Transcripts For CNBC Squawk Box 20130122

And he will join us live from there starting tomorrow. Theres a lot of big guests lined up. Could be a lot of fun. Earnings central is in full swing today. Among the names that are reporting before the bell, we have dupont, Johnson Johnson, travelers and verizon. Four dow components before the bell even rings. Our newsmaker this morning is duponts ceo coming out want 8 00 eastern time. After the bell, Technology Takes center stage. We will hear from google, Texas Instruments and amd among others. And friday, the 49 mothership and it was good. Revenues above expectations. And also a little beat on the bottom line, but a lot of the different Business Segments doing well. All clicking and stock was up above 22. Comcast traded over 40. I saw that, too. And it makes you wonder if the Dow Jones Industrial average will follow the transports at this point. Why follow those two so closely . Comcast at 51 and 49 owners. Im hearing that dupont is hitting the wires right now, which is inconvenient for those of us still getting our computers up and running. Were going to talk to Ellen Kullman. And well be able to get a better idea on whats going on. Fourth kwarer, one of the numbers im seeing, a 12 cents and then adjusted number of 11 cents. And that is versus an expectation of 7 cents. So either one of those on numbers would be above expectations. The sales number for the Fourth Quarter was 7. 3 billion. And the estimate was 7. 26 of. So that is doing okay so far. It always helps to get a look at the bid and the ask as those numbers are coming out. At this point, too wide to tell whats happening. The full year, theyre giving full year numbers. Full year 2012 earnings of 333, which was x items. And then i think were going to see some forecast at this point. 2013 outlook for operating earnings is 385 out of 4. 05 a share. And the estimate was for 3. 84. So that looks like they are at least compared to where the street is, thats above expectations. I can tell you about some of the comments from Ellen Kullman, the chair woman and ceo says at this point they had a record year in new product introductions and that helped strengthen their position. But when you talk about the overall performance, they did say some weakness in markets served by the Performance Chemicals and communications provided significant challenge necessary 2012. They say theyve adjusted their plans to meet the changing market economy and grow the business in a slow growth World Economy. Again, reflecting slow growth overall. I think they had strong numbers when it came to agency. Some of those numbers up by 18 . Volume was driven by agriculture with robust tales in latin america and a strong selling to the north American Selling season along with increases in asia pacific for performance materials, electronics and communications and Performance Chemicals. The stock was higher a year and a half ago or so. But in terms of the last year, its getting its sort of the in the mid point of the trend. Coming back, at least trying to get back to where it was earlier. Alltime highs are at about 58. In corporate headlines, more developments in the boeing story. There are indications now that the dream liner could Stay Grounded longer than initially anticipated. Investigators turning to the maker of the lithium ion batteries that are used in the planes. That is gsyausa. Investigators visited the batterymaker yesterday. Shares of boeing have started getting to the low end of the range after some choppy trading with every twist and turn in this story. Phil lebeau has been following it from the very beginning. He will join us more in the next hour. Also, another twist in the Hewlett Packard saga. The wall street journal reports hp narrowly missed out on an opportunity to buy out that company. The company was told there was an alleged of improper accounting at autonomy. The article says hp executives on the call does not mention that up the food chain to the board or the ceo at that point was leo apoteker. He was like a pharmacist, apothecary. The board established a limit of how much to pay on autonomy. And the Board Finance Committee did not follow normal practices in approving this deal. As people dig back through, there will be even more places they are pointing the finger game. Japans central bank is promising to pump unlimited into the economy and generation some growth. The bank of japan hiked its target for inflation to 2 . I was out last week and it was said from 2014, it would adopt an open ended commitment to assets. There are the asian markets this morning. Japan had a big move last week. The nikkei especially new years, thursday or any, it was up almost 3 . And then theres the yen which traded above 90 at one point last week. But now you can see it, 88. 79. And a u. N. Agency warns the world unemployment could top record levels this year and continue rising until to 17. More than 197 Million People worldwide are jobless. An additional 39 million has given up looking for work. I cant start worrying about the world. 139 million . I was worried about the 24 million that supposedly are earth unemployed or underemployed in this country. The International Labor Organization Warns government budget balancing is hurting employment and will probably lead to more job losses in the near future. All right. Lets take a look at the markets this morning. Markets have been sitting at these record levels. You can see right now those dow futures pulling down by about 12 points. S p futures are indicated slightly lower, as well. But the nasdaq is indicated higher. The dow Jones Transport sitting at an alltime high. Other markets sitting at fiveyear highs. The big question is whether the Dow Jones Industrial average follows suit. Youre a huge transport. Yeah, i am. Thats all alltime highs. Alltime high. Oil prices, you can take a look. Youll see right now is down by about 2 cents to 95. 54. The tenyear note that had been coming down the yields last week a little bit, you can see the yield right now is at 1. 877 . The dollar this morning after the euro picked up strength last week, the dollar is stronger against the euro and the yen and the pound. Right now, dollar yen is at 88. 79. Gold prices this morning up about 5. 80. 1,6933. German chancellor Angela Merkel is hoel hosting french president Francois Hollande and his government, his entire government in per lynn today. Festivities mark 50 years since the treaty of friendship was signed. Thats knight nice. A joint Cabinet Meeting and parliamentary session is being held also. Todays events come as the two countries struggle for a common vision as crisis hit europe. And its nice that friendship . Yeah, after that cold and nasty occupation thing in world war ii and all. Meantime, in brussels, European Finance ministers are meeting. Theyre expected to give their approval to allow 11 states to start preparations for imposing a tax on all Financial Market transactions and measures likely to unsettle banks and houses. For more on the story coming out of europe today, let us head to london to kelly evans who is standing by this morning. I like that necklace. I dont know what it means what its saying to me. It kind of looks like its telling you to buy goad, joe. Its a subtle signal to investors. I coordinate my wardrobe with the prevailing market move. Yeah. I was thinking you were stepping out there. Is that attached to the wall behind you . Are you allowed to move or has ross got you its attached to my wrist here with the same thing going on. Oh, my god. I am actually chained to the desk here because ross westgate, lakeeffect snow, is in davos and he will have the very latest out of there and Worldwide Exchange for the rest of the week. Well also see Maria Bartiromo there. In the meantime, before that meeting gets under way, france and germany are celebrating their Friendship Treaty today. Its all about markets in japan and, in fact, we want to give you a sense of the trade that were seeing, even here in europe affected by what we heard from the bank of japan this morning. Now, markets are to some extent in the red across the board. There are few exceptions, but were seeing declines of about a quarter to a third of a percent. The dax is down. Theres concerns about Deutsche Bank playing into that, as well. The nikkei is shedding abo about. 3 . This market has been on a tear as the yen has beakened. In the last couple of months, everything that we learn from the bank today has basically been signaled to markets. We know he wanted more stimulus. Thats what we got from the central bank today. So while the buy the rumor sell the fact is at play, theres a sense of disappointment. The purchases, the open ended qe wont start perhaps until next year. More importantly, theres questions about achievability. Lets scoop around and is show more of the Market Reaction throughout the day. Todays idea that the bank of japan will suddenly be able to achieve 2 simply for sustaining its target. The yield on the tenyear, 0. 74 . The 30year, under 2 . Were seeing an increase this morning, but its marginal. Its barely a couple of basis points. Theres not yet this feeling in markets that theyre actually going to be able to do it. The bank of japan had a 1 inflation target for years. It hasnt managed to get there. Lets take a look at the forex rates. The dollar yen, over here, is now down. 9 . In other words, the yen is strengthening. Some of our guests on the program this morning, guys, said theyre surprise its not strengths strengthening further. They would like to see more action, more creative from the bank of japan if theyre serious about shaking inflation. But for now, the main message because the bank of japan has gone and can done the big, bold thing. But is it bold enough . That would be heavy if it really was gold, all gold, kelly. Yes. Its not, right . No, it is actually. Its worth millions. Its worth millions. You tried to walk down to the other side of the wall and i saw you get where is it tethered snch do you hear what were playing . I think this is from eyes wide shut. Our audio guy has a really sick mind. Im just glad that that is what you took away from the Global Markets report, joe. Its always Something Like that. Kelly, thanks for playing along. Youve been bad and youre going to need to be punished. Anyway, thank you. Well see you a little bit later. Kelly has actually been very good. She has, since shes been bad shes going to need discipline. All right. She mentioned that youre wearing black, too, arent you . I am, but no yeah, exactly. Good luck trying to pull me back with this one. Kelly mentioned that everyone is going to davos this week. The worlds most powerful leaders in government are gathering there in switzerland. This is the annual World Economic forum. Groups founder is warning that the world has not yet escaped the risk of economic collapse. This is for business and government leaders to focus on what he calls cautious realism and recovering public trust to try and avoid another major crisis. I think what the world expects is that someone with a major crisis takes the lead and im very hopeful that the United States in the second mandate will assume its responsibility as the strongest power in the world. Andrew will be reporting live for us from davos. I believe he is there today. A wardrobe thing . No, no, no. His sweaters are probably going to be part of this and turtlenecks. Yes. Chic jackets. You need warm changes every day. Thats what i mean. I cant wait to see what he goes with. Hes had some interesting hats. Hats, too. You never know. Coming up, why Phil Mickelson is warning that he might need to make drastic changes, even hinting at retirement. And it has nothing to do with his swing. Plus, were going to head to d. C. On the morning after the inauguration festivities. John harwood, probably hung of, but hes going to join us with the latest on washington getting back to work. Think debt ceiling when we return. [ male announcer ] this is not my home. There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. Welcome back, everybody. The s p is indicated slightly down as the is dow jones. The nasdaq is staying higher. We did hear from dupont which came in with better than expected numbers and ta dow component is up by 1 at this point . If you split the bid and the ask, it would be. 1. 4 from the free market. Our headlines this morning, a Tropical Storm intense fieging off of australias coast. Its bringing nearly half the worlds iron ore trade to a halt today. Right now, lets get todays national forecast. Reynolds wolf joins us from the weather channel. Reynolds, its great to see you this morning. Great seeing you guys, too. The story down under is the extreme heat theyre having in parts of australia. Meanwhile, in the northern hemisphere, we have a big wintry blast in spots. Now the story in terms of the snow is going to be in parts of the great lakes with some places in upper michigan and Northern Michigan could be over a foot of snow. The same can be said from erie. That will be the snowfall from now through thursday morning. For much of new england, the story will be the snow. In the southeastern United States, still mild conditions holding in play. 70 degrees in orlando. 54 degrees in montgomery, alabama. Out west, we see the jennings of a winter storm affecting mainly alaska and parts of canada. Seattle will see some fog in the pacific northwest. Mostly sunny for much of the west. Lets talk quickly if we can about delays. Here is how its going to stack up. Boston, snow showers in the early. You might have the back up, new york, basically the same deal but with some wind, and minor delays a possibility compliments of those snowflakes. Back to you in the studio. Yeah. We saw that, reynolds. Yesterday, like today, i went out this morning and i saw the headlines about, you know, keeping the oceans from rising and healing the planet. I was freezing my rear off. Its not warming today, like 18 degrees this morning. Thats always weird the way it happens. Exactly. At this point, any type of change in the climate, whether its warm or cold, rain or drought, snow or no snow, its all Climate Change,ite . Any change at all is Climate Change, i think, thats why its called Climate Change. Have i got that right . Absolutely. But the big debate is is it naturally occurring or is it manmade . Its still out there. Reynolds, i would give you a high five if i was there with you. Amen, brother. Amen. Thank you. All right, guys. Phil mickelson is warning of drastic changes because of his state and federal tax situation. Mickelson lives in california. Speaking aftersundays humana challenge, said if you add up all the federal and state and disability, unemployment, Social Security, he lives in california. My tax rate is 62 or 63 . So ive got to make some decisions on what im going to do. Mickelson acknowledged he could end up leaving his home state of california. He said the Financial Issues were the reason he pulled out of an Ownership Team that push chased the padres back in august. I like the back and forth that i saw in the papers about this. They point out he makes 40 million a year, so he should you know, i see certain people saying he should be happy with 10, how could he need more than ten . But the idea of paying twothirds of your income and its almost not it almost seems like its in fees. 10 out of 40 is 75 . All right. Well, what is it . 15 million out of 40. How do you pay 62 of what and its not like i mean, he has a lot of talent. He works very hard. He gets paid highly for what he does. Part of it is problems with the tax code, too. Its confiscatory. I wonder if his changes are leaving california, leaving the country or if its something even more. Jae. John harwood had similar problems, although hes not in california. Where do you pay your taxes, john . And what are you . Are you a maryland. Where . Maryland . The state of maryland. Youre probably a Baltimore Ravens fan, too. No. I mean, im happy theyre in the super bowl. I like the harbaugh versus harbaugh thing, but the redskins are my team. Thats where my heart is, man. And duke is back. Are they number one sthp. Yes. Louisville lost to syracuse the. Were number one again, but were not going to be the same until we get ryan kelly back. So were going to have to watch that. Thats the key to whether we go deep into the postseason. I got home yesterday and i turned on cincinnati was up six or seven over syracuse. They had just beat louisville. And you said, you know what . If i watch this theyre going to lose, and they did. Youre the curse. Joe, who do you like in the super bowl . I want to get that out there first. I i im inclined to see the 49ers, but then i saw the ravens and the ravens and are tough and that guy is good. Flacco is really good. New england is no pushover and they manhandled them, you know, to my chagrin. I was hoping for a patriots 49ers matchup. Werent you . No. I wanted the brother thing. But i cant decide who is the stronger team. Im thinking baltimore probably. But well have to wait and see. Yeah because, you know, atlanta showed me something that they didnt prevail, but they looked good. They were up 170. What can you tell me about, john, my fantasy, at that tacking to the center and the second term fantasy . I guess im going to have to just live with whats happening. Thats not happening, is it . Well, you know, the practical result of what he ends up getting out of the congress may be different than the vision he articulated. But i have to tell you, i was surprised at how assertive he was, how programmatic he was. He delivered a political manifesto yesterday, which is not what a lot of inaugural addresses are. Usually theres more poetry in an inaugural address. Its a unifying moment. Youre not talking a whole lot about programs or initiatives that youre pushing in particular, but he was. On liemt, which was notable because he didnt talk about that in the campaign. One of the things that fell to the wayside in the first at this term on gay rights. He tried to frame the argument about entitlement programs and programs serving the poor. And it was very striking, i thought, joe, the way he made a reference to this doesnt make us a nation of takers. You almost expected him to have a 47 reference that harkened back to the campaign. I think we cant jurmt underestimate the effect that the experience of 2011 dealing with the congress and then in 2012 what he felt was vindication in the election, how that changes his approach to dealing with congress and dealing with the country. Its going to be interesting to see how successful he can be. Yeah. Yep, yep. Well see. You know, i dont you just dont want to push an agenda too far if it was still a pretty close election, john. Well see. But i dont feel like well, it was. I dont feel like a whole lot of unity was headed our way. This is like throwing down the gauntlet and i agree with you. He was. And one of the dangers for president s is that they get a little too confident, a little too cocky. Well see whether he is reaching a little bit further than he can grasp. Now, i willsy that what House Republicans did last week on the debt limit was a promising sign for him in the sense that and i think he took it that way, which is that they at his insistence, he came out after the election and said im not going to play that game on the debt limit. In the end, they have broken the link between spending cuts and at least in the shortterm between rising the debt limit and the dollar for dollar spending cuts. I think he is feeling that they have recognized that he won the election, that he made a set of arguments to the American People and theyre recognizing the limits of their power and theyre supporting the country. Now, the question is how far can you push that . Can you do it on Climate Change . I dont think so. I dont think you can get legislation through this congress on climate, although everybody is going to have to watch the use of regulatory authority, which is going to be the fallback for him when he cant get what he wants from congress. All right. All right. Weve got to weeks to wait between now and two weeks from yesterday, we were going to talk about this a lot, john. Well probably go back and forth five or six times. Who is favored . Is it pretty even odds at this point . We have to go. For the ball game . I dont even know who is favored. Im assuming that San Francisco is favored by a couple points, but i dont know. Thats what i think. Thanks, john. When we come back, well get an early read on the trading day ahead. Well talk to the ceo ellen can you llman at 8el oclock eastern. What are you doing . Nothing. Are you stealing our Daughters School supplies and taking them to work . No, i was just looking for my stapler and my. This thing. I save money by using fedex ground and buy my own supplies. Thats a great idea. Im going to go. We got clients in today. [ male announcer ] save on ground shipping at fedex office. Good morning, everybody. Welcome back. Were getting numbers from veer rison right now. That number is coming in, Fourth Quarter, 38 cents a share. That includes 7 cents a share of negative impact about a because of superstorm sandy, because of those recovery efforts. What was the estimate, joe . I mean, the number that theyre that were seeing reported by reuters are i dont know whether thats yearly or what, but theyre taughting Fourth Quarter of 1. 48. Fourth quarter, 38 cents. I saw that, but even with the seven cents back in, the estimate was 50 cents. This must have a lot on other stuff in it. The one that is sitting on the wire. Were getting some news from the company itself. But yeah, there is a does that include did they sell something or have a big gain . They might have. What did you 38 is what they say, plus the 7 cents. That is still below. Below what the street would have been looking for and i doubt if theyre going miss by you know, as stable a company as verizon is although the company is saying they were positioning themselves for growth in 2013. The story is the verizon Sees Opportunities in the Fourth Quarter to improve profits for 2013 means they probably threw a lot of things into this quarter to get themselves in better shape the next time around. Some of the numbers that the analysts look at include what theyre doing in terms of wireless. Verizon added 10. 3 million. Revenue is also above. Revenue is 38. 5 versus the 29. 8 estimate. The stock is called lower, though, at this point. Its down about actually, its down more than what youre looking at up there. Ive got a 40. 94 bid. Actually, a 42. 05. Down 1. 6 in the free market. The numbers are things that people look at. Wireless is the big one that people tend to watch. Wireless added 2. 2 million retail customers including a Company Report 2. 2 million in the third quarter. Buyout is the other thing people watch. For the Fourth Quarter, it added mortify yoes customers it had in the previous quarter, despite super storm sandy. Im surprised analysts didnt have a better grip on exactly what the want was going to report. And that big loss number, it was impacted by items in both quarters and addition nol nonoperational debt items for the Fourth Quarter that just ended. It sounds like they were taking a lot of those things low with that theyre positioning themselves low for 2013. I see now. The 1. 48 i was seeing was a loss that theyre reporting and that is because of a dollar 86 a share charges of 1. 86 a share. 1. 55 was related to pension and benefit changes and 31 cents due to the early retirement debt. So but it was in the year ago period, it was 52 cents. So were talking about 38 cents plus seven cents impact of sandy. That 1. 48 number was a loss which included includes a lot of different items. They messed that up, reuters when they posted it. No, im looking at that right now. Its a loss. All right. Weve been watching other earnings that have been coming out today, another dow component, too. Dupont up about 66 cents. Earnings of 11 cents a share. Were going to talk to the ceo Ellen Kullman at 8 00 eastern eastern. Lets head to the futures pits. Had you fixated on the yen . Anything happening in the yields arena that is that interesting, kevin . Definitely the currencies are still where the action is. I think the big thing last night you saw the move back up, what we call up in the yen futures of 1. 50, 1. 75 higher. Kind of an after the fact movement. But we cant keeping seeing these kieps of acute cross turn flukt yait yagzs and expect the debt and equity markets to remain as constructive and calm as they are. So, you know, that window can stay open for a while. But i think that those type the term youre going to keep hearing is currency war. I cant really buy into that. But certainly this idea that you can move the pegs around that quickly and keep the other markets in line is going to end. So im trying to figure out what youre saying. The flux in the currency markets is going to be a negative eventually for equities . Theyre ahead of where they should be . Well, yeah, not just equity once but bond markets, too. And i would say, yeah, weve been constructive, i would say, you know, that the market is probably a little bit fully priced to a little bit rich for what we think is going on elsewhere, joe. Why should the yen affect whether i buy u. S. Stocks or not . So its not necessarily that. But the International Capital flows are where we call factor account flows. And two weeks ago when i was on, i talked about how the yen was reacting now behind the bond market moves here in the states. Those are factor flows. Those are going to be the big what you call when youre running a merchandise trade deficits and current account deficits. These are the things that really matter. And theyre just kind of big macros. So they divide them down to a single session or a quick abrupt move. But theyre the real flows in the Global Economy that are going to matter going forward. Yeah, all right. Im staying long. Im staying long, kevin. Well, we think last year we gave it a bite on the cheek. But thats going to be a lot harder this year, joe. And one of the things youre pointing out are extremely high gdp. And so the big thing this year is to make the switch. The customers are now the employees. The employees are the future customers. So youve got to keep the growth and accelerate the growth in employment over the 1. 25 1. 50 that were doing if were going to keep the equity market going in the direction that it has been for the past two years. All right, kevin ferry. Thank you. Is that a phone ringing down there, kevin . Yeah. Someone is trying to get to their broker. It would ring and ring and ring. That must drive you crazy. Robo call, i would say. They are trying to get to the yen. Yeah, exactly. Thank you, kevin. Well see you again soon. If you have any comments or questions about anything weve been talking about here this morning, email us, squawk cnbc. Com. When we come back, the debt ceiling spike. Youve heard the doom and gloom warnings. But is there really a chance ta uncle sam defaults on the nations bills . Our next guest says, yes, there is. Well find out why. [ male announcer ] how do you make 70,000 trades a second. Reach one customer at a time . Or help doctors turn billions of bytes of shared information. Into a fifth anniversary of remission . Whatever your business challenge, dell has the technology and services to help you solve it. Welcome back. U. S. Equity futures at this hour down about 31 points or so is what were expecting so far. Making headlines, ataris u. S. Operations filing for chapter 11 bankruptcy protection. Oh, no. Yeah. The video gamemaker wants to separate from its french Parent Company and that company is filing a similar motion separately in france. Atari says the move is necessary to security investment in its needs to invest in mobile and downloadable games. That would be great, Space Invaders coming to my blackberry soon. Missile command. I got the high score one time on pit fall. I used to be able to play asteroids as long as i wanted. Theres a way to go up into the millions and millions. Asteroids unfortunately mean a different thing to me at my age. Need a suit cushion . Announcer this squadward moment has been brought to you by i dont know what to do, really. You have to eat more fiber or something. As squadward box continues. Thank you, swroe. Affidavsteroids. Could the nation default on its debt . Ow next guest says yes. Joining us now is steven englander. Steven, are you talking about a real default where we stop paying our bills . Are you talking about where we pay our bills late . What do you envision . Well, my views are much more conditional than that. I think the outcome of the defaults would be terrible due to the knock on effects of the economy. So i dont think theyre going to do it. But what i would warned is that given the experiences of the middle of 2011 and last year with the fiscal cliff, the markets arent likely to believe were going into default until it actually happens. Too many times when weve gotten fixes at the last minute. So i think there will be a sense of complacency. Well have a real panic very quickly at that point. What would happen to the dollar at that point . Weirdly enough, the dollar would rise. The first instinct when Something Like that happens in Financial Markets is are to cut the position. They would cut those positions and money would come back into the u. S. Its a signal that everybody was panicking. But the situation where were facing right now where you could see the house do Something Like a threemonth extension, were not going to worry about this now, well wear about it come march, if that were to go through, what happens with the coral . I think thats likely to be a scenario. It cant be three months and you have to eat your whiteys. Weve had the sequester kicking in. It keeps a lot of pressure on the feds to keep Monetary Policy easing to offset those shocks. The u. S. Not addressing the longterm issues on the expenditure. I dont think it would give foreigners much confidence that the u. S. Was coming closer to resolving the problems. Im wandering to wonder the same thing. If we dont come up with a solution, then these severe cuts kick in. When is there actually a day of reckoning . Well, to some degree, you know, because of the dollar safe haven status, we went from 2011, middle of 2011 to the middle of 2012 with the dollar strengthening, not because there was anything good happening, but because, you know, the rest of the world was on a risk off mode and were selling off. I think the worst outcome for the dollar is actually kind of the one we have now where a lot of Central Banks are pumping liquidity into the world. And that kind of world, the dollar does poorly. And on top of that, there are doubts about the u. S. Fiscal situation and above, you know, what is doing on the Monetary Policy. So you would be telling people the most likely Case Scenario is that the dollar goes down in the first half of the year . Yeah. Lets be clear. Other countries are in the same boat. The uk with the stagnant economy, were looking at japan using the Exchange Rates to depreciate. Its a g4 question. The Big Four Companies and if you throw switzerland in the big five all face similar issues and theyre all doing similar things. The dollar will weaken against currencies in emerging markets, will weaken against the smaller g10 currencies. But within the g4s, it depends which one has the bigger problem at any point in the day. Steve, thank you very much for joining us. My great pleasure. Thank you. 47 million in 2012. He stays in california, tax bill is 29 million. So if he moved to florida, he would save 6. 25 million. The tax bill is 29 million . 29 million out of 47. Thats not bad. Thats pretty good. But he could move to florida and keep half, basically keep half instead of keeping 18 out of 47. For a guy who is on the road a lot of the time. And then the asteroid thing, i saw what al rockier was able to he got a lot of mileage out of that story. So are you about to make a confession . Its not really true. Today im feeling fine. Coming up, im going to start being more open. More open . I know everything about you. To viewers. Our viewers know just about everything, too. If i feel like i have to burp, i am going to you are not a closed book. Could you be more open than al roker about something . Probably not. Probably not. So every little thing happens to me. Oh, boy, viewers, look out. Anyway, if youve ever been worried about what your boss uhoh, i forgot about him. About what your boss things about one of your facebook postings, one of your tweets, dont worry about it. 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Welcome back, everybody, were in the chairs this morning. Joe was just talking about a story thats out of the New York Times today, saying that your right to speech, free speech, is still fully engaged when it comes to twitter, when it comes to facebook, even if it ticks off your boss. It is protected. This is according to some new rulings from the National Labor relations board. There were a couple of situations, and the board is coming down trying to say that this is just an extension of existing law, making it apply to new technology. There was a case, his pan igs united of buffalo, a Nonprofit Social Services provider where a caseworker threatened to complain to the boss that others, other employees werent working hard enough. One worker, Mariana Cole Rivera posted a facebook message saying my fellow coworkers, how do you feel . Four other people came back with sometimes angry, expletive laden responses. What the hell, we dont have a life as is. Try to do my job, those five workers were fired. For posting those things, and the nlrb said that that is not okay. That this is free speech, theyre allowed to vent, as they called it, and its okay, and they had to be reinstated with their positions. Now there were some other situations where the board said this is not free speech. They cracked down where a newspaper reporter, a homicide reporter at the Arizona Daily Star in tucson posted some things saying, what . No overnight homicides . Youre slacking, tucson. And another began by saying, you stay homicidal, tucson. He was fired, and the nlrb said no, thats a situation where you can be fired. Were trying to imply that you can tweet you cant say anything. But you can tweet stuff about your boss. And its different for us, because on air. Yeah, being on the air. And being, im not saying Everybody Knows this, if we were theres alist, theres blist celebrities. Where is is the alphabet big enough to find a place for us . Were in the back half. But, still being somewhat public im petrified. Of saying anything . Yes. See rupert said something thats why you dont tweet, right . Thats why no. I do on the air, and you know, i sort of consider it as saying it. But you see but if you put it in writing and it stays there, it becomes viral. You see Rupert Murdoch said something about that fullfigured gal that fell in to the i dont know. Fell into the what . She fell into some hole but it saved her because she got stopped. Out in l. A. . I dont know where it was. But he said something about, you know, howd she get so fat or something. He made some comment like that and it immediately then he said i was just commenting on our eating habits in this country, that its causing obesity and things. But he had to immediately backtrack. Youve got to be careful what you say. You really do. And now, so im allowed to Say Something about our bosses . Why dont you go ahead and try that out . Ill Say Something about you mean those guys in the Corner Office that we have no idea what oh, stop. See, im not going to do that. Yeah, good idea. I dont believe that that youre really protected . Yes. This says you cant fire them. It doesnt say anything about where they can put you in terms of what hours they make you take or any potential raises down the road they give you. You mean they could put me on a show that starts at 6 00 a. M. . Oh, yeah. Can you imagine . That would be awful. Youd have to get up at like 3 30. How much worse could they you cant do that much worse. We do have programming starting at 4 00 a. M. Yeah, we do. Anyway, that so go ahead. Tweet at your peril, though. You know, that we may see phil. He should come on at 3 00 a. M. We do the show at 3 00 a. M. In california. That will be a week from friday or two weeks from friday . Two weeks from friday. Anyway, coming up why shares of boeing are falling again this morning. Plus a Hedge Fund Titan who turned in returns of more than 20 last year. Our guest host when squawk box returns. What are you doing . Nothing. Are you stealing our Daughters School supplies and taking them to work . No, i was just looking for my stapler and my. This thing. I save money by using fedex ground and buy my own supplies. Thats a great idea. Im going to go. We got clients in today. [ male announcer ] save on ground shipping at fedex office. Looking ahead on money matters. An economic recovery has begun. Americas possibilities are limitless. Can americas leaders rise to the fiscal challenges facing the nation in the next four years . Were following the money trail. Seizing opportunities in the Global Economy. Ppg exxon panel founder is here on where to put your money right now. And taxing times for Phil Mickelson. What hes saying that is shocking the golf world. The second hour of squawk box starts right now. Good morning, everybody. Welcome back to squawk box on cnbc. Im becky quick along with joe kernen. Andrew is on his way to the World Economic forum in davos. Weve been watching the futures and other earnings coming in, too. Right now we have travelers, which is out. Thats another dow component, thats the third of four that are reporting before the bell this morning. Travelers coming in with earnings of 72 cents a share versus the 14 cents the street had been expecting. Thats an incredible feat. It is down from where they were a year earlier. It was 1. 51 a year ago. Thats because the losses from sandy came in and it was 689 million in catastrophe losses. Almost all of that was from sandy, 669 million. The company, again, coming in at 72 cents versus the 14 cents the street had been expecting. Partially because they have underlying margins that were better revenue is above expectations. 6. 48 billion in revenue. Property and casualty insurers are notoriously hard to figure out. To analyze and to predict. You can see the analysts werent even close. That underlying underwriting margins, i wonder if thats because they were able to raise rates because of sandy or if its too soon to be looking at that . Again theyre Getting Better numbers than the street had been anticipating. The losses from the storm, thats something that a lot of people will be looking through. Theyre saying at this point 669 million after tax. It was 1. 024 billion pretax. And that compares to losses of just catastrophic losses of just 6 million after tax from the year earlier quarter. Take a look at travelers this morning, youll see it is indicated up by about half a percent. This comes after we saw from some other dow components this morning, du pont coming out with its Fourth Quarter profit, 11 cents a share. When you strip out certain items and that is four cents better than the street had been expecting. Revenue for du pont also beating conseine tess. Well be hearing more about that quarter when the ceo joins us in the next hour. That stock has been trading higher. Verizon came in with 38 cents a share and profits for the Fourth Quarter when you stripped out certain items. That was a little short of what the street had been expecting. Street was looking for 50 cents but 38 cents included seven cents worth of negative impact from superstorm sandy. But that stock is indicated down by about 1 . You add it all up and youll see the futures this morning looking a little bit nexted at this point. You can see right now the dow futures down by about 22 points. S p futures down by 1. 8 and the nasdaq turned negative, as well, down by less than one point indicated to open lower. In our other headlines this morning, japan unveiling what its Prime Minister calls a monetary regime change. It is raising its inflation target to 2 and starting openended asset purchases a year from now. This is all part of an effort to try and kickstart the japanese economy. All right. Im just looking at these different, you know different revenue numbers on trailers. We put up a totally different one. I thought that was net written premiums what we use for revenue . 5. 28 and thats what we use. Because the overall revenue that they get when it comes out was above that. But i dont think maybe you dont total revenue is 6. 477. 5. 385. So the analyst estimates are for revenue as based on net written premiums apparently. The dreamliner is likely to be on the ground for longer than originally anticipated. Phil lebeau is here with the latest. What do we know, phil . Theyre checking out these batteries, i guess. Why does it seem like its going to be longer now . Well, remember, last week when the grounding was announced at the time boeing said, listen, our engineers are working with the faa, we believe that perhaps we could come up with a quick solution, that could convince the faa the planes are safe, put them back in the air, perhaps early to mid this week. That was the original goal. Well now when you look at whats happened over the last three or four days its pretty clear that the drama roevolving around the dreamliner its been extended. First of all the Flight Cancellations continue to grow. A a, jal announcing cancellations through the 28th or 29th. Boeing is not slowing production, even though it is officially halting deliverlies of 787 dreamliners. Heres the issue. They have come up with different finding for the burned batteries. We mean the investigators in japan and the u. S. First in japan. Investigators there say the a a battery received too much voltage. That was the Emergency Landing dreamliner. The investigators visited the japan firm monday that makes the dreamliner batteries as they try to figure out why did that battery get more voltage than it was supposed to get and was that the cause of this . Take a look at the stock of the battery firm. They confirmed yesterday they were talking with investigators. Compare that with what we saw from investigators looking into the Jal Dreamliner flight in boston, the fire there. They say that the battery in this case was not overcharged. Now today the ntsb investigators will be in arizona visiting the secure plane facilities. That is the company that makes the charger for the battery, as they continue to figure out what happened in this case. In both cases if you take a look at shares of boeing which are likely to be under pressure today as its clear that this investigation is extended, becky and joe, the bottom line is this, youre looking for commonality in the two failed batteries. In one case they say it was overcharged. In another case theyre saying it wasnt. Thats looking more and more like an indication that they dont know exactly what happened here, and as a result, figuring out a solution is going to take a little longer than originally anticipated. Phil, we were talking earlier about how the stock has started to break down a little bit out of that trading range where it had been earlier. Right. And the thing you want to watch, becky, the thing you want to watch is when boeing, if boeing says we have to slow down our production schedule. Because thats the key. Once that happens, if that happens, then youre going to see wall street and investors say, okay, now were a little more concerned here. Yeah, weve talked last week with you, phil, and i believe mike boyd in talking a little bit about the 747 and the troubles it had. Was that a situation where they had to flow down production or were they able to correct it more quickly . Im not sure how much they had to slow down production. That was so long ago its hard to remember exactly what happened. Youre looking at a much more intense situation here because youre ramping up production of the 787. Thats a big part of the estimates that wall streets looking at for boeing this year. Starting at five right now per month and going up to ten per month. If that doesnt change, then youre going to look at most investors saying, oh, well theyll get through this. If they have to change that its a totally different ball game. Phil thank you very much. Well check back in later. Hewlettpackard narrowly missed an opportunity to back out of buying autonomy. The wall street journal says that auditors spoke with hp days before the acquisition went through, and told the company about an allegation of improper accounting at autonomy. But the auditor said that they found the allegation had no merit. Now the article says that hp executives on the call did not pass the mention up the food chain to the board or to the ceo. Had almost written off the whole acquisition. Meantime the journal reports that hp exceeded a board established limit on how much to pay for autonomy and the boards finance committee reportedly did not follow its normal practices in approving that deal. Our guest host this morning is one of the best performing Hedge Fund Managers of 2012. Joining us right now is dena carsing. He is the founder and ceo of the hedge fund ppg axon which closed up 20 according to an investor. Great to see you. Thanks for joining us today. Weve been watching earnings that have been coming in this morning trying to get a feel for what the overall economy, not only in the United States, but also in the globe is going to lk like this year. Earlier this morning, Ellen Coleman was out with du pont. She says shes looking at what shes considering something thats going to be a slow growth World Economy. Is that the sense that you get from looking around . I think the good news when you look back is that the worlds not ending, and investors were positioned as if it were. So i think much of the rally at the end of the year and this year has been a reflection of the fact that things are settling down a little bit. Bad news is theres no easy solution. Theres no big recovery coming out of this. So we see a lot of restructuring. And i think there are some good parts, some bad parts. I think it spells a lot of variety in earnings. Overall i think its going to be tough for S P Companies to earn a lot of money and grow rapidly going ahead. Which means its also tough for investors to find easy ways to make money. The good news, if you look across Global Markets, every month we look at valuations of each sector, each country and stare at them and see how theyre doing. Pretty interesting. More than any point in years, almost every region is right on top of each other in valuation. So europe, japan, u. S. , all within a point whats your number in the u. S. On the s p . Give or take off of current numbers, its about 12 times, 12. 5. Times dinakar. Its time for the s p to go to new highs. Joe, the only thing tell me. Heres the good news and the bad news. Its not that i care. If you look at the last 20 years, average multiple is higher. Average multiple all good stuff. Three sectors make up almost the entire year or more of that undervaluation. Health care, tech and energy. Right. Why health care . Because the golden days are gone. Health care is going to have a tougher road ahead. Decent sector but mercks not trying 20 times earnings any time soon. Technology, theres revolution under way right and i think as a result you can make a bet on apple, google, et cetera, but there are reasons why they trade where they trade and so the world of 20 times multiples for large cap tech stocks will challenge as well. And energy, oil is at 100 not 20. But another revolution in energy too, right . But its a bit of theres a lot of volume. Not much profit. The market ultimately you can see why some of the sectors that drag multiple down are where they are. Doesnt make it bad. But does it make me think that multiples just bottomed out . Not so sure about that. Yeah, you wonder whether you see multiple expansion in either one of those last two. In health care its hard to its going to be continuous cost pressure and then energy we just saw, Climate Change is the biggest thing that he talked about yesterday. I mean i wonder if you worry about hydro carbon buildout now, or whether you believe it or whether you think congress will stop any actions that slow that down. The funny thing is, youre talking about airlines and building. The one common thing that people in boeing have in common with Energy Companies is that the new thing you make is a whole lot more expensive and complicated and very risky compared to the old thing you used to make. That just means your quality of earnings is going to be a little tougher for the next decade than in the past decade or so. Not a bad thing. Do you think profit markens which are at alltime highs, do those come down, since were only at 12 times earnings i think they are coming down. Were seeing that quarter by quarter the last few quarters and so i do think that the big wave is gone. In the last year, you already saw top line slow down, the Companies Use Balance Sheets to go and help bottom line. But, at some point thats already working. So i think at this point margins are coming down. Again multiples might go up. Or might go up enough to overcome that . Depends on the sector. Again, i think bearish on the s p for the next year . I we were on equities. Right now id still say negative on credit. I think its okay. I think you just had a great two months. And you dont tend to get great two months over and over again. Look, i was in asia during the asian crisis and i remember that go to japan, and we always hear from strategists why the nikkei should go up a lot, because rates are really low and the discount level said that you should get high multiple. Youre comparing one way which is that when rates are really low its usually for a reason, right . You dont get your cake and eat it too. Youre not going to get robust Profit Growth and low rates. One of those two is going to break. I do think for an Equity Investor youre better off for credit by a mile. If things settle down and are okay, rates start pirking up over the back end and youve got to factor that in over the multiple, too. It feels fine to us. The good news is rates may actually come back. At some point say were back and the economy is growing again . Im looking for the Silver Lining . I think one way or another rates go up. Because ultimately were not in this low boring world. If rates stay low if the economy stinks, and governments cant get revenue to go up, rates have to go up one way. And if things are great, rates go up another way. Either way rates go up eventually. For a good reason. At least it would be nice to get something in when you have wouldnt it . The good news is, investors are positioned for very bad stuff a few months ago, and so the starting point for companies and investors has been a lot of caution. As a result, things settled down means people get back to business and spend some money. Dinakar is going to be with us the rest of the program. Were glad youre here. Great to see you. When we come back, a review of the president s inauguration and what it means for the markets. Well take a closer look at the issues he speak about, and those that he didnt speak about, too. And later, taxing times for phil mickels mickelson. Well have his comments that raised some eyebrows in the golden state. And washington getting back to normal today, after president obama took the oath of office for his second term. Jared bernstein, former chief economist and Economic Policy adviser to the Vice President , and senior fellow at the center on budget and policy priorities. He also is a cnbc contributor. Also here is chuck gabriel, managing director at Capital Alpha partners. These notes that i saw from last week were the question is going to be whether the president transforms himself into a progrowth, promarket president. Did you write that before you saw that the address, or did you see any indication that thats the way he wants to head now . None at all joe, unfortunately. A lot of us, me included, got caught up in the moment. It was really a great celebration of racial unity and the moment with, you know, the first black president , in his second inaugural. But, where some might have been looking for an olive branch to republicans, i think a lot of them felt that it was a stick in the eye. Frankly, he may a very spirited defense of activist government and kind of continued this narrative that, republicans dont believe in Social Security and medicare, et cetera. So, you know, we go on a very cold Tuesday Morning and we soldier on to the next battle. And, the theres an inauguration theres speeches, and then theres what youre able to accomplish given the the tone the makeup of the country, the makeup of congress. How much gets done . How much is just bluster . And how much actually ever gets proposed . But then again, how much is executive order . Is he going to be able to do that without legislation some of it . Well, again, now we get to wait for a state of the union on february 12th, and we probably wont see his fiscal 2014 budget until march. Well have to deal with the debt ceiling and probably at least the sequester before that. So you know, there are not a lot of proposals formally on the table from the democrats. And i think were going to have a very, very messy march and probably into early april, maybe even with a government shutdown, and initial sequester. But eventually, one might hope that theyre going to be forced in some sort of balance of a deal with new revenues and spending that jerry and i were talking about yesterday. Jerry, as hard as it is for a centrist to look at when the president would be subjected to criticism from the far left, and i saw it for four years, that this guy let us down. Matt damon, whomever, any of these clowns, that thought that the great progressive mantle that he was given had been left behind for four years. Given the speech are they now going finally, this is what we wanted all along . At least from the rhetoric they must be satisfied from that speech yesterday. I think thats right. And i think im hearing some of that kind of sentiments expressed by people who were kind of looking at the president and the kind of things he talked about yesterday, as weve been waiting four years for this. I do agree with chuck that there wasnt a lot in there about growth and markets, but it was a speech that was very much about the role of government, particularly in the lives of people who, you know, very arguably, need government the most, just so they can get a fair shake. And in that sense i thought it was a very strong, yes, a progressive speech. But i thought one that resonated. But jerry, given the amount of divisiveness that we already found ourselves in, and i guess, i dont know if i call it a close election, but there is still probably i would say 47, theres that number again, 47 , 48 that really thought that the Progressive Agenda had gone too far already. To come back with such a rousing defense and then all these new proposals to even extend it, what does it is that the right move to try to bring the country together in terms of unity . I mean thats certainly not what bill clinton did. Well, it is in the following sense. I think that the divisiveness youre talking about has a lot more to do with the kind of arguments that chuck was referencing, and those are obviously going to be problematic going forward. But if you actually look at poll after poll you find that the vast majority of americans are actually very sympathetic to gay rights, to equal pay, to, you know, antidiscrimination. Even to gun control. So, i think the kind of unity that he was talking about yesterday was actually, again, very resonant. You didnt hear him talk, and interestingly he talked more about this in his first inaugural speech, about unity with republicans. Unity with people who oppose him. I think here hes reached his hand out many times to have it slapped away. Now we are going to have to figure out a way to move forward, just as chuck says. And actually there are a few sort of semipositive signs on that front lately. Theres been a couple of arguments that have been resolved but chuck, there are some people that are disturbed by not only our spending, but the growth and the size of government. The growth in the number of people dependent on government. And i mean, theyre not going to be happy about what they saw yesterday. Well, again, exactly. That 47 really is 49 of the of the population that somewhat dependent on some sort of transfer they can be for gay rights. They can be for immigration. They can be for all these social issues but they can still be looking at the lack of progrowth, you know, private sector initiatives, and possibly even more headwinds that with climate i dont know what he can get done with Climate Change. Nothing there really was trying to get to 3 or 4 growth. It was like trying to make do with 2 and expand the government. Let me just say chuck one last point. I mean, really, the International Message of that speech yesterday is that, you know, we are gone, and i think, in a irretrievable way now were moving towards a government that will take about 23 , 24 of gdp. And were going to pay for it. Weve got to go. We only got ten seconds. Maybe we did see that. I just want to were going to push the taxes up to where we can afford 24 of gd just want to know why joe, free market guy, sauce asking the president what are you going to do for growth . I mean i think what hes going to do for growth get out of the way. I just want him to get out of the way. I hear you. But im not hopeful. Anyway, thanks, jerry. Thanks, chuck. Sorry. When we come back, weve got more tax talk for you. Squawk will be right back. At 1 45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. Surgery was successful, but he will be in a cast until it is fully healed, possibly several months. So, if the duck isnt able to work, how will he pay for his Living Expenses . Aflac. Like his rent and car payments . Aflac. What about gas and groceries . Aflac. Cell phone . Aflac, but i doubt hell be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a getwell card at getwellduck. Com. All right wed like to continue the squawk conversation this morning. Weve been listening to you, watching your tweets coming out. Wed like to wish a very happy birthday to rich coyle, his wife lisa wrote in and asked us to do that. If you have any other comments, questions, about anything youve seen here on the show this morning, email us at squawk cnbc. Com. When we come back were going to talk more about Phil Mickelson and his tax talk. Its the buzz of the morning. Well have that story right after this. And at the top of the next hour, du pont ceo ellen cullman joins us to talk about the companys Quarterly Results out earlier this morning. Du pont is indicated higher this morning after beating expectations. Coming up the dow transport near historic highs. So is now the time to climb aboard, or is this train already left the station . We preview some key earnings, and talk about the sector in just a bit. [ wind howls ] [ dog barks ] [ male announcer ] something powerful is coming. See it on february 3rd. Tdd 18003452550 tdd 18003452550 and the streetsmart edge Trading Platform from charles schwab. Tdd 18003452550 gives me tools that help me find opportunities more easily. Tdd 18003452550 i can even access it from the cloud and trade on any computer. Tdd 18003452550 and with schwab mobile, tdd 18003452550 i can focus on trading anyplace, anytime. Tdd 18003452550 until i choose to focus on something else. Tdd 18003452550 all this with no trade minimums. Tdd 18003452550 and only 8. 95 a trade. Tdd 18003452550 open an account with a 50,000 deposit, tdd 18003452550 and get 6 months commissionfree trades. Tdd 18003452550 call 18008368799. Good morning, everybody. Welcome back to squawk box. Weve been watching earnings this morning, and there is quite a parade. Dow component travelers coming in with 72 cents a share for the Fourth Quarter. That killed expectations. The street was only looking for 14 cents a share. The big beat was driven by a substantial improvement in underwriting margins. It did have big numbers, catastrophic losses from sandy. But again the underwriting margins were better than the street had expected. That stock is indicated higher this morning. New high. Also verizon coming in a little bit short with Fourth Quarter profit. It came in at 38 cents a share. Strip out certain items, analysts had been looking for 50 cents a share. Verizons margins were hit by the introduction of the iphone 5 which was a product that it actually subsidized. Thats going to be down. Thats going to be down . About a dollar. Also fresh read on the Housing Market a little later this morning. The National Association of realtors releases december existing home sales at 10 00 eastern time. Could be up 2 from the november level. Phil mickelson is warning of drastic changes he needs to make because of his state and federal tax situation. He lives in california and speaking after sundays hume nan challenge he said if you add up all the federal and you look at the disability and the unemployment and the Social Security the state, my tax rate of 62 or 63 . And ive got to make some decisions on what im going to do. He acknowledged he could end up leaving his home state of california. He also said that Financial Issues were the reasons why he pulled out of an Ownership Team that purchased the San Diego Padres back in august. Mickelson has promised to address the issue in further detail at this weeks Farmers Insurance open and its rare that, you know, golfers usually, you know, they Say Something controversial, its about, you know, about a putter or grooves on your wedge. Or tiger. Yeah, tiger. Controversial himself. He didnt really say them. Its sort of things that happened. All rights get back to our guest host Dinakar Singh. Tpgaxon founder and ceo. On friday, maybe it was thursday, we talked about whether the new normal was real. And whether it was something that were still in the midst of. Growth would solve a lot of our problems. 2 growth or 1 to 2 doesnt solve any of our problems. Are we stuck at 1 to 2 . I think, for the near term, i think were probably, maybe its 1 to 3 , Something Like that. Is it selfinfrikted . You know, i think theres just from what . Theres good news bad news, right . We know that starting now start to cutting back theres no way they cant. Thats bad news. Good news headline a couple weeks in the New York Times was california might have a surplus this year. Optimistic, probably wont. But still thats nearly a miracle, right . Florida, same thing. So, the states have been radically cutting because they had to. Theyre largely flatlining this point just as the federal government steps up. So this is what youre going to see going forward. Some areas that have to really go and change a lot. Other areas that have gone through that change. The seesaw is going to go back and forth. I think there are growth sectors in the economy where things are going great. Other sector where it looks like its going to be tough. I think its going to be diverse and mixed. How are we going to haveish didwhat austerity will we allow to happen to us . Bee dont seem to want anything to happen to us. Yeah. You know, markets will inflict that upon us one way or the other, right . Youre seeing the first not as long as the feds buying 85 billion worth of bonds every month. I think for better or worse when you look at the last month or two, starting for example, really now, you are seeing some tax revenue kick in, right . And at every level. Unemployment and payroll taxes going away the lower income consumer got hit. And is going to get hit very directly in this few months. And guys have had tax rates go up, thats a change from before. Last year tax rates were stable and it was companies fulling back worrying about the cliff. Now youre seeing the reverse a little bit. So people are nervous about Companies Like Dollar General when they were worried about capital Discount Companies six months ago. We got something on the tax revenue side. What makes you think that were going to get somewhere on the spending side . I mean we just heard basically a speech that said were at 24 . And im not uncomfortable with 24 . Id like taxes to be raised to where i can cover i want i like these entitlements. People want them. And im going to pay for them. Will that be okay for growth . Yeah, look, i think youd be okay if we had a permanent 24 , 25 of gdp percentage of gdp on government . I think first and most i dont think we can run, 7 , 8 , 10 definites indefinitely. Getting that down is the most important thing. So if we paid for the 24 , is that okay . If you had to, i would prefer to have higher tax rates and lower deficit. I think in the long run its a bad outcome. I came to this country with my suit case, my family did at least, and opportunity was why they came here. There are two parts, because theres growth theres opportunity. And in one generation this is the only country where you can actually really make a claim. On the other hand Public Schools and scholarships are how that opportunity came about for me right . And both things matter. So from my perspective i think we need to be careful not to scare people off. I think if youre a ceo, or youre a wealthy investor globally and you have a choice, if people you might choose to stay away. The only good thing for us and this is going to sound ridiculous to say but its true, its not as if you have better choices right now. There are no parts of the world where a ceo is going to stare at the tax code an expect its going to go down a lot. So i think the bad news is as dysfunctional, the good news is its actually not necessarily worse if we dont do something with our entitlements were going to be not at 24 or 25 , were going to be at 39 within 20 years. Yes. No one wants to do we had john kenneth on friday and you said 130 into medicare and you take 450 out. Is that okay . He goes, yeah, thats what people need to do and the governments got to pay for that. There are people that think its okay that our children are going to be paying back foreigners based on a 300,000 shortfall in what they put in to their retirement and what they take out. But we all know the math which is that entitlement issue, especially later in this decade, gets out of control. And so sometime in the next six, seven years people have to but were told republicans hate medicare and Social Security just because they want to try to fix it. You know, i think it strikes me that the most obvious deal were going to strike at some point some day is going to be to go and start putting in things like qualifiers on medicare raising the age. The funny thing from investor p perspective, we have hospital stocks. Single digit earnings multiple. When people you look at Health Care Stocks multiples have really compressed. And investors are saying theres going to be very little Revenue Growth going forward. When i look at budget projections, its the reverse. People are saying revenues are going to grow rapidly and cost for health care is going to keep on growing. Someones right or someones wrong, right . The Health Care Investor is looking at a world of low growth going ahead. The government budget analyst is looking for me the one way to go and offset my medicare risk own hospital stocks. But i do think that i think costs will eventually have to be part of the equation because you you look at a very few numbers like 20 to 25 stocks. Exactly. All right so we just talked about community health. Youre with us for the rest of the show. Were going to talk about some more. You carried interest should go away in your view. I think its part of a overall solution, sure. Okay. Again, if youre the only guy, you dont like that very much. The concern if youre a very progressive eight points in the last number of months. And i wish i could say that the world is a better place for it. That our problems were solve and were really getting a big were not going to use it to cut the deficit. Were going to use it to expand entitlements. And thats the problem. I know. All right. Up next, planes trains and automobiles. Were going to take a look at the dow transports and find out if theres more upside as the sector gets ready to report earnings. Check out the transfers over the past four months. Welcome back, everybody. Take a look at the futures. Right now you are looking at a mixed picture. The dow futures, s p futures indicated slowly lower. Dow futures down by just about 10 points. Nasdaq slightly higher up by 1. 4. Weve got a number of dow components reporting this morning. Verizon out with earnings. That one is indicated lower. Trading lower in the free market after it missed expectations. Travelers and du pont are trading a little higher after they both beat expectations. Were still waiting upon Johnson Johnson this morning as well. Dow transports have been surging lately as youve seen. The index is up nearly 14 over the past two months. And is leading the gainers so far in 2013. So is there still room to make money or has the train already left the station so to speak . Joining us now Senior Research analyst at avondale partners. It must be on the idea that the globe is shaking off some of its doldrums because oil prices are still, you know, above 90 dollars and yet transports are at a high. It must just be on the notion that growth is accelerating globally. Thats the notion. Certainly youve already pointed out we were oversold. We were planning for doomsday. Some people have to get especially at the beginning of the year, okay ive got cash, lets get reinvested. You saw that the marquee names were first. J. B. Hunt, Union Pacific, we saw fedex move first. And then now were starting to move into a little higher risk names. But the underlying goods doesnt confirm it. So i look at truck tonnage. Truck tonnage was less than 1 growing, now its contracting. Car loading and the rail space and unless im talking about the oil, balkan related fracking related activity theyre contracting. Ocean containers contracting. Theres nothing out there other than those things directly related to ecommerce because that is a real trend or those things directly related to fracking that are confirming it. Is that because all right thats not fiscal cliff. Were not just measuring the last month or two. Were measuring actual, real things. So is it the austerity dinakars been talking about . Tax rates are going up around the world. We call it austerity in europe what it really was they raised taxes over there. Youre reducing consumer income. So if you raise consumer taxes by 2 youve reduced consumer income by 2 which means youre going to reduce consumer spending. We heard china is doing better, europe is also the front burner. Why are you seeing the contraction in these numbers . Because youre seeing less consumption and less production. Less prosperity. From the austerity from the higher taxes . Thats at least part of it. And also just caution. You know, you see you go through space by space by space and theyre just unwilling to make those investments. In the past, and i hear j j numbers in the past the dow transports hit a new high and its not confirmed by the industrials, then that signaled that we should have a pullback. Yes. Do you think were going to see that situation . I believe that is the case. Because lets face it, if the dow if the transport went up by 7 every month for the next 12 months, then, the dow is going to be at, what, 23,000 . Thats okay. Which none of us expect. We want it, though. Well that would be nice. But you know but it would only maybe get its 1. 19 a share when you strip out certain items. That is compared to 1. 17 the street was expecting. So a slight bit. They had special items that were in there. Again 119. Revenue is a little light. 17. 6 versus 17. 67 estimate. The company is also talking about the outlook. 535. To 545 which is blow 5 4r9. So well take a look at some of these numbers. They talked about solid results for the quarter, even though, they looked at sales momentum in many parts of the business continued sales momentum in many parts of the business. But again, at this point that stock is down by about 1 . The new guy, isnt it . Yeah, thats right. New ceo. And that always begs the question whether they might set themselves up for a little bit better ruts down the road sometime. Alex gorsky is the new guy. Maybe that was a little concerning though. A little be a little bit below where the street is. You dont know whether its below the previous guy from j j. But theyve got all those quality issues theyre dealing with. Its been less of a story about products, and things like that, than it is cleaning up some of the stuff that the all right. So where we were . Yeah that would be bad. We dont like it when the transports, but what would the dow have to do just to confirm a new high on the transport . Wouldnt have to go to 23,000. No. But the point being that the, you know, dow transport theory is that if the dow moves higher and the transports dont confirm it. Yeah. Or the dow moves lower and the transports dont confirm it. Its not a problem. But its not that the transports move first and the dow needs to confirm it . No that would be like saying that the rioting in greece because michelle is over there. You know what happens you is hear that there are riots, and you send her over to confirm it. Its not that theyre rioting because shes there. Then you wouldnt be you think that the transports right now are for some reason theyre up here but no good reason. Its not that the stocks are somehow omniscient, theyre a reflection of the underlying goods flow. Is there any of the groups in the transports more vulnerable . Rails are still pretty good, right . We have the truckers rated underperform. The truckers are where youre worried about im worried the most there. Quite frankly were seeing 6 something percent cost inflation get improved margin wer. Out of that . Very difficult. Very difficult. Least worried about certain segments of rail Union Pacific in particular simply because theyre a great ben rush i of fracking and the research the chemical research. Okay. Well be a little less bullish maybe just listen like you said, well keep that in mind. Thank you. Thank you. All right. When we come back on squawk, the ceo of chemicals giant du pont is going to talk Business Innovation and Quarterly Results with us. That company out with earnings a little earlier today and that stock is trading higher in the free market. Plus, a preview of googles earnings and what you can expect when the Company Reports after the bell. Squawk will be right back. [ male announcer ] how do you turn an entrepreneurs dream. Into a scooter that talks to the cloud . Or turn 30million artifacts. Into a hightech masterpiece . Whatever your business challenge, dell has the technology and services to help you solve it. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The allnew cadillac ats 2013 north american car of the year. For a limited time, take advantage of this exceptional offer on the allnew cadillac ats. Take a look at a couple of stocks to watch this morning. Well start with research in motion, rim considering a Strategic Alliance with other companies once its new blackberry 10 models have been launched. The ceo told germanys newspaper that an option being considered that that is an option being considered along with possible sale of the companys hardware production unit. Stock was trading higher. And brinker is reporting Second Quarter net of 50 cents. That was right in line with expectations on slightly lower revenue. Verizon also out with Fourth Quarter profit. 38 cents a share, below the 50 cents the street had been expecting. The numbers were impacted by yoi phone subsidies as well as superstorm sandy. On the squawk news linee have James Radcliffe of barclays. Good morning. What do you think of these numbers, the bigger problem the iphone subsidiesubsidies, or th surprise zane . I would expect that analysts would have thought there would be something coming from sandy. Yeah, we had something from sandy in the numbers. The overall numbers ended up being pretty much where we expected them to be. Wireless margins were a little bit lighter than expected. But they added more smart phones than we forecast. You trade those off and they came in roughly in line. When you include the impact of sandy, they were pretty much in line with expectations. This is a situation where its more iphones than you expected is that good news or bad news . In the longerterm, higher smart phone rates are good news because they drive higher roi customers tend to be stickier. Theres higher up front costs associated with them. Looks like mainly in the quarter the number of customers switching to become smart phone customers wasnt just existing smart phone customers upgraded more rapidly. Its existing nonsmart phone customers moved to smart phones. Maybe thats good news. Right now the stock is trading down 2 . Would you recommend people buy it as a result . Equal weight on the stock. I think theres some upside to it. Verizon wireless is a great business and wire line is more of a mixed business. The upside is modest but certainly a solid, robust company. Is fios a great business . Fios is an excellent product. The longterm returns on the fios business, i think, are still up for debate and will depend tremendously on how much cost they can take out of the network when they can shut down the copper network. Its good for them. But, is it i just look at comcast and cable and a lot of times i see their metrics in terms of churn and who they had. Cable still is a great place to be, isnt it . I mean, i hear fios, some people like it, i dont know what do you like, like the quality of it . My old provider used to be right, right. Used to be comcast. I mean, used to be cable. Is it a better product . Is it a better product, james . I think it certainly goes headtohead and fully competitive with anything cable can offer. I mean cable is taking share rapidly in areas where there arent fios, where theyre facing traditional lower speed dsl products. Okay. James, while fios has been a fantastic business in the u. S. Would you worry about sprint becoming more aggressive competitor and disrupting the twohorse race so far . I think sprint on the margin is a more aggressive competitor and better funded competitor. But i dont believe sprint or soft bank are intending to try to destroy the Business Model in the u. S. Or get extremely aggressive on pricing. That churn is coming down in the u. S. Market due to growth of family plans and attempting to rapidly grab share through aggressive pricing is likely to be a loser for the carriers that would attempt to do that. I dont expect to see that happen. James, thank you very much. Great talking to you. When we come back, due month chairman and ceo Ellen Kullman on the companys latest ru9s. Well talk about the chemical Business Innovation and what the company is hearing from some of their biggest customers. Also take a look at the futures as we head to a break right now. Dow futures down about 21 points. S p down by 2. 8. [ man ] ive been out there most of my life. You name it. Ive hooked it. But theres one. One thats always eluded me. Thought i had it in the blizzard of 93. Ha never even came close. Sometimes, i actually think its mocking me. [ engine revs ] what . quattro overmany discounts to thine customers [old english accent] safe driver, multicar, paid in full a most fulsome bounty indeed, lord jamie. Thou cometh and we thy saveth what are you doing . We doth offer so many discounts, we have some to spare. Oh, you have any of those homeowners discounts . Here we go. Thank you. He took my shield, my lady. These are troubling times in the kingdom. More discounts than we knoweth what to do with. Now thats progressive. There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. Dow component du pont reporting earnings at 11 cents a share topped estimates and revenue was roughly in line. Chairman and ceo Ellen Kullman will join us first on cnbc. House republicans seeking to extend the debt ceiling and fight another day. Better luck next time. Oh, sure you cant win them all, you know. If the bill passes march 1st becomes the new deadline to watch. Thats when drastic spending cuts are set to kick in automatically, unless a debt agreement is reached. Well ask the ceo of cowan and company if the delay would help or hurt the market . The third hour of squawk box begins right now. Welcome back to squawk box here on cnbc first in business worldwide. Im joe kernen along with becky quick. Andrew ross sorkin is on assignment in, i think its davos. Isnt it . Davos is how they say it. We say davos. They say davos . Oh, never mind. Hes in davos. He will join us tomorrow with the latest from the World Economic forum when becky goes over there she gets stockholm syndrome so badly. Thats why you wont let me go anymore. And sorkin is already basically a socialist, so being over in europe, hes going to end up, who knows, maybe he will actually be, could it be influence would be more or less . Its hard to keep it you dont even have tv in the rooms, right . Youre not in your room. Youre out sourcing all the time. Doing what . Sourcing. Is that a journalist thing . Drinking. Oh, i like that. Our guest host this morning, Dinakar Singh founder of tpgaxon company. You ever used to go to davos . Thats not my thing. Theres work to do in january here. Okay. Well be talking to him in a minute. First becky has the headlines. Some of the corporate headlines this morning, there are some more developments in the boeing story. At this point there are indications that the dreamliners could stay grounds longer than initially anticipated. The investigation is turning to the maker of the lithiumion batteries used in the planes. Gsyusa, u. S. And japanese aviation safety officials visited the batterymaker in kyoto, yesterday. Weve been talking about this with phil lebeau and watching the stock. Shares of boeing are indicated down another 1 . Theyre breaking below that mid range. 74. 27 is the last tick. Also in some Global Market news, japans central bank promising to pump unlimited stimulus into the countrys economy. Policymakers are trying to fight the threat of inflation and generate growth. The bank of japan hiked its inflation target to 2 , and said from 2014 it would adopt an openended commitment to buy assets. As a result the asian stock markets, take a look right now, japan the nikkei actually ended down by a third of a percent. The shanghai kos just over half a percent. But the hang seng was higher by about 0. 3 . Been watching the jen versus the dollar, too. The dollars been a little stronger. 88. 69 is the last tick on that. A check on the markets overall. U. S. Equity futures are looking a little bit lower. Dow futures down by about 29 points. S p futures off 3. 5. Nasdaq futures down by just over 2 points. This is all coming as we get dow component earnings. Weve now had four dow components reporting before the bell this morning. Similar earnings reports, verizon reporting Fourth Quarter profit of 38 cents a share. That was below estimates of 50 cents. Numbers were impacted by iphone subsidies as well as superstorm sandy. It is down about a dollar. Dow component travelers reporting Fourth Quarter earnings of 72 cents a share, much higher than the 14 cents that the street was expecting. Revenue was roughly in line. That stocks going to be up almost 3 . Another dow component, Johnson Johnson reported 1. 19 a share, two cents ahead of expectations. Its Fourth Quarter revenues were a little bit shy in 2013 the outlook looks a little bit short and the stock indicated down about a percent. And the fourth dow component to report this morning is du pont. They came out with Fourth Quarter earnings above expectations. Revenue came in roughly in line. Joining us right now with more on these results is Ellen Kullman, chairman and ceo of dupont and ellen, your characterization of the overall globe was that we are looking at a slow growth World Economy. So, how does dupont take that and kind of make lemonade lemons in that situation . Good morning. Its really great to join you this morning. You know, uncertainty was the watch word for 2012. And although we saw some bright spots coming through the Fourth Quarter, you know, 2013 i think is setting up to be a cautious year. The question is, how will the u. S. Economy respond . Weve taken good steps around the debt, but the deficit has to be dealt with. And it needs to be dealt with in a matter of months. You know, how is china going to come through, not only Lunar New Year but the final changes in their government . You know, i think the economys going to strengthen as the year goes on. But i think the first half is going to be there are a lot of question marks out there that we all have to deal with. From dupont perspective, were well positioned in agriculture. Were coming out of a strong latin america season. Year over year our ag segment revenues were up 18 and were setting up very stockly for the north american season in 2013. Nutrition and health, industrial biosciences, great process with new product introductions. Advanced materials. Kevlar, tyvek, going to be enhanced by a strong Construction Market in the u. S. Which is supposed to be up 28 . In 2013. So, you know, i think there are some bright spots in this uncertainty. Just real quickly. You point out the concerns with china and the concerns with the United States. Which gives you more concern when you start looking around the globe . Well, i mean, i think if you look at 2012 it was both under a large degree of uncertainty at the same time that caused some issues. Certainly i think the u. S. And construction has sped up to have a stronger first half than we thought. Although automotive, the growth in the first half in the u. S. Is not going to be as strong. It will grow. But not as strong as it did in 2012. You know, china was a bumpy road in 2012. We saw some sectors in some areas with great strength. We saw them pull back quite a bit in infrastructure investment. The bright spot there in the Fourth Quarter they announced theyre going to install twice the amount of gigawatts in photovoltaic capacity in 2013 than they did in 2012 to support that industry. So weve seen some Revenue Growth from there, and expect their infrastructure investments, if they continue through 2013 i think it will bode well for the year. Ellen, we had a transportation analyst because the transports are at a new high and he looked at trucking volumes, and stuff in the real guts of the whole industry, rail shipments, and also shipping data that he looked at. And all of them were contracting a little bit, so he was theyre kind of wondering why the transports, why the whole index was at a new high. Have you seen a little bit of weakness in the same kind of stuff . I know you said cautious for 2013. Is that part of what gives you pause . Is it a little soft right now . Yeah, so certainly, you know, were coming off of lows. So, if you think about europe, theres no expectations there. You know, zero growth. If you think about the u. S. , u. S. Had very strong growth in automotive last year which drove a lot of parts moving and things like youre talking about in the transportation industry. The growth next year is supposed to be only 2 versus 5 or 6 in 2012. So there are certain segments in industries where there is a softening of that growth, and i think thats going to impact Different Industries in that way. So its not just a slam dunk that were coming out of, you know, that malaise from 2008, and definitely going to be definitely going to be a better world. Thats not a slam dunk. I mean you dont sound that optimistic, really. Yeah, so i think there are hurdles we have to cross. I think theres certain sectors that are going to perform like agriculture. Like in the foods and nutritious Food Ingredients areas. I think those areas are areas where innovation and science really bring a difference to the customers, and theyre taking it up and theyre utilizing it. I think other areas, theres a wait and see attitude. You know, are we, in this country, going to deal with our deficit . You know, as china comes through their transition in power, theyre the two biggest hurdles i see in front of us that we still have to clear to create a real strong economic environment for the world. So, the deficit, and the talk that weve heard now coming out of washington, is that were going to push things back, the debt ceiling will be pushed off essentially for three months. Is that good news or bad news . I mean what would you like to see happen right away . Well, i do think that that just continues the uncertainty. You know, i think if theres a time frame and a time line and they can make Real Progress that thats a positive. I think to the extent that they just keep if they keep moving it out i think thats going to be a negative. You know, certainly its not going to be resolved in the next few weeks. And so if they need to take a few months to really pull together, and really get the dialogue and the actions put in place, that we can make Real Progress, then i think that will be seen as positive. But i think it really does have to play out in the individual actions that are going to occur over the next few months in washington. We also, the gentleman from the transportation said that around the world, and we talk about austerity, a lot of the austerity in europe, i guess, was higher taxes. He said consumers here and around the world are going to have less disposable income because of what hes calling austerity, and as a result, thats one of the reasons hes less optimistic, and is austerity something that is here to stay that factors in to your thinking . No. I think that when we take a look at 2013, we have factored in a lower growth environment on average. But weve also factored in an improving environment. I do think that as china comes through the transition, and what weve seen about their intent around infrastructure investment, and their announcement around portable pay here is a positive sign. But thats just one sign. And we have to see more. So i think were entering the year cautiously. Were entering the year cautiously from an investment standpoint. I think you have to play it out as it goes. And you have to take it a month at a time and a quarter at a time. I think doing anything else is imprudent in this environment. You mentioned that agriculture was one of the strengths revenue up 18 for the last year. What do you expect the coming year in agriculture, and im just trying to get a feel for what youre hearing from your customers so that we can kind of take that and look at what it means for other companies that will be kind of building into that, too . I think 2013 is shaping up to be another strong year in agriculture. We had in 2012 very strong farm incomes. We have the industry investing in yields. And what that means from the standpoint of advancements and fees, novel Crop Protection products, these are all things that were actively engaged with our customers, the farmers today. But i see 2013 as setting up to be a very strong year in agriculture. In the United States or around the globe, as well . It is around the globe. Were coming off of a very strong season in latin america. The Summer Season is closing out well. The Spring Season is starting off strong. Were seeing where the needs around feeding a growing population, and the collaboration that has to take place between the farmers and between industry is growing. And real communication taking place on what their needs are, and that allows us to advance our science and really develop new products, whether its drought resistant native traits or aqua mex product or the first year of our extreme product thats going to be out in the market place. Were seeing a lot of interest in the science, in the new products that can really advance the yield for the farmers. The drought resistant products, thats especially important based on what weve seen here in the United States and midwest . Yeah. We introduced the product last year based off a native aquamex its called in water stressed area that yielded 8 more than other varieties. And so we see that as being a real advantage. And something that we can engage with our customers and talk to them about their needs for their particular farm in the coming season. All right. Ellen, we want to thank you very much for joining us today. Stocks trading higher on the numbers have been ever since the numbers hit this morning, and i guess thats good news. And a little bit of a birthday present for you. Happy birthday today. Oh. Great, thank you very much. Thank you, ellen. We appreciate it. Again, Ellen Kullman, the chairman and ceo of dupont, keeping an eye on that stock this morning and again it is indicated higher this morning. Its been trading higher. Is she a capricorn . Youre a capricorn. Well thats the best sign. When does it switch . It switches thats the best one. Ellen, are you still there . Yeah, im here. Im an aquarius. Oh, you just missed. Im sorry. January 20th. Age of aquarius. Age of aquarius. Okay. Its okay for you. Ellen, were going to look up your horoscope, joe reads those religiously. I dont believe them. Dates. It did . And thats confusing, too. What is this . Kind of like the starship. What happened . Oh, they dont know what theyre doing, these idiots. I mean, who believes astrologers anyway . Its ridiculous. We read them for entertainment. When we come back google is set to report after the bell today, analyst jordan rohan will tell you what to expect from the later quarter. As we head to the break, take a look at this picture of google cofunder sergey brin. Are you kidding me . Yeah. He was and a guy recognized him. Oh, my gosh. The glasses, too. Hes lost weight. Yeah. He was spotted on the downtown free train in new york city. Those are the futuristic glasses presumably testing googles project glass. Yeah. He stood behind me in front of the tracks id go over to the wall. I wouldnt stand in front of that guy near the tracks. Those are if those are the glasses those are the ones that overlay Digital Information on the physical world in a whole different view of things. Number one, id buy him a cheeseburger, i think. And i dont know. Hes definitely lost weight. The developers version of the glasses is expected to be available to softwaremakers a little later this year. Why are you taking my picture. Go ahead. Squawk will be back. Welcome back, everybody. Take a look at the futures this morning. Indicated a little lower. Weve gotten some earnings reports out from dow components that have been mixed. At this point, we do see that duponts been trading higher. You also have travelers thats been trading higher. If you look a look at verizon its been trading a little lower and Johnson Johnson havent looked at in a few minutes, but its trading a little lower, as well. You have dow futures down by about 28 points. The worlds most powerful leaders and business and government will be gathering in davos switzerland this week for the annual World Economic forum. The groups founder is worrying that the world has not yet escaped the risk of economic collapse. Economist claus schwab is calling for leaders to focus on what he calls cautious realism and recovering public trust to try and avoid another major crisis. Hell be kicking off the conference tonight. Also among tonights speakers is the actress charlize theron. Andrews going to be reporting live from davos for us tomorrow morning at 6 00 eastern. Is it me . Whats charlize talking about . Humanitarianism or something . Yeah, they always have people, actors and actresses, famous people who are there, usually promoting charitable perfect. He loves stars and celebrities. Maybe shell be on with him. Googles Quarterly Results are out after the bell. Jordan rohan joins us with a preview. Googles earnings it only takes us like a quarter to figure them out and then were on to the next earnings. But, is it going to be inscrutable as usual . What should we be looking for . This quarter is especially confluence of particularly inscrutable things. Good. What we like. Youve got some selling a unit in late december that will be excluded from results. When the revenue number comes across only a handful of analysts, including myself have actually adjusted our forward numbers why . Because they just put it on a blog post in december. Theres never really a formal announcement of it. So their analysts arent as good as you . Listen, i start to make a lot of assumptions. Were going off what we think is the right way to split the motorola Home Business from the motorola phone business. They sold the home part of it. Thats difficult. Currency has been a big swing. The euro got stronger. Thats difficult. What will people key off of in general is it the revenue number . Is it the bottom whats the most important number and how should we look at it . If you peel everything back and say what is the one thing people care about . Not google . Its the core google advertising business. And what you really want to figure out is, how much is search growing . How much is search growing for google . Are they gaining share, not gaining share . And that transition from desktop search where google keeps all the revenue, to mobile search where they share a lot with apple and other partners, thats been a bumpy one. Thats been a very bumpy transition. We want to figure out where they are in this. At some point, there will be enough mobile devices, enough revenue on that side when the mobile ppcs, cost per clicks go up, googles revenue will go up. Were not there yet. Mobile is a today, about 25 of clicks. When it gets to be 40 or 50 , which cant be that many years away, given how incredibly high the appetite is for people on these mobile devices to shift, it will be easy sailing for google. Until that happens, its every quarter is a crapshoot kind of a stock. Do you easily search the internet with your blackberry . On google, yeah. You do . Maybe i dont know. I think that were that may be why i get rid of the keyboard just to get on Something Like no, i will admit i have one of the minis. Thats so much better. A mini ipad that works really well, too. Theres another its a little clunky and i think its a little slow. Id sit there just looking at it. I can do it but its slow. Theres another dynamic, which is worth discussing, is that when people search for restaurants they may go to open table. Thats not google. When they search for travel, they may go to kayak or expedia or orbitz. Thats not google. And they may go to the apps. So apps and vertical specific searches are taking share from google be the one place that everybody searches for everything online. That cuts google out a bit. They lose centrality. That centrality has enabled google over the years to get over half of all online advertising. If that goes away, and people get the apps that they like, on their phone, they dont have to go back to google to search for a restaurant or airfares or such. Whats your number or earnings per share . Ive got 10. 65 for earnings per share. Im ahead of the street. Whats the other number you said, a ref flew number for search and the growth, right . The owned and operated core Google Search number. Im at 19 growth year on year. Im higher than the street. Actually think the stock probably trades up today. However i think this is not one thats going to break out of its recent. It has tended to kind of go look at the mid 700s before and fall back down. Im below the street for 2013 earnings, im at 43 versus the street of 46 dollars a share. So its a tricky message to deliver to investors depending a lot on your time frame. For the longerterm investors, there are easier names to own. Ebay is an easier name to own. Its one that has still much to prove. People believe the platform hasnt been revitalized. I do think they are revitalizing that platform. And i like facebook. Facebook. Great. All right, jordan, thank you. Appreciate it. Well be watching. When we come back, a former microsoft executive taking some shots at the ceo steve balance her. Well bring you that story next. Then well be talking to the ceo of cowan and company about the budget fights in congress. [ male announcer ] at northern trust, we understand that if you pick three people, odds are theyll approach everything in their own unique way including investing. So we help clients identify and prioritize their life goals. Taking that input and directly matching assets and risk preferences against them. The result . A fully customized plan. We call it goals driven investing. You have unique goals. How about a portfolio specifically designed to achieve them . Expertise matters. Find it at northern trust. Welcome back, everybody. A former microsoft executive says that ceo Steve Ballmer is not the right leader for the company. Former senior Vice President makes thats aertation, assertion in a new book. He was in charge of Windows Software sales claims that ballmer forced out any manager who challenged his authority. Hes the highest ranking executive ever to write a book about his time at microsoft which is known for exemployee loyalty. His criticism echoes that of investor driefd einmore. Coming up were going to head to chicago for a look at the events likely to drive markets in this short trading week. Plus were going to talk to the ceo of cohen and company about a possible extension of americas debt limit. [ male announcer ] how do you turn an entrepreneurs dream. Into a scooter that talks to the cloud . Or turn 30million artifacts. Into a hightech masterpiece . Whatever your business challenge, dell has the technology and services to help you solve it. Welcome back to squawk box. Four dow components reporting earnings this morning. All four are on the move. Insurance company travelers earned 72 cents a share for the Fourth Quarter. That was much better than estimated of 14 cents. Earnings were helped by a significant increase in underwriting margins and many times we give travelers earnings and scratch our head sometimes. Sometimes theyre low. Sometimes theyre high. But the stock price has been a thing of beauty to behold. Dupont earned 11 cents a share, excluding certain items. And now its four cents above estimates. Its 2013 thought look is also indicated higher. Verizon reported Fourth Quarter profit of 38 cents a share. But this is where that was below 50 theres sandy losses. The company is saying that it should really be 45 cents versus sandy losses back in . If you add the sandy losses back in. Thompson is already going with 38 cents. Unfortunately theres no one at thompson to actually speak with right now. Even though there are four dow components. Dinakar, how about you . I think most analysts were already adjusting for it. So it looks like its a miss. But its 45 krz 48 to 51. So i think the 45 is probably the right adjusted number with the being story being margins being weaker. Margins were higher. Capex was higher. So add back in its a, you know, single digit miss but its a miss. People look at different metros, they look at wireless ads and fios and all that other stuff theres a lot of Different Things to base your decisions on with verizon, right . I think verizon was slightly higher. Arpu was slower, ap pecs was higher. Nothing radical but all the not the good trend it was before. So when you look at this multiples, this was a big beneficiary of the flight to safety, right . And at this point looks like things are topping out. So you at almost 5 . Yes. It but dividend payout is complete. Theyre paying out in almost every penny of fashion. And Johnson Johnson earned 1. 19 a share. Two cents above estimates. 2013 outlook is shy of where wall street is. Stock is down slightly. Lets get a check on the markets. John brady joins us from the cme in chicago. Hes the managing director at r. J. Obrien. John, its good to see you. Nice to see you, becky. Weve been talking about how the gains that have come in for the last couple of months could be hard to follow up on that. What do you think the big trends are right now in the market . I think a couple of things. First of all as you said earnings. Earnings expectations in general in a very macro sense have been downgraded. Keep in mind the fiscal backdrop of the Fourth Quarter of 2012, as long as with Hurricane Sandy sort of brought earnings expectations down so theres room for earnings beat. Of course ibm and google later on today will have a lot to say with the Market Performance during the course of the week. Something else the market is paying attention to will be home sales, both existing and newer home sales later on this week. They should be very, very strong. And then, of course, well get some important words from ecb chairman draghi on thursday. You know, within central bank world, becky, its all been about competitive currency devaluations. Now the tail risk has been removed from the eurozone late last year, and with the weakening of the yen its about currency evaluations and independence of Central Banks moving forward. Okay. So, that means what, john, in terms of whether people are going to feel good about our economy versus everybody else, whether people are going to feel good about stocks overall . Again the United States economy remains the tallest midget in the room. The investment environment here in the United States remains relatively benign. Interest rate policy benign. As long as Foreign Exchange volatility remains rather muted, becky, risk asset, both housing and equity should continue to do well. We expect s ps probably to get above 1500 by the end of march, beginning part of april. Im sure people everywhere are going to be irritated with you this morning, john. Lets talk about some of the things that we heard from these companies who have reported today. We spoke with Ellen Kullman the ceo of dupont a little earlier. We talked about how things like construction are expected to be very strong in the first half of the year. But things like automobiles, maybe not as strong as they were at the end of 2012. Is that things that the stock market knows at this point or is this things that could actually move some of those other indices . She also talked about something something being very strong and maybe that helps somebody like a john deere. Those are two different stories. Fnks financing rates and borrowing rates remind very, very kind and a turnover within the domestic stock of automobiles should continue to lend itself to further automobile sales. Likewise, too, china is just exporting 1 millionth automobile this year. So i think Global Automobile sales remain strong. I think the commodity aagricultural story is a story for later on this year. As you know, becky, were experiencing a very cold day and week in the midwest here but the real story is drought. And the lack of moisture within the air. Commodity Prices Higher up d during the course of the year. Which has the potential to pinch consumer spending. But i dont think that story here is in the shortterm. I think its more of a medium summertime early fall story. Okay. John, thank you. Great talking to you. Thanks, becky. Right now lets get some more from our guest host today Dinakar Singh, founder and ceo of tpgaxon capital. We talked about your broad views on things. How this is going to be a little more difficult of a year. Youre not going to see all the averages rise the way they did last year, perhaps. But, you do focus very specifically on some areas and some stocks that you think are going to be great areas. You already talked a little bit about health care. What are some of the other stocks that you hold . Media stocks . Yeah, so, i think like as you said i think this is a very good stock picking environment because when youre focused on whether were going to be crashing or soaring what happens in between matters a lot. After all the adrenaline it seems like things are getting focused on bought up line and microstocks. For us i think when you look around the world first, if you can find cash glow thats not overvalued and a low rate world its worth a lot. Verizon to us is an example of expensive cash flow. Its a decent dividend. I would own verizon over bonds but theyve had every penny they make and you can buy companies in the Media Business like news corp. , viacom, that have double the Free Cash Flow yield. So i think from our perspective theres still areas where you can find companies that actually have Free Cash Flow. If you go globally ntt has the same dividend that verizon has but it has half the cap ratio and the business in japan looks like the u. S. Business from three or four years ago. Its really starting to turn and stabilize. When you look globally or look across other sectors you can find places where people havent paid for safety. I think the other places you want to look is real structural change. For example shipping is a great business globally. Its been a disaster the last couple of years. So as an example the stock smart guy a norwegian billionaire has made a fortune in the drilling business and basically hes been, front line basically is buying up ships on the cheap to go and really capitalize on shipping. And its always good to be someone coming in on a low capitalized basis buying as the was it just an over build out . Basically weak economy, massive build out, cheap financing and at this point you cant get financing to build ships so people have gone out of business. The shipyards themselves basically are pulling back as well. So if you have capital now and your new entrance its actually a good time to consolidate assets. First i think its looking for change industries. Shipping is one. Aerospace suppliers have been an area weve been very fond of and still are. Hospitals as you mentioned are another. So for us these are all areas where you can get still a lot of structural growth in a world where cyclical growth is going to be tough to come by. What about Aerospace Suppliers . Saffron in europe and the aerospace here. So i think what do we like about them . First, the Airline Industry in the u. S. And japan, as well, is has really transformed. Its Like Airlines are actually making money. Which is incredible. Thats the good news. The bad news is counting on them to maintain this one forever not such a good idea. There was a real pause during the crisis. Companies needed to spend money but they didnt because they couldnt or theyre scared and now theyve got to go and refresh their fleets and modernize. So the winners are the suppliers. And you sell the equipment and youve got 10, 15 years of maintenance afterwards. So this is again an area where even if gdp is low and choppy around the world, youre going to see structural growth for these companies for the next 10, 15 years. And thats what you have to find. I think we were talking with du pont this morning, right, i think when you look at Companies Like this, the challenge is, for dupont, global gdp is going to be the single biggest driver of whether or not earnings will grow a lot or not. For an investor, if gdp is going to be choppy you want to find places where theres a selfhelp story to make some money from. What would be an example . You say a slow growth World Economy . So for example in our case, we, so its funny, alan talked about construction, its weaker in china. I think around the world when you look at offsets some places good some places bad. We have a Large Company called rockland which is in the chemical world. Rockland. Smaller company, but theyve actually got one overlap business with dupont which is a depressed business. Low multiple. Lithium and things related to another area thats a great growth area for them. But in the chemical world i think youre going to see large guys, basf, dupont, dow, acquire other companies, Balance Sheets are good. They need to generate growth so theyll buy. If you can buy something where earnings are going to grow structurally, multiple is low and its a Pickup Target its a good way to win. Okay. We will have more from dinakar stale head. Dinakar singh is our guest host. Still to come, House Republicans seeking to pass a fourmonth extension of the debt ceiling. Joining us to talk about the debt fight in congress, jeffrey solomon, ceo of cowan and company. Hes making his way to the squawk set. What we call a perp walk, no guy that runs a big wall street needs a perp walk, do they . Squawk walk. Kind of like walk like a duck. All right. [ cows moo ] [ sizzling ] more rain. [ thunder rumbles ] [ male announcer ] when the world moves. Futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with papermoney to testdrive the market. All on thinkorswim. From td ameritrade. Welcome back to squawk box. Joining us now on set to talk equity Market Structure, and the debt ceiling. Jeff solomon Cowen Company ceo. Lets start with, im intrigued now. Equity Market Structure. What are you going to talk about now . How do you want to talk about that . Well, i think, i mean, weve been talking for a little over a couple of years about how crazy the equity Market Structure has gotten in terms of fast speeding, electronic trading, High Frequency trading and how basically weve gotten away from fundamental investing in the equity markets. And so, theres a movement afoot, later on, actually beginning of next month, to have a roundtable discussion at the s. E. C. About a widening tick increments, adding bid offer spreads for small cap stocks and a way to try to drive liquidity back into the small cap market. My question is, if we did see a return of the individual investor and just more interest in the stock market, i argue was very low, still, even though were getting close to highs on the i agree. I still think its low. Wouldnt that solve a lot of the problems without doing anything, if the individual investor came back . And, or is it a chicken egg thing, where because of the unfair perceived unfair playing field, maybe investor individual is hesitant . I think its definitely the latter. So i think if youre an individual investor its kind of tough to compete with some of the electronic Trading Tools. I like to say, if individual investors come out of their houses armed with pitchforks and people are in the streets fighting with semiautomatic assault rifles, thats not a fair fight. So one of the things weve been talking about with regulators is how do we bring some sanity back to the markets . How do we slow them down a little bit and focus on fundamental investing where price is more important than time . One of the things thats happened in the markets that may seem nuanced to viewers but i think its very real, time has gotten more important than price. Ive got to do it faster. I need to execute this trade at this nanosecond because in three nanoseconds its going to be somewhere where i can take an advantage. I think if youre an individual investor that is wholly unfair. Hard to put the genie back in the bottle. Hard to put the toothpaste back in the tube. I got a lot of these. But the problem is, you think about so i think social media has gotten to the point where so much news is instantaneous and blogs, theres no accountability. Id like to put all that back in the bottle. Its never going back. As Technology Moves Forward it gets harder and harder to say okay, hold on. Were not going to do everything were capable of doing. Were going to go back and put guard rails in . I think you can but i think we can do things. So were not going to regulate the press. Because we cant do that because of the first amendment. But we can regulate the markets. We cant put humptydumpty back together again. We do regulate the markets. One of the things that you can say is that were going to slow down were going to slow down the execution rate. Were going to actually i would make the argument that wider spreads make it a little bit more onerous on people to execute more quickly because there could be a bigger penalty for being wrong. Part of whats gone on here is theres very little penalty for being wrong. Youre talking about individual investors have the perception, are they right . I think they are. I mean, im not going to not going to say that that theyre wrong about this. I mean, we had routinely seen what i would call predatory readers of hap who try to pick off retail order flow. Thats a very big lasts a day or two and you get total pennies. If youre an individual investor dinakar has 20 billion dollars or something messing around with. You move there Everybody Knows what youre doing you cant get in, you cant get out. I think individual investors have a lot of advantages instead of the bigger players, right . Well, every trade looks like a retail trade today. Thats something thats fundamentally changed. Everybody trades in 100 lots today because you can because theres a lot of Technology Available to mask your trading capability. I would argue that really its become very important part of Market Structure to know how to mask your trading capability. And i think that that that really drives liquidity out of the market. I think weve got too many venues. And again, the thing were talking about here is really focusing on a small subset, a small capital heres a company, some company like wow i love what they do, id buy whatever i want to buy, whether i can afford it as an individual investor and then a year later i check it out and ive made some money. I dont see how that changes with all of this flux on a daily i think part of this is bringing Research Back, fundamental Research Back to the marketplace. The way the equity market is structured today it is difficult from an economic standpoint from a firm like ours to write fundamental research on small cap stocks. Cant make any money on it. I would argue if you would allow for there to be money made, a reasonable amount of money made in small cap stocks, trading at wider increments this is all about you, isnt it . Today it is. Im here. How would you be allowed to make money on it . What changed in the regulations that made that no longer expense because before the reason it was broken about is because of the banking. How do you actually make money on that . I think its a good question. So i look at the world and those who carry about alpha generation and those that care about passive management. Our Business Model is very much squarely to providing fundamental research for alpha generating ideas and those can be in small cap stocks and large cap stocks. We discuss in dialogue with some of the larger investors about investing in small cap stocks one of the things we hear is theres not enough liquidity. If you take a look at market volumes today, theyre really tilted very much towards large cap stocks. One day last week i paid 40, 50 percent of the nasdaq volume was in the top 20 names. That should just tell you that theres something wrong with Market Structure and theres no silver bullet, a healthy dialogue about bringing liquidity back to small cap stocks is really something that should be at the forefront of our regulatory initiative. Would that change things for you . I think we try and focus on the middle companies that are big enough to actually be actual for us so we can focus on a few things. When it gets to ours it gets to for us too because were not going to add a lot of value to google, so i think first that middle spot is important. Every investor has got to find their sweet spot. Youve got to assess your strengths. Ferret out where youre getter off and for a Retail Investor as well, reality is that to get information all around the world has gone up tremendously compared to five years ago, ten years ago. We havent gotten any wiser. So we have lots of information, we get i very quickly. Im not sure were any better at knowing what to do it. Information comes across, people dont know what to do so they react instinctively. Correlation is a shortterm jurn and then people figure it out. So from our perspective our whole focus is saying lets try to ignore all that. Trying to predict that surge were going to see when these things happens which things make sense, which weve got to go, dinakar, thanks. Well be back with dinakar in a second. Weve got to get on. Thanks, jeff, for coming in. Pleasure. Were going to kick off the short trading week with jim cramers take on earnings, the president ial address and the harbowl. Welcome back to squawk box. Jim cramer joins us now from the big board. Jim, verizon. I dont know. Look, people want to sell verizon on this, the miss or wireless. This is a bond equivalent, as your previous gues. Yes, theyre paying out a lot. But its not going to go back to the 30s. I think its fine. Dupont. Dupont, a margin which is a whitener, you cant put the toothpaste back in, as you mentioned, but it looks better. I liked ag margins. Im surprised latin america so strong. I like the quarter very much. Trailer . Which one . Travelers . Oh, travelers. Wow, look, when you get these horrible storms, they raise your premiums. This was an extraordinary quarter. This stock is going much higher. Jim, i was surprised to see them this quarter. You know theyre going to get the raised premiums, but its already taking effects. Is that why were seeing the higher margins . The storm last year, they never screwed up on their balance sheet, putting through higher premiums, the margins are going up. What a remarkably wellrun company. Doesnt get enough credit. How about the speech yesterday . You know, i read the times. Theyre saying natural gas is the winner. This was an antifossils fuel speech. Thats what it was. This is a anticarbon speech. It looks like the Global Warming is the key issue that the president wants to face. And wow, i guess youve got to get out of the coal companies. Jim, are you playing hurt this morning . You sound a little sick. You know, i got what everybody else has. It doesnt go away. No. Back and forth and back and forth. Cant get rid of it. Glad youre here anyway. Thanks. Weve got to keep it short, jim. Thanks. Well see you. Coming up, were going to give our guest hosts the last word when squawk returns. Tomorrow on squawk box, earnings alert, dow components mcdonalds and the sector report. Well bring you the numbers and instant analysis. Plus, guest host jim rorh tomorrow at 6 00 a. M. Eastern. At optionsxpress were all about options trading. We create easytouse, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius we knew you needed a platform that could really help you elevate your trading. So we built it. Chances of making this . Its a lot easier to find out if a trade is potentially profitable. Just use our trade probability calculator and there it is. For all the reasons you trade options from income to Risk Management to diversification youll have the tools to get it done. Strategies. Chains. Positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Around here, options are everything. Yes mom, ill place a long call to you tomorrow. I promise. Open an account today and get a free 13month eibd™ subscription when you call 18882800154 now. Optionsxpress by charles schwab. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The allnew cadillac ats 2013 north american car of the year. For a limited time, take advantage of this exceptional offer on the allnew cadillac ats. Back to our guest hosts for the last word. Theres sharks circling around the company, youre one of them, right . Were not typical activists. Thats not what we do for a living. We have 20, 30 stocks that matter. If we see one that we actually can be active in we get involved. Where are you now . The official process has started. Theres a 60day process, and if they vote, they can replace the full board and effect rule change at the company. Youre at what percent of the