Transcripts For CNBC Squawk Box 20150120

Is expected to touch on this evening in the state of the union. Lets check on u. S. Equity futures at this hour. Youre seeing implied open for all major averages here. S p 500 would open up by 8 points. Dow up by 50 points. The nasdaq up by 21 points and a lot of that is based on firming in the markets over in europe. Better than expected gdp numbers out of china and of course thats helping move Global Markets in a vastly different direction than we have seen for much of the month. Breaking news overnight too. Isis releasing a video early today which has been verified by nbc news consultants. It shows two japanese hostages and the now notorious isis militant seen in previous videos. Hes now demanding 200 million from the japanese government within 72 hours or the hostages will be killed. Japan reacting with anger demanding a release of the hostages and saying it will not yield to terrorism. Quite a stunning release of this video and looks similar to past videos released from isis that of course we know now how those turned out. Google is nearing a 1 billion investment in spacex to back the efforts to deliver Internet Access via satellites. The funding would value the venture at more than 10 beside. Amazon is making a big bet on the movie business. The Company Announcing plans to produce 12 million movies a year focussing on films between 5,000,025 million dollars. It would be released in theaters and then be released on prime Video Service within two months. And in other media and tech news twitter is buying zipdial. The price tag is 30 to 40 million. Twitter trying to expand in the second biggest mobile market. Lets go deeper into your Tuesday Morning market. Stock futures indicating a slightly higher open. Dow shows a jump of 50 points. The european markets shaping off central bank chaos. Well probably talk more about switzerland. Denmark, some of these Central Banks. We talked about not talking about it. You went back on what we talked about. Im talking about not talking about it. You just spent 30 seconds of our precious time on it. Asia perhaps the big story. You do not want to be switzerland. Its a nice country. Its a terrible country right now. Asia the big stock story. Yesterday you were off maybe with your family guess what shanghai collapsed. Stock market fell 7. 7 yesterday. Theyre trying to rebound a little bit. Up about 2 today. Well probably talk more about chinas problem. We should say why. They reduced the ability to do margin in that company with the sense that it was overleveraged. And growth was the slowest since 1990 although at 7. 3 or 7. 4 not a bad problem to have. Its still called better than expected. Slowest in decades and better than expected. But its one of the hottest stock markets in the world and if things disappoint just a touch. You cant short stocks there either. You can only go long. They have this weird semifree market. Lets go to oil. Brent crude overseas getting closer to breaking below our price for oil. Brent crude up slightly a couple of cents. Still below 49 barrel. Will the refinance boom for housing continue . The treasury yield at 1. 8 . A 66 jump in mortgage refinancing. That number will be out in one day. 116 per euro. Currency isnt moving much but gold is. Price of gold is up 1440 an ounce. Trying to get above the 1300 mark. The strategists are starting to to look pretty smart on that trade. Yeah they are and you know one of my four predictions for the year is that i think gold will go in triple digits. Ive been negative. Its got four digits right now. Under 1,000. Its a fun prediction. You can say things like that in january. I just like to raise the ayre of those that love gold. Why dont you give out your email and twitter account. America do you have a pen . Steve. Lie i dont comment on gold. Dont ever bash apple, gold, or bitcoin. Exactly. A volatile start to the week in china which we just mentioned. Stocks are bouncing back today if only slightly after it plunged about 8 yesterday. It was the biggest daily percentage drop in more than six years. Eunice joins us with the whole story on whats a roller coaster of a market so far this week eunice. Yeah, its basically everything that you guys just talked about but chinese stocks mainly recovered because of the chinese gdp data. The data came in at 7. 4 for the year. That was largely in line with the governments target of about 7. 5 . Still this is the slowest growth the country has seen since 1990 and the report really intensified debate over what beijing should do. What beijing will do and theres a lot of calls today about how the govern ltment would need to come in to stimulate the economy. Now keeping traders on edge in the market was the recent decision by the regulators here to crack down on margin trading because as you guys im sure well know the shanghai market has been rallying over the past several months because of a new concept in the country of margin trading. Bank of America Meryl lynch had a really interesting stat where they said that the shanghai market margin balance is now on par with the nyse. For new york it took 13 years to get to the ratio. For shanghai it took 17 months. So its not a surprise that the regulators would want to take speculation out of the market but what some people are worried about is that the effort to professionalize the Capital Markets and margin trading could end up leading to steeper sudden declines. Guys. Thank you very much. Its a big week now turning to europe. In addition to the squawk team hanging out with World Leaders in davos theres a lot of market speculation that the ecb is set to announce a full scale Bond Buying Program for quantitative easing. Seema joins us from london. You know my last name by now. Seema mody. Come on. Sorry about that, seema mody. Theyre higher across the board. All eyes on the European Central bank. What will be unveiled by mario draghi. The question isnt whether the ecb will unveil a Bond Buying Program. That is expected by the market. The bigger question is how big will the Bond Buying Program be. Analysts are saying 1 trillion euros. Will this Quantitative Easing Program will enough to revive the economy. Some are saying its needed in addition to structural reform. Thats one of the questions out there. Will it be enough to stimulate the economy. Gains across the board. Xetra dax up. Also want to draw your attention to the swiss index. After the sell off we saw on swiss equities last week on the back of the unexpected policy reversal from the Swiss National bank we did see swiss stocks sell off last week. Right now some bargain hunters coming in. Index up about 1 . Also take a look at the euro. It did break 115 last week hitting an 11 year low against the u. S. Dollar. Its strengthened on the back of sentiment data out of germany. Guys sending it back to you. Thank you very much. Here in the u. S. Traders are returning from the Holiday Weekend and the bulls are looking to change course as all three major indices are on a three week losing streak. Joining us is investment director and managing director. Did i mispronounce either of your names . I want to start with you. Are we at a point that we decided that what the Swiss National bank did was a terrible mistake . Well certainly from a Financial Markets point of view it was a mistake. A lot of people got badly hurt. The question was did they have another choice . There was a small country absorbing capitol flows through europe. We talked about this when it first happened that pegs ultimately always fail. This was the latest example of that. Weve been trying to gain out what else they could have done. Once you make the mistake with an Exchange Rate peg you made that mistake to get in. Theres no other way to make a mistake. If i was king for a day of head of snb i would have said something communicating were going to push the peg down to 115. A step down approach. At least that way they would have given the market a little bit more release. Well stick with you just a second. How bad is it . Do you think weve seen the bankruptcies and other issues out there. Full disclosure you have money in a bank that youre potentially not getting back. Some of us are in the clear. You are getting some of your money back. Over the weekend we had very positive news in terms of people coming up to rescue various parties. The irony of the whole thing is in many ways a lot of people that got hurt for doing the best possible things for their customers. Honestly nobody really knows if everything has cleared the market weve seen hedge funds already fail. One of the remarkable things negative negative negative, positive, and that positive is the United States. Youre asking the question will we recouple with the rest of the world, with my question to you, which way do we recouple . On the down slope of the roller coaster or recouple on the up slope . S p was up 14. Europe was down 5. Huge spreads in performance and certainly the first few weeks of this year its been recoupling in the wrong direction for the u. S. You can see the earnings estimates coming down. You can see how declining oil prices affected the high yield market. Theres some effects with high yield and oil and exports sector which is only gdp but it will be limited. If europe can really inflate its system maybe it will be recoupling in a good way. Why do we care about europe so much . We dont export there. Exports are 13 of gdp. Europe is important. It maings a lot of the world. Its a very heavily banked continent and if you can get the banks to lend more and people to borrow more it effects emerging markets. It effects a lot of parts of the world. But some people would argue that even excluding the rest of the world the story in the United States isnt as strong as it lets on. Were starting to hear more people reference Economic Data they havent heard of. Its down 15 from the high. You start hearing people talk about it again and im just wondering if you think that thats a distraction or you think theyre right to be looking at stuff like that. Thats at the margin where a lot of growth has been but only at the margin. It only contributed a few Percentage Points of labor growth since the recovery began. But almost all the wage gains. Almost all the wage gains. You talk about why stocks are down and energy is 8 to 10 of the s p 500. We have to reset the market expectations. We have to always differentiate do we not . The economy from the stock market because they are not the same things. Right. And earnings you know expected Earnings Growth for 2015 has been cut in half for the last few months so there are fewer expectations now and usually the companies do beat the numbers as they come through so well have to see, you know how that plays out. I was going to say the bullish side to the wage gain argument is we were talking about this earlier. Theres a massive time gap between behavior and price and if we have six months of low oil prices thats extremely positive. Wage gains for the rest of the world that hopefully translates i think people forget that brian. Higher wage gains means better stock market. Better economy. I know it does. No it doesnt. Were going to run out were going to run out of time. I want to ask you this question a lot of talk about the Federal Reserve. The Federal Reserve remains on track to raise rates despite whats happening around the world. Youre shaking your head because you agree or disagree . I disagree. Im shaking with him. Everybody is shaking this morning. Theres no reason they had it absolutely right. The fed only wants to raise rates for philosophical reasons. Theres no reason to raise rates right now. If you read the story everybody is talking about this morning theres no reason to raise rates other than they had planned to raise rates. The only people that disagree with the story were talking about is everybody that traded fixed income in the world. Last week was pretty important because it priced in a terminal rate end of 2017 of 2 . Now its about 1. 5. So the collective wisdom of the markets have been down. 42 basis points is the year end this year for the feds funds rate. That means were fast on our way to getting rid of any hype this year but maybe only one would be built in. Yeah i hi thats a more realistic assumption. I think if the data change if you get a situation where you have higher Inflation Numbers and higher wage gains its a different story. Think how realistic that is. Its not realistic at all. I dont think the path here is higher rates. And maybe like you said one at the end of the year. Is that good for stocks . So on that note its interest baugzecause the euro has come way down against the dollar without having to do anything yet from 140 to 115 and now theyre about to announce a qe. The expectations for the fed have now come down so im wondering if this is a by the news moment for the euro and european equities can actually wake it up again. Theres two big, big positive things for the european company. Lower euro and oil prices. This could be bargain hunt in some ways. The currency translation effect of pricing euros in dollars versus euros last year was like 1,000 basis points. So even if the dollar just stabilize and jurors gets some sort of reinflationary lift off we have to leave it there. Have you been in the office before. I missed the first one. I was here when the snb disaster happened. When will we have our fight about Lower Oil Prices not being good for the economy. Any time you want. Maybe its early for a fight now. But everyone is like its a good thing. I dont think its a good thing. You sign up to come in at 6 00 you be ready to fight at 6 00. My buddy took a 20 pay cut in taxes. 20 overnight his employer cut his pay. He may not buy a house now. Thats bad. Somebody saving 50 a month on gas isnt going to change their decision to buy a house. Thats my only view. Thats for another segment. 50 times 99. 9 of the economy is real economy. 4 of house net income im not going to blow through the break. Well come back to this later. Coming up eye catching new findings on who owns half the world wealth by next year. Its not the 99 . Plus why taylor swift is sending lots of love to one very sassy Delaware Police officer this morning. The video behind it. Stick around. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Its a little bit different because if youre on the radio try to picture a Police Officer jamming to taylor swifts shake it off. Dover, Delaware Police department does confirm that the whole thing was not staged but that doesnt matter to taylor swift who loves the attention and the buzz. The pop star shared the video with her followers giving this the appropriate boost. Listen hes happy and jamming. As if there wasnt enough buzz about this song before. This has taken it to a new level. I dig it. Let him be happy. He sure seems happy, doesnt he . All good. Can you shake that off steve . You hate taylor swift. I dont hate taylor swift. Between mispronouncing seemas name and dissing taylor swift. Now todays National Travel forecast. Kate parker joins me from the Weather Channel to save me kate. Im telling you, you dont want to tick off the taylor swift fans. Definitely not. Thats not the move to make. The whole grateful dead fan and taylor swift thing is difficult. I understand your challenge here but be careful with your words. Right. Heres whats going on with the forecast. Look at the snow moving in michigan. Lansing youre going to get it this morning and this is along with two clipper systems. Theyre going to be moving their way on east. We have ice on the southern end of that. You may see sleet as we head into wednesday morning. Look at this tomorrow. Thats where well see the greatest snowfall amounts. A clipper by nature is fast moving and doesnt produce that much snow. Its not going to be this tremendous snow fall event. The winds are going to pick up and youll see the snow and it will be enough to hit the road and cause some problems. Hopefully nothing like what we saw last week. The freezing rain possibility is lower with this especially compared to what we saw on sunday. Take a look at the snowfall totals through tomorrow. Central pa 13 widespread and taking this a little farther back off to the west. Youll notice its about 13. Thats the clipper system but i know youre in the south and thinking i got out of all the rain, the snow the temperatures have been warm think again. Change in pattern coming. Get ready for it. Cold weather dipping back down south right across the east coast. Youre going to feel it cool down by early next week folks. We are in the wrong part of the country. Thats for sure. We want to be on the west coast about now. Heres where you want to be. Kate we appreciate it. Thank you so much. The weather map looks like boise states football stadium. The orange and blue. In squawk sports news this morning, the nfl is investigating the super bowl bound patriots at issue whether football is used in new englands 457 win sunday were not fully inflated. Of course this has been deflategate as you can see on your screen. People who love to hate the patriots. It seems like they are the most hated team in america by those who are routingoting for a team playing them. Its going to take on a new life of its own this story. Should i also diss the new England Patriots as well because i dont like them very much. You dont . I dont like anything this morning. Are you a patriots fan . No im not. Im a chargers fan. If it deflated the balls it doesnt matter. Can we talk about green bays epic collapse. You know im a packers shareholder. I didnt know this. I go to wisconsin in the summers and some of my friends i talk to over the weekend are just now again finding their words. They were literally speechless they have been speechless for 48 hours. It was unbelievable. And you cant say that the im going to tick off the seahawks fans. Seahawks didnt win that game packers lost that game and theres a difference. If you want to go to the super bowl in arizona check out these statistics. Seat geek is putting the average ticket price at less than 2,900. Thats down about 20 compared to the same time last year. Ticket agoseller ticiq. Com puts it at 4,000. Luxury boxes between 726,000 and 1 million. Thats incredible. Lower gas prices will make up for that. Im not sure the people buying those luxury suites care about lower gas prices. You did note my sarcasm. Yes. The cheapest you can pay to get in the door at the stadium about 1,800. So maybe 1,800 that customers are saving on gas. Thats about what they could save in a year . You get to a level of somebody selling out 1,800 for a ticket to the super bowl the price of gasoline is irrelevant. Did you see the great shot that tom bradys wife sent out on the twitter feed. On the twitter feed. The three boys just facing a window all three eating breakfast or dinner or something with their dads jersey on. It was a nice shot. Reminds you, you know despite their shocking beauty on both sides theyre actually human beings with a family. Stars are just like us. Tom brady was pumped. If you looked at him during that game he was rallying his team and very excited. Even got a high five. Sometimes he gets left hanging. No surprise that hitting the slopes can be dangerous business but it turns out being a spectator may not also be as safe as you might think. Tiger woods surprised his girlfriend lindsey vonn by making the trip to italy. She snapped her 63rd world cup win yesterday but in the process woods apparently lost a tooth to a camera man during the award ceremony. This picture is going around of tiger woods missing, there you go. Missing one of his front teeth and he apparently got whacked in the face. This is the story of the day. That might be. This is the story of the day because i tweeted out what will happen first. A fed rate hike or New York Knicks win, i was wrong. The knicks won last night. They beat the power house new Orleans Pelicans 9992. And in the world of college hoops, dukes hall of fame coach is on the brink of 1,000 career wins. His 5th ranked blue devils topped pittsburgh 7965 and as a North Carolina tarheel even you can marvel at the accomplishments. I have to see this one. Royal williams only have 700 and change career wins. This is an area ill give it to him. Im impressed you didnt see a phonetic pronouncer on that. Thats a tough one. Wow. I would have gotten it wrong. Seema mody. Ive never heard of mike before. Youve been asleep. For like 25 years. I slept through july. When we come back president obama set to outline a big tax proposal in the state of the union. All the details coming up. But first take a look at last weeks s p 500 winners and losers. Gamestop week to date up the most up 12. 5 . Squawk box will be back in a minute. Good morning everyone and welcome back to an entirely new squawk box. For one day. Joe, becky, and andrew are on their way to davos switzerland for the annual World Economic forum. Theyll be on all week with great guests and big show. For now you have us. A new study out today is a little scary for those of us that spend most of the day sitting down. Researchers out of the university of toronto say the amount of time a person sits is associated with a higher risk of heart disease, diabetes cancer and death. Heres the worst part. This is said to be true regardless of regular exercise which guys means i am officially screwed. I wonder if the standing desk in this study got some data. If they found that a standing desk does make a difference. Well, youre too tall to stand at your desk. The rest of the show. Im going to face north and think about direction and wonder why. Now face east. We have another study also making headlines. A new british study suggesting the richest 1 will own half of the worlds wealth by 2016. The groups wealth increased from 44 in 2009 to 48 last year. If you look at the 1 group the average wealth per adult is 2. 7 million. The other 46 is owned by the rest of the richest fifth of the worlds population. On the front page of the usa today. So certainly an interesting study, steve. I wonder what you think about this. Its underscores what Everybody Knows is out there is a massive inequality problem and nobody has good ideas about what to do about it and it links into the state of the Union Address well talk about shortly around here which is some of the prose proposals are designed to get at the inequality problem. They do come from the idea that you have this massive and very well off top 1 and whether or not you should tax them more to help out the rest of the people out there or does that do more damage to the economy by doing that listen theres a couple of arguments here that i dont think get enough attention on the inequality issue which is number one inequality globally is coming down. Inequality in america is growing because capitol is dispersing throughout the world in a way its never done in human history. Number 2 is we always say the 1 is gapping up above the 99 . That is true but because the. 1 is gapping up so far above even the 1 . In other words we may be all in the 1 but bill gates is also in the 1 and the gap between gates and me is at a widest point ever so its really whats happening if you look down at the data guys and i dont know how you change this other than taxing equity or capitol which is the. 1 has gone so far off the charts that its moved the whole 1 needle. As robert frank calls it the haves and the have mores. To be in the 1 is 350,000 a year. So think about that versus bill gates. When you talk about global inequality, the idea of the difference between china and the u. S. Is lessening at the same time that its getting worse inside of china. Yes. Because the same phenomenon we see thats a good point. It has a lot to do with the economy we live in and the world we live in with returns to ideas and these guy with great ideas or whatever tend to get unusually large returns weve not seen almost in human history. But the reason i bring up that. 1 thing is im not slamming the. 1 . It comes from equity and stock gains. The gap between the person making exactly 1 of the income and the person in the 50th percentile, the gap is fairly steady. The 1 has not jumped that much above everybody else. Its the top of the 1 thats screwed everything so far up. That was able to ride the rally from 2009 and not put their money out. Youre going to have somebody soon worth 100 billion. Im going to make an easy segway now to president obama said to deliver his second to last state of the union tonight. John joins us from washington where he has the findings of a new nbc wall street journal poll. Good morning. Before i give you the results of that poll i just want to say that im praying for brian on two different counts. One that with really hard work he can close the gap between himself and gates, which is really widening and not fair. And secondly that he can do that thats not my point, john and, you know that. Thats not what i was suggesting. And that he can do that without spending too much time sitting down. Hope any a stand up strategy would be the most effective and the healthiest for him. Look heres the results of the nbc wall street journal poll. It shows a country that continues to be anxious and concerned about the direction of the country and their political leadership. First of all, lets take a look at these numbers. 16 of the American People on the eve of the state of the union approve of the job that congress is doing. 46 approve of the job that president obama is doing. Hes ticked up a little bit but still in negative territory. 48 disapprove and when you ask is the country headed in the right direction, 59 say no. Now the bright side is that Economic Optimism is rising. 59 is down from 71 down a few months ago so the results that we have seen in Growth Numbers and the reduction of the Unemployment Rate were seeing in attitudes and people are turning the corner and president obama is going to try to capitalize on that with the proposals that you guys were just talking about to raise taxes 320 billion worth over 10 years through an increase in the Capital Gains tax and removal of the exemption of certain assets that are passed on to peoples heirs and use that money to increase child care tax credits and also individual child tax credits for two earner households. Thats a direct redistribution proposal thats not going to Pass Congress but this debate is accelerating. Its going to be interesting the next 24 months through the 2016 campaign to see what ideas actually emerge and probably not to be passed until the next presidency guys. John it feels like we know everything thats going to be in this speech tonight. Almost every single proposal has already been talked about. Is that just to get the buzz going or do you get the sense that some of these were up for discussion leading up to tonight . No theyll all be in the speech. The president could be saving stuff that we dont know but i wouldnt expect it. When you get into this point in the presidency hes addressed congress over and over again its harder to break through to the American People. So they have the details of these proposals in advance to try to engage the public and move people and get some degree of public support and pressure on congress for his proposals but the vast majority are not going to be in congress. I have a certain obligation this morning. Do it. Come at me. What are the politics of proposing things that are doa. You want to work with republicans and get stuff done and here you go proposal things i dont know that theyre even going to be considered. Im not saying theyre wrong to do but the politics are zero on this. Whats the thinking of the administration here . The thinking is that you try to shape the debate Going Forward were quickly going to get sucked into a 2016 president ial campaign. Mitt romney said the issue for him was the rich was getting richer and the middle class deserves a wage raise so theyre playing on the turf that the president is laying out in this speech, are we talking about the traditional proposals of lowering tax rates and looking for Economic Growth to benefit everyone or is he trying to provoke a debate around different kinds of proposals and some republicans are pushing things. Marco rubio has higher tax credits like the president does. Hes trying to form what Hilary Clinton talks about in her campaign if she runs. Its not really about passing the congress because he knows that republicans are not going to move most of the economic proposal he is talking about so if theyre not going to move them anyway might as well go big. Thank you so much john. I know well be checking in with you throughout the day for more on what to expect in tonights state of the union. Theres another important day happening today. Its the first day that you can officially start to file your 2014 taxes with warnings of delayed refunds and long waits, what does this mean for taxpayers . Joining us is dave. Good morning. Its rare we hear of a tax season being enjoyable but what will be especially bad about this one . I think its not going to be a horrible tax season. Theres rumors of delayed filings but thats for people that file with their paper and pencil but folks coming in to professional tax preparers or online should see a smooth season. New Health Care Laws will also add complexity for a number of people this year. Fair in recent years we have seen delays because of the fiscal cliff or legislation passed. Is it unique to see the Filing Season starting on time and did that surprise you . It did. Most of us thought it would start at the end of the month like last year. Were ready and people are coming in and filing their returns with us. I know its always tough for me to get my act together on the tax front. Im a procrastinator by nature but what are some of the benefits for people to file sooner rather than waiting until the very end of the deadline . I know obviously that the accountants and the professionals that work at Jackson Hewitt and other shops get very busy in april but for the consumer whats the benefit . Yeah the big benefit for consumers is especially for our clients that are hard work americans. Most of them get a refund. So the sooner you file the sooner you get your refund and for most people thats well over 3,000 so thats a big benefit for people looking for extra money to pay the bills and it just gets something thats not the most pleasant experience for people out of the way quickly as well. Is there an estimate for the average refund that you think consumers will get this year . I dont know. Its been ticking up a little bit. Its been averaging around 3,000. Ours is a little higher at Jackson Hewitt but it all depends on everyones individual tax circumstances. We appreciate you joining us today and theres a lot of people watching this hoping to get their ducks in a row and hopefully a lot of them can make that happen. Great. All right. Coming up, todays market agenda but first, a little bit of news coming into the newsroom this morning. Shake shack saying it expects its ipo priced at 14 to 16 a share. Squawk box coming up. You just got a big bump in miles. So this is a great opportunity for an upgrade. Sound good . Great. Because youre not you youre a whole airline. And its not a ticket youre upgrading its your entire operations, from domestic to international. Which means you need help from a whole team of advisors. From workforce strategies to Tech Solutions and a thousand other things. So you call pwc. The right people to get the extraordinary done. Welcome back to squawk box. 6 47 on the east coast and its time for the squawk planner. Quarterly results before the bell from Johnson Johnson and Morgan Stanley and were waiting for one economic report of note. The National Association of Home Builders will release its survey at 10 00 eastern time and tonight as we have been discussing all morning president obama will deliver his state of the Union Address. Thats todays squawk blanplanner. Coming up a start up that says it can solve the most common problems of homeowners. The story of porch when squawk box comes right back. Ameriprise asked people a simple question can you keep your lifestyle in retirement . I dont want to think about the alternative. I dont even know how to answer that. I mean, no one knows how long their money is going to last. I try not to worry but you worry. What happens when your paychecks stop . Because everyone has retirement questions. Ameriprise created the exclusive confident retirement approach. To get the real answers you need. Start building your confident retirement today. [ laughter ] all right. If you own a home you should know porch. Com. Because porch is trying to solve one of the biggest problems that many homeowners have. Finding the best electricians contractors, et cetera. They have some news of Venture Capital funding and entrepreneur of the year last year. Those are some of his investors. Peter thiel, ty pennington and others. Matt is here with us. Congratulations on the usa today honor. Pretty cool. So a new round of funding. When a company like yours is growing so fast gets 65 million bucks or whatever it is what happens to it . We innovate. Were really focused on the porch app thats available nationwide. So people can push a button and speak to one of our conciergekonsconcierge. You can push a button for any small thing. So i suppose a competitor would be an angies list . Would that be fair . You say theyre the best professionals. How do you know that . Its built off a massive data. 130 million projects that theyve done. And with that we know who your neighbors have used or which professionals work on homes just like yours. And so for any project whether its a massive roof you need to put in or whether its building a fence or just getting a cleaner, we know who your neighbors have used and loved. How predictable is it . You get one quote up front from a contractor. Then it ends up being double what you were quoted at the beginning when the project was done. Do you solve for that . Whether maybe your toilet is not working, whatever it might be. We prenegotiated pricing. Thats one of the things were using funding for. Rolling that booking experience out. We know what its going to cost. And somebody comes over right now and we stand behind it. For big projects we help you find the people that your neighbors have vetted and said theyve liked. Forgive me for being skeptical here. Is you ask your neighbor for a recommendation, they give you a recommendation. And you get a couple three bids and you pick the guy with the lowest bid. That system doesnt seem terribly broken to me. Where is it that you come in and really provide value that i need from the way i do it now . Well its a great point. Porch is really taking that word of mouth experience people like and bringing them online. Weve done a tremendous amount of work. To verify licenses. Some homeowners want to have a licensed professional. And across all 50 states weve gone and done the true verification at the state level. So we know who is licensed, not just saying theyre licensed. Maybe you want professionals that are the lowest priced maybe you want people that are licensed. And we surface that information to people. We surface information. Is it paid . Its free for homeowners. Professionals can have a free profile. But we give them the ability to have a premium profile where they can pay a monthly fee, get more insights and more exposure on porch. You were telling us during the commercial break that you created the company after you and your wife were building your own house. What did the Company Start as and how different is it now . Well its been an unbelievable run. We launched 16 months ago. We were 25 employees 16 months ago. Just before that we were in the basement of my rental house when i was building a home. And were more than 350 employees at this point. The company has exploded and is doing exceptionally well. I think its just because theres so much pain out there that homeowners and renters feel every day as theyre trying to take care and maintain and take care of their home. It was a real pleasure. Youre a homeowner. What do you think . Do you click on porch. Com . Im going to check it out. Its been tough. Owning a home has proved to be a lot more expensive than i ever thought it would be. I might go back to the renters society. Every week something breaks. And id rather just pick up the phone and have somebody do it. Im very lazy. Download the porch app. Thanks. Good to see you. When we come back debate of the morning. Oil prices and a global economy. Good, bad, ugly . Which is it . Well discuss when squawk box comes back. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Good morning. Tax talk. President obama wants to raise taxes on the wealthy to cut for the middle class. Global growth fears. The imf slashing expectations for the year warning even Lower Oil Prices cannot make up for dim prospects in china, europe and elsewhere. And the ultimate buying power. New report suggests the richest 1 will own half of the worlds wealth by next year. The second hour of squawk box begins right now. All right, guys. Welcome back. Were going to jump in here because Morgan Stanleys earnings are breaking right now. Digging through some of the numbers, it looks like a miss at least on the early read right here. Were seeing a Fourth Quarter number at 47 cents. The Analyst Consensus was 56. The revenue consensus was 1. 13 billion. Fourth quarter revenue came in at 7. 8 billion, guys. So at least from the eps basis and the overall revenue number were seeing a number which appears to be gepagain, appears to be a little bit light. But weve got a look at these numbers more closely. Kayla as you know some of these banks are the most difficult to go through. Sometimes they back stuff out. Theyll take charges here and there. But the early headline read at least thats the way it looks to me based on the estimates were seeing on street accounts and others. In a similar pattern to what we saw from the rest of the banks last week were seeing shares moving down in the premarket down by about twothirds of 1 . And now just taking a sharp move in the futures now down by about 2. 2 in premarket trading. Were seeing another similarity of Morgan Stanley from the fixed income currencies and commodities trading unit of course as we saw the yields on various instruments. Moving downward in the quarter. Volatility was low and a lot of traders as we heard from these executives just sitting on their hands. Morgan stanley also had that deal fall apart in russia which no doubt im sure well hear in the press release and Conference Call today. Listen. When you say Consensus Forecast depending on your source whatever it is sometimes the numbers are different because theyll take a high or a low. The lowest consensus ive seen is 48. So any way you slice it on an eps basis, this is a miss. I think revenue because eps you can kind of tweak here and there. Revenue tends to be the number youd want to look at because you cant fake sales. Morgan stanley revenue, any way you slice that youre looking at a miss. Investment banking did look like it came in a bit higher. I believe this makes five of the Big Five Banks now which have missed forecasts. The rate of miss for the major multinational banks is 100 . And even a beat is not getting the credit for the banks it might have actually seen. Its still had a rough day in trading before the market overall turned around. How many of these banks blame litigation and the government . I dont see that in the Morgan Stanley release here. Was that a reason was that a major reason for the miss weve been talking about . Well citigroup had a 9 billion right. But it wasnt across the board. It was really the trading environment, steve, and the vast moves that so many corners of the market saw. And they said that in other volatile times, you see traders with conviction getting into the market or getting out of the market. But with the market the way it has been too many people dont have conviction with where certain securities are going. And therefore theyre not trading on that. 12 cents a share. Thats what Morgan Stanley is taking out for Legal Expenses. And remember folks, a big part of the president s plan tonight based on reports over the weekend is a fee on any asset manager with assets over 50 billion. So theres another aspect Going Forward to these banks. More than just the trading or some of these currency issues. Just remember if the reports are right, the president tonight is going to call for a fee, tax, on big banks with more than 50 million in assets. You said 12 cents a share. You may not know this but is it unaptd 12 cents a share . Does the market not build in i think at this point you have to. So just to be clear, the litigation is not necessarily the reason for this. They spent 284 million on Legal Expenses last year. Stimulus for attorneys. Thats small potatoes. There was some telegraphing that they might be next in the cross hairs for the justice department. And this rmbs fraud working group. But remember Morgan Stanleys exposure was so much smaller than the other banks. So yes it is 12 cents a share and it will deduct but its overall exposure and the size of any potential settlement will pale in comparison. Can we blame litigation or not for the miss . No. 284 million on 8. 1 billion in revenue, you know, its expensive and a lot of lawyers i went to law school. Ive got legal buddies. Some of this Bank Regulation has become permanent stimulus for them. Part of their concern is with oils coming down and Energy Stocks coming down and banks looking weak this might explain why we had a threeweek losing streak. I still want to know why banking sucks. Kayla do you want me to tell you . I dont know if we have time for that. Banking did well. Investment banking was above the Consensus Forecast. Trading is not good. Tradings not good. Were going to come back. Kayla is an expert on this. Im going to check the futures right now. Here we go. Wait. Were stronger now. Im confused. But Morgan Stanley came out, big miss, its down but the dow jones is up 78 points. Is that about where it was . 11. 5 points for the s p . The nasdaq last we heard it was 20. Now its 28. 30 minutes time were expecting to get numbers from another dow component Johnson Johnson. J j could impact the dow later on. Those numbers should break in about 30 minutes. Now my favorite number of all time now which is the 10year which has a vanishing yield. Now its 1. 83. Thats weaker than it was this morning. Anyway ridiculous numbers when it comes to the 10year yield. Yeah. We have seen a bounce back for china stocks in todays trading. Well see if the Mortgage Application numbers impact. Well talk about china now. It was a badly needed reversal today. You can see the major markets in asia Holding Firmly into the green. Shanghais index by about nearly 2 . Japans nikkei about 2 as well. Mondays trade saw the biggest oneday drop since june 2008 after regulators unveiled new rules to curb excessive speculation. Todays sentiment helped by better than expected 2014 Economic Growth figures. That data from china also helped sentiment in europe as well as a german Investor Sentiment survey. The mood also helped by that better than expected reading there. You can see that major markets are slightly positive. France is positive by the most gains. And of course well continue to watch europe. Europe and china, they have been the tail wagging the dog here in the u. S. For much of our trade over the course of the last few weeks as volatility continues to be the story of 2015. Yeah. In fact, there you go. Lets continue on some of the other major markets this morning. Starting with what has probably been one of the if not the economic story of the year nap is the collapse of the price of oil. Wti crude down one right now. Brent crude which trades around the world is up slightly to 49. 02. The euro about 1. 1582. A little bit of weakness in the euro. Thats a continued trade. Everybody has been on that strong dollar train. And a sizable jump in the price of gold this morning. Gold last time we checked up about 15 bucks an ounce. Well amid all the noise on oil prices, china has quietly surpassed a major milestone on imports. 7. 19 billion barrels in december. Ian bremmer has been writing about this. He is here with us now. He sat patiently through the Morgan Stanley breaking news as well. Weve got Swiss National break, weve got denmark doing funky stuff as well. Is number one on your global radar right now . Europe is number one. And thats just because theres so much going on that its geopolitically negative. You had the Swiss Central Bank move last week because there were concerned about further slipping of the euro. You have the ecb stepping up later on this week that everyone expects is going to be a penny short and late. And then further more, you have all of the knock on effects from the Charlie Hebdo attacks and then greek elections coming up on sunday. So when you say its going to be negative do you mean for europe or the world . Obviously the world cares, but if you look at the u. S. Economy and the european economy, you dont see the linkage you did in the financial crisis. Having said that i think if youre a Significant Investor in europe and youre saying wow, the crisis looks a little bit expensive right now. Things are going to get its definitely going to turn around. And this is an important point. We do often forget that now, this could easily change the next data round we get. The combined economy of the eurozone is bigger than the u. S. Economy. Sure it is. Globally it has now, theyre going in opposite directions. So much of whats happening in the world seems to not be impacting the United States. The relationship with russia. Were you surprised by that ian . You saw the imf forecast this morning. Everybodys negative but the u. S. Revised up. Yeah im surprised by that. We are so much more of a clean dirty shirt geopolitically than we were economically. So in an environment where the geeo geopolitics seem to be get wonkier in terms of instability and russia not backing down. In fact, the fighting in ukraine getting worse. These kinds of things are vastly problematic for europe. Theyre not really problematic for the United States at all. Theres a reason why dont want boots on the ground. And its because most americans are saying why do we care . Boko haram in nigeria, theyve declared an islamist state. Theyve got 200 Million People under it. We dont talk about it at all. Because we dont need nigeria. We dont import from there. Nigerian imports are down 91 . We get basically no oil from them anymore. Its basically gone to zero. The same way were looking at the middle east saying why do we want to spend this cash in a part of the world we dont care about as much as we used to its happening all over the world. The europeans are going to be affected much more negatively by all of this than the americans are. Yesterday was a holiday celebrating Martin Luther king jr. Our markets were closed but the rest of the world was not. The shanghai composite fell 7. 7 in one day. They changed some market requirements. Gdp dmam at 7. 4 but the rate of growth was slowest since 1990. Im trying to understand that mark better. That would be a good problem to have. It is a good problem to have. Can you imagine if we had 7. 4 7. 4 . Id be doing victory laps here. They were up over 50 for the year. Lets be clear. Look. I mean i dont the question is not 7. 4 . The question is do we believe those numbers . There are a lot of people doing major manufacturing there. There are people saying it feels softer than that. Having said that the Chinese Government is the single biggest beneficiary of Oil Prices Going down in the world. Its not because they want to use it for consumer its because they want to ease all the pain on the state of the enterprise that is inefficient on the commodity intensive industries as they transform their economy away from fixed investment zblps investment. So why are they buying so much oil then . I think thats okay. My view here that is not being passed on to the consumers at the pump. Prices for diesel and gas in china have only gone down about 50 of the Global Market price reduction. Instead theyre doing things like lets try to increase rates on taxes for the for lets say the dirtier emitters in some of the cities that are wealthy because they cant look across the street out their windows. Do you think a lot of these global issues come to a head and derail this halting recovery weve had . Optimistic on the United States. Optimistic for stability in china. Those are the two largest economies in the world. And yet im very pessimistic about geopolitics making going badly in lots of other parts of the world. So i think its a lot of delinkages and the u. S. And china are paying less attention. Theyre not going to be doing very much to respond to them. So its a very mixed message, but if youre sitting here in the United States, 2015 is a very good year. Theres no question. I like ending there. Thats a great way toend. Is there any time in history when there has not been a lot of bad news . Im not sure longterm what ian laid out is all that optimistic in the sense there are festering issues. And as the United States delinks, theres no leadership to handle these issues. The question is our involvement how much we care about the growing islamist radicalism. And how the world deals with that collectively. Its a fragmentation of the Global Environment over the longterm is bad for u. S. Multinationals that are operating globally. Its less efficient. Not minimizing the threat but growing up we did worry about global thermonuclear war and we did okay. But id rather end on a positive note. Ian, good to see you as always. New plans on shake shacks planned ip oo. Plus ready or not, earnings season is here in full swing and to that a boat load of Economic Data and volatile Global Markets. No surprise analysts are feeling nauseous these days. Well talk to a top strategist when squawk box comes right back. Welcome back to squawk box. Making headlines, shake shack expects its ipo to be priced at 14 to 16 a chair. That would value the burger chain up to 568 million what do you call them . Guacamoles . Green backs. Its interesting. That does seem to be a lower valuation than maybe they had initially planned. When they were meeting with bankers it was talking a billion dollar valuation. How many burgers do they sell . How many with the valuation is per cheeseburger is what i want to know. Whats amazing about the shake shack success story, is mcdonalds their numbers have been lousy. People are changing their eating habits. Are they . Shake shack is doing well enough. I think mcdonalds needs to realize its not a Health Movement its just we dont want mcdonalds movement. Thats right. If you go to the mall theres all these specialty things out there. Theres five guys now. My kids love smashburger. Theres all this competition. I think youre right. Yeah. They only have 53 shake shacks worldwide and they plan to get to 450. Can you imagine seeing ten times for shake shacks around . Ive never eaten at shake shack. Every time ive gone the line is so long. Thats a good problem to have. Nobody goes there its too crowded. The u. S. Stocks are on a threeweek losing streak. Joining us now peter, its good to see you here in the city. Theres a lot to choose from today. What are you focused on . I think every day this week is anticipation of the ecb on thursday. So obviously in its all about the ecb as they dot their is, cross their ts on the details. Do you think the move weve seen on whats happened with switzerland was enough to show that qe needs to happen in big fashion. They think it needs to happen. Weve seen it in japan. And were not sure that its going to be the medicine to cure the ills of the european zone. Im not convinced it has anything to do with curing the ills and theyre trying to goose asset prices and hope inflation follows. Ian bremmer said he expects it to be a penny short and a day late. Is that what you expect . Going to underwhelm the market on thursday . It will be big in size but will fill in the Balance Sheet the way they wanted. Whether its 200 billion or 600 billion or whatever they still want to get another trillion euro increase in their Balance Sheet. Again the results will be in question. There are those and im pretty sure youre not among them who say that qe worked in the United States when they finally made it open ended. And it was this notion of limited qe that didnt work because every time it ended, it fell off. Finally the fed did an open ended one. So this idea that the europeans are going to do a limited amount is that then its doomed to fail. To me qe is just a temporary air going into the balloon. Once it stops, the air comes out of the balloon. So i dont think it worked in the u. S. I think the economy grew in spite of the qe. Oil prices fell 50 in the second half of last year. Yields flatten everywhere. It will temporary goose things. Thats all it did uz. This is called a coup peter. Lets talk about it in a way that doesnt look like were talking about it. That is denmark. And here we go. People should know the producer of the show said guys do not get down and dirty into denmark today. I dont want a wonky show. Heres the points. Talk about denmark, go ahead. Heres why were talking about it. We had the Swiss National bank doing what theyre doing. Denmark over the weekend kind of did their own thing. Youve got the greek elections. I wonder if all big changes tend to start with a small change. Are we witnessing in some ways the beginning of the disintegration of the european monetary european . Thats a possibility. But im going bigger than that. Bigger than the disintegration . I think were seeing the end of central bankers to cure every ill. Interesting. I think were living in a world right now which has been the last couple weeks where there is no defined range for trading of a whole lot of important securities. We dont know what the right level is of the 10year. We dont know the right level of the swiss franc. And i tie that into central bankers because theyre so manipulating of markets. We have to go peter, but great discussion. Thank you. Coming up Surprising New stats on the socalled 1 and how much wealth the group controls. These numbers, im telling you, youll have to sit down. If youre sitting down, you might have to stand up. Squawk box will be right back. Breath in. And. Exhale. Aflac and a gentle wavelike motion. Ahhhahhhhhh. Liberate your spine. Ahhhahhhhhh. Aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just four days. Ahh four days . Yep. See why speed matters, at aflac. Com. You just got a big bump in miles. So this is a great opportunity for an upgrade. 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We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. These days, the most important person in your business could be a software developer. So, hows the app coming . Weve got to make something great. Hows the app coming . Weve got to do it fast. Lets do this on bluemix. You can build apps with analytics, big data, even ibm watson. That could give us the edge. Lets do this on bluemix. It can provide code for you. We could be first to market. Because being best is priority one. Being first is priority one. Theres a new way to work and its made with ibm. Welcome back to squawk box this morning. In the headlines, president obama will deliver his sixth state of the Union Address tonight. Among the proposals, hell discuss tax breaks for the middle class and higher taxes on Capital Gains. We will talk to chairman jason furman at the top of the next hour. Well also get a fresh read on the Housing Market later on this morning. The nahb thats the National Association of Home Builders releases its read on home builder sentiment. And british authorities have closed the investigation into the hp purchase of autonomy. Theres not enough evidence to prosecute the former executives for alleged accounting fraud. It was a deadly weekend on the roads. You had icy pile y ups from coast to coast. Check out this video from the new jersey turnpike. A terrifying moment. Wow. A tractortrailer truck came skidding towards a passenger car, barrelled up and over the median. Jackknifed and somehow the driver of the car was able to remain calm enough to capture it on cell phone video. There was like a 50car pileup. Scary weekend to drive. Amazing they stood there and watched that continued to tape it the entire time. The president will give his state of the Union Address tonight. Taxes, the economy, isis and Higher Education will be addressed. Joining us now with what to expect, lonnie chen and michael feldman. Lonnie, i want to start with you. Sounds like the president proposed a whole bunch of things that arent going to pass in congress and i thought we were in a new era of bipartisan cooperation. Little confusing isnt it . On the one hand the president is talking about cooperation. There are opportunities for that like trade. But yet the president thus far has no willingness. The ones weve seen so far really arent serious. Stay with that line. Are you going to defend the president on these proposals here . Does it make sense . Sure it does. His job is not to hand down laws tonight. His job is to make proposal ls. Thats what a president does in a state of the Union Address. Shouldnt be a surprise to anybody. Hes been michael, im going to push back against you. He has been in office for awhile. And hes not i mean certainly not the early part of the administration but the second half has been rocky to say the least. You would think his job would be to get things passed. Yet what we have here is a situation where he is heading right into gridlock. He is jumping the median like that there. Some of these tax credits is going to take the congress to do. Leadership said they want to do tax reform. Lets not leave the middle class out of this. He put forward a series of tax breaks to do that. How thats paid for, hes inviting the Republican Leadership to say lets have a conversation out of that. But if he starts by saying okay i agree with you, im with you 100 , hes not doing his job. A lack of partisanship is both ways. For 23. 5 to 28. Right . What if he had said 26 . Would that have had a chance of passing . Or is the notion that republicans refuse to compromise on any dividend on Capital Gains tax increase. I think there are components of the policies that might get republican support. But when you put them all together it isnt a serious proposal. Hes using this as a political positioning tool. Thats all this is. We have to see it for what it is. My question to you is are the republicans looking to work with the president . I think so. I think theres an opportunity here. Michael, is that true . Yeah i think they should. Are republicans looking to work with the president . Yes. Theyve got a narrow window before were in the middle of another president ial campaign. Theres a limited period of time before we can get anything done. Some things hes talking about tonight came from republicans. They were part of republican plans from the last congress. So lets look for ways as lahnee says to embrace ways to work together. Its got to be a negotiation. Theyre going to reach across the table and hug if we dont stop it right now. We need more of this in washington. But less of it for the shows. First of all, hes going to lay out a series of things he can do by executive action. Hes shown in the last year hes willing to do it and he needs to do it. How much meaningful reform on taxes has got to be handled by the president and the congress together. This is the first step in that process. By the way this is a president who has said from the very beginning the politics in this country are not necessarily reflected by the politics in washington. So i think youre going to hear from him tonight saying i know you guys out there want Real Solutions to problems. We dont always get along, but weve got to make progress on issues that matter. All right. So as a Business Reporter i find politics basically boring. And what i want to know from each of you guys is tell me whats going to happen. Give me something concrete that this Republican Congress and this democratic president are going to pass and adopt this year. Well i would hope that the first thing they look to is trade policy. Look. Weve got two trade agreements were working on. One with pacific countries. One with europe. Those are p primed and ready to go in the next year. And the president needs fast track trade authority. He needs an up or down vote can they separate out all the animosity and complicating parts of relationships and past trades. I think theyve got to. We need to have continued policy out of washington. Give me something thats going to happen. You cant use his. Thats off the table now. I will say on trade this is something thes. Will have to take on his own party to get done. Its not like he can just its not like hes taking advantage of his includesed popularity now. Hes going to have to spend Political Capital on both sides of the oil. I think on broad band and Cyber Security and other issues that by the way youve seen them roll out over the last couple of weeks, he will be able to for the record neither of them said tax reform. Neither of them said Corporate Tax reform or individuals. That doesnt happen. By the way, this is the first part of that conversation. By the way, its not just the president. Look at republican governors and some of the republicans thinking of running for president. Theyre talking about economic anxiety on the middle class. Who is the middle class . Its like if youre not in the 1 youre in the middle class. 99 of the people cant be in the middle class statistically. Id love a politician on either party to greater define who theyre speaking to. Whos the middle class . Thats part of the problem with the president s tax proposal, right . On the one hand he loves to say were helping the middle class and those left behind in this economic recovery. If we wanted to do that wed get to fundamental tax reform and simply tax code. But he doesnt do that. Brian, the poor naive person the middle class is who you want to vote for you. Thanks guys. Im going to school mr. Sullivan. I cant wait. Class is in steve. All right. Coming up breaking earnings news from Johnson Johnson. Thats expected out momentarily. As soon as the numbers cross, well give them to you. Morgan stanley with a big miss already this morning. Plus drug pricing wars are heating up. Meg tirrell next to talk about it. And your futures as we head towards the open on wall street. We are indicating a slight ever so slightly positive open for the u. S. Equity markets. Were back after this. Ill you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. The drug price wars are heating up and at least one company has been under fire from express scripts which is looking to reap savings from high cholesterol drugs. Meg tirrell joins us on set with this special guest. As if you didnt hear enough about biotech last week we have len joining us now. Thanks for having me. So last week so much talk about drug prices. Of course express scrips the manager coming out and saying your class of experimental cholesterol drugs might be next under fire once they receive approval. Can you just tell us about that dynamic . Well, i mean i think express scrips we all have the same goals. We want to get good goals that get them to patients in a way that can award them. Im not really in favor of what i mean they want to make exclusive choices and say if you give us a huge discount well take your drug and wont take the other drug nap is good for Patient Access because prices come down. But whats really best for Patient Access is choice. And we think doctors and patients should be making that choice. Not all drugs are going to be the same for all patients. Some we hope our drug will work for many patients but sometimes it will be another manufacturers drug that will work. Its better to have choice, thats our view. We have to get there by having fair prices. Weve seen this play out with hepatitis c. Express scrips getting the deal with abbvie. But then others going with gileads regimens. Are you saying that youre going to price in a way thats not going to lead to this discount war in cholesterol . Its a little early to be talking about a specific price of course. But what wed like to do is come up with a price that represents the value of the drug to the patient, to the health care system. So that theres so pricing doesnt become the enemy. The enemy is heart disease. The enemy is stroke. The enemy is arteries that are restricting. Its the disease thats the enemy. Thats what we want to focus our efforts on. Of course we have to come up with a price thats fair and thats based on the value we deliver. I think in a lot of ways folks kind of bristled against the idea that they werent going to have choice or their doctors werent going to have choice over the best drug for them. Can you put that in context as a doctor yourself. If there were differences or because express scrips argue the drugs are the same because theyre in the same class. Some patients use its been almost 30 years since statins come out. Thats a decision that the doctor makes, evaluates what the patient needs, looks at their baseline. Sometimes they have to switch because one drug isnt doing it. Sometimes they want to start at a lower dose. I like choice as a physician. And i think patients and doctors should be making those decisions. And emgen has filed a lawsuit against you and your partner. How do you expect that to play out . We dont think we infringe anything in the patents. But this is for the industry. Len, i want to ask you about valuations in general. There was a lot of angst last year in the rally in the nasdaq biotech. Which was four times what we saw in the s p overall. Im wondering how you think the sector should be valued. What the right metric is and at what point wed get overheated. Biotech is a place theyve been able to find it if not elsewhere. Im wondering at what point you think thats going to reverse. Right. So were going to take the longterm view. I think it was Warren Buffett who said over the shortterm stocks are valued by voting how investors vote. The longterm, you sort of weigh what theyve accomplished. Wed rather be weighed over time and see how much value have we delivered to patients. Thats really the only way to value a biotech company. How much value they actually are delivering to patients for medicines they need. But thats pretty immeasurable. Thats a pretty intangible metric. I dont think so. We go for mackulardegenerationmaculardegeneration. Take people who dont have driefing vision and can allow thoem drive. It can allow people to read the newspaper. That makes a difference in patients lives. You can value things like that. Len, i got to ask you one more question. Youve got a big partner in sanafee. Who do you want to see as the next head . We can work with them whoever they bring along is fine by us. These partnerships are less determined by the people than the products. And we have great products in that partnership. All right. A lot coming down from generon. We are watching i can do it. I feel comfortable. The first number spooked me out here because it was not adjusted. Here we go. The adjusted is a one cent beat. The adjusted came in at 1. 27. I saw the first number at 89 cents and said holy smokes. But then they adjusted it up. Beat by one. Sales also coming in better than expected. Sales coming in at 8. 6 billion. The Thompson Reuters estimate was 18. 55. So beat by you know whatever. A couple 50 million, whatever it might be. But a beat nonetheless. Pharmaceutical sales at 8 billion. Consumer sales 3. 6 billion. The numbers better than Morgan Stanley which was a miss on many levels. Meg tirrell, im going to put you on the spot. Your initial response on j j . The whole thing with them recently is their Pharma Business is showing a boost from previous years. Its been driving a lot of the strongest growth. Theyve been having a lot of trouble with fx. Thats another thing were worried about. Thatll be interesting to look at. Forecast right here guys. Ill give you a number without context. They see the full year adjusted eps 46. 12 to 6. 27. Thats a little lower. Thats why we have you here, meg. You bring brains to the operation. From what i was looking at from jpmorgan they were saying 6. 25 to 6. 35. On the back of Morgan Stanleys numbers, we saw futures firming up a little bit. But this no doubt would be a boost to the market if the shares could hold into the green when were looking at the open. I want to just peter just our earnings specialist. They dont know the voices in our head. Dont reveal our secrets. Pay no attention to the man behind the curtain. Peter just told me and peter is the man with the word. He said the estimate was 6. 13 for the year. I dont want to contradict you. They just gave a range that is better than where the street was. Potentially. Lets be clear. 6. 12 to 6. 27. This is important. That is the range j j is giving for the year. The current consensus is 6. 13. So j j is leaving some room for a beat. And it has provided a slight boost to futures this morning as we j u. S. Saw. So well talk more about that when we come back. On the other side of this break, its a match made in hippie heaven. A special guest that will be one of the biggest concerts this upcoming summer. We have the shows producer. Steve leisman is excited for that. At the top of the hour, the president s righthand man when it comes to the economy. Jason furman will join us. This is squawk box. Tomorrow from the World Economic forum in davos, switzerland. Blackstone ceo steve schwartzman, at t ceo randall stevenson, and many more. Squawk box live from davos. Starting at 6 00 a. M. Eastern time. Only on cnbc. Why do we do it . Why do we spend every waking moment, thinking about people . Why are we so committed to keeping you connected . Why combine performance with efficiency . Why innovate for a future without accidents . Why do any of it . Why do all of it . Because if it matters to you its everything to us. The xc60 crossover. From volvo. Lease the wellequipped volvo xc60 today. Visit your local volvo showroom for details. Welcome back. A very special guest we have with us now. The man who put together the grateful deads 50th anniversary shows. But also i think the reason youre really here pete shapiro, founder of day glow ventures is because youre an entrepreneur. You are a Small Business entrepreneur, big business entrepreneur. Lets talk about the grateful dead and this reunion. There is some skepticism out there. Youre going to try to sell 50,000 tickets times three for a band thats 50 years old. A lot of skepticism on the web. Why is this going to work . Well, its going to work. Its amazing to see this band which really was the Great American rock and roll band. They had a little bit of bluegrass, folk southern rock come out. There are so many people out there that are fans of these different genres of music that just gravitate to the grateful dead. And i grew up in the 90s in the summer going to those stadium shows. There was nothing like going to see it. Whats the buzz telling you how its going to do. The mail order process. It went backwards in the age of the internet to make people fill out forms and index cards and money orders. The buzz is huge. We got top trending on friday. We announced the show. But look at yahoo and facebook. We were top trending globally. I think there are a lot of people out there that saw how many closet deadheads there were. Theres a lot of deadheads on wall street i have to tell you. When you go up front and sit at a grateful dead show these days. And from phish. Youre going right . Im going to try to go on the 5th yeah. Soldier field. Soldier field in chicago. First of all, theyre talking in Chicago Business about the Economic Impact of this. What do you expect it to be . People from all over the world are going to come to chicago. Just over the weekend we got emails from people from australia, europe all asking about money order and how to do that. The process i have to say if the viewers dont know its a little weird. Its old school. Mail in envelopes, write on the front of envelopes. Because people used to decorate the envelopes. People dont realize that. Used to decorate the envelopes, what show what ticket what price. Youre going back to the mail peter. Its amazing in the age of the internet were going to do a normal one but its amazing how much people want to get away from all the technology. Is it nostalgia or is there a fundamental reason to do it . Nostalgia. Its fun. Its the way it used to be. I want to pivot before we run out of time. You are on independent promoter in a business that is now dominated by two big national promotors. How does that business work . How do you come into the radar . You have the Brooklyn Bowl. You franchised the Brooklyn Bowl. Youve got one of the biggest musical spaces in las vegas right now. One of the biggest ones in london. So is this is business that as everybody says is on the wane or is it on the upswing . Its definitely on the up. You cant sell records in the same way. If youre a musician and youre looking to make a career and youre looking to pay the bills, you got to hit the road. Because the same revenues not there from the same record advance. Theres nothing like that live experience. Thats why were talking about that mail order. Going to the post Office Putting that in the mail. I think people want to go back and feel that versus just the quick internet thing which well do also. And the live were seeing at the Brooklyn Bowls is no virtual experience. Nothing with the phone. Nothing with the computer can replicate the feeling. Whats the next big thing in terms of a Brooklyn Bowl or the next venue . Im putting you on the spot. Come on. Ive got something coming. I dont think theres a great place for these people who love going to shows and communing at shows with their friends. I dont think there is a place thats built for that online yet. Im going to try to do that. Are you saying that people still matter . That human contact and physical touches and relationships and smiles and friends all matter . Peter, weve got to go. But quick question. Why you . A lot of people wanted to put this show together. Why did you put it together . I wouldnt give up. You know . Until those guys said yes. And i also put together bringing trey in. I grew up part dead part phish and put together the show that i wanted to see. Referee there was a rumor that bob is going to get up 4 50 west coast time and watch it and then he was going to fishing. But i dont know if thats true. Bobby, good morning. Thanks. Coming up a look ahead to tonights state of the Union Address. We get serious again. Were going to talk taxes and the economy being front center. Jason furman will join us. Then marriott ceo will join us from davos. Squawk box still a big show to come. She inspires you. No question about that. But your erectile dysfunction that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. 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Welcome back to squawk box here on cnbc first in business worldwide. Im Kayla Tausche along with Brian Sullivan and steve leisman. Joe, becky, and andrew are in davos getting ready. Becky will join us from davos in a minute with Marriott International ceoarne sorenson. Heres whats happening at this hour. The global imf cutting. Whats the s . I think its lower case. The wall street journal reports google is near a 1 billion investment in spacex. It would value the venture at more than 10 billion. Amazon announcing plans to produce about 12 movies a year. Focusing on budgets between 25 million million. Then theyd be available on the amazon prime Video Service within two months. All right. So we are less than 90 minutes away from the opening bell on wall street. And your markets look like this on this holiday shortened week. We are seeing 87 points on the Dow Jones Industrial average. So the u. S. Markets hoping this week to reverse three straight weeks of losses. Lets also check out the markets in europe. Theyve been volatile in the last couple weeks and months. Not so much today. Actually france, uk, germany are up. Asia though this is the interesting story. Yes chinas up a little bit today. 1. 8 . But we forget because we were off yesterday, the shanghai composite fell 7. 7 yesterday. Concerns about a slowing economy and some margin requirement issues there. Oil falling again yesterday, too, after managing to close up slightly on friday. So well keep an eye on those. A few stocks on the move this morning. Morgan stanley missing on both the top and bottom lines for its latest quarter. It reports an adjusted quarterly profit of 39 cents per share. We previously reported we were going to go with 47 cents a share. Safe to say it was a messy release to say the least. A lot of charges being athdded in there. 12 cents for legal issues. And you can see those shares down 2. 25 . The firm saw a drop in fixed income and commodities trading revenue much like its peers. Thats been a trend on wall street thats not been moving in its favor. Johnson johnson, its profit of 1. 27 per share was above estimates. Revenue slightly below consensus. And the shares which had been positive on perceived higher guidance than earlier expected, now they have moved to the downside by about half of 1 . Thanks. President obama will deliver his state of the Union Address this evening. Hes expected to call on congress to raise taxes and fees on wealthy americans and the nations largest Financial Firms for the middle class. Joining us now first is council of economic advisers jason furman. You understand the viewership. So heres an opportunity, jason, to convince our viewers why they should pay more in Capital Gains and dividend taxes. First of all, let me remind you. You began the top of the hour with that new imf downgrade of global growth. There was one major economy that they substantially upgraded the Growth Prospects for. That was the United States. And thats because we have the successful economic strategy. That strategy has that is apparently helpful to the Economic Growth. And in the tax deal at the end of 20152, some people predicted it would be the end of the world. It wasnt. Precisely the opposite. As part of a balance plan, our growth has sped up. Theres an awful lot of your viewers who have said over and over again if wed only done bole simpson, they proposed exactly these rates, exactly this structure on Capital Gains. The bank tax, republican ways and means chair dave cam, he proposed a very similar tax. These all have a strong economic logic to them. The Capital Gains will help unstick capital. So its not being held. It moves around. It goes to its most productive purposes. The bank tax is to internalize some of the risks associated with those activities. And all of this is paying for tax cuts for college, child care retirement. All of the things essential to middle class economics. Im a little bit lost on the logic there of increase in the Capital Gains tax is good for capital. Walk me through that one. Sure. A lot of problems economists talk about with Capital Gains is lock in. If you hold the asset, you can defer the taxes. If you hold it until death, you can entirely eliminate paying the taxes. If you get rid of that angel of death loophole as some economists call it therell be less of an incentive to hold onto your Capital Gains just for the tax benefits. Thatll actually free people up to realize some more of those gains and let them move their capital around to whatever is the most productive use of that capital. If this is so similar to what Simpson Bowles had proposed and what congressman camp had proposed, why is the white house now proposing the same thing that hit road blocks so many times over the past few years . The president s entire approach to the state of the union whether its these tax proposals were talking about, whether its two additional years of Free Community college for everyone whether its sick leave. All of that shows hes not trimming his sales. We have a lot of economic success and momentum in this country that were building on. But we still every month im on your show talking about jobs and youre always talking to me about wages. We need to do a lot to raise wages, to make sure our economic gains are translating. He has a big ambitious agenda. You may not know this or want to talk about it one of the things lower oil has hurt is alternative energy. Is there going to be anything in the speech tonight thats going to suggest some type of help for solar et cetera given the fact that gas and oil prices are down. It makes that industry perhaps less attractive. You know our track record in terms of all the things weve done to support those industries. And one of the most important things we can do Going Forward is the talks in paris this year to try to come up with a global approach to deal with climate change. That approach would give a lot of impetus to continuing those investments in renewables. We have to leave it there, but i think youre going to be back. We have a lot to discuss about all the things in the president s state of the Union Address tonight. A lot of economic proposal. Thanks for joining us this morning. Thanks for having me steve. Here we go. The World Economic forum gathering in davos this week. The squawk box crew is there and will be bringing you great interviews with power players all week long. Kicking it off, becky joins us now with a special guest. Beck y i, start the davos parade. Hey, good morning, steve. Good morning, everybody. This is it. This is our very first guest. We are joined this morning by davos. Beautiful day here. A lot of snow a lot of sun. But we are joined by our first guest from davos arne sorenson. Its great to have you here today. Its great to be with you. I read a release that said Marriott International now has a million rooms that it will have in 2015 either open or under construction, under development. How did that happen . Well we had a spectacular 2014. We signed over 100,000 new rooms that will be for hotels joining in our system. Some of them opened in 2014. Many of them will open in 15, 16, or 17. Weve never done a number like 100,000 rooms. You add that other numbers and we think by midyear this year we will have a million rooms open or signed and under construction. Why this rapid advance this year . What happened . Was it the macro event . Was it something internally . What led to the is . Youve got two things going on at least. One is the u. S. Economy is great. So were seeing growth come back to the United States. Including folks starting new hotels. Thats mostly still secondary markets. But then youve got this global trend of new travelers. Billion trips to take in a year crossing borders. And thats growing by about 10 every year. You look at the growing middle classes in africa china, india, south america and so many places. Thats driving demand for hotels the rest of the world. Id heard that you were the person at davos who has the most meetings that come in. Something like over 300 requests have come in. You heard something i havent heard. I did hear this from my sources. There are people from all over the world here. So we have great customers here. I like to see the customers. Weve got hotel owners that are here. Weve got both heads of states and other officials from countries where travel policy is important or growth is important. So theres a lot that can be accomplished this week. You know the turmoil thats taking place right now around the globe whether its oil prices which is low or Interest Rates that are uncertain or moves that the Central Banks may or may not be making it has set things on edge. I wonder if when youre trying to figure how people traveling with what is it . How do you look at these big confluent events and figure it out . People travel to see the world. And when they have resources that enable them to do it, thats one of the first things they want to do. You get to be a member of the middle class and suddenly maybe dont worry as much about housing or food or medical care and you start to thinking about that. The second thing that drives travel is Economic Activity. And thats trade. Its meetings. Its you know investments, all sorts of things that happen. I think when we gather here i worry less about the Interest Rate environment. I worry less about oil. But because of the eastbound traffics in paris last week were in a time when people are talking about strengthening borders. Limiting the movement of people and goods in order to protect our security flanks. Weve got to protect our security, but weve got to make sure the Economic Activity and the freedom to move is preserved. You talk about security. Is there anything hotels have done to step up security in paris or other areas . Oh sure. We have gradation of security levels at different hotels. Many marks in the middle east we are at the highest code. Metal detecters, looking at cars before they get close to the hotels. We dont publish what every hotel is ranked. But in paris we have stepped it up a bit. In just france or other areas in europe too . France has been the primary market. One of the things i was looking through that we just heard is the millennials now outnumber baby boomers. You have the ac hotels that look to play on the millennial ethos. Which i dont know what that is. I think theyre looking for authenticity and maybe something that turns them on a bit and they can talk about and share with their friends through whatever social media theyre using. This is something that is us. What does that mean . In a hotel concept, what does it mean . Friendly. Genuine. Dont pretend to be something youre not. But we also are rolling out new brands. So ac hotels in the United States is one moxie. We opened in italy first time last year. The second modern day edition opened in miami beach. First of december. And these brands are going to be loved and massive successes. So were looking at hipsters sort of hotel . Thats a luxury hotel. While millennials will stay there, you need to have the resources to pay for it. But its got not just a dance club but bowling rallies, an ice skating rink and spectacular outside grounds. Thank you for joining us here today. Thank you. Glad to be here. Steve, i will send it back to you guys in the studio. We promise well be here tomorrow with many more guests to come. Looking good out there, becky. Thanks very much. Up next a fund manager who says sam zell has what it takes to shake it up. And then larry kudlow will join the conversation on tonights state of the union speech. And i cant wait to hear what he has to say about that. And later the cofounder of a company life is good will join us. Plus a look at netflix. The company will be releasing Quarterly Results a the bell today. Squawk box, lots to come. Come right back. Take a closer look at your fidelity green line and youll see just how much it has to offer, especially if youre thinking of moving an old 401 k to a fidelity ira. It gives you a wide range of investment options. And the free help you need to make sure your investments fit your goals and what youre really investing for. Tap into the full power of your fidelity green line. Call today and well make it easy to move that old 401 k to a fidelity rollover ira. Push your enterprise and you can move the world. But to get from the old way to the new youll need the right it infrastructure. From a partner who knows how to make your enterprise more agile, borderless and secure. Hp helps business move on all the possibilities of today. And stay ready for everything that is still to come. Volatility is back. That means investors are coming out of the shadows looking to withstand the wild ride. With us ceo of third avenue management. Got a bit of a bad wrap but stock pickers underperforms last year. Why do you think now you can actually find value in investments . Its not now. Its not before. Its not the future. Its always. Theres always a place for value investors. Were not here to compete with value. Were here to find really good stocks or bonds and own them for the longterm. Be patient. Being a shortterm market timer is just too hard to do. And theres a place for that for people. But not for what we do at third avenue. But longterm you can do value too. And its hard to discern what is a value investment. Id love to hear how you actually decide whether an undervalued stock is something thats going to go up or go down. Theres sort of three things we think about. Being focused on the Balance Sheet of a company so we can be longterm. Because bad company with a bad Balance Sheet, that might be a value. It is in fact a bad investment. And the third thing is resource conversion. We want to see an exit for our position with some kind of corporate m a activity. Or some kind of spinoff or something where we can take advantage of what other people do with our companies that we own. That doesnt necessarily sound longterm though as a strategy. It depends. We own bank of network tow york to pick one. Weve owned that for a long time. Only this year has it started shaking up a little bit. One on the board of the company. There is a lot of low hanging fruit in bank of new york to fix where we still think the stock is expensive. Is there value in other banks as well . Because theyre all down based on recent earnings. Well theres a macro play on the financial sector. But again were not betting on all of them. Were just betting on but youre one bank. We own a few others. Thats the one major money center. Are you adding to your banks given what happened to the banks recently . We are. Coamerica. Were getting a tax on big bank or asset manager with more than 50 billion. That sounds like a lot but they all have more than 50 billion. That doesnt scare you off . No. Were also getting proposals for taxes on kal tap gains too. What do you think about the Capital Gains proposal . I personally dont like it but i think for the general public out there, this is a great low hanging fruit thing for the administration to try. Is it going to hurt the stock market . It should, shouldnt it . If you want less of something, tax it more. Theres less to reinvest if they dont keep their money. What are your picks . Sam zell has had a mixed record recently. Why do you think this is the company that hell turn around . Its a life Long Investment for third avenue. It was a Company Originally founded by marty whitman. Weve been with the predecessor for over 25 years. This particular company is a fantastic one. And something that we think has great growth opportunities. And we just changed the chief executive there and looking forward to the steve jones our new ceo to continue to build from here. And Forest City Enterprises is another of your picks. Perfect another example of another where we owned them forever. We love the rattners. Weve been pressing them for some years to consider reading it. Now theyre reading it. Its a resource conversion. This is going to be something that we think will create value for shareholders. Always traded at a discount. Before we go you also run a credit fund. Your outlook on rates right now . You know its a high yield fund. Its categorized as still sensitive to where yields are. In that environment the only place to be is in high yield. Really . Until when . If youre making good credit decisions in your portfolio, forever. We got to go we could debate defaults all the time. But as we reported trillions hundreds of billions potentially trillions of high yield is backed on oil and gas, production. 6 of our portfolio is in energy. Okay. Thats it. Were a focused fund. Its not a market beta play. Its an individual investment fund. Weve only scratched the surface. Well have you back. David barse of third avenue. When we get back thinking of going to the big game in fooe innics . Find out how much that will cost you. And can netflix stop the bleeding . Losing in the stock just over the last six months. Find out what you expect netflix to say about the future of streaming service, subscriber growth, and more. Squawk box will be right back. Ice time. Before earning 1 cash back everywhere, every time. And 2 back at the grocery store. Even before she got 3 back on gas all with no hoops to jump through. Katie used her bankamericard cash rewards credit card to stay warm and toasty during the heat of competition. Thats the comfort of rewarding connections. Apply online or at a bank of america near you. Sunday dinners at my house. Its a full day for me, and i love it. But when i started having back pain my sister had to come help. I dont like asking for help. I took tylenol but i had to take six pills to get through the day. So my daughter brought over some aleve. Its just two pills, all day and now, im back aleve. Two pills. All day strong, all day long. And now introducing aleve pm for a better am. Ameriprise asked people a simple question can you keep your lifestyle in retirement . I dont want to think about the alternative. I dont even know how to answer that. I mean, no one knows how long their money is going to last. I try not to worry but you worry. What happens when your paychecks stop . Because everyone has retirement questions. Ameriprise created the exclusive confident retirement approach. To get the real answers you need. Start building your confident retirement today. Welcome back. Were going to send you right to the breaking news desk with Mary Thompson with breaking news on Morgan Stanley. I just got off the phone with the cfo. The companys easternings for the kwourt quarter coming in light of expectations. First of all and most important to a number of analysts who watch the stock, the company is lowering its compensation ratio to 39 from 40 . So Going Forward what youll see is revenues rise at Morgan Stanley. Youll see the comp ratio go down. So cutting expenses there. Also as this as you can see, it would give the firm more operatinge inging leverage. A couple questions about the pipe line. The pipe line is up again. The equity markets pipeline is strong, she said. She said a couple of deals didnt get done in the Fourth Quarter because of volatility in the equity markets. Expects that to be pushed forward. No comment on a potential doj settlement on concerns the subprime lender new century. Of course they dont comment on legal issues and no additional comment on the recent data breach in Wealth Management business. Again, Morgan Stanley in light of expectations. The factor behind that equity and debt in its fixed income commodities and currencies trading unit. Back to you guys. Thanks very much. Coming up cnbcs larry kudlow. I know he has an opinion about tonights state of the union speech. I know youre going to want to hear it. And then its not just a tshirt but a lifestyle. The cofounder of life is good joins us to discuss their Retail Success and how they are giving back. And as we head to break, look at u. S. Equity futures. To the upside. Us librarian emily skinner, each day was fueled by thorough preparation for events to come. Well somewhere along the way emily went right on living. But you see, with the help of her Raymond James financial advisor, she had planned for every eventuality. Which meant she continued to have the means to live on. Even at the ripe old age of 187. Life well planned. See what a Raymond James advisor can do for you. You just got a big bump in miles. So this is a great opportunity for an upgrade. Sound good . Great. Because youre not you youre a whole airline. And its not a ticket youre upgrading its your entire operations, from domestic to international. Which means you need help from a whole team of advisors. From workforce strategies to Tech Solutions and a thousand other things. So you call pwc. The right people to get the extraordinary done. All right. Welcome back to squawk box, everybody. Good morning. Its 8 30 here on the east coast. Lets look at stocks to watch. Delta air lines. It topped estimates for its latest quarter. Lower fuel costs and an increase in passenger traffic. A little surprisingly halliburton Beat Estimates by nine cents. Adjusted quarterly profit of 19 bucks a share. And regions Bank Regional financial with a sizable miss thanks to a drop in interest and noninterest income. And Morgan Stanley missed ref knew and earnings as well. The banks going about 0 here sfwlp. Interesting to see regions moving that way. The regionals are where you can see growth it was said. And it appears even though they are growing loans that loan Interest Rates are really hurting the revenue theyre able to make on the loans. Is that the curve . Larry kudlows here. Sorry, hi. Im larry kudlow. Im with cnbc. I love these guys. Congratulations on your new digs and the best path to free market capitalism. And, you know there was a sense that 2015 was going to be the year that the earnings turned around. Theyre hoping for a rate rise. Whether that happens or not, steve, i know there are some varying viewpoints this morning based on a wall street journal article. Its the cost of funds of a bank versus what theyre able to lend it out at. When larry says the curves flattening what he means is the cost has not changed but the amount the bank can get. Whats the the erm . Interest marmargin . Net interest income. Im sorry. Theyre both correct. The margin as well. As a former wall streeter in the last century its called the cost of carry. And thats gotten crunched and it affects the big banks as well as the regionals. But the banks have lots of problems. Im going to stop talking because who is here . Its larry kudlow. Lets go on. Weve got a big state of the Union Address tonight by the president. Many people are calling what hes going to propose a robin hood tax plan. Tax on the banks, tax on wealth at certain income and wealth levels. Giving it back in middle class tax cuts. Senior contributor legendary guy all around good guy, larry kudlow is here with us. So much to discuss. Tax plan. Purely a populist movement with no chance of success . Or a real success because as jason furman pointed out republicans have pitched some of this stuff themselves before . Well actually jason has a point. But not in the manner in which obama is presenting it. Republicans have indicated concerns and efforts to reform the middle income situation. Im just going to call it. Because their wages have lagged badly in this expansion. However, can i just say, you know taxing the rich to give to the middle class, i mean it sounds like 19th century carl marx thing. Its just so old really. And from the back ends of the 1900s. But you admitted it. Wages have stagnated. If youre a government doesnt matter what political party, i think if youre acknowledging that you cant do anything about wage growth if youre doing something on the other side. No no. I didnt say that. Thats what im saying. Yeah. Im going to politely disagree. His idea is not going to go through. America is not a class warfare country. Never has been. Heres where we should start. Let me make this real simple. To help middle income wages and everybody else and investment and equipment that creates jobs please let us begin by slashing the Corporate Tax. That is the number one priority. Personal income tax code needs help. We need to broaden the base lower the rates, simplify the code. Thats down the road. Washington is actually close theres actually bipartisan serious discussions to drop the Corporate Tax rate to around 25 , all right . Im just saying what they want. Drop it to 25 . Make the International Territorial so youre not double taxed on overseas profits. Bring the money back home can i interrupt you because i just had a thought . Corporate loopholes to balance it out. What if obama is setting a grand stage not going to happen. You have to admit. You cannot go forward in this political environment and say what the cure is for what ails america is slashing Corporate Taxes without in some other way politically sticking it to the rich. No, no no no no. Im just saying the politics of it. Not the economics of it. Not a good politician. Thats a compliment actually. It is a compliment. The studies show the work shows on the left of senate think tanks and on the right side. The biggest beneficiary of a lower Corporate Tax rate is middle class wage earners. But you cant sell that. Oh yes, you can. And they are going to sell it i can sell it. Im a message guy. I sold this 30 years ago. Nobody believes it was possible. I can sell it again. Paul ryan can sell it. With no increase in taxwealthy . Dont this wealthy. Think loopholes and corporate cronyism and corporate welfare. Thats what you want to get rid of. Its not rich versus poor. Its the lobbyists. If you go down that road capital comes gushing into the United States. We then Start Building stuff again in a bigger way. We have Better Capital investments. Thats the best job. Obama is tonight so far doesnt have anything like the broad sweeping Corporate Tax he will. Hes going to have a paragraph on that. Hes going to have a paragraph on this. This raise the Capital Gains and the estate tax. Not going anywhere. They know it. Its just politics. The Corporate Tax was the one to focus on. Thats what paul ryan was working on right now. Thats what orrin hatch is working on. They are talking to the white house. They have talking to the treasury. Im not saying that its going to work. Im saying its hot. Its on the table. This other stuff, raising cap gains which pushes money offshore raising the estate tax, which pushes money offshore, thats not going anywhere. The class warfare stuff isnt going anywhere. The best way to help he american middle class is jobs and lowering the Corporate Tax rate will go a long way. We had a nice little pickup in jobs. I want to increase it. Out of the whole nbc wall street journal poll said the increase of american who is say the economy is doing well. Jason furman at the top of the hour says theres momentum. Does that help or hurt a proposal like this . Its just good. I dont think it has a political meaning, per se. I think jason furman is right. The economy is better. Ive said this a million times. Just get to what you can do. In other words, the art of legislating in a session like this, youve got two republican houses. Democrat in the white house. Youve got to do what you can do. If you put too many things on the table, youll come out with nothing. Youve got to prioritize. I hope we get something tonight about infrastructure. This country is crumbling from the inside out. Theres got to be some investment. Public, private, whatever its going to be. Theres got to be some investment in infrastructure. This country, you come into Newark Airport and you feel like you know we havent advanced in 40 years. I cant let this go larry. I disagree with you in the following way. Lets say you are correct and im going to concede that you are correct that one of they have great things we can do is cut the Corporate Tax rate. Yeah. You will not get that from the democrats and it will not pass from the president unless you give up something on the other side. And that is going to include either an increase in the Capital Gains tax rate or some other concession. Youre cross ruboughing. Which is good but not in this case. The Corporate Tax stuff doesnt require that kind of tradeoff. The Corporate Tax stuff requires lower rates, broader base get rid of the deductions. The loopholes. And im a strong proponent of lets get rid of corporate welfare whether its agriculture, manufacturing so lets stand alone not related to the other issues. Right. The personal code is a hornets nest. Leave that for the moment and get to where we are we can get. I want to hat tip Robert Franks piece running yesterday on our website. He did the numbers on this. Top 1 of americans pay 33. 4 in income taxes and the middle class paid 13. 7 . So look. Can we please stop talking class warfare . Can we please all get together and grow this economy at 4 a year plus and get back to our longterm line so america is number one. Thats what i want. Lead with the Corporate Tax and a lot of things will get better. Is there a flag . Cue the banner. Ive got to read this. Larry, thanks so much. And the fed should go slowly. We havent talked the fed. But youll be back. Spreading optimism through shirts hats and accessories from a small fair in massachusetts. A retail empire that not only sells cool stuff but gives back to the community. The story is as larry will attest, life is good. Thats next. Hey what are you doing . I was thinking about taking this speed test from comcast business. Oh yeah . If they cant give us faster internet or save us money, theyll give us 150 bucks. Sounds like a win win. Guys faster internet . I have never been on the internet and i am doing pretty well. Does he even work here . Dont listen to the naysayer. Take the comcast business speed test. Get faster speeds or more savings, or well give you 150. Comcast business. Built for business. Welcome back. Unconventional beginnings can lead to unanticipated success. 25 years ago two brothers took to the streets to sell their hand made tshirts touting inspirational mantras. Life is good now worth 100 million and is ready for a brand evolution. Cofounder and ceo burt jacobs is here with us. And hes the face of this months inc. Magazine. Thanks for being with us. Good to be here. In that one day you went and you were struggling the whole time eating Peanut Butter and jelly sandwiches and one day you set up and sold out. Yeah. What was different that day . What was the reason why . You know i mean the biggest thing was for those five and a half years we were designing things but there was no Common Thread running throughout. We got focused on the idea that the media inundates our culture with negative information. And could we come up with something positive that celebrates whats right with the world. And thats when life was good was on the tshirt . Thats what did it. Three simple words. Five and a half years you struggled with it didnt really quite work. And you must have thought about quitting a thousand times. Absolutely. We were pretty close. We actually already took jobs as substitute teachers. You were this close to giving it up. We had 78 left. 78 bucks . 78 bucks, yeah. I had 78 bucks. My brother didnt have anything. You didnt do 78 lottery tickets. Thats an amazing story. Talk about where youve gone now. Looks like life is good is not the only message. One thing weve learned through the years is that like the people who actually face the most adversity in the world, theyre the one who is embrace the message the most surprisingly. People who went through chemotherapy, people facing difficult things been in car accidents, et cetera. So we started focusing the messages on greater depth. So emotional connecters like love you know is a really powerful like we refer to those things. Gratitude at life is good we refer to as a superpower. Youre like the greeting cards of tshirts. Youve got to think about what people are thinking about and want. I like that. Can we use that . Itll only cost you 78 bucks. You changed the designed. When you started people were familiar with the stick figure on the front who always had a smile on his face. How do you manage the design of this and make sure this is still a design b and its still apart from the messages that people want to buy . The idea is spread the power of optimism. Life is good the three words are still very powerful. But its the brand. There are many messages that we can spread. And many art styles and designs. So were going from that for 20 years it was primarily that style. Now were finding our Customer Base is broadening and we can speak to different demographics and different audiences if we tailor the message a bit. Whats growth like . Growth looks really strong right now. We grew like mad until the recession. Then we kind of flattened out. Now we have a strategy in place. We talked about entertainment, life is good festival. Were using all forms of art to grow the message. And were also watching closely whats happening culturally. Right now you have messages out there that are i cant breathe and i can breathe. Both of which are understandable. Its a difficult situation right now. Its a racially charged tension thats is between police and civilians. How does life is good gets involved in that . Were not choosing a side on things. Were elevating the conversation. We say if we learned anything along the way, okay do people send you submissions for tshirts . Constantly. Did you ever do one . Whats an example . Hundreds of them. Keep it real . I need that one. Can you do the vneck steve . Its a good question. I am limited in terms of my fashion choices i can make personally. But its all right. Simplicity is a big theme with life is good. Somebody closed a letter to us and said i love what youre doing, keep it simple. We put it on a tshirt. Remain a private company, remain it closely held two brothers even as you grow whats the future . The future were ambitious about growing it but were not interested in taking it public. And were not interested in selling the company. Its our little dream and were an integrated model. 10 of profitability go to kids facing violence, poverty, and illnesses. Thank you very much. Thanks for having me. You dont want this hat back. When we return, jim cramer giving the market setup for the day. Then can good Quarterly Results from netflix turn things around . Their earnings are out tonight. Everything you need to know in the next 12 and a half minutes. Squawk box will be right back. Tomorrow from the World Economic forum in davos, switzerland. Blackstone ceo Steve Schwarzman aetna ceo, at t ceo randall stevenson. And many more. Starting at 6 00 a. M. Eastern time only on cnbc. Ntly, a 1954 mercedesbenz grand prix race car made history when it sold for a record price of just under 30 million. And now, another mercedesbenz makes history selling at just over 30,000. And to think this one actually has a surroundsound stereo. The 2015 cla. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. I take prilosec otc each morning for my frequent heartburn. Because it gives me. Zero heartburn prilosec otc. The number 1 doctorrecommended frequent heartburn medicine for 9 straight years. One pill each morning. 24 hours. Zero heartburn. Push your enterprise and you can move the world. But to get from the old way to the new youll need the right it infrastructure. From a partner who knows how to make your enterprise more agile, borderless and secure. Hp helps business move on all the possibilities of today. And stay ready for everything that is still to come. Bk back to squawk box. Jcpenney bringing back its big catalog, nearly five years after shelving. The new 120page book which is rivaled only in size by Restoration Hardware feature items from the retailers Home Goods Department and sent to select customers in march. Experts say, while shoppers are buying more items online they like to browse through the low tech print catalog to help decide what they want. Brian . All right. If you want to go to the super bowl in arizona, you better start safrnving. Tikiq. Com puts the average super bowl seat price under 4,000. Folks that is per ticket. Luxury boxes, you want to be inside, get froufrou stuff, are going between 726,000 and 1 million each. Cheapest you can expect to pay to get into the door at the stadium is about 1800. So 1800 folks, nose bleed bad seats, fully obstructed view. Saving up for money in the grateful dead in july rather than the super bowl . I hope so. Youll do the ticket thing . Try to mail it in. Buyer on the mountain. Think about your design now. Youve got to make it creative right . A lady with a fan. Down to the New York Stock Exchange. Jim cramer joins us now. Earnings this morning, j a, regions, Morgan Stanley, what are you watching. First, one of the things weve learned about the earnings season is if you read headlines, you trade, youre an idiot. Not a single one of the Companies Reported a number that can be fathomed until you listen to the Conference Call. Everybody continues to say, this quarters bad, this quarters good, this quarters bad. These are much more complex. You cant understand it from the release. I mean you think to buy halliburton up three right now, you sell j j, down five. Its a question of doing homework and waiting, because there are too Many Companies being traded just on releases when this is not that kind of earnings season. Jim, before we go j j had an interesting number domestic sales up sharply, International Sales down sharply, currency headwinds. Is this something we need to get used to for the foreseeable future. Ppg 500 million swing, 50 million earnings and nobody cared because everybodys ready for it. We sit here and we can bemoan it or recognize the market doesnt care. The market isnt surprised by huge shrinkage in net interest margin. Markets factored in the currency. Only people that havent are the journalists. On that note, jim, well leave it there. See you in a few minutes in post 9. Next a look ahead to netflix Quarterly Results. What you need to know before numbers hit the wires. Later today, well be right back. Take a closer look at your fidelity green line and youll see just how much it has to offer, especially if youre thinking of moving an old 401 k to a fidelity ira. It gives you a wide range of investment options. And the free help you need to make sure your investments fit your goals and what youre really investing for. Tap into the full power of your fidelity green line. Call today and well make it easy to move that old 401 k to a fidelity rollover ira. How can power consumption in china impact wool exports from new zealand textile production in spain and the use of medical technology in the u. S. . At t. Rowe price we understand the connections of a complex, global economy. Its just one reason over 85 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. The internet streaming space getting more and more saturated woody allen, the latest to team up with amazon prime. With amazons announcement its getting into the movie business how will netflix fare with increased competition . Netflix set to post results after the bell tonight. Joining us analyst at nurima securities. One or two key numbers foe kusds on tonight . Fourth quarter subscribers, net video additions, people looking for 4 million globally. What is guidance for the First Quarter . Streets looking for 3 1 2. You can argue, buy side is expecting something lower. 3. 5 million new subscribers. In the First Quarter. Under over benchmark . 3. 5 a number . Views are should Pay Attention to . Thats the sell side thats analysts are expecting. Netflix stock has come in investors on the buy side are expecting dis inging discount. My view, expectations need to come down a bit. The hopes for growth have been pinned on europe and expansion there. Do you think the slowdown in europe will affect a customers willingness to pay 10 a month . I dont think the its a secular story. Netflix all about the tailwinds of video apps on mobile devices, how great the distribution is its about the future of internet video. I dont think its links to the macro xheepeconomy. I think its about the competitive mark like france germany, so forth. Simple question is this a win or lose thing . Does netflix win or amazon win, or can both win. I think both can win. Its a huge space. The ceo of netflix is fond of saying, netflix, hbo compete the way football competes with baseball. Theyre in the broad competitive set. But whos got deeper pockets for the programming that is ultimately going to win. Amazon may. Apple. Thats that could be. Amazon and apple, they have broad businesses. Apple is interested in devices. Amazons interested in ecommerce, right . Netflix lives or dies with streaming video. So in that regarding theyre more laser focused. They do spend more. Netflix spend 3 billion a year in content. Theyve said 10 10plus percent is originals. Amazon spends were not sure maybe a half or twothirds. You think amazon has been emboldened by a recent Golden Globes win for transparent how far do you think the brazenness might go. Amazon announced woody allen deal and news this morning about original is in terms of original movie investment. So we think that amazon is full steam ahead in terms of its investment in amazon prime instant video. Youve got an intense competitive environment in the u. S. Between hbo go potentially launch its standalone. I think showtime. Espn over dish apple tv theres a cnbc app on apple tv. Is that an app . What are the icons that apple tv, i use that at home. Bullish about the space. Long term bullish about the space. Netflixs earnings look beyond that. I like it long term. On valuation, go with trades at more attractive market cap than twitter ebitda lower than hbo. Well watch netflix earnings after the bell. Appreciate your time. Weve had a good time. Squawk box more from davos this week. The crew has arrived but for now, squawk on the street down at New York Stock Exchange starts right now. Good morning. Welcome to squawk on the street. Im david faber with jim cramer. We are live from the New York Stock Exchange. Carl has the day off today. Lets give you a look at futures now, as we head into the opening of trading for the week though it is of course tuesday. As you see, we are headed for what looks to be at least a fairly higher open crude oil, that can often dictate the way we trade over the last months now it seems, as though. Certainly last few weeks. You can see wti down 3. 6 right now, under 47 a barrel. How about