Transcripts For CNBC Squawk On The Street 20130206

Advertisements. Uncertainty about whether or not the offers are real. Wed like to help cut through that. To get people to take advantage of that. Which would be another housing upside for the economy. Tensecond surprise . Hoimts do yw many times do y the word uncertainty . Theyre screaming there are opportunities in the markets. Its when people are certain that you have to be fearful. I think were far from seeing certainty. Youre still bullish . Bullish as anything. Doug, richard, thank you. Steve, michelle, thank you. Thank you. Chicago tomorrow. We also have bob ruben tomorrow. Squawk on the street begins right now. Good wednesday morning. Welcome to squawk on the street. Im melissa lee, with Carl Quintanilla with jim cramer and david faber at the New York Stock Exchange. The day after the s p and nasdaq posted their second best days of the year. We looking at a higher open, pretty much across the board. Actually, they just turned. Were looking down open here, 59 points on the dow. Down 7 on the s p 500. Take a look at the picture over in europe. The big waiting game is on with the ecb starting tomorrow. Were seeing red arrows on the board. Most notably the euro hitting a oneweek low against the u. S. Dollar. In asia, china up eighth straight session. Nikkei highest level since september of 2008. Disney set to open at record highs. Strength in media networks. Word that its planning films based on star wars characters. Zynga, revenues continue to fall and the social Gaming Company said 2013 would be profitable. Company seeing momentum in americas improvement in europe and big margin gains for 2013 for ralph lauren. The post office could be eliminating or cutting back deliveries on saturday. Well explain. They carry the official announcement at 10 00 a. M. This morning. We start with disney. Shares rising premarket, set to open at alltime highs at fiscal Fourth Quarter profits beat the markets. Growing attendance at the theme parks. Real news came during bob igers interview with our own julia boorstin. In fact, we are working on a few standalone films. Larry kazden and simon ginberg are working on films derived on star wars characters that are not part of the overall saga. We still plan to make star wars 7, 8 and 9 over roughly a sixyear period of time. There will be a few other films released in that period of time, too. It is amazing, jim, because this was an acquisition done just in october. Theyre monetizing this thing left and right already. Look, the big controversy last quarter was, espn not so good. That turned out to be false. Did they buy this. He said, trust me, its going to be marvel. People didnt trust him. Why they didnt trust him, i have no idea, since hes completely bankable. But he had just bought the thing. Now hes got a clear path. In the meantime, geez, the theme parks are booming. Its doing great. Shanghai numbers. Everything that was disappointing in the previous call that drove the stock down from the low 50s to the 40s, he corrected, and i think this is a story that is going to get better and better as the year unfolds. We talk about 2014, not 2013. This quarter, its opposite from the last quarter. Affiliate fees, expectations there are going to be significant increases, the ability to ramp that up this year. Parks look good. Especially domestically. Right. One thing i think you could say about the studio strategy, its been a little for a while it looked like they wouldnt be doing the big temple movies, now it looks like theyre going for the big blockbuster type movies. There are a lot of worries. Movies have been disappointing. Dont forget, we have iron man 3, im not in it this time, much to my chagrin. But i do like the fact that espn had been viewed as a peak product. And it turns out remember, he said, dont worry about espn. Its up 7 . Why did people worry when he told you not to worry . Given how right hes been. Thats a good question. I guess because theres always some worry about the largest single driver of cash flow at the company. Theres always the ideas that its somehow slowing, or young men not watching. I mean, it plays into a fear, i think, that is out there. But has not really been realized. I think espn is a fabulous brand. People say, jim, i spent the day with espn on friday. And i got to tell you, they are a News Organization primarily, of information that you cant get elsewhere, and you cant dvr. I would love that brand. It says nothing about the digital component, you dont need to watch the game, you want the score, and you want it now. They will continue to raise rates responsibly, carefully in his words. But hes not done, charging more for access to that channel. 15 million peoples names in fantasy for espn. 50 million people. They dont even they have so many irons in the fire. They didnt bother monetize that much. Maybe charge 1. We talked about the investment of theme parks. The theme parks and resorts, about a third of disneys total revenues. With the mind magic bracelet, you can use that as a room key, and also go in the park and purchase things. Imagine how much more you could buy and swipe the thing and buy a mickey mouse ice cream. You might buy dozens. Thats true. Remember in the old days, if you stayed at the one of the hotels, you got in a half hour early, and that was a big deal. Everythings coming together. The new rides are very exciting. There was a stagnation factor here of which universal had been in stagnation, by the way. And theyve done remarkably well. Generated enormous amount of cash flow, much more than anybody anticipated. Back to disney. I think this is also a good sign for america. Remember gasoline prices are up. People worried about gasoline. Payroll taxes. I didnt here iger all that worried. A good quarter. Put a little bracelet around your daughter, make sure you dont lose her. We lost ours. Maybe thats more of a parenting thing. She was 5, of course. I find when you take your kids, a little parenting advice, you try to keep track of them. Thanks for that. Appreciate it. Ill keep that in mind for the next time. Ill keep that in mind for when i have children. All prodad. I always watch where they went. Even with mr. Toads wild ride. Im the best. I dont think its there anymore. Jungle cruise . Tell me about it. Its the best. It is the greatest. Shares of zynga up in the premarket. Revenues came in flat, but they did the forecast. Seeing wider than expected loss for the current quarter. The analysts who still cover it, evercore raised it. This is a paddles clear. Theres a pulse. I did feel really, come on. I remember when it was much bigger than electronic parts. 5 million company. Zynga, at one point 2 billion. If it was really that good, they should have bought them because there was so much cash. This is a company that came public during the heyday. The and reminds me of icge, which sold the division to google. It was like 500 going to 900. Of course. I think zynga is alive. And it is okay. Im not calling it well. I dont have to reason to buy. But its not dying. Its there. Right. But the catalyst could be online, real money gambling. Yes. And when that happens, i mean, that could be a real catalyst for the stock, as the stock itself as an independent company or takeover target. A lot of these british Poker Companies do very well. Its not dead. I know thats never been as a broker i would never call people and say, its not dead. Ive got one that rigor mortis has not yet set in. If you get to the e. R. , you know, sometimes they have these remarkable situations where a neardeath experience and then they come back. You go down the tunnel and see something, the light. Do you think zynga has seen the light . I think theyve seen the light. Its a turnover, yes. A little bit. Lets talk ralph lauren. That could be one of this mornings big winners. The upscale retailer up 28 in higher sales. Citing what it calls a strong holiday season, continuing momentum in the americas, and improving trends in europe. Ralph lauren raising the full year outlook for fiscal 2013. The revenues were a little light, but nothing in the scheme of things, when you consider that the companys raising its forecast for margins for the Fourth Quarter, and for 2013 by at least a hundred basis points. When do you hear that . Remarkable quarter. The short ralph lauren off of europe, short quarter off of europe, that whole wrap, the short pbh off of europe, that looks like its not going to be a good thesis for the short sellers. Two Companies Said positive things about europe in the last 24 hours. I trust roger, who ralph lauren is still not ralph lauren, but does a pretty good job. David yesterday in a remarkable Conference Call, remarkable for emerson saying, listen, the last 60 days ill just quote him all of a sudden i feel better about europe today. This is obviously flow control, engineers. I feel better about europe today than i did 60 days ago. I know that may be too granular for the european bears, the ursa major people that youre in touch with. But ralph lauren, and emerson, thats pretty broad. Yes. That encompasses a lot. Yeah. I mean, theres always the mcdonalds executives and the Auto Executives who would say, were not seeing that yet. Wait until mcdonalds comes out with the egg white mcmuff inf infor mcmuffin for 240 calories. Wow. I think this egg White Mcmuffin have you done the work on this, the whole engineering side of mcdonalds . Yes. Have you been back in the test kitchens . Of course. I have my sources within that test kitchen. And i asked for something under 250 calories that doesnt have cholesterol, my wish, their command. Chuck dan is like, im on it. But the lauren news comes a day after este lauder after luxury in general i dont know, do you go with the coach tiffany view or este lauder . I think you go este lauder. A lot of people were short este lauder off of Elizabeth Arden. I apologize to bill for mentioning este lauder and Elizabeth Arden in the same sentence. Theyre going to call you and say huh can you put panera in the same sentence as wendys. But i do think they have enough evidence well have the ecb, theyll say whatever theyre going to say in france, but ralph lauren, este lauder, emerson, very tough short. A lot of it i wonder how much of it is decline in cotton prices year over year. Thats got to help. The Gross Margins do explode here. Because of the year over year, the cotton rollover of futures. But i think that you could go back to coach, i think coach will eventually get it together. If you talk to a steve tanger, he says, have faith in frankfurt. I have faith in roger, ralph lauren, i have tremendous faith in trinko. I dont have as much faith jcpenney, ron johnson on the show today. Stock investing. 11 30 a. M. Already reports about some layoffs at corporate offices. Sales for the month of the quarter down. Hasnt moved yet, because hes got kids in high school. Hasnt moved to the west. I got news flash. They do have high schools in no, really . Egg mcmuffin research, there are high schools there. My daughter met someone who went to high school in plano. Very smart guy. Thats a little anecdotal for you, maybe not empirical. You dont necessarily have to keep your house in california if youre running jcpenney. Its been a while. It has been a while. When they graduate, the guys going to make a beeline. Its hard to move kids. It is . Yeah, it is. Im trying to give the guy a break here. I actually i want to move up. I dont want to get into this. I would like to move. Would you help me do that . Can you give me one of your houses . Ill give you one of the ones in mexico. Its getting much safer there. I read about that. That general, hes in trouble. Looks beautiful on google maps when you show it to me. I dont see any soldiers or drug runners or nothing. No. Theyre hiding. Its like a drugfree satellite. Thats a town that says just say no. The post office saying no to saturday delivery. Email sparking changes at the post office. The cashstrapped agency announcing plans to eliminate saturday delivery of first class mail. Well bring that to you in about 45 minutes. It has been a year since jcpenneys ron johnson outlined the plan to transform the retailer. Would he have done anything differently and what about the future now. Stay tuned for that exclusive at 11 30. [ kitt ] you know whats impressive . A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . But that doesnt mean ive dont want to make money. Stor. I love making money. I try to be smart with my investments. I also try to keep my costs down. Whats your plan . Ishares. Low cost and tax efficient. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. A major deal in the Media Industry this morning. The cable business Liberty Global agreeing to buy the uks Version Media for 16 billion. Fabers got more on this deal that you said would happen. You said that yesterday, in fact. It ended up not being quite 50 a share. There are holders of media out there that may be disappointed in the price. That price could change today, because, of course, this is a cash and stock deal. And in typical john malone fashion, its not just stock, its actually two separate stocks. Youre getting a and c or what we call k. It gets complicates. Were going to keep a close eye on those liberty shares. Because this deal is cash flow, right from the getgo. Depending on what analyst youre following or what your assumptions are on buybacks or what the synergies are. Could be as much as 18 to 25 cash flow accretive. That could be a positive. The currency used for part of the consideration may go up, hence the value may go up. Its going to be important. Weve got some big shareholders in there. Unclear whether theyll mount any sort of defense to this deal and say we want more. But something to watch closely. As for the deal itself, the biggest Cable Company in the world. About 25 million customers. I think bigger than comcast at this point. Obviously a huge footprint with which to negotiate, not only with programmers, but the i. T. Services and everything else. Thats some of the synergy numbers were talking about there. Its a typical john malone deal, one would argue, for this kind of environment, where investors seem willing to at least embrace a levered equity. Theres john. Levered equity story in what is a core market. Free cash flow accretive right off the bad. Shareholders own 36 of the combined company. You know, theres just a lot here. As i reported yesterday, they were back and forth for quite a long time, in part because the prices were moving all over the place. Virgin media shares actually shot up. They broke apart. They were able to come back when liberty stock prices also started to follow up. Look at that move up. How could you want more . Well greedy. By the way, why didnt they do this deal a few years ago . Unclear exactly. But theyve gotten it together at virgin media. They were not for sale, so they needed to be convinced to actually entertain this. Again, we do keep your Shareholder Base focused on the future of the company. The Free Cash Flow number is going to be huge, not to mention the net operating loss, 10 billion. Theyre domiciling this combination in the uk, hence, they will be able to use that against any earnings. Does he still love those tax plays . Boy. This guy is big enough to tax it was made for him. He sniffs that out, the taxes. Hell follow. If you ever want to get a deal done with him, thats the thing to wave in front of him. Ive got to ask, two months ago we were talking about executives paralyzed by fear. One week we get dell, and now malone. And in part, citing conditions, right . Market conditions . Yeah. As to why do this deal now, david. Is that significant when you put them together like that . Thats a good point. By the way, both have been in play since the summer, really. At dell, there were some considerations in the fall about do we want to do this. This deal originated with dinners that began late in the summer. It is interesting. They take a long time, but they are reflective of confidence, no doubt about it. Can you broadly speak of that . I dont know. Oh, i think you can. I think carls right, three of the smartest guys ive met in my career, oracle, monday, michael dell puts his own money in this lbo, smartest man as perhaps you mentioned yesterday in the business. What do we need to hear from people . These are three guys, malones not even buying on weakness, hes buying on strength. Weve got managers coming out, these analysts stretch valuation. Wow. Ill take ellison, malone and dell anytime. A selloff one day, a rally the next. Cramer with advice you can run with today. Mad dash is next. One more look at futures as we get through this wednesday morning together. Squawk on the street is coming right back. How do traders using Technical Analysis streamline their process . At fidelity, we do it by merging two tools into one. Combining your customized charts with leadingedge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. We like this idea so much that weve applied for a patent. Im colin beck of fidelity investments. Our integrated Technical Analysis is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades en you open an account. To grow, we have to boost our social media visibility. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] check out jims mad dash before the bell. Cummings cutting some staff. Yeah. This is the new pattern, carl. Guide down. Price range, 745 to 895. Everyone was looking for 9 bucks. This stock is up 3. This is the new pattern. You get industrials. They guide down. We saw it with caterpillar. Then the stock goes up. Cummins, huge china business. Heres something to watch, 12liter natural gas Diesel Engine working on in their jamestown plant. By the way, charters out there, you know, this is the stock, one of the greatest head and shoulders ive ever seen. Regarding their rate of improvement, better . We talked to eaton yesterday. Numbers in january for trucks is looking real good. Cummins, the greatest Engine Company on earth. Sorry, caterpillar. They know each other well. Yes, they do. Boise cascade rolling out the lumber, ringing the opening bell. Jims been tweeting about it all morning. And the first trade when squawk on the street comes back. Save up to 500 on beautyrest and posturepedic. Get a sealy queen set for just 399. Even get 3 years interestfree financing on tempurpedic. Keep more president s in your wallet. Sleep trains president s day sale is on now. Ns come over to mithis is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. [ male announcer ] at his current pace, bob will retire when hes 153, which would be fine if bob were a vampire. But hes not. Hes an architect with two kids and a mortgage. Luckily, he found someone who gave him a fresh perspective on his portfolio. And with some planning and effort, hopefully bob can retire at a more appropriate age. Its not rocket science. Its just common sense. From td ameritrade. Youre watching there the opening bell as we get ready to start the wednesdays session. The day after the s p and nasdaq posted the second best days for 2013. Rebounding off of mondays losses. Boise cascade, and the distributor of Building Materials, celebrating its ipo today. Doing the honors at the big board. At the nasdaq, amgen. Lots to watch here. Boise, of course, is going to trade behind us. This is one that is seeing strong demand. Another housing related ipo, the second one this year after t tripoint. This is their second foray into the public markets. Well see how this goes. Shortage in plywood. Developing shortage in that particular kind of wood. According to wearhouser. This is an lbo going public. Ive always liked this company. And i feel that now that this is a great housing play to add to the list. A day after lumber was up. And on a morning when home depot is going to hire 80,000 seasonal spring workers, 20,000 more than last year. This is going to be an interesting summer, jim. Last year we were scots miracle, came on mad money and got the whole spring wrong. This spring, these are very dicey things. Theyre a little bit like when disney talked about the fact that monday night they had some bad teams at the beginning of the year. So monday night football you get a couple of bad weeks, there are a few weeks who make the spring. And you get three bad weeks in a row, you missed the spring. I think home depot is so good, that it makes me wonder whether they think even the weather cant stop them. Hes a good man. Yeah. Im trying to think, core logic yesterday, too, on house prices since last may, theres a bunch of things working here. Well see. The analysts are negative. There was a downgrade of the housing yesterday, although the dow was not negative on Building Materials stocks. But the housing system in this country was 1. 6, 1. 7 for years, dropped to a million. Got to 400,000. Same number we had when gis returned from world war ii. I think theres real tailwinds here. What about the billions of dollars deployed to buy up the Single Family homes to rent. And that is really putting a floor under some of the prices for the singlefamily homes out there, allowing the publicly Home Builders to raise their average selling prices. Thats huge. The competition is fierce now. That was a good quarter. Yes, it was. Did you see apple, the apartment numbers . Not good. No. So people are finally moving out. Theyre done with the motherinlaws. Lets hope. You love your motherinlaw got to get that we absolutely have to get the birth rate back up. Go forth and multiply. Housing starts will really spread this economy, then bernanke can raise rates without worry. The number one gainer on the s p is movies. As you point out, ray jay with thoughts on mcgrawhill today. Yesterdays presser was much ado about nothing . Jim . Wow, i think that theres some real issues there. I dont want to get in front of mcgrawhill. Maybe we look back moodys has not been the subject of any prosecution by the feds. Or anybody else at this point. I mean, recently. S p is the one thats being sued. You have moodys stock is down. What was it, 15 , 16 at least. S p down mcgrawhill, excuse me. Put yourself in that jury room. Youre in the jury, the prosecutors bring in cats. Remember the email that says it will take place years from now. Maybe not. Justice department, the wheels of justice work swiftly when it comes to a case where they have emails saying the cows can do a better job. And the statute of limitations, if you go back to 07 now that theyve charged, theyve charged. Bring farm animals in. You have them rate cbos, good, bad, and you see how mcgrawhill did on these, and you see the cows did better. The prosecution will rest. Thats a joke. Can you imagine if cows did a better job . Weve been living with that for a long time. They could have brought the case years ago. Well see what the context is. Why didnt they bring this years ago if these emails have been around . Thats what davids question was yesterday. Last night reading the complaint, theres a great page 53, where they had a better ratings model that they were going to implement, upgrade the old system. And bear stearns said we dont think this is a good idea. Theres been a lot of testimony about that, in front of congress in terms of that rating industry. They didnt want to necessarily spend the money to add in all of the mortgages that they would have needed in the data base to get a much better read on what was really still a new product, which was, of course, this new afford ability product, subprime, that made up so much of the cbos. Interesting, the code name for this was alkamay. That helps the jury. Whether or not it was fraud, i think still remains to be seen. We were talking, its a lower standard. Is this a lower standard under what theyre charging at the same time, you know, if you get a fraud, it sticks. There will be Pension Plans that say, listen, im not going to subscribe to the s p because they committed fraud. A lot on the line here. The First Amendment does not trump the act. No, it does not. We want to get to bob. Time warner shares trumping disney. Buybacks, an important part of so much of the interplay in media these days, with many of these companies. Just shrinking the cap. Thats certainly the case with time warner, which now initiates a 4 billion buyback. That stock up over 2. 25 . Viacom. Say again . Two no trump. Got it. My grandmother played bridge. Well toss it over to bob pisani. Here we are, it looks like well open well above the pricing. Talk about an old favorite name, im the son of a home builder, i know Boise Cascade very well. This was a giant in the Home Building industry, giant in the plywood industry overall. Theyre using the old symbol, bcc. Remember, they were taken private back in 2004. Always i recall. It was Madison Dearborn that took them private. Now theyre coming back. Price talk at 21. We dont know where it will open. Price indication is about 25. So certainly going to be very nice play here. And its simple. Why the move up . Why the timing . The housing industry, this is another great play on the housing business right now. And these have been very successful ipos recently. The Real Estate Companies that went public, back in october, were talking about great numbers since then. They opened at 27, as i recall. Now theyre around 344. So obviously the Home Building, the real estate play is very good right now. The other big talk, see japan . Everybody in the pool with japan. 3. 8 gain in the nikkei. Thats the biggest gain in two years weve had overnight. Those are huge. To give you an idea, thats a 500point move in the dow. Thats what 3. 8 on the nikkei would be. It barely gets any news. But everybodys back in on that. The bank of japan announced one of its big governors might be leaving his post a little earlier. That means abe will be able to appoint a new appointee even earlier. More compliant with his desire for more easing overall. More yen weakening. The yen fell to a 33month low on that news. And of course, the weaker yen has been helping companies. We saw toyota yesterday make positive comments on their exports. Mitsubishi had positive comments as well. There has been huge plays on etfs around japan recently. The big one, wisdom trees, japan hedged equity, that owns japanese stock. Its a great idea. Huge inflows recently. There are a number others that have been big. The London Business school of economics, several economists there put out a study overnight predicting worldwide stock returns for the next 20 to 30 years would average only 3 to 4 , bond returns only 1 . Lets hope they get that one wrong. Longterm prognostication, not that good here. Looking good on Boise Cascade. Housing, housing, housing. Rick santelli in chicago. Rick . Thanks, jim. Well, we continue in the fixed income market, treasuries at least, to march over the same ground quite a bit. If you look at a couple of day chart of 10s, were continue to hover around 29 level. Yeartodate chart, it shows you were up about 20 basis points on the year so far. 176, 197, 21 basis points. Now, if we continue to monitor whats going on with the Foreign Exchange market, lets start with the british pound against the dollar. You can see on this chart, that were at sixmonth highs in favor of the green back. Lets switch it around a little bit. Lets take a look at how the pound seems to be faring against the yen. This is really fascinating. Now, we know the nikkei, as bob pointed out, is up close to 4 today. Its up over 10 on the year. For kuns si adjustments, take away about 7 of that, you would be up 10. 25 . If youre in japan with their currency losses against the dollar, youd only be up about 2. 5 . But look at the pound versus the yen. 36month high. So the dollars beating the pound, the euros beating the pound, and once again everybody seems to be beating up against the yen. Thank you, ridge. Lets check out the latest in energy and metals. Sharon . Jim, several traders telling me thr egetting out of their long positions this morning, looking at the supply issues here in the u. S. Two factors contributing to the fact that were looking at a dollar slide here in the u. S. Oil prices, just above 95 a barrel. One of them is the bearish data we got on inventories from the American Petroleum Institute Last night. Another factor is that supply glut we continue to have in the midwest. Its likely to remain there a bit longer. The largest refinery in the midwest, bp refinery is not likely to restart its key crude unit until the middle of this year. That was a surprise to the market place, contributing to the slide. Were looking at a slight decline in brent crude prices as well, backing off a 4. 5month high. There have been productions issues in the north sea but they pale in comparison to what were seeing here in the u. S. The supply concerns here are the big reason were looking at the differential between brent crude and wti crude prices, above 20. Highest price differential of 2013. Its up 23 in just the last six days, and well continue to watch whether this spread widens as we get the dat a from the Energy Department at 10 30 a. M. Eastern. We have yet to mention biogen, a medicine for relapsing ms. Owned by alon. No longer the case. Biogen paying alan 3. 5 billion up front, and then essentially an Energy Sharing arrangement that will amount to 12 of global net sales for the first 12 months. Thereafter, making contingent payments of 18 on annual global sales, up to 2 billion, 25 beyond 2 billion. Its a huge deal for biogen, for a drug that is going to be immediately accretive, jim, to its earnings. Were seeing different analysts out this morning with their estimates of what it will mean. It could be as much as 50 accretion for 2013, earnings per share for biogen. Leaves alon without much cash. On mad money, i had a guest on talking about there were some bad side effects. But they have worked out tests ahead of time for whether you would be prone to the side effects. 10 of the market, 20 with abonex. This could be game, set, match, for biogen, which is why the stock up so much. Up over 5 this morning. Talking about confidence, talking about willingness to spend and invest. This is a significant one. 3. 25 billion acquisition, we would be talking about it, so certainly we are talking about that deal in that industry. 400,000 patients in the United States. 40,000 currently using bisovry. This could go higher. They could use that. Okay. And as you can see there, the crowd is eagerly awaiting the trade for bcc Boise Cascade. Its now going public once again. The Home Construction play set to go public. The price is 21 a share. Looking at a range of 23 to 26. Well bring you that trade, plus an interview you will not want to miss. Still to come the fundamental Pricing Strategy being fair and square of having a great everyday price, plus monthlong value, thats going to happen forever. That was jcpenney ceo ron johnson a year ago. Boise cascade actually making its first trade here. It is up by 22 . 25. 69 is where its trading now, price of 21 a share. The price range has been raised. Keep in mind, tuesday morning. Again, this is a supplier of plywood to a lot of the home retailers, as well as construction workers. Housing play essentially. Yes. Weve seen strong demand, obviously, second housing related ipo of the year. This is rather extraordinary. Louisiana pacific, huge plywood company. The stock has been a horse. I dont think people remember, these stocks were in the doldrums for many years. Boise cascade, they tried to bring this public in another era. This group is much more powerful than the analysts seem to understand. Everyones going to be revising up the value of warehouser pcl, louisiana pacific, just on this deal. That group has higher to go. But the analysts have really kind of said, valuation spread. What do you say to those who have the dark view of ipos, meaning theyre going to leave the public now holding the bag, Insider Selling to buying in the last week, 9 to 1 . Dark signals, yeah . Yeah, absolutely. And if you start seeing a lot of margin debt, that would be bad. I dont like to see deals this high for lumber. Because lumbers not a big growth industry. But when i talked to warehouser, theres a shortage going on. Weve got fukushima. Orders havent hit yet. Heres one for you, david. We have a bubble in lumber, how is that. Bubble in osb. Thank you for alerting me to that. Im going to get right on it. Such a shortage. Anger management control. All right. Were going to take a break. Again, bcc opening for trade, it is now higher by 22 . Much more squawk on the street straight ahead. Neither rain nor sleet nor snow, and now on saturdays, as the moneylosing u. S. Post service announcing it will end saturday delivery by august 1st. The plan is aimed at saving about 2 billion. Agency would continue to deliver packages on saturday. Theyll hold a News Conference at the top of the hour. Theres a live shot of washington, d. C. Well bring that do you live at 10 00 a. M. 150 years theyve been delivering mail on saturdays . Maybe they should charge the Catalog Companies for the freight. What a gimme. You never hear about those four pounds of catalogs you get every day and how little they have to pay. I went on this website, and it doesnt work. It just doesnt work. Unsubscribe. Why do they get a free ride . What about lumber . Printing all those catalogs. Maybe the u. S. Post office wouldnt have lost 16 billion in its last fiscal year. How powerful is that. Apparently they might suggest other costsaving measures that we havent heard about it. Saturday just might be part of it. Can they afford the shrinking part of the business. Netflix fresh 52week high. Very good things out of disney yesterday. Oh, geez. Good for netflix for the content deal. Iger, thinking about the money hes made on that position. Hes smiling. How about herbert groover. Disney was rather remarkable when iger took the timeout to explain how much he likes netflix, and the library. Youre listening and saying, the noose is tightening on the shorts of netflix by the minute. Bob lange yesterday said it could go back to 300. 300 . Just a technical guy. Remember, you get a new clicker . Have you seen the new clicker for buying a new tv . Has netflix . I heard about it. Thats what carl said, new tvs. Skip the wifi thing. You need to work on that. I know. Forget it. Im not even going to go there anymore. Ive got to get it down. Could you do a wapner . Wapner says, how do you feel about herbalife . When wapner says, what are you bullying me . Time warner trading at alltime highs. A live and exclusive interview at 11 45. But first coming up, weve got a 6 and weve got a 60, put them together and you get jim cramer, 6 stocks in 60 seconds. It will make sense when squawk on the street returns. Investor. Yeah, im a serious investor but im a busy guy. It used to be easier but now there are more choices than ever. I want to know exactly what i am investing in. I want to know exactly how much im paying. I want to use the same stuff the big guys use. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. We create easy to use, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius strategies, chains, positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Open an account today and get a free3month e ibd™ subscription when you call 18882800149 now. Optionsxpress by charles schwab. Save get a sealy queen set on befor just 399. Osturepedic. Even get 3 years interestfree financing on tempurpedic. Keep more president s in your wallet. Sleep trains president s day sale is on now. Time for six in sixty. Six stocks in 60 seconds with jim. Well start with cbs. Much better than expected. I think people are starting to think that the walgreens loss to cbs is overplayed. I like this stock. I wouldnt sell it. Expedia. This is interesting. Trading up. And now downgrading. I like expedia. Ceo on our show tomorrow. Atk. What is this overvalue . You sell this, this is the biggest bull company in the country. Big mistake to sell. Steve is one of my favorite executives. One of the best dividend policies. Fabulous hotel chain. This guy is a huge money maker and i love him. Panera and chipotle. Chipotle talking about raising food prices. Right now reverse leverage. They would go up. Chipotle has bottomed. Whats up tonight . Okay. You know, ive got a very controversial story tonight. He reported a good number, people dont like it. I think that hain is doing well. Chipotle, listen to me, theyve got a new tofu dish which is what my daughters requested for four years and theyve got it. See you tonight at 6 00 and 11 00. You bet. Well hear from the post office about saturday deliveries when we come back. Great, everybody made it. We all work remotely so this is a big deal, our first full Team Gathering i wanted to call on a few people. Ashley, ashley marshall. Here. Since were often all on the move, ashley suggested we use fedex office to hold packages for us. Great job. [ applause ] thank you. And on a protocol note, id like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh im sorry guys. Ah sometimes the caps lock gets stuck on my keyboard. Hey do you wanna get a drink later . [ male announcer ] hold packages at any fedex office location. All stations come over to mithis is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. Welcome back to squawk on the street. We want to show you a live shot of the Postal Service headquarters in washington, d. C. , where the postmaster is expected to speak in a few moments. Announcing they will halt saturday delivery of mail. Early this morning we brought in Hampton Pearson for the details. How are you doing, carl. Yeah, that saturday mail delivery stopping on august 1st of this year. Designed to save the Postal Service in the neighborhood of about 2 billion a year. The Postal Service actually right now is losing about 36 million a day. Now, some reports say were only talking about stopping the first class delivery of mail on saturday. The packages would actually continue. Ironically, in spite of stiff competition from fedex and u. P. S. , Package Delivery for the Postal Service is up 14 over the last two years. The big controversy here would be how does the u. P. S. Expect to handle a likely pushback from congress on that saturday mail delivery cut plan. Heres the postmaster general. Delivery schedule. I think anyone following the Postal Service over the past couple years knows that weve been consistently advancing this idea of making the change to our delivery schedule. Its an important part of our strategy for returning back to financial stability. Were now at a point where it is absolutely necessary to make that move. Before i get into the details of the announcement, id like to spend a couple minutes discussing the financial reasons for this delivery schedule change. Since 2008, weve seen a steady decline in first class mail. Its our most profitable product and generates the most revenue. But people pay their bills online. Its simple, easy, free. You cannot be free. On the other hand, people do still like to receive hard copy statements and bills and correspondence. The fact that businesses continue to send mail to the homes, and thats been pretty stable over the past few years, really shows that people do value the mail that they receive. However, they do like to make their payments online. And its put a tremendous financial pressure on the Postal Service. The Biggest Issue we face is whether we can adapt to these changes in the marketplace. And unfortunately, our Business Model, and the laws that govern us do not provide a lot of flexibility to adapt. And this results in a major imbalance between costs and revenue. This past year, the Postal Service posted a financial loss of 15. 9 billion. By any measure, that is unsustainable and its unacceptable. Another 15. 9 billion loss, 11. 1 billion was due to the amount we were obligated to pay the treasury to prefund Health Retiree benefits. We had to default on those payments because we did not have the funds. You know the Postal Service is expected to operate like a business. We generate all of our revenue from the sale of postage. We take no tax dollars. We do not want tax dollars. However, we also dont have the ability to reduce costs in a way that a private business would. And were at the end of our borrowing authority. To give some perspective of our liquidity situation, a typical Large Organization would have either cash on hand or quick borrowing ability, two months worth of cash to cover their operating costs. In october, at one point this year the Postal Service had less than four days of cash on hand. Thats a very scary situation. That is no situation that a business should be in. And this is why weve taken aggressive steps to reduce our costs. And why weve been so vocal about seeking postal reform legislation. We face some major hurdles to return to profitability. We need to generate nearly 20 billion in cost reductions and revenue increases to close the budget gap and be able to repay our debt. Thats both, close the gap and repay the debt. And this is why the board of governors, the Postal Service has said to do whats necessary to continue our operations. Thats what weve been doing consistently over the past couple of years. Since 2006, weve made tremendous strides in cost reductions. Weve reduced the size of our work force by 193 weve been listening into the postmaster general and ceo of the u. S. Postal service, patrick donahoe. He made it clear there is no choice in the matter, at this point in time, it is necessary to eliminate saturday delivery. And also examine ways to raise revenue and close the gap, so to speak. Youre absolutely right about that. We knew the Postal Service had been cash strapped. But hearing those details that they were actually down to a matter of days last fall, as far as cash on hand, that is new in terms of the depth of their cash shortage. It is widely believed that the Postal Service could again run out of cash, or be cash short as early as the end of next month. Theyre up against their Borrowing Limit authority as far as with the treasury. We didnt hear yet the postmaster general make the headline were all expecting, that the most immediate thing they feel they can do is to cut out saturday deliveries starting in august. That would save them in the neighborhood of 2 billion a year. And specifically, what is the likely reaction to be as far as pushback from congress. There was a bill introduced in the Senate Last Year to help the Postal Service, but it specifically had a rider in terms of calling for a twoyear moratorium on this idea of ending saturday service. That bill never got taken up by the house. But again, if this is their biggest play, i. E. , cutting out the saturday service in august, what is going to be their response, if congress says, hold on, lets wait a minute, lets look at some other alternatives. Does this sort of make the cries of privatizing louder and stronger . I dont know about that. As i said, the Postal Service say they think theyve found a loophole around any pushback from congress about stopping the saturday service. I think privatization would be down the road, and yes, it turns up the heat in some respects. But thats a longterm solution perhaps. The Postal Service right now saying, it needs cash, and or relief from congress in terms of some of the mandates here and now. Thats the issue on the front burner as we speak. You know, hampton, i think people i mean, none of us know the economics of this organization very well. But wouldnt one obvious solution be to dramatically increase the cost of a first class stamp . I mean, i just wonder if thats out there in the ether, or part of the discussion. Im not sure you know, obviously revenue wherever you can get it from would be a solution. But also, remember, the Postal Service is saying its actually the first class letter delivery thats declining. Package business is up, and theyre competitive to the degree that its possible with u. P. S. And fedex. But its that dramatic drop in mail vim in the first class area in particular over the last few years thats led to a lot of these cash problems. I think i saw some figures that first class mail delivery is down Something Like 27 over the last three years. And those kinds of trends just simply cant continue if thats the bread and butter piece of the Postal Service business. Maybe its more about bulk mail rates. And we had a discussion earlier this morning. You try to hamper with that, youre messing with a very powerful lobby, hampton. Absolutely. And on terms of the saturday lobby, one of the big pushbacks against cutting saturday service is the greeting card industry. A lot of those cards come in the mail over the weekend. Think about also folks like the netflixes of the world. A lot of customers get the movies coming in on the weekends and the like. You know, so theres constituent business forces that are going to be heard from, too, as far as any desire to cut saturday service. Its interesting, because cbs, which posted its earnings, good earnings report, by the way, cbs in the Conference Call was asked about saturday delivery, and the elimination of saturday delivery, and they said they would feel minimal impact from elimination of one day a week. A lot of prescription drugs nowadays come by mail. Its interesting to actually think about the ripple effects in the little ecosystem. Hampton, does the post office own its real estate . You know what, i dont know. I know, for instance, one of the previously announced steps weve seen is a significant consolidation of the mail delivery processing facilities around the country. Those cuts are in fact in effect over the last year or so. Theyve been down significantly, not only as far as downsizing or consolidating mail handling facilities, but its also resulted in a net loss of 28,000 employees over a relatively short period of time. Interesting. Theyve continued to take the steps that they can within the Current Business model, and part of what they need the help from congress to reform the Business Model and what theyre able to do or not do. Interestingly, u. P. S. Is down a touch. Fdx up a touch. American greetings, exactly flat, ham doptonhampton. We will talk to the postmaster general in a few moments live here on cnbc. Thanks, hampton. You got it. All right. Time warner reporting Fourth Quarter, beating estimates by 7 cents. Raising the dividends by 11 . The chairman and ceo will join us live for an exclusive interview postearnings later in the show. And well talk to the postmaster general as soon as hes done with his press conference. And that also will be next. Your. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Postmaster general still speaking. Were waiting for headlines of what is largely expected to be the end of saturday Delivery Service starting in august. The post office lost 16 billion last year, one point was down to fewer than four days on cash on hand. Well talk to the postmaster gem about the further details and what we might expect in just a few moments. Disney shares trading at record highs this morning on earnings momentum. Topping expectations, although earnings slipped from a year ago. A lot of ins and outs. Basically the trends were good. We had very strong results at our domestic parks. The buickings have been pretty solid. Advertising was okay. Generally speaking, our business performed well and our Interactive Media group was profitable for the quarter. Thats the first time the group has been profitable since weve been breaking it out. A buy rating on disney from lezard. Up from 60 this morning. Great to see you. Happy to be here. A lot to like about the disney quarter. But do you like the stock at record highs . I do like the stock. The tv network group, disney newscorp, viacom, discovery, theyve been great outperforming stories. But i think theres a secular story. These guys have contacts that all distributors want to have. They have pricing leverage for that. Thats really driving a healthy top line. Disney is seeing an acceleration in their fees they get paid for their Cable Networks over the quarter in december. Theyre investing in theme parks. I think the setup is very good for the next couple of years. 2015, 2016, youve got star wars movies coming back, the shanghai theme park launch. Theres a lot here to keep you interested in disney. I like the stock here. Lets talk about the domestic theme parks. In your note, per cap spending rose 6 . Are we not feeling any sort of impact from fiscal cliff talks . And more importantly perhaps, the expiration of the tax holiday that started this year . Is that a concern at all going into 2013 and the next quarter . Im amazed at how much people still want to go to theme parks. And how much pricing leverage you have, given how expensive it is. But people are going. The numbers are real. I think a lot of it is that disney is investing in an experience thats unique. Its getting better. Their launch in california drove the bulk of their attendance growth in the december quarter. And thats a real statement to what you can get out of investments, in big, attractive rides that are unique. Theyre doing great investments in disney world. So i think that the theme parks business is actually surprisingly healthy, given how many kind of puts and takes we have in the broad macro. What is important to know regarding espn when it comes to both programming costs and Pricing Power . Whats going to happen . You know, my concern with espn, frankly, was eased on the report. The concern with espn is a law of large numbers. Theyre the most successful cable network. Would they be able to grow with peers. In the december quarter, we saw theyre getting 7 pricing growth in the march quarter thats going to get bigger as they go through affiliate renewal recycles. A lot of them hitting the march quarter. Theyll see growth step up in march. That will stick around for several quarters. You know, the distributors are dead without Something Like espn. They have really no defense against the leverage that someone like disney has. Disney can push it up to the point where they imperil businesses. But they have tons of leverage right here and right now. Thanks for your time, barton. Thank you. It is officially one year since jcpenney ceo announced the reorganizing. Good morning to you, carl. In just about an hour and 15 minutes from now, i will sit down with jcpenney ceo ron johnson himself and well talk about that first year of transformation, which by john n johnsons own admission was a tough year. Ive got to tell you, tough might be generous at this point. Take a look at some of the numbers. Since february 1st, 2012, jcpenney has lost 5 billion in market cap. Its shares have lost nearly half their value. Its Credit Rating is at junk status and sales down 23 for the first nine months of 2012. Now, the Transformation Plan is all encompassing, from price to product to presentation. Its proving confusing to some of the loyal jcpenney customers, and frustrating to those who are used to coupons. Jcpenney said they no longer give coupons. However, theyre right now offering a 10 gift if you spend 10. Well ask johnson how that works and how that is or is not a coupon sale. Not in jcpenneys vocabulary, but now they are again, sales that are event driven are back in play at the retailer. Now, analysts wonder what bringing back sales will do to the gross margin. There was initially a target, a longterm target by the year 2015, of 40 plus gross margin. Thats, again, Something Else we will ask. In cash, another big question. Transformations certainly are not inexpensive. There has been questions about liquidity, and now reports are surfacing about the possibility of some layoffs. Does that mean that cash has now become an issue . Carl, potentially, one of the biggest questions for wall street is, is 2013, year two of the transformation, the year that jcpenney will return to growth. That is what johnson said. He said it a number of times, that they had to get through one tough year, or five days into year two. Well hear what he has to say. Stock down 2 . Its definitely going to be one of the interviews in a little while. Courtney reagan in dallas. How does a 10 gift card for every 10 you spend work . Well find out. As courtney said, thats got to be high on her list of questions. Definitely. Coming up next, well be speaking to the postmaster general as soon as hes finished up with his press conference. Thats coming up next. Stay tuned. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. A talking car. But ill tell you what impresses me. A talking train. 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Airlines are not the only ones feeling the economic pressure from the 787 grounding. Good morning, carl. Four cities in the u. S. In particular are impacted by whats happening with the dreamliner. You see them over here. San jose, san diego, denver and houston. Lets walk through and explain whats at stake for each of these cities. San jose had the Dreamliner Service started at one point. And the flight from san jose to tokyo, the Economic Impact, its estimated to be about 214,000 a day to that region. Now, thats just an estimate at this point. Next when you talk about san diego, Japan Airlines beginning Dreamliner Service, or supposed to Begin Service to narita, and at this point, 750,000 in marketing support, along with reduced landing fees. The reason why . You want that direct flight over tokyo from san diego. Denver, colorado, this is a big deal for united airlines. Service was supposed to start at the end of march. At this point they say its still going to happen. But look at the Economic Impact if this is delayed. Its estimated this service will bring in 132 million to the state of colorado. And then finally, united also planning direct service from houston to lagos, anigeria, the oil trade there. The whats happening for the airlines that said, you know what, were going to have Dreamliner Service. For united airlines, we were on the first flight from houston to chicago, they have six dreamliners that are grounded. Theyve replaced some of the 787 flights with 777s, for example, los angeles to tokyo. For Japan Airlines, they were at the center of a lot of whats happening with the dreamliner because of the flight in boston. They have replaced their 787s flying to boston from tokyo with 777s, the jal chairman said the cancellations will cost at least 7. 5 ion. The implications not only for the airlines, but the cities, is substantial, depending how long this grounding lasts. One thing we noticed that since the grounding, look at that chart, theyre now trading over 76 a share for boeing. Theres no indication when well see this grounding lifted for the dreamliner. Thank you very much, phil lebeau. The yen hitting a threeyear low against of the dollar. How low can the yen go . Kathy, good to see you. Thanks. The early departure of a bank of japan governor, would enable abe to appoint somebody else who could work with him in terms of the reforms. Thats absolutely right. That is the big story right now. Which is that, you know, stepping down three weeks early. The announcement will come right after abes trip to the u. S. Hes here in the u. S. And shortly after will make the announcement. I think youre going to see additional yen weakness. Theres no doubt all three candidates hes talking about are dovish. Hes going to talk about reinforcing the message. When the persons nominated, theyll talk about a reinforcing message. Youll buy dollar yen at this point . Right. So dollar yen had a nice rally. Its down a bit today. Theres an opportunity to come in slightly lower at 92. 50, with a stop at 91. 50, and a target of 94. 85. I want you to notice, the target is below the 95. A lot of resistance there. Just quickly on the ecb meeting which starts tomorrow. A move in the euro against the u. S. Dollar, one week low. Im curious, what are you expecting out of the meeting . I actually dont think that the ecb is going to have anything negative to say about the euro. Its less than 2 higher than where it was at the last ecb meeting. The germans said today theyre not all that concerned. I think the message will be clear, as long as the euro is not a 138 to 140, they wont be comfortable with the move in the currency. Kathy, thank you for stopping by. Catch money in motion 5 30 p. M. Eastern time and at cnbc. Com. Simon is back at hq with a preview of his interview with the chairman and ceo. Well have a moment of pure american capitalism. You know these brands here, these are from windham worldwide. Cash flow of almost 800 million a year. And if you cant use it immediately, hell return it to shareholders. Described as a money machine by jim cramer on the show in the first hour. Were going to talk to the ceo of windham worldwide. Stay with us. This is cnbc. [ indistinct shouting ] [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. Frbut i am yourade. Rmarket data. I know what youre looking for. Im not chained to your desk anymore. Im faster and smarter now. And so much less expensive. I am your market data. And if i do say so myself, i have never looked better. Superderivatives introduces dgx. Data done differently. The latest report from the Energy Department showing in the last week Food Supplies rose by 2. 6 million barrels. Gasoline supplies rose by 1. 7 barrels. This is basically in line with analysts expectations at list for the direction where supplies would go. The build we saw in crude supplies was a bit less than what the American Petroleum institute reported last evening. Were looking at prices right now about a dollar. Above the 95 a barrel mark. And off of the lows of the session. The key part of this report that a lot of traders have been watching is what happened to supplies in the middle part of the country. In curbing, oklahoma, we did see a small decline in crude supplies from cushing. This as were still watching to see what happens with the seaway pipeline which is supposed to be running at full capacity of 400,000 barrels per day, taking crude from oklahoma to the texas coast. But of course, has run into problems getting that crude out of the end point there in texas. Were also watching whats happening with the gasoline price. We are looking at gasoline futures slightly lower here. Because we did see a historical build in the gasoline supply right around what analysts were expecting. Of course, well continue to watch what happens here with the heating oil price, the proxy for diesel which is often most expensive and a great concern to the transportation industry. Thank you, sharon epperson. Shares of time warner hitting new alltime highs, raising its quarterly dividends by 11 . Well have a live interview with jeff bewkes later in the show. Disney and 3m jumping to record highs. Boise cascade up 25 this morning. The plywood and lumber Company Trading on the New York Stock Exchange under the Ticker Symbol bcc. He was just on, but we have breaking news. Well go back to phil lebeau at headquarters. The chairman of the ntsb, which is investigating the dreamliner fires saying in washington today that the ntsb is likely weeks away from having an explanation in terms of what happened with the dreamliner batteries, and what needs changing. In other words, were nowhere close to them finding the root cause, and then ultimately saying heres the solution that needs to take place for the dreamliner grounding to ultimately be lifted. Again, the ntsb chairman at a breakfast in washington, saying that the probe is likely to take several more weeks. Theres no indication what weeks away means, if its three weeks, five weeks, seven weeks, who knows. At this point thats what were hear from the ntsb. By the way, she will be holding a press Conference Tomorrow in washington, taking more questions about the state of the dreamliner investigation. Guys, back to you. Fascinating. Phil, hard to know how to read that. The idea that its giving any kind of timeline suggests maybe they are making progress. I think they are making progress. I think theres no doubt about that. They are finding indications of things like short circuits, chain reaction, overheating. But thats one part of the investigation. What you ultimately have to do is say, here is exactly what happened, and heres what we need to prevent this from happening again in the future. I think theyre not to the point if they were to the point, carl, where they said we know exactly 100 this is what happened and this is the solution, we would not be hearing them say weeks away. I think its an indication its still a work in progress. Phil, thanks for that. Home for a while here in the east coast. A live shot of the postmaster general. Were still awaiting his press conference. Hes talk for a while here. Hell join us for a live interview as soon as hes finished. In terms of stocks were watching off the back of the usps announcement,ing others involved in the sale of postage. Simon . People have made a lot of money on wyndham worldwide. This morning, again, wiyndham hs beat expectations, and increased ownership. That has boosted its profits by 45 . Peter holmes joins us now in an exclusive. You were described in the first hour of the show as a moneymaking machine by jim cramer. Other people, weve got a note from chris who says, its consistent execution and Free Cash Flow generation. For you, Free Cash Flow is now almost 800 million for last year. Where does it go from here . Well, it continues to increase over time. We moved our target up from 600 million to 700 million to 750 million a year. Youre right, in 2012 we actually exceeded the 750. Cash flow is a little more difficult to predict than earnings, frankly. But we feel really comfortable that 750 will grow over time as we add to our earnings. Some of the people can see the brands behind you. Youre different from a lot of the other big names in the sector. Youve got 7,000 hotels, but theyre franchising. Youre not attempting to run them under service contracts. The bulk of money doesnt come from hotels at all, its coming from peoples managing, holiday homes, but also developing and selling time share. Its the time share business that is doing really well now, i believe, for this quarter. Well, its been doing really well for many years. Its a business that hasnt been well understood, has great cash flow characteristics. Its a terrific business, with terrific loyalty for the consumers. 83 of consumers who own time share really enjoy the product. And 50 buy more. Its a product that has great loyalty, has great consumer affection. Its just not really well understood by investors, frankly. Lets talk about the Vacation Home aspect, where you physically manage peoples homes, when they want to put them on the market and rent them out. Ive got a note here, fbr, i know a lot of the business is based in the netherlands and germany. Theyre very worried about what they say are headwinds coming from europe. Would you agree that youre challenged there . Weve been challenged there for the last couple of years. We performed extremely well in the market. For us, flat has been a great performance in europe. We look for that in 2013 as well. Well see some Movement Based on Foreign Exchange. But in general, well be pretty flat over in europe. But flat is a terrific performance when you look at all the other travel sectors throughout europe. Your prs are very anxious to say, hes focused on cash generation, and when he gets the cash, he never sits on it. It goes straight into the business on a fee for performance basis, or he returns it to shareholders. Where are we now on dividends and buybacks . Well, youre right. Were not a bank. We dont think unlike apple. Theres a lot of companies that sit on a lot of cash. We dont need the cash for fundamentally running our business. Were ready to either deploy the cash for growing the business or investment in the businesses or beyond that, give the stock the cash back to the shareholders. Weve increased our dividend this quarter. Weve announced its going to go up 26 . That comes on top of a very large increase last year as well. And we will continue to buy back stock. Our stock is undervalued right now. And all ceos say that, i guess. If you look at us versus our peers and where our comp set is, were trading below where we should be. Mk partners have a target on you this morning of 75 a share, which would be 25 , 26 higher than where you are at the moment. Does that seem about right for you, if youre buying back stock, do you set targets to where youd like to be . Im not going to answer that question, because you never have a target that you put out there as being your target for the stock. Frankly, our earnings keep growing every year. Our cash flow keeps growing. The fact is, we think right now we are undervalued. The analysts have been raising our numbers, but then again, weve been executing and delivering better results. What about m a . That would cut into the amount you could spend giving back to shareholders. Thats a real concern for you, as are potential provisions on time share. Weve been in m a since weve been in the business. Ive been involved in this business in one way or another since 1992. Weve done a large number of acquisitions. This last year we did several acquisitions, i think we spent short of 300 million on acquisitions. We hoped we could chew gum and walk at the same time. Were doing acquisitions and also buying back stock. Now, your foreign print is actually quite low. Nearly a quarter of your hotels are outside the United States. Its the economy end of the market. It was interesting when hilton came through, and revealed what they had been doing since they were taken private. Theyve been able to take that brand there, their lower brands, if you like, and expand those internationally. That goes into the valuation of hilton as it hits the market. You, as a franchise model, i would imagine you would be a super way of engaging hotel owners in an emerging market. We are heavily engaged in international markets. Were just so large in the u. S. , that it outweighs the presence outside of the u. S. But we are the largest u. S. Based Hotel Company in china. We have super 8s, days inn, howard johnsons, wyndhams in china. Same thing in india, we have hotels in india that are franchised over there, some of which we manage in china. Mostly franchised properties. Its a great offering just like yum brands proved bringing their product over to international markets. Good to see you, mr. Holmes. Thank you. Congratulations on the results. Carl . Back to you. Thanks so much, simon. From hotels to retail. Mover in the retail space. Josh lipton is at headquarters with the market flash. Carl, after a 16 pop, over the last three sessions, game stop is getting crushed this morning. There is a report that the video Game Retailer that sells games on consoles like Microsofts Xbox could be hurt after the launch of the next xbox, which will require an internet connection. That would make online games more accessible. We have a call in to microsoft. Apparently this is not the first time that this has been speculated. But it does seem to be moving the stock. Today well keep you posted here. Carl, back to you. Thanks for that. Exclusive with time warners ceo jeff bewkes, his first live interview since 2007. Whats his master plan for making over the media giant. Still to come, he was behind the design of the apple stores. And brought luxury labels to target. Im most excited about what were going to do with jcpenney in the years ahead. Well, its been a year and well check in with ron john and jcpenney, later on squawk on the street. With fidelitys new options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Its delicious. So now weve turned her toffee into a business. My goal was to take an idea and make it happen. Im janet long and i formed my Toffee Company through legalzoom. I never really thought i would make money doing what i love. [ robert ] we created legalzoom to help people start their business and launch their dreams. Go to legalzoom. Com today and make your business dream a reality. At legalzoom. Com we put the law on your side. Welcome back. The u. S. Postal service announcing its stopping saturday mail delivery in order to cut costs for the agency. Patrick donahoe joins us this morning. Postmaster, good to have you, welcome. Good morning. Obviously big news all around the country. Affects just about every american. I guess the first question out of the gate would be, is trimming saturday delivery, and in this case not including packages, is that going to be enough to attain your goals . No, its not really. This is just one step, as a plan that weve put out to resolve our finances Going Forward. We still need legislation to address a number of things. But this is something weve needed to do because weve lost so much first class to bill payment. Well eliminate mail delivery on saturday but well have Package Delivery six days a week. Is there a mandate to deliver mail five days a week . I think in the press conference you mentioned a loophole that you have to mandate that kind of service. Can you go into that . Well, i wouldnt call it a loophole. Our interpretation of the law as it stands today, its a continuing resolution, we think that it gives us the ability to move ahead. If there are arguments, there are resolutions in place for another six or seven weeks, we can work that out. Our encouragement to congress is, take any language out of that bill, let us move ahead. Its a common sense right business decision. Patrick, how dire is the situation . We understand that last fall, you were within days of running out of cash on hand. And there were reports that you could once again run out of cash as early as next month. Is that true . Well, the cash situation is much better now. These changes will help it to be stronger Going Forward. Were working with congress to get the issues resolved and get everything behind us. The Postal Service is still a very good vibrant organization. A lot of people depend on us for mail and packages and we want to be there to deliver for people, so we want to get this resolved. Again, youre not in danger of running out of cash as early as next month . That is not on the table . No. No. And im curious, do you own your real estate . Is there something that could be done with your real estate . I understand youve already closed up a lot of locations, but is there more to be wrung out of that . We own a substantial amount of real estate. We continue to sell buildings. We lease a lot of buildings as we consolidate and downsize, well take the appropriate action. If were trying to think out of the box here, just how much Retail Retail potential real estate there is . I dont know what the law would say about potentially leasing it in a space where property is at a premium. We lease right now. Theres a number of locations around the country where weve got people that lease space for us from Business Needs, copy centers, even small coffee shops. We already do a lot of that. In many cases, we have too much space, so its better just to get it off the rolls, and somebody else can repurpose it. Theres opportunity from the real estate aspect. Im curious, because there are a lot of companies examining Real Estate Investment trusts, sort of structures where they separate it into a Real Estate Company and the business leases back that space. Is that under consideration at all . We really dont want to consider that, because we pay no taxes, so theres no tax advantage to doing anything like that. We own our buildings outright. We have no mortgages or anything like that. The key for us is shrink the facilities down to the amount you need, and dispose of the rest. Were very aggressive doing that, too. Mr. Donahoe, isnt the simple fact that youre not charging enough to send a first class letter. You charge 46 cents for a first class stamp. In britain, for example, which is a much Smaller Company to deliver first class letters, they charge twice that, 93 cents. Why dont you simply raise the price of stamps and fill the black hole in your finances . By law, we are required not to increase the price of whats called market dominant products, first class mail, by more than the rate of inflation. So were limited this year to a 2. 5 2 w1 2 price increase, that wa the one cent on the stamp. Our concern about raising prices like britain, chasing business away. We have a substantial way to do direct mail to the customer and we want to preserve that Going Forward. It seems to me youre not winning the argument. You will save here 2 billion. That might be considered basic infrastructure for a 14 trillion economy. You say on one hand we have one service which is our most important and profitable, its delivering first class letters, now, were going make that service worse because were not going to deliver on saturday. To many people youre behaving like the head of a Large Company rather than a ceo. We have a lot of cost reductions, resolving Health Benefit issues wave got and t e taking over our own Health Care Plan and those two alone are worth 7 billion any given year. That esmuch better than potentially raising prices and having the loss and elasticity with volume wed see. We have plenty of opportunities within the infrastructure and going after every one of those things. We reduced the head count to more than 3,000 people in the last 10 years. Nobody has done that and negotiated aggressive contracts with unions for a lot more flexibility. We know the package businesses is the growth factor in this future and we will continue to get that and continue to get that Stable Revenue coming into the system. Finally, youre a lifer, spent your entire career there. Economics from pitt, master from mit. Wonder if there was a case study written about the challenges you have ahead. Can you address it in a way you feel the company should be free to do . We have a five year plan we have out there. Weve discussed this with everyone from congress to the shipping business and people know what direction we need take. Any Large Business has to make changes. You said pittsburgh, i saw what happened to the steel mills when they did not react quick enough. We dont want that to happen here we have to get ahead of the issues and changing the delivery is the way to do it. Michael mcdonough, postmaster general, thank you very much. Coming up sometimes outspoken congressman darrell issa and his own approach to fingsing the Postal Service at 11 00 a. M. Eastern time. And blacksmith ceo andrew witty and whats still ahead in the pipeline. After this. Platform from charles schwab. Tdd 18003452550 gives me tools that help me find opportunities more easily. Tdd 18003452550 i can even access it from the cloud and trade on any computer. Tdd 18003452550 and with schwab mobile, tdd 18003452550 i can focus on trading anyplace, anytime. 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Why the need at this point to go into or expand what youre calling your major change program, opportunity to cut costs or a number of other things that can reduce complexity. Theres two major changes. One is to right size our pharmaceutical business in the response to price and pressure weve seen from european governments and the second and most excitingly is make sure we change our Technology Platforms and asset structure to bring on new technologies, particularly manufacture, to some degree, r d and cost of manufacturer and Carbon Footprint and reduce recycle time. Its a little bit about classic restrur restructu restructuring and allowing us to take the Company Forward another step. Are the austerity measures youre facing in europe in the pricing of pharmaceuticals and the like, has that run its course or continue to see pressure in your business . I think we will continue to see negative price evolution in europe Going Forward, we saw 6 to 7 negative territory last year hopefully a little less dramatic this year and still see pressure, maybe Single Digits for 2013 and anticipating and factored into our guidance we gave today within which we think we can deliver 4 ets growth in 2013. When one looks at your enormous company, its still a fairly diverse fights one than others. I know you mentioned divestiture of your sports drink business. Why still so diversified when others seem to be following a different strategy. We have key business, pharmaceutical business and vaccine business and Consumer Health care business. The Consumer Health care business is often the area that attracts this type of come men tri. We have a good synergy the way our Consumer Products blend with our pharmaceutical products from a distribution point of view particularly in america and europe and we have a super strong business in pharmaand customer and now accounts for 40 of the group. Tremendous synergy. One that doesnt work with it is the drink business. And were seeing increasing degrees of expert endorsement of otc products, the same experts are experts we talked to about our pharmaceutical products. We are a big believer in bound together synergistic businesses. We are absolutely against diversification for the sake of it. We think the bound together synergy makes us the right owner of these businesses, question mark around the one business and we will review it the next six months. And continued pressure in terms of declining sales or is that going to reverse at all . We just saw it come growth despite the pressures in europe. Weve seen an improvement in performance of advair over the last 12 months and continue to see changes in the market products and regulators review in our overall portfolio as part of our six new products under review. We have a lot of activity in this field and decent 2013 for advar, decent 2012 and looking for decent 2013. We appreciate your time, sir andrew witty. Thank you. Youre welcome. Before we wrap up the hour, whats coming on tonight . The ceo of yelp and whether his graph on facebook will hurt yelp and ig trt agitating for change at the Gaming Company. Thanks a lot. If you were just joining us this morning, hes what you missed earlier on. Welcome to hour three of squawk on the street. Heres whats happening so far. He understands entitlements you wont have entitlements for the future. They get fixed how . Snow thats what nobody wants to talk about. This is big news, breaking news. The post office says it plans to stop delivering mail on saturdasaturda saturdays. I hope its a message to the Financial Sector they need to clean up their act and there really needs to be a culture shift. Its not dead. I know thats never been when i was a broker and call people and say its not dead. Have one thats not dead. I have one that rigor mortis has not set in. Everything that was disappointing in the previous call that drove the stock down from the low 50s to the 40s he corrected. I think this is a story that is going to get better and better as the year unfolds. Youve got star wars movies back, the zhashanghai theme park watch, a lot to keep you interested in disney. I like the stock here. If there are arguments, continuing resolutions the next six or seven weeks. Take any language out of that bill, a common sense right business decision. Good wednesday morning. Were live on the New York Stock Exchange. Lets get a check on the markets. Dow negative ly moderate action nasdaq down less than a point, actually one point to 3170. Shutter fly soaring today after the online Photo Service had sales that topped estimates. Customer transactions rose 31 and orders gained 39 . Expedia is sliping after getting hit with a downgrade at mahaney who said it is likely to enter a period of growth deceleration. Neither snow nor rain or saturday delivery, the post Office Getting rid of saturday delivery in a move they say will save 2 billion. Congressman daryl issa will join us with his reaction. Zynga score in the Fourth Quarter and sent the stock scoring and is it time to give this game maker a chance . And jeff bewkes as the stock hit new highs, what he has planned for timewarner and cnn in the future. And one year after making plans for a big transformation, jcpenney ceo ron johnson joins us with an update on that turnaround. You dont want to miss that. Saturday delivery to be a thing in the past. Hampton with details and people still asking questions whether they can do this yurn laterally. I think you have more in the postmaster clarification in your live interview the last half hour. Essentially what hes saying, the continual resolution funding and running the government as we speak, the Postal Service believes as that resolution is written, there is, he wont call it that, a loophole that will allow the Postal Service to go ahead with its plan as of august 1st of this year, to stop delivering mail on saturday, packages Going Forward would continue. Now, thats the ups stance. The continuing resolution were talking about lasts for another six weeks until the end of march. Hes also taken the position if congress disagree, theres time to work this out. Further down the road, the issue of the august 1st deadline is six months, because to put all the things in place to make that service cut happen. Hampton, thank you for that. A good primmer what we need to know for the next interview. The postmaster general did talk to us this morning on the news saturday delivery will be no more. Take a listen. A typical larmg organization would have either cash on han or quick borrowing ability and two months of cash to cover operating costs. In october of this year, the Postal Service had less than four days of cash on hand. That is a very scary situation and no situation a business should be in. Hes been outspoken about the Postal Service in the past and proposed his own legislation what to do with it. Congressman daryl issa from california the chairman of the Oversight Reform Committee joins us from capitol hill. Today is a good day for americans. This is a responsible action by the post office. Theyre losing tens of billions of dollars each year. They defaulted on over 11 billion on their obligation. This money saving smart move will be a step in rightsizing the post office. Remember, theyre keeping with the spirit of the rider, if you are an american and want to get postal delivery on saturday, you will get it. It will cost you 5 dollars and change to get a package or letter. At a time a greeting card white cost 5 dollars, to spend 5. 60 to have it get there for sure on saturday is a reasonable price. Your view is they can do this unilaterally and even if they cant, you believe congress would approve . Absolutely. They are maintaining six day delivery for our elderly and others that depend on medicines, theyre maintaining a six day letter delivery. What theyre not doing is agreeing to go with one letter to your mailbox for 40 some cents. Its been unreasonable. Direct delivery at a cost of 5 dollars and change will get a letter or small package to your home and get it there on saturday. By the way, the post office is the final destination for u. P. S. And fedex. They haul a tremendous amount of small packages. This will continue that service, but will save over 2 billion a year of excess labor right now being spent in a diminished market delivering as few as one letter to somebodys front door. I dont think we want to deal if its costing 2 billion of loss every year. Congressman, you know how businesses are run better than most congressman and we have discussions all the time how you cant shrink yourself into prosperity. You look at charts of mail volume, annual revenue, net income versus loss, their comp and benefits, this doesnt seem to be the answer to everything, saturday, that is. Its not the answer to everything. There are a number of things in our legislation need to happen. We came close to a deal in the senate in the last congress. Certainly, we need to stop delivering to a chute and deliver to a cluster box. That saves many billions more. The reason we need to do it, more and more citizens are receiving packages and homes do not have a place to put a small package. We need cluster boxes secure so when you get your medicines or packages you can get them securely. There are changes in what will be a 21st Delivery System that will do on successfully. It has to be done with a little less labor and streamlined and meet the needs of an internet age in which most mail, most communication and most checks are not going to be delivered by the post office. As someone said this morning, email continues to operate 24 7. What im hearing from you, though, the privatization discussion really isnt on the table so to speak anywhere in washington, is that true . Privatizing something always seems like its a catch all. Nobody would buy the post office losing over 10 billion a year. Making sensible changes, congress stopping those sensible changes, thats what we have to change. We can get the post office to a break even. If theres a further independence of the post office whether commercialization or private, we can have that discussion. When the post office is delivering a service it can break even or make a small profit. Theyre not there today and congress has an obligation to treat them what they are. They already in fact a private enterprise run by the deposit under the constitution and they have an obligation to break even. We stopped them from that a long period of time. We need to do the opposite, help them break even. The American People like the service when they want it but they only want it when they want it. One thing people should realize not even Social Security checks will be delivered not one through the mail, theyre all going direct deposit. Even the government is no longer using the post office unless it makes sense for the government. Even on a day like today people still marvel at the fact you can spend less than 50 cents and send a letter 3,000 miles. Congressman, thanks for your time. Daryl issa from the hill. It has been three months since ceo johnson from jcpenney spoke out. Now, courtney is live in dallas with a preview. Good morning to you. Thats right. In about 20 minutes from now, we will sit down with jcpenneys ceo, ron johnson here at a location in dallas much of which has been transformed to the new look of jcpenney. Johnson will sit down and talk about the tough year ahead and whats to come. If we can look financially because this is a cnbc focused audience. Look at the chart. In a year shares lost more than half their value and Short Interest is 29 of shares outstanding, up 14 yearoveryear and almost four times the nearest competitor. Last hour we talked about the changes in pricing and now we look forward to the shop strategy. Johnson has said 30 new shops will be in place in stores throughout the country including the new Home Collection and Martha Stewart, although Martha Stewart and macys are set to go to court in a couple weeks to talk about the possibility of conflicts of interest in the partnership. Well address that. And jpmorgan believes the r a technology has been checked and all we will address coming shortly. Two days ago we found out that a group of bondholders are alleging jcpenney has violated some bond covenants. Well address that as well. The big issue is growth. Is 2013 the year were going to see this turn around . Carl, stay tuned. Theres so much to ask, you will have to talk really quickly. Courtney in texas. We have a double dose of exclusive interviews, ron johnson from jcpenney and jeffrey buwkes and the future of cable. First, Rick Santelli talks defense spending. Good morning, rick. Good morning, carl. Hour guest is columnist and Competitive Enterprise Institute fellow bill freso. We will talk about defense spending and the sequester and may even reminisce about eisenhowers speech. Why wouldnt you want to miss that . Tune in 10 minutes. How do traders using Technical Analysis streamline their process . At fidelity, we do it by merging two tools into one. Combining your customized charts with leadingedge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. We like this idea so much that weve applied for a patent. Im colin beck of fidelity investments. Our integrated Technical Analysis is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Dont wait for president s day to save on a new mattress. Sleep trains president s day sale is on now. Save up to 500 on beautyrest and posturepedic. Get a sealy queen set for just 399. Even get 3 years interestfree financing on tempurpedic. Plus, free delivery, setup, and removal of your old set. Keep more president s in your wallet. Sleep trains president s day sale is on now. Superior service, best selection, lowest price, guaranteed. Sleep train your ticket to a better nights sleep lets get a check on the restaurant sector. One of the big movers has been ch chipotle, the restaurant chain. Josh has more on that. Carl, take a look at chipolte, in the green, the burrito maker with last months preannouncement. Analysts debate focusing on the likelihood of the company raising prices. Most think it will happen later this year and some think price increases will offset food inflation and 0 worst than expected and worried about valuation and the stock about 5 . Some of that comp guidance not too bad even without the pricing. Thanks. Meanwhi meanwhile, sequestration heating up and Congress Weighs ways to slash spending. Good morning, rick. Absolutely. In ikes farewell address, he said something i think is appropriate. Ill read it before we get to the guests. We must guard against the acquisition of unwarranted influence, whether sought or unsought by the military industrial complex. Legend has it that that was changed. Originally, it said the military industrial corporate complex. Id like to welcome our guest, bill fresa. I liked your piece on defense, sequester and spending. Do you agree with ike . Have some of the more staunch republicans, should they be against some of these defense cuts were potentially embarking on . Your thoughts . Just ike but george John Quincy Adams said americans dont go abroad in search of foreign monsters to destroy. An opportunity for the Republican Party to make a pivot crony capitalism and back to its historic roots leading the charge on slashing defense spending not in a ca prishs way but rightsizing the spending in the future. If they were to do that get out in front of the issue, they would throw the Democratic Party in complete disarray and get the party fighting against itself as keynesians say no, important to build bombs and leftists saying no, defense spending and might get some chance of getting entitlement reform bit only if republicans give up their own pork. When i look at troops stationed around the globe wearing u. S. Insignia, is this needed. Do countries like japan and europe, weve been down the road before . Should we be sending the bill and footing the bill . Or bring our forces home. Step one is spending the bill. If there is any nation in the world we are defending they a bill. Et if they dont pay the bill, the soldi soldiers come home. Ho are we defending them against . Part of the problem. Sensible way you think we to war with russia and china. Russia is selling Everybody Oil and all they care about is their own crony capitalism. China is our biggest creditor and have no interest in a war with us. We should not be spending money on these things. One of my refrains has been stop spending, stop spending, stop spending and theres a similarity between our current discussion and what we learned about the post office. What gripes me most about the post office, i understand they lost 16 billion last year but thats not the worst part, they have skipped two years of payments totaling over 11 billion for some of the retiree benefits. It is stop spending but maybe overpromising is this reason. I think that applies here as well m. Your final thought, only a few seconds left. Going to defeat the spenders and taxspend borrow forces of the Democratic Party tactically the republicans do a pivot and get smart leading the effort to cut defense spending. Its the only way forward. Thanks for being our guest. Carl, all yours. Rick, come back to you in a little while. Still ahead, Jcpenney Ron Johnson speaking out in an cl f exclusive interview and find out what he is planning next. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. The dow is down about eight points. Bob miss san no is there to talk about not so much the markets but where its moving. Were slowly moving towards positive territory. Real estate hot hot hot. We saw a company i did well in the 70s. I hauled a lot of this wood when i was working in my fathers construction company. Went public at 25. 44, the highs of the day. This is a Real Estate Company. Look at realogy, they went public last year and 45. This is wall board. Another i carried a lot of it. U. S. Gypsum is doing well and Ceiling Tiles in commercial buildings are not doing as well. Its an uneven recovery. Bottom line, commercial, choppy, housing business, still recovering, doing very well. A beat you know all too well. I hauled the wood for those companies and hauled that gypsum in the 1970s. Meanwhile, shares of zynga soaring an unexpected quarterly profit following cost cutting moves. They beat forecasts. Ben is there. Good morning. Good morning. The challenge is the same, demonstrating success in mobile, right . The real issue is they had success on facebook on the web. Can they bring that same success to mobile, really the unanswered question so far. Bookings not bad, adjusted ebitda, and farmville 2. I wonder if the window on some of these games is longer than we think . Thats what the quarter does show, if you execute, you can do well towards these older games. The company is going more towards mobile and the company is aware of this and transitioning them to meet that challenge. We need to see if they can execute before we get too excited but clearly the market likes that so far. Is the primary catalyst new game launches and what does that pipeline look like at this point . I think theyre trying to redo the whole company around mobile, franchises and Network Effects and profitability. We think if they can get the Network Effects correct you will see the franchises do well and profitability come back to the company. You point out stocks still not cheap. Whats your view at 3 . It is ahead of where we expected it to be. A 2. 75 target. People excited about it. In general, investors are taking another look at the whole space. With mobile and new concepts coming more and more people are playing games and up to the e experts to decide if they can benefit about this. You mentioned do i wish we had gone more into mobile and made a commitment to it earlier, yes, according to a times interview. Given all the shuffling theyve done in the corner suites, credibility with management, where does it stand. How sturdy is it . The reality the company came out with a lot of expectations they didnt meet. Very quickly the facebook story began to move away from them and they were not able to execute rapidly. Now that theyre shifting to mobile, they understand the challenges and what they have to do and it remains to see if they can execute. Were cautiously optimistic they can get these things right. If you wanted to play in the mobile space, would this be in the top tiers of your play . Would you go instead to facebook or take tier 2 or Something Else . Overall people are coming back and looking at the space again for the first time in quite a while. Our favorite is tier 2 and grand theft auto and the Management Team seemed to have turned that company around and Electronic Arts has turned around and we think the momentum continues in a bunch of these games. Interesting quarter. Straight ahead, our exclusive interview with Jcpenney Ron Johnson and what he has to say about the turnaround efforts one year after that. Back after that. [ cows moo ] [ sizzling ] more rain. [ thunder rumbles ] [ male announcer ] when the world moves. Futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with papermoney to testdrive the market. All on thinkorswim. From td ameritrade. Investor. Yeah, im a serious investor but im a busy guy. It used to be easier but now there are more choices than ever. I want to know exactly what i am investing in. I want to know exactly how much im paying. I want to use the same stuff the big guys use. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Rincludes possible loss of principal. Sleep trainsor president s day president s day sale is on now. Save up to 500 on beautyrest and posturepedic. Get a sealy queen set for just 399. Even get 3 years interestfree financing on tempurpedic. Plus, free delivery, setup, and removal of your old set. Keep more president s in your wallet. Sleep trains president s day sale is on now. Superior service, best selection, lowest price, guaranteed. Sleep train your ticket to a better nights sleep the european markets are closing now. In a week europe is in the news, simon. Were on the edge of perhaps a lot of political news. Tomorrow, we have an ecb meeting where mario trackdracki will bed about the largest bank before he took over. And the heads of state meet tomorrow to discuss where we are overall with the european union. This set of markets actually started in positive territory. Its very much about the banks. You see them moving very low on political and economic concerns and Industrial Orders was quite good today. Its notable french banks are available and these guys are invested in all those peripheral areas around europe weve spoken about many years. The royal bank of scotland is interested. We finally got a judgment on its libor pace and going to pay over 600 million in fines, most to the United States to the cftc and department of justice. Important they dont get a criminal accusation here in the United States and they keep their banking license and there doesnt have to be a fire sale of their assets in the United States. As far as banks are concerned i mentioned italy, mario drago used to regulate and we should get clarity how deep that black hole is from their derivative trade several years ago and could be a billion euros, excess of 1 1. 3 billion. We should know that imminently. This is a huge scandal in italy. How does it play into the this. In the middle of last year. Phillip van heusen, we got a manufactured suggested retail price that really helps customers understand this is our high quality product. When your price is below that, wed love you to show our manufacturers suggested price so the customer can understand the value. That was one of the biggest learning for last year. I still believe the customer knows the rice prigt for the product and they want a reference and the manufacturers suggested price is a way of conveying value. When we show that along with our price, it really does help sales. The question is what do you do with all of this privately label produced unbelievably well priced in arizona or jcp. It doesnt have a compare. We dont have to make up a price. We can do the hard work to find out what the price would be elsewhere. Our buyers and legal team shop three to five Specialty Stores find the lowest priced item and find the price in three to five stores and whatners pay elsewhere and the way you can find value but rooted in the everyday price being the right price. Thats something unique to jcpenney. We will see if consumers understand this a little better. Coupons. Jcpenney got rid of coupons. Right now, youre offering a 10 gift if you spend 10 . Isnt that a coupon . It performance just like a coupon. We are doing that because our customer has told us at times they like to have additional value. As we approach this year, our number one priority is return to growth. Also the number two priority and number three priority. We want to return to growth. We think the key to that is communicatie ining value. Well do that in whatever way it takes to return to growth. It all is rooted in the first price being the right price. You had said previously you had to get through one tough year. Here we are, five days into year two. You said 2013 would be a year of growth. Do you still believe earnings and comps will be growth positive this year. I believe we will return to growth this year. I think it will be easier when we complete this home transformation. As you know, were adding about 30 shops to our stores. By the middle of the year, nearly 40 of the stores will be all transformed. When that happens, i think people will see the new jcpenney. Last year, we had pretty much the same merchandise priced differently. This year, we have different merchandise. Joe fresh comes in, in six weeks and home transformation in may. The new jcpenney will come out of the ground and allow us to return to growth. Do you think youre still on track for 30 shops . Absolutely. What about Marsha Stewart . She goes to court with macys in two weeks . Will we see her products . Martha will debut at jcpenney in may. There are a lot of categories martha will do macys has never done and greeting lines and helping people throw the perfect party. Things like window treatments, there are categories we can do and some categories macys and martha are in dispute and we will see how that plays out. We have two minutes left. I have a lot of questions. Its been a tough year. You lost 5 billion in market cap, shares lost half their value, credit now junk status. Is this transformation still the right move and is that what the board believes as well . Absolutely. If i had to do it over again, id do it almost like we did knit. Id change some tactics and be a little more clear on pricing. We had a Business Model that didnt have any growth in the future. Every Business Needs to build off a growth platform. Apple that digital devices in ios. Google had search. Early in our years, we had a promotional model which had merit but it played its course. We need a new growth platform. Its rooted in helping americans live and look better everyday. The irresistible style unmatched value. If you come today, we have the style of specialist store with prices below target. When americans understand that and start to experience shopping in the new jcp, it will be phenomenal. Well have a growth platform for years to come. The key was we had to have the courage to transform the business. Im so proud of our teams for staying the course last year. As we enter year two, were anxious to get started and return to growth. You say when customers see it. How do you get them back when youre down 20 comps . How do you get that customer back or alienated them. Come to our stores right now. Our stores are busy. Were gaining that customer back. We know who she is. We talk to her in a variety of ways and its important to get her back in the store. Its even more important to attract new customers. Thats the key to this long term, new customers. We had one of the oldest and poorest customers in the industry. We have to over time get a little younger and affluent. What will bring them in is everyday value on products they cant find elsewhere. And not losing the older customer as well. Wed love to keep her. Transformations are not inexpensive. You had laid out a plan and cost structure. You also said jcpenney would be able to selffinish and you wouldnt have to tap the line of credit, is that true. Ji w we will complete the transformation by 2015 and this year complete the transformation by 40 of nearly 700 of our stores. Thats significant. We do it with the cash we have on hand. Weve yet to tap into the revolver. Doesnt mean we wouldnt at some point but we havent done it in the first year. We said wed end the year in about a billion dollars in cash. In a couple weeks we tell people exactly where we ended up. Our teams did a great job managing our cash during this transformation. There have been reports of layoffs to come or layoffs currently happening at both the headquarters and even some of the salon positions and receptionists. What can you say to address whats going on there . Is that because youre running out of money . No. There is a lot of rumors. We have like a rumor a day. Today there is a rumor about layoffs at headquarters. I would never talk about that. But you have to separate the fact from the rumor. Ultimately we need the right cost structure for this business and we have to grow and we will assure we do those two things. If we could end and talk a little bit about apple. You had a lot of success at apple. And theyre stumbling a little bit, too, maybe, do you have any advice for your old friend, tim cook . Tim is a really smart guy and has a really great extensive team. I dont think they need my advice. Stay true to apples vision. If they execute well, theyll flourish. What are the biggest lessons youve learned in this tough year . Ive learned a ton of lessons. The most important thing is you have to state your vision clearly but be willing to learn and adapt. Weve done a good job of that. You have to be really careful. Change does take time. There are days you look back, you feel like it happened overnight. It does take time to change stores, change Customer Behavior and impact and influence. That doesnt mean change is wrong, it just takes time. Were aggressively building a new jcp. We have patience because we believe in our vision, our board believes in our vision and our industry believes in our vision and we are going to become americas favorite store. A couple days ago we found a group of bondholders are alle alleging jcpenney violated bond covenants and going to court. What do you say to that as far as investors, what is going on . We think this is totally groundless. Theres a lot of opinions that support that. This is a case where youve got in the old days people hold stocks and make money on how the company performance. Today, a lot of people try to make money in very short artificial ways. I dont think theres any truth to this. We dont believe there is. We have to let this play out. Thank you so much for joining us here today ron johnson, ceo off jcpenney. For now, carl, i send it back to you. Courtney, you cant get anywhere else, Courtney Reagan with ron johnson in texas, one exclusive interview after the break, another ceo reacts to results, jeffrey bewkes, in his first live interview in a year and a half, all of that after the break. At optionsxpress were all about options trading. We create easy to use, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius strategies, chains, positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Open an account today and get a free3month e ibd™ subscription when you call 18882800149 now. Optionsxpress by charles schwab. Coming up on halftime were following the late morning spike on apple shares and what could be behind it. Green mountain bouncing back after a lousy 2012. Should you go long ahead of its earnings. Debating this at the top of the hou hour. Timewarner surging and news of layoffs and possible sale of the Timewarner Center here in new york. Hey, julia. Thanks so much, carl. Thats right. Joined here by jeff bewkes, better than expected earnings results. Thanks for talking to us today. Your Cable Division is really driving this growth. The big question is youre getting higher cable fees, higher fees from the cable and satellite tv providers. How much longer can you keep showing this kind of growth in the cable revenue . The best news in media, probably strongest trends are in television. You have subscribers up not just in america, all around the world, viewing is up, time spent viewing. Program quality and investment is up, more devices everybody has. Now, all these networks are going on demand. If you want to look to the future what that will do, look at hbo. The viewing goes up, can look at it on demand. And Companies Like netflix, amazon, everything in tv is robust. American, overseas. Since its about 80, 85 of our companies economics we feel as though were focused on the right thing. We have a rising tide. Were doing great in all our networks. That is what you saw in todays earnings. A really good time to be in the Media Business and in television, as tv goes on the internet. You say youre investing more in content and youre investing more, when youre competing with more players and now youre competing against netflix and amazon for your content. Wont that drive up your costs and how do you maintain your Earnings Growth . Weve been competing for years against an ever growing number of cable channels launched not only here but all over the world. We have strong channels. Timewarner has the Strongest Group of networks in the network business. Thats true for just the turner networks, you think of cnn cartoon network, tnt, tbs, if you add hbo and sin max, you have not only a strong group of networks, a density of top tenet works. We dont have weak networks. From a consumer point of view as we promote our stuff to our viewers and affiliate point of view, we try to go in and get our networks carried and put the strong offerings, we offered more of our networks on video and demand more than any else. Carl. Carl at the exchange. Thanks for being on air. Publishing continues to be tough even though time continues to get market share, i guess is encouraging. We watched the likes of news corp. Try to put those assets in a separate room. Are you considering anything like that. You know, carl, its always a good question. Were happy how time is performing competitively. We havetitles, by the way, titles like people, instyle holding up well in the digital world, going over the tablets so you can get your favorite and Sports Illustrated and its not only convenient, its a good version of the magazine. Your question is not a bad one. I think for all Publishing Companies even though theyre doing much better than newspapers. Readership stayed up, advertising national, not based on classified ads, tremendous resilience in the National Publishing business but advertising demand is secularly not so strong. Its down a bit. The question whether we ought to put that into a different frame is one weve been asking. At this point have not decided to do Something Like that but we will keep investigates that. You mentioned netflix earlier. Have you seen house of cards . I have seen one of the episodes. It was very good. I want to play a short sound bite of our interview over two years ago. Yeah. I would say its like a 200 pound chimp. Its not an 800 pound gorilla. Just another competitor. You know, we have plenty of competitio competition. So saying hbo is the biggest competition, is netflix a threat . Its competition but reasonable competition. We always welcome showtime, when they make original series, we welcome starz, tnt and tbs are making fantastic original series. Netflix, i think they have a good show there. I dont think its going to change the culture. We welcome them to do more of it. It would take a while for them to get enough series to rise to the level of a threat, i think. A quick final question. You made big changes. But in jeff becker of cnn and appointed a jeff zucker from cnn and other changes. What do your changes say about your vision for timewarner . We will keep doing what we are doing so successfully. We aim to be and focused on being a great storytelling company, whether film or tv. Its working very well. We also think if you look at the success of warner brothers, hbo, turner, cnn, over the years, even time magazine, we basically were the ones who pioneered each of those business mod capitels and we feel good a moving from our existing business to digital empowerment of our businesses and think we can do it on a good basis. Unfortunately, were out of time. Jeff brewes, thank you for being with us. You heard from ron johnson from jcpenney and how you should play the stocks on the heels of that exclusive interview. Guided portfolio summary, ty you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Recognize me. But i am your market data. I know what youre looking for. Im not chained to your desk anymore. Im faster and smarter now. And so much less expensive. I am your market data. And if i do say so myself, i have never looked better. Superderivatives introduces dgx. Data done differently. It has been a year since ceo ron johnson transformed the company. He was just on the air. Listen to his Business Model. If i had it to do over i would do it almost like i did it. Change some tactics and be more clear on pricing. We had a Business Model that didnt have growth in the future. Every Business Needs to build off a growth platform. James fallon editor of womens wear daily. Good morning to you both. He said when he came in the company had no growth in its future. People still wonder whether theres growth in his future. What did you think of the interview . He said a lot of it before. The pricing message is key and they have to make that clearer and the question how fast he can transform the company and attract those new customers. Sounded like he said, stacy, return to positive comps this fiscal year. Was that a pipe dream . That was the most interesting part of the interview i thought, ron johnson was willing to draw a line in the sand and say return to growth i think most investors arent really