ours as a result of the tariffs and the trade friction do you think that strategy makes sense and will ultimately lead to victory from the administration >> depends on how you define terms. the optimum maximum production for all is if tariffs are zero, and what the trade war is the tariff level of one country versus the other both parties, china and the united states, are losing because it's like taxing the domestic economy, which is what we're doing. a tariff is an exorcise tax and it's the suppressing of economic activity, so it's just that we're viewing it if we have less of a problem than china, we win, but the bottom line is we both
lose it's just who loses the most. >> right nobody wins in a trade war, i've heard you say it many, many times. finally, you know, the market volatility, we can point to trade. we can point to interest rate hikes. do you see any of this being related to the fact that the federal reserve has to unwind question 1, 2, 3, this mass multi-trillion dollar balance sheet that they created? you raised questions about it in the past but do you see this volatility that we're in reflecting that, that challenge that they have to do i've so far, at least in part, managed to restrain from commenting on recent federal reserve policy i don't think it's appropriate for previous chairmen, especially, to carp about what has happened after we've left office i don't know whether i fully
succeeded, probably not, but i sure try. >> well, we appreciate your comments on everything else. chairman alan greenspan. good to see you. thank you. >> okay. thank you. >> with his new book on the history of capitalism in this country. meantime, secretary of state mike pompeo is heading to the middle east this week. our very own wilfred frost just sat down with him in an exclusive interview. good morning, welcome back, wilfred. what did he say? >> thanks, sara, great to be back as you said, the secretary is traveling to the middle east tomorrow a trip that will take him to eight or nine countries and i started by asking him what message was he going there to deliver? >> we're traveling we'll visit eight or nine countries along the way to share with them a couple of ideas first and they know this america is there we're interest to continue to do the things that need to be done to protect the american people and ensure middle east stability. second, there's been a lot of noise about this withdrawal from syria, and we want to make sure that they understand completely what that means.
there's no change in our commitment to the defeat of the caliphate or of isis globally. there's no change in our counteriran strategy america is still committed to taking down the maligned influence that the islamic of iran -- that those activities, the risks that those activities present to the world, there's no change there's a change in tactics. we're going to withdraw our 2,000 soldiers from syria but the mission, the purpose for which we've been involved for the 24 months of the administration remains in full that's why we're heading there we'll continue to build out the alliances with those partners in ways that are very important for the security of the american people. >> now, as it relates to that middle east trip, we also spoke about a level of trust with president erdogan, with iran, saudi arabia and oil prices before moving on to china, trade, north korea and the topic of brexit. we also asked him whether the government shutdown has affected his ability to do his job. sara, all of that, of course,
coming up on "closing bell" at 3:00 p.m. eastern time. >> really looking forward to the full conversation. couldn't be bet per timed to have the secretary of state, wilfred. anything you can tell global investors or global wall street about what he said about the status of u.s./china trade talks going on in beijing right now? >> we didn't dive into the trade talks done specifically and, of course, that's not his own personal beat, but he was very clear that trade is a part of diplomacy and that, of course, is his booelt and that's something linked to the negotiations with china and other countries, and so interesting comments on that to come as well later today. >> all right wilfred frost. see you later back at the new york stock exchange from the state department with a full interview with mike pompeo, secretary of state thanks. >> when we come back, big news from pharma today. ceo david ricks will sit down with cramer in a first on cnbc interview from the jpmorgan healthcare conference.
as we go to take, take a look at top performing names on the s&p which is up israel three points. we're back in just la moment problem as t & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back...
i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. let's get back to the jpmorgan healthcare conference where jim is sitting down with a special guest. jim? >> well, i'm so excited. i've got dave ricks, the man of the day, chairman and see of lilly. congratulations, dave. the loxo deal, tell me why you
spent $8 billion to change the way that lilly does business. >> yeah, fantastic this is an important deal for us today. loxo oncology really harnessed the power of emerging science and we're excited to bring them into lilly and continue that work what they have done is really taken the technology that allows doctors to understand exactly what's driving your tumor growth and then make drugs that specifically block that action so you have a detection of why is your tumor growing and then a medicine that blocks that growth they just had fda approval on a drug called vitrakvi, another within loxo 292 hopefully coming as early as 2020 which does that for another kind of mutation this platform of seeing and then attacking with precision medicine is what drove us to get excited about this we see great value here, and -- and hats off to loxo for producing this kind of innovation we're happy to have them part of the lilly family now. >> the stock drop, valuation
guide sheet, a lot of people say you paid a lot of money and this is international, and i know you can spend internationally. won't we all be thinking if we go do doctors and say i can catch this thing early and save my life. >> this is already happening there's a category called alk inhibitors in the lung this is precision detection of what's driving your cancer, why it's growing and then blocking it specifically with a highly targeted medicine that just attacks that particular driver, and what we've seen in other settings and with vitrakvi, the newly approved drugs, the response rates for patients are profound in the case of vitrakvi, three-quarters of patients had an objective response and almost 25% had a complete response so highly highly effective because you can see what's driving the cancer and you can block it directly. >> does it fit in at all with your emerging oncology franchise, and i mention that because i don't think people
realized that lilly has a much higher success rate when it comes to phase three, 70% when it comes to the point where you've become so right with stocks on goal do you need this >> we would like to grow our presence in oncology we have a good set of medicines there but would like to expand that there's so much exciting science for patients emerging in oncology so many things to invest n.loxo is so attractive because it's so rational that you can detect the kind of problem that's driving the tumor growth and block it directly as you said, there's a lot of rationale for this deal. one is they have a great group of scientists that can do this, finding other mutations. we would like to keep that going. we have global reach whereas a biotech company even in contact with bayer can have with lilly that can have with globally reaching patients in asia, europe, china, et cetera, and we
can develop these assets at the scale of large familiara. >> let's talk about china. three hospitals in shanghai and each have 500,000 patients and there's a lot of people who smoke in china would this be something that could revolutionize the way that they detect tumors in china? >> i think there's a lot o interest around the world and specifically in china with loxo 292 because it's active in lung cancer, that could be an important medicine for chinese patients with lung cancer, and everybody is looking for a rationale for treatment we don't want to treat people with drugs that don't work. we want to treat them with drugs that will work by having the dying stick, the precision medicine test, the odds of success go way up for patients and that's what's key about the technology loxo has developed. >> three years ago, 2009, people wrote you off because you were spending too much money on r & d and since then you look what you do with your diabetes franchise. i look what you're doing frankly with psoriasis, with soriatic
arthritis. you've come up with another ways to tackle migraines. amgen has a projects and how is it doing particularly you're a consumer-focused customers and how is it about getting your relationships with drug stores >> first of all, migraine is a huge problem in america and around the world almost as many people who have significant migraines as people with diabetes, but until now there really hasn't been an effective preventive regimen, let alone that could be a once a money injection so ngality provide that opportunity patients had half the number of migraines before than having treatment so if you were having nina month you went to four-and-a-half. it's really something new to help patients living with migraines lead a better life and helping people with diabetes manage their condition day in and day out has helped us with an easy easy-to-administer
autoinjector and there's other serious types of headaches, chronic cluster and acute cluster and those are exciting new indicators that could be coming this year. >> when you surprised when you spun off how the pe multiple ultplayed? >> it made sense that's the why now the why is really our business eds have drifted apart in terms of scientific and commercial sin. and as we looked at it, we thought both companies would be better off focus on the unique missions, lilly is a dedicated human pharma company so we can focus on things like the loxo transaction and commercializing the last five products we've
launched. >> how is it going fortruliciti? >> it's going great. you can control your dine pease and lose weight and this is an understanding we've gained after working 100 years with diabetes patients and in the fall we're hoping to get more into the label and we have a follow-on product coming where we had some really breakthrough data announced in october we're excited about getting that one into phase three at the end of last year. >> you've been a terrific steward of a great american company. we're talking about 1878, indianapolis, go colts, had to do that for you. dave ricks, chairman and ceo of eli lilly. congratulations on the loxo deal. >> jim reporting from the jpmorgan healthcare conference and a lot more to come from him, and as we head to break a quick check on the major averages. nasdaq and s&p both higher
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utilities. the utility select sector etf and xlu lagging amid pg&e's liability concerns surrounding the devastating california wildfires which david reported on earlier this morning. some perceived safe havens like utilities and staples have emerged as top investment picks from some strategists for '19 in a more defensive environment, but obviously underperforming today on the back of david's pg&e reporting >> dow is down now 22 points let's go over to sue herera for a news update. good morning, sue. >> good morning, sara. good morning, everyone here's what's happening at this hour a new round of trade talks between china and the united states getting underway today. china's foreign ministry reportedly saying beijing has good faith in these negotiations they are the first face-to-face talks since president trump and chinese president xi jinping agreed last year to press the pause button on tariff increases for 90 days. meanwhile, china is upset though over the route a u.s. navy ship took in the south china see over the weekend. a navy official says the "uss
mccampbell" carried out a freedom of navigation operation to challenge excessive maritime claims china and other nations have competing claims of ownership in that region. a night of upsets at the golden globes. "bohemian rhapsody" about the late queen singer freddy mercury took the awards for best drama and actor topping the favorite "a star is born. best actress in a drama brought another surprise, glenn close won for "the wife. beating the likes of nicole kidman and lady gaga, although gaga did win best original song for "a star is born. and as if canada wasn't cold enough already, the locals near winnipeg are getting the first taste of a half mile long snow maze it's dubbed snowmazing believe it or not. the creators of the labyrinth believe it's the largest frozen maze ever created. looks like a lot of fun actually that's the news update this hour sara, i'll send it back downtown
to you. >> it does all right. sue, thank you sue herera. when we come back, could a recession actually hit this year concerns over the market swings are starting to raise some questions among longtime investors? pulitzer prize winning columnist jim stewart joins us with his thoughts it is the subjectch his new column dow has ipflped back positive up 20 "squawk on the street" will be right back
welcome back to "squawk on the street." i'm sara eisen here with carl quintanilla and david faber live as always from post nine at the new york stock exchange. one hour into the trading session, not big moves but all over the map gone positive and negative higher across the board. it's the nasdaq outperforming up three-quarters of a percent. consumer discretionary, energy and real estate are the best performing sectors it's the defensives like staples and utilities that r
underperforming with yields higher to start the week, and the dollar is weaker >> our next guest wonders whether the recent volatility means the u.s. economy is headed towards a recession this year. joining us at post nine today pulitzer prize winning "new york times" columnist jim stewart who talked to james stack who called last year pretty well. >> he did. i was getting a lot of questions. are you going to do your prediction column this year? i was thinking i don't know. no one is ever right and i looked this year and said this guy is right on the money and i went back to him one thing i like about him he really relies on historical data and he's not a perma bear. not one of the people who has been saying for five years we're heading into another recession he's usually bullish and thinks we're in a bear market now. >> he thinks the market overreacted in december specifically to announcements and warnings that he thinks might still be coming. >> that's correct. one of the things the data shows very clearly is the economic data doesn't tell you you're
entering a recession often until you're already out of it it's the lagging indicators that really prove that we've had a downturn so you can't wait for any of that. like the employment report, it's not really a leading indicator which people are very excited about. that's all very good, but there are earlier warning signs, some of which are now starting to turn a little bit negative and i think his call is primarily based on technical factors whereas in september, you know, evaluations were very stretched, you know there were a lot of technical indicators that were reaching extremely overbought. >> so is the upshot bear market yes, recession >> well, that is the big question, and i've been doing some additional research into bear markets, and, you know, there are bear markets and there are bear markets people say the average bear market does this the average does that, but the average doesn't tell you that because there's bear markets that precede presessiorecessiona
markets that don't the saying that the stock market has predicted five out of the last nine recessions that's the true. the stock market is about 50% right at predicting recessions so you might as well flip a coin it's a little better than that because the market tendency is up so, you know, you can't ignore it entirely doesn't really tell you much the bear markets where there are recessions are really pretty bad. the bear markets that -- where there are not recessions really aren't that bad at all and they tend to be very short. many of them are like four or five months like if we actually had a bear market started in september, and by the way we haven't confirmed the bear market, it could be over now so there's a very wide difference that's why i think this economic data is so important rate now why the fed is watching very closely and why investors are turning on a dime with every new release of data. >> jim, something else you don't get is apparently two
back-to-back down years very often, at least not since 1928. >> yeah, that's very rare and i was kind of encouraged by that i think that, you know, the odds of there being a second year in the downmarket is quite rare and by the way those only occur when in fact there is a recession, so if there is no recession within the next eight or nine months i would say the odds are very, very strong that by the end of 2019 we'll be hire than now. >> are you sympathetic to stack's point of view though >> i am sympathetic. we were already down like 16.ing is percent and a few more percent would take us to the bear market level. with this volatility we could get that within a day or two this high volatility is very characteristic of both market -- market infliction points which may be a peak or it could be a bottom like the march of 2009 which was a bottom also had some of this very, very high
volatility unfortunately, so did the fall of 2008 on the downside. so the sudden big rises that we've seen lately don't really matter that much i think, but we could still have a bear market say by march, and yet still in 2019 higher if there's no recession. >> i think you have to look, jim, at the fundamentals, right? mean, yes, we'll watch the data but also one of the chief concerns since september is that the fed is moving too aggressively on rate hikes and was not flexible enough in changing their outlook jay powell went a long way to soothing the market's fears on that, didn't he, on friday >> i think he did. >> i would have liked him to say a little bit more about why they were so confident about raising, because i'm assuming they have some data that the rest of us are not privy to, and by the way the employment numbers seem to confirm a very strong economy, but it was heartening to hear him recognize that they are not blind to all these other
factors, and by the way, even though the predictive capacity is not huge. stock market prices are a leading indicator. they are one of the earliest intricators of potential trouble so it was very hard hearing him recognize that there could be problems on the rise, but i think it's also worth bearing in mind that the fed doesn't totally control this i mean, the indication that they might put the brakes thon or even cut rates would definitely moderate selling tendencies, but it doesn't guarantee that there won't be a recession the fed's track record is not all that fantastic at engineering the so-called soft landing. we are in a rising phase, and, again, history suggests that it's a very tricky thing to sort of thread that needle hand know exactly when to stop cutting >> although you get mortgage rates awfully close to eight-month lows here. just as a stock play, home depot today is back above the 50-day moving average for the first time in almost four months. >> that's a very significant
number that end of year commentators were focusing so much on the rise in interest rates, the short-term rise, but the ten-year has been in a rallying mode pretty much even as the stock market has been going down and i think the lower mortgage rates and the lower ten-year rates, a lot of rates depend on the ten-year thing there's been loosening there, and i think we'll definitely see -- >> which should we fear, lower rates or higher rates because higher rates win dicktive of a stronger economy and a fed that can continue to normalize. lower rates suggestive of the opposite. >> well, especially if you get to the famous inverted yield curve which we got extremely close to another predictor of possible recession on the other hand, i don't think rates in and of themselves, higher rates, lower rates are all that determinative there's no doubt in my mind that higher rates will dampen activity and lower rates will ease it up, so at the moment might be signifying weakness but the way to get out of the weakness is to see rates go down so i think it's a very healthy
market correction. i will say the market going down here, having had this. everybody i talked to thinks this is a healthy thing. we've been going up, up, up. people have been forgetting about risk and forgetting about the fact that markets can go down and forgetting entirely, yes, there are bear markets, and bear markets is 20% decline and even more than that. it's putting some awareness of risk back into the market and it's improving asset allocation. i think it's a healthy thing. >> we love it when you go deep on markets, jim. good to see you. jim stewart. >> former chairman of the president's economic council ed lazaer. tune in today at 1:00 p.m. for the debut of "the exchange" with kelly evans kelly's special guest legendary value investor bill miller we'll get his take on the market and some of the names he likes that's today at 1:00 p.m. on "the exchange" with kelly evans.
okay time now to get to the cme group and join rick santelli for the santelli exchange. >> reporter: thank you, david. i would like to welcome president george w. bush's head of the council of economic advisers, ed lazear. ed, 312,000 jobs, the unemployment rate moved up two-tenths and rages year over year at 3.2 and we continue to hover at a ten-year high on employment to population ratio at 60.6. comment on friday's jobs report. >> well, obviously it was a very strong report. you talked about the employment to population ratio. that's the number i always look at that's looking really good it's 60.6. you know, because of
demographics, you know, guys at the elder end of the distribution are dropping out of the labor force. we're never going to get back to the previous level, but 60.8, you know, possibly 61 would be about the peak right now so we're very close to it the good news in terms of job growth is the way you want to think about it the last three months have been about 250,000 the last year was at about 220,000. we only need about 140,000 to keep up with population, so these numbers are really excellent, you know, not just the one-month number but actually the three-month number. the other thing you mentioned, rick, is the wage growth of course, we would love to see wage growth. the question that people always ask is whether these inflationary i always point out that it's not inflationary if it's lower than the target rate plus the rate of productivity growth, and that would be at about 3.5%, so the 3.2% year over year wage growth is not pushing the fed in a
direction to have to worry about inflation. >> if you only think we can maybe get up to 61% on employment to population which is only another, what, four-tenths, do you think that that would actually keep the unemployment rate the same or higher do you think that phase is over, or is there more to come and this is an important aspect to consider. >> absolutely. well, i'm reluctant to say it's over and here's why. if you think back a few years ago, you and i kept talking about how there were people out there who could come back into the labor force. other people, you know, some of my distinguished colleagues, people i respect a lot were saying exactly the opposite, that this was a structural problem, no way these guys are coming back and, you know, people have referred to that work that was just dead wrong i mean, those people did come back the best thing to look at to see that is the participation rate and the employment rate of the people who are 25 to 34 years old. those are the guys we were worried about, and that's back
up almost to pre-recession levels right now, so those people came back in, almost a five percentage point increase, so you hate to say, well, it can't continue obviously, you know, it's not going to continue forever. we're at a much more mature phase of the recovery than we were a few years back, but there's still some slack out there, and the fact that employment growth is so high relative to population growth tells me that we're still moving in a positive direction, at least on that measure. >> ed, were you able to observe any of the panel with janet yellin, ben bernanke and jay powell that we all watched on friday that gave the market confidence. >> yeah. >> in the last minute will you give me your observations? >> well, you know, i was encouraged that the chairman became a little bit more flexible, and the reason for it is this. you know, i like to watch the market i have spent a lot of my life when i was in the government doing forecasting. that's part of the job of what
the council of economic advisers was was to put out the forecast. you know, those forecasts are notoriously bad even though they are as good as anybody else's forecast, but best fact is the market when you see the market drop as much as it did, you know, is a%, 15, 17% over a three-month period, that's telling you something, and to ignore that, not for the purpose of manipulating the market, that's a different story, you know. people say we have to lower rates so the market will go up no the point is that the market is giving us signals and the fed chair i thought was a little more open to that than he had been the week before i thought he was a little stubborn about it the week before, a little more open minded about it this week. so that was good news. >> many of us with old cars remember when you flooded the carburetor we're going to talk about it on the next piece, about how that's exactly what the fed is confronted with. ed lazear, thank you carl, back to you. >> all right always bringing it back to the automobile, rick we love it
rick santelli. let's get to jon fortt for a look at what's coming up on "squawk alley. >> hey, carl, the consumer electronics show this week to kick it off, apple is putting itunes on samsung tvs. this is about more than one piece of software or one product, it is about the ecosystems that are huge in the world. going to tell u yowhy that's important, what investors should look out for coming up on "squawk alley.
welcome back to "squawk on the street." i am dominic chu at the highs of the session, with major indexes trading to the up side, most sectors are in the green so far in positive territory. consumer discretionary standing out as one of the outperformers of 2% so far retailers like dollar tree, gap, best buy some of the best performing names mattel extending gains, up more than 7%, showing a strong start to 2019. up 12% since the first day of the year i will send it back downtown to you guys, sara, at the exchange. >> all right thank you. trade talks beginning again between china and the u.s. this week let's get to ylan mui for more
good morning >> good morning. the first day of trade talks wrapped up, they go on for one more day all of the signs so far are positive wilbur ross on cnbc this morning said the white house looks at this as a binary decision he says china has come to that realization as well. >> china now understands how dependent they are on us i don't think they had truly realized how much their high tech companies depended on american ones. but remember, when we cut ct off from u.s. supply, they essentially shut their doors. >> ross outlined three layers to any deal first, immediate trade, reducing the deficit by increasing u.s. exports. second, structural reforms like addressing intellectual property theft. and finally, enforcement measures to ensure compliance. on the chinese side, the foreign
ministry is saying that beijing has, quote, good faith in the negotiations yesterday on his way to camp david, president trump said he has a good relationship with president xi and thinks good things are going to happen guys, we'll see if day two is good as well back to you. >> some discussion this morning about additional participants in talks, more than we perhaps expected is that a good sign? >> it gives you a sense of the scope of talks we're seeing some agriculture experts, energy experts sitting at the table those are both areas which have been contentious for china and the u.s. but also potential areas of market opportunity. so i think what you're seeing are wide ranging, perhaps technical talks that can really lay the ground work for future discussions. >> i wonder the posture of the u.s. feeling like china is the one getting hurt the most, whether the u.s. is feeling pressure behind the scenes we started to see manufacturing and ceo confidence numbers roll
over we're starting to get warnings from apple and fedex, and whether the administration is recognizing that yet >> i think the administration's line has consistently been that there will be a little bit of pain but that the u.s. can handle it. i think that their argument is that the bigger pain will be felt in china and that eventually there will be strong gain for the u.s. continuing down this line >> going to watch that this week thank you, ylan mui. when we come back, more from jpmorgan health care conference. cramer sits down with emma walmsley "squawk alley" starts in a few moments.