pictures hundreds of millions of dollars. i don't think it was an act of war. it was an act of cyber vandalism that was area cost lee and expensive. we take it seriously and will --pond fortunately proportionately. calledcyberattacks was "a new form of warfare." caesars entertainment will merge with an entertainment company. it consolidates properties like many hollywood and value las vegas. the debt load of its largest unit. a possible life preserver for vladimir putin, who is trying to shore up the ruble without the foreign exchange reserve. provideon will assistance and is confident russia will overcome its difficulties. the prime minister suggested a currencies lot -- currency spot. here in new york, vigils were held for those police officers gunned down on saturday. the shooter approached a police car and fired to the passenger side window. the gunman later took his own life very strong words from patrick lynch, who blame to the civil rights protesters, and mayor bill de blasio. >> violence onto the streets under the guise of protest that try to tear down what new york city police officers did every day. warn, it must not go on and cannot be tolerated. that blood on the hands starts at city hall with the mayor. following michael and eric gardner decisions. and a major storm can throw a wrench in travel plans beginning tomorrow. heading toward us. reading heavy rain and strong winds to two thirds of the country. 99 million people will be 50 miles or more this year. despite backthat channel talks, sony and the white house still failed to create a response for the hack attack, fueling a debate on when and if they should have responsibility to protect private companies from the cyberattacks. john joins us with more. i am curious to hear what you think the whole situation that unfolded tells you about the relationship between the government. >> president obama said he was not consulted, and yet sony says they were asking the government for help. legalis not really a structure to allow them to talk and some in the business community -- i think they're both telling the truth. president obama tells them nobody asked them and that is true. sony said they consulted the white house. what we hear is the response to was basicallyns, to give them standard advice and when they made public comments deciding what to do or what the government was urging them to do, i think they know they were answering a lot of sony's direct questions about how seriously to it mightthreat, that be a difficult precedent to send for the future. >> the president said this is not an act of war but cyber vandalism. but this is cyber warfare. what exactly is the difference? >> the president is trying to draw a line and say that the attack is different from espionage. there are not fatalities involved. they're trying to find a space where they can draw a line. say, you cannot do what north korea has done, which is a really disruptive attack where you are destroying assets and that deserves a response, but it is not the same kind of thing asked wrapping a bomb another country. so much for joining us. the ongoing story of the sony hack. let's turn to another story here on hedge funds. recently, predicted a rash of bankruptcies. she herself is in big trouble. an investor has cemented my that. her madison avenue office is now on the market. we are joined with more. what is going on here? >> those things in a row do not sound good. the street, at the end of day, does not have that many stars people really know. hedge funds, you can count on your hands. it is incredibly tilted. people are really pulling for meredith whitney. over the last few months, all the things you do not want to see happen on your hedge funds have -- hedge fund happened. they have had some pretty nasty things, like their biggest a in error.d to the interesting thing is, as far as we know, they said no and did not want the money back. they have major executives leaving on top of that. it was not pretty. >> a lot of people were gunning for her demise. she really pissed a lot of people off. friends and enemies on wall street. >> that is fair. when i first came to bloomberg news four years ago, i was watching tv on a sunday night and 60 minutes came on and meredith and he said on national said, billions of dollars of cities in new york evolving across america. people were freaked out. that was scary thing. one of the first things for bloomberg, she said when i asked, it was an estimate, and i remember she said, six derivative dimensions had gone out and she did not have specific math to back it up. people were upset not only that it was a very dire prediction about america, but that it turned out she did not have the civic things. between that and the hedge fund is that the revival fund, it seems she would be putting her feet -- putting into the market and my sense was she had the idea of fly vote -- flyover states, that their economy states would grow faster. cases, that may well be true. but i guess it is hard to make specific bets on docs -- on stocks. we wrote abouty, a retailer in texas who sells appliances in the south. it has been down more than 60% this year. lost a coupleshe million dollars on it on that alone. hard days, i guess. >> thank you. you will be on this story. the s&p has rallied 12% so far this year compared to a decline of 6.5% of equity. the diversions is the widest from every year since 1992. this year's record-setting rally could be a sign that maybe it is time to start investing globally. time -- drain me to explain this is mike reagan. >> whenever you look at u.s. versus global equities, it often comes down to a story about currencies. the dollar has been so strong this year that even a lot of european and overseas markets that are up in local currency terms, on a dollar-denominated basis, that is a big story behind why the rest of the world -- that said, with the dollar being so strong, it is a boon for the rest of the world and increases our purchasing power. america is famously an importer. with the dollar so strong, it bodes well for the earnings. >> what does history tell us about where we are headed? >> it is a remarkable diversions. it has only happened four times since 1970 where the u.s. has outperformed the rest of the world so much. it is generally bullish for the rest of the world. next year in global equities excluding the u.s., it is about 14% here they tend to outperform the u.s. the following year. , that is only happened four times since 1970. jump for global equities the following year. strategists forecast is looking for a 7.5% gain next year, which is decent. the estimate backs up the idea that the rest of the world will perform better. europe, the average gain is about twice of the u.s. gain -- 13, 14% gain. more ahead, three shopping days left until christmas. plenty of discounts still to be had. we will hear from the ceo of companies ranging from mr. coffee and the candle about how this shopping season is shaping up. skiing, theg to first day of winter, we will hear from the ceos key resort in colorado. acretle against competitors. stanley luke. -- stay in the loop. ♪ >> last-minute shoppers lock the doors before christmas. sales would hit $10 billion. that would top the $9 billion from black friday that we saw. bargains on everything from winter clothing to coffee brewing. the man behind many consumer products shoppers have been picking up this holiday season, as you can see from a long list of brands. e is the ceo of jarden. you just mentioned, the world's biggest seller of skis? ride snowboards, skis. -ok. ok.> what do you see that asked weekend? -- last weekend? >> it has been robust. october, november, and of that december have been good for us. we are happy. >> will to succeed what you saw on black friday? robust, but for some retailers, not robust enough. >> black friday was not robust at all for us, but the entire week leading up to it was good. the numbers are still coming in, but we are still happy. saw sales up. much more mobile on tablets than being in the stores themselves. you always say the weather really has the generations, so people like to see snow. new england is pretty good. out west is pretty good. in california, the drought struggled. no snow in germany right now. internationally, we are a little soft, but the good. >> how do you measure whether it will have an impact on sales? >> anytime you put money on the consumer's pocket weeks before the christmas holiday season, it is a good thing. real wage inflation. sales, our at our store traffic is flat to slightly down. people are spending more when they come into the stores. it is offsetting the traffic. >> speaking about mobile and online shopping in general, google has been expanding themselves. they have recently gone into same-day delivery. you heard amazon going into that as well. how much pressure to those companies, the fact they want to deliver on the same day, how much pressure is that on your retailers? >> the pressure is on them is matching what other people are doing and making sure they are providing the same level of service. it is good for consumers and good for retail. >> it is great for consumers. it is very costly, i would imagine, are amazon and google. be costlier for people with your company competing online. >> we offer free shipping with our products. today, we just want to get products to a person's home. >> i was shopping this morning online. >> a good thing, that has not been nasty weather during the month of december. last year, if you remember the problems the company said, we do not have those things going on. one of the bottlenecks people are not too focused on is what is going on at ports. stranded onucts ships, but so do retailers and amazon and google. is a four imports sitting off shore, just the volume of products coming in, then we initially to this -- anticipate, that could really hurt us. i do not think it will, but we are certainly missing important things we otherwise would not have, but we asked people to take substitutions. retailers have the same issues. i think it will cause a level of disappointment for some consumer. >> before we go, is free shipping essentially a given now? >> the world has set the bar were free shipping is the standard. that is where we are and where we are going to be. >> stay with me throughout the hour. still ahead, the smart phone maker who overtook samsung sales in china, just valued over $45 billion. it is expanding all over the place. we will have more on this company. plus, forget about leaving a voicemail. we will tell you how i drink giant plans to increase productivity next. ♪ >> good morning. here is a look at the company top news this hour. a smartphone bender now valued at $45 billion after a new round of funding raised a billion dollars. the company unveiling new products unveiling growth in china. overtaking samsung and smartphone sales. they are expanding into content and services. $7 billion in debt, generating enough dollars. the company says it settled $24 billion this year. the ceo says the company -- covers that the set -- despite sanctions limiting access to the capital market. one of the reasons may be why we saw the ruble decline last week. and if you need to reach somebody in the coca-cola headquarters in atlanta, forget about leaving a voicemail. company's chief information officer says it is to simplify the way we work to increase productivity. the change began earlier this month, encouraging callers to use an alternative method to contact. past the hour.s bloomberg television is on the market. julie hyman has much more. >> yes. it is time for futures in focus. a lot of volatility in equities this month. we want to focus on s&p may futures, doing something different this year. founder is options at the cme. i want to start with you because this is something we have not talked about in this particular segment. let's talk about one. >> traders wake up in the morning and they want to know what the market is doing. i checked the s&p 500 index. traded electronically on the chicago exchange. it is worth a few times the index. it is called the mini because there are big contracts. difference is that is traded on the floor from 9:32 4:15. the mini is traded electronically. of institutions and retail traders. >> todd morris chicago is definitely one of the folks trading this contract. what do you make of the volatility we have seen here in december? >> it has been expected. we have had selling prices, taking a little fear of what is going on in russia, and what is going on with oil, and we saw ,anet yellen of course come out which related a rally. of volatility for this year is probably pretty much over right now. be.ave seen where we will about 20-80.e we are trading something like 2073. i nice think this is probably a great spot to take a stab on the short side. i think we are up in the upper level here of resistance. it is an old i -- high . we are now in a big range of 1975 to 2575. make 100as a chance to points on the downside is it works out, with very little limited risk. one of the things about the s&p, for people who trade, this track 500 shares. shares, so you can get in and out of this much easier and faster with the same benefits. questions to put it in layman's terms, you can sell is between here and 2065, 2075. that would be a move of 20 points. 12.5, you actually have the potential to make a profit of $5,000 on a trade. about the santa claus rally frequently, where we send to see stocks strong in the last couple weeks of the year. do not know if that will happen, but what do you take? >> did not look good earlier last week. if you look at what traders are focused on right now, the dollar starts to rally, crude oil bottom, and bonds the before equities took off. that is what traders are focused on. they just added fuel to the fire. that is when we get wednesday into thursday morning. assuming they stay in place in thee other markets, i think rally could see an attack. that is what traders are looking at right now. >> how big of a risk is it we will see continued rallies? has got a maximum risk of $400 with a chance to make 5000. >> ok. risk, reward, is what it is all about. thank you. i appreciate it so much. we will be on the markets again in 30 minutes. >> thank you so much. coming up, there may be a lot of but not for shoppers, if you are shopping for retail stocks. we will tell you why. plus, caterpillar pushing for over a decade. ceoill find out what the plans to do now that their wish has been granted on cuba. we will be back. ♪ >> at the mall this weekend, you're likely hunting for bargains. a lookyman is back with at stock valuations among retailers. >> if you look at these valuations, we are seeing near the highest levels we have had in more than a decade. a little lower than this time last year, but relatively i still. is 26.7.ing basis it compares to about 18.3 for the s&p 500s. considerably more expensive. the s&p rallied about 12%. on ae seeing these stocks relative basis as more expensive. if you look at the highest and lowest valuations, the highest are coming from tractor supply which is aindex, home-improvement type retailer. trading at more than ready times trailing. rounding out the top valuations. on the lower end of the spectrum, the game stops, macy's, which a lot of investors say is a top thomas but the valuation is relatively low. that the on, rounding out the lower end of the evaluation spectrum. goodbyes and bargains? where can investors find that? >> of course, depends on who you ask, but with you look at an index of most love retail stocks, according to analysts, you see some of those we just talked about, including macy's. the variousr about home-improvement tractor supply, home depot is also on the list. fact, coverage of home-improvement retailers came out. liquidators continuing to like the home-improvement trend, but liking a smaller trend versus the home depots and the lows of the world. retailers, apparel not a lot of optimism. coming out with a note recently saying it is neutral on the softline sector. we have seen so many sales being offered this holiday season. there is concern about margins for many of these companies. we do not know what the sales numbers we will see, we do not know if all of this will pay off. it is a mixed bag when you look at retailers and which stocks you want to be buying coming out of the holiday season. >> thank you so much. our senior marcus corresponded. i want to bring back our guest host for the hour. jim lillie. i want to bring up your stock and how jarden has done. over the holiday season, you might expect your stock to hit the highest this year. in fact, not that expensive. around 17.8. not too bad compared to some of the other retailers. chart,u see the stock while you are happy you're sitting on a higher stock rice, does it worry you that going to 2015, you have got to build on that? >> not at all. look at our history. the equity is up 37% plus. coming off the 15% gains this year, you really have to look at a year ago, you are up that 50%. but that future. we trade at a multiple discount. there is still earnings growth, but also mold old spansion. the stock has a long way to roll. , we are at analyst 46 today, and there is a lot of runway, but we are patient. >> what are you hoping will drive that valuation higher? >> it is about putting up the numbers, laying out a report card for investors so they understand the roadmap of where we want to be. ourant 3-5%, to continue prices, improve our income 10%, generate $700 million cash a year. inwe keep doing that year and year out, the stock will continue to invoke -- to evolve. >> you are a lucky ceo does not need to take back capital and buyback stocks. your shares are doing well. where you actually putting the capital? as we are opportunistic about putting capital to shareholders. do m&a.done -- we the nice thing about that is we do not need to do deals to make our numbers. absent a great opportunity on the m&a front, we are happy to buy back our shares from a debt basis. we have smoothed out maturities. we feel good about where our structure is. >> have you locked in rates 30 well? >> yes. we feel pretty good about the structure. the content flow maturity really going out over the next 10 years. >> what about hiring? >> we are cautious on the hiring front. been, i would say, a fast follower, not a fast leader. when it comes to hiring, i see improvement in the employment outlook. adding talent to our bench as we move through 2015, make sure we have the bandwidth in all parts of our organization. we are investing more, making sure we have a second generation of leaders, being developed. we are spending a lot of money on training and development this year. focus, i would suspect we spent about 10% more on training and developing evil. a good roster of talent in the organization and we can always be better. >> what about international? i was looking at a map of where you are internationally. your presence in china and australia and parts of western europe, but latin america i thought was interesting. you are well saturated also in that market. cuba is now just opening up. branchou look across our all of the brands really resonate in cuba. opening of cuba is a great opportunity for us and a lot of other companies. it will be good for cuba and the world. policy shift in the last 50 years has not really been working. we think there is a good opportunity for us to establish a toehold in cuba and help grow the marketplace. >> and home the market of consumers. did you spring into action last week? i am curious what the discussions were when you hear something like this. what happens afterwards? >> i would say during obama's speech last week, i blessed an e-mail out to our business leaders saying changes coming to cuba and we should look at our latin america, export businesses , and think about what the opportunities are. the legal opportunities need to be defined in little better, but our teams are meant to report back to us in the middle of january to say, i think these products are viable. clearly, it is a very popular .rand and very well known as are our other products. we will have to not breaking cold. because there is knowledge. >> right. there is already familiarity with the product. stay with me. we have a lot more ahead. over to juliek hyman again because we have got breaking news on american apparel. >> that is last week, bloomberg news reported we had gotten a takeover bid from urban place capital. the company is now confirming that the takeover offers for a share, it-- $1.30 per could entail the return of the founder to the company at least in some capacity. he was fired by american apparel on december 16 after a month-long investigation into his conduct as ceo of the company. in addition to the confirmation of this indication of interest, as american apparel is calling it, it was also appointing a new chairwoman to the board. formerly on the board. colleen brown will take over as the sole chairperson a miss this takeover offer. >> all right. thank you so much, julie hyman. more ahead. warren buffett once again topped the list of the country buses biggest donors. number one is a billionaire and number one as a billionaire's donor. we will look at key trends giving by the world's wealthiest. plus, the 85th anniversary the new york stock exchange. a lot of work ahead. the ceo the next hour on business as the stems off slowing mining industries. stay in the loop. ♪ and othersuffett, have popped up this year as the world's's biggest derisive 2014. donations nearly back to pre-crisis levels. leading the way with over $2 billion into the bill him when the gates foundation. let's take a look at other key trends. david freeman. also still with me is jim lilli e, the ceo of jarden. david, a predominant area that education., >> that is correct. if you look at the list, it is a microcosm in what pulls at the heartstrings. largest donations were foundations. six out of 10 support educational institutions. >> harvard. >> that is right. it shows up quite a bit. about thisting thing list and cameras from hong kong real estate tycoons, is that it is the largest nation in the history of harvard. a you think about that for second, here is an institution that is part of america's history. the interesting contrast is the lantern he is such a part of american history. a new concept in asia, relatively new. and here you have the largest gift coming out of hong kong. >> thembut why are so many of going to universities? it was not just harvard. it was notre dame, the university of wisconsin, the university of southern california area why so many? -- california. why so many? same thing whether you're selling a private jet, asking for a donation for a private school, and it is all about the affinity for that rant , and the memories you have. people have a strong affinity base for the university they went to. and think about professors experiences they have there. when it comes to approaching them to give, it is not a hard , to as -- hard thing to ask give took place you had an amazing experience that. >> they are pretty good at asking you to give. i got caller id because the university of wisconsin calls every three nights. guess.orks for them, i developmentect teams at ivy league schools, the other universities, have the most sophisticated data and analytics analysis for donations and donors that would rival any private day. it exceeds them in most cases. especially in the eyes of larger private schools. >> i looked on your website ofterday and saw that one the services you provide is to actually give people statistical research to help them with fundraising. is that a trend you think will keep continuing? a 15-20 pageo dossier and it gives you a 360 -- view ofew of the the heart, mind, and soul. the nonprofits have been doing this for a long time. the area where it is new and there has really been no data is internationally. that is one area where we sell. we are the only firm that has data. it is new to rain. tos obviously underscore everyone in the nonprofit world that there are huge opportunities. just as a parallel trend, we have seen that in the art rose. everyone has been focusing only on the people who collect are today. there have been major purchases this past year by asian art collectors who were not substantial collectors for basic a rock the world in terms of what is going on. there is a major shift to look at other markets. it especially goes back to the gap in terms of wealth. we think -- we see cute tremendous wealth being generated. >> now jim, you do gift. >> i do. i like charities where i can see the impact. the better chance really helps talented high school kids move into a community come out of the inner city, to have an opportunity to go to a great school out in the suburbs. in the donors help these kids go to college. i like it in a charity. good ceo would. also, education here, to my point. putting money into education. david, thank you for joining us. and thank you, jim, for staying with us through the hour. still ahead, alibaba's -- ipo. also starting new companies. we will be back. ♪ >> big number this morning, how much the third installment of the hobbit trilogy reduce. according to numbers, it beat out the sony's remake released online by hackers. obama urgedrack americans to continue to go to the movies and yes, i also sat through the hobbit movie. 2.5 hours. 56 minutes past the hour, which means bloomberg television is on the market here in equity futures are higher and you can do it is a blessing after a big run-up we saw last week based on the fed. on the markets again in 30 minutes. caterpillar is celebrating its 85th earth day. for a look back at its long history and a look ahead at the future. doing business in cuba. ♪ >> welcome back. we're 30 minutes away from the opening bell. here's a look at our top stories. futures indicate stocks will move slightly higher after equities posted their biggest -- sincein six october october. a fourth weekly drop for oil. saudi arabia to maintain expert levels. reversing an earlier gain. that was created by lack of cooperation from outside of opec. caesars entertainment will merge. the transaction will consolidate big properties like planet hollywood. the will also help caesars entertainment restructure the debt load of his largest unit. president obama will not call the hacking of sony pictures and act of war. the u.s. hasn't used north korea sonye attack, which costed hundreds of millions of dollars. here is the president speaking to cnn over the weekend. not think it was an act of war. it was an act of cyber vandalism that was very costly and dairy resident we take it very seriously and we will respond fortunately -- proportionately, as i said. >> republican senator john mccain called the cyber attack a new form of warfare. saturday, adown on shooter approached a parked police car and shot to pass through the window. the gunmen later took his own mind. >> -- his own life. >> those that try to tear down what new york city police officers do everyday. -- ited to warn, it must must not go on and he cannot be tolerated. the blood on the hands starts on the steps of city hall in the office of the mayor. >> protests following the michael garner and eric round decisions. in hawaii, president obama condemned the killings. minutes from the start of trade. a county down with the open of the top headlines hitting our radar. olivia sterns is joining me this morning and you look christmasy with the green. and matt with his type. geter 10, google looking to partners for its vision of a self driving car for markets in the next five years and to the wall street journal. in plan is to start testing early 2015. matt, you are in some of these driverless cars. >> he is. toyota or lexus cars mostly for self driving cars here in they are in talks, with specific carmakers. but they didesting just hired the former see me at -- former ceo of ford. just for the initial prototype. i'm sure eventually google will want to partner with many different automakers. they will not want to confine themselves to one. this is for a 2020 prototype. >> he makes sense. why would they want to get into manufacturing cars? life they definitely would not want to. nemye is also a fre situation. >> number nine, apple in russia. they have raised prices in russia by 35% to account for the ruvell's pledge against the 30%ar area the ruble lost versus the dollar this quarter. we saw last week to rally is incredible. very difficult to price everything in russia, from cars to iphones. >> they have already been increased by 65% a year before that. much more expensive this year, but obviously. >> they are basically the same in dollar terms. if you saw your currency collapse at this rate, you would be looking to buy hard assets. is retail value today probably worth more than the ruble. >> right. well through the -- wealthier russians are probably buying basketball teams, and i mentioned the football. >> this falls into the larger inflation story in russia, which they are not already feeling the hyperinflation pin number eight, another data breach. almost 1.2 million payment cards have been affected in a series him -- series. >> it sounds said to me. it only has 1.2 million cars out there? target has 40 million and 70 million addresses. initially, i was shocked there were 1.2 million. >> i am looking for target. 50 plus million for other retailers. >> right. whereint of sale now malware, i am looking forward to the update to jets. >> right, it comes to mind when i think of staples products. >> i love this story, commode commerce. there is cash surfing and now this commerce, basically shopping from your toilet. of respondents0% to their holiday shopping while they were sitting on the toilet. >> have you done it? >> i am not saying -- [laughter] flex i am sure everyone has used his or her own smartphone far too and on the toilet. i was doing research on my desk and i saw a lot of studies showing that spending too much time on the toilet can give you hemorrhoids. you should not do this. --i was shopping this week this weekend looking for presents former brother and take a look at what i found. i did not buy this because i do not want it in the house, but this is extraordinary. there is actually a booming business. >> let's ring the bell. >> i will say it is unhealthy. that's number six, alibaba's millionaires, who have made their fortunes off of the company's ipo. beginning to emerge as a contender to silicon valley erin chinese companies have raised over $30 billion. >> they raise a lot more, six believere, but i do not they are merging as serious contenders to silicon valley. give me a break. >> tons of money in silicon valley through alibaba. >> he talk to people about what makes silicon valley work, and they talk about the ability to fail and resurrect itself. >> where do wealthy chinese people want to go when they have made a ton of money? go to silicon valley and sell because it is so i am just guessing. >> coming up, a look at the competition in the ski industry from the president of colorado ski resort coming up. ♪ >> we continue to count down to the opening bell. we are more than halfway through. we're doing something a little different. number five is the ski business. the unofficial start of ski vacation season. it means increasing competition among resorts. one of the biggest changes, multi-mountain ski passes, often sold at a loss. ,50,000 of these last year putting pressure on smaller and independent resorts. have you hit the slope already? make of this trend, which i hear is being watched very closely, these big resorts that have only gotten bigger, now selling these across all of their properties? that is the name of the game. the seed business is -- ski business is stable. 56 million visits in the u.s. the game is how do you grab a bigger slice of the pie. and theyd to make it just tried to take a bigger chunk. >> how do you compete with that? >> cannot go head-to-head with them on that kind of stuff. the way you get your ticket deal, it is basically 46% of the lead ticket price. it really does hit your bottom line if you drop. we tried to be different and understand why we are a little more unique and special. it is a lot of things for us. want a different that is what we are really trying to focus on. >> the kind of money are you spending this year to prepare for this year? what are you doing differently? we are just like farmers. we depend on the weather. when it does not produce, we have to be there. we spend a ton of money on snowmaking so we can you more efficient. we spent more than 1.6 billion dollars making efficiency do not need toe pump water, and we also took some snow guns and spent a ton of money on those, where we used to spend about dixie of., to make snow, we can then -- we can now do it with four. we save 30% on our utility bills by doing those changes. >> where are you now making most of your money? like you are talking about with the big guys, they may cast their money on other stuff. each number has a dollar figure. ski school, you get about four or five. it all adds up. we are in the same boat. we make most of our money off of tickets, but food and beverage our next he does leading generators. >> i know it is not that convenient for those on the east coast to get over. you have got to take several flights for some people. the tickets can be expensive. lower gas prices? will that help? >> it will definitely help. we are harder to get to, but, we can get around nine direct cities, only an hour away and a beautiful drive up here. but you are right that we focus a lot of our effort on the regional driving markets. instead of just blasting out e-mails and doing other stuff, we went into the markets and develop personal relationships with ski shops and we know the ski managers and we told those guys, you sell $500 worth of equipment and we give you a free ticket for your guest. it is a partnership and we try to be different by doing relationships instead of just kind of mass-market. christmas, weor are not getting snow. we are actually getting rain. it is actually pretty warm here on the east coast. is that affecting your business at all? >> i'm glad you mentioned that. are just getting hammered right now. i had to walk over here. now, we have had close to 108 inches of snow already this season. 16 inches of powder last sunday at eight inches on thursday. the reason i am skiing is because it is incredible out there right now. >> thank you. i am sure it is. still ahead, sony has other plans. they insist they will still release the interview. private equity firms are feeling pain, but it is not stopping some investors from diving in. ♪ >> welcome back. let's get back to getting you the most important stories you need to know. joining me, ok, number four, is now in deepy trouble with her hedge fund, down 11% this year. investors want to pull out. her madison avenue office, big troubles for her. troubles. underperforming benchmarks. i have heard a lot of people saying they have this thing >> -- >> i cannot believe her husband would do poorly. five years ago. everything should go right. >> she went on 60 minutes and said every bond in america is going belly up. it turned out that was dead wrong. >> if i may just defend for one moment, because i know there are a lot of haters, other calls have been wrong. john paulson. >> ok. number three. true. .> i think it is great >> hold on. number three. sony may have canceled a december 25 release in the "the interview" will be distributed. how will it be distributed? will it be mailed to all of us? >> david said this on "meet the ." ss a letter to all media organizations last week saying, stop spreading all the gossip the hackers are releasing. he is a u.s. lawyer. he mentioned the film will be distributed. i do not really take his word as bedrock for that. look. eventually? i am sure. but they are too scared to put it out in any decent way in the next few months for sure. >> netflix is too scared and comcast is too scared. you are essentially making --rself a target very lacks target. >> even through all the contra see, i still do not want to see it. it looks terrible. know.on't have you seen "pineapple express." it is awesome. one of the greatest comedies. if this is anywhere near as good as that. >> private equity firms have billionombined 11.7 dollars. 27 publicly traded producers since june according to bloomberg data. no surprise. everybody is feeling the pain of lower oil prices. many. that theyteresting think over the next five years, there is a huge amount of money to be made. of their be one biggest that's for the next five years. they said it is probably going to go down in value. if you have a lot of untapped money to invest, it is a great time to buy. >> if you are still bullish on oil and energy. how could you not be in many ways looking at the global economy -- global economy. maybe this is a correction in oil. do you waition is, for it to hit the bottom? -it may have already, who knows. bloomberg television is on the markets. a quick check of where futures are settled ahead of the open. you can see we are slightly higher. the top story in the opening bell is next. ♪ >> welcome back to "in the loop ." let's get back to the most important stories you need to know before the bell. matt miller and olivia sterns. >> you are so excited about it. christmas.re >> number>> one, this year's record-setting rally in u.s. stocks. a gaptime there is between the u.s. and the rest of the world, every time the gap de, gotten so wi republicans is caught up within the next 12 months. in other countries caught up within the next 12 months. i think that is completely ridiculous. correlation, not causation. why would your money abroad? >> i like it. >> enough said. >> are you looking at yourself in the camera? >> great point, olivia. the divergence is only going to get worse. i got to say, if i could call something like this, i wouldn't be sitting here. >> and maybe you could open a hedge fund. >> i would run a hedge fund from the deck of my yacht. >> gas of the coming off of its best week in two years. -- s&p coming off of its best week in two years. i thought this was so interesting. the 10 year treasury yields also rose on this news, along with the s&p. stock and bond investors are interpreting the fed must statement -- the fed's statement in two different ways. joining us with more on this and his best guess on what the fed meant is this chief investment strategist at sanibel captiva traveler. what do you make of this divergence the train what bond investors believe the fed is going to do and what equity investors think? who do you listen to? >> equity investors are hardwired to be optimists and bond investors are hardwired to be pessimists. the more interesting divergence that you are referring to earlier between the u.s. and europe. there are excellent reasons to buy europe, largely based on valuation. is 20-25% cheaper than the u.s. a lot of companies are driven by em demand, not domestic demand. the fact that the economies are slowing does not mean that much to u.s.-based companies. >> answer the question, though. who do you think is right, bond investors are equity investors? are you an optimist or pessimist? >> more of an optimist than pessimist, but the expansion of the earnings ratio in the u.s. over the past five years has been a huge driver of this rally. in the multiple expansion is not a good bet to make. >> we have a chart to my believe, of this. it is amazing if you look at the ratio of the s&p 500 on the upward trajectory. i guess market prices have been on that kind of trajectory as well. why do you think we will slow down? is it because we have hit the historical threshold? >> we certainly could. there's no telling what animal spirits will do. i'm civilly saying that it is not a bet that is prudent to make to make expectations on. in terms of your planning and your expectations, i think keeping those filed down to about the rate of corporate earnings growth, which is historically been 7% nominal, that makes a lot more sense to me. >> everybody is trying to figure out how to make money off the falling price of oil and whether they will buy back into energy stocks could we did a story about how steve schwarzman and david rubenstein are licking their chops looking to buy energy stocks. i know you like colfax is an oil services play. tell us why you think investing in these fracking services companies -- you said they are like manufacturers, not like oil companies. what do you mean by that? >> the business of fracking. historically, exploring for oil was let's go out and try to find a giant hole and stick to it and hope something comes out. million and if nothing comes out, oh, well. >> i love that. that is fracking in a nutshell to >. >> no, no, that is not fracking. >> that is vertical oil drilling. 60, 70%decline rates of in the first year, you do things over and over again on a small you can turnmeans up the stated or turn it down quickly, but also it means there is more room for technological improvement. if things are not working well in well a, you will be drilling f quickly to, and improve your abilities. we are seeing different techniques on horizontal well drilling, getting better recovery rates. that is because we have the opportunity to do it over and over again and get better at it, which is more like manufacturing that spending $700 million on the d12 rate and not getting anything out of it. >> we have to leave it there. thanks so much for joining us. matt miller and olivia sterns as well. coming up, the ceo of caterpillar on whether the oil crash is going to hurt sales even more for the company. ♪ >> there are 2 million truckers on the road in the u.s. they can lock up to thousands of miles and 70 hours a week, which causes fatigue, exhaustion, and even disease and illness. thanks to a recent decision by congress, soon they may be driving more. goes with aon female driver on the road to understand that the perils they go through. give us a better understanding of where you went over the week and who you want with. sure. we drove from michigan to tennessee and back up to michigan and then down to kentucky and back up to michigan for six days. i went with a woman driver named tracy livingston, who drives for usa truck, and she is also a trainee -- trainer, i should say. >> what did you learn along the way? >> i learned that talking is a very difficult job. for a lot of people who spent time in their cars, they see truckers and they think that they sit there and drive all day, but really, is a huge responsibility. they are in charge of this 80,000 pound machine, 72 feet long. they have to avoid car drivers who are not necessarily watching out for them. they have to comply with all swords of april and state regulations, as well as make sure that their load is safe and that they are getting it there on time. and they are all of the same time battling fatigue as well. they are working long hours and are on the road and have a huge responsibility. did you witness that yourself or do you feel that when you were on the road? >> for sure. bys schedule is dictated shippers and receivers and a lot of times they don't have any control on whether the shippers are receivers are ready for them and can load them on time or if they are loading the load properly, so they can wait for hours, and is happened to us, we were delayed because we had a load that was too heavy. it would set us back an entire day. these drivers not only are tired 14-hour days behind the wheel and driving for up to 11 hours. they have to cope with these delays. imagine.i can certainly a top business to bn in. what about the changes by congress? how will that affect trucking standards and truckers themselves? >> some truckers say, like tracy, she drives a dedicated group. it -- they call it a milk run. she will go the same way and for her it won't make a difference. what it will make a difference for is those who drive different routes every week, independent drivers. it depends on the time crunch you are under. if you are under a big time crunch and you are paid by the while you might drive more in this does lead to more fatigue on the road. >> thank you so much for joining us. timefer oldham on her driving for a week with a trucker across the country. on to more of a glamorous business -- real estate and real estate in particular in miami and how the prices are rising. with stronger than ever demand at record levels. we have been talking a lot about this on the program. "market makers" anchor stephanie ruhle sat down with gary stern to discuss the latest project in south beach, a gleaming project right on the beach. >> betty, it would blow your mind. groundars ago, miami was zero for the housing crisis and guys like gary stern brought up many of those properties when they were in deep distress and they are not starting from the ground. they are going to major overhauls, multimillion dollars. the biggest beachfront property in miami and barry is pretty excited about it. >> i think miami is the singapore of the united states to your getting all of international travel, international buyers, europeans, spanish. was selling units -- not one unit to a guy, it units. -- eight units. >> isn't it a risk when you have international buyers? they are not setting up a home here. >> i think it is slightly different and i don't think of this market -- unlike maybe new york -- these people will come here. >> it is not just south americans. he is seeing more new yorkers who are sick of paying the price is they are here, especially all the taxes to you are seeing hedge fund-type guys not go to perjury go does not go to puerto rico. are going to miami and barry likes that. >> hear her entire interview with barry sternlicht. up next, the 85th year on the new york stock exchange and where he sees the industry having a tough time for them. ♪ caterpillar is celebrating its 86 the year at the new york stock exchange today, although 2014 was a tough one. take a look at these numbers. global construction agreement sales down 6% in november, mining sales down 23%. chairman and ceo doug oberhelman is with me now from the new york stock exchange. 85 years on the near stock exchange. you have seen many cycles. how tough is this one? >> we have seen a lot of cycles. i can't imagine that the leadership team that came out here two months after the crash of october 1929 issued their public offering and raised money and 85 years is history. we have seen cycles over the last 85 years. the cycle we are in right now is fairly stable. we saw a big downturn in mining in 2014 and before that, being in 2009 -- big drop in 2009. we would go through this one as well. i will beast -- someone will be standing here 85 years and smiling as well. in 85 years for someone in your exact same spot. mining pulled back quite dramatically in 2012, 2013. what about 2015? at what point will we be in the mining sector? >> we are looking across all of our business for 2015. we will have good news and bad news. the u.s. economy is committed -- continuing to grow slowly. everything outside the u.s. is kind of flat. we are watching oil and gas in a big way and we will have some impact from that. mining has been bouncing off of the bottom for the last three years and will probably continue to do that for a while longer. we are waiting for the replacement cycle, which should be coming fairly soon. we are just in the meantime taking advantage of this and doing all we can to strengthen our walls. we are focused on our balance sheet and making sure it is efficient and productive. what about energy? energy had been a bright spot for caterpillar but you have had a dramatic lunch in oil prices the -- plunge in oil prices. might that cause energy capex?es to pull back on of ourvast majority energy business burns these old fuel and we will see somewhere along the line the benefits of that. we will see the impact in 2015 as drillers cut back an exploration declines in which we see and fully expected the rest of it should be positive into the future as the world gets this huge stimulus package of energy. it should be a net good for us over the next couple years. >> does that mean you see oil prices bottoming out towards the middle of 2015? >> i will not make an oil price forecast, betty. i don't have a clue. forecasters are sitting tight and they tell us they will take a look and january and see what happens. but we will feel it. after long years around 100, there is no question about it. >> i know caterpillar has been one of the big voices calling for change, diplomatic change with our relations with cuba. now last week you finally have got to not change. there is the opening of trade relations with the about -- with cuba. what kind of action did you take my after or during the announcement? >> well, i smiled. it is finally a step in the right direction, a very small step. nothing will change in terms of commerce for business or for that matter, relations, but it is an opening and i am happy about that. it ought to be good for america. i have said many times that the cuban system is the cuban system and hasn't changed much in a long time and this maybe affords an opening. i like that maybe in a few years, maybe puerto rico could be a great ally of the united states and good market for us. there are a lot of cuban-americans in america but it has to be positive down the road from somewhere along the line. >> i would think so. caterpillar has been on the forefront -- were you more ready than other businesses? were you ready to be right there when the market opens up? how quickly can you spring into action? > we can spring into action probably yesterday on this subject. we have distributors around the territory that know a lot about the cuban market. it is a question of when it opens for business and commerce. i will think we are close to that yet but we are -- i don't think we close to that yet but we are ready. >> jpmorgan put out a report saying that caterpillar is on the hunt for a multibillion-dollar acquisition. could you eliminate us on what that means? >> i'm not sure on the hunt for we are looking for growth opportunities. we have stayed away from oil and gas opportunities because the valuations are so high. a balance sheet is strong and we have lots of capital to deploy, which i would rather use growing the business. we are looking for those kinds of things. i would not say that there is any target or deal in mind at all. we have a group looking at it long and hard and if we find something, it would be good. >> what are the aussie find something in 2015 -- the office you find -- one of the odds you find something in 2015? >> pretty small. in terms of anything day, it is a pretty small chance. >> thank you for joining us. >> always good to see you. >> doug oberhelman, chairman and ceo of caterpillar, saluting their 85th anniversary on the new york stock exchange. that does it for today on "in the loop." p forrow, the new whatsap teenagers. the anonymous messaging app is drawing plenty of cash but also a lot of controversy, especially among parents. bottoms up -- we are testing the holiday season with a deep dive in the champagne market. tomorrow at 8:00 a.m. eastern time on bloomberg television. ♪ >> we are coming up on 56 past the hour. that means bloomberg ilevision's "on the markets." am julie hyman. we could have another record for the s&p 500 today. the indexes only up less than a point and a half. percent.q is up .2 last week's gains were spurred by comments by janet yellen. havee treasury market we yields rising to some extent of the 10-year yield only at two point 17%. there is a lot of uncertainty over what the fed statement met last week. there's a lot of parsing afterwords, poring through it. the fed said it would be patient when raising rates. the bond markets seem to have the verdict, that the fed will hike rates sooner than investors previously thought. joining us with what this means on treasury market is lisa abramowicz. first of all, let's clear up some confusion here. it seems as though janet yellen in her comments said that the second half of the year is what we are looking at. is that significantly different from what investors were expecting? >> she didn't seem to be concerned about oil prices plunging. she did not seem to be concerned about the u.s. economy. she voiced confidence that the u.s. will be able to avoid the general slowdown globally in economies from japan to germany. confidence that she was looking for every excuse in good -- they could. people were pricing in a june rate hike rather than 2016, as they had been earlier in the year. >> how is this affecting the yield curve? >> the differential between 30-year bonds and five-year --ds has shrunk to than ours the narrowest in years. they are not expecting long-term inflation to pick up. longer-term bonds still look attractive relative to the rest of what is out there. do we actually see an inversion of the yield curve where the bond rates are higher? if that happens, what are the implications of that? >> usually pretty negative. we have a ways to go to get back .o 2006 levels we still have a ways to go before the inversion happens. still, people are watching this and people are concerned that, frankly, someone was talking to me and saying, look, the fed good hike interest rates and then have to engage in another round of quantitative easing. frankly, the economies and accelerating enough. -- the economy isn't accelerating enough. prices will rise again, as janet yellen seems using just, or is in a longer-term reality we are going to be facing? >> i don't know if there is consensus on that but what are you hearing? >> another good year for treasuries next year, which flies again in the face of the consensus last year -- >> but the consensus was wrong in the beginning of this year! >> is there a growing consensus that treasuries will be a winner again and will that -- is that consensus wrong? >> oh, man. thank you very much, lisa abramowicz. we will be "on the markets" again in 30 minutes. "market makers" is next. ♪ from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. takeover target -- american apparel confirms it has been approached by a potential buyer charney'smean dov returned to the company. we have an exclusive interview with the embattled founder. whitneyn -- meredith down a whopping 11% this year and her biggest an answer -- biggest investor wants o-u-t come out. and no real ruby -- nouriel
operations which will benefit certain input, but it's difficult for a lot of all these companies, even caterpillar, they all have some involvement with oil and gas, especially with all the republic sans of the domestic oil and gas industry. and then they're not that optimistic, these guys. >> they're not. it's surprising. if you look at what we hear from we talk to economist, things are better. >> with capital spending decreasing. >> that is the big concern. if you don't see more capital expenditure, you're fought going to see -- >> the regulation with randall stephenson, right over there. >> but it's the same story for four or five years where some of our viewers are tired of hearing about taxes and regulation. but these guys look at it every day. they see it. the economy is still growing based on problems with government, based on government helping. we talked about all of that. we'll tell you about some of the morning headlines. we have three big stories to watch this morning. an important snapshot on the jobs, at the adp employment report, the economy likely adding 223,000 private jobs. eurozone business equity slumping to 16-month lows. the numbers confirming concerns about the region's economy still struggling and could put pressure on the ecb to increase stimulus measures when they meet tomorrow. and president obama is expected to announce his pick for a new defense secretary this week. he is likely to pick aspen carter. the wall street judicial on the front page says he is known more as a technocrat. this is more continuity than change. you kick out hagel and then you choose him, it's like the same thing. >> i saw that yesterday and i thought, you have got to be kidding me. >> you thought it was jimmy carter? >> not really. but this is for you, andrew. the heartland, bob evans is the first stock to watch this morning. have you ever been to one? >> yes. >> sausage, all kinds of breakfast meats, eggs. bob evans, down on the farm? >> i'm afraid to say, no. >> it was a mixed quarter for bob evans. earning he beat the street. revenue, posting flat. same-store sales. it's hard to, as you're flying over all those states, it's hard to stop in. >> that's something for your bucket list, andrew. >> as you're flying over, it doesn't really matter much, anyway. >> which ones are those? >> microchip technology says it's bookings and billings have improved since the company's last earnings report. the semi conductor company is offering a bit more optimistic guidance for the current quarter. and puma biotechnology announcing it will postpone its cancer drug until 2016. that is putting pressure on the stock. down almost 42 points, although it is a $200 stock, but that's almost a 20% decline. >> 18%, yeah. that's a big number. let's get a check on the markets this morning. yesterday was a strong day for the markets. the dow closing at a record. there are red arrows this morning, but these are modest declines. s&p down by less than half a point. the nasdaq down by less than a third of a point. yesterday was a record close for the dow. it was the best day for the dow since november 20 05. that is the best numbers in more than a month. you'll see at least right now, things are relatively flat for germany, for france and for the ftse. in asia overnight, you can see that things were mixed. the hang seng down by about 1 %. you did see gains of the nikkei of about 0.3% and the shanghai xot composite was up 0.6%. oil prices, this was the big story. all the ground oil made, it gave back yesterday. 67.25 is where oil stands right now. wti. take a look at what's been happening in the bond market. the ten-year note looks at this point like it is yielding 2.96%. the dollar is up against the euro. down against the pound. and if you check out was been happening with gold prices this morning, you'll see right now gold prices are slightly higher. 1,200 an ounce, sitting just above that line. >> it's called the round table and there must be a king arthur for any round table. and we are joined now ahead of today's ceo summit. i'm going to tell you first what happened here. the round table pulled the ceos that are members in one of the most interesting headlines, 40% do plan to hire more workers. that is up from 34% in the third quarter. but there are some worries. as you can see right there, about why the economy continues to grow below its potential. and a lot of it is regulation and a lot of it is taxes. kidnapping arthur joins us now. the head of the -- you walk around here and i watch people, someone is holding your coat behind you. >> there is nobody bowing to me. i don't think anybody even listens to me. >> we'll get this jobs number from adp. one of the reasons that the fed exited pretty easily and one of the reasons we're talking about maybe rates going up in june next year is because there's a perception, at least an optimism that we're going to hit 3% on gdp and things have gone into a higher gear given that we've been above 2000 on all these jobs numbers. your members polled sans 2.4% flat last year. that's an outlier. that is worrisome if we think we're going to start growing quicker. >> who knows if that is accurate or not. last year at this same time, the ceos were polled. and the ceos said 2.2%. this year, it's going to come in pretty close to 2 ma.2%. as we look into the future, all of us as ceos tend to be conservative. we are looking at something that's about 2.4%, 2.5%, let's call it just for rounding. and look, that is good relative to the rest of the world. i think that's about as good as you're going to see around the rest of the world. but i think what the ceos are saying is let's not do high fives. we're of a mind-set this could be four, this could be a 4% growth economy. if just a few fundamental things are done in terms of tax reform and in terms of regulation and how we think about regulating business. so, you know, i think we're all apprehensive to do a high five and is declare victory when so much more is possible. >> you've mentioned a lot of these concerns to him before. the business round table has. how many times? did you expect any different reception to -- from what you tell them today? >> this will be the fourth time the president has joined us. he will be joining us today. and actually, the president, i expect the president will outline an agenda that doesn't look too dissimilar from what we established as priorities if you want to get this growth rate moving up. we hope that he makes it a priority. we met with both speaker boehner and leader mcconnell yesterday to clue us in about their interest in doing tax reform. we are the highest tax rate in the oecd countries. and if we want to move it further, we have to change the tax code. there's general agreement this needs to be done. it will be interesting to see if something can happen here. >> the white house just scuttled the deal that reid was working on with the house to try and get a few things done. do you think that was done with the intention of hoping for a broader reform next year? >> that was an extender package. in january of this year, a lot of tax provisions expired. so people were hoping you could get a broader deal done in the lame duck session. this is about what you would expect in a lame duck session. rarely do you see much get done. >> that was just a housekeeping deal. that want even trying -- >> it keep taxes from going up. >> why do ceos think capital spending will decline this year? you guys are kind of getting on everybody's nerves at this point. we would like to say ceos should just play along, but if you don't have the demand, it doesn't make sense for shareholders. that it is what it is. when you guys say 2.4 or 2.2, economists have a lot of numbers, but you guys have your hands on the knobs of what does end up being 2.4% or 2.3%. >> in this survey, what would cause you to invest more? it was no surprise, the first was taxes, tax reform. and, look, when we talk about investing more, you invest more for one reason. and the whole agenda is to drive economic growth. what are the policies that will drive economic growth? middle class job creation, innovation. tax reform continues to come at the top of everybody's list. we're moving in a direction where the united states has a very uncompetitive tax structure. if we have not that capital being invested in the u.s., we need to fix the tax code. the second is regulation. the cost of regulation is a big concern with people. we're seeing a lot of uncertainty. when you have uncertainty in an environment where you're investing billions of dollars of capital, that can recuse -- >> i'm going to recuse myself because you're looking at possibly new regulation and the president will be here today. net knew at that time, i don't think we've talked to you since then. that could be some totally new regulation. it's dated 1932 or something. >> you're overstating. it was 1934. >>. >> 1934. andrew, this is something we need desperately to keep you corporate profit mongers from ruining the internet. have i got this right? >> no, no. >> listen, i want him to invest and he's not going to until -- >> one thing on the tax issue. between taxes and regulation for at&t right now, do you flip those issues in terms of your decision to make additional capital spend temperatures? because of what the s.e.c. said and the debate, i assume you pulled back on those? >> yeah. do we know what the rules are? it's a pause. these are multibillion dollar investments. >> it's the president telling the s.e.c. what to do. >> this. >> here is the internet, right? there are some concerns people have about how the internet will be treated in the future, you know? is there going be blocking inspect paid prioritization. and the president articulated that we need to guard against these things. we all got that. what has created the noise, the president said to joe's point, he wants to put the internet into regulations that were written in 1934. these regulations were written for the black rotary dial telephone. at&t, the monopoly. we're going to take this dynamic echo system and shove it into this regime. this regime says we're going to formulate prices. these services will now be subject to taxes they're not normally subject to. this will increase the average internet bill for a family by $19 a month. we have said our objective is to increase penetration. increasing the price of it is not exactly a formula for increasing penetration. >> no, $19 is straight on taxes? >> taxes and universal service fees and so forth. >> i wanted to inspire innovation so the next time an amc comes along with joe's favorite "walking dead" and is wants to go over the top of it, that that's not going to buffer because they're a new guy on the street and they can't afford to pay some extra fast speed where the other -- where netflix or somebody can. how do you balance that? >> i do record -- >> what you just identified or articulated you desire is what we have today. so just recognize, that's where we are today. now, there are people who are concerned there might be bad behavior if there aren't rules around it. we got that. let's not take a 1934 system and shove it into this. >> andrew, you have to get into your rant about it's not a free market to be made right now -- >> there's an argument to be made that it's not a true, free market in that there are franchises in each municipality. if i decide i want to start a cable company or i want to start a telephone company and build one directly into somebody's home, not so clear i can do that. >> like somebody like google if they want to do that in kansas city or austin. >> in some municipalities they can. in other blass they're told to talk to the hand. >> the efforts, in part, look at what's going on in the uk or other places, where there's faster service and it's cheaper. why is that. >> europe, i've been to europe. i've it's mobile. europe is not where the united states is today. the it's in terms of capital investment going into broadband is unparalleled in the world. now, you can see japan has better bandwidth. you're talking about a company the size of montana. in fact, we have invested at&t over the last five years at record levels. i do not believe there's another company that's invested in the level that we have in the united states of america. >> you've been the top company. my concern is when you say this is going to put a pause on things, we could be looking at a situation that takes years to resolve these years. does that mean over the next several years, you'll be ratcheting down significantly in terms of cap ex. >> we find a way to give the fcc and the policymakers the comfort against the kind of potential behaviors andrew has identified. we'll all feel better about investing. where we are right now is we made some commitments in the directv deal for deployed fiber. we're going to live up to those commitments. but anything beyond that, we are on a pure pause mode so we understand how these gets flushed out. you need some type of compromise with the fcc. at left it's with the fcc which is not -- the administration can't specifically dictate. if it was just with the administration, i would say you -- >> we're very open and collaborative. we've been working -- >> do you think le land is urchbtd pressure from the president? >> i think the president has been very straightforward about what his expectations are. i do believe that wheeler will be practical in terms of how we do this without years of litigation. >> randall, thank you for having us today. we appreciate that. >> i appreciate you guys joining us. we enjoy having you here. >> thank you. good seeing you. when we come back this morning, a man whose company is mission critical in the communications world. greg brown sounds off on everything from immigration to tax inversion. stick around. "squawk box" will be right back. ceos are calling on congress and the white house to work together. greg brown, the chairman of solutions, he's the chair of the business round table's immigration committee. good morning. >> good morning, andrew. >> to help us with this, the immigration policy gets announced. you come out with a statement, you are the head of the group. are you -- i couldn't really tell from reading your statement, are you happy about what's happened or not? >> look, at the end of the day, things that keep the discussion we are happy about. the executive action, yes, it's controversial. yes, it makes things a little harder. but if, andrew, it serves as a catalyst to continue these conversations around immigration reform, i'm happy. now in the statement as you may have seen, i acknowledged and gave credit to the president that he remains committed to this. it's not without controversy. i think it stays at the forefront of the conversation. the president remaineds steadfast this is important. >> they support some form of immigration reform. yet when you think about what's happened politically here in washington, so much money has moved towards republicans as opposed to democrats which are in large part against some of these policies. >> i wouldn't say it that way. i'd say the debate is more around the how than the what. the business round table has been consistent that we want comprehensive or common sense reform. what does that mean? order security, interior enforceme enforcement, ee verify. and legal united statesing all that goes with that. we want reform that's broad based. we've been consistent about that. the senate addressed it. the house didn't say we're against that. they said we think reform shouldn't be a 1200 page bill. it should be more surgical in individual pieces of legislation. that's fine. we don't care about the how. we care about the what. >> greg, you said you're glad the president has remained true to this and is keeping the issue in the forefront. do you think executive action makes it easier to get more legislation or more difficult? >>. >> my personal opinion, i believe the prospects for 2015 are pretty good. it's a tough situation, but at the end of the day, he's saying he wants something done. i think the republicans also want to do something. by the way, as you know, reform increases gdp 4 had.8% over 20 years. it's a 1.2 trillion dollar -- it makes economic sense, job sense. it improves the competitiveness of the business community in our country. it's one of the few -- that you'll see the business community as united as we are. >> you had a comment recently, there was a statement that went out, and then you supported abbott in that shire deal on inversion saying it is not unpatriotic to leave the country to speak to that. >> it was a q & a in chicago. inference was ceos are big, bad people that are purposely deploying offshore to stay jobs away from america. i just said to the interviewer, ceos are following the law. so to characterize us as unpatriotic is a bit interesting to me, given the fact that we're complying with the law. we've been very specific about randall talked about it before, comprehensive tax reform. the last tax reform was '86. we have the highest tax rate in the world. so we global -- capital is global. so we deploy it where it makes sense. so i just found it a bit ironic to characterize the ceo community that way. it was all a good exchange. >> so motorola conversions is not considering. >> no, not at all. >> we will have you back. there's a lot we didn't get to. >> thanks. coming up, the biggest market, we've been watching energy prices. it's a great time to talk to the head of the nation's biggest oil player. exxon mobil's rex tillerson is here. he will be our special guest when "squawk box" returns, live from the business round table. welcome back, everybody. take a look at what's happening with energy prices. they just keep falling. today, prices well below $68 a barrel. $67.20 for wti. rick is the chairman of exxon mobil. he is the chair of the business round table, education and workforce committee. rex, thank you so much for being here today. >> my pleasure, becky. >> so we watch wti just about every day. it's been a stunning decline, down about 35% from june. what does it mean for exxon mobil? >> we've been through a price correction. for al a lot of our younger people, this will be the first experience to go through a price xhot commodity correction. it means a return to fundamentals for us. it's important about watching your cash, watching your investment decisions, being very disciplined about everything and looking for opportunities that may present themselves in an environment like this. >> it's interesting that you called this a correction, returning to correct prices. you don't see this as something where we are looking at deflated prices over a long period. you think prices are too inflated when they were trading up around $100 plus? >> well, if you look at the reasons for the price correction, it's been at the fundamentals supply demand. demand from this year to last year is up fairley modestly. but if you look at demand in the united states, it's flat. demand in europe is down and has been down for a koump years. japan is down. so modest demand growth of about a million barrels a day, plus or minus. in the face of supply growth driven by north america, last year or this year, we will add about 1.6 million barrels a day for new supply. from nonopec areas, that's largely the u.s. and dan da. you put it on top of $1 million a day growth you've got capacity. at a time when opec members are by and large holding their production flat. so you fill storage up, you fill inventories up, but at some point, it has to show up in the price. >> with jim kraker last night, boone said he sees prices rising to $100 by next year. you sound more skeptical. >> i'm not any good at predicting prices. that is his business, i think, to do that. but, again, i think it's keep an eye on the fundamentals in terms of what happens with demand, there likely will be some correction. it's hard to say what that will be and when it will become material. >> how does it affect your thinking in terms of investment? you make big investments har 5, 10, 20-year investments. overnight, there was a report out that 40% of the permits of drilling for december are down. i was a bit surprised by that. what do you see? >> well, i think in terms of investments here in north america, companies are able to adjust fairley quickly because it is the nature of itself. it is a well at a time, a rig at a time. so your ability to adjust your investment profile is -- you know, you do have some capacity to do that. for a lot of the big investments we make, these are decade long decisions. so all of the investment decisions we take have been tested across a range of pricing and it accommodates these type of price swings. what you do is ensure that you can invest and be successful at the bottom of the cycle. >> what's the threshold? what's the bottom for you? >> we test across a range down to $40 and up to $120. that is for a number of reasons. it's as dirchly as price changes, because of fiscal regimes and government companies around the world. >> big oil has not been a big -- production in the united states. they haven't invested heavily themselves. is that because it's more expensive to get that oil out of the grouped? >> no. i think we are a big investor in the shales in the united states through our acquisition of xto additionally into the shale gas. we have been expanding our holdings. we have significant holdings in the bakken, the permian, and some in oklahoma in the bakken. it is a huge resource base. so if you're in our business, you have to be in the big resource bases around the world. and this is one of the largest new resource plays in the world, what's happening in north america. >> certain parts of either the environmental movement or the left have indicated that exxon is the major producer of power and energy in the united states. and needs to move quickly to the next generation sources like renewables, wind, solar. and they wanted you to be a solar company now. at this point, some of those investments might not look so attractive. did you go slow with the knowledge that maybe the stone age didn't end when we ran out of stones? >> we look at the full array of energy sources, all the renewables, all the emerging technologies. we have been in the solar business. we were one of the early movers in solar power 20 years ago. we lost a lot of money in solar at that stage. but it's not that we do not pay attention to these things. and we do evaluate their commerciallty, their effectiveness, their competitiveness. importantly, they're going to be material for the energy balance. >> the shareholders? >> and the shareholders because, obviously, that's where our obligations are, too. >> going slow might have been the prudent thing to do even though you're going to be criticized for it. >> well, i think we just look at the commercial aspects of it themselves. if there is money to be made there and we think that is a good investment and we have something we can bring, we're going to invest where we can add some capabilities, our technologies, what we have to bring to that. so we are continuing a lot of work in areas of alternative fuels from the biofuels space. we have a lot of technology capabilities in those areas. >> given where oil has gone in terms of pricing, is that relevant? >> the keystones are an important piece of infrastructure for north america. the canadians are our best trading partners in the world. considering how the u.s. economy will benefit from this enormous energy boom we have experienced is to connect north america from canada to mexico and operate that north american system in a very integrated fashion. >> does the economic still make sense? >> the economic still makes sense. >> i don't know if exxon was happy about it. that is a competition to your sources. >> we're one of the largest investors up there in canada. >> you just said how great it's going to be. but then look at what happens to exxon, you look at what happens to producers, look at what happens to you politically and some of the things that this could cause. who knows what putin -- can you smile and are you happy for consumers that oil is at $60 a barrel? >> well, whatever the market wants to wants to give us, we take. >> are you hedge to this? >> no, we do not hedge. we take whatever the market gives us and i think corrections like this are actually in the industry, they refocus people on the fundamentals. all industries go through these swings where when you get to the top of stock oil, things get crazy. this happens a way of refocusing everyone. and we'll use this internally with our organization to refocus on the things that we can control, work hard on that, be very disciplined. they create our own margins through efficiencies and is better reliability of our assets. >> does it advantageous in that it washes ott the weaker affairs? >> there will always be some sorting out at the margin whys. whether we're at that point at this price point or not is hard to say. but clearly, the barriers to entry to what's happening in this particular explosion in the u.s. with the unconventionals have been particularly low. so there's been a lot of people enter the space. some are good, some are not good. >> do you have an indication about what is going to happen in the middle east? >> clearly, this is going to have some effect. it's hard for me to predict. and it depends ow they're broadly performing. >> i know how it thinks. they're going to think this is going to cause people to dodge big cars again. it's going to delay the migration to renewables. the time when it makes more economic sense to transfer to less -- you know, to cleaner, lower emission type technology. should there be a gas tax levied now, a large one, so people don't migrate back to suvs so we continue our conservation efforts and we use this gas tax to fix our infrastructure? it almost makes sense, doesn't it? >>. >> it is a result of. it is not providing the revenues necessary. now, whether that is done through an increased gas tax or other funding mechanisms, i think it's something that does need to be addressed. i think focusing narrowly on one element of it is probably not a good long-term solution, either. part of the reason the funding has been lower, it's because we've become much more efficient. automobiles and vehicles are much more efficient. how do you want to deal with this over the long run? >> some of these are going to be expensive for the automakers that we've just bailed out. if oil is $ 6/0 a barrel, do we need to keep the same -- that we have, these stringent ones that are going to hurt the industry in the future? >> that is a policy question for people here in washington to deal with in terms of what are you trying too chief with that policy objective? >> if climate change is in the background, we should do it no matter what, right? >> if that's your policy -- >> it is. it will be for the next few years. this is a priority at this point. >> rex, you offered the chair of the business round table education and workforce task force, this is a huge problem facing business right now, finding qualified employees. can you describe how big of a problem it is based on what you hear from your members? >> we just conducked a survey in conjunction with change the equation. we surveyed their member companies, as well. what we found is a serious issue for their companies. today there are something north of 4 million jobs open simply because we cannot find the right skilled employees to fill those jobs. this is symptomatic of a workforce not improving. how do we make improvements in k through 12 education? how do we improve the teacher capacity to given us better educational outcomes? how do we incentivize states to put in high standards and to put an assessment capability to test their performance against those standards and then if he skills gap level, we can't wait 12 years for the first grader to graduate and fill that, we work with a number of local community colleges to put in place curriculum that we are helping them design that will train people, high school graduates returning military veterans and others to fill the jobs we have. in the case of exxon mobil, we have an alliance with nine community colleges in the houston area to train, process operators, we're building new petrochemical facilities down there, we're going to have to have new operators for those facilities and to replace our retiring employees, as well. we have a number of solutions to address this. the real critical issue, though, is improving the educational outcome in the k through 12 system. >> back seat as you mentioned, that's a long-term issue, something that's going to take some time. sglts going to take some time. what we have been proven to do is take those programs to scale. >> rex, thank you so much for your time today. we really appreciate your coming in and we're going to be watching this issue, too. hope you'll join us again to talk about it. >> thanks, becky. my pleasure. >>. >> about this parade. it's a stretch and -- you know, marching along. our parade of ceos is just beginning this morning. still to come, the head of manufacturing giant caterpillar, doug oberhelman will be here. then at the top of the hour, walmart's chief executive doug mcmillan joins us. later, we're going to make a deal with blacktone's co-founder. we've got a packed agenda that you can't afford to miss, so don't. once there was a girl who always mixed and matched. even in her laundry room. with downy unstopables for long-lasting scent. and infusions for softness. she created her own mix, match, magic. downy, wash in the wow. caterpillar, those big earthly machines come to mind. they say that crude prices also affect this company's bottom line. this is caterpillar's chairman and ceo. how big is the company? cat's revenues last year more than the gdp of costa rica. doug's a chairman of the business round table's international engagement committee, and one of the things you stress, though, doug, and, thanks, again, for coming in here. >> you bet. great to be here. that's a nice fact. i didn't know that about costa rica. been there many times. remind myself next time. >> great line. >> yeah. great zip lines too. >> dow component three for three this morning. >> yeah. >> what i noticed is you stress a lot of the equipment you sell for transmission, and that's not going to change, is it? >> shouldn't change too much. the vast majority of the transportation and energy business is outside. gas compression, a lot around marine, rail, and industrial engines, engines we sell to ag makers, to lift truck makers, to handling makers. so some of that gets the benefit of lower prices. oil fracking business is watching that. >> counting on it. this is the renaissance when everyone says where are the jobs coming from for the future in the united states. how can we bring manufacturing back? it's the energy story that we site for the renaissance. hopefully a manufacturer like you will benefit from lower input. >> lower energy -- let's face it, lower energy and inexpensive energy made this country what it is. if you think about it. we had the most abundant lowest source of energy supply for a hundred years, and now we have -- i would like to say we have a renaissance in manufacturing ahead of us as this comes back. think about canada, u.s., and mexico, think what we can do in terms of supplying the world its energy. this risk premium i've had on my shoulders since college in the 70's oil embargo, it's gone. it's good if we apply it right. no federal reserve here, china, japan, could drop a stimulus package in our laps like the oil. overall, it's good, but there's going to be adjustments and transition. >> we went to college at the same time. i've been waiting -- >> i think i'm older. >> maybe a little. waiting for oil to go down. always seems -- i never liked it, 30, 40 a barrel is fair to me. >> that would be low. >> buck and a kwaufrt a gallon. >> everyone would like that, i think. >> we talked to randall about what a lot of your members feel about the current economy, and you probably have a good eidea. you're an international company. is the united states the place to be now for caterpillar? >> well, it is. i would say we are probably the least ill patient in the world. >> nthat's a half empty way of characterizing. >> or half full. next year, we'll be healthierment right now, we are running sub 3% growth. we have a high correlation of 3% growth in job creation. simple. almost in any economy in the world. where we see 3% gdp growth, we are adding jobs. >> if you don't, we're flat. we've been flat two years in a row. two years -- next year, we'll be flight to slightly up. third year at flat. >> they don't believe government numbers when we say we have 6% unfloi unemployment? >> it's hard to say. there's no question there's statistics are what they are, but at the same time, as we said in business round tables and elsewhere, were skilled trades, difficult jobs, service technicians, hard to find qualified people. it's tough. talking about education, we have to work on that. for us, infrastructure's a key play. if you take a road, a pipeline, a bridge, whatever it is, we have people to make equipment. that's what makes us grow. that's a big piece of how we get out of this and raise our economic growth i think. you know, look at infrastructure. you're going to hear this all day. i suspect things are after tax reform, infrastructure, immigration, two or three small pieces of this makes a difference in the next 18 months if we get it done. >> a big discussion on infrastructure on how to do it. the state should do it, the federal government? >> all of the above, all of the above. >> how does immigration play out for caterpillar? >> we have several things going on. we're like everyone else trying to compete for the best brains in the world. we want them to work for our company. we bring them in here. we educate. we give internships, co-ops. we send them home, and we have many examples of this five years later. we see the same folks across the table with us with our competitors. i'd like to keep them here. not only that, but there's a huge hidden economy here in the country. with illegal and legal immigrants. we have to embrace our economy. we need growth. look at japan. no immigration. dropping 20 million people in the next few years, dead economy. we -- these people can help us grow the economy. big piece of what we need to do. >> we've talked about the past in the mining acquisition and, initially, it ran into head winds with the global economy, and then it was good. it was coming back. >> yeah. >> what about now? commodity prices again in australia, in, you know, the oil -- in the strong dollar, in the oil slides, seems like commodities are lower and again mining is hurt again. >> that may be, but i guess the truth about our mining business is we're so low in terms of new equipment production, we don't see how it can go much lower. with that, we have seen, and i think we've turned a corp.er in the after market. we're see trucks come back into production. there's a lot of cannibalization by using parked trucks. we are seeing some of that. what we're waiting for, and it will happen, is simply the replacement sickle. customers run trucks and equipment longer. at some point, that has to stop. that comes back to us. that's going to be nice, not a big boom like in 2010, but it'll be good. >> we ask you more, but we have 30 seconds. you'll be back, a faithful guest, which we love. >> well, we have fun here. good to see you. >> great. >> a plash. >> thank you, doug. >> thank you. when we come back, the man running one of the most powerful companies in the world right now, doug mcmillion with his take on the economy. do you know walmart averages a profit of $1.8 million an hour? that's for every hour of the day, every day of the week, every week of the year. we'll be right back, live from the business round table in washington, d.c. this morning. stick around. you don't want to miss this. 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[ laughs ] -i'm flo! -i know! i'm going to get you your rental car. this is so ridiculous. we're going to manage your entire repair process from paperwork to pickup, okay, little tiny baby? your car is ready, and your repairs are guaranteed for as long as you own it. the progressive service center -- a real place, where we really manage your claim from start to finish. really. ♪ easy as easy can be bye! welcome back to a special edition of "squawk box," the ceo edition live from washington, d.c. another big hour of ceos tackling the biggest problems facing washington and wall street. >> walmart's ceo doug mcmillon on winning customers. >> joined by the chairman and ceo of blackstone as the second hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. we are live in washington with the huge lineup of ceos all from the business round tables meeting in washington where they're attempting to tackle the country's biggest issues from immigration to tax reform, from health care to hiring. the ceo of walmart will be joining us on set, but first, andrew has the top stories. >> let's get you through headlines this hour. early read on jobs at 8:15 eastern time from adp's employment report showing they are expecting an added 23,000 private sector jobs last month. the beige book, assessment of the nation's economy coming at at 2:00 p.m. eastern time. a judge dismissed a lawsuit brought by banks over last year's payment card data breach. becky? holiday shopping season is setting records for walmart, talking strategy, consumer confidence, and fepding off the competition, is doug mcmillon. this is his first -- >> i'm not the chairman, though. >> that's right. as the ceo. thank you very much for joining us today, doug. >> happy to be here. >> we hear stories about what's happening with the holiday shopping season. the nrf with amazing statistics saying based on their survey, sales were down 11%. ibm ease numbers for cyber monday sales up 8%. does that match what you see in the stores and online. >> i can't talk about results until the end of the quarter, but i can give color on themes you talked about in figures it out. there's a transformation going on. the move to e-commerce and how stores work together, and mobile, and we knew, for example, this holiday mobile would be really important for us. it's been 70% of the orders we've taken through our digital business. >> how does that match up to a year ago? >> a dramatic increase. >> doubling? >> happening all over the world. mobile is a driving force in the country's that we operate in. today, we're in 27 countries, and it's just a global phenomena that mobile is taking over, and, for us, finding a way to bring these two things together is a tremendous opportunity, so if you fake what we did over the weekend, for example, the internet's on all the time. customers shop whenever they want. thursday morning before thanksgiving meal, you can be online checking out what the deals are and go into the store thursday night at 6:00, in our case, 8:00, and the next morning experience what we do now with the one-hour guarantee where we can have some items if they are sold out in the store, there's inventory back stream through the e-commerce business to ship to your home. we satisfy all the demands. >> people shop at home, pick up in the store, or how can we track people who go into the store, browse around, and then go home and end up buying online? >> it's small, andrew, but it's growing quickly. you might be interested to know that 10 % of the mobile orders that we're receiving in the country are coming while someone is in the store. >> wow. >> so they are in the store. either we're out of stock or there's something they want that we don't have, they buy it then and have it delivered to the store or their house. it's still small, but it's really growing. people, i believe, and we're seeing this in the u.k., which i think is a forerunner to what happens in this country, people are very interested in picking up in store. either coming in the store or on the parking lot. we have driver-thrus in the u.k. stores. it's popular. they don't want to wait at home on an item, especially if it's a food item. it's convenient after work to swing through the parking lot and pick it up. pick up today business in the u.s. grew this year 50%. >> wow. >> it's happening. >> it feels like it's a water shed moment. >> yes. >> this is the year, a holiday season when a retailer does not have online options is going to be falling behind. >> yeah, customers are getting almost everything. i mean, the real winner in the whole scenario is the customer. think about what's changed in retail over the last few years. they have access to an incredible assortment of goods between online and stores. they've got more transparency relative to price. they got more ways to take delivery, so, for us, we're actually excited about the opportunity to figure out how to receiver the customer in all those ways, and they will choose how they want to interact with our brand. we're there for low price and providing a broad assortment, and they can choose what the channel or the path is. i hear people all the time asking, well, how much of your business do you want e-commerce? the lines are so blurry, it's irrelevant. the question needs to be tell us about the overall business, what do you see from the customer? that customer one dayments to pick it up, the next day, it's delivered to the house, but the next time, they want to pick it up. in the u.k. doing food delivery for 15 years, and now we have store pick up level that's strong, we do 90% of the business still in the store. customers still want to have that demand met immediately. they just want new things. it's new things that drive the growth. >> when we talk about oil prices, gas prices, the consumer, we don't usually think, wow, tiffany's going to do well, gas prices are down. because, that's, affabobviously with walmart, that's what we think about. the lower prices could help you. you can't talk results yet, but was there a discernible, in your view, impact over the past two weeks with gas prices 12? >> i don't think there's any doubt that low fuel prices help us and have a tail wind. >> just a little bit? are there other head winds that come with lower oil prices that hurt you? you sell goose too, right? >> customers are under pressure. there's a health care bill to pay. they need to pay down debt, which is happening a little bit. there are pressures. they shift around a little bit, but no doubt, fuel prices are helping. yesterday, rex from eon says i don't have a thank you note for low oil prices. no doubt it helps. important to remember for us in the u.s., we serve the u.s. demographic. our customer base looks like the bell curve in the u.s. from the income point of view. we have a important middle and lower income customers, and 25% of the transactions are done in cash. it's that customer in particular that if it went into the gas tank, it wouldn't be spent on an item in the store. >> doug, you know, before the segment started, there was a headline on target and data breach. how much money are you guys now spending on data security? there was an announcement on sony, the fbi put out a statement. >> it's one area in the information systems budget where i don't put much pressure on that number. our team does a great job of working every day to try to keep our data secure, but it is a daily battle, and it's difficult. attacks occur all the time. >> do you think the customer just decided to accept it? do you think it's materially -- i mean, look at target, other stores, home depot's come back. how do you think about how the customer thinks about the store in the context of a breach? >> yeah. i think it's still mattering. people are not used to it. i hope we don't get used to it. trust is the number one asset we have, whether it's how we protect their data or the prices we sell to them at, and so we're very serious about doing anything we can to build trust, especially in data security. >> attacks come in every day, though. >> everyone lives with it, yeah. >> when you look at the health of the consumer, you mentioned already that the gasoline helped things here in the united states, but overall, how would you grade the consumer right now? how have we done since the recession in this country in particular? >> i think we are like we were. just 2 to 3% growth range number feels like it's perpetual. there's customers that are under pressure, trying to stretch it to the next paycheck. we see the pay cycle play out the first of the month demand goes up and sales are better. we're like we were last year. as i look ahead to next year, feels like more of the same. >> japan? walmart is closing stores in japan. >> sqwe are, but i'm encouraged about the business in japan. we are growing same store sales, and the teams are doing a great job. >> why close stores? >> they are is stores that don't fit the formats. they are on an acquisition from years ago. they are too large and too many floors, and we are moving to supermarkets in japan. those are doing great. >> the bumpy stretch with pr predates you, but there's -- to me, it's a disconcerning take on what walmart does. i think of 2 million jobs, but there's a perception that the jobs at walmart are, you know, there's minimum wage discussions. there's discussions that these are not the jobs that we wanted to create because they are not high paying. there's, you know, you can't open a store within new york city because that's not the kind of retailer we want in our town. i mean, do you -- do you think about that? do you just do your -- >> our reputation matters, and we have a lot of pride, and we have a great -- >> does it bother you when you see a mischaracterized like that? >> i think the way to think about it and the way we have been thinking about it in recent times for sure is to take the criticism and figure out what makes sense and what can we do to get better. let me talk about employment and min mim wage for a sec. how i view walmart rpgs the reality, social security a ladder. where we set that first rung matters. what the first starting rate is matters, and of the 1 preponderate 3 million soerlgs in the u.s., less than 6,000 make current federal minimum wage. within a few months, we hope to resolve that so i can tell you no one makes federal minimum wage. once in, opportunity is the issue. we promoted in the u.s. last year 140,000 people. these people are doing more than they dreamt they could do. when you are a store manager for walmart, it's a great job. around the country, people took advantage of the opportunities they couldn't have dreamed. i took one, my first job was with trucks in a warehouse. >> you talked about the effect of walmart on the cpi over the last, 10, 15 years, allowing interest rates to be low, and the feds can be accommodative. how much, on cpi, do you think walmart contributed? >> a few percentage points according to the studies done over the year or per year. >> the consumer side, but the labor side where you hear the grousing most of the time, which i think is -- don't -- i said 2 million, that's globally. >> yeah, that's right. >> but that's 1.2 million here paying -- getting a paycheck and paying taxes on that too, right? 1.2 million jobs. >> right. we'll keep working to make it a great place to work, and as sometime goes on, truth will be known that we got great jobs, and our associates are pleased to be there and want to be there and taking advantage of an opportunity. >> what do you think about the health care plan, the position that some business leaders have been concern about is the eeoc actually coming back and saying that you can't have health care plans, wellness plans, that hand out carrots and sticks. what do you think about the concerns? >> health care is a big issue. we have over a million covered lives in our plan, and we work really hard to make sure that we got flexible plans, affordable plans, and $2 1.90 a pay period is the plan most popular, opening price point plan. we have continued to make adjustments to make is so our associates can afford health care. we cover as a company 75% of the premiums, 60% of the total costs considering outs of pocket, so it's a big issue for us. it's a big pressure point relating to costs, and we have to constantly stay on top of it. >> what do you hope to hear from the president today visiting the business round table later this morning? >> yeah, i think it's going to be great to hear what he thinks about tax reform, extenders, those need to be taken care of. what we're hearing is they will be extended for another year. it would be great to have a longer term view as so what happens, but let's at least get that done. bigger piece of reform to take place is important for global competition. i mean, we work against people from other countries with the advantage. it's a reality. so tax reform would be one thing. trade, some of the tpa authority, i think, is something we're supportive of. we want trade progress to be made. immigration. you know, what's the current thinking there? we heard from some members of congress yesterday, and it seems like -- >> what's the walmart position on immigration? >> we think that an appropriate plan would be good for the economy and it's just about growth and jobs, how it's done specifically is for someone in d.c. to work out. >> well, doug, we thank you very much for joining us today and spending time with us. see you again soon. >> thanks for having me. >> appreciate. thank you so much. it's been a busy morning so far, but we have seven more, if you can believe it, ceos lined up here. up next, a deal for deal making and blackstone, and they have been putting money to work, stephen schwartzman after the break. coming up, m&a expert at 7:45, the ceo of the giant advertising group interpublic. at 8:00 a.m., larry fink. at 8:30, i can go all day, the ceo of honeywell, all that and more in just a moment. welcome back to "squawk box" live from washington, d.c. break ups, shake ups, and blackstone is a part of the action. one of the world's largest private equity firms, 2,000 employees, and more than $28 4 million assets under management. i could argue you have more employees thinking about the companies you own. blackstone chairman, steve schwartzman. how many do you have with all the companies? >> 650,000, approximately the 12th largest company in the united states. >> unbelievable number. from a deal's perspective, tell me this, where do you think we -- if you think of deals as a barometer of confidence and where we are in the market, what inning are we in? >> probably in the 5th inning. >> fifth? >> maybe somewhere between the fourth and 5th. >> stocks have been on a tear, valuations have been on a tear. you don't think we're near the highs? >> no. what happened is the economy is starting to do much better. there's a lot of liquidity in companies. you have $2 trillion of cash, and so in the normal m&a cycle, you see companies buying similar kinds of businesses that make sense for positive synergy. that part of the cycle is going on now. >> how much of the little interest rate environment or no interest rate environment impact that? >> that's normally whap lly wha. you saw it with the japanese coming in the 1980s, no interest rates, so no cost of buying anything so every deal was earnings secretive. we have something similar to that. the feds's approach to raising interest rates, i think, is a little overrated in terms of the impact, and i think they are going to be quite cautious. they worked since the crisis to make sure the u.s. has got positive momentum economically, and they are not going to stop that voluntarily, i don't think, and for some period of time so if there's gradual rate increase, whether it's 50 point or a hundred does not make a difference to the u.s. economy. it makes news. you'll have something to do. markets will respond on an interim basis, but fundamentally, the economy grows through that. i don't think the fed is trying to throw us into a next recession. >> you know, it's interesting. we talked about how president obama's headed here later today to address the group. janet yellen is coming as well. who will you pay attention to? what mathers most to your business? >> good to pay attention to both. you know, i think janet yellen does a terrific job. she was at the right hand of ben b bernanke, through the crisis, best record at the fed in terms of predictability of the economy, so she's always good to talk with and learn from, and the president, of course, is the president has that role, helps control what we end up doing or not, so it's useful to hear what he has to say. >> steve, there's a report that suggests you may be trying to put together a permanent capital base. i don't know if you saw the report. >> no, i didn't see it. >> this is november 20th saying that blackstone chases buffet, but maintains traditional strategy. do you plan on putting together a core base of capital? >> well, in the private equity area, there's an opportunity for institutions to buy companies at lower rates of return than we can deliver with our private equity funds, but with much longer holds. so what institutions need in the one hand, everyone likes high returns, which is what we deliver, but long term, some institutions would prefer a lower rate of return. still quite high, but hold it for 10 to 20 years, so that they have no money not at work at that high rate, so it's a different approach, not replacing the normal private business. >> what about calpers getting out of the hedge funds space? they're not getting out of private equity? >> well, i think their returns were not satisfactory for their needs. as a result, they decided to exit that asset class, and, you know, they were running their own program. they run their own program very successfully in liquid securities as opposed to hedge funds, and so this was just an adjustment for them. i think it's a little over blown. you know, in terms of people looking at that. >> do you imagine it's a trend? do you hear from funds looking at where they're allocating assets saying -- question is whether they -- calpers was just late, right? late, wrong, and whether everybody else isn't? >> well, calpers aside, companies use hedge funds as downside protection in markets. it's not a huge part of their allocation at all, but, you know, we're actually the largest manager of hedge funds money that comes from institutions. there's still a very active interest in that area. >> all right. i was going to ask about real estate and where real estate is right now. john gray runs a real estate maybe mewants to buy publicly traded reits. said that in a limited partner meeting of things that could be happening over the next year or two if the fed raises rates, if reits go down as a result of that. would be an interesting thing to do. we've done that in the past. it's really part of the cycle. real estate's been terrific asset class, really remarkable. we just sold a company yesterday for over $8 billion that we assembled in a two and a half year period with 14 acquisitions, and, you know, the rates of return on that are extremely high, and we invested a billion-seven and got out 2.2 billion, and we built the second largest warehouse company in the united states. there's a lot of opportunity in real estate in the united states, but particularly in europe where things are growing slowly, and people are very pessimistic, and so the yields that you can buy and then you borrow on top of it, you can create very, very good returns in a no-growth environment. >> back at home, single family, multifamily? >> well, multifamily, interestingly, is where all the cranes are, and it's always a worry when you see a lot of cranes if you're a real estate investor because supply goes up. we're the largest owner of single family homes in the united states, about 50,000 of them, about 9.5 billion dollars worth, and that area has done well, certainly as an investment. the house building cycle is a little below where it should be because the regulatory environment made it difficult for people to get mortgages. >> right. >> what's the synergy of all the single family homes? that's maintaining single families homes has been a tough job, and you put a lot of them together with the thesis that somehow you can bring down the costs of maintaining those homes. does that work the way you wanted? >> i don't think that's the thesis. >> no? okay. >> the thesis is if you buy at the right time, you have appreciation, the market was done 40% from the top, and we kpnlted appreciation. we wanted to fix up those homes to make sure they are great for people to be in them. that employees a lot of people. we set up a monitoring group to make sure that if there's a problem, it's fixed. >> when do you exit that investment? >> we'll exit it at some point over the next few years. there's a lot of ways to exit. you can create a reit. you can take it public. you can sell individual houses. you can sell them all together. you can sell them in geographic pieces. there's a lot of ways to realize on that, but what's important is that we've created a place for other people to live in that's high quality places, and, you know, we charge them rent, and they get to be in excellent school districts, so it's a win-win for the people involved in this, for our investors who are pension funds. we manage money for half the pensioneers in the country, so they benefit from this. >> wow. >> thank you for joining us. >> good to see everybody. >> absolutely. when we come back this morning, considering buying a streaming device this winter? new survey data shows a shakeup in popularity among the top three brands, that story right after this. then the ceo of ad giant interpublic, the group behind ads like coca-cola, verizon's, can you hear me now, and chevy's, "like a rock." ♪ ahhh-ahhhhhh. liberate your spine... ahhh-ahhhhhh...aflac! and reach, toes blossoming... not that great at yoga. yeah, but when i slipped a disk he paid my claim in just four days. ahh! four days? 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(announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting are. and trading features, plus powerful mobile apps so you'reu because at scottrade, our passion is to power yours. welcome back, everyone. live from the business round table meeting in washington, d.c. today. among the stories this morning, teen retailer ab com abercrombie & fitch, sales dropped by 10%, you see the stock is down today. >> and the battle of the streaming content to the living room is heating up according to the survey. google's chrome cast took over apple tv. according those who purchased a streaming device, croakcast was second and apple tv was third with 17%. fire tv stick was fourth with 10 % of the those are the little ubs devices you stick in your tv. that's the google chromecast thing. the apple tv are the boxes. >> yeah. >> interesting. >> it's official, there can only be one kim jong un. the people have been forbid p to use the leader's name. in 2011, his father ordered citizens with the same name as his son to get new names. i don't know what it means. >> don't they know imitation is the highest form of flattery? >> nothing i read about -- i don't expect to understand what goes on there, and i just read what it says. there is a movie -- >> yeah. >> "the interview." >> with seth rogan and the green goblin. what's his name? hand sm. james dean type character. there's an actor portraying kim in that movie -- >> a little more effective than the actual guy. >> well, that's in the eye of the beholder, i guess, becky. >> watch yourself. check your e-mail now. i'm not going to north korea soon. >> apparently, they are coming here with all the hacking. >> sony? >> yeah. >> anyway. >> did they hack the movie? >> that was part of the -- >> that was part of the -- >> that's what caused them to hack the other one. by the way, they just started shipping the salaries, did you see that? of all the people at sony and hollywood. they made it public. well, anyway, the parade of ceos continues here in washington. coming up next, talking deal making, m&a is back in a big way, and ken moelis the most recognized adviser behind wall street's big deals. he's joining us right after the break. impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? 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with us at the business round stable is an expert on this topic, ken moelis, founder of moelis and company, you advised on 1 trillion since 2007, is that true? trillion? seven years? >> dollars. >> in dollars. a few more yen. >> becky mentioned it's on the front page of "the wall street journal," getting a seat on the board, and how much do you think the m&a activity is driven by activists getting on the boards and forcing or at least pushing ceos to explore breaking up or splitting up or selling off piases of the business? >> well, it's the same forces, andrew. you got -- there's a low growth environment, and i think you also have -- people talk about interest rates staying lower longer than anybody expected, so you know, allocations are an issue for people that they have not thought about. how do you deal in an environment where interest rates stay low for a long period of time? there's activists triggering people to think about that. this is really an m&a boom. i think it's driven by trying to take costs out from the cost of goods sold line down to the tax line which are just different ways of taking costs out of the income statement. >> we often talk about m&a in the contest of the buyer. you have a view about the seller. when you're a seller, you have to either -- you have no confidence in your business at that point, or prices 10 high i take it? what's the thought process? >> i hear morning after morning watching you guys talking about the confidence and the buyers driving m&a. that's an interesting point that you need a seller in the transactions too. no one talks about the second half of the transaction. i believe we've buyers. from the moment the crisis ended -- for a while, people were in the cellars with guns and canned foods, but the minute the crisis was over, buyers asked for anything to buy. there was plans to buy quality assets at deep discounts. >> those sellers were stupid. now the ones selling now are probably smarter. it signals a top. you're right, there's buyers and sellers. >> there were no sellers back then. sorry, but the interesting part there were not a lot of sellers. sure, there's going to be someone who has to sell for some reason. >> lucky they didn't, right? equity holders too. >> today there's people waking up, saying, okay, well, in 9, 10, 11, 12, they are half of what they were in 2007. now they are 50% higher. >> makes you worry if the selling -- people with comfortable selling, isn't that not necessarily a great forecast for the next couple years of m&a? >> no. i think it actually -- bus there's always buyers. interesting. take a quality asset and you offer it for sale, quality, there's always a buyer. buyers are in for different reasons, long term, 20, 30, all different strategic reasons. talk about housing, in the business of timing cycles. most strategics are not, but in the business of putting together an effective, permanent business for 20, 30 years. those people might sell for other reasons. >> steve did okay. remember selling at the top, always making out on that deal, right? that was not a great -- >> no one knows what the top is exactly. >> sam seems to. >> where do you think we are? steve mentioned we were in the fourth or fifth inning? >> earlier. i think you're seeing quality businesses willing to accept the price, and there's people also, boards and ceos recognize that no matter how many times they grow at 4 %, which has been every year, we end up growing at 2 or 2.are 5. that's a hundred percent difference in the growth rate. you have people saying, i don't think we'll make the numbers without cost synergies. if we want the bottom line, we need to make synergy. >> what tells you we're in the seventh inning stretch? what are the signs? >> i think when capital becomes hard to obtain. so quality businesses will get -- one of the reasons people, boards, ceos enter a transaction is the transaction is completed. probably the riskiest thing a corporate undertakes is a sale because the risk of noncompletion to your employees, to your morale and brand is high. when capital is available as it is now and liquid as it is, once you enter the market, chances of getting successful completion is high. that's a capital availability issue. >> ken, i'm remiss since we're in washington, d.c. not to ask, but we have to run in a second, inversions. since the new -- i don't know if it's laws or new rules, but what are you seeing? what do people talk about in the board rooms? >> that particular inversion, international inversion, is cloudy, risky, you have to assess chances of success. i think people factor that into the conversation. andrew, inversions are just, as i said, three places to take a cost out, cost to goods sold, sgna, and taxes. you have to expect managements to look at that. interesting because we don't talk about inversions from california to texas. >> right. intra-u.s. inversions going on forever. >> right. daily interstate inversion, and no one talks about that as a problem. it's -- you've got to look at the costs in the environment. it's going to be a low-growth environment i think when taxes are a valid place to look. >> ken, thank you this morning. great to see you. >> thank you very much. when we come back, a closer look at the world of advertising through the fourth largest advertising company with 935 agencies worldwide. that's a long history of success from classic commercials like got milk to the current lebron james campaign for beats by dre. the ceo will join us right after this. dad,thank you mom for said this oftprotecting my future.you. thank you for being my hero and my dad. military families are uniquely thankful for many things, the legacy of usaa auto insurance could be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. we'll have the same conversation -- no, maybe not. don't count out media, interpublic is the advertising giant behind dozens of brands you know including beats by dre. that campaign with lebron and produces ads for pizza hut, for patron, and many other ad agencies. and we have more now on how competitive it is in the business, and we do talk about crazy things. we talked about "bewitched," wracking your brain. seems like a hard time. you don't have to, you manage the place, but creativity and something that sticks and that might be funny, but causes you to buy something. that never changes. that's why people are in the business. >> no matter how much you talk about digital versus tv, fact is, you have to have a creative big idea. >> content. >> yep. >> we keep talking about that here as well, and you would say, and note splitting up between the different types of media now, but the growth is doable? you call it okay? >> 7% of the the quality. full year, we have 5% or better, hopefully better. >> how is that? >> that's okay. >> it's okay. >> it is. historically the industry is at 5%. we think 3 to 5%. the forecasts for the year, in the third quarter, doing over 4%, and that's on a global basis. there's margtss like latin america and asia doing better e and there's europe which is challenged. 57% of the business is from the united states, so that's helping if we put in those numbers. >> if people in the last five or ten years, things change, figure out what to do. it still has not changed that much, right? i mean, but is there something on the horizon that changes your business? >> well, clearly, the shift to digital is -- >> managing that okay? >> yes. >> we have to navigate through a fragmented environment. that's what we're paid to do. we're living in a data diversified media environment, and we have to use that data in analytics and help the clients put money to work where it's most effective. you know, we're predicting that in two years, digital out paces tv. >> tv and broadband? >> just in the advertising span. >> wow. >> that's a major shift. it's all part of navigating how you reach the consumer, and if the consumer's spend all time on digital, then that's where we have to spend our money, and -- >> ads work on digital? >> yes. in fact, what's interesting about digital is because of the analytics and data with it, we target market individuals specifically in terms of the markets we're looking for, and that's a big advantage. >> figure out i'm looking for a new car. >> exactly. >> hire kids out of college i think. the average age has to be younger than most. not my age, that's for sure. andrew, you better take over. >> right. >> all about digital here. >> what about madison avenue strategy question about your firm, which is, as you know, that way at management taking stake in the company, would like to see, we think, a sale of the company or something. we don't know what yet, but i wanted to get your thoughts on just being independent, do you need to be independent? we saw size. wpp the size of this, trying to do its deal, and where do you stand? >> a major force in the business with 45 billion of media in a year with the clients. there's more than enough scale to have a seat the at table. mergers are not necessary, certainly with the scale we have. the issue is enhancing value, and, certainly, the l.a. group, should be happy campers now given performance of the sale price, out performing peers in the market place, and they are sharing in that, and so like any other investor, they are looking for us to enhance shareholder value. that's what we are doing. >> are they happen? have you spoke with them is. >> we meet with them all. that's one of the things we take very sleers lseriously in makin there's transparency. >> they have a contest for board seats. >> usually the amount of fight, if there's something going wrong, we're out performing and delivering on the targets, and, yeah, we have a ways to go in expanding marginme memargin. we agree we have to do better in expanding margins, but this year, we grow a hundred points, hopefully better, and on track to grow what we wanted to achieve. >> bigger is not better? >> certainly not. we have enough scale. we're in 120 countries, 147,000 employees. we have enough scale to compete with anyone. >> you figured out how to advertise on twitter. >> still working on that. >> social media's -- >> twitter five years from now -- >> it may not be twitter, but there's going to be social media. face it, it's a big part of how you reach those types of -- >> this is social. >> this is not. >> i know. different age group. [ laughter ] >> we are. >> all right, michael, thank you. >> that's what i say. set up some satellites on the college campuses. >> absolutely. >> great to see you, michael. >> same here. >> when we return, stock stories to know ahead of the opening bell, and later, jason furman, economic advisers joining us in washington to talk tax reform, imgragsz, and possibility of a government shut down. we're back in just a moment. shabing a brown grats bo is, you never jim jam river flab dry ris. bliss pounds hazy dray? drywall sh-boop leaver - murray. hey, big bog panorama corn salabaty? dude, squibble bits. mareyayzee. mormal snap jebby rolban jebby deetle flosh. [laughter] eh. now's the time to get in the loop. just look for our fall tv picks with xfinity on demand. huh. quickly find the season's hottest shows, huh. quickly find the season's hottest shows, with a handpicked collection all in one place. only from xfinity. you can see i'm going to talk now about stocks to watch. i saw it. it said "stocks to watch." jcpe jcpenny under pressure, competitive changes in the retail industry make it difficult for penney's to achieve financial goals. meanwhile, abercrombie & fitch falling this morning. they bet street estimates, but revenue was before forecast and same-store sales fell at greater than expected 10%. they actually use the the word "tumble." i guess double -- you need -- >> 10% is a big deal. >> for a tumble, you need 10%. >> we'll go with that. >> the merchandise, right? they took it off? they thought it was going to help them. >> maybe not. >> apparently not. >> the logo. >> a lot of stuff. >> my -- you're in the allowed to wear those. >> not allowed to wear them. >> much more ahead this morning from the ceo at the business round table. black rock steve's executive, larry fink r, own the health of the economy, and honeywell and frontier communications moments away. stick away. we'll be right back. "squawk box" in the middle live from the nation's capital. this is the business round table with the who's who of corporate america. >> you fill storage up, inventories up, but at some point, it has to show up in the price. >> face it, lower and inexpensive energy made this country what it is. >> incredible change of retail, there's a transformation going on. >> starting with larry fink with market predictions for 20 15. >> plus, manufacturing, energy prices, jobs in america, and the great health care debate with h honeywell chief. the third hour of "squawk box" begins right now. ♪ welcome back, first in cnbc business worldwide. we are reporting live from the nation's capital this morning with an exclusive look at the business round table. we've. talking to some of the most powerful leerz in corporate america all morning long and heard from walmart's ceo, exxon-mobil, at&t, and cat pill hear, and in a moment, larry fink, more money than all those guys, of blackrock is talking oil, fiscal issues facing businesses everywhere, and where economic growth comes from in 2015. blackrock, what, $3 trillion? >> a little more. >> 4 trillion. more than 4 trillion. >> i'm happy, i'm not complaining. >> what's the official number? >> 4.5. >> who's counting. >> adds up. >> later in the hour, david cote is here, doubling the stock since he took over, and the chairman of the counsel of economic advisers, jason furman, will be here. he was on set not too long ago in new jersey. reacting to the conversation with all these. larry, heavy hitting ceos this morning. not disappointing. giving us a look into the obama's message, and first, andrew has the morning's headlin headlines. >> adp employment report due in less than 15 minutes saying the economy likely added 223,000 private jobs last month, of course, ahead of the government's monthly employment report coming on friday. president obama expected to announce a pick for a new defense secretary as early as this week likely to pick former pentagon official, ashton carter k taking over from chuck hagel who resigned abruptly last month. 40% of the ceos plan to hire more workers up from 34%, but the chief executives have a warning for washington. the corporate bosses they two big things holding back the pace of domestic spending are the nation's tax policy and regulatory issues. >> less that 90 minutes away from the opening bell on wall street, watching the futures this morning, and now things are relatively flat after a strong day yesterday when the dow was up triple digits with a new high. best day since november 5th, best day for s&p 500 since october 31st. on the heels of better than expected spending in construction. we'll see what's happening near the opening bell. at this point, the markets are relatively flat as well. across the board. looks like things are within just a few points of flat. >> the nation and the world going through an oil shock. crude dropping more than 30% in the last six months driving down prices at the pump. earlier in the show, we asked exxon-mobile about how price wounds affect his company's investment decision. >> for a lot of the big investments that we make, around the world whether it's in large gas projects or deep water developments, they are decade lonic vegsment decisions you take with the view they have to perform across a broad range of pricing. all the investment decisions we make have been tested across a range of prices accommodating these price swings, and what you do is ensure that you can invest and be successful at the bottom of the cycle. >> talking more oil and business investments with larry fink, chairman and ceo of blackrock, the firm the largest in the world. they have -- going back on forth on the number, but 4.3 trillion? >> four and a half. >> 4.5. >> by the end of the day, 4.6. it'll keep going up. >> one of the fund manager, sam beck, quoted hours ago saying the oil route leaves portfolios, quote, outdated. what's that mean if. >> well, i object to even the commentary of route. you know, we are -- we're overlay i overlaying huge negativity about this. it's a spectacular event for the world. it's going to create -- it's going to move capital to different places, and, obviously, when sam was talking about it, you look at the portfolios, you have to reassess portfolios. sam is in the emerging market, eastern european, russia, ukraine, so he hassed to do better. >> he has to think about those things from his vantage point where he's investing, but the reality, this is spectacular from india, china, japan, prt american consumer, and for europe. this is is going to help draghi, the europeans in terms of restabilizing the european economy. i just find is shocking that the narrative is negative. this is an incredible tax cut more americans and everyone else around the world. now, does it destabilize venezuela, iran, russia? possibly. does it make some fracking facilities to be less profitle? yes. do we have some corporate credits that may be in trouble? the corporate -- high yield market went from 5% waiting in companies to 18. i'm confidence some of them will be tested here, and now the question is, what is the length of time of the lower oil prices? i think if you follow the saudis' actions, they are stating, and it was said earlier, the world has more supply than demand. saudis want to keep their market share and willing to watch the prices to fall, resell, and it'll shut down in the short run soft m new oil rigs slowing down activity, but i believe it's going to set the paradigm of oil prices where we used to say 100 to 110, but i think it's closer to 80 to 90. >> for snoung. >> until we see global demand picking up, crossing over the level of new supply and new creation of oil ratings, and -- >> 7 a to 85 is not out of the question? >> no. maybe it's -- i don't know. used to a cartel, what was when cartels can't control prices? >> when -- this is fine, this is good. we talk about lower prices on so many products whether it's a computer, anything else. here we talk about one of the most important elements of our lives, you know, petroleum for heating, driving the cars, and the natural gas for manufacturing goods and items, this is really good. >> hey, larry, i agree 100%. it's great, but i can't help but wonder about some of the potential instabilities it causes in a place like venezuela, a place like iran, a place like russia, to see prices down -- >> we normally don't care about them. >> we don't, but from a geopolitical perspective, if they are desperate, what would they do? >> might invade. >> i don't think so. he may. >> he's already done it. >> there may be positive behaviors. you know. i'm not worried about average behavior from venezuela. i'm acustomed to that behavior. >> given what's happened, is the stock market properly reflecting, are companies properly valued given what oil is now? you came on, i think, it was october 15th, told us we were at the bottom, a brilliant call at that moment. what's the call now where the stock market is, and to the extend that people at home need to start thinking about rebalancing, if you think there's opportunity relative to the new issue. >> so, lower oil prices will allow for nor qe. bank of japan, in october, 17 from when he announced a level of quantitative easing because oil pricing of lower and fieging depolice station issues, and japan can do that now. there's more stability for europe, you know, and so i actually believe, and one thing i said that i thought the fed may be late in easing and tightening, and, now, obviously, the lower deflationary pressures of oil prices, they could keep rates lower longer, which means equity markets are going higher worldwide. they will continue to go higher. most importantly, i have -- since i last saw you, toured many parts of the world. i visited many companies. i actually believe the duration gap of assets and liabilities have gotten wider. most predicted higher rates. they had a portfolio that was going to be -- that was short their liability, and so i believe the gap widened. there's the issue of longevity on pension funds. hearing pension funds reassess their liability. do they have to have -- extend longer? i actually believe the biggest issue i have is we still have great demand for securities, financial assets. we completed the deleveraging process of europe after the bank stress test. you may see banks lending again. i see it a robust percent for the financial markets subject to, obviously -- >> what about bonds? >> i think there's a high probability bonds stay in a narrow range for some time until we see real growth that forces behaviors of different makers, so we'll be in a very low range and maybe the new range in u.s. treasuries is 2 to 2.5. it's not 2.23 or 2.75 or 3%. you may see between now and year end, if i'm right, a bunch of insurance companies covering their gap or bonds at 2% again. there's a higher probability of interest rates down in the short run. i don't believe it stays down that low for long term, but there's high probabilities of markets rolling because evaluations of bunds trading at 80 basis points forcing behaviors and forcing investors into equities. >> you mentioned high yield debt of the energy companies. do you just stay away? >> we're light, if not short credits in energy in the young companies that came to the high yield market. and so we have a new tral to a negative buy on that. we're not making any large statements related to where the credits go. if we see a prolonged level of lower oil prices, if joe is correct saying maybe 75 or 85 is the new pair diparadigm. there's stress credits. >> every time the round table meets for the last six years, it's packed with regulation every time. you know that's why -- in your heart of hearts, do you think anything good happens in the next two years? we've done this. the economy did all this without that. maybe help from the fed, but the energy revolution is without really much? >> it was all private sector. >> i know you guys would like some good things to happen. do you think in your heart of hearts anything happens? >> i think ppp will happen. >> pacific partnership? >> i think we under estimate how important it is, but trade in asia is the most dome innocent area, where the trade is stable with our trade with europe and our trade in asia, it's grope exponentially, i think there is a realistic probability of some form of tax reform. >> it's the law. >> it's going to take awhile. you know, i think the con cement would be has to be revenue neutral. you have that concept of revenue neutral, companies have to accept they do not get tax deductions they previously get. it would be some form of, you know, a 26 % flat tax rate. >> do you think the business round table still supports it? the devil in the details. >> it's difficult. more important by, and a great reason for our country's success is the research and development in so many different industries. think about the industry revolution. it's rd in the united states. can you continue that without tax represents related to research and development? i'm not an expert on navigating that, but i think it is going to be difficult in the details. i'm questionably the united states company's facing a high tax burden overall. now, if you subtract deductions, that may not be the highest tax place in the world. people assert that. when you look at the deductions you have. >> some is -- some makes capital go where -- the reason they have lower tax rates is because they move facilities offshore. >> most times people expand overseas because of the demand overseas. let's be honest. i mean, there are -- if we have cheap labor rates, lowest cost of natural gas. there's a strong reason why so many european companies move to the united states in that effect. i know you -- and -- >> so, again, we have to thank you, larry. steve coming up with adp numbers in a moment. appreciate it. >> thanks. >> right now, going to steve with the numbers. >> reporting that payrolls in the month of november rose by 208,000, a bit shy of the estimate, which is 223,000. october revised up by 3,000 to 233,000. goods producing manufacturing in production up by 32. services surged by 176, and there's the nonfarm payroll estimate, 230, is that in line? depends what happens to government, again, not included in the adp with what the government reports friday. ten puts it closer, otherwise heavy on the non-farm payroll estimate. here's the details of the report. construction up by 17,000. good number. manufacturing upedly 11,000. trade, transports, utilitieutil about 50,000, and finance keeps going, and business services 37,000. small business had a pretty good month of hiring there, 101,000. this survey is consistently at odds with the nfid numbers. medium bid is 65,000, and large business, the early job adders in this recovery, and them they slacked off here at 42,000. becky, pretty good number, consistently above 200,000 here month after month, and it's nice and roomy here with you guys gone. i can get used to this. >> all right. steve, thank you very much. we'll be watching that very closely and try to figure out what that mean for friday's numbers, and at this point, there's not a huge reaction from the market. following that, though, when we come back, talking about corporate america's push for tax reform with the ceo of pricewaterhousecoopers. next, jason furman joining us, and the nation's largest providers of dsl, frontier communications ceo is here." squawk box" will be right back. welcome back, everybody, growth over the next year, pricewaterhou pricewaterhousecoopers asks the question of corporate leaders worldwide, and joining us now is dennis nally. great to have you here today. >> great to be here, thanks. >> what are you finding in the united states? based on the business round tables survey, corporate leaders are not confident about next year, not like you would expect. >> not as confident as you might expect, but more confident today than 12 months ago, which is important. that's the early indicators coming from the global ceo surveys. that's look from around the world. >> breaking it down country by country, is there a sharp distinction or the same? >> i think it's different. quite different in terms of the developed markets versus developing markets. for example, look at the u.s., higher confidence levels in europe, not surprising, higher confidence levels in india, china, interesting, parts of asia, so you do have to look at the different geographic areas for a better feel for it. >> interesting. larry fink, who we just spoke with, mentioned all of those countries as countries that would benefit greatly from lower oil prices. do you think that's a direct reflecti reflection? >> i think it is. i think it's a factor. i think the economies move in different directions, driving levels how ceos think about the future. >> taxes are an issue all yearlong. playing out here in the united states. what do you hear from the ceos that deal with routinely? >> interesting. we say the number one issue that's out there around the world ask regulation. that is the top issue that's on the minds of ceos today. the second issue is taxes. if you go to the u.s., it's the exact opposite. u.s., you know, taxes are number one, and regulations are behind it. you know, the bottom line is we have tax systems put in place around the world that are not fit for purpose. they were put into place years ago in the case of the united states as we know, last major tax reform was 1986. massive need for changes to update that making it consistent with today as economy. >> what we hear time again is taxation is a problem here in the united states. why does it rate high globally? if we pay high rates, other people have to feel good about the rates they pay. >> one thing from the financial crisis is we're dealing with global financial markets. everyone in the world use tax systems to insent jobs and investments, and so if our tax systems are not competitive globally, that's a disadvantage whether you're in the united states or parts of europe or asia. the tax systems put in place by individual countries, you know, dictate economic policies that are put forth to drive jobs and investment. ? dennis, i want to shift gears a bit and just talk about the work force. i read it. ism to know it it's true. two-thirds of the work force are millennials. >> yeah. >> younger than us at the tail. >> exactly right. i have 200,000 employees around the world. we hire about 42,000 people a year. the average age of the pricewaterhousecoopers is 28 or 29 years old. >> what turn do you have? >> 14 %. >> because it's a traveling job? >> it's a great place for individuals to start their career, get great experience. if you're 21, 22, 23, figure out what you want to do for the rest of your life, some want a career in professional services, others want other things. it's a great venue to start off to find out what you want to ultimately do. >> in terms of millennials, what's the most distinctive? >> millennials want more flexibility than any of us ever dreamt of. when i started with a firm how many years ago, it was a clear, you know, lineal progression, accepted that or you went and do something else. today, the environment is so much different. it's really, you know, how do you create the environment to allow people to achieve what they want to achieve from a career point of view, be successful, but do so more consistent with the way they want to balance careers. it's a different way to think about business, and thinking about how we attract best and brightest is the challenge in front of us. >> word to have the word coddle jump in the brain? i don't think so. the folks are just as committed as any one of us in terms of what they do from a career point of view, how they want to dwoch skills and make a difference, but they want to do it in a different way. that's key. we have to recognize that it is different than what we grew up. >> dennis, thank you so much for joining us today. >> appreciate it. >> thank you. over there now. okay. let's get a check on the futures right now after the adp employment report, down 255. s&p's up 10 cents, so flat across the board really. nasdaq up fractionally. coming up, honeywell on tax reform to health care to the global economy. she was named one of forchip's most powerful women in business, maggie wilderotter. she's going to join us and andrew can intro her for fun. be right back. to help spread some holiday cheer. before earning 1% cash back everywhere, every time; and 2% back at the grocery store. thank you! even before they got 3% back on gas, all with no hoops to jump through, a couple was inspired to use their bankamericard cash rewards credit card to throw the ultimate ugly sweater party of the season. that's the spirit of rewarding connections. apply online or at a bank of america near you. coming up in washington, honeywell chairman, david cote, and where the white house stands on the state of the economy, counsel of economic advisers chairman, jason furman, will be here. a lot more coming up live from washington, d.c. in just a moment. >> the equal employment opportunity commission is taking aim at controversial corporate wellness programs offering employeeing inacceptabilityives like things of losing weight or quitting smoking. they file suit against honeywell, and they got a reprieve where a judge declined it issue a restraining order on the program, but the issue is far from resolved. ceo is our special guest, so many things to talk about. >> an interesting start, joe. country's great, economy's moving, what else is to talk about? >> what was i doing? see me just -- they make me read it. >> oh, it's not your fault. ? they make me read it. they get mad. >> what do you want to know? >> part of obamacare, i mean, if you look really hard, you can find good things in there. this was one of the good things that there was -- try to do it, try to comply, and you don't put any negative things about the law in the business and effects on business, and they sue you for doing what they wanted you to do in the first place. >> i was more than a little surprised by this suit, as you would imagine. in fact, infuriated is a good way to put it. from the beginning, since getting to the company 13 years ago, we work on how to improve quality outcomes for employees. anything on the medical side. i'm a believer better outcomes for employees result in lower costs for employees. they go together. i thought it fit well. all we're asking is that they get a biometric survey -- blood pressure, cholesterol, weight -- basic stuff. we don't know the datament only they know the data. if they don't get the survey, they have to pay a hundred bucks more a month for the policy. we don't refuse anybody coverage. the point is, why should people who don't care about how they're living, why should they be taking advantage of the people who do care and are doing something about it? you have all the people who say i can take care of myself subsidizing the people who don't care. it was not right. >> would it be different if you say there's a hundred dollar discount -- a discount? >> you know -- >> i think it's a personal -- >> what i learned, and this was a book "nudge," tremendous, which says people are three times more likely to respond to a negative to that positive. it's really -- i got fascinating stories on the medical side that show that. it's more like the fact if you say you'll get it -- you have to pay more, has a greater effect than saying you pay less. it's interesting. that's why we construct eed it e way we did. we have 85% compliance now. it's not like people are having a hard time with it. >> the e, oc is different than the obama administration. >> totally independent. that's the frustration here. i'm not speaking for them, but if i was the administration i would be frustrated also saying this is what we want people to do, and why would this be -- why would you do this? they are an independent agency. >> okay. business, you -- i mean, it's been good for a while, and how long have you been in honeywell now? >> 13 years. >> unbelievable. we remember the fight for it and -- >> i was not there, thank god. >> it's more than doubled -- >> oh, yeah, yeah, yeah, when i was there, it was 33, and now we're a hundred. >> plus dividends. >> dividends more than double. >> okay. this point in time, a snapshot, everyone on says business is okay, but nothing owner okay. >> i was going to use the same word. a shame everyone else used it. okay is not great. it's not bad. if there's a shock of some kind, i don't worry about recession. there was not a recovery not worried about the recession, and as you know, you give me a hard time in the past, i've been more conservative about the outlook more than anyone else working to our advantage. goes our way. >> flat with last year, not the 3% everyone said was in the bag, hoping, and low 2s. >> short on that one. short of three? >> of the three unless we do what we're talking about. so if tax reform is serious, if an infrastructure bill is serious, immigration gets done. taxes. budget. >> any one of those things push above 3%? >> i think you need a combination. there needs to be this feeling that the country has a real momentum, and that things are changing, and that we're really supportive of business again. to the extent we can start doing some of the things and get that feeling going again, yeah, i think there's a chance to get above 3. europe doing as poorly as it is, it's a drag on us because they are the biggest trading partner. to the extent they are at 0, that's a drag and will hurt us some. oil prices, of course, gas prices help also. >> sure. >> i think if we can start doing some things here along with what we're seeing on oil, i think it could get above 3, but so far, the right bet has been to assume nothing's going to happen. >> yeah, and i'm split because i think when things are going okay, policymakers, i don't think, feel the urgency to get serious, but then we had a time when things were not okay three, four, five years ago, and they didn't do anything then either. there -- >> yeah. >> it's not a business friendly -- well, it's tough -- >> when it comes to the history of it -- >> every year you say the same thing, regulations and taxes. >> yeah. >> if someone said every year regulation and taxes was holding back hiring, and it was my job to get people hire, my job i was elected was the get people hiring, and every year the guys say it's regulations and taxes, it might sink in to do something. >> a different dynamic now than we did before. i actually believe the shift in the senate in particular is going to be hugely beneficial to getting something done. if we didn't have that, there would have been a greater chance that status would have been the previous five years. >> because now it's in the light of day? >> no. because there's republicans who have both houses, and they want to show that they can get something done over the next two years because of the big presidential election. you have the president with two years left to drive his legacy. that, to me, an interesting combination to try to get some thing done here that would have not existed without that change, so i've said you can't be a ceo and not be optimistic. i think there's a possibility here that did not exist months ago. >> saw the slightest thing reid tried to do working with camp and others, just the extender, just another year, slightest thing, nope, veto, immediately threatened a veto. why would that change after january? >> the issthere was the child t credit was not included. >> did he forget? >> i don't know. i was not involved in that one. it will get sorted out by year end. >> it's voiding a tax increase. it's not like it's a big benefit, but it's a start, right? you have to start somewhere. >> people take it. >> it's a start. >> new hampshire. >> houw long you been here? >> should have heard me before. >> my word. >> thanks for joining us. >> always fun. up next with the president to speak at the business round table in a couple hours, find out where the white house stands on the state of economy. right now, jason fur man, chairman of the counsel of economic advivisory joining us after the break, and the largest dsl provider joining us, stopping net neutrality and the telecom business. we return in just a moment. ♪ my baby drove up in a brand new cadillac. ♪ ♪ look here, daddy, i'm never coming back... ♪ discover the new spirit of cadillac and the best offers of the season. lease this 2015 standard collection ats for around $329 a month. opinions. there's no shortage in this world. who do you trust? whose analysis is accurate? how do you make sense of it all? a simple, unbiased stock score consolidated from the opinions of independent analysts... is that too much to ask? nope. equity summary score, powered by starmine, will help you execute your ideas with speed and conviction. and it's only on fidelity.com. open an account and find more of the expertise you need to be a better investor. e financial noise financial noise financial noise financial noise it's more than the car.er. for lotus f1 team, the competitive edge is the cloud. powered by microsoft dynamics, azure, and office 365, the team can gain real time insights and instantly share information around the globe. when every millisecond counts, staying competitive begins with the cloud. this is the microsoft cloud. welcome back. jcpenney under pressure in premarket trading, cutting stock to neutral saying competitive changing in the retail industry makes it difficult to achieve financial goals, and abercrombie & fitch falling this morning. quarterly profit beat street estimates, but its revenue fell below forecasts, and some same-store sales greater than expected 10%. president obama is set to speak with the business round table in a couple hours. fed chair janet yellen will be here and joining us now is jason furman, chairman of the president's counsel of economic advisers. jason, thank you. good to see you. >> good to see you. >> and in new jersey with us on set before, but glad you were able to stop by today. you hear from the business roundtable, and i've characterized it earlier today as it almost -- it has less than an effect. taxes and regulation, taxes and regulation, that's all we hear they complain about keeping the economy blow planned. whenever i ask about it, you say the administration knows about it and wants to do something, and yet we never get anywhere. >> first of all, the economy's doing really well right now. we had the longest consecutive streak of job growth, 10.6 million jobs, pace of job growth is picking up, gdp growth picking up. >> all relative. below the potential that it could be. >> no debate we should be doing better. no debate at all. >> okay. >> the question is what can we do to do better? the president is coming here today to talk to the business community how to work together to advance our economy, and he's going to talk about three things. he's going to be talking about what we can do to reform our tax system, bring rates down, close loopholes, and what we can do to invest in infrastructure, and that's something we can do as part of the tax reform, and what we can do to expand global trades with partners in the pacific and with europe. those are three areas that we could really work together with the business community to help -- >> regulations seem to be increasing. i don't think there's any hope there in terms of -- i mean, we've got new ones every week whether it's -- not to go down the list with you, but -- >> look at the biggest ones the president's done this year, the clean power plan, for example, for power plants, and that has a very high set of benefits relative to the cost of -- >> people argue with that. >> being as flexible as possible. >> a quick question. you have met with the president since the election. do you notice a -- when people characterize what we are seeing, is there more of an openness, some of a, you know what, maybe i'm getting a message that i should work closely with the other side, or do you see what other people characterize as digging in the heels and becoming more impracticable? >> i see the president continuing to do what he was doing before. >> digging the heels -- >> which is trying to do everything he can to move the country forward. a way to move the country is to work on immigration, and the other side did not necessarily love the steps. >> that might have -- >> we can -- >> might have hurt possibility for other things happening. >> i hope not. >> just because you disdwrae on imabrasion here, does not mean we can't work on trade here. that's the proposal he'll bring today. let's not let a distraction over here stop us from doing what we need to do here. >> how much do you think the president feels a pull within the own party, arguably fracturing itself. i think now about elizabeth warren on one side, look at the antonio wyche nomination as a symbolic fight, if you will, over what's a division within the party and progressive left that pushed or pulled the president, perhaps, more in that direction. how do you look at that? >> the "new york times" had an excellent piece about antonio wyche, by you, i want to point out. >> thank you. >> a qualified nominee. >> we hear he may have to get withdrawn, ultimately. apparently the hundred thousand signatures -- >> an outstanding nominee and really excited about it. but i, you know, there's always debates within every party across parties, and what the president has been focused on is not where the ideas come from, but are they good ideas for the economy, and immigration was good for a variety of reasons inco incoming the economy, business tax reforming investments in infrastructure, raising the minimum wage, expanding preschool. ideas from all over the spectrum, and what's in common is they all help strengthen our economy and achieve our goals. >> what do you think about lower gas prices? how does that help the american consumer? what does it mean for the american economy? >> i think that right now, look at the global economies, two things. one, there's a global slow down, and that's hurting our ability and growth, but at the same time, that's getting offset by the fact that we have dra mat cli dramatically lower oil prices, and prices are lower for the right reasons in that we're producing more in the united states. we discovered the united states has oil equivalent to iraq, just so far, and oil production is continuing to increase. i think that's a good thing for the consumer and country. >> quickly, the ceos surveyed see 2.4% growth next year, economists see 3%. what do you see? these guys can make the difference. >> i see continued robust growth next year m i think consumers have deleveraged, wage gains in the middle and bottom and businesses sitting on cash, and they chase the demand, and risk from the rest of the world and domestic strength in the united states. >> jason furman, thank you. >> thank you. >> thank you for joining us today. when we return, a frontier communications maggie wild ot r octob octobero after the break. on the firewall for customer db access. install version two-point-three of db connector and ensure verbose flag is set in case of problems. 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(announcer) at scottrade, we share your passion for trading. that's why we rebuilt scottrade elite from the ground up - includina proprietary momentum indicator that makes researching sectors and industries even easier. because at scottrade, our passion is to power yours. welcome back to the business round table. among the most important items on the agenda today, we have jobs and the skills gap. we talked to the exxon ceo about it earlier. it's also a big deal for the ceo of frontier. thanks for being here today. as rex mentioned, there's a huge skills gap. something like 98% of the ceos were questioned about this see this as a big problem, or at least a problem, finding people to fill the jobs. what do you see? >> at frontier we have 17,000 employees. at least 60% of them require some digital literacy and the capability of dealing with ip technology. and because of that, we have a hard time filling those jobs. we're also in about 30,000 communities in rural america. so we partner today with our community colleges and colleges and universities in our areas in order to put training programs in place to take folks that don't have those skills and train them with those skills. >> i spoke with rex about it last night. he was mentioning part of the problem is you don't have the same strength in vo-tech skills. and it's not offered as part of a lot of high school classes anymore. how do you turn back the clock and change americans' perceptions of that? >> i believe that vocations are important in america. it's a fabric of our country. and what we've done over the years is say to kids, look, if you don't get a four-year degree, it's not worth it for you to go to school. and we disagree with that. what we've actually done is taken our telecommunications labs and put them into the community colleges. we have our employees volunteer and go in and teach people that are taking classes in community college how to use our equipment. so when they come into our work force and we hire from those classes, we already have a great head start on the training. >> you mentioned you have a huge presence in some of these rural communities. how do you think consumers are doing there in rural america? >> i think consumers are holding their own. we are cautiously optimistic that if the economy continues to inch along the way it has, that consumers will continue to consume and use products. we've also taken a look across the country, and if you think about it, since five years ago, there are 10 million more people working than five years ago. about 200,000 new jobs created every single month. we feel good about that, because we are seeing that happen in rural america. we're also a very large employer of the military, our folks coming back from war, also reservists, and their families. over 13% of our work force are from the military. we also see putting those people back to work when they come back to their communities as extremely important. the other thing i'll say is with gas prices dropping, it will provide consumers with a lot more disposable income, which i think will be good to spur the economy. if you think about it, the average consumer, you know, spends -- well, actually drives about 12,000 miles a year in rural america. and it will be about $400 in their pockets. that's a big pay increase for them. and they can use that money for other things. >> we talked earlier this morning with randal stephenson about net neutrality. obviously the fcc is an independent agency, can decide what it wants to do with this, but the president has made clear what he would like to see happen. how does that change the equation for you in terms of how you're investing, how you think about the internet and broadband? >> so frontier invests three-quarters of a billion dollars a year in capital in our markets. we've been able to take rural communities and give them the exact same experience from an internet perspective as what you'd have in new york city or chicago. we think it's important not to leave any american behind. if you think about our infrastructure, our average homes per mile is 34. it's a lot more expensive for us to build that infrastructure. and when we're put in a situation where we can get that return on investment -- because if you think about it, the capital we spent is shareholder money. we want to make sure that there's certainty in the environment and a fair marketplace for all of us to operate. we don't believe that taking a 1934 regulation for telephone monopoly and applying that on the internet is the right solution. we absolutely agree with the principles of net neutrality, which means an open internet. i mean, i've been ceo of frontier for over ten years. we have lived by those principl principles. we don't throttle customers back. we don't prioritize content today. we're not even in the content business. but we have to put in place a mechanism where we can have commerce on that network that's good for the consumer, good for the content provider, and good for the isp. >> maggie, thank you so much for your time today. >> thank you. >> coming up, we're going to look back at some of the great moments here at the business round table. we're back in a moment. welcome back to "squawk box" live from washington, d.c. we have much more coming up from the business round table. the meeting still ahead today, president obama will be speaking around 11:00 a.m. today and is expected to take questions from some of the ceos in attendance. keep watching cnbc for the highlights. gentlemen, good work today. >> quite a lineup. >> it was. including the ceos. >> that does it for us today. make sure you join us tomorrow. right now it's time for "squawk on the street." ♪ >> what a show from the guys on "squawk." welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. a day after the dow had its first triple-digit move in a month. a lot of moving parts today. exon ceo responding to oil prices. speaking of which, crude still under $68 today. the ten year edging closer to 2.3. but that italian ten-year dips below two for the first time ever. our road map begins with the marks. oil prices in fus
quarter gdp, personal income and spending, new home sales and consumer sentiment. on wednesday, weekly jobless claims will get here a day early because of the holiday. a big part of the story on the markets and the economy, oil with the latest lumberg survey showing gas prices dropping to the lowest level since may of 2009. the national average for a gallon of regular unleaded is at $2.47. and andrew, welcome back. >> thank you, becky. it sounds like nothing happened last week. it was kind of boring? what happened to the market in cuba? >> and russia. >> and then the whole -- i don't know, i feel like -- a lot happened. anyway, we'll tell you what is going on in corporate news. the price over a new hepatitis c drug expressing its largest plan is now going to be offered for treatment with patients that have the most common form of the virus. starting in january it will exclude drugs from gilead and johnson & johnson. meg terrell is going to join us with that story next half hour. and ocwen's executive chairman is going to step down. the firm is accused of hurting hundreds of thousands of borrowers by sending back-dated letters about foreclosures. and ceasars palace is trying to buy their affiliate of wsj. it would file for chapter 11 bankruptcy protection by mid-january to cut the mounting debt. joe, i don't know if you follow this, but paul singer at elliott manager was hoping to file by last week friday. he had all the cvs protection to pay off in a big way. i think they'll make a small portion of that back. all right. usually they only have it for a little while and then, you know, then they get a better name. it sounds like it's native american or something. it is just spelled backwords. how about jeritol spelled backwards? it means nothing. a number of headlines on oil this morning, which is opec's secretary general hoping to see a recovery in the price of crude by the second half of next year. saudi arabia's minister of oil says he calls the lack of non-opec producers cooperating. he hopes it will help energy demand arguing the arab states will escape most of the damage. they are urging all producers not to raise output next year saying this will quickly steady prices. oil prices this morning as you can see look high to me, almost at $58 a share. >> wait a second, now the uae is trying to get all the world to be part of opec saying everybody opec and everybody else including the united states will all agree not to raise output? >> this is interesting to watch. i don't know whether i -- did they do it to put fracking out of business or did they slowly lose control as more came online here? and then they were like, whoa. >> and we need a bigger cartel. >> i hope it's a seat change. >> it's sort of a splintered cartel. >> yeah. >> let's hope it stays that way. >> if you want it to be an effective cartel, get the united states involved, too. >> how did they stay involved so long? opec, really it's been most of my adult life we have been talking about opec. since 1975 -- kind of. kind of. i was just going to college. so yeah, but it had -- they had their hands around our neck for a long time and it feels good. it's a long national nightmare. it would be nice to break it for a bit. for that part of the world not to have such a huge influence on our future. let's check on the broader markets this morning. it was a great week for the markets last week with the dow up 3% and the s&p up by 2.4%. it's a pretty volatile week with things starting off with a rough start at the beginning of the week with concerns on the rouble and oil. you can see this morning the green arrows, that trend continues with the dow futures indicating up another 80 point this is morning and the s&p futures up ten points by the nasdaq up by 20. you're watching what's happening in europe this morning, also green arrow there is with the biggest gainer the cac in france. strong gapes from the ftse and germany dax as well. at one point shanghai was up 1%. hang seng is up by 1.25%. the nikkei was up just slightly. the ten-year note back here in the united states looks at this point like it is yielding 2.174%. so that is below 2.1%. and if you check out the currency market, the rouble is there at the bottom. the rouble seems to have stabilized in a big way trading at 56 to the dollar. the dollar is up against the yen at 119.8. euro trading at 1.2264. >> and when the market is up most of the year, this is what you usually expect. and that is people that haven't matched it, which is a lot of money managers that cannot match the indices. >> and they are charging 2 and 20. >> and then they try to get into the winners toward the end of the year. and then -- >> then the winners go away. >> and for the next year, everything -- the air comes out right away. >> but do you expect january 5th this will be -- >> it says here it deepened the fear of the early 2015 slump. you have seen it happen before, but it's usually after a really good year and then the next january might be hard, but we need january to be good for 2015. let's see what the people think. three days before santa comes but he's spreading the joy on the dow adding 3% last week. they lost 4% the week before. lindsay is a chief economist and tom manning is chief investment officer of bp wealth management. so lindsay, does this usually indicate that we opened soft in 2015 when everybody chases the market at the end of the year? >> well, i certainly think the fed is sending a favorable message. you remember last week on the one hand they reiterated their commitment to accommodation. but on the other hand they suggested that the u.s. economy is on slightly firmer footing turning the corner to 2015. still boosting the optimism suggesting the later markets specifically were eating through some of the outstanding slack that has been plaguing the u.s. recovery for quite some time. so a very favorable outlook presented to the markets, something they continue to boost with expectations. >> i guess since you are chief economist, the first words out of your mouth were the fed again. so the fed is really still. that's the first thing you talk about, not only prices or other favorable factors. it's still the fed even though they just said we'll be patient. >> i think it is. now, certainly oil prices play into monetary policy as chair yellen noted we still have a net importer of oil. so she does suspect lower oil prices will continue to boost economic growth here in the u.s. on net. but the number one story driving the market at this time is the fact that monetary policy will remain accommodative well into 2015. as we assure ourselves that the u.s. economy is on strong enough footing to withstand eventual higher rates. >> just like opec. a cartel, i could -- i wish they would just -- i almost feel the same way of the fed at this point. the fed has been in our lives for six -- >> the same categories. >> the cartel, they don't know what they are doing controlling our lives and think it is all about them, but it's not. it's about the private sector, tom. i'm ready to take the training wheels off. did we have the fed 50 years ago in every part of our life? >> well, i would have to agree that the fed right now is anything -- the only thing everyone is thinking about is the juice behind the market. they will continue to be the juice behind the market. i do think, though, however going into the new year that the resiliency of the market is going to be tested. we haven't had the type of pull-back that one might have expected in a normal market environment. largely because of the fed. i do think that sometime in the early part of next year we're going to get that correction that everyone has been waiting for, more than just a few percent. but the year, as we progress, we'll wind up with higher returns. but that first quarter i was a little concerned about. >> well, will the fed if there is a correction, do you expect them not to -- every time we get any type of market turmoil it seems like they think the illness is on them to talk the market up or to say we're not going to get out that quickly. i mean, if we had a real problem economic wise and marketwise, they would do another round of qe if they could. they still think it is all on them, don't they? >> they are still involved but i think that 2015 is the year that not only do they take the foot off the brake, but they actually -- excuse me, take the foot off the gas but put the foot on the brake to a certain extent. >> once they do the first rate increase, eventually we'll get back to what is more normal. >> i think so. >> we could eventually get back to -- >> go ahead, lindsay. what? >> i was going to say eventually we'll get back to a state of normalcy but the question is how long. now again, going back to last week's fed statement and press conference, janet yellen was clear they are not reverting back to the 25-basis point increase that we saw in the early 2000s. it is likely after the first rate increase we could wait two, maybe three meetings. so the progression back to 3.5% to 4% fed funds rate could take years. >> i just want to know, if you're convinced of this, does that mean you just don't -- you wouldn't put any money in the market right now? you're just waiting for the correction? or if you think the end of 2015 will be so much higher, you don't really care? >> you've got to think about the long-term. i think if you're waiting for that correction in the first quarter, if it doesn't happen, then you're obviously going to be weighing for quite a period of time to be able to put the money to, with. we do think that 2015 will be a year of higher returns. i'm just a little concerned here in the first quarter. if you have money and are sitting on the sidelines, you may want to take it with a slow approach lasting until the end of the year. there should be softness to get the dollars in the market. >> if things sell-off. are you looking for 5% to 10% quarter when you tell people to jump in? >> i actually think we'll see a 10% number here at some point. it's been quite some time since that's happened. you have noticed here in the last few months the market has gotten skittish and we have come here near 10%. i think we hit it intraday in october. i think we may see that for more than a couple of days but eventually the market is going to start to move higher once again. >> thank you, lindsay and tom. appreciate it. a big piece in the journal day, the whole reason for the saudi and opec decision to try to hurt our tail. that guy just said we had nothing to do with it. >> he just suspected all along. >> it is not very nice to say. >> i just said she could do it. >> cuomo is smart because new york never has to worry about losing jobs because they won't add any from friday, right? >> that's what he was thinking. >> thinking ahead. actually, he was like, you know, totally washed his hands of the home issue that we -- >> i missed it. >> did you really? >> i didn't read the note. i heard about cuba daily. >> that's immediately what i thought of was cuba. >> why? >> another place to get a 0.001% rate for vacation -- >> i don't know if i've been to cuba. >> this time now that you're back you can tell the viewers that the eastern rivera of mexico is where it was. >> now what would you tell people? >> well, we don't want people -- we don't want to get mobbed. we have a lot going on with two storms threatening to disrupt holiday travel this week. carson is joining us from the weather channel here. we need to play that d.c. top. there we go. ♪ >> good morning, guys. >> we're betting now. >> i got a comment from the producer about my button being unbuttoned. stylistically, we are okay. >> who said that? >> that's a great question. someone told me in my ear. i just get heckled by different voices and don't know who they are. >> that guy department know what he was talking about. >> it was a woman. >> that explains it then. because this is a man's style. >> okay. i was like, i don't want to touch that one. i'm going to do some weather and we can make fun of me on the backside again. we'll talk about what's going on here. we have a storm system here. we have two storms coming together. it will be really messy across the east in the next couple of days. not the winter wonderland stuff, but a rainmaker with a dip in the jet stream with a lot of moisture up the eastern seaboard. this is an inside runner with the storm to the west with warm air on the side of it. showers today getting into washington, getting into new york by later tonight. tomorrow this first impulse is again rain. it's the mountains of new england. the only place that sees any snow. look at this christmas eve forecast. not only rain, very windy and maybe some thunderstorms. then christmas day showers in new york, rain in boston and through new england and a little bit of snow here terrain driven into parts of west virginia. in addition to it being rainy, it will be very windy on christmas eve day and through christmas eve itself. new york city, washington, d.c., down in to raleigh, up to boston, winds of 30-plus miles an hour. it looks like through southern new england we could see winds up to 40 to 50 miles an hour. so it's going to be a nasty, nasty day. of course, a big travel day there so we are concerned about the travel delays. we could only predict of course what the weather is impacted to do with travel. we could have other issues with the volume of what happens on wednesday. i do think we'll see delays in new york, philly, d.c. and cincinnati. i wish i had better news for you. anyone would take snow instead of the rain but that's what we've got. >> oh, grinch. have you ever worn a vest before? i feel like you're dressing for us now? maybe that's me being too -- >> let's not flatter ourselves. but the vest is something that i wore when i first got here, but i think i was coming in too hot with it and it was too much, and i put it on the sideline and now i'm -- >> now i feel like you're stepping out for me even if you're not. >> see, i thought he was dressing for me. >> see, we are all the self-centered -- me, me, me. >> you were here last week. >> was he wearing the -- splendor last week. >> you screwed me up a couple times last week. i don't know if i was on, was i? >> we had a couple -- yes, we had busy "newsday"s bnews days. >> even if you claim you weren't dressing for us, you are. >> boxers or briefs, kid? >> that was not me asking. >> don't answer that, boxers or briefs? >> combo. sony might release "the interview. " /* /- quts and michelle caruso-cabrera is back to share pictures and stories with us. and what the companies in the u.s. are doing to help protect themselves of a security breach. "squawk box" will be right back. welcome back. this week we are looking ahead to the playbook playing our predictions for media companies, but before we do that, we'll see how she fared in her picks for this year. julia predicted that the cable industry would see consolidation in 2014 and ding, ding, ding, she was right on that count. comcast going after time warner cable and at&t making that bid for directv. she was also predicting more convergence in tech and media. right again with hbo announcing an over-the-top service and amazon extending their original content. and julia also said the film starring superheroes would dominate the box office with not much more of anything else. we'll give you a ring for that, 3 for 3. franchising to eight of the top ten spots at the domestic box office in 2014. so what is julia predicting for 2015? here's a look. old media will give itself a new look in 2015 as it embraces digital content and delivery. first for tv, that means more streaming options and more cord-cutting. in addition to hbo, shotime and cbs launching over-the-top services, look for amc to jump on the bandwagon. easy access to streaming video will send cable subscribers plummeting putting pressure on broadcasters to pay more for sports and live events to keep customers. then the death of the 30-second spot. as we move from traditional tv to streaming, marketers look to grow the roi from ad investments from taking 30-second spots across platforms while native advertising, subtle content will become more prevalent making it harder to tell when marketers sponsor video. and third, get ready for more m&a as media giants buy startups to bolster their presence. following in the footsteps of disney's maker studios, they will embrace youtube stars to better compete. and look for more consolidation among cable channels as everyone from stars to amc look for more leverage to negotiate with distributors. >> and there we have the playbook. so this is the question, this is a little more negative than your 2014 predictions. your 2014 predictions had a positive i thitinge to them. the nba madness, the idea of what happens to the 30-second commercial and the broadcasters -- >> it depends where you are sitting. if you are on youtube or the dimmal side. >> but so far, so far in media everybody is warm meaning nobody has lost as a result of the new form factors. the question is when that begins. >> we have seen a shift. it's all about the shift and i think what is happening is the media conglomerates become more digital so they will not lose. we'll see negativity in the fourth quarter. even in the third quarter as we see the rise of digital viewing really start to eat into tv ratings and also tv ad revenue. that's starting to have an impact now. and i think my negative prediction for next year is i think the introduction of the new streaming services, like a stand-alone hbo service, cbs already has one and a showtime service, those will start to eat into the cable subscribers. >> are we always going to be trading in analog dollars for digital pennies or dimes? >> not necessarily. i think that's why you have like an acquisition of disney's maker studios. you have all the media giants going more towards dimmal. bob egger said we know advertising is shifting more away from broadcast to digital because part of that shift is for themselves. one of the reasons cbs launched the own digital streaming service is to charge for that and bring ads in with it. >> stay with us. we'll bring in david here, digital pennies or nickels or whatever it is, it seems to me everyone is moving digitally, and that's a good thing, but it is a lower margin business generally speaking. >> i thought julia's theme attics were interesting but i see something far less dramatic than i think she describes. what really stuck in my mind is the term cable subscribers plummeting. so i think cbs offering a $5.99 product for cbs all access or hbo product for -- we don't know what it will be but probably priced similarly at the retail level to what it is on cable, we don't see those things driving the plummeting of cable subscriptions. if anything, on stand-alone basis, they show the value of the bundle at $60 or $70. i think what happens this year, though, is this is the year the cord gets more options. while we don't see a plummeting, we might actually start to see some cord-cutting. the advertising question, i'm sorry, the advertising is a different question if you want to talk about that. sorry. >> david, you cover all sorts of stocks, who is the big winner in all of that and who are the losers if there are some? >> well, to me content, there's one constant in all of this. content is absolutely king. and so -- and i think to me, the winner is the guy who owns the most content and is the clearest play on content. the clearest single pure play. and in big cap, close to that on tv, which is what the digital services what. marginal in theatrical, that's cbs. that's how we look at that. we also think that if you look to an unbundled word, if you start busting the bundle apart, there's only one structurally undercompensated area and that's the broadcast networks. so we think cbs has a lot of upside for that. >> and the loser just now? >> i think the losers are going to be the more document drama oriented, less scripted cable guys. you know, the scripts, the discoveries, we see them less showing up on amazon and netflix. getting a little more marginalized. >> the stocks have -- i've watched those and wondered what happened to those stocks. even discovery, that was the darling and suddenly it is off i don't know how many percent. and listening to it, i'm not an early adaptor, i admit that, but in my early experience, i don't know how it could get better. i know how to use netflix and the universal remote to go to the apps on the big 75-inch screen. so i can go that, but everything else i have on just regular -- i wouldn't change anything. i'm not going over the -- what is it called? i'm not doing that. i have everything i need. >> you're not going anywhere. >> i have nine of them. >> but the people have never -- that's what david just said, the never -- the cord-nevers. >> david pointed this out. it is remarkable we have not seen a dramatic drop in cable subscriptions considering all the other options, but next year is when we could start to see that because of the proliferation of new options and because the cord-nevers are starting to be a bigger piece of the pie. >> before we let either of you go, we have to talk about sony for a second. just tell what you say you think is happening with this movie "the interview." >> the question is about the distribution of it. the cfo of sony said we want to get this out there. there's a report they are definitely putting it on crackle, which is sony's video streaming service. my sources tell me nothing is definitively decided. crackle is an option. it's very convenient that sony has a streaming video platform. but it seems they would like to get another company on board. and netflix and itunes and amazon. they wouldn't put it that way, but it certainly would help spread the risk and also maybe one would be a vod platform to sell it. >> netflix or somebody, if they want to touch this, given nobody wanted to support it last week. >> they all give me the equivalent of no comment. netflix says we are approached by the studios about an interesting up innovative situation. what about our parent company comcast? no one is partnering with them but sony would like someone else on board. >> david, is there any financial ramification long-term on hollywood and broadway? >> i'm glad you asked this question. that's $40 million movie. it is not like "avatar" and how are you going to release it? the reality is compression in windows across the board. marketing budgets are now starting to being agnostic between windows and sin that in releases and dvd releases. so i don't think this is a -- i think it will be interesting to see what happens, but i don't think there are huge financial ramifications. >> it's about whether amy pasqal keeps her job. >> i think it is about whether hollywood is willing to take risks and take on some of the things or start sub-censoring. that would be my guess. >> i think it is likely sony could distribute this for free and give it away. they are going to take a loss on the movie no matter what, but this is far beyond the amount of money sony is losing on this film. >> the president says he wishes they would have called him first. so is he going to intervene now and do it on video on demand? >> sony said they did have a conversation about it. so there's a lot of back and forth there. >> and david said there was silence for no weeks. nobody would help us while they were attacking us. >> the president's comments could inspire another company to get on board as well. we'll see. >> david, julia, thank you. coming up, how the nation's largest pharmacy benefit manager could be fuelling a drug price war. plus, a historic change as u.s. and cuban relations begin to thaw. we'll have a report on the story firsthand. we'll be joined with details of michelle carusa cabrera's travels and whether she brought us all cigars or one for bill clinton when "squawk box" comes right back. stay with us. act i. scene 3. open port twenty-two-oh-one-seven on the firewall for customer db access. install version two-point-three of db connector and ensure verbose flag is set in case of problems. (clapping sound) isn't the cloud supposed to make business easier? get the one that can connect to the systems that you already have. today there's a new way to work. and it's made with ibm. express scripps is making an exclusive hepatitis c deal shunning gilead and johnson & johnson. the biotech reporter is joining us with more. is this a new way of doing business? it hasn't been done in the past. >> express scripps is calling this up precedented with controversy over the drug that is cost $84,000 and $94,500 for the first week of treatment. so this drug was $1,000 a day. and because they are easier to take and cue more hepatitis patients, a lot more patients came aboard to get treated. so gilead brought in $8 billion for this year in the market. express scripps is the biggest pharmaceutical manufacturer in the united states, this new drug just got approved on friday and they have a significant discount to get a deal on the formulary. many will be able to get this drug that is covered and express drugs is covering this from johnson and johnson in this formulary. this is a really new thing and express scripps is the loudest voice here against the price of these drugs. but the question, is will this start to happen more and hepatitis c is one of the main drugs in the price wars, but are they going after rheumatoid arthritis now and diabetes and cancer drugs. >> what happens to the development? does it put a freeze on development because companies are afraid they won't be reimbursed for the hard work put into drugs? >> of course what we heard from gilead it is helping to bring $8 in revenue and people say is that too much. but down the road, the potential things that could have cost a lot of money are a lot of payments down upfront. >> how do you read it, a good or bad move or we'll wait to see what happens? >> i think people think it's bad for the biotech. there's a question on whether drugmakers will start to compete against one another. it's always the insurance policy company versus the drugmakers. now it's the drugmaker against o one. >> hepatitis c, there are so many companies vying for a position there. because it's a treatable condition. there are so many many-to drugs. >> it's a really good question to the point we have made. this regiment is four to six pills a day and take them at different times with meals. express scripps takes you when to take the bill. >> when i watch the nightly news, and one of the reasons i don't like to watch it that much is because i have to listen to the -- there's a commercial where a woman takes four pills a day and her friend says, you only have to take two. and then she's like, really? >> it can be kind of difficult to remember when to take them. >> then it's the effectiveness of the cure if you don't take them properly. >> will you come back to do a segment on the commercials? >> i had a push-back on how much time to spend on all the side effects. >> god almighty, unbelievable. >> i watch a lot of the news with my father. it's up comfortable. >> you're probably going to want to -- >> the side effects they have to list are not only caused by the drugs. there are things people get in a clinical trial whether or not they are caused by a drug. you get a headache and it is put in there. >> we need to hear it. thank you. when we come back, a first interview of u.s./cuba relations. and a cyber firm protecting nearly half of the fortune 500. and we'll have veteran predictions from bob dahl. "squawk box" will be right back. that makes our lives possible. because we do. we're exxonmobil and powering the world responsibly is our job. because boiling an egg... isn't as simple as just boiling an egg. life takes energy. energy lives here. and michelle caruso-cabrera is just returning from overseas. >> things are better today than they were a year ago. better than two years ago. way better than 15 years ago. when you got on a plane 15 years ago, people were, i don't want to say starving, but they are thing, thin, thin, thin. they were gray. when you arrive, people are overweight and the right color. that's an improvement. what's happened? exiles can travel back and forth more and bring more money and stuff. there's much more of a consumer economy. and also there have been some tiny transformative free market reforms that they never called free market reforeims. transportation has improved in the last year. why is that? i said there's a special place in heaven for cubans waiting to ride the bus because it was so brutal with people jammed in there. now there's a lot more cars, taxis and buses on the roads. a couple things happened. first of all, they started cooperatives where they said transportation is so bad, they told workers in the transportation sector, the government is not going to own the company anymore. you do want you want to do, give half the money to us and keep half the money. so now there's more incentive to get the bus back on the road. they also bought chinese buses according to people living there. and we'll show you -- you can't do a cuba story without old cars. they have allowed people to retrofit the american cars from the '40s shaped like almonds. this guy is selling his for $3,500, he hopes. they will retrofit these for diesel to be much cheaper and easier on the black market. so they get them on the road and allow more taxi licenses to cop vert them to taxis. then they allow the buying and selling of used cars. this is a '48 chevy. it is bolted and bonded in so many places, it is just crazy. there's a lot more food -- oh, look, this car is also for sale. it's a brand new car, 2009. the long story about it, the family brought it in from spain. that knee zap from 2009, she's trying to sell for $80,000. >> wow! >> that would not be true value but scarcity value because there's so few new cars. remember, it's a 2009. >> how long is it going to take to see a real shift in terms of the color -- >> it is a time what wearp. >> the article i read over the vacation, people in cap da travel there because they claim it's going to lose its time capsule. >> they would love for people to live without infrastructure and crumbling walls. some people said it's great to live without internet for a a life. >> now i go there to -- >> i would love for all young people to go there to see what it is like. >> i think raul castro will say, we're sticking with it. >> then on saturday. >> sticking with it. looking good, working well. >> the markets can do things foreign diplomats and world leaders can't. we saw this happen last week with the rouble and an about-face. that broughttous a position that couldn't -- >> sure. the obama administration feels by lightning night the -- >> is there more than 1% down there? >> yes, musicians and artists and athletes who for whatever reason, back in the '60s, got the exemption. they can keep their revenue. >> equal outcomes, it just doesn't look that great when everyone is equal down here. >> when the richest people get to -- >> it seems really fair. you don't want to feel bad about yourself. >> uber, there's enough to deal with today. at least its equal. i was just getting ready to look for corporate thwith that. we'll talk to the firm charged with keeping nearly half the forcheck up 500 safe. we'll do that right after the break. we'll be back. [ male announcer ] your love for trading never stops. so open an account with schwab. and when a market move affects, say, a cloud computing stock you're holding, we can help you decide what to do. with tools that help you see how market activity is affecting your positions. so when the time comes to decide whether to scale in or scale out... you can make your move, wherever you are. and start working on your next big idea. ♪ and start working on your next big idea. ♪ my baby drove up in a brand new cadillac... ♪ ♪ my baby drove up in a brand new cadillac... ♪ ♪ look here, daddy, i'm never coming back... ♪ discover the new spirit of cadillac and the best offers of the season. lease this 2015 standard collection ats for around $329 a month. hurry in. offer ends soon. everyone is vulnerable. that is the clear message to corporate america following the massive cyber attack on sony. joining us right now is the ceo of cyber arc. the company helps firms fight cyber attacks. it has about 35% of the fortune 500 as clients. some of the notable big names include southwest airlines, conagra foods. thank you for being here today. >> pleasure. good morning. >> are we that much more in peril that any of us realized? how easy is it to do something like this? >> if hackers keep at it, they'll open the door and get in. i think that's the new realization organizations are waking up to today. >> we heard sony was in a poor position, they did not do things to keep things safe. are they in the minority or is that common place in corporate america right now? >> i would say that's common place in corporate america and elsewhere around the world. organizations have been focused on security perimeter. that was the focus on the security practice. and not about what happens is when the attackers do get in. and the soft part of the enterprise has been out there for everyone. they have been soft on the inside. >> when you come into an organization, do you change things drastically with the companies using you or could this happen to companies you're protecting too? >> what cyberark does is we add a security layer on the inside to make sure that even if the organization was breached, they can't move around and get to the sensitive information. it's a whole new layer on the inside. >> my guess is it would be this is a situation where corporations really have to start investing and have to have people who are reporting directly to the ceo or board to make sure these things are being taken care of. every hack we've heard, there were warning sign it is along the way. whether you're looking back at target who should have known something was going on or other retailers hacked along the way. what do you really think? are we able to do something that we make ourselves that much stronger or is this just a way of life and something we need to get used to? >> first of all, i agree with you. this is becoming a board level topic. and we're seeing it within the top enterprises. are we protected on the inside? what happens after we're breached? there is a change. this is again after 20 years where the approach was put up a fire wall and keep the bad guys out. the boards are asking good questions. i think as a matter of looking into the future, the pendulum has swung toward the bad guys because of many years of neglect. but it doesn't mean all gloom and doom with proper verinvestm they can make this. >> president obama speaking over the weekend said this was cyber vandalism. how would you qualify it? >> well, i think it's actually similar to other attacks that -- and sophisticated attacks you mentioned. the difference in this one is that the intent was really to cause damage and really bring a company down to its knees. but in other attacks, if the intent is to steal credit cards, steal intellectual property, they operate the same. they move around on the inside and try to get strong access and steal information. this time around it was really to bring the organization down. and that's what smells like vandalism. >> all right, udi. thank you. >> pleasure to be here. thank you. coming up, futures pointing to another higher open. santa clause is coming to wall street. the bulls wish list when "squawk box" comes right back. the dow gained 3% last week renewing hopes for a santa claus rally. >> santa's coming. >> santa! oh my god! >> what you need to know about stocks. oil and the dollar before the market opens. caterpillar stock down in the last six months. the ceo on the company's performance and the slide in oil prices. and it's make or break time for retailers. >> you disgust me. how do you live with yourself? >> cool it, zippy. >> you sit on a throne of lies. >> with three shopping days left, how their shaping up. >> i think you're going to have a good christmas. >> you smell like beef and cheese. you don't smell like santa. >> the second hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. it's crunch time for shippers. u.p.s. expects to deliver 34 million packages today. 34. that would be an all-time record for the company. it's double the volume of a typical day. i know his kids, i ask how they're doing. we're like, you know, we see eep other three or four times a day. we're going to talk last-minute shipping in just about ten minutes. it's a combination of more things going from the net and just maybe better economic times, more stuff being bought. >> i think the biggest thing is this is the holiday that i've done almost all of my shopping online. i haven't been to a mall. i haven't set foot in one. this is -- everything's coming to me. >> well, it's hard -- you know, there's a lot of people going to the malls because there's no parking spaces. >> i drove by a mall the other day and couldn't believe it. i thought there would be more parking as a result. >> no. . it's rough. >> and amazon's now shipping within an hour in new york city. >> have you used that yet? >> no today i plan on doing it. if you're a prime customer, they'll get you the stuff in an hour. it's craziness. let's talk about some of the top stories at this hour. the big one, gasoline prices dropping to the lowest level since may of 2009. that's according to the latest lundberg survey. national average now for a gallon of regular unleaded stands at $2.47. also sony planning to release the controversial comedy of "the interview." that's what they say on a streaming service. reporting sony hasn't made a decision yet about where to release that film. now, meantime, north korea denying it breached sony and warning of consequences if the u.s. takes action. and javers is going to join us with more on that story. it's a three inform day trading week, but we have plenty of data to keep us busy. here's what's happening on the schedule. 10:00 a.m. eastern time today, we're going to get existing home sales. tomorrow a flood of data including durable goods, the second revision of third quarter gdp, and new home sales. weekly jobless claims going to come out on wednesday this week. also u.s. stock markets close at 1:00 p.m. eastern time on wednesday for christmas eve and remain closed all day thursday. trading resumes on friday. then we do it all again next week. stocks coming off a week of big gains, but will they keep momentum? our guest host is bob dahl. he's senior portfolio manager at nuvene asset management. it's been a heck of a couple of weeks. what should we think is the real market? was it the swan dive we saw a couple weeks ago or the santa claus rally? >> i think what we're seeing is don't expect it to be just monolithic up. it's going ton bumpy. we forgot markets are typically volatile. >> yes, we did. >> or like in october, should i jump out the window today? after the market goes up in five years. i think we're going to have more volatility. the economy is getting better. you talked about energy prices. on balance, that's positive. i think the slow growth overseas is good news for the u.s. >> why? because it makes us look like a better neighborhood? >> there's that. but it keeps interest rates low. it keeps commodity prices low. that more than offsets the weakness that comes because we can't export more. i think the weakness overseas a good news. >> when you look at oil prices, you say i'm balanced. you think that's great news too. but you sound a little guarded. >> it's clearly a negative for the oil patch which has been on fire here in the u.s. and other parts of the world. and that's all going to slow. the overwhelming positive, lower gasoline prices as you reported and the benefit to manufacturers and airlines and so on. the wild card is does the repeatty cause a financial problem? we don't know the answer to that. it happens so fast i can't believe we're going to get through this without bumps along the way. >> we've been talking about that this morning. just the bumps along the way, the return of volatility. you've got people chasing returns at the end of the year. but sometimes that can lead to a messy january. do you worry about that too? >> i sure do. last year -- look at last year. we had that big run at the end of the year. some were saying we borrowed some from 2014. maybe we're doing that again. of course last january toward the end of the month we had that nasty 7% decline from which we recovered. and i think we'll recover again. but i think it gets bumpier. remember, liquidity, tons of it from everywhere was part of what kept the market being less volatile. there's nothing like liquidity to keep things moving to the upside. slowly but surely starting with the fed and the uk, we're removing that liquidity. and that's going to create a more normal set of volatility. >> haven't actually removed anything yet. we're just stuck putting in, right? >> well said. so less gas pedal. >> you think the fed is really signaling it's going to move in the middle of next year? that it's going to rauz rates maybe come june? >> i think they are. all kinds of cross with the oil price and the meetings last week. all that good stuff. but, look. we have nominal gdp in the united states approaching 5%. 3% real and almost 2% inflation. that's not consistent with short-term interest rates. we got to zero because we had an emergency. the emergency's passed. and so the fed has to find a path to normalization. yes, they'd like inflation to be closer to. it seems to me the fed will move. >> they are awfully nervous and slow paced how they're doing this. >> we need leadership on the fed. janet yellen has to step up here. they're at a turning point. you have discontinuities and disagreements. when should we move? how should we move? we've got to get going. >> i thought janet yellen was one of the more dovish ones? >> in some sense that's right. and therein lies one of the issues as well. we can't let the fed fall behind the curve. if you watched the monthly wage numbers you'll know we're beginning to see a little bit of wage inflation. i think we'll see more next year. not enough to be concerned, but enough to say it's not zero real wage gains anymore. it's starting to come in. the job market's picking up. unemployment's moved down. time for the fed to get going in my opinion. >> trying to figure who it would be. i guess if it had been a financial firm, they would have already got margin calls. we would have heard about oil. >> most likely, joe. but some of these things take a bit longer. i'm sure there's a bot of small companies we're going to hear about. that's like a quarterly thing when they go. talking about emerging markets or countries that can't pay the bills. and there's going to be some of them too. >> i would agree. that's going to cause some bumps in the night. >> we saw the ruble. that's where we saw all of the stress sort of manifested because russia is so dependent on oil. then even emerging market, i was worried about currency there. it doesn't seem it's systemic at this point. >> we may see the ruble get hit again. i'm not convinced we're out of the woods there. >> it's an interesting crisis because we're -- i feel bad for opec and i feel bad for russia. i don't feel bad for either. you know what i mean? it's like, make it hurt even more. >> yes. that's part of the saudis' message. having been the swing producer every time in the past they're saying time-out. we're not lining other people's pockets by shoring up the price. we're going to take care of ourselves. and they're sending a message to the u.s. too. you can produce more, but not so fast. >> can i do caurocodile tears without sounding like clinton? i don't. >> no. >> i need a new -- he's gone. i need a new guy to field. >> that sounds better than being whiney. >> yeah. >> sounds a little more manly. >> really? >> yeah. >> that was manly? >> yeah. relatively speaking. i'm thinking in terms of a 3-year-old, what they would sound like. >> yeah, a 3-year-old which is what i'm really more like. all right. so, you know, so many good things. and oil is a good thing overall. >> overall when the dust settles this is good news for the u.s. >> how long does it have to last before it's really good news or before we figure that out and it reflects in the stock market? >> i think once we get past the concerns we were talking about. is there a financial disruption? if we get past that, i think good news will filter in. you'll see it in fourth quarter earnings to some degree. >> there's not chance if oil prices jump back up, the good stuff never comes to fruition. >> if we go back to $100. >> bob, thank you for agreeing to spend the morning with us. we'll have more from bob. he'll be our guest host the rest of the show. >> tim cook finally sent me a christmas card. >> you finally got one from him. >> just now? >> well, it was in my -- have you? >> i got one too. yeah. i did. >> but i opened it, i was expecting a note or something, like a long note. this is what i got. doesn't say anything. you got one too. did he just send it without writing anything in there? >> i think you got a note. >> oh! >> all the best, tim. you're my favorite i think it says right there. no, it doesn't say that. >> have you gotten one? >> i don't know. i might be out of luck. i haven't checked my mailbox. >> we should fess up. i actually wrote that myself. just to drive him a little crazy. >> that way i would have felt bad too if i opened it. >> we should have waited. he would have been -- oh, yeah. you would have switched to samsung. you would have got a new phone probably. up next -- thank you, though, tim. it's nice. he didn't send out 10,000 of these, did he? maybe. >> maybe. have you sent yours yet? >> you know what? that's right. no. i haven't. mine are in the mail. like that check. it's the final countdown to christmas. details on how super saturday went for retailers. and what last-minute shoppers are bingeing on with just three days to go. plus the ceo of caterpillar. "squawk box" will be right back. welcome back to "squawk box," everybody. looks like we're in positive territory once again. look at the dow futures ahead of the morning's open. last week the dow finished up 3% for the week. the s&p up by 2.4%. this morning dow up 70 points above fair value. big question this morning. is it too little too late for some customers? we usually see you across the way in a little box somewhere. talking about boxes, who's the winners and losers given we've got three days now until christmas? >> sure. i'll start out by saying the expectations were so low heading into the holiday season, people thought the consumer wasn't going to come out and shop apparel. and while retailers did plan conservatively were aggressive with the promotions and are seeing more traffic than expected. as far as the winners, shockingly enough, american eagle outfitters. >> people thought it was a lost cause. >> absolutely which is why we're saying shockingly enough we think they are the winner. >> cargo shorts are back? >> actually joggers. lime hammer pants. those are the trend this year. >> you know what i noticed about american eagle? they have a good website. i ordered some stuff off of there too nep retailers who have not done well with the web are probably suffering. >> absolutely. the website and also the mobile as well. everything's online right now on the phone for the kids. and a lot of my retailers have ramped up aggressively. >> does that mean they're -- is any of the other teen guys winning? is abercrombie anywhere? >> abercrombie has a lot going on elsewhere that people care about than what's given in the stores. abercrombie has a lot more 70% off on top of the already reduced price points. they're struggling a bit more, but longer term we do think they make it through. but as far as what's going on right now in the mall for holiday, we think eagle has the most traffic, the conversion they have in their inventory is well controlled. and they sell what product is working and were able to get it back in quickly. >> tj maxx? >> the checks have been coming back favorably on them. maybe you've seen they're doing the the campaign this year. there's also a treasure hunt experience going on there that we talked about online. but this gets the customer back into the store to see what's going on there. >> okay. we don't like to be so negative, but who are the losers? >> we don't like to use the term losers, but we'll see those who are potentially struggling a little bit more, for example, gap north america continues to have problems. >> a gap north america meaning gap the gap stores themselves, is it banana's the problem? old navy? all of them. >> old navy is rocking. they did phenomenal last month. it's really core gap stores is struggling. >> so does it ever come back? what has to happen? why has -- it feels like a decade-long -- >> it's one good quarter and one bad quarter, right? >> not really. in the public consciousness gap and banana has been on a steady march wards -- >> and the pe reflects that. >> right. >> i think part of the issue is that gap is no one's first destination when they come to the mall. so you walk by, you see 40% off, 50% off, maybe that entices the customer to come to the store. but at one time gap was the place you wanted to be. i don't know that they resonate with a particular core customer base anymore. i think they're going too broad and the product wasn't there from a color palate perspective and fashion perspective. >> color palate. what was wrong with it? >> very dark. >> and are the mc hammer pants called that? >> joggers. >> so if we were to put this on our christmas list for our wife to get us -- how do people -- does someone say, listen, we've got to plan a new season for things people don't have. who comes up with the original decision to put such a ridiculous style back into fashion? who would come up with that? and then how does it spread to where other people go, yeah, that's a good idea. people want those. who wants these? >> holy cow. i'm looking at some of them. >> i haven't gotten one yet. >> would you put it on your list? >> i'm in your camp. i won't. >> double breasted suits are back too. >> people put it on the runway. you see it in a creative approach and then the retailers in the mall try to get it appropriate. >> is that snem. >> there are even pleather ones for you guys. >> it looks like the room there appeals to me there. it looks like they're roomy. >> they're low hangers. >> i don't like -- you know. >> while joe continues to look at that, we're going to get to kate rogers. she joins us with a report on last-minute shopping including maybe what's going on with joggers. >> this weekend on super saturday, shoppers were getting it done the old school way. they're going to stores rather than shopping online as the clock ticks away to complete their shopping list. analysts we spoke with saw increased traffic at stores. still feeling the sting from last year's delivery debacles. saturday was actually the number one sales day of the year for retailers. raking in as much as $10 billion in sales alone. which are ranked number four and number ten shopping days of the year when it comes to those sales. now, if that forecast is right, it'll be the first time in a decade that super saturday will out-pace black friday's estimates $9.1 billion in sales. black friday has become less of a one-day event. it's sharing sales with thanksgiving day promotions which bring in an estimated $3.2 billion in sales. and if you're wondering who's shopping in these last few days, we're hearing it's mostly men who are procrastinators. they're just getting started on their list making this the home stretch. time for general stocking stuffer gifts. those will be the most popular in the days leading up to christmas. >> wait a second, guys. have you finished your shopping yet? >> finished is the wrong word. >> started? >> that's today's project. there's a lot of things that need to get done today. >> it's only monday. >> thank you, kate. and thank you, pam. maybe we'll spend some -- you going to buy some joggers? what do you think? >> i want even -- if i'm going to do it -- >> they don't look like mc hammer, tighter. >> it doesn't hang as low but the bottoms of the pants are tighter. >> i want the i dream of jeanie. >> you should start the trend. >> thank you. >> i'm not going to be a slave to fashion. i'm sorry, andrew. you got a double breasted -- i saw that one suit you wore here that day. that thing -- >> it was a beautiful suit. when we come back this morning, the winner at the weekend box office. here's a hint for you, more bad news for sony as "annie" came in a distant third place. and then doug oberhelman. stick around. "squawk box" will be right back. your 16-year-old daughter studied day and night for her driver's test. secretly inside, you hoped she wouldn't pass. the thought of your baby girl driving around all by herself was... you just weren't ready. but she did pass. 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>> so now you've got that ready. >> i'm ready to play. >> okay, never mind. but harvard was good the last couple of years. aren't you in a bowl? >> yes, we are. >> toilet bowl? >> no. it's the quick lanes bowling. they have changed the names all of these bowls. the blue bonnet bowl is no longer the blue bonnet bowl. the peach bowl is no longer the peach bowl. they've sold the bowls. what did the bowl used to be? does anybody know? >> be careful. >> maybe i should have kept that to myself. >> the year was 1929, will be forever remembered as the stock market crash andi beginning of the great depression. but it was also the year the caterpillar started training at the new york stock exchange. caterpillar is going to be ringing the opening bell today. good to see you, doug. saw you at the round table meeting a couple of weeks ago. we talked then, too, about what's on everybody's mind and that is oil. we need to revisit that again. you're not necessarily big in necessarily exploring. we were thinking if it's just transition and other things, maybe your operations wouldn't be that affected. do you have a better idea how it's going to affect caterpillar? >> we are here at the stock exchange. 85 years of trading. whenever i walk in, it's a thrill. this is a big thrill for us. certainly we're watching oil. there's no question there's going to be an impact on us. we're seeing some of that in the early days. i think most of our customers are kind of talking, get through the holidays, see what happens to oil price before they make major decisions. we'll have an impact. and it won't be like we've seen in mining and some of our big cycles in the past. but we'll see it in 2015, no question. >> i would think eventually it might -- you might not be able to directly connect the dots. but eventually it might help your business like it helps all businesses that have input cost. there's energy you have to pay for, too, right? >> that's right. and every one of our machines uses a diesel engine in the world. this giant stimulus program we've been blessed with will work its way through. in the mean tuyl we'll see the impact of that. i find it interesting when the people talk about interest rates at 2% ten years and $2 gasoline, $55 oil and it's bad for the economy, i think for the economy overall it's going to be great. some of us in the meantime are going to have to adjust, go through a transition. and after that i hope it really helps stimulate the world economy which really drives growth and drives our business. >> sometimes commodity prices seem to head the same way. i wonder if you're -- you see the australian dollar when commodities are weak. you've still got the mining business. that has recovered a little or at least it's been bouncing off the bottom. could this put more pressure on that again? >> the mining business is definitely bouncing off the bottom. we're seeing a few signs here and there of replacement cycles starting, we haven't seen a commodity price in the metals really drop much more. but we are keeping on eye on that for 2015. we'll see how it goes again. economic growth drives everything. that's been the root cause of a lot of the lack of growth for many of us. >> doug, the other side of the oil price decline is the dollar rise. what does that do for you or to you? >> we've worked hard over a long period of time to really balance our cash flow. so the bottom line, we're somewhat new to top line. it will affect us with less sales when we convert into dollars. but with our philosophy of trying to produce where we sell -- trying to make the amount of machines and the three currency zones, the eurozone, the dollar zone over the last many decades, we're kind of in a balanced position. but we will have some impacts on the top line. no question. >> doug, can you just quickly comment? can you feel china? can you tell from your order rates what's happening there? what is your latest take on that? >> china is definitely for our industry has been slow. certainly as they work through reforms, as they work through transition. in the meantime, we've worked hard to fill out our business model, make sure our dealers are there taking care of our customers. i like our positioning. we're doing okay, but the market's not what it once was. it's still a huge market. we've got to be there to engage our chinese competitors. but in the meantime, we'll see cycles up and down like everywhere else. china's turning into a somewhat with developed developing country. >> we've talk sed so many times about bringing the money back overseas and tying that to infrastructure here. we talk about it a lot. and i know that, you know, at the round table the president came and talked to you. january will mark a new maybe starting point. the president, you know, alienated some of his base again by just getting that -- i don't know what it was, derivative issue in the budget. do you think that might be a sign that there will be some give with either corporate taxes or could we tie something bringing back some of the money to infrastructure? that would help. that would help you. >> it would. and everyone's talking the right things and saying the right words about tax reform. solving some big problems in 2015. i'm optimistic. yet we've got to see somebody bring it home. there's a lot of ideas on how to use some of that cash to fund infrastructure. there's a lot of other ideas, but we've got to have somebody taking a lead and making big decisions out there. if that happens in january, that could help us all in 2015. we'll see. we know how sad our infrastructure is in this country. we've talked about that many times, joe. you're right. >> we've talked in the past about the dollar swings and how that can really impact some of the big multinationals. i know it's something you've been working hard to make sure that caterpillar is less impacted by that by making sure you set up plants in the places where you sell the machinery and the equipment. i just wonder what does a stronger dollar mean to you at this point? >> well, for example, use the yen for example. we have lots of plants in japan. we export from japan to the united states, to china, to asia. that's obviously right now a nice tail wind for us. we've worked hard to make sure in the yen zone we try to be somewhat balanced. in the eurozone it's the same way. we see giant moves like we're seeing in dollar strengthening right now, our top line will be impacted. because of our cost structure and where we put our plants and the fact we can use yen in japan, we can use euros in europe it does impact us. it's something you have to work on over a long period of time. >> you don't have any plants in russia, do you? >> we do have two small plants in russia. i was kind of looking back at 1929 when our guys cake out here for some reason in late 1929 and did their big ipo. which we were into. five years of the company at that time. >> what do you do when the ruble crashes like it just crashed? we're suspending sales in russia because it doesn't make sense when the ruble has wild swings. >> for the most part they're spent on the local economy. it won't have a big impact on us with the exploding economy. >> what do you spend on r & d? i guess fuel efficiency would be something you spend money on, right? >> we've got some cool things coming. i was just in our text center and grounds not too long ago. a lot of it is around technology. how do we use machines more efficiently. some of the machines coming out today and those three or four years from now, we're looking at 5% to 25% fuel economy in which we tie systems, hydraulics, the engine, and the track together to work efficiently. and then let the owner use that to get 24/7 productivity out of it. we've got no operator running in australia running a complete mine site. dumping, loading, all the things it does with an operate. high-technology. >> would you say if someone wanted to do something anywhere in the world they'd say i want the best to buy, would they think caterpillar or think some other -- they would, yeah? >> you bet they'd think caterpillar. that's one of the reasons i'm here. because my predecessors have been doing this and really investing in the company for 85 years. we're going to keep doing it for 85 more. >> i think cuba might need some infrastructure. >> oh, yeah. yeah, i'm excited about the opportunity in cuba. i think the announcement last week was long overdue, frankly. not just for business reasons but for other reasons. and i think we could see cuba down the road in a few years, maybe like puerto rico. there's a lot of cubans in the united states that would like to see that. it's a big opportunity. and it's between us and latin america. i think we could look at it that way down the road. >> all right, doug. congrats again on the 85 years trading on the new york stock exchange. and good to see you. >> good to see you, joe, as always. thank you very much. >> we appreciate it. see ya. >> thank you. have a good holiday. >> you too. joe, i looked it up. i told you quick lanes took over. you know the bowl they took over for? little caesars pizza bowl. >> nice. >> i have not been to a little caesars in a long time. >> i like any pizza. but tell me again. the quick lanes bowling bowl. >> it's quick lanes the oil change company. but my family owns quick lanes bowling in indiana so i associate it that way. >> so it's not a bowling -- that was really. i thought that was -- i felt bad. >> so it's an oil lube, oil change company. by the way, how many bowl games has colorado been to? >> we won a national championship, but you remember what happened when we beat michigan? we got five downs oun one -- do you remember that? yeah we got five downs to win. that's how we won. official screwed it up. >> by the way, rutgers has been to -- this will be its ninth bowl game since the last time colorado went to a bowl game. so the toilet bowl probably looks good to you. >> there's a a lot of bowls, becky. >> and you haven't been to any of them. >> but you did beat some of the teams that weren't -- you're 1-6 in the big ten. >> no. i think we won more than that. how many did we win? 3-5. not bad. >> i have a christmas present for you, actually. >> oh, no. now i'm scared. when we come back, time for the trading block. i am here tomorrow. oh, boy. can't wait to see this. wti down almost 50% since peaking back in july. plus why shars of oes of one bi company are soaring. "squawk box" will be right back. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ in our trading block this morning, we are talking oil and currencies. king dollar keeps roaring ahead. the u.s. dollar index hitting its highest level since march of 2009. joining us right now on currencies with kathy lee and micha michael khoohen. >> i think that in the new year we would very much seen a further extension. interesting, the last two weeks of the year nobody anticipates a big change in currencies. but we took a look at how the dollar performed in the last two years. and the green back actually climbed a fresh year against the euro at this time. so a lot of the moves that previous happened could continue. >> why do you think that is? is it the late fed meeting? are currency traders seeing something that stock trader aren't? >> i think in general what it is is the thin liquidity allows for exacerbation of existing moves. i think because we have a confidence about policy in this case that we could see a further push higher in the dollar. particularly against the euro because they were closer to the euro than the yen. dominating with more of the same prices for oil. >> if oil is spriesed in dollars for them, it causes them to purchase that oil. it will lead to weakness further on. it also has an implications. if they're earning those revenues in dollars then they have an incentive or can weather this storm. because their dollar of oil produced is worth more. >> did you see the front page of "the wall street journal" today suggesting this wasn't the saudis being nice and playing u.s. allies. this was them trying to crush the frackers here in the united states. that sound like the truth to you? >> it's a bit of a bunch of things. there's geopolitics involved, certainly, but i don't think that it's the primary motive. i think the primary motive that's involved behind the saudi decision is to preserve the market share in the long-term. and they convinced the gulf that some of their gulf allies to go along with this that they're willing to endure some short-term pain for long-term gain of market share. >> which means you think oil is where for the first six months of next year? >> our view is that oil stays pressured for the next six months. we have a forecast of about $58 per barrel for wti during the first half of the year. we don't see much potential for strength as we move through the first half of the year. partly because the fundamentals are weak, the demand for opec crude is about a mall and a half barrels a day less than the course over the next six months than the market needs. and they've stated very affirmatively that they're going to continue to produce. also you have producer hedging any time that the prices to come up, they're going to come in and begin to hedge. that's also going to put pressure on the price. >> quickly, does that sound right with your forecast? >> i agree with all of that. yet more good news for the u.s. consumer. >> michael, kathy thank you for joining us. all right. coming up, sony's lawyers say the company plans to distribute the movie "the interview" somehow, some where, some time. meantime tensions rising between the hackers. eamon javers will join us with more and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours. . welcome back to "squawk box" this morning. eamon javers joins us this morning and has an update on where things stand. >> good morning, andrew. the united states has not yet said what it will do in response to the alleged north korean hacking of sony entertainment website. it's been an embarrassing and damaging hack for sony. the president said over the weekend that it did not amount to an act of war. take a listen to the president. >> i don't think it was an act of war. i think it was an act of cyber vandalism that was very costly, very expensive. we take it very seriously. we will respond proportionately as i said. >> now, for their part the north koreans released a statement over the weekend. they are saying the u.s. should bear in mind that it will face serious consequences in case it rejects our proposal for joint investigation and presses for what it calls countermeasures. now, guys, the north koreans here are denying they had anything to do with this attack. they also say that they would like a joint investigation into who exactly did this. and interestingly on the diplomatic front friday, the united states reached out to a number of countries to help develop some response to this including china and remember that it was just back in may that the united states actually indicted a number of members of the chinese military for hacking in the united states themselves. so align with the chinese could be an interesting turn of events here. >> eamon, we were talking to julia boorstin about this earlier. that sony would try to release this. to call up netflix and say here's the state of play and we will protect you if you were to distribute this film? >> i could see that. if you're going to have some kind of industry-wide effort here as been suggested by a number of people over the weekend to release this on a multiple platforms all at the same time, you're going to need somebody with what they call convening power and negotiations. the white house has to convening power. part of the calculus here on part of the white house is in the past when north korea had provocative actions, the united states has always acted to kind of minimize it, not pay too much attention, not respond too much. under the theory that what north korea wants is a response and an escalation and a possibility to sort of rally the populous back at home. the question here, the president has said this is a core american principle. if they're going after seth rogan films, what happens next when they go after a documentary or news program. >> thank you very much. i think we've got to get dennis rod man to go over there with a little negotiating for us. >> it's funny. when the film came out, i thought was dennis rod man a ploy that was sent that way. 2014 has been a record-breaking year for the auto industry. and a look ahead to the trends for 2015. plus after a weekend to sleep on it, how are cubans feeling about america thawing its relationship with havana. we have a live report from our michelle caruso-cabrera. 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>> who the heck are you? >> we will check off the investor wish list. home for the holidays. ♪ falling oil prices and low rates. what will 2015 bring for the housing market? and it's the busiest shipping day of the year. meet the company that lets you schedule a package dropoff at your convenience so you can avoid this. as the final hour of "squawk box" begins right now. ♪ welcome back to "squawk box," everybody. this is cnbc, first in business worldwide. i'm becky quick along with joe kernen and andrew ross sorkin. in studio with us, bob dahl. he is the chief asset strategist from nuveen. >> we've got a couple headlines this morning. u.p.s. expecting to deliver 34 million packages today. that would be an all-time record for the company. it's double the volume for a typical day. fedex to deliver 23 million parcels today. that's a lot of stuff going on. i don't know how they keep track of it all. caesars trying to restructure the $18.4 billion of debt that it has in its largest unit operating on friday. that unit says it will file for chapter 11 bankruptcy production by january to cut its mounting debt load. then there's dish network pulling fox news from its lineup as a dispute. dish settled disputes that led to the temporary block anl of some cbs stations. we are less than 90 minutes away from the opening bell. looking to build on gains. the s&p 500 posting the second best week since january way back in 2013. this morning the futures are pointing to a higher open. europe's in the green today on a rebound in crude. prices at this point have stabilized. right around $57, $58 a share. saudi arabia for its part says it will not cut production to prop up the markets. an interesting piece in the journal that we've had had a couple of them, almost what do you call those things? >> they're almost -- >> postmortems on what happened. a lot of it had to do with fracking. they don't -- they're not pleased that we produce 9 million barrels a day. >> no. that is probably what you could say has flooded the markets with more supply. big reason for the dropoff has been the increased supply. sometimes you're friends, sometimes you're frienemies. starting in january it will exclude drugs from gilead and johnson & johnson for that indication. meg tirrell will join us at 8:40 eastern time. also check out shares of achillion. and it's thought to be a probable takeout target. shortened week, trading week for investors. after the expected lower volume this week, could see a move higher as we head into the new year. joining us now is howard ward, cio of growth equities. our guest host is bob dahl from nuveen. while you were out, your boy letterman. maybe he hasn't stop but colbert's show ended. >> it stopped. and will begin again in the summer. letterman i think is going to retire in may. then colbert begins some time -- >> could you have a top ten list for why people should buy stocks? have i got that right? >> well, i've been doing that every year for the last few years. >> somehow we missed it. so do you want to start at number one? on letterman they start at ten. do you know all ten? do you have them memorized? >> probably not. >> can i help you? >> i invite your help, yes. >> is there any rhyme or reason to how you did them? do you want to start at ten or one? >> it doesn't matter. >> well, let's do it like letterman. what's that? oh. we made them one to ten, dude. we got to go one to ten. let's just pretend tenth is the best. all right. number one, u.s. economy. right? >> yeah. i mean, we're going to have the 50-year next year of record gdp. >> bob is nodding. when he comes up with something stupid, will you -- >> i read his list. >> you like them all? >> yeah. >> all right. there you go. >> just take my word for it. >> we heard about this. the u.s. poised for its fifth consecutive year. so that's a favorable backdrop. >> what about number two? central bank policy. here or everywhere? >> well, here -- you know, even if they raise the fed funds rate from zero to 25 from 25 to 50, that's still an extremely accommodating policy. so yes. and overseas, even easier. >> global markets, stimulus abroad in global markets doing better. that's three. what's number four? >> yeah. so china's weakness is resulting in part of the collapse we've seen in the produce of oil and commodity prices that will keep inflation down. low inflation is good for the dollar, good for profit margins, good for higher pe multiples. >> you're not saying china just being a quick rower. it's a consumer-driven economy now. >> not yet. it's going to take years. >> and because of that, that's the bullish part you're talking about. >> correct. less demand for stuff. >> in your view, stocks are still underowned. by whom? >> sure. both institutions and households have around -- and what i'm talking about here is households, financial assets invested in stocks is around 37%, 38%, 39%. institutions, private and public pension funds combined around the 40% mark. those numbers had been north of 50%. and when the previous market peaks in the trade percent was 6% or higher, much more competitive than it is today. >> that's number six. number six is relative to bonds are attractively priced. don't mush them together or we'll only have eight of them. >> i know. that's a no brainer. the hurdle rate to outperform bonds is very low. if your bond yield is roughly 2%. >> that's the one thing that could be a head wind eventually. >> it's going to have to go up a lot before it becomes a problem. >> i agree. goes up 25 basis points at a time, it's going to be -- i hope to see 5%. >> if you remember back, greenspan was trying to raise rates in the early 2000s. he kept raising the fed funds rate. it kept going down because of foreign demand for u.s. treasuries. that was his so-called conundrum nap could happen again. because the german rate's 30 bips. and u.s. treasury yield is at -- >> i didn't think of that. that puts a very interesting spin on how the fed manages all of that. >> wuch is another reason, good news for the u.s. economy. if rates are so low. how do you get a 3% treasury? very unlukly. >> companies will continue to -- number seven. continue to reward shareholders with buybacks and dividend increases. that's kind of obvious. i mean you don't need to explain that. andrew doesn't like buybacks. >> i like them when the company's making a lot of money. >> just last week boeing the raised their dividend and buyback. >> it was the other one we made a big deal out, disney. all right. market will continue to enjoy gridlock. that is a cynical, ward. >> it's a fact. and that's been true of recent years. >> these republicans better start playing and let the president do all the progressive things he wants to do. don't you think? that's what i hear on mainstream media all the time. when are these guys going -- >> to let him do his thing. >> yes. when are they going to stop being obstructionists! market will con't to -- they're just meanies, all those republican guys. mergers and acquisitions will continue. >> i do love those. market continues to go up. >> mergers and acquisitions will continue. that's good. all right. number ten. >> yeah. here we go. >> wait a second. drum roll. wait a second. wow. that's boring. estimated investment returns continue to favor stocks. see did not plan -- i think it should have been ten to one, maybe. we did a drum roll. that's what we get for the drum roll? well explain it now that we built it up. try to make it interesting. >> yeah. >> rising pes came up a couple of times in the commentary. you'll remember pes went up 95, 96, 97, 98. the dollar market seems finally here. >> we've had the last several years you've had expanding earnings and pes. very likely in 2015 you're going to have expanding earnings and have another little bump in the pe. typically when inflation is around 2%, the pe on forward earnings is around 17. we're still not quite there yet. personally i think earnings estimates and gdp will be going higher, not lower. so we'll be looking at a higher figure to base that off of before too long. >> howard, your mind is fried now from doing all ten of those. so i'm going to do your stock pix. you like names with cyclical exposure. >> correct. >> honeywell, boeing, financials, blackrock. and then energy like eog, pioneer, and continental resources. and i did that all from here. >> that was beautifully done. you might have a career here. >> thank you. because you couldn't have come up with those after you got all ten of those. >> my head is spinning. >> i'm here to help. thank you, howard. bob is going to stay and keep nodding for the rest of the hour. you added some stuff. we appreciate it. say hi to that guy -- >> dr. love? >> yeah. brings us the cheap briefcases. does he -- you know how frugal he is, right? yeah. it's just unbelievable, isn't it? >> yeah. >> for a guy who makes that much money. but, hey, you know, you should watch every penny. good businessman. >> thank you. when we come back, nissan sounding the alarm about russia saying they are facing a blood bath over the ruble. plus reporting. michelle is back from cuba. and we show you a new app that promises to keep your packages safe from thieves this holiday season. and jim cramer is getting ready for the day ahead. "squawk box" rolls on after this short break. thanks. ♪ [ male announcer ] fedex® has solutions to enable global commerce that can help your company grow steadily and quickly. great job. (mandarin) ♪ cut it out. >>see you tomorrow. ♪ this week we are looking ahead to the new year giving investors a playbook on how to cash in. phil lebeau lays out his predictions for the autoindustry. but let's see how the predicted this year. he predicted entry level would heat up for 2014. unfortunately that battle never panned out. that's strike out. that one phil got right with the incentives help boost auto sales. he also said tesla model s stays strong and all eyes would be looking to model x. he got that half right. boost bid a big september. the release of the model x got pushed into the new year. but that just write up the calendar. i can't believe we're judging everybody like this. however, let's see what phil is predicting for 2015. >> record auto sales? probably not in twpt. but should be pushed up for the first time since 2001. here are the things to expect. first, cheap gas. the national average is now well under $3 a gallon. and most analysts believe relatively cheap gas will be with us for much of next year. how low could it go? the energy department is predicting a national average of $2.94 a gallon. but even better and subtract gas prices admit it would wind up lower than that. low gas prices means you can expect another big year for suvs. in 2015 suvs and crossovers will stay red hot. partially because several new utility vehicles will hit showrooms and stir the market. at the same time fuel efficiency still attracts buyers even with low prices at the pump. and the newest suvs are getting better mileage than ever before. finally the crossover to watch next year will be tesla's model x. the electric crossover will falcon wing doors is set to roll out by the middle of next year. will it be as successful as the model s? can tesla make the transition from making one model to two. and will elon musk's company attract as many high-end buyers if the world is running on cheaper gas? >> joining us now to look at the road ahead for autos in 2015 and what is next for your car's technology package, reuters managing editor paul ingrassia. we better talk about the lower gasoline prices. how is that impacting sale of these things and will what will it mean for what consume consumers are buying in 2015? >> phil had it right. party like it's 1995. they've changed that equation on to get an suv or a sedan. that's what it amounts to. >> is that something that the manufactures actually respond to or do they kind of figure out this is a potentially changing thing. >> it's a bit of both. i think their model development plans are already going. but they have the flexibility to add extra shifts at assembly plants that make bigger vehicles. one of the most this year will be the new ford f-series pickup truck which is the first all aluminum body pickup truck. but can it compete with steel body trucks? it's going to be a big one to watch. >> you also pointed out something i didn't realize. the big three and the uaw are up for talks. how's that going to play out? >> it's going to be interesting. this market has had a remarkable recovery. the uaw will want a piece of that. and they'll want to end the two-tier wage system. hourly wages of people who have been on the job for decades. so, you know, they're going to probably have to come to agreement in the middle there. you know, the other thing will be interesting, of course, would be weather in the wake of saving these companies and really saving the uaw whether the union will mount a serious strike threat. whether the talks will be contentious. we don't know. >> finally we've been looking at technology. seems like every technology wants a piece of your car. you can name just about any technology company that wants to be there. are the big three going to give that up, or is it going to be something they can control how this gets laid out? >> it's going to be a battle royale. probably the silicon valley and that sort of thing. obviously the automakers will have a voice in this. but you have three simultaneous. hybrids, electrics, et cetera. all that stuff in your dash board. the nav system, et cetera. and driverless cars a few years off, but probably closer than we think. >> it's clear lower oil prices are great in the developed world. there are more costs in the emerging world. how do you assess that? >> i mean, you know, russia is the big example where, of course, oil prices are going to take a horrendous toll because the ruble, the currency has been sharply down. worth about half of what it was. the russian automarket is collapsing. so i think that countries that are really commodities dependent and there's a lot of those including russia, but a lot of them around the world, a lot in the emerging markets. those markets will suffer because of what's happened to commodities places. >> i want to thank you for joining us. merry christmas. >> good to be with you. thanks. up next "the hobbit" is victorious at the weekend box office and sony's other movie makes it into the top three. details after this. plus will plunging oil prices help housing in the new year? predictions from a top analyst straight ahead. "squawk box" will be right back. cute little guy, huh? this guy could take down your entire company. stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon. why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. welcome back, everybody. "the hobbit" on top this weekend. debuting with $56 million over the weekend and taking in $91 million since its opening on wednesday. and a distant second place, fox's "night at the museum" installment. the comedy took in $70 million while sony which is reeling from the cancellation of "the interview" amid hacking attacks unveiled its other holiday option as well. and the "annie" remake opened with $16 million. the north pole, the weather outside was frightful. so santa went some place delightful before his busy night this week. old st. nick diving on a reef in the florida keys. scuba santa's swim helped raise money for a children's charity. that's good. >> that suit is never going to be the same. coming up next, michelle caruso-cabrera has returned from cuba. we'll talk about her experience, the mood there, and the economic opportunities to come. plus there's a new app out there that says it can stop this from happening to your packages this holiday season. and beyond. the man behind it is going to join ugh moments from now. after the break. welcome back to "squawk box," everybody. a number of analyst calls of note this morning. rite aid upgraded to market perform at cowen. credit suisse thinks that blackberries should break up. the analyst sites the inherent challenges in trying to revive the services business and expects the company to continue to burn cash. little late. finish line downgraded to neutral from buy blaming promotional comps and margin pressures. the price target cut to $25 from $32. michelle caruso-cabrera is back in town after spending a few days in cuba. you still have a blackberry, i bet. >> i have a blackberry and iphone. >> who else copped to that last yeek? >> you. >> you and someone else. >> i have a different provider on each of them. >> exactly. >> my wife does the blackberry with the mini. she says i have everything i need here. you have cute purses to carry it around. so tell me. >> so cuba's relationship with venezuela is on full display if you go to cuba. there are posters and big billboards. you know, there's no advertising in cuba. the billboards are pro communists and pro socialism. you see chavez on the right, castro on the left. we have no evidence that fidel castro is alive but no evidence that he's dead either. but they really talk about him in the past tense. cuba's relationship with two other time is in focus right now because of the decline in oil and the geopolitical situation. it's really crucial for them because they've had to retrofit their power grid in order to be able to run off heavy oil so they can maintain the electricity. they get more than half of their oil from venezuela every day. and 50% of the oil that venezuela gives away every day goes to cuba. we know venezuela is descending into chaos. and you can be sure they have fears. russia -- now, the question also now, what about the relationship with russia and how does putin feel that we're re-establishing relationships with cuba? putin was there this past summer. he forgave about $20 billion in debt from the old soviet union to cuba. that was denominated in rubles. it's shifting in value at all times. the other question you have to wonder about and central bank experts have raised is we don't know what kind of reserves the central bank of cuba has, if any, and are some of them denominated in rubles which is certainly a possibility. >> talk about a double whammy. >> exactly. speaking of russia, we have news this morning. russia has had to bail out a bank called trust bank. half a billion dollars worth of rubles. >> there's a more importants a te -- important aspect to this. >> we're going to get to it. bruce willis is their spokesperson. that's their home page. >> he gets paid in rubles? >> i hope he's got a good enough adviser that no. i mean, we've reached out to bruce willis for comment. we'll see if we get any response. >> the dangers of foreign endorsement deals. >> i wonder if he can even read what's on that website. >> i doubt it. maybe he does. who knows. >> but all those movies he's done with the russians always seem like the bad guys, right? the yippy kiyay you know. one of them were the russian bad guys. >> good day to die hard. >> the fourth one. no. the first one was they were like terrorists. remember, hans gruber. >> but the more recent ones were definitely russian. >> you guys got to go. i mean, it's just so -- it's so weird. it's just such a strange time warp place. i wish young people could go so when we hear people like michael moore endorse socialism. you want socialism, come down here. >> he could slim down down there. you said people were -- not a whole lot -- >> for a long time there was little to eat. that's gotten better because of the easing of the travel restrictions. so more and more exiles go, they bring more money and products. and because now individuals there can open little restaurants, there's a lot more actually fast -- not quite fast food, but the equivalent. more places to eat, more food. >> for some reason socialists and left leaning people write it off as any type of historical lessons that can be learned -- >> i don't know why. it's amazing to me. if you want massive government intervention into an economy, you want say every person works for the government, this is what you get. >> where you give everything up. >> they themselves cannot admit -- like it's not the public and private sector. it's the state sector and the non-state sector. >> venezuela, look at the oil production. >> it went down. >> i know. i know. >> mexico went down. right. >> but we have to learn at every 20 or 30 years, it seems like. in the process again. but you're doing your part. thank you. all right. mixed year for housing starts so far. prices and gains have fallen sharply. in 90 minutes we'll get the latest on existing home sales. joining us now the former chief economist at fannie mae. do you expect 2015 to improve over 2014? it's just -- it's been a slow grind. kind of like the overall economy, i guess. but obviously interest rates aren't going to get any lower. and we're still -- i don't know. is it regulations? why is it still not as good as it should be? >> merry christmas, joe. i think 2015 will be a better year for housing. the fed isn't going to tighten if the economy isn't growing sthonger. or even if the fed does tighten, it's not going to tighten much. what we're really waiting for are millennials to form households. they haven't yet. as they get older, as they start to get married, as the jobs get better they're going to be less interested in living in their parents' basements and more interested in owning a house or renting an apartment. >> so that's going to be one of the big shifts. what about just whether it's easier to, you know, to get credit at this point? i still hear that there's a lot of people that even though they would have qualified ten years ago, they're not qualifying right now because it's more stringent. >> you know, ten years ago the qualifying standards were too easy. what we want to do is go back to the qualifying standards of, say, 20 years ago. we're not there. it's much tighter today. qualifying standards are way too tight. we don't want to go back to where we were ten years ago. that was just too easy. but somehow we have to get a little easier from where we are. we're not quite there. and part of the problem is if you ease just a little bit, people complain that we're going all the way back to where we were in the middle of the housing boom. >> i thought we're talking about sales for people who are putting down less than 3%. >> you know, 3% is probably a risk. 5% maybe is not. but the real problem is layered risk where you let somebody put down 3% and give them a loan where they have a fairly low fico score. maybe it's not fully underwritten. as you add those risk factors, the probability default goes way up. if you just loosen one factor and maybe keep everything else fairly tight, the loss probability is still pretty low. we haven't eased in any way at all. >> this is the issue, joe. i think you hit the nail on the head. it's less about demographics. it's less about where interest rates are. it's all about how stringent are these lenders and they're very stringent. >> at this point, better to rent or to own just long-term, do you think? depends on your own individual circumstances? because it's not always better to own, right? >> no, it's not always better to own. if you're going to be moving in a few years, you think you're mobile and might be changing jobs. it's often better to rent. if you're an in area where the price of homes is very high. if you live in san francisco where i used to live. even though rental costs are way up, the price of owner housing is through the roof. but there are many parts of the country where i live now in columbus where owning a house is less expensive than renting. you know, you're starting a family, for example. owning a house may be a better long-term investment for you than renting. >> all right, david. thanks. happy holidays, merry christmas. >> to you too. >> see ya. up next, afraid of this? take a look at what's happening here. are you afraid of this happening to your holiday packages? if you want to make sure things arrive at one piece, there's a new app to let you do just that. we have the brains behind doormen. ♪ the clock is ticking and the men and women in brown are out in full force. that can't be right. two days -- well -- i thought it was -- anyway. with two full days left, today predicted to be the busiest day of the year for u.p.s. set to process 34 million packages in just one day. and that'll happen in the next 24 hours. >> until midnight on wednesday, is that how much is left? >> is that how it works? we should tell you it is the most wonderful time of the year. it is, but it can also be stressful especially if you just start buying all those gifts. there's a surge in package thefts and mis-deliveries in the season. and for all you last-minute shoppers, there is no room for error. doorman is a san francisco base start-up that ensures you get your packages on time and exactly when you want them. with us now zander o'dell, he's the founder and ceo of doorman. if you don't have a doorman, he will get you one. tell us how it works. >> thanks for having me. good morning. you sign up and we give you a new shipping address you can use on any site. once your packages arrive, we notify you on your home. then you can use the doorman app to schedule delivery from 6:00 p.m. until midnight seven days a week. >> what i'm worried about with this to be honest is this is just setting up a second level of delivery, if you will. right? they're going to deliver to you and then you're going to deliver it to me within a two-hour window. now i feel like i'm waiting for the cable guy. >> well, it's a two-hour window when you're actually home. then if you get the gold service, it's just a one-hour window. you can say i want it on wednesday from 9:00 to 10:00 p.m., and i will be there. >> how much prior notice do i have to give you about when i will be there? >> you can get a scheduled same day as long as you get your request in by 5:00 p.m. that day. >> and who's bringing me this stuff? >> so we have our own team of drivers. they're all background checked, dmv checked. these are great folks for a lot of them it's their second job. and they're driving around in their own vehicles delivering packages all night. >> now, you just introduced this. walk through the fee structure. >> sure. so we have a few different plans. you can either do $3.99 per package if you just want to try the service out. for a lot of our customers that order a lot of stuff online, we have unlimited plans for 19 bucks a month or 29 bucks a month if you want one-hour deliveries and unlimited package returns for all those trunk club and rent the runway purchases. >> so i get amazon prime right now and i have to tell you we probably have a package coming in virtually every day. it's crazy at this point. how can you make money off of me -- even if i pay you $30 a month and i have a package coming literally every day or every other day and 20 days, you can't -- i can't imagine that $2 per delivery actually makes sense. >> well, the way it works is most customers don't actually want a delivery every single day. even our gold customers. they're getting around 15 packages a month. but they tend to get around seven deliveries a month. and even at that many deliveries in a single month for a customer, we're making money. >> we have go. we have breaking news but is this stuff insured? >> yeah. we have standard coverage rates. similar to fedex and u.p.s. >> well, congratulations. sounds like a cool business. >> thanks very much. >> thank you. we do have breaking news out of russia. michelle caruso-cabrera joins us. >> more fallout from the sanctions. morgan stanley and ross were supposed to be doing a deal together. morgan stanley was to sell to the russian oil company. but both have put out statements saying they are unable to get the deal done. they are very specific saying it's due to the impossibility of the deal because of regulatory clearances being refused. i'm being told that it is relaid to the political situation and the change in relationship to the countries over the past year because of the situation in ukraine. more financial fallout because of what has happened in the last year or so. back to you. >> all right. okay. up next, jim cramer's wish list. plus the chief medical officers of express scripts will join us with meg tirrell next. the futures at this hour have been strong all morning. up 80 point oss on the dow. we'll be back. who are these clowns? our new hires. feels like we are just hiring people off the street. we are! we're growing so fast we need man power. at least cdw preconfigured these 2-in-1 devices with intel inside for us. it's a tablet when you want it and a laptop when you need it. just take it already! ♪ big news in the ongoing battle over drug prices. express scripts saying they will have an exclusive option on its biggest plans. sharing the news of gilliard down sharply down $11. abbvie up almost $3. in dollar terms, bobbles the mind. >> $160 million market cap. >> and down $10 on -- >> $16 billion right there. >> our meg tirrell is here with a special guest. >> let's bring in steve miller. thank you very joining us. >> thanks for having me. >> so let's get right into it. we know that abbvie's drug has an $83,000 list price that the company told us about on friday giving you. >> we never disclose drug prices but you can say, it's a significant discount, big enough to allow us to recommend treating all patients with geno type one hep c. >> folks argue abbvie's regimen has more spills, some need to take it longer than gilead's renlment what happen do you say to doctor whose need the choice to prescribe gilead's drug. >> in the clinical trials the outcomes from the drugs, which never faced head-to-head trials, but the studies demonstrate the outcomes are outstanding. with both drugs cure rates over 90%. abbvie's done a phenomenal job of packaging the product, convenient to take. comes in a blister pack with morning dose, your evening dose. compliance in trials has been really hoop. we're excited to be able to offer this product to our patients. >> you called this unprecedented arrangement. do you see this as the new normal for negotiating drug prices? >> we have been very clear in the marketplace that the drug prices are becoming unsustainable. and abbvie was really convinced that they wanted to open up access. we're hoping that more and more pharmaceutical companies take that same view. listen, this is what express scripts does for the country, we think when we find like partners leak this we can move drug prices and get more patients treated and more patients cured. >> are you looking to do this in other therapeutic areas, moving into diabetes, cancers, where there are multiple drugs on the market? >> yeah, we think there's great opportunities across all of the categories and we have to do something because the prices have become unsustainable. >> dr. miller, thanks for joining us. >> thanks for having me. >> stay tuned. i have plenty of questions about this, because it reminds me of putting ten experts in charge of what you get for, you know what kind of medication you get. i'd rather have my doctor decide. >> exactly. changed it right there. >> much rather have my doctor decide than someone who is only worried about negotiating a deal with a drugmaker. new york stock exchange. gilead, jim, i know you followed that for a long time. what a story, number one, a larger market cap than some pharmaceutical companies that have been around for a hundred years. this is crazy, isn't it? i want to hold down the cost of drugs, too, but i also want to make sure there's an insensitive to develop drugs for things that where you're not going to make $10 billion, you're going to help people that need the help. >> yeah. look, i think that gilead paid a huge amount in order to get the formulation, did a lot of great work on this. abbvie did a lot of great work, too. abbvie's drug, no one thinks is better. but you know what? they cut a deal. express scripts is 70% of the whole group. 70% of the populous. so express scripts is more -- you dealt with a guy who is like the government. i mean, he just mandated this. his team mandated. does he want to save people money? well, yeah. but i agree with you, don't we want the best drug? if the other drug's better, i'd like to think that the other company, that my insurer would pay for it. but we heard an edict and the edict, gilead, you're done. i think it's pretty shocking. i'm sure gilead, you see it's going down all morning. meg's next question, who else is at stake? this, my friend at the street.com saying, listen, everybody's going to have to rethink pricing if express scripts is now going to be the arbiter. it is kind of -- it's on a sleepy monday the only story. >> brave, new world. i can see even if it works 9 out of 10 times where the drugs are equivalent enough to where it wouldn't make a difference. >> the doctor gets cut out of the equation. >> the doctor has no say. it's tough in health care land in terms of cost and everything else. >> the flip side of this? >> you want -- you know you want to throw your poor relatives over, you know, 75 years you want to throw them under the bus. i don't know if you have much credibility. >> it's not true. >> yes, it is. >> it is not. >> i have spoken about it. >> we had zeke emmanuel, you're behind his effort to kill everyone at 75. >> so -- by the way, he wasn't even agreeing with that. >> i know, i know. >> but the other question becomes whether when you give doctors as much discretion as they have -- you want doctors to have discretion -- whether they use the discretion properly. >> jim, andrew's word there. we have to rethink our opinion. thank you. we'll see you in a couple of minutes. >> when we come back, bob dahl, 2015 investment resolution. later on "squawk on the street," a top mastercard executive talks apple pay. stay tuned. [woman] can it make a dentist appointment when my teeth are ready? [girl] can it tell the doctor how long i have to wear this thing? [man] can it tell the flight attendant to please not wake me this time? the answer is yes, it can. so, the question your customers are really asking is, can your business deliver? ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ ♪ get -- get back to our guest host, bob dahl. bob, for your -- you have a resolution for 2015? >> i guess i'm supposed to. >> did you come up with one? >> no, i haven't. this is the least believable market of my career. i'm reminded of john templeton, led me read it bull markets born on pessimism, grow on skep mifrp, die on euphoria. we move from disbelief to belief. from skepticism to optimism. it's not over but a lot of money in the rear view mirror. >> does it tell you how old the bull market is or how much life is left? >> the first half of the bull market has more price vengeance than the second half. i don't want to get bearish. stocks are not as cheap as they were, can't pound the table. everything is expensive. >> what inning? >> we're in the sixth inning in time in the seventh inning in price. how than sound? >> that's -- that -- could be a doubleheader. >> love a doubleheader. >> resolutions? what are those things, fit things, what are those? >> jawbones. >> aren't we doing something? >> when the new one comes out, we'll get them around the table and we can all monitor our sleep and exercise. >> i don't want to know. >> kind of got sucked into a personal trainer, like a free beginning and i feel like a -- i'm doing stuff that i want to kill this guy, seriously, when he stretches my leg and pushes it up over my head and stuff. >> whoa. >> i'm supposed to wear one of we're going to get one? i don't need to spring for one myself? that's my resolution. >> i'll get you one. >> are you going to pass it off as as a christmas to me? >> yeah. >> thank you for being here. appreciate it. >> we'll be here tomorrow. >> we will be here tomorrow. joan us. right now time for "squawk on the street." ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. kicking off a holiday-shortened week after the second-best week for stocks in almost two years. oil down 11 in past 12 week, some arguing the worst is over, b it's in the red. te ten-year yields around 217. housing numbers in an hour. markets, stocks again poised to break records as s&p starts
city. the city has been relatively desolate. the only people out there are the people plowing the sidewalks at this point. we walked over ourselves this morning. didn't get hit with anything much but the ban on cars in new york city still is accurate. >> i'll wait until the posts in other places start making fun of the weather people because it's still a very serious storm. may be loss of life somewhere. >> in fact if you take a look at some of the pictures in new england it's a different story. >> wow this is a picture of philadelphia. there could be more to come. still falling there. >> you look at -- i looked at my radar thing on activitiescuweather. it's moving northeast and most of it is there. >> in the northeast region up in new england bracing for 3 feet as snow. they have been getting as much as 4 inches an hour. with the hurricane forced winds causing wide out conditions. it's been a huge issue with coastal flooding too. i was just reading that they're talking about storm surges of about 7 feet with some flooding already taking place. that's a big concern up and down the coast and we'll have wide reports in just a moment. but first other big stories we have been watching this morning. >> now that the roads are clear all the people that claim they're not going to work today do they decide they're going to open them later? >> schools are done today. out in the streets themselves we vn seen as many snowplows coming by. >> everybody -- our newspapers aren't here. those guys have their feet up. what are you kidding? >> we'd be taking advantage of it too if we could. >> over at the hotel, no maid service today. >> horrors. >> well they're not going to clean the room no room service last night. no way to get any food. >> because the roads were shutdown and subway systems were shutdown. >> i think i told you any theory. >> what's your theory? >> that if it had been really bad that could have been climate change caused the adverse weather but because it wasn't that bad that's because of global warming. so the warming warmed it up so it wasn't as bad. so either way -- >> too nice a morning. it's too early. >> oh i'm sorry andrew. i think that's what happened. had it been really big, that's when you use the climate change. having not been that was -- don't you think? >> i think it's business as usual. i think it's what we live through every winter. >> we can't do 24 to 36 hours forecast that well but 24 to 36 years we're much better at being accurate. >> could be. i will take the less than expected with no complaints. >> there's places i'm sure are getting it a lot worse like there always is. >> in the meantime beyond the blizzard this morning earnings in the economy are the name of the game on wall street today. dupont just hitting the tape. looks like earnings and revenue beat from the dow component. they'll happily take that one given what's going on trying to get into that company. also before the bell we'll hear from pfizer procter & gamble caterpillar among others. also the home price index. new home sales, consumer confidence and the fed survey so even though it's a snow day a lot of things going on and in washington this morning fed policy members are going to be gathering for the first fomc meeting of the year. it's a two day gallery with a decision due tomorrow afternoon. they have not closed that down yet. yet is the word. >> we're looking at some of the things we'll talk about in shares. i wonder if they're all the way back down now. >> you know they shut the city down. >> right. >> overnight. >> stories we'll talk about later. >> i'll bet they're back down. >> i should tell you, i bet you the supply -- >> last night to the audience that doesn't know we all stayed in a hotel because we were worried about the snow. i ubered to the hotel -- >> don't use it as a verb please. >> i thought we were going to have crazy surge pricing. services suspended until further notice. >> you're not allowed to be driving. >> yeah. >> on the streets of new york city. >> anyway among the stocks to watch today microsoft posting earnings and revenue both in line with estimates. sluggish pc sales hurt demand for window's software. still look at the revenue number because it's always a number any other person has trouble. sales have been at 14 year highs along with inobstetrical. and texas instruments matching wall street expectations. growing demand for the auto industry. united technology posing line for forecasts but lowering four year guidance. get used to that utc to rise about 52% of sales outside the united states. so that makes sense. we need an anchor here. >> they said to go ahead and read with this. we are watching the markets this morning and yesterday the markets barely budged. probably because people were so focused on the snowstorm here potentially in the united states. the dow traded in 129 point range and believe it or not that's the lightest range we've seen so far this year. the nasdaq was up for the 6th straight session and if it closes higher today which doesn't look likely at the moment but if it does close higher that will be the longest winning streak for the nasdaq since all the way back to february of last year. right now the dow futures are down by about 70 points. in some of the early trading in wrurp you'll see similar delines. the dax is down by half a per cent with similar declines in france and london. overnight in asia with the asian stock markets the nikkei closed up. hang seng by .4%. oil prices dropped by 1%. they hung in there around the $45 level and settled at the lowest level since march of 2009. this morning up about 18 cents for wti. the ten year note is going to be interesting to check out the 30 year treasury. the yield hit record lows falling below 2.34%. the dollar in terms of the currency markets you'll see the dollar is down against the euros. still all the way down at 11272. and if you want to check out gold prices at least at this point it looks like gold prices are up slightly. 1,000, $1,281 an ounce. >> let's get to the story of the morning, the blizzard. morgan joins us now from new york's times square where she is hanging out in a little bit of the snow. not too much snow. morgan. >> reporter: good morning guys. it's cold out here and windy and you can see it's still snowing though the snow slowed down significantly. as of 1:00 a.m. last night here in manhattan we had 6.1 independence from lands of snow. the forecast 8 to 12 inches for manhattan and new york city. that's significantly lower than what was initially anticipated. out in queens we had 10 inches of snow as of 1:00 a.m. and now the national weather service is downgrading it's blizzard warning for new york city to a storm warning but it is still in place. that blizzard warning out in long island but guys keep in mind it isn't just the snowfall. it has been high winds that had everyone concerned over the last 24 hours. that's why we had 8 governors declare states of emergency. maine, new hampshire, massachusetts, i ri connecticut, pennsylvania new jersey and the lower part of new york state. we have seen major highways closed down. we had travel bans put in place in multiple states and here in new york city not only did the streets close at 11:00 p.m. local time last night but so did public transforation. subways, commuter trains buses. now that doesn't happen often in new york city. so the issue now is as the snow is starting to slow down and the blizzard warning is scaled back in the city what's going to happen with the transportation and slow downs throughout the northeastern region? we should start to get answers on that this morning. we have andrew cuomo holding a press conference at 8:00 a.m. today and more coming from other government officials later on in the morning. back to you. >> all right. found a little snow there. it's cold as you pointed out. thank you. thousands of flights have been cancelled throughout the northeast but at new york's jfk passengerers got stuck on an outbound virgin atlantic flight and had to sit on the tarmac for about six hours as they dealt with the icing and sick passenger. they were then sent back after all that to the terminal. >> and our hotel room is looking a little roomier and roomier. >> it is. >> yeah. i was watching some hoops. i did go down and i was able to bring in some food. i got it myself. i just miss everybody. new york's airport was closed completely and that's where we find kate rogers. hi kate good morning. >> good morning to you, joe, that's right. pretty much closed down. we've only seen a few people here this morning. a few stranded passengers and a few loan workers here. flight aware.com is reporting that between yesterday, today, and tomorrow there's over 7,000 flights completely cancelled. wednesday's cancellations around 300 so far but that number likely to increase as the day goes on and the snow continues to fall. now la now it's a ghost town. no one here but a few stranded passengers. united has a few workers at their booth. they're saying they're here just in case. the kiosks here all say not in service this morning and there's a few dozen passengers stranded here overnight but being taken care of in a separate part of the airport. boston logan is still the only one to officially shutdown last night at 7:00 p.m.. last night continuing into today but major airline carriers saying no flights getting in or out of the newark new jersey or philadelphia areas. >> everybody sit tight. that's the message. let's get a check on how retailers could be impacted by this winter storm. joining us right now is budd budd bugatch. he's the managing director at raymond james. we saw yesterday how some of the stock is trading higher as people get ready for the storm. we know this is the knee jerk reaction this time around. what does it mean for home depot or lowes. >> it doesn't mean much on the continuing basis or long-term basis. every storm is different. there's three phases. there's the preparation phase which in this case was pretty short. the first weather advisory i saw was on saturday and then the event itself which is a drag because the stores will be closed for a period of time and the 400 stores for home depot in this area that will be the biggest impact and then there's the aftermath and in hurricane or super storm sandy, we saw for home depot about $500 million in the four quarters afterwards of improved sales. this will be nowhere near that but i don't get very excited about these kind of events for these retailers. there's a whole menu of reasons why you want to own these retailers. had isn't ranking high on one of them. >> let's talk about what you think about these retailers in general? bhast what's a reason you should own them? >> they're great companies. the shareholders are always served well by these companies. the suppliers and the community of course and in events like this and from the financial side you see expanding margins. you see improving sales as the economy continues to recover and they return to share repurchase and dividends. you see a lot of reasons why you want to own them. these are certainly world clas companies and the stocks already reflect that. they're selling over 20 times forward earnings and they're at the highs of their historical ranges so it's hard to want to put new money into these names but you want to own them because they're great companies and if you want exposure to the housing market and great retailer and great companies there's no other places to go. >> budd thank you for your time today. great talking to you. >> thank you, becky. >> coming up the street reacts to microsofts quarterly results in earnings. why is the stock under a little pressure this morning? first though, check out the shares of dupont. beat by the profit forecast that sell fell short and check out these live pictures from philadelphia. someone is using a snow blower. squawk box will be right back on a stormy winter morning. stay tuned. sandwich massachusetts. they have heavy snow still coming down there. >> northeast of us apparently. and that's some serious wind action. >> yeah another 10 to 15 inches is still expected in boston. >> we got 8. thought we were getting 30. we did not. my vo soft earnings in line with expectations expectations. revenues did beat estimates but the shares fell after the bell after the tech giant warned about the currency market. joining us is robert with stern ag. he covers that stock. that couldn't normally cause a strong to sell off just because of a strong dollar would it? >> there's three things. the foreign currency is going to create a hangover effect for the next three or four quarters. we also have the sp upgrade cycle which ended last marchand we have to anniversary that for the next three quarters and longer term microsoft is undergoing a transactional business to more of a subscription model and that's also going to create a headwind. those are what's going to hurt the stock here as analysts continue to reduce their estimates going forward. what was the revenue number? >> it came in slightly above the numbers. it was at 26 billion. 26.3. >> in a quarter. >> 26 billion in a quarter. >> not bad. >> i missed that xp upgrade. i don't know somehow it was below the radar for me but didn't workout, right? but they still did 26 billion in revenue in a quarter. >> correct. >> it's very powerful and great cash flow machine. as the company transitions this transactional revenue. you might miss this one as well because it flies under the radar. but if you moved and let's say you signed a $100 million deal at the end of the quarter, under the transactional model you would recognize all of it. under the subscription model only 1 million of it. it has a dampening effect in the short-term but it's a great longer term model because it's more predictable. >> what happened in the last year and a half? we had ten years of almost a trading range. did the earnings per share just catch up with the multiple or was there something that changed that got the stock finally out of the dog house? >> well one, the sp upgrade cycle only occurs about every ten years so that's one thing and then the other thing was obviously the change in management and leadership. a much more focused management kind of moving to where the puck is going to be in terms of moving to the cloud. moving to mobile and moving the model underneath it toward that multiple. it should outpace over the last ten years. >> did you have a buy on it? do you have one now? >> we're neutral on the stock so once i join sterne agee about a year ago we were neutral. we saw this fundamental shift in terms of where revenue and earnings were going to be so we're near term here cautious. as estimates come down across the street we're likely to get more constructive as we go forward and the company navigates these tough short-term head winds. >> so this is now a cloud company or still totally dependent on pcs? i don't think that's a bad thing. we have michael dell talking to us. the demise of the pc was greatly exaggerated too. >> there's two components. one for microsoft on the enterprise side. it's probably the most rock solid area and then when you look at the consumer business which would be about 35% of the total revenue that's still going to undergo some transition but the pc market is definitely important but both of those are moving in tandem to the cloud. both for the consumer and the enterprise as office 365 was up over 114% this last quarter. so they're definitely getting significant momentum moving the applications. at the end of the day what microsoft wants you to do is use their applications whether that's microsoft office or excel or word they want you using it at work and at home in every format whether that's a pc tablet or phone. when you look at the new window's 10 they're trying to eun pie the whole experience for the developer where he or she can write an application on window's 10 and it can be deployed across all three devices simultaneously. >> the margin has to come down on all of those things because the problem is it used to be we buy three different versions of it and now they give parts of it away from free. isn't that the problem? i don't know if it's a problem, but isn't that the issue? >> margins will definitely come down as we move to the cloud revenues. that will have a dampening effect over the next one the two years but coming out the side should be better. microsoft will introduce new pricing strategies. you can buy a discounted version for home. they'll introduce new pricing strategies to entice you to purchase them across your devices devices. >> all right. thank you. if you write a program you don't need to do -- you really did. that is a benefit to be able to write one program and it goes across all the different devices. >> yeah and for people that already have max you write a note on your iphone and it will show up on your ipad. >> it will be everywhere. >> the world has passed me by. i guess you guys already know that mostly. >> you have an iphone. you know what we're talking about. >> i do but i don't know -- what amazes me is there's still so much microsoft software that people don't have that they still, 26 billion, that's 26,000 million. >> that's because every time you buy a new laptop you need software that goes with it. >> even if you have an apple device most people still buy microsoft. even microsoft office. >> what are you doing after the show? can we go somewhere and talk about all of this. >> we can definitely walk down the street. >> there's no snow. >> maybe we could hang out at the genius bar together. we have a little bit of tech news for you this morning. if you're stuck looking inside looking to pass time hanging out on facebook you may have had an issue last night. facebook instagram and tender were among several networking sites that suffered outages. it was caused by a technical change made on the site and not a result of a cyberattack but a hacking group claiming responsibility on twitter for the outages. >> i just thought it was so many people at home trying to get on at the same time. >> if you were on tender that doesn't help you. >> you heard what i said. the one night everybody really needed tender. you're stuck inside. >> isn't there a geographic component to it? >> you get stuck there and you can't leave. >> you're always thinking. >> when we come back this morning, a live report from new england. right now new england is still getting pounded by this blizzard. we'll talk more about that. plus we'll talk about the economic impact of what some say could be a historic storm. first as we head to a break, take a look at the s&p 500 winners and losers. ♪ she inspires you. no question about that. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be 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the ground in central park. honestly we were told 30. >> we should point out long island 17 inches was down there. in hartford connecticut you're looking at 5.5 inches down and boston area it's only been about 6.5 inches but another 10 to 15 inches is still expected. so depending on where you are different amounts. >> the blizzard warning -- you keep trying but i know we have reporters fanned out across the area to -- looking for snow. the blizzard warning is cancelled for new york city. i saw our producer coming up to shoot us coming in and it was like you're going to be let down here. anyway, this was video of our walk to the studio this morning. andrew, tried to look dramatic. an actor without a role. i walked out and was like what are you doing? i went to school in colorado. maybe that's it. there i am. i had no coffee at that point. where's becky? >> i took my own pictures. >> you did? >> yeah i don't think i'm in the pictures. i was just walking around shooting it. i will say i found a snow drift up to my shoulder. >> there should be drifts -- there should be volkswagens in drifts that people can't find based on the height for what this is -- do you know who i blame again? msm. >> msm? >> mainstream media. >> oh. >> it's always their fault. this is where up to 4 inches of snow an hour fell overnight. the region bracing for as much as three feet of snow. near hurricane forced winds causing the conditions. the only other thing i'll say we're very new york centric, we barely talked about what happened to the folks up in buffalo a couple of months allege. >> right. >> where we thr trapped in their houses for weeks on end. >> it didn't happen in new york city. so it's like yankees are playing aren't here but there is no baseball. >> there are parts of the country getting hit by this. >> you think other parts are snickering at us at this point? >> maybe just a little. out west where they're used to much more snow. >> maybe. >> we should check in now with nbc's john yang. he joins us from portland maine. >> we're selling it for you. >> hey, becky, it's gotten a lot worse here. the snow really coming down heavily now and also the winds are picking up. you got it blowing. it's a very light snow and very fine flakes. not the big fluffy heavy wet flakes that you sometimes get. they expect this to last all at a long during the daylight hours. they don't expect it to taper off and stop until tomorrow. the blizzard warning is still in effect here. schools are closed. the government has declared a state of emergency. government offices are closed. there are parking bans across the region to let snowplows get through. it's falling at a rate of more than two inches an hour. expected to keep that up all day long. total accumulation could be upwards of 18 inches. back to you. >> all right, john thank you very much. by the way, john is pointing out that we are sitting here laughing about it while we sit outside. he is out in the snowstorm dealing with this. >> why, john? i know we need the shot but are all the doors locked? go inside. >> john thank you. >> as soon as i'm done. believe me. >> look don't let him in here. >> now to lower manhattan, even before the storm, the nyse promised it would be open for business today. >> i always wonder about that. when they're standing out. >> go inside. >> they're going outside to show you what it looks like so you don't have to go outside. >> i never went to journalism school which is obvious. jackie, good morning, how are you? >> good morning, guys how are you? well the good news down here is that the financial community braced for this storm. it certainly wasn't as cripples as everybody was expecting but a slower pace down here this morning. as you can see behind me on the west side highway you have every once in awhile a rogue vehicle and taxi cab right now. hard to tell if it's snowing here or a snow drift because this area is on the water and it's windy down here but it's the wind chill that is making it very fridged. a couple of pedestrians december tri -- walking around and a lot of people telling me they would be working from home today taking things a little slower. also the community around here the super markets, the delis not hustling and bustling as they normally would at this time of day. coffee shops, et cetera, everything is closed and quite at this point but the exchanges are operating as expected. nyse nasdaq all expected to operate today and actually a lot of the traders staying at hotels in nearby areas because they din want to have to commute and deal with the issues surrounding us this morning. business as usual here in this area although it's a little bit slower than normal i would say. back to you. thank you for that. we appreciate it. joining us now on the economic impact or lack of impact we'll see in what some are calling a historic blizzard here is evan gold of planalittics client services. you quantify the impact of weather. help quantify it for us. good morning. >> good morning. we think the economic impact of the storm will be relatively small. we're estimating about 500 million and that's based on the duration of the storm, the timing of the storm, the population centers that are impacted and just to put it into perspective last year when we had the polar vortex and all the blizzards and significant snow fall the economic impact of last winter was anywhere from 15 to 50 beside. this is a relatively small event. >> what was your estimate 24 hours ago? how has your estimate changed? >> so we were also calling for a little bit less aggressive than the major outlets out there calling for the two to three feet of snow. you have to think about this from a consumer perspective consumers are buying on the forecast. from a business perspective a lot of that purchasing has already happened and that's what you see with a lot of these events is people are buying on the forecast for the threat of the storm as much as on the aftermath. >> this is a pull forward to some degree. >> in some cases it absolutely is a pull forward. there's some cases where this is simply going to be lost. people aren't showing up to work today or school. restaurants are a big one where if you go out and get a cup of coffee or lunch on a day like today you won't buy two cups of coffee or lunches tomorrow. there's economic impact that's going to be lost or built into the number i just talked about. on the winter side there's going to be folks like restaurant delivery services will do well. as will on demand and online businesses. >> what does this do to a company like ups or fed ex? what does it do to their costs? >> for some of those folks, look, this is not the first storm those guy versus gone through so it's not as significant of an event for those guys. they have as much about the preparation as anything else so everything i heard is they are operating as close to normal as possible today. while it is about 50 million people impacted here because of the fact that the schools are closed roads are closed they'll have an easier time than they might on a traditional day. >> is there an upside surprise for somebody we don't normally think about? >> yeah i was talking earlier about some of the on demand businesses businesses, some may have an apple or comcast and people are staying home there's opportunity here. another opportunity for good news perspective, for traditional retailers it's not all that bad. it's actually probably descent news because you're talking about the slowest retail week of the year during the lowest days of the week. it's not going to be all that bad for some of those folks. next week is a great opportunity to clear your winter boots, scarves, hotsats, gloves sweaters. joe made the mention the mainstream media speculating it's overgrown. what were you doing differently you think? >> i think from a media perspective we're out there advising our clients here's what's out there in the media but also from our own perspective this is what we think is going to happen but we advise them to focus more on the consumer. >> you're not doing weather prafts. >> really trying to protect what the economic impact is from a traffic perspective. >> thank you for joining us this morning. >> thank you. >> stay warm. >> coming up a blizzard in the northeast but there's a storm of a whole different kind in greece this morning. michelle will bring us the story from athens and that is coming up next and as we go to break, check out the scene in plymouth massachusetts. squawk box will be right back. they're coming. what do i do? you need to catch the 4:10 huh? the equipment tracking system will get you to the loading dock. ♪ there should be a truck leaving now. i got it. now jump off the bridge. what? in 3...2...1... are you kidding me? go. right on time. right now, over 20,000 trains are running reliably. we call that predictable. thrillingly predictable. welcome back. take a look at the u.s. equity futures today. things barely budged. you saw the dow within the range of 129 points. that's the tightest range all year in 2015. we're looking at weaker number with the dow futures down by about 83 points nasdaq down by close to 25 points. lest head overseas. the global story of the week is greece. michelle joins us from athens and you're continuing to monitor the fall out there. what does it look like now? >> we want to tell you about the first day as prime minister of greece. he's a radical leftist. what's the first thing he did? he went to the site of a german nazi massacre of innocent civilians during occupation. the first ambassador he met with is from russia. he did those to establish his leftist credentials but it's being scene as a message of antagonism toward the germans. the local paper of record says right now what they're working on is reinstatement of government workers and elimination of the evaluation process for government workers. they tried to get rid of that. he is proposing legislation to raise the minimum wage back to where it was before the crisis. he wants to bring back -- excuse me collective bargaining for wages for the unions. he wants easy repayment terms for overdue taxes and free electricity for those living under the poverty level. his creditors still giving him billion of dollars are going to ask how are you going to pay for all of those things? those are all reasons they could potentially say we aren't giving you more money because it contradicts what they want to do to make the economy more competitive. we're learning who the cabinet member is going to be and finance minister is a man that wilbur ross famed investor and has a big investment in a greek bank here and he described him as moderate and ross is right. he is a moderate but only in greece. he describes himself as a libertarian marksist. he is to the left of elizabeth warren. he'll be in charge of the other promise he made which he promised he'll convince the europeans to lower the debt burden they have already taken on from the previous loans. he's one of the guys pushing for the ecb to take a hair cut when it comes to the 27 billion that greece owes to the ecb. here's his proposed plan. >> my proposal would be that we issue a new bond with a small interest rate that we can agree and the same face value of what we owe to the ecb and park it on the asset books and then move on to the rest of bailout clauses and aspects. >> he wants to give what's almost called a propetual. that is a bond that lasts forever and has zero interest payments. he said when would they get paid back? he would attach gdp warrants to the bonds and when the gdp was growing that's how they would get paid back. to not pay back on time san explosive idea. i don't think it's going to get far but certainly that's the original stance guys. >> the idea of tying it to gdp growth is a longer shot i'd say. we'll pay you back when and if we're ever growing again. >> what they're going to come back with you're exactly right becky, is all the things you proposed go against the current thinking of what would make this economy grow. >> sounds like a bit of a mess but still a work in progress. maybe we'll see action on some points. maybe something that draws the two sides together. michelle thank you very much. >> all right, coming up a major winter storm slamming the northeast. this is a live picture of the scene in boston right now. when we return we're going to talk about uber's plans to cap surge pricing during the blizzard. but, you know supply and demand. prices got to go up. that's the way uber works. squawk box will be right back. story because i took they have wiped out effectively the massive surge pricing that we have seen historically. so highest during this storm they'll do is times which is much less than on new years. >> 7 or 8 times. >> and they'll contribute the money to the >> and it is price gouging. changes the way everybody thinks about this non-surging, non-gouging market environment. >> it was purely in a vacuum and went right to the price it needed to go to make sure that there was enough supply for demand but the problem is people get in the system and it never is. >> not only that how do you define the difference? >> it's all about price discovery. it should be big enough to where you should be able to do that. but it's never perfect. >> no. >> i want to talk about the double down dog that kfc unveiled in the philippines. it's a hot dog. but that bun is made out of fried chicken. check it out. >> wow. >> it also has cheese dumped on top of it. this is something they're calling an extra meaty legendary dish. >> heart attack on a plate. >> pretty much. each of the branches was allotted 50 sandwiches and they all sold out. you have to wonder if this is coming to a kfc near you. >> meat on meat is weird. i used to get an arby's burger that had a piece of ham on top of the burger. and i've done that at home with my wife. and she says ham is not a condiment. but for me it is. >> isn't bacon a condiment? >> yes. think about that. >> exercise and do other things. once in awhile it's fine. so bob kraft -- i agree with bob, and i'm not apologizing for anyone -- but if it turns out the nfl doesn't find anything i think that brady's been wrong, that belichick has been wrong. >> what do we think about this kid who apparently is on videotape? going into the bathroom. i don't know. >> you want me to read it closely? he went into a one-toilet bathroom with 24 footballs and exited 90 seconds later. now, he was able to lower each football that the patriots owned to find them and lower them by two pounds? you know what he probably did in there? he probably unzipped waited like we do went waited to finish like we do and i couldn't do it in 90 seconds. >> what i can tell you he didn't do, he didn't wash his hands. >> really. he did 24 balls in 90 seconds? >> i know you have to do each ball in seven and a half seconds and got to get them out of the bag too. >> and 90 seconds is crazy. he didn't wash his hands. that's my take. >> it's too bad that the whole thing happened. if someone did something wrong, it's bad. >> but bob's probably right. if there's nothing found from the investigation -- >> how hard did those guys work to beat them? when we come back we're going to talk about the storm. a lot of people still getting slammed by this. stick around. 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[ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter.com/offer2. a blizzard pounding the northeast. >> this is an unrelenting event. >> thousands are stuck at home. but the worst of it is missing new york city. we'll bring you the travel bans and cancellations. earning alert. pfizer caterpillar, and 3m. >> and a squawk market master weighs in on the crash in crude, the falling euro the russian downgrade, and a possible exit. the second hour of "squawk box" begins right now. welcome back to "squawk box" right here on cnbc first in business worldwide. i'm andrew ross sorkin along with joe kernen and becky quick. snow totals in new york city and northern new jersey fallen short. i'm going to say a lot short. major exchanges reaffirming they will be open for business today. travel bans though still in effect for massachusetts, connecticut, and parts of new york. in new jersey the travel ban south of interstate 95 was lifted. that happened at 7:00 a.m. right about now. about a minute ago. we're going to be getting an update on airline cancellations in just a few minutes and there are a lot of them. among the other stories -- you got some earnings? >> we can do pfizer. i'm sorry. procter & gamble. the estimate was for $1.13 and the adjusted net here is $1.06. i wouldn't be surprised if that's a currency problem. the estimate for revenue -- >> it is a currency issue. they're saying the october to december 2014 quarter was a challenging one with unprecedented currency devaluations. virtually every currency in the world devalued versus the dollar. while we continue to make steady progress on the strategic part of the company, the considerable business portfolio product innovation and productivity progress was not enough to overcome foreign exchange. >> they reported $20.16 and the estimate was $20.6. >> the outlook for the year will remain challenging. will reduce 2015 sales by 5% and net earnings by 12% or at least $1.4 billion after tax. we have and will continue to offset as much of this currency impact we can through productivity cost savings. but again this is going to be a big hit. pain's not over and it will continue. this may be the first of the companies that's really lads it out in such stark language. >> pfizer is out as well. pfizer is above expectations. 54 cents was a penny ahead of expectations. the number we're looking for for revenue is $12.89. and i don't see the revenue number. $13.1. $13.1 versus $12.89. so that's above. and it looks like that stock -- can't tell whether it's actually trading. looks down at this point. company has seen continued momentum with its pipeline in 2015. it breaks out some of the different things. that would be the stuff that they've had for awhile. then innovative pharmaceutical revenue up 3%. global vaccine up 18%. here it is. fiscal earnings per share 1.37 to 1.52. actually, that's not adjusted so we can't use that one. adjusted 2.10 and the estimate looks like 2.18. they shouldn't be estimated, right? are they talking about next year? fiscal year $2 to $2.10 would be below the $2.18. >> that might be what's pulling down the stock right now. >> because if they gave us a fourth quarter here we shouldn't need to get a forecast. so that should be for next year. >> let's just go back to procter & gamble for one moment. if you want to talk about how much this is hitting the company, if you want to talk about how much it's going to impact their earnings for the year they now say earnings per share is expected to be in line to down low single digits versus the year ago. the street was up at $4.15 for 2015 earnings for procter & gamble. they say they are maintaining their outlook for core earnings per share in the double digits growth. but when you include the currency impacts, you talk about a company at best is going to be reporting the same number it was last year and the street was looking for growth. >> not to swap in between p&g and fooiz, but continued head winds from expires, we've talked about all those and what that means in the drug industry at all. we were able to deliver modest adjusted growth. then he says this was through incremental revenue generation from key in-line products and recent product launches responsible expense management as well as support of capital location. none of those kind of comments would be ringing endorsements of what the future holds. >> i can't -- i don't have a -- i wish i had had one, but for some reason the screen's not set up right. but i don't know what next year's estimate is for pfizer but they're saying $44.5 to $46.5. >> i'll give it in a second. for next year they're looking for 49 -- no no. for $47.56 is where the street was. >> so below this year. revenue is indicated to go down. >> which is down from last year. which so down from the year before that. >> so 47? so 44.5 to 46.5. >> the street was looking for $47.56. >> low end of that as well. >> these are both dow components. if you want to look where the major indexes are trading, check out the dow jones industrial average, both stocks will have an exact because they are trading below based on the earnings. >> now down 106. >> another 26 points for the dow. >> i will say it. keep in mind that the fed hasn't raised rates yet. now the market gets in front of things for the dollar. the market gets in front of things obviously. and we know they're going one way over there in europe and we're going the other way here. any reason to think the dollar has seen its highs? >> not based on everything from every analyst we've talked to? >> who was it frank's wife? that said eventually it will get to the point where they will start complaining about it. the strong dollar will -- >> in fact she said that two weeks ago. >> she said long before then. >> already reaching that point. >> and that you'll start hearing some protection type stuff. but it gets so bad with the dollar that strong that we'll see. because it's early for -- i mean, this is one quarter. but i don't know why you don't really look at the ongoing business and judge it based on currency, do you? >> you don't if you're a trader. >> you do if you're a trader. you don't have you're a long-term investor. >> the opposite. anyway the story everyone on the east coast is talking about and here's our problem. here's our problem. it's still going on and it's a big, bad storm that's still going to affect a lot of people. however -- so we've got to keep it in mind -- but i guarantee you the tabloids tomorrow are going to be all over the big letdown. >> on twitter you hear from people complaining in new york z city about not being able to take a subway to work about not getting out on the streets. >> parks are closed. you think bloomberg was -- >> i'm going to be out there sledding in a couple of hours. >> i'm afraid he's going to come over here. he's tall too. >> can we get arrested for sledding right now? >> you're not allowed right now. my guess is things will change in the next couple of hours. >> why can't people in the private sector who want to work get on the subways which are now closed and those guys are all -- >> no look. they took an abundance of caution. and if things had played out differently and this was atlanta all over again, people would have been complaining about that too. >> also there's a huge cost -- >> that's why i'm here and why you're here. does it ever get -- i can't help myself. you have to make it -- >> i'm just trying to balance it out. >> anyway, morgan we got her up so early. said it's going to be really bad, you've got to be out there. so don't disappoint us. like have the camera man blow some snow in your face or something, can you? >> i had that enough the last couple hours. we no longer have a blizzard in effect here. the national weather service canceling that for new york city. also not getting as much snow in the city as anticipated. we got between six and eight inches of snow here in manhattan. nonetheless, this is times square. and honest lu, it's been a bit of a mess. we've seen more journalists and folks digging out pathways here this morning than we have tourists. and keep in mind we still have public transportation is suspended. we've also seen a number of folks slogging through the snow to get to and from in the city presumably to work. even though we technically still have -- the streets are still technically closed we've seen a number of taxi cabs starting to venture out and move around the city. so things are starting to shape up on that front. as far as the forecast through the rest of the day and what we should expect in terms of additional snow boston 8 to 12 inches. providence, five to eight inches. portland maine, 12 to 18 inches. and here in new york another one to three inches. though it isn't really snowing here right now. in massachusetts also we're getting reports of 10,000 people without power right now. here in new york city given the fact that everything is shut down, we're hoping to get some more guidance on that later this morning. we have press conferences scheduled from both the new york city mayor as well as the new york governor. so hoping to get a little more information on when all the roads are going to get up and moving again. i will leave you with this. this was a picture tweeted out by the mta just a little while ago. that is an image of an empty grand central station. that's not something you see very often. and that's given the fact that metro north has been suspended as well. you think maybe that's the picture for this storm. guys, back to you. >> okay morgan. i wonder weather -- remember bloomberg got hammered the time he didn't prepare well enough. can you get hammered the other way when you close everything down? >> there will be people irritated they can't get on the subways this morning. >> but can't we tell them now? >> yeah i think in the next hour or two. >> they're not going to open up schools. >> but they'll lift the ban on traffic. >> that would be cruel. you can't -- like -- >> so here's the question. if you're a retailer -- >> you get a snow day, no we're taking it back? >> if you're a retailer and you already told your employees you effectively have the day off which a lot of companies did last night. what if you're app snl do you call them this morning and say hey, guys we're opening up at noon today and you all have to be there? >> yes. >> what about if you have kids that you're at home with from school? >> it becomes complicated. >> but you make the parents go so the kids stay home by themselves? >> no. this is the issue though. within reason. >> okay. >> anyway the blizzard forcing thousands of flight cancellations across the country. kate rogers joins us now from laguardia with more on that. good morning again. >> good morning to you becky. the doors are open here but the airport essentially shut down. in fact, all airports in the northeast, flights basically aren't getting in or out at all today. as you can see behind he laguardia is is a ghost town. all cancellations one after another. the kiosks behind me all saying not in service and the tsa check point is shut down. we're told there's no one there behind the security gates. we did catch up with one lone passenger trying to make his way to denver. his flight was canceled yesterday. he may be here through tomorrow night as the very least. >> i'm just chilling sit issing down. meeting new people eating. ain't nothing else to do but facebook. >> and we're also being told there's several dozen passengers that were stranded overnight as well. they're being helped in a separate part of the airport. but i do have to tell you there's probably more journalists and members of the media here at the airport actually covering winter storm juno than there are travelers stranded here that tried to get out yesterday. back over to you. >> can't say i'm surprised by that. thank you very much. great to talk with you. we'll check in later. for more on the travel descriptions, we are joined now by daniel baker, ceo of flight aware. good morning to you. you have a better than insight than most on where things stand. just walk us through what the cancellations look like how quickly we're going to bet back online if we will today at all. >> the airlines really got ahead of this storm and began canceling flights yesterday afternoon and evening because they wanted to get the airports and crews out of the know so it wouldn't disrupt their own flight patterns elsewhere in the country. basically every arrival and departure in and out of the new york city area, philadelphia, boston. so we're talking north of 5,000 flight cancellations. that's more than 15% of the whole schedule for the airlines in the u.s. and the expectation is early morning tomorrow we're going see some cancellations as well. the airlines need to get those planes back into the northeast to begin service out of the northeast. >> if you think you're flying out tomorrow morning and they haven't canceled yet, your expectation because you are a pretty good predictor of what's about to happen you suspect it will be? >> it's dicey tomorrow morning. absolutely. if you're flying into the northeast tomorrow morning, you've got a good shot. the airlines want to get back in business. if you've got an early morning flight out of the northeast tomorrow, it's dicey. tough ask you're where is that airplane coming from? how could it be here if there are any flights into new york city this evening how would they depart tomorrow morning? >> and no chance anything's landing tonight? or taking off? >> the airlines want to get back in business. the schedules have pretty much been canceled through the end of the day. there's a chance they might start repositioning airplanes into the northeast. but they're going to be in recovery mode tomorrow morning. >> so even if the weather is looking good as we're looking out here and by the way the sidewalk here is you know completely clear as a bell. you could take off or land right on it actually if you get a tiny enough plane. that should not be an indicator for those thinking about what's about to happen? >> that is right. they can't start resuming flights this afternoon. and then they have the human factor as well. the folks that work at the airport that are meeting the planes checking people in dealing with the bags. they're saying the subways are shut down. so until the whole infrastructure of the city is back up and going again, they can't get the airports going. then that's really the blocker for the airlines to begin their operations again. so it's sort of the end of the list of all the things that need to get going again before they can resume service. >> okay. i'll be all over the flight aware app. thank you for helping us out this morning. >> thank you. coming up dow component procter & gamble reporting minutes ago. stock's down a couple of dollars now and hurting the dow as well. cfo john muller will join us next to break down the quarter. then at 7:30 eastern, two more dow components set to report. we're going to hear from 3m. >> the return of frozen-omics. find out how much this blizzard is going to cost. right now you're going to look at a live shot of boston massachusetts, where that's some serious snow. there. we didn't really get it hooere. we got lucky. procter & gamble quarterly results moments ago. more than 180 countries. missing on the top and bottom lines because of currency. joining us now how to break down the numbers is john muller cfc of p&g. we actually posed the question, it's currency, it's out of your control, should it matter to investors? but just if you look at face value, both revenue and earnings dropped from a year ago. so what's an investor to do? >> well you know it was a quarter with both rewards and challenges. we grew constant currency organic sales, we returned $4 billion of cash to shareholders. we tightened our strategy by devesting some businesses. and we increased our cost profile. but there were definitely challenges. and fx was the prime one. virtually every currency. sh points on the quarter. able to includes savings to offset part of that. but we continue to invest as well in our business our brands products capabilities and people. because it's the right thing to do for the long-term. and so we did in terms of all in earnings, we were below a year ago. from a fiscal year standpoint we're holding our organic sales guidance. we're holding our cost of currency. earnings per share guidance. we're holding our commitment to return 12 to $14 billion of cash to shareholders. but we are reducing our all in guidance range to a range of flat to down single digits. what will cover these impacts over time through a combination of both pricing and cost savings. but in the near term it has an impact. >> so is that assuming that the dollar stays where it is or continues to get stronger? those numbers you just gave. >> i'm sorry, i can't hear a thing. >> okay. let me test. testing, testing. jon. jon. jon. cfo of procter & gamble. >> i don't think it's working. >> no? maybe the snow got in the way? >> we're going to try to reconnect. but -- okay jon. i understand that you're back. my question was if the fed's going to raise theoretically and maybe it's all already in the currencies, maybe the dollar has seen its highs, nobody knows. but is that -- those forecasts you just gave -- is that assuming the dollar stays where it is? what if it continues to strengthen? you could be less on the all-in turms, right? >> so the forecast we just provided is current with spot rates. as we look forward and you look more broadly, we're pretty hopeful that tail winds are going to increase. we're going to have a benefit from lower oil costs. we're going to price to recover currencies. that will help. we've got increase in savings from our productivity program. the benefits from our portfolio focusing will grow. you know the oil costs are not only a benefit in terms of cost but we're hopeful there will be a stimulant for demand and oil importing countries. the oil importing countries, the u.s., china, japan and western europe constitute about 2/3 of our business. interest rates are low. and we're hopeful we'll see growth in the united states. so we're bullish on the future. >> nice to have two-thirds of your sales in developing fast-growing countries untiling is like this happens though. i mean that's just a multinational problem. but live by the sword, die by the sword. >> yeah. and it's not something that we haven't dealt with successfully before. you know the last russian crisis is an example. the ruble is one of our big currency exposures. our business halved overnight. then six to seven years, we built that back. it started precrisis at $700 million business. now a $3 billion business with profits above the company average. so these things take time. but we're well rehearsed in how to deal with this. we have many opportunities that are within our control. and we're bringing all those to bear. >> what are some of those opportunities? we've spoken with caterpillar in the past and they talked about doing more local sourcing. i get the feeling that procter & gamble already does a lot of that. right, jon? >> there are opportunities in the margin. both from a manufacturing standpoint and also from a supply of materials standpoint. so we'll move some of that around. but what i'm talking about is the big cost savings programs we're executing against. the portfolio we're executing which will increase our growth rates and profitability. there are many operational levers aside from just managing the currency exposure itself that should help us. and we have some very good, strong large businesses. pampers in the u.s. detergent? the u.s. are growing nicely. so this is -- we can't make the mistake of taking the eye off the ball and cutting too much cost. we need to continue to invest in our brands. so there'll be a short-term hit. but again long-term i think there are more things in our favor than working against us. >> going to figure out -- trying to give you some advice on who to start kissing up to, jon. healey is leaving now. she was supposedly a potential successor, right? so now there's four. you got your money on any of these guys that you're willing to say on the air? david taylor debra inretta, martin rant? you're staying close to all of them? how are you working this? >> i have the blessing of working with a wonderful team of people across businesses across disciplines. and we're focused on growing the business and they're all key contributors. >> good answer jon. >> he's totally inflappable. you're always expecting something, aren't you? nothing surprises -- you didn't even switch. i didn't see your eyebrow move when i started going there. >> what can i say? >> all right. thank you. but we are watching because obviously a.g. is a tough guy. you tried to get someone before and you tried to get him back. good luck. thanks for playing along, jon. and you always give us everything we need to make an informed decision. see you. >> thanks guys. have a good day. coming up when we return bacon news. why your favorite breakfast meat is getting a little bit cheaper. and we're also expecting quarterly reports from 3m and caterpillar. we'll bring you those numbers and the move in the market. we're back in a moment. breath in... and... exhale... aflac! and a gentle wavelike motion... ahhh-ahhhhhh. liberate your spine... ahhh-ahhhhhh...aflac! and reach, toes blossoming... not that great at yoga. yeah, but when i slipped a disk he paid my claim in just four days. ahh! four days? 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the answer is yes, it can. so, the question your customers are really asking is can your business deliver? welcome back to "squawk box" this morning. among the stories front and center, some meteorologists are now apologizing for what many call a huge forecast miss. tweeting this morning for much of new jersey and for the philadelphia metropolitan area this is a big forecast miss. my deepest apologies to many key decision makers and so many members of the general public. you're seeing blizzard miss. i also saw #snowporn this morning. >> i tell you again. it's very difficult to forecast 24 to 36 hours in advance. but 24 to 36 years we've got that down. so i want you to believe me when i tell you about my forecast for -- >> it is amazing -- >> we can't get 24 to 36 hours. we can't even get close on that. and yet -- >> the question is -- we get very upset when they missed the forecast and there's too much snow. and then we get very upset when there's too little snow. >> you didn't laugh at my other line either. that if it had been a huge storm it would have been climate change. now it was because of global warming. >> can i tell you where predictions have done a better job? with 3m right now. coming in better than the street was expecting. it's a penny beat on the bottom line. top line just slightly light. $7.72 billion versus the $7.77 billion they were expecting. now for the full year they expect to earn $8 to $8.30 a share. street was in the middle of that at $8.20. we'll see how the stock is trading on this expectation. this is the first of the three dow components we've seen today that have beat expectations. that stock is trading higher right now. it's up by about $1.26 versus pfizer. and procter & gamble we're watching this morning, that was a big miss. but that was because of currency fluctuations. >> okay. so you mentioned 3m. we want to do caterpillar at this point? >> i don't know if it's in. >> let's see -- >> it does look like caterpillar is just hitting right now. i want to look closer at this. >> there must be an adjusted number unless that's a huge miss. but i don't see it. revenue -- they see revenue at this point at a billion. but adjusted, it says adjusted -- >> sales look good though. sales came in. fourth quarter sales, $14.2 billion. that's also slightly ahead of what they had been anticipating. i want to look at what's in that. restructuring costs, profits were $1.35. i don't see what else is in that. let me dig through deeper. >> what's the stock doing? >> stock down 4%. >> is the stock's down $4. and i'm also seeing a crazy adjusted number of 4.75 and i've got, like, over $6 as the number that people are looking for here. >> i've taken all of seven seconds to look at this. so i'd like to take a closer look. >> caterpillar decline in oil prices for the decrease in both the sales and revenue outlook. >> wow. >> now, they told us doug told us that there's a lot of different things that go into oil and gas. and there's downstream operations that aren't necessarily as dependent on the price and it keeps going on. but this seems to indicate -- >> they're disappointed by the fourth quarter. >> the recent dramatic decline in the price of oil is the most significant for the year over year revenue and outlook. they're saying it's a significant headwind for the transportation sections for their own company. and negative for our construction business. so the effects for oil producing countries that no longer have the money to invest. >> so they miss by a couple of pennies. they're supposed to earn 657. they needed $1.55 to do that. that's below by 50 cents. next year they're supposed to earn $6.67. they're now saying $4.75. >> yeah. all right. that's the reason you're seeing the stock trade lower. it doubled on. expectations for the construction industry in china are lower. so they're getting hit from a lot of different directions. >> we're also using $1.35 as the actual number here. that's what we do. adjusted is $1.35 which is 20 cents below. fiscal year 50 billion. 55 is what they had this year. so they did say they're going to see lower and revenue. >> looking for revenue. still $55 billion is what the street was looking for. the street was look willing for relatively flat. >> and they're saying $50 billion. i wonder did we have any 4-x details on this? >> they mentioned everything but 4-x. they say lower prices for oil, copper coal iron ore. >> we asked about the results and they said it couldn't get much worse. but think about overall commodities have gone down along with oil. and that probably hits mining as well. >> they say that's negative per sales. continued weakness and commodity prices as well. they are expected to be negative for our sales. >> this is new low on caterpillar as well. going to be a new 12-month low. and there are people that have been talking about this. looks like he's going to have a good day. >> just about two weeks ago. >> caterpillar ceo and we credit him with this he will join us will be able to explain what we're talking about here. recovered a little. it's down about $4 right now. as we head to a break, more on the storm. governor cuomo has lifted the travel ban as of 7:30 eastern. that was just a few minutes ago. you can imagine we will see it pick up soon. of course a squawk market master will be joining us on a potential greek exit coming up. he'll also speak about the russian downgrade. also an update on the blizzard in the northeast. frozen-omics series returns after this. but first check out a live look at hartford, connecticut. still snows hard there. e financial noise financial noise financial noise financial noise opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. talking about procter & gamble being down on 4-x. now we got caterpillar down. i think pfizer was also down. so here's what's happening with the dow now. down 156 points. >> when we walked in this morning, it was down only about 80 points. since then we've gotten these three components. none of which have been great news. >> and the currency is -- >> 3m was okay. >> but we'll see. the market's been crappy this year, too, since january 1st. and we needed you know earnings to do relatively -- we don't need earnings going down year over year to justify 17,000 or 18,000 on the dow. but my point now, don't you think the fed will need to get together today -- >> and do something? >> they panicked. they had the taper tantrum they did. they see these numbers happening and if they raise rates and the dollar gets even stronger, are we sure -- >> you listen to the comments from the companies saying this has been unprecedented. the strength of the dollar versus every other currency. >> but are they going to waiver? we have steve leisman coming in soon. >> i thought he was arrested. i thought they arrested some russian spies. >> yuri? >> yeah. he's a plant. >> no he's not. >> let's talk about frozenomics. cnbc's series continues. and steve leisman joins us. >> who bailed you out? >> my contacts did. my kids think my wife and i are both spies. when we don't want them to know what we're talking about, we speak in russian to each other. >> before you start, seriously, i know we're talking about -- we got this all prepared with the snow and everything. but what about june? the market has been crappy. all these companies down year over year results. if we raise rates, the dollar gets even stronger. they're going to waiver. >> i think that's right, joe. and i think this caterpillar story is a bigger story beyond just caterpillar. let me start with the storm. it's not as big of a storm in the new york city area. and even then they were playing down the economic impact. here's the reason. it takes a lot to derail the region's economy, the nation's economy. a single storm is usually just not up to the task. >> referee: what's really important from an economic perspective as it relates to metro areas and the costs to cleaning up snow it's more important the number of storms not the amount of the storms. if you've got ten storms where you've got five inches that has a bigger impact than one storm with 50 inches. >> all we have to do is look to last year which is a good example of how winter weather affects. lots of storms affecting a wide area. remember, that surprise 2.1% decline in the first quarter mostly thought to be weather induced. and some of the gdp in the next two quarters which you can see there averaged a strong 4.8%. that was a weather induced snapback. now we get a 3.3% gdp number expected. that seems more in line with trend. now, we're going to get a piece of that data in about 45 minutes from now. the street sees for durable goods a 0.3% in december. it will focus on new orders for capital goods. that's a proxy for business investment. it's been down in six of the past eight months. a couple big months have left the left up on the year over year basis. here's the big question. bigger than the economic impact of the storm is the ongoing storm in oil markets. it's possible a decline in spending for oil services in equipment could show up in the data this morning bringing down overall cap x. why? because it was a big part of all the growth when it came to cap-kp rks. and i wrote that before i saw the caterpillar. we're seeing that in other oil-related companies. >> caterpillar is down five now. and 3m is now down $2. pfizer was down fractionally. >> to joe's point, the question he asked before. does this give the fed pause when you start looking at the strong dollar and what that means for american companies? >> ftin fact -- well we don't know. we haven't heard from the leadership of the fed since the last press conference. what we do know is what the market is thinking. and you can take a look. we'll have our fed surveyed tomorrow. delayed a day because of the snow. but look what's happening at fixed income markets. look what's happened to it in just the past month. where it's 63 64 basis points a month ago. now flip the numbers around. now we're at 46 basis points. so increasingly it's pushing ahead and reducing the amount of spikes it's seeing this year. like i said yesterday, this employment cost index for friday is a big number. could put the fed back on track for rate hikes or delay them. the fed's running out of time to have the data to justify the rate hikes. >> i could see the scenario where it's not working in europe, greece is going to leave, they're going to be in a slowdown we got no bullets left japan's got no bullets and we're going back into a slow period. >> then would you preemptively hike to prepare for that? >> no. i'd say they can't. now the scary thing is now they can hike maybe. look what they did with the storm. i'm allowed to say something scary about this. >> steve, thank you. let's get another voice. mohamed mohamed, what do you think? is the fed in a box? what do they do in this situation? >> i think it is facing this uncertainty between a healing u.s. economy and a weakening global economy. i still think the hike during the summer will go slowly. they'll start well below the 4% historic rate. but they've got to build in some cushion. so i think they'll still go. but it reflects you this divergence that's occurring in both economic performance and policy prospects. >> do they do it almost begrudgingly? i mean you have to hear what these companies are saying about how the dollar is already strengthened in an unbelievable way against every other u.s. currency. how do they continue to do that and what are the impacts it has back here on the stock market? >> so first on the currency you've heard me say this for months. history tells you whenever you get very sharp movements among the major currencies something breaks. this has been the history over and over again. in the past it was emerging markets. this time it is corporations that are weaker. and importantly it is adding to the volatility. remember, the whole notion of the fed is to repress market volatility. so the currency movements are important, but they're not unexpected. i don't think that in itself changes the fed. i think the fed is going to look at that and say that's part of the adjustment process. >> so what gets broken in this scenario? or you think we just limp our way through this? >> so i think the true risks -- and these are risk scenarios. one is you have companies that are unhedged. you've been reporting this morning about the u.s. but that's nothing compared to emerging market corporations that are unhedged. so the first risk is unhedged companies particularly those who have a mismatch in their revenues versus their liabilities. the second issue is this notion of lower volatility the ability of central banks to repress volatility. they're battling. look at the swiss central bank today. they had an -- so if we shake this low volatility pair dime then we're undermining a main element of policy. >> i'll ask you very quickly, what is the baseline scenario? you think stock's going to do okay just because they look better than other places to invest? >> so i think first and foremost, we're going to see a lot more volatility. and the resilience of investors are going to be tested a lot more this year. this is not going to be the goldilocks like in the past. that's the first thing. second, where we end up is a geopolitical call as much as it is an economic and corporate call. and there's -- keep an eye on russia. this is a major source of concern if you're in europe and europe goes into recession, the u.s. is going to be impacted. >> okay. mohamed, thank you. futures are closing in on down 200. not yet, but close. >> that's all because of earnings. >> right. >> coming up it is a big morning for earnings. we're going to run through the big movers ahead of the opening bell. we'll see where futures are going when "squawk box" returns in just a moment. so what's going on today? 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because it helps me skip the bad stuff. i'm good. that's what i like to call the meta effect. 4-in-1 multi-health metamucil now clinically proven to help you feel less hungry between meals. experience the meta effect with our new multi-health wellness line. ♪ ♪ i love my meta health bars. because when nutritious tastes this delicious i don't miss the other stuff. new meta health bars help promote heart health. experience the meta effect with our new multi-health wellness line. ♪ ♪ push your enterprise and you can move the world. ♪ ♪ but to get from the old way to the new you'll need the right it infrastructure. from a partner who knows how to make your enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come. welcome back. that is the current situation. dow down 191. futures dropping sharply this morning. caterpillar missing by 20 cents. revenue might have been above projections, but next year the company is cutting its outlook sharply. just went over something. microsoft is down. united technology is down. >> the multinationals are in trouble this morning. >> this is a big story today. >> it is. when we come back we're going to talk more about it. we have the ceo of caterpillar who will be sounding off on earnings. much more to come. stick around. "squawk box" will be right back. ting who will win the big race between the tortoise and the hare. what do you think andrew? rabbits are faster. it's not a rabbit, it's a ha \ maybe figure that out before debating the best wide reciever of all time. wait, are you odell beckham jr.? live from new york where business never sleeps, this is "squawk box." >> welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. breaking news this morning. that is u.s. equity futures are pointing to a sharply lower open after what has been a crappy start to 2015 already. so we're down almost 200. people talking about the four horsemen. there's more than four actually. this is like a budweiser commercial with like eight horses at this point. caterpillar is going to account for about 27 dow points based on where it is trading right now. united technologies is going to hit by about 19 pountints on the dow. microsoft 22 points. and procter & gamble about 15. utx is all over the place with elevators. >> and industrial. you have to look at 4-x. >> microsoft is technology. but all these things are affected. these aren't just -- some of these aren't just misses. these are lower earnings per share and revenue than 2014. >> all of 2014. >> now forecast for 2015. so where is -- how do you do 3% or 4% gdp if you've got -- and it sets up what does the fed do? europe is -- we're supposed to be the shining beacon in the global economy right now. getting interesting today. >> you know who i want to talk to today. i'm looking forward to catching up with cramer. he tends to look at this over a slightly longer term. he'll look at how the businesses are operating and i am looking forward to hearing how he addresses all of this today. >> it's absolutely nothing that the company -- >> although you could look at a stronger dollar for a long time. if you need to take money out, tough pay attention to it. >> it's like -- >> business could be running better even though you're getting hit by the stronger currency. why don't we look at the market boards this morning? those futures are under pressure. dow futures were indicated down by about 80 points. then we heard from procter & gamble and pfizer and caterpillar. add that up to what we heard last night, and it's a concern to the markets. dow futures down by about 200 points. and the nasdaq down by 38 points. watching in europe what's been happening there, similar stories there as you do see the dax down by 1.25%. the cac off by 1.2%. the ftse off by .5%. in asia overnight, the nikkei was higher. shanghai was down. if you look at oil prices it was down about 1%. it's trading down once again. 45.08 for wti. down by another seven cents. 10-year note is right now yielding below 1.8%. let's check out car insurance sis -- currencies. you're talking about the euro at 1.13. dollar down against the yen at 117.73. and gold prices barely budged earlier this morning. let's see where they end right now. up by $4.20. caterpillar reporting quarterly profit 20 cents below estimates. revenue, doesn't matter what we just saw now. it's next year that we're talking about here. here now with the first on cnbc interview with more doug ole oberhelman. we might as well get it out at this point. we want to make sure we have the right apples to apples stuff. how much are you bringing down next year's forecast on revenue and earnings versus where the street is? is this $2 less than where the street is on earnings that you're now forecasting? >> good morning, everyone. nice to be here. it's a little bit less than that but, yeah we are bringing it down. we're bringing our top line down from a little over $55 billion in 2014 to around 50. and we're bringing our bot top line down to 4.75 if we put some restructuring plans in there. but we are looking at a soft year in 2015. and there are several reasons for that. when we were all together in new york i talked about the impact of oil and it would hit us. and it is. oil is a piece of our energy and transportation business. oil and gas is about a third of that business. actually the natural gas piece of that business is doing pretty well and so far holding up. the oil piece, though is what we're taking down. that's our primary number reduction for 2015. >> and there's a reason that a company is called cyclical. when they're done they're great. and when things are bad, it's like everything is going -- i think about the businesses that you're in. think about it. you've got oil and oil goes down, other mod tycommodities goes down. and then you're an international company and the dollar's up. so you've got 4-x problems. i don't know if i would have got out of bed today if i were you. >> you're right, joe. there's a lot of external winds buffeting us. and the one thing our leadership team talks about all the time is to work on the things we can control. and actually if you look at 2014, we did that. we had a very solid year. albeit a soft quarter. most of the fourth quarter decline was as we are taking inventories down trying to improve our turnover and as i've talked many times with you and others leaning out of the supply chain. in the short-term it was quite a hit. long-term it ought to help us. but yes it seems like when it rains, it pours. this is one of those days. >> doug you know shareholder has one concern obviously. so maybe they don't know what to do with caterpillar. it is at a new low. it's down below 80 at this point. but what about the world? how long is this situation going to last for you, do you think? and for the rest of us in terms of the economy? i mean, is it -- are we in a -- is 2015 and even beyond not going to be as plushflush as we thought? >> it's very concerning. and i have been saying and we talked about this last month as well that it's hard for me to envision that $2 gasoline at the pump in this country, 2% interest rates is bad for an economy. and i think there's a transition upside way in the short-term where the big reduction in oil, the big reduction in commodity prices are hurting many companies including ours. but over the long-term, it's got to help us with growth. having said that we're only forecasting world gdp growth to be up .2 of a point to about 2.7 in 2015. that's not enough to create jobs, not enough to drive our top line. it's a pretty weak any overall. even though the u.s. outside the oil patch shows some life. >> several billion dollars worth now by my estimates. maybe close to four. in terms of what was authorized. in retrospect was that a mistake? >> not at all. we have a lot of cash on our balance sheet. certainly i'd like to buy low and never sell high. but we still have a lot of cash. we ended over $7 billion at the end of '14. that was a bright spot for us in 2014 was our cash flow. third best year in history. we're likely to buy more of that in the future. if you look at this over the long-term, we just have cash in our balance sheet we don't like to leave there very long. we'll continue to do that in the future. i'd look for more of that in 2015 as well. >> i know you can't control commodities prices, but you pointed out the lower prices for copper, for iron ore, for oil, for all of these things. that's really tough news for caterpillar. when do you see this changing? what are your own estimates and internal plans call for? >> it's tough news for the world because it's indication that world growth is slowing or certainly not growing or is slow, i guess. we forecast 2015 at fairly flat rates in terms of the dollar i think there's more risk to the stronger dollar this year. commodity prices we've held pretty flat. although in terms of copper folded up at the end of the year. i expect to see those prices stay relatively soft until we see some kind of growth in the world somewhere. and again, with low interest rates, low oil prices we can see some of that the end of '15. we did not work that into our forecast. so what we've tried to do all along as we grow we try to retain 25% of every incremental dollar in margin. as we drop we try to keep as we drop a dollar in sales we try to limit our damage to 25% to 30% on the way down. we're doing that in our forecast. that's reflected in a 9% drop in the top line. and that dollar and a half or so at the bottom line. >> it gets a little scary when you sort of connect all the dots. we got 0% interest rates all around the world. we've got europe. you know what have they got left. they're already expressed in basis points. and they're trying to cut rates that are already in basis points. then you have oil that was at 90 six months ago. you're trying to avoid deflation. and then oil gets cut in half when you're already having tough. it can get kind of scary. i wonder what policy makers have left in their quiver globally if there is a slowdown. then that's very concerning i think. >> joe, you're right. none of us sitting here six months ago could have $2.5 copper today. but policy makers have their hands full and we have around the world governments that aren't functioning. so there's a compounding effect. on the other hand what we're trying to do no matter what happens around us and i talk about the four walls around our country, try to make them as strong as we can to weather the storms. we've seen since 2009 tremendous things that have come at us that are unprecedented in our lifetime. with the glass half full it's exciting. >> goellyld i did goldilocks. >> you have a good idea about what's happening in the united states. what does the united states economy look like in your perspective? that could give insight about what the federal reserve might be doing come this summer. >> it's very interesting, becky. i have just been with about a third of our dealers in north america at different meetings and venues this month already. outside of the oil patch, outside the frac states outside the frac zones, our dealers and our contractor base are pretty busy. a lot of them had record decembers with that doubled appreciation that the government came through at the 11th hour, that helped push business going into 2015 with some backlogs. it's not a boom, but it's certainly more positive than it's been. then you go to the frac states texas, pennsylvania area north dakota and things are very tough and i think going to get tougher. in our case, if you visit a frac site you'll see maybe a dozen, 15 20 trailers with cat engines, cat transmissions all supplying pressure to help drill and frac that well. that's all going to go away in the next few months. we had a great year and quarter and month in our oil and gas business in december. that's going to tail off quickly in 2015. that's what we built into the forecast. outside of that, things are okay, apparently. and we need something more than 3% in the u.s. to really grow create jobs and grow our top line. i'm not sure we're going to see that in 2015. >> you think that this is just your opinion but fed going to change its schedule round of interest rates hikes at this point? would you put it off? >> i would put it off, definitely. there's no question it's a fragile economy. the european action is probably a slight net positive. they've got to do something to revive europe. it's going to take awhile. we've just got to keep doing more of the same. i do not look and encourage not a raise interest rates sooner than they have to. because the underlying foundation is not that strong yet. maybe it will be later in the year as we see the positive impact of gasoline prices work through to the pump. right now it's certainly not there. >> it's amazing. it's amazing how in 24 hours -- in the past two hours sort of the mind shift. >> what's more amazing is it is the half empty, half full thing. the same things we said two months ago, wow it's goldilocks. low interest rates, low oil prices. and now it's oh my god we have low interest rates and low oil. what are we going to do? anyway, what about china, doug? that's the one place we haven't talked about. they better get going. now more important than ever. >> it is. it's a huge economy. it's a very important market for us and a good one. we are actually forecasting a slowdown to about 7% or so in growth in 2015. that's a bit of a head wind for us. but i sure like our business there and where we are. it's a good solid business for us. just a lot smaller than it was four years ago. i like the way we're positioned there long-term. >> all right. thank you. >> by the way, thanks for coming on whether it's good news or bad. we appreciate that. >> it's only you, microsoft, united technologies, pfizer 3m -- so it's not a caterpillar story. but we appreciate you coming on and letting us know what's happening because it helps. >> nice to be with you. there are good days and not so good day, but always nice to be with you. >> okay great. let's take a look another the u.s. equity futures. they have been under quite a bit of pressure this morning. first came in this morning, it was down about 80. that was because of microsoft's news last night and utx. concerns about what's been happening in those industries and foreign exchange. a lot more of that this morning with all of the dow components that have been under pressure. joe rattled off the list. caterpillar, pfizer procter & gamble pfizer. right now dow futures down 230 points. s&p off 17 nasdaq down 51. we'll talk a lot more about this this morning. when we come back biggest stock movers of the morning. they are about all losers as you might guess. we're watching a selloff here. "squawk box" will be right back with much more. the real storm this morning has to be the storm in the futures markets, not necessarily on the streets of manhattan. there's a difference when you trade with fidelity. one you won't find anywhere else. one-second trade execution. guaranteed. did you see it? in one second, he made a trade we looked for the best price and the trade went through. do the other guys guarantee that? didn't think so. open an account and find more of the expertise you need to be a better investor. e financial noise financial noise financial noise financial noise recently, a 1954 mercedes-benz grand prix race car made history when it sold for a record price of just under $30 million. and now, another mercedes-benz makes history selling at just over $30,000. and to think this one actually has a surround-sound stereo. the 2015 cla. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. welcome back to "squawk box." it is setting up to be an ugly day in the markets. forget about the snow this morning. futures at this hour are looking distinctly in the red. dow looks like it would open down about 236 points. the nasdaq would open down about 50 points. we've heard a lot of big losers this morning in terms of earnings. microsoft warning it's dealing with the impact of a strong dollar. we then had 3m. we've heard from caterpillar, procter & gamble missing. it's not been a pretty sight. we'll see whether the sort of sentiment, if you will is shifting here. >> look at that chart. it doesn't give anyone anything to feel optimistic about. look at that. lower highs and lower lows. >> let's talk a bit more about this with jim iuorio. check out this results if you look across the board. cat pill sererpillar is the big loser right now but you have losses from other components. jim, what's going on? >> when we began earning season we knew the energy seasons were going to be bad because of oil. then that moved into the financial names because of cost. then we're on the multinational because of the strong dollar. we have plenty of excuses for individual sectors. but taken as an ing aaggregate it gets complicated. the reality of it is is we have to work through that. i'm not ready to write off the earnings season with this today. apple could save the day. at the end of earnings season we'll be able to look back and see is oil is going to be a net positive or net negative. i'm holding out it's going to be a slight net positive. >> as you mentioned, where do you look for growth? >> i'm looking at apple for growth. we're crossing our fingers for that. i know it's a lot riding on one name. but realistically we're going to look for consumer names that have a domestic focus. when we start seeing names like that do poorly then i'll be convinced that things are going to go badly for the entire earning season. this is an awful start, but i'm not ready to head down that thought process road that everything's a disaster. i still think things would be good. at the end of the day, you know with yields where they are here and in europe, the question you have to ask yourself every day is do i find a better investment across the world than u.s. stocks? i haven't seen it yet. i mean, you can think maybe you put money in gold but it's just still the cleanest shirt sort of theory. >> that's a fair point. when you're talking about companies that are warning for the full year it's only january. they're saying forget about it until 2016. >> yeah. i get that that's a bad thing. and i am -- i'm troubled by that, to say the least. i was under the impression coming into this most of the multinationals were better at hedging security risk than they appear to be. but we knew caterpillar was going to be bad because they're hinged to oil prices. we throw them almost into the energy sector. then it leaves microsoft and procter & gamble. and that's just two names so far. yes, it's a big deal and yes, it's a bad deal. but it's not the end of the world yet. >> thanks. it's good to talk to you. >> thank you. when we come back this morning, a russian spy ring in new york busted. it was trying to recruit u.s. citizens and collect economic intelligence. we have the details after the break. [ radio chatter ] ♪ ♪ [ male announcer ] andrew. rita. sandy. ♪ ♪ meet chris jackie joe. minor damage or major disaster, when you need us most, we're there. state farm. we're a force of nature, too. ♪ ♪ push your enterprise and you can move the world. ♪ ♪ but to get from the old way to the new you'll need the right it infrastructure. from a partner who knows how to make your enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come. welcome back to "squawk box." our next story is a crazy one. coded messages spy recruitment, and stealing economic intelligence. it sounds like a scene of a movie but it happened here in new york. eamon javers joins us with this russian spy ring. >> that's right. alleging they were officers of the svr, that's the successor to the kgb in russia. they arrested one man in the bronx and the other two were posing as diplomats and were able to leaf the country. the one arrested was arrested in the bronx yesterday. it's not clear what they were doing but it appears they were focused on economic intelligence gathering in the new york area. and one area that's raising a little bit of concern is this exchange that was released from an audiotape made by the fbi of these alleged russian agents when obviously they weren't aware the fbi was listening. and they're talking here about questions to the new york stock exchange. they are working with a news organization that a u.s. government official tells me was tass. look at this exchange here. agent number one said well i thought about it. i don't know whether it will work for you but you can ask about etfe exchange. agent two says yes i got it. agent one, how they are used. the mechanisms of use for destabilization of the markets. agent number two, obviously taking it down mechanism of use for market stabilization in modern conditions. then he says you can ask them what they think about limiting the use of trading robots. so clearly in this transcript of this conversation between these two russian agents that was release bid the fbi, there is some interest by the russian agents about u.s. financial markets and the destabilization of them. but it's not clear exactly what they're after here. whether they were trying to figure whether markets could be destabilized whether this was something they were trying to do offensively or defensively or simply information gathering. we'll learn more here as the details come out guys. >> okay. eamon, thank you for that report. it is fascinating. in the meantime we've got breaking economic data coming up. we're going to get you the durable goods numbers and talk the fed especially given the drags on the do u. you're looking at this right now. they are dragging everything down. take a look at u.s. equity futures. red in a big way. down about 245 points in the dow. s&p 500 down close to 20 points. nasdaq looks like it would open down 52 points. back in a moment. welcome back everybody. we are just a few seconds away from durable goods numbers. rick santelli is standing by in chicago. we've been waiting to see what happens. and after all the numbers that we've gotten from earnings today, they've been pretty disappointing so we'll see what the government has to say as well. go ahead, rick. take it away. >> december durable goods orders headline a bit late, obviously, it's the weather. well we are expecting up around .3%. still don't see it out. i'll do a little tap dancing here. here's what i find fascinating. we still haven't challenged the 6:00 p.m. eastern low yield closes from the 15th of january whether you're looking at fives, tens or thirties. which means that the big 20-second announcement was so preloaded we're not seeing the extremes. look at europe today. their equities are down. but their bund yields are not. so there's something interesting afoot here. i'm not sure what it means at this point. maybe they'll wait until the qe begins in march. but it seems there is a head wind. we're not only pushing a string. we're pushing a string in a hurricane, so to speak with regard to what central banks and and cannot accomplish. because you can never division if the talk is going to turn and work. once it's on the graph it is what it is. obviously this data is late and i can't -- i suspect that there's only one reason. so of course we could talk a little bit, joe. i'm glad you guys didn't get the big two to three feet they were expecting. that's cool thing you didn't get it. >> no, we didn't. so rick how will we know in looking at what fed funds or something, how will we know if fed is losing its resolve for a mid-year hike? >> well i think you'd lose it in the following fashion. that you start to see the interest rates, the big sovereign rates start to move sideways to higher versus lower. well i'm hearing that this data is here. anybody picking it off on the screens down here? still don't see actual data. if you guys have it you can tell me. >> steve, do you have it? >> i have a number here. >> all right. here we go. >> minus 3.4%. >> yep. >> and that was a good expectation of plus 0.3%. so that is a massive miss. i have durable goods down 3.2. so it wasn't defense. i don't have the table -- >> steve, let's not release that today. can we not release that today after these earnings? >> i think there's an argument there, joe. and i'm also wondering how much the story we heard from caterpillar has to do with it. we've been talking about the issue of oil serve which was whether that's a piece of what's down here. also we do know there was a timing issue with boeing orders and the civilian aircraft orders expected down. >> wow. big revision. steve, the revisions are coming in. they're breathtaking. this was already revised. >> wow. >> they changed some of the revisions. now we're down 2.1% from the prior down .7% which ruz already revised. that's headline non-defense aircraft orders now down .13%. so these numbers are getting a little bit sloppy here. non-defense aircraft proxy for new spending as steve pointed out is down .6%. down .2% on shipments. this is pretty spongy. you know when i walk away if i wanted to keep it simple all the ire the treasury market was getting when we were talking about a lot of reasons besides just the european value trade, this market has been flawless. it was way early on this hiccup we are now seeing with some of the november/december data. >> i want to say this is going to impact gdp. the revision. i think what's going to happen -- i don't have the spread sheet in front of me now, but likely that business equipment spending will subtract from gdp in the fourth quarter. another pretty good run. it was up there pretty decently adding a little bit to gdp. now it's going to go the other way in the fourth quarter. we need to know the sources of it. i don't have the table in front of me as to which particular sectors. but this big revision downward for the prior month and this big mess this month is going to raise questions about the strength of business spending in this country. joe? >> there was no mission accomplished banner behind the president burg sduring sotu but it's something in the middle of something. i was watching scott pelley on "60 minutes" to mcconnell and boehner. read off a list of accomplishments in his hard hitting interview of mcconnell and boehner. but, man, i thought -- and the approval rating back to 50%. were we rushing, jumping the gun, rick? >> well you know i don't think we're jumping the gun. i think that -- >> no jumping the gun that we were out of the woods. >> i know what you mean. i don't think we were jumping the gun. i think it's normal for us to continue to the look at our economy as this self-driving perpetual motion machine that comes back. and it did. but we overestimate what we have done to help it. i think many of the things we've done to help it have hurt it and yet it's still come back. it's still about sustainability. it's about that old adage about the new normal. >> we didn't fix anything. there's not a government in the world that's fixed anything yet. >> oh, yeah it did. they came up with a six-year cure for a two-year flu! come on joe, be fair. >> you've seen what's happened to those countries that prematurely withdrew their stimulus and they're really not doing very well at all. and you've had the sustained job growth. you've had the sustained gdp growth. you had tremendous numbers in the second and third quarter. you're probably still going to do 2% 3.5% -- >> steve, when you were young did your parents want you to get straight a's? did they push you to get good grades? >> yes. when i came home with a 95 they asked why i got five wrong. >> whaen they graded on a curve and you got a "b" and everybody else got a c-minus, did that make your parents feel good? grading the u.s. economy on a curve is not an excuse. we're not doing what we need to do! we're doing better than everything we're going. a generation and a half down the road we can say we sunk slower than everybody else. >> i will say that the 4.8% average growth over the second and third quarter is a good number, a strong number by any standard. >> only if it's sustainable on a glide path that's flat to higher! it's too bumpy! >> here's what you want. what do you mean bumpy? it's always been bumpy. gdp is up and down. >> come on. look at the trends after the last three recessions. >> there's no moment of smooth growth in this country. >> guys we just crossed 300 points down on the dow. >> all countries in europe are going to do qe now. but none of them have fixed their structural problems. over here we didn't do anything with corporate tax reform. didn't even bring it up. we're talking about the same stuff. none of the structural things that we're supposed to have time and take care to fix, none has been done yet. it's been all fed induced, hasn't it? >> i think part of what we have here has nothing to do with the fed, nothing to do with the administration. it's just a general bounceback. i think the fed did give it some juice. i think you're right, joe. but i don't think you've repealed the laws of the strong resilience in the underlying economy as well. we do need some changes, but we get by. >> what about qe? what number are we on? >> we're at infinity already. >> we're at infinity. but did bolen really say we might have to go back and do it again, steve? >> i didn't see that comment, joe. but i have no doubt that they hold that as a possible tool that they'll use again if they need to. >> all right. this is worse than -- you said durable goods is going to be fine and we can write off the bad earnings numbers. we had a lousy number currently. iuorio? >> i think it's worse than spongy. i think it's a bad number. the only thing worse than the number is the timing of it. just to talk about what rick and steve were just saying. what rick started off by saying is our country is showing amazing economic resilience despite the fact it's saddled with bad economic policy. the corporate tax rate, it's almost punitive and we still managed to claw our way out from under that. when we do claw our way out, it makes less incentive for people to change it. it's a double edged sword. it seems like we're cursed to this lukewarm fed induced mild growth. but back to e the numbers. this is a bad number and the stock market is reflecting that. it's no longer bad is good and bad is good. bad is bad. >> i got to tell you. the december durable shipments number was up 1.1%. it was the orders that were down which is sort of bad for the future. but the current number for december rick i don't know if you have an estimate on what people expected shipments to be. because the street does expectations on orders. >> i was looking for 1%. it actually came down .2%. >> i got shipments up 1.1%. do you have that number there? >> no. sorry. >> that's going to feed in. that's not going to be too bad actually. >> no. it's nice to see there's -- yeah. listen, steve. we want bright spots. but if we're not honest about what the economy can produce versus what it is producing and do some cost benefit analysis as why and we just blindly never cannic the tires because we don't have a plan "b," then we're doomed to the future that fate will deal us. >> maybe it's three steps forward, two steps back. it's just we were all sure that after six years of -- because of the financial crisis it was a tepid recovery we were all sure we finally made it to be on stall speed. right when we thought it was clear sailing. i don't know. your confidence gets shaken. maybe that's all this is. >> gentlemen, thank you. in the meantime we have some breaking news from twitter this morning. the company making two big announcements to keep users engaged and give advertisers more tools. we'll see if this is a game changer. julia boorstin joins us. >> the company pushes to innovate to keep investors and users hooked. twitter is launching mobile video tools that are in the apps. users can capture, share, and edit videos up to 30 seconds long with instant playback. all within twit per sop there's no need to swipe out of twitter to your phone's camera or to youtube. for advertisers it promotes videos. with these tools, twitter joins facebook in battling youtube luring consumers and advertisers to their own place too boost ad revenue and user engagement. users can now send direct messages to groups. the company's boosting its investment in private communication, an area that has been criticized by users and investors. twitter hinted at these developments back at its november investment day. under growing pressure from shareholders looking to show just how fast twitter can innovate and roll out new products like these. andrew? >> thank you for that report. coming up next when we return, we've got a roundup of the earnings reports of the morning. that's driving down the markets in a broad way. look at the futures right now at this point. 283 points down for the dow. nasdaq down 60 points and the s&p would open down 22 points. we'll see where it really opens in just a little bit. we're back in a moment. ew york state. already 55 companies are investing over $98 million dollars and creating over 2100 jobs. from long island to all across upstate new york, more businesses are coming to new york. they are paying no property taxes no corporate taxes no sales taxes. and with over 300 locations, and 3.7 million square feet available, there's a place that's right for your business. see if startup-ny can work for you. go to startup.ny.gov. you know.... there's a more enjoyable way to get your fiber. try phillips fiber good gummies. they're delicious and an excellent source of fiber to help support regularity. mmmm. these are good! the tasty side of fiber. from phillips welcome back. a number of stocks on the move this morning and they are all losers at this point. caterpillar's earnings missing the mark. company cutting its sales and revenue outlook because of the decline in oil prices. 3m's earnings beat by a penny. then we have dupont's earnings matching estimates but currency head winds pulling the full year forecast well short of consensus. procter & gamble falling short on the top and bottom lines. consumer products giant is experiencing what it's calling, quote, significant negative currency impact which will hurt its sales for 2015. and we heard from pfizer. beating the street. but the pharma company issuing lower than expected 2015 guidance because of patent losses and a stronger dollar. so that's bad news. then we had microsoft posting revenues and earnings in line with estimates. you think that's okay but sluggish pc sales hurting demands for pc software. you add all that up and you're looking at the futures right now -- what are we off? going to be close off -- >> down 300 last i saw. >> it was weird. dupont beat for the quarter but says the full year forecast is going to be below. that was 2014. so they're saying for all of 2015 it's going to be below. it's january. that was last year that dupont -- they're going to miss 2015. up next jim cramer was unable to make it to wall street thanks to the blizzard. but that doesn't stop him from covering what investors should be watching at the open. we ought to be here in hotels. we reveal his secret location next. here's a hint. it was once two settlements under cliff -- do you know what that is? okay. >> you could read it that way. # 1-800-345-2550 [ male announcer ] your love for trading never stops tdd# 1-800-345-2550 even on the go. tdd# 1-800-345-2550 open a schwab account, and you could earn tdd# 1-800-345-2550 300 commission-free online trades. tdd# 1-800-345-2550 so if you get a trade idea schwab can help you take it on. tdd# 1-800-345-2550 we're getting a lot of questions tdd# 1-800-345-2550 about organic food stocks. tdd# 1-800-345-2550 [ male announcer ] sharpen your instincts tdd# 1-800-345-2550 with in-depth analysis by schwab experts. tdd# 1-800-345-2550 and if you want to run your idea tdd# 1-800-345-2550 by a schwab trading specialist, tdd# 1-800-345-2550 our expertise is just a tap away. tdd# 1-800-345-2550 what's on your mind lisa? 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right there in our old set. >> they felt there was maybe no way to get from "mad money" downtown. >> and getting back this is important that you are there, ready to go. >> thank you. >> i've been dying to talk to you all morning. crazy earnings news. companies like proctor & gamble and caterpillar warning forget about it 2015 it's only january, but numbers are not going to be anywhere near bar the street is expecting. how do you take this? it's a stock by stock situation. >> the a giant reset for companies that do more than 50% of business overseas because when you get that -- to that level you truly have gigantic misses. at the same time up until today, we had a lot of domestic companies. domestic companies doing terrifically. i call this on "mad money" america first situation, do business with companies here. think about all of the companies not overseas that have blown out the earnings. and then a couple of companies overseas like caterpillar, just doing terribly and there's some other companies, like 3m we'll look back and say, wait a second organic growth here was 6% we want to own that kind of company when the smoke clears we may not want to own caterpillar when smoke clears but we want to be a company that x currency is growing and taking share. we have to reset everything and then look at who actually did well overseas. but really just stay in america if you want good earnings. >> how do you read proctor & gamble? they were okay with organic growth. strip out currency, they said they'd be on goal. they're blaming currency. >> i was not crazy about organic growth. kimberly-clark, down from 119 to 109 in a straight line i felt not great quart, similar to what proctor's doing and in the end will get backed up where the dividend is yield is buy backs respect i don't think proctor is a horrendous number i don't. the problem is we want to hide in something that will make numbers and suddenly proctor revises numbers down that's not so good which makes me come back to look at banks, look at domestic banks. they turn out to be winners. we got to circle back. wells fargo, started out earnings season a great number. you want to be in the united states companies or take a look at companies again, go back to what reported and recognize we'd had good quarters last week that nobody thought were good quarters if you didn't have currency, you saw good numbers. >> let me throw one more at you, microsoft, we didn't get a chance to talk about the numbers after the bell. i know you did on "mad money" but a different situation. >> microsoft is a tale of two cities. the quarter wasn't so bad. when you listen to the conference call very downbeat and when you lose all of the analysts you say, it's going back -- if it holds 43 terrific, otherwise on the chart, you've got to look some are bizarre, like microsoft's guidance you think it stops at 40? i don't know. it was truly a bad job. did a bad job. people expects something bold and didn't give you anything bold other than the fact how bad china and japan are. i think they should get a do-over. it was not a microsoft call that i'm used to since the new guys came. body language out and out downbeat and that's a reason analysts are down grading it. >> great to see you ready to go. see you in a few minutes. coming up oil, currencies and the other issues that are slamming some of the world's biggest companies this morning and durable goods number with revisions. 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[man] can it tell the flight attendant to please not wake me this time? the answer is yes, it can. so, the question your customers are really asking is can your business deliver? oil is a piece of our transportation business is about as oil and gas is a third of the business natural gas piece is doing pretty well and so far holding up. the oil piece, though is what we're taking down and that's the primary number for our reduction in 2015. >> that was caterpillar ceo doug oberhelman on "squawk box." joining us talk about the big market move ben liechtenstein. i don't know if you got to see that, ben, jim cramer said stick with domestic companies at least at this point -- we've known that our economy's best in the world right now, but how long -- we're all attached now -- how long can we not be affected by both currency and slowness in the rest of the world? >> i think that we've been saying that for five years now if you will. this market rally that we've been seeing it's been unprecedented. and rate that we've seen rise is just incredible. and everybody and their mother who has been standing in front of it if you will at some point or another picking a high. but we still continue to see value being established to the upside. we still give the benefit of the doubt to the bulls right now. we're in sideways action lost some volatility we've been seeing recently related to crude oil and the dollar-type activity we've been seeing. for the most part the market continues to hold bid and yet to take out significant levels of value established on the way up. holding a bid off all-time highs of 20.88 in the s&ps and 1960 level but eagerly waiting anticipated date tap not so much earning but was looking for fomc tomorrow. today, yes, sell side activity related to the durable goods orders come in significantly lower than expected. we were ahead of than there's uncertainty out there. unusual we're seeing volatility continue to come off uncertainty in the middle east right now, as well as in the european economic zone. but, yeah there's a lot of movement right now. just multiple major markets on outer extremes here. ahead of the fomc we expect to see continued energy. with the dollar continuing to move the way that it has been the strength that it's been exhibiting, i think that's creating quite the stir across majors and i think that will continue to be the case as long as the dollar holds upper levels. >> i have no idea what you just said i don't think. >> be positive. >> down 300. you're not worried about any of the earnings that we just saw or the durable goods? what are -- >> he's seeing through it. >> looking ahead. >> i think -- i think basically, joe, we're in a bit of consolidation phase up on the highs. i don't think that we've exhibited any real weakness worthy of getting concern that this bold trend, this underlying market trend that we've been seeing has derailed or is no longer -- >> what do you think the fed's going to do? when do you think the fed acts now. >> fed has to raise rates. i don't think we'll see it in the next six months but potentially after that. i'd love personally to see the fed throw out a quarter rise feeler, if you will tomorrow but i don't expect that to happen. the fed's make it clear in terms of targets for unemployment in terms of inflation and i don't think we've hit those levels yet. look at our numbers that came out, durable goods orders that's concerning in terms of if you are looking for a fed interest rate hike. >> ben, thank you very much. great talking to you. >> thank you. >> enjoy. thank you, everybody, for joining us. join us tomorrow. time for "squawk on the street." good tuesday morning, welcome to "squawk on the street" i'm carl quintanilla with david faber at the new york stock exchange. jim cramer at hq, courtesy of the snowstorm that has largely spared new york city but hammering much of new england. >> good morning. >> kaycase-shiller home prices out. dow futures down almost 30 on weak earnings from -- 300 on weak earnings from a lot of dow components. big miss on durables a lot of revisions, raising questions about the u.s.
oil stable. and ten-year has crept down to 1.77 1.77. futures falling. earnings painting ableak picture. greece continues to weigh on the markets too. >> seven dow companies, p&g, pfizer, caterpillar, dupont, 3m microsoft, and united technologies, all seven lower. >> nyc largely escapes storm unscathed but boston new england battered by heavy snow. we'll get live updates on flight cancellations and travel around the region. a rough morning in store on wall street. wave of earnings news sending futures tumbling. dueuponting proctor & gamble, pfizer expect the stronger dollar to weigh on full year profits. caterpillar, a warning for 20157 the ceo on "squawk box" -- >> oil is a piece of our energy and transportation is worth about oil and gas is about a third of that business. the natural gas piece of that business is doing pretty well and so far holding up. the oil piece, though what we're taking down and that's the primary number for our reduction in 2015. >> jim, not only did he say when it rains it pours but also said fed's got to hold off. can't hike rates in 2015. >> i don't think -- if the fed took it, it would matter for caterpillar. it was a terrible quarter. i have to tell you, it's absolutely -- true copper was bad, natural gas will be bad, doug to give you heads up in the first quarter what matters this company has not guided the street at all, didn't really give you a sense this was going to happen. caterpillar, so we distinguish things and this is what's going to happen in three days we'll start distinguishing things caterpillar was a terrible quarter because they executed poorly end and markets are bad. stocks trading down today did not execute that badly. they executed well. they have to back out currency figure out the organic growth and recognize some of the companies are doing quite well. but if -- that's not today. today is the day where the market's stupid and everything goes down. >> that's fine. >> are you referring to companies that are executing? is that p and g. >> i had tom on from kimberly. i thought kimberly was better than proctor. that stock lost share in proctor. what we're going to do circle back that wells fargo was a good quarter. honeywell was a good quarter. we'll look at 3m. 3m is going to be down today. an amazing quarter, 6% organic growth, made no excuses, department have a doug olberhein situation. these are all going down and we'll take a look and maybe -- again should be looking today but it doesn't work like that -- maybe look thursday, friday, did a great job at 3m. what are we doing throwing that away. we'll say john stumpf did an amazing job at wells fargo, let's be in on that stock. i a america first purely. but we'll be saying what are we doing investing in overseas? so few doing well. domestically, companies are hitting the ball out of the park. >> caterpillar shares jim are going to be down sharply, call it 79 bucks a share from close of 86 yesterday. i mean that 460 number for 2015, well below what people had been anticipating in terms of the outlook. energy and transports, about 30% of their business but it's got 20% margins. >> right. >> a strong profit contribution given that. also interesting, the number for the quart that was reported was not particularly good. some believing at least the impact from oil and gas was not going to be felt until 2015 but it appeared to creep in at the end of the quarter as well. >> right. schlumberger didn't have bad an oil quarter as caterpillar did. caterpillar is a great american manufacturer. the fact is caterpillar is trade like a commodity, iron like cliff's natural, like freeport -- nothing is bad as freeport excuse me. i look at caterpillar and i say to myself why am i in it? after today, maybe for yield protection. they do a lot of cash flow. but, david why didn't this company preannounce? why didn't they at the begin of the year look at order book and say we're not going to make the number? >> they do issue rolling retail sales, jim. you could have taken a clue from na that. >> look, i think in the end if you look at their end markets you were hoping that nonresidential construction you were hoping that road building hoping that anything might offset what caterpillar had. instead i look at schlumberger halliburton, baker hughes, deeply involved in the oil business and they did not complain about the price of oil as much as caterpillar did. >> yeah. >> not the only big component. microsoft shares down sharply after weaker than expected revenue guide 'for the quarter and fiscal second quarter in line with forecast. on the conference call the ceo spoke about some of the challenges the company faced in the second quarter. >> as expected the one time benefit of windows xp end of life pc refresh cycle has tailed off. additionally, ran into unexpected issues in select geographies. where there are execution issues, we will address them. where there are macro economic challenges we will weather them. >> jim, software up five new york where near the double digit. citi takes it to a sell. amy hood mentions the dollar moving to office 36 pa5. >> my charitable trust owns this. bad call. body language was like we're not that good. don't worry, we'll get better. in the meantime, when you have companies like adobe going to the cloud, they tell a good cloud story. satya telling a good story. what happened in japan, what happened in china i think a quarter where everybody's turned on microsoft. when the smoke clears you might like the stock, they have a lot of cash into a buyback. but it is -- what's incredible to me is how hated this company was underneath. they -- if the stock had run, nadella didn't do anything bold hood did nothing bold maybe they can pull off something in the next few months. this is a quarter they said gee, we've got problems in thing about countries but don't worry, we're fine. well they made me worry about china, made me worry about japan, made me worry about pcs. go back and look the intel, widely panned and say, intel did good. >> by comparison, what we're going to start to but is that a broad reflection then of weakness jim, or a lack of strength, if you want to put it in a different term? >> both companies did well in the united states. i think what we're seeing is that if we hear -- we talk every day about the weakness overseas client na europe. >> we do. we talk every day about oil and gasp if you're in that business or international company with real selling linked to the dollar, what stay away? >> well i think you have to recognize it as a reset going on. maybe you don't have to stay away. after a couple days stay away people are just shocked. again, witness kimberly first day goes down eight and next day it goes down two. kimberly is a prelude to proctor but some say proctor is taking share from kimberly. again, no benefit for most companies from the decline in oil that occurred in october of 2014 to the end of the year. that will benefit. second half of the year's going to be pretty good for kimberly. if you look at diaper or depends -- hopefully you didn't have to look at either lately -- these are oil-based products but not seeing gain yet. that comes later this year. so, yes, i see you want to throw these away and you want to throw away 3% yield and say forget about. in the end ten-year at 1.77 raw costs getting better everybody's digesting the fact dollar's going to be strong. guys saying we were using 115, 120, well get real. if you start using 100 you'll do better than expected at the end of the year. >> we see your point going domestic jim, but durables not reassuring down 3.4 november revised down 2.1. the idea that the u.s. the single engine on the plane is the oil pressure of the engine dropping? >> the durable goods out of whack with almost every company, whether ge honeywell, microsoft, intel. i have yet to find any company that -- include target there -- i have yet to find any company that is bemoaning the united states other than tiffany in the month of december. tiffany had other issues overseas. i'm not so quick to dismiss the u.s. retail sales number that looked bad in december we don't have retailers doing bad other than the high-est end. flummoxed by the big numbers. but i still come back to you raise numbers for the domestic companies. we had a lot of banks raise numbers people circle back. numbers, look finance is 17% of the economy. >> it is. jim, before we hit a break, you know, we haven't mentioned dupont, which i know both of us have done a lot of work on in anticipation in the midst of what is a fight seeking four directors on the board and somewhat different direction for the company. the company reported numbers, 2015, to acknowledge the share 4.20 what the operating earnings forecast is below what analysts anticipating. they do put in $4 billion buyback, as well jim. curious to get your take on this. >> sure, accelerated the cost takeout from 1 billion to 1.3 billion. obviously, right now oil is still not a tailwind, that will happen late in year. ag division is rooted in corn and more farmers are planting soy. that sounds small, but when you have a gigantic ag business that is not small. in the end, look it reported on a day people are starting to adjust, wow, 60 cents currency, that's bad. i want people to go over 3m he's saying i don't care about the dollar. we're doing well. he does a lot of domestic. he does a lot of domestic organic numbers to show what's going on. when 3m goes down 10% -- i don't think it will i'm just putting that number out, the stock united states up when reported -- this will be the stock to watch today. if 3m bottoms some point today, that's a sign the market's distinguishing between companies that did well and companies that didn't do well. i put dupont in the middle between caterpillar and 3m. >> 3m yeah local, organic, organic local currency growth up six. >> fantastic. a funny one, who had the best domestic organic growth so far in the industrials? david, guess. >> i don't even know. no way, can't be what i'm saying. >> is it, man, i'm reading your mind. i'm carnac. put it in the form of a question david. >> doesn't start with -- >> david, you're on jeopardy!" form of the question. >> what would be -- it's not possible. i don't know. ge -- no. >> what's the answer jim. >> the answer is ge for $500. >> very nice. >> it was. >> double. >> i got it. it took me a while. i was scared but i got it. >> jim, we'll come back to you in a moment. >> reporter: blizzard battering the northeast. new england bearing the brunt of the storm. a live shot of plymouth massachusetts in a second. unbelievable especially new england. boston pounded as well. we don't have the live shot. thousands of flights canceled or delayed. collect in with phil lebeau at united's flight operation center in chicago. good morning to you. >> good morning, carl. good news here. they're starting to look at whether or not to bring back flights quicker than planned, at least with the new york city airports. a lot of that predicated upon when will mass transit open up how quickly can they get planes crews there the fact that the storm was not as bad as expected, that certainly is welcome news perhaps indicates they might be able to bring back some flights quicker than planned. overall, between yesterday, today, and tomorrow united is canceling about 1750 flights, that's about 15 to 20% of the total flights that it operates here in the united states over those three days. when you look at problems when it comes to not just united but other airlines and dealing with this blizzard you see on the map, it's swirling over new england, hartford boston are getting hammered now. those airports are completely shut down. flight aware says cancellations right now, totalling more than 7,000 for all airlines related to this blizzard almost 5,000 today. again, most of those cancellations are in the tri-state area as well as with hartford and with boston. gis, here at the network operations center for united they are optimistic that perhaps they can start to bring back some flights in the tri-state area quicker than planned. back to you. >> we'll come back to you later on phil lebeau. earnings to tell you about this morning. plus the ceo of medtronic, the company closing the transatlantic purchase of covidien despite guidelines meant to discourage the tax inversion deals. premark, looks weak. we haven't gotten to a lot of earnings including pfizer corning, texas instruments from last night. more "squawk on the street" continues in a moment. ugh... ...heartburn. did someone say burn? 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no what is it? starting february 21, 2015 if you have a 415 or 628 number you'll need to dial... 1 plus the area code plus the phone number for all calls. okay, but what if i have a 415 number, and i'm calling a 415 number? you'll still need to dial... 1 plus the area code plus the phone number. so when in doubt, dial it out! take a look at premarket. it a tough one, at least at the open in large part because of the earnings that continue to come in. pfizer another one, jim cramer where they reference the dollar though vaccines were up 18. as someone mentioned this morning, welcome to a strong dollar world, this is what it looks like. >> yeah. it would have been great if all of the company as the beginning of the year said look our forecasts for the dollar is wrong. you analysts who are using certain forecasts, you've got to change them right now. i think a lot of people kind of hoping that this dollar wouldn't continue to slide, it's been a record decline in the dollar like it was in oil, cut in half. i look at pfizer this is going to sound contrary, i like pfizer. i thought they did a good job, given the patent expirations. no one wants to hear that today. it would easier to say i hate pfizer, but i'm not. i like new drugs that they have that are doing quite a good job. but i would come back to say, when this period is over we're going to say, why weren't we in regeneron? what were we thinking not to be in biogen. celgene will get hit and it will come back. this is again, return to thinking all right, pfizer had a good number but nobody cares. maybe a week from now we'll look at pfizer and say they didn't do that badly. pfizer is night favorite of mine. bristol-myers is a favorite of mine. currency is completely -- i don't know what analysts who got currency right. there wasn't anybody who said see, currency was going to be bad. instead, everybody's surprised if you have currency bad and execution bad, like microsoft, you're hit with multiple downgrades. ore otherwise people say x the currency out it's not that bad. that's the theme three days from now. >> interesting on pfizer of course continued focus on whether or not the company's going to pursue consolidation, as we know of course for quite some time, pursued astrazeneca, speculation, a story at another news organization that it even may have approached the generic drugmaker, 50 billion for a generic maker, they could use overseas cash borrow accretive but it's away from innovation, which pfizer is embracing as its strategy not to mention the breakup of the company. if they were to do a deal like that, they'd spin it off. not sure that made that much sense. but we wonder whether going to look to do a deal. they are aggressively looking at opportunities. >> a lot of biotechs that would welcome pfizer's cash and stock. you're right, the idea of mylan to go down the food chain for pfizer. the reason why your pork prices are falling, the vaccine. that was innovative company they decided to get rid of. maybe kimberly wanted to become more focused. i'm not sure what pfizer wants to become. >> all right. we'll get cramer's "mad dash" count down to the opening bell in a minute. one more look at futures on this tuesday morning, as we continue to watch developments regarding the snow mostly north of new york city. more "squawk on the street" in a moment. . you can see columbus avenue is completely clear. it's 7:00 in the morning. not sure how laura's getting to work today. dan working from home up there? possible. look look a good time for a subway ride. but no. is it the dupest thing in the world? >> yeah. we can walk. where are the cabs? this is a joke. >> here's my ride. there they are. saviors. >> want a ride? >> yes, thank you. >> so interesting to bump into you. >> all right. time for the "mad dash." i took videos on my way down jim. i made it 36 and i got picked up travel ban was lifted. absurd they had subways closed. never in all of the snow days of all of the years in new york have they ever done than perhaps flashbacks from sandy i guess were bothering governor yesterday when he decided to do that. >> look, it is kind of -- if you're in chicago, right now you're just saying what a bunch of jokers new yorkers are. green bay thinking the biggest group of losers i've ever seen. i was surprised. one of the reasons why i stayed at the crown pavilion royal plaza, i had a feeling, you know what? this was a warning post-sandy every time we get some snow we just have to accept the fact that everyone's going to close everything because the one time you don't, sandy made it so everything's changing. >> that was the hudson river rushing into the tunnels of the subway. how many riders are going to and from work city's built on commerce. the idea to do that with seven inches of snow. less than six minutes to the opening bell. >> i was impressed you took the subway. i got to ride it with you. goes underground. >> i used to see you on the subway. going oppenheimer. opening bell 5:30. mad dash. you want to start with freeport. >> freeport is like caterpillar. listen, what are you doing. freeport more directly involved with copper. bought an oil company. talking about trying to find third party financing. david, when i hear third party financing what that tell me things are stretched here. am i being diplomatic? >> no. i don't believe you are. i think you actually are being appropriate. >> thank you. it's no laughing matter what they got, david. they bit off more than they could chew. >> the planes deal shareholders didn't like it at the time boy were they right. >> right to revolt against. got a big dividend. >> they sold off a lot of the good properties from planes as well. the stuff that they kept i don't think break even -- it's above in wti i believe. >> sure. remember at 44 we could be soon, everything is underwater when trying to drill. everything in this couldn't trip we're not saudi arabia. sometimes we're saying we're the saudi arabia of this or that but we're not. >> right. we may match in production at some point but not what it costs to get out of ground. >> exactly. >> "mad dash"? >> american air's a company that is going to get lost in the shuffle today. first it ran up a lot. expecting a good quarter. you got a good quarter. second we're in a market now where they're the last to report in the group. all you can do is say, they were as good as delta. we're in a moment in the market where everybody feels like look, even if they're good we should sell because they've run. if they're bad, sell anyway. let's get caterpillar down to 75 76 where it's more rational. look, when we have big down days you wait and buy bye the end of the day you think which of the biotechs bounce back? which of the companies have good dividends and look again. but it's a reset day. that's the point. reset day. >> all right. we'll start that reset day just a few minutes from now with the opening bell. we're back after this. >> you're watching cnbc "squawk on the street," live from the financial capital of the world. opening bell set to ring in 30 seconds. of course nyse open though subways here in manhattan took a while to open up not that you care much if you don't live in new york city. our feeling sorry for the folks in boston providence, long island, talking one to two feet maybe three. >> they got a real storm. here in new york -- >> deflated up there at that point. >> there's the s&p at the top of the screen. and at the big board, rosenblatt securities. at nasdaq world of money.org providing education to young people. jim, you say that 3m should be one of the keys to the market but everybody's watching caterpillar and microsoft at the open. >> well caterpillar took your breath away. literally. how -- this is a quarter where if i really felt that oil was such a big impact i would have thought to sell oil companies. i would have sold observation on i wouldn't have thought to sell caterpillar. caterpillar if they set out to make equipment for all of the parts of the world and all of the didn't commodities that are bad, they're doing that. now i know i saw a downgrade today, machinery stocks down caterpillar taking out levels we haven't seen in a long time. i remember -- i remember delivering alpha a couple years ago, chanos talking about how caterpillar could be in real trouble. it took two years to manifest itself. that caterpillar quarter was a head-scratcher given the fact when doug was obviously -- he literally kind of said listen you know wow, i come on when it's good i come on when it's bad. inga does not come on when it's good and bad, he just does a good job. dave cody from honeywell, he put up a great number. currency wasn't a factor. you talk about headwinds, make the headwinds be real ones at proctor and kimberly talking about the dollar. go back over what cody and honeywell said, this is pretty good. back and forth, this is pretty good. these are not what you're hearing from other companies. i say it's a men from the boys moment. seeing some companies doing well and they're being obscured by other companies that haven't figured it out. >> yeah. even some of the companies, jim, you could argue, got the higher grade on the curve, lockheed texan, glow worm punished a little bit but not much. >> i liked the texas instrument quarter, they did a lot right, a good organic growth good buy-back. lockheed martin, i was surprised the buy-back slowed versus previous quarters. that concerned me if only because this company's one of great buy-backers of all time. and if you want to see, watch kimberly, they've bought back a quart of the company last decade they had good organic growth but hurt by venezuela. venezuela something to watch guys because venezuela has literally -- it's just -- it's left the building. >> a look at american airlines this morning, right? >> yes. yes. glad you mentioned that. i think if you fly over venezuela you're earnings have been hurt. venezuela is amazing. that's a country to watch when oil keeps going down. when kimberly took $400 million charge -- how about clorox with vision saying we're getting out of the venezuela. listen kimberly can't afford to get out of venezuela they need our products. let someone else make those products. clorox held up well in part because they bit the bullet in venezuela. >> you spend a lot of time talking about venezuela for a couldn't that small with minor implications. >> $400 million charge from kimberly, that's not small. >> no that isn't small. how did they get to be so big there in. >> growth country. remember when you in fifth, they have a lot of oil. it was a great market. >> it was, i remember being there in the -- i guess it was early '90s, late '80s, good stuff going on. >> the equivalent of brazil. it was like ric instead of bric. >> anyone who has any business is getting killed. i want to come back to the first earnings period a great number from alcoa, great number from wells fargo we just didn't flow it was great. last week fantastic number from honey well ge. amazing number from schlumberger in retrospect. today it caught up with us. >> you keep trying to rewrite history here my dear friend who i wish was next to me here so i could give you a look. come on ge was not a great number when it -- >> oil and gas -- >> all right. stock went up. a horrible day, stock went up. >> stock went up. that said i feel like you're coming back to things and recycle through them only things to grab a hold of, this i not a good day. >> i'm talking about did. >> plaj major parts of the dow and s&p -- >> by friday we're going to look through. i'm saying if you go over wells fargo's quarter, use that as an example, which stocks stock to where it was, say domestic with rates down rates don't help curve this the house number today is going to be the last of the bad ones we know from horton yesterday, things are good in housing. this gasoline is going to trickle down to the rest of the economy. hasn't happened yet. >> and i think, really like last night, i was really struck by the fact going over the quarters a lot of companies have said we haven't seen the benefit yet. a lot of that's diesel hasn't come down enough. you'll see benefit. but right now throwing away everything. and oftentimes that's an opportunity and i'm going to include airlines. >> a lot of pressure on tim kick agree? >> which one? >> tim cook. >> way too much. i wish i weren't tim cook -- i guess there's a lot of good stuff being tim cook he runs greatest company on earth -- i heard someone say on "squawk," apple could turn everything around. that is revisionist history. david, i will give -- i think if i were to say apple turned things around, that's being a pollyanna. everything's coming down going to cause up to relook at what we didn't think was that good. and we're going to be at lower levels and maybe some opportunity. >> back to your point of reset. microsoft down 8.5% is a reset. when you look at a longer term chart, it's still not too bad. >> but they didn't -- right, but this is level it's got to hold or it becomes head and shoulders pattern. >> hewlett-packard down 4.5% oracle down 3%. >> that's on top of seagate, sandisk, zylink. build a good argument on that front. >> i think they'll be -- i'm going to give in to david. it's a horrible david i'm going to got crown royal plaza pa viv pavilion double degree, say it's so bad. i'm trying to find opportunity. that's wait to handle the market for the last seven years, look at opportunity. but it's not the first day. it's not the first day. >> right. that has been the blueprint. >> what am i supposed to do? >> put in the german ten year. pay them. >> there you go. that's -- how about -- how much -- you know what? if you open an account at first horizon, do they give you $151? >> currency trading. maybe an accountant at fxcm 50-1. >> a lot of the guys discovered there is such a thing as currency trading. why didn't companies preannounce? did anyone hedge? >> jim, you're saying these things and you are right behind you is a wall that is entirely red. >> it's like the red sea and it ain't parting. >> with all of that look at the bred very negative. down dow286. mary thompson. >> low of the session for the dow jones industrial average, of course disappointing earnings news disappointing data on durable goods, contributing to the sell-off that we're seeing here. vix ticking a bit higher. seeing strength as you might expect, strength in gold. also, oil is higher oil service stocks looking positive and we are seeing people move into treasuries as the yield on the ten year is moving higher. a couple of things traders are talking about the wake of today's earnings reports. they're wondering whether or not, well they say, basically expectations for earnings for the s&p 500 to high have to be brought down. that prompt strategists to readjust earnings? durable goods numbers, negative print, disappointing reading. btig noting poor orders a sign of business spending down for four straight months right now. out of the earnings hearing a couple of specific themes. first, the stronger dollar and the impact of that. the negative impact of lower oil prices and potentially positive impact of lower oil prices. let's take a look at the dow component. caterpillar, a currency story. microsoft a number of factors there. disappointing cloud revenue for casts for that company. weakness in china also at play and currencies. united technologies taking the numbers for 2015 down as well. once again, stronger dollar impacting those companies' results. dupont a dollar story, currency story as well. company announcing $4 billion buy back not helping its stock. p&g, impacted by the negative dollar but the cfo on "squawk" saying a positive that could help them in the months ahead are these lower oil prices which could boost demand for some products. i want to focus on regional banks because zions reported weaker than expected results. a significant energy portfolio, goldman sachs taking down the numbers there some other stocks, regional banks exposure to energy under exposure as well because of the results. dow coming off its low, 271 points. >> not a single s&p component up more than .2%. it's been a while since i've seen breadth this negative there talking about the negative impact of the dollar for quite some time. oil and gas, certainly our focus for months now, to a certain extent, and it's creeping into earnings and certainly outlooks and the market had not fully adjusted. i think a fair point. >> in part because companies like caterpillar didn't forecast it or at least foreshadow it perhaps as they should have. we'll see. debate for later on. the bond pits this morning. ten-year a different story as well. rick santelli at cme. rick? >> hi, carl. before i even get to the chartize want viewers to realize, you know some of our systems use a 3:00 close for cash and pair with futures. i continue to monitor the late evening cash close. so if what i'm saying done jive with the charts, you'll know why. look at two day chart of tens sorry, 24-hour chart should jump out at you, that is of course the data had a quick response from the treasury market yields moved lower. but they didn't challenge what i view is the late cash close from the 15th of january, right around 1.71 for tens. you can see the number on left side of the chart. but 30s a different story. again, the long end. the long end, intraday is trading under that 2.36 level. we monitor this closely because there's divergences. not only weak data, divergences and thank making the market nervous. i'll point to a couple out. europe stamped on the divergence that is worrisome to traders who expected a different kind of marketplace after thursday. they didn't get it. maybe the time line leading up to it was too long. look at two-day of bunds and the second half, basically today's half. look at the two-day of the dax, okay? normally, when the stock market goes up or down rates have a corresponding move. no rates creep higher though the dax reversed lower. that is very significant. if we look at two-day of the euro versus the dollar no market can go one direction forever. we get a reversal blast on the euro, significant also post the 22nd, thursday's ecb meeting and the mirror image, dollar index, having one of the bigger down days from intraday perspective. back to you. >> when we come back ceo of medtronic, what's ahead for the medical device maker after closing its deal to buy covidien. s&p back to 2033. we're back in a moment. ♪ etta james "at last" sometimes, at last doesn't happen at first. ♪ your dad just kissed my mom. ♪ turning two worlds into one takes love. helping protect that world takes state farm. [ male announcer ] at northrop grumman, we know in the cyber world, threats are always evolving. at first we were protecting networks. then, we were protecting the transfer of data. and today it's evolved to infrastructure... ♪ ♪ ...finance... and military missions. we're constantly innovating to advance the front line in the cyber battle, wherever it takes us. that's the value of performance. northrop grumman. know that chasing performance can mean lower returns and fewer choices in retirement. know that proper allocation could help increase returns so you can enjoy that second home sooner. know the right financial planning can help you save for college and retirement. know where you stand with pnc total insight. a new investing and banking experience with personalized guidance and online tools. visit a branch, call or go online today. crosses the diversification, revenues, from these two companies companieser. >> 27 to 30 billion. one thing an impendment we're seeing a lot of international sales, only more now, of course the strong dollar, what is the impact that you're seeing currently as a result of our currency here in the u.s. moving up so sharply? >> well you know for sure that that is a headwind there's no question about it because a lot of our sales are outside the u.s. but primarily the euro and yen, two places we have large amounts of sales and so it's an issue that we deal with. long term medtronic had hedging strategies. long term expected to settle down, overall operationally, moving costs to where revenue is only way to manage this but obviously that's a long-term strategy. right now it's a headwind we've got to deal with. >> jim's back in ec. he has a question. >> the combination, makes you a dominant company in 12 different business line but was left open an opportunity i've been waiting for a long time. talking about potential for the repeal of the u.s. medical device tax which i never understood at all. can that be a 2015 priority for you guys? >> well, you know, this is something that has had a lot of energy in the last you know six month or so a lot of convergence around it. we are glad to see than but at the end of the day, there's not too much we can do about it. currently, device tax is there, we have to pay the device tax. we built our business accordingly. obviously, device tax were repealed it would give us opportunity for incremental investment incremental jobs and that will be a positive for us and the medical device industry. go ahead. >> if i can ask you, it seems that one of the reasons for this very clear to your website, this gives you a little more power against what i guess are some pretty powerful hospital administrators these days. >> well i'd like to say it makes ace better partner because what we have with covidien id a broad range of offerings not only in terms of clinical areas but in terms of wait in which value's generated. a lot of medtronic's therapies are chronic therapies value created essentially outside the hospital setting. covidien's therapies create value within the hospital. when you join together in the upcoming reimbursement reform which will happen where you get paid over a longer time horizon it positions medtronic to be an effective partner with hospital systems evolved into provider systems. >> you are no longer a u.s. company as of today, though of course you're based here. >> yes and i think we all think of you that way. was it worth having done that? >> well you know obviously we looked at the best opportunities we had and the ability to access the cash that's sitting outside the u.s. and use it effectively, a lot of it in the u.s. we think is well worthwhile. and it makes complete sense to us, we think it's the right thing for medtronic. it's the right thing for the u.s. under the conditions. >> you mentioned that specifically access to cash generated overseas are you going to can you give us detail how you will deploy that in the u.s. >> we made a public commitment we're standing by we will invest in a billion dollars in the u.s. in medtronic specifically -- medtech, in which medtronic is an expertise in. we know -- access to the cash will help us accelerate that effort. >> thank you for joining us today, particularly on a difficult day to get here. appreciate your willingness. >> medtronic completing the act question six of covidien. omar ishrak chairman and ceo. >> dow's down 302. caterpillar, visa microsoft, goldman four worst, taking 125 points off between them. back in a moment. time for cramer and "stop trading." >> what happens when you deliver good quarter? good organic growth international company, break everything out how did tid domestically in the different countries, you get 3m. take a look at 3m. it's up. why is it up? it's up because executing magnificently, for the same reason honeywell hangs in here because dave cody executing magnificently what happen will happen, three, four days who can handle the currency who can handle this oil situation, and who can't? and we're going buy throws stocks. 3m remain up all day? i don't know, etthe a down day. 3m is best in show. a great manager. that's what happens when you have great management at a great american company. >> what's on "mad" tonight? >> a come polaris, why did we pick that? what david should have used to get from midtown. you should get one to cruise around the upper west side. tim walbert, a drug company, drug companies, take a look at pfizer, bristol-myers, people want to buy stocks that have 3% yield. kimberly clark is stuck. 3%, done want to go down a lot. a like that. >> we'll see you tomorrow hopefully downtown. >> yes. >> across the bridge. >> i'm going to stay at four seasons englewood cliffs otherwise. >> breaking news on consumer confidence, new home sales. take a look at markets. dow down 300. we'll talk to rick and see what you think of microsoft down almost 10% in a moment. welcome back to showdown! i'm jerry rice here discussing the big race between the tortoise and the hare. my guest is stephanie branton. jerry, i'm going bunny. shocker. not really. you see, the hare's "thoracic limbs" allow for greater extension and elongated strides. look for the hare to leverage this advantage. ok. good tuesday morning, welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber. simon hobbs in los angeles today. >> lucky. >> america's lodging investment summit talking with virgin america president and ceo david curb in a moment. the real storm ms not about snow it's about strong earnings, miss in durables and the dow down almost 300 points s&p below 2030. oil one of future things that's working today, down almost a percent. getting some macro data now. rick santelli in chicago. rick? >> all right. first, we'll go for the easier date tap richmond fed for january, about as expected came in at six. now for the heart throb of it all, 102.9 for january read on consumer confidence, that is just off the charts i think it's probably due to energy. believe me that's the best read since august of 2007. and the last one to be coming in, of course new home sales, and that is a big deal. why is it a big deal? new home sales is definitely a bit on the strong side unlike durable goods. 481,000 on the seasonally adjusted an annualized base since nitty-gritty on this stuff, aim towards the snow head east and see what diana olick is up to with regard to her interpretation on the read on new home sales. >> a big number, of course signed contracts, not closed sales, of newly built homes in december of 2014. the jump is big, as you said a revision. what's interesting is the pricing because that's what we've been talking about in both new and existing homes. prices, significantly higher. pricing, the median price $298,100 in december. that's a big gain from 275,500 in december of 2013. the builders still raising prices, even though complaining on the one hand that not enough people are coming in because of these higher prices. existing home sales, we saw from case-shiller, price gains coming down. you might think more people would be going to existing market. i've got to say, everyone's going to say a volatile number but a big jump. can it continue into 2015 as we see more supply of existing cheaper existing homes come on to the market? we saw dr horton yesterday saying express homes, an entry hfl level -level doing well helping to boost earnings. prices higher for new homes, can they keep that going, once the inventory of existing homes comes back this spring? already seeing inventor start to bump up a little bit on the existing side. back to you. >> thanks for putting it in per perspective perspective, diana olick and rick santelli with the number. a big sell-off. the dow's down nearly 300 points. s&p 500 down 1.3%. bring in art cashin director of floor operations with ubs. the blue chip companies missing, one by one by one this morning, that is what it is negative sentiment around earnings? >> more than domestic. you're right impact of the dollar on earnings is clearly being felt and that's casting a pall not only on those reported but anticipation of those yet to report. we still have problems in europe. they kind of let greece slide yesterday. they're back at them today. greek banks are down 10%, in some cases. so this is kind of a combination of several things. the strong dollar impact on earnings, and some lousy 8:30 data. >> why is this coming as such a surprise? we've been talking -- i've been talking about the strong dollar for the last six, seven months and how it will hit earnings and the stock market kept going higher. why is this a surprise? is it going to impact the stock market and earnings for rest of the year because it comes up in all of the guidance and lowering forecasts. >> yeah, i think up until now people looking at it other than you and i, were saying, you know it's a nuisance it's not a high-impact item. >> dealt with it before. >> right. >> it is one of those things they can't control. >> i know. but recall all of the arguments that people would pop up only 18% comes from offshore blah blah, blah you know, that's not important. i think they're going to see how important it is. and again, we're beginning to see that the drop in oil is not necessarily an allowed gift. a kind of ugly buffet in friend of us today. we've got europe starting in again, greece getting pounded, and then we have these problems with the dollar and some earnings outlooks. >> michelle caruso-cabrera write the market thousand tsipras would strike an -- >> i think the first day things looked like they were in stride he made a quick coalition with a large enough team that he could even avoid some of his -- his version of the tea party, if you would that the more rebellious member of his own group. so everybody thought, well maybe this is going to move along, it was all for publication, the election. not so far. still using the same rhetoric. >> consumers feeling awfully confident right now, but that is not matching up with what we're getting in terms of retail sales, and durable goods, you buy the number? negative 3.4%. there's sketchiness. steve liesman is pointing out if you take away defense and aircraft orders it looks a lot better. >> looks improved. but some revisions bad, too. it is a worrisome number. i agree with rick santelli i think the confidence number got a big boost from dropping gasoline prices. you know, art, it's funny, i mean, through time we've seen other periods of a stronger dollar, though haven't been that many in recent history until very recently. willingness of investors are to ignore it sometimes and then focus on it goes back and forth. i don't know necessarily what distinguishes this point in time from other. you're a student of history. perhaps you can help me here. >> i think it's one of those things where you know it's an annoyance, it's conditional. it's not important. as carl said you've addressed it before. and then suddenly begin to say, wait a minute this is ongoing. this is the aspect of currency wars that we've talked about, when it begins to change for the cerebral chess match to people poking each other in the face and we're getting very close. you had an absolutely stunning whipsaw move in the swiss franc overnight. some people felt there may have been closet intervention that came across. but you're beginning to see currency markets destabilize here. and that will not be good. that will not be good for people's trust. >> i thought it was interesting p&g used unprecedented in their earnings release, that's not a word you use lightly. unprecedented currency devaluations from a company that has -- for whom this is not their first rodeo. >> absolutely no the they've been around the world and successful. not given to using currency as an excuse. absolute concern. >> i would point to that i mean they depend a lot on the emerging market. ruble devalued by 55%, unprecedented. venezuela, ukraine, sell a lot of the emerging market countries. >> morgan stanley pushing expectation for first rate hike 2016 q1 sound reasonable to you? >> i've been there okay? i think we still have surprises to see in europe. it looks like they have some form of qe, i'm not entirely sure it's going to work. i think there's going to get pushback before they begin to implement it. >> all right. art cashin thank you very much for joining us. we're monitoring off the lows but dow down 267 points. we dodged a bullet here in new york city in terms of the worst of predirections for the storms. much of new england hit hard the farther out east the stronger winds, colder it got, and the more snow. obviously roads in new york city are back open and so are the subways. man who dodged all of this is simon hobbs who went out to los angeles for a hotel industry conference with the virgin america president and see. i'm sure simon, he's dealing with the fallout. >> it's in the 70s again today here in l.a. you know sara the airports are closed in new york. you need to bear in mind about one-third of the country's air traffic goes through the new york region every day. so as it stand as the moment it's a national problem. the ceo of virgin airways. the youngest full service airline in the country. good morning. >> good morning. >> how many flights did you cancel? >> about 100 flights over 3 days, which is 25% of our schedule. >> you have 53 aircraft. where are they now? where do the aircraft go? >> i'll tell you where they aren't and that's new york and boston, most important thing, get the aircraft out of there. what we ended up doing, canceling out origination, primarily california and they're gassed and ready to go as soon as airports open. >> one of the big questions, will flights resume today? if you canceled them can you reinstate them now that the new york airports aren't that bad? >> you can reinstate them. one of great things about the technology available now, in terms of getting in touch with customers. we could operate it to the airport this even for example, we could reinstate a flight and get people on that flight. the biggest issue we have with the airport now is getting groundworker there's. and -- >> out for the day. you subcontract. they may not come back in. >> even if you do your own ground handling, they've been told to stay home. drag people in on a snow day when told to stay home is difficult. >> it's interesting watching the way in which the big airlines canceled. their biggest fear to leave aircraft at the stand, during a snowstorm. now, why is that because physically it's difficult to clear them or clean them or because you don't know what the air crew is going to do or is it charges? do you get charged more for being at the stand for 24 hours? its not the cost. if you have an aircraft there, in an event like this that aircraft is out of service. >> it's locked. >> it's locked. >> locked. >> yes. if you have got a snowstorm like the one they're having it can take an hour hour and a half to de-ice. you've got an expensive asset no longer at your disposal. >> it's two months over two months since you and i sat at nasdaq when you ipo'd at nasdaq april great run for the airlines. stock's up 60% because of what happens happened to fuel costs. >> yes. >> this bombshell from you thursday, it's taken $6 off the stock, you're down 12%, from a good high. >> right. >> but still down because you're locked into high fuel prices this quarter and next quarter, hedging. how about you hedges the wrong way? >> we didn't hedge the wrong way. hedging is there to smooth out the wild gyrations in the market whether up or down. we're getting negative side because the market's down. at the same time that will balance itself out. once we lock in the second half of 2015 we'll be locking them in at current prices. >> but you're at $2.76 this quarter, $2.48 next quarter, when the market price is below 1. 6? >> yes. >> david let me ask you about the virgin group in general. wlp you ipo'd, it was clear, but the richard branson might be looking to exit. virgin money on the market in london at the same team we're in a phase where not only is virgin homes launched in chicago and we've seen pictures of that particular premise, but also now, virgin cruises, it's clearly on deck. that's a huge investment. that will be billions of dollars. >> yes. >> what is happening to the virgin group. >> having been i guess, quite successful with one of its main businesses, what happened to david cush now? >> the group is riding high. it's a popular bran. it's a lifestyle oriented brand. >> premium at low cost airlines. >> absolutely. we expect it will in hotels and cruises because of the experiential nature of the brand. the bran will do well. what happens to david cush i plan on being here and bugging you. >> david cush ceo of virgin america. plenty more to come from the investment conference and perhaps we'll get a chance to talk about gouging, guys. the knack fact that simon's hotel is twice as high as the first two because he couldn't get back to new york. >> thank you. ? when we come back microsoft one of the stocks waving heavily on the dow, down sharply. rick has been bullish, did downgrade the stock to neutral. he'll join us live. financial noise financial noise financial noise financial noise you know.... there's a more enjoyable way to get your fiber. try phillips fiber good gummies. they're delicious and an excellent source of fiber to help support regularity. mmmm. these are good! the tasty side of fiber. from phillips blizzard 'hitting new england but microsoft taking a hit. earnings were in line with peck expectations but saw a decline in commercial licensing revenue. downgrading from buy to neutral, citing a tough transition for the company. joining us analyst rick sherlund joins us 30 rock. good morning. >> good morning. title of the report honeymoon end, that's all you need to say? >> yeah i think that they've had a benefit, you know for the past 16 months of significant multiple expansion. it's been a great stock. and last year you had the migration from the older version, windows xp where they ended support, to a newer version of windows, so you had some tailwind as you're transitioning more to the cloud, you had this benefit that's now dissipating. and no one was real sure how much of a been fit that was versus underlying pc demand. when you looked under the covers of the december quarter, you realized windows was down 13% and office was down 13 per commercial and 25 for consumers. so if kind of took your breath away. and you realized the tough comparesons are coming up in march and june. so as we say, the honeymoon's over, you've got a tough transition ahead. you can either get through the next two quarters before you see things more normalized for them. >> you have been pinning hopes to move on the balance sheet. that is still alive? >> we thought the last remaining catalyst here was what are you doing with the cash. they did announce on the call they were going to use remaining share repurchase authorization up more quickly. there's 31 billion left. we'd like to see them do about 35 billion or buy back 10% of the stock over a short period. they announced they'll do it over eight quarters. there's not immediate gratification there. it's going to be extended over a longer period of time. >> amy hood mentions the dollar which has been the focus of our discussion regarding all kinds of earnings today, rick. we've been talking about strong dollar environment for months, not just us everybody. it's the worst-kept secret everywrp whyevery everywhere. >> for microsoft, a 1% impact on the quarter because they have extensive and expensive hedging program. so about the most i've seen microsoft get hit one or two percentage points from currency. but because of the extraordinary move i guess you can't hedge for all of that, they did say it would be 4% headwind in the march quarter, was going to be a lot less than we'll see for most of the software industry. >> all of the tech sites are writing about the hollow lands don't know when it's going to become a consumer product, vis virtual software product. is there a different kind of spirit at this company that makes them cooler and more innovative on par with the likes of google and facebook? >> yeah i think the new ceo nadella wants to innovate. the reason they showed you that product was to underscore that you know the company is innovating again. so it's nice to see. but i don't know that it's going to be a commercial product for another year or two. it's not going to move the needle. it's one of the things to demonstrate the philosophy of management, which is they're investing in the business they're not just wildly slashing costs and getting rid of x box, bing areas where they lose money. he's trying to build business. at the same time they are cutting costs. i don't think you'll see costs go down dramatically from here i'm think they're going to continue to want to invest around windows 10 the platform for innovation going forward. >> rick, given the stock price itself down 10% right now, you're talking about a multiple i think, of about, let's call it 12.5 times if you tax effect offshore on 16 numbers. has the result in 10% in the stock price already taken out or taken into account what you're talking about? >> well david, on calendar 15 if you look at enterprise value to free cash flow, about $11 is where i've seen oracle and microsoft show good support in the past. you hit that level around $40, i don't know that you'd ever get to that level. but that's kind of the floor, i would think, from a valuation perspective you would think of. >> 11 times, yeah. okay. >> right. >> finally, rick i don't know if apple's in your universe but they report tonight. would you look for as much forex effect from them as we have seen from other big national multi tech companies. >> not aware of what they're hedging perhaps are. but the currency swing for example for the march quarter is going to be 16 percentage points. half of your business is in -- offshore, you could expect an 8% hit from that. so it's going to be more about the guidance for you know march and june quarters. it's really dramatic impact from currencies. meanwhile, the euro seem to be weakening. i'm not sure we're through the whole thing. currency is something that will ripple through. we know it's coming but you don't reflect in the numbers until you get more clarity on the call. so it's an optic, at least at minimum. it's a headwind for us. >> good to get your insight. >> rick sherlund. >> dow down 288 points. more on today's big sell-off with jeffrey gundlach the bond guru, one of the few who predicted low interest rates. ten-year 1.76. sitting down with bob pisani in california. volatile day. that execclusive coming up on "squawk on the street." take a deeeeep breath in... and... exhale... aflac! and a gentle wavelike motion... ahhh-ahhhhhh. liberate your spine... ahhh-ahhhhhh...aflac! and reach, toes blossoming... not that great at yoga. yeah, but when i slipped a disk he paid my claim in just four days. ahh! four days? yep. see why speed matters, at aflac.com. markets close session lows here. pretty much at bottom of the day. dow's down 309. news has been uniformly negative, whether durables and a miss for december, revisions for november and of course all of the earnings from big multinationals hit by the strong dollar. dominic chu, as you saw, at hq with market flash. >> sneak peek. although there was mixed news out there, right? good consofumer confidence. corn, the company reported adjusted quarterly profits of 45 cents a share, 7 cents better than what wall street expecting. sales came in higher than forecast, as its results helped by strong demand for lcd glass products, the stock as you can see, up 3.75% on the trade. one green sliver. >> caterpillar in the red, hit hard by the drop in oil prices. the stock on the dow, down more than 7%. low oil prices low copper stronger dollar hitting hard. what the ceo had to say about the year ahead and find out what to be doing with the stock. we'll talk to jpmorgan's analyst when we come back been know that chasing performance can mean lower returns and fewer choices in retirement. know that proper allocation could help increase returns so you can enjoy that second home sooner. know the right financial planning can help you save for college and retirement. know where you stand with pnc total insight. a new investing and banking experience with personalized guidance and online tools. visit a branch, call or go online today. [ male announcer ] at northrop grumman, we've always been at the forefront of advanced electronics. providing technology to get more detail... ♪ ♪ detect hidden threats... ♪ ♪ see the whole picture... ♪ ♪ process critical information and put it in the hands of our defenders. reaching constantly evolving threats before they reach us. that's the value of performance. northrop grumman. an hour into trade, some stories we're watching at 7:30 on the west coast, 10:30 wall street. pfizer, higher on better than expected quarterly results drive bin rising sales of vaccines and cancer drugs. the stock, down 2% for aal. consumer confidence, above ten points to january reading of 102.9, the highest since august of '07. >> u.s. markets taking a hit from a slew of disappointing earnings out. caterpillar among them, shares trading at lows we haven't seen since july 2012. doug oberhelman discussed the impact of stronger dollar and falling oil prices. >> looking at a soft year in 2015, and several reasons for than when we were altogether in new york, i talked about the impact of oil and it would hit us and it is. oil is a piece of our energy and transportation it's worth -- oil and gas is a thrird of the business. the natural gas piece of the business is doing well and so far holding up. the oil piece, though what we're taking down the primary number for reduction in 2015. >> what should you be doing with the stock? let's bring in ann of jpmorgan. you anticipated the oil price plunge would hurt took the stock down to $80 price target underweight. surprised how much it's impacting results and guidance for the year? >> clearly, guidance lower than anybody had anticipated. now caterpillar, in particular, deck kramental margins what investors care about, they forecasted 25 30%, on lower revenue number. 475, turns out to be the right number, then investors are might want to look at putting a peak month, 20 month on those earnings which might make it attractive after today but a lot of questions going into the conference call. >> what's going to be your main question? they'll take additional restruck restructureing act. >> for deep value investors the most concerning thing in the press release keep cap x roughly flat. when earnings fall by more than 20%, year-over-year we expect managements to cut back on capital spending and rein in spending of all sorts. for me the most important question going into the call. >> was there a way to extrapolate from any of the monthly or rolling sales data this quarter? should people have been taken by as much as surprise as they had been? >> that's an interesting question. yesterday we got their dealers' retail sales data and oil and gas sales were up 25% year-over-year. so, that was a surprise to everyone i think, to the upside. might have spooked some people coming into today. i think this is -- the ceo doug trying to set expectations as low as he possibly can, and the question is whether 2015 is the trough or whether we're going to look to you know further downside going into '16 from indirect exposure to oil and gas. >> obviously, not looking for big things out of the economy. oberhelman on our air, trying to fen fend the fed off. i wonder where do you draw the line between number of ball he has to juggle and his own execution? >> we've talked about that several quarters before this. you know i think, again, he is in cyclical industries and has to manage the down turn and the upturn. the big question for doug whether they can, if he can handle 25% 30%, decrimentals. if the company doesn't, his performance will come into question a year from now. >> china numbers were disappointing. what is the view what are the problems over in china, besides falling price of iron ore and commodities? >> i think china's not huge for caterpillar directly and investors focus on it but in the big scheme of things it's only 5% of their revenues. but what we are seeing is a continuation of the downturn in construction and construction activity and the industry's paying the price for overspending and overproducing for the last three, four years. it's just a continuation of what we've seen for the last couple of years. >> so bottom line i mean if you hear what you need to hear out of the call do you think this guidance was conservative enough to have a low bar, low expectations for 2015 and then would you be a buyer? >> i think we're going to have to wait and see how the economy turns out. it's early to start jumping in at this point, in my view. we don't know what the impact of lower oil prices is going to have on their business into mid '15 and into '16 versus what could be a positive for consumers. so we are lacking visibility at this point. i think it will take a little bit of time for investors to start jumping back in. >> and they said they're expecting economic growth to improve modestly in 2015. that was out of the earnings release. thank you. dow's down 350, this is the biggest point drop not percentage, but point drop for the dow since june 2013. you've got to go back a year and a half to get as many points to the downside as we have today. fed kicking off a two-day meeting, investors watching for clues about rate hikes in its statement tomorrow. steve liesman at hq. >> sharp movement for the federal reserve, pushing ahead outlook for federate hikes. fed time line that we show you how this survey is different from the prior one. 33 respondents, economists, investment managers and analysts. take a look, first time the issue of when the word "patient" would be struck or removed from the statement. that is march. that's only 33%, you have to go ahead to april to get to a 50% majority or greater. how about when they will hike rates? important movement here from july 2015 in the current survey now it's september on average, respondents do not see a rate hike until september. balance sheet allowed to decline, 4.5 trillion balance sheet, had been february 2016 pushed ahead until april 2016. one last metric we follow when will the federal reserve get finished hiking rates and where will it be? had been first quarter 2018 for one of the longest lowest rate hike cycles. it's still the same quarter but looking for a slightly lower average rate. we asked our respondents, why are interest rates so low? here's their reasoning. the first one is 72%, it's because of low inflation. i have to say, i maintained this for a very long time ten-year more sensitive to inflation outlooks than it is growth outlooks and only 19% say it's because of low growth. 13% say it's european qe. about a fifth say it's because of the easy fed. and a third come in with the number two position, flight to safety. now, let's take a look at the fed funds outlook and the ten-year outlook. fed funds right here a quarter, 73 for december 2015 down ten basis points. 1.26, 1.75 this number was above 2% just back in august this year. push that over take a look at the outlook for the ten-year, and this has come down sharply, folks. 2.14 for june 2015 all the way to 3. all of these are down about 50 basis points. carl, we'll have more on the outlook for european quantitative easing effect on the u.s. and europe as well as the impact of oil and in a few minutes i'll punch the button put a story on the web about this on cnbc.com. >> quickly, steve, how much is because of the strengthening dollar, even if the federal reserve won't come out and say it -- >> you mean the outlook for fed policy, how much that's changed. >> people are pushing out forecast for rates a little bit later. morgan stanley today calling for march interest rates. this is hurting growth. will the fed acknowledge that? >> first, i think it's a piece, i don't think it's the whole thing. you have lower oil prices you low inflation, and you have the stronger dollar which could be having an impact by the way, we saw this morning in the durable goods report. that could be hurting some shipments, some exports. although that number was much worse than the underlying economics suggested. but still, i think it's a factor i don't think we had a point where the federal reserve would add the stronger dollar to the statement right now. >> yeah. would have to be pretty bad for them to get there. thanks, steve. an exclusive interview with the co-founder of home away. one of air b&b's biggest competitors. what happens next for their mobile strategy. before the break a check on the markets. market equivalent of deflategate deflategate, s&p down to 2024. worst day for the nasdaq since october, down almost 100 points. exclusive interview with jeffrey gundlach in a moment when "squawk on the street" continues. grand prix race car made history when it sold for a record price of just under $30 million. and now, another mercedes-benz makes history selling at just over $30,000. and to think this one actually has a surround-sound stereo. the 2015 cla. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. opinions. there's no shortage in this world. who do you trust? whose analysis is accurate? how do you make sense of it all? a simple unbiased stock score consolidated from the opinions of independent analysts... is that too much to ask? nope. equity summary score powered by starmine, will help you execute your ideas with speed and conviction. and it's only on fidelity.com. open an account and find more of the expertise you need to be a better investor. take a look at technology this morning, one of best performing sectors of the year until today. down sharply in the sell-off. dominic chu at hq. >> the worst performing s&p 500 sector today. a tough day for the information technology sector. led to the downside by microsoft shares this after the software giant gave 2015 fiscal guidance below what analysts expecting, citing currency headwinds. hewlett-packard, intel, micron, moving lower as well. cisco also in that list there, carl intel, microsoft, cisco, hp four of the most heavily weighted companies in the tech sector down big in today's trade. >> that explains a lot, with the dow down 360. as the blizzard disrupts travel while companies like air b&b may be disrupting the logic industry the idea of renting out your home is not new. home away does that connecting travelers with homes ready to be rented. over to simon hobbs. >> hi, karl. everybody today's stressing about what foreign exchange markets and stronger dollar can do to your earnings abroad. for this sector these momentum plays like priceline, 75% of its profits earns externally, we've been through this rose with priceline and fell with priceline. as a result its market cap went from $4.5 billion to $2.5 billion. the co-founder of home away which has 1 million international rentals online now, carl shepherd joins me now. >> when you see the markets really under pressure today, foreign exchanges front and center, you've been through this what would you say? >> i think, like any company that has 40% of our revenues from outside the united states we've always been looking at the euro and the appreciate sure that the you'reeuro's under lately is a concern. ethnic neutral basis, we look at this as if there's no fluctuation in currency and we manage our company to hit targets that fx newutral. >> momentum plays you and priceline and everybody else moving together in the stock market you rise and you fall? >> absolutely. in the last round of earnings reports, we watched that day the euro was falling, priceline went first, tripp second we went last and fell in tandem this day. >> this isn't your first rodeo. what would you say to investors? dow down over 300 points looks scary. >> i look mostly at my sector and follow it the most. one of the things that in the united states travel we see travel unlittle pressure and therefore, home away looking in the united states is fine. and we're also looking at our european sector. one of the things we've noticed through the last recessions europeans tend to travel. even though we may have some pressure sures we expect travel to maintain steady. >> let me pick up the mood of the conference. this is very very important here. this lodging industry in this country, is going to have record occupancy this year. as a result the advice from consultants to push holtz prices higher by over 5% they think the market can take this year to the extent that there's going to be record profitability from the lodging industry this year. and this is the motif, don't worry, be happy. literally what this conference is doing with its dellegatedelegates. it's on the front of the programs. i'm not sure that's what you see from the financial press. it's very different. >> certainly is. the mood is more upbeat about investment in hotels and in the sector. perhaps that's going to ride out and come on the other side of this with investing being in a rationally high level. as far as whether or not the hotels could push through price increases in this year that's telling for us all. >> they say 10% in parts of california. people keep talking about air b&b. you are not air b&b. you don't rent out parts of apartment you rent out whole airportsren't apartments. you're defending yourself in san francisco against air b&b. the judgment will come through in the next 24 hours. summarize what's happening there? >> right. what home away is leading in the united states and 100-year-old industry in europe and new regulations that regulations that are coming out trying to regulate the sharing economy, where you're sharing your apartment. >> at the city level. >> at city level. i think one of the things that we're doing always is we fight for fair regulations, want everyone to be able to rent short term who can rent short term. we want this a level playing field, taxes collected when owed. what we came up to in san francisco they said some people can rent some can't and that's not -- that's bad for people and they said one business model works and another business model doesn't and that's not good for industry so we decided to take a stand on that. >> seeing if suing of san francisco works and what it means for other cities around the country. great to meet you. carl stepherd. >> see you in a bit. coming up shark tank's kevin owe o'leary braves the blizzard. dow is down 377 points. s&p 500, almost down as much as 2%. seeing more than 2% declines on the dow and nasdaq. back on the sell-off after a quick break. stock market extending its losses. let's get the santelli exchange with rick. hey, rick. >> good morning, carl. . i would like to welcome our guests, my housing guy, mark hanson. we will work backwards in time to the recent data. we had case-shiller new home sales. seen existing home sales. new home sales foreign listeners and viewers, the 20-year chart tells me the low 270 k from february of 2011 and the high july of '05 shy of 1.4 million units. today's number 481,000, best since i think it was about, what, 2008. what are your thoughts on today's number? >> 481,000 gets everybody giddy but in reality, that's a seasonally adjusted annualized sugar number. the real number is that there were 34,000 houses sold in december which rounded in each four regions, could be 32 to 34 compares with 30,000 a year ago during the polar vortex when rates were 150 basis points higher. normalized i would think it's roughly apples to apples the same. you have to look at those not seasonally adjusted numbers, rick. >> good point. as a matter of fact, my santelli exchange about an hour from now will apply the same logic to durable goods and viewers will be surprised at the outcome. here's the only thing that matters. is the housing arena, housing sector because of all the cottage industries a helper for the u.s. economy and any significant fashion for 2015? your thoughts? >> in the past year and a half two and a half years rather we've had a price recovery, not a demand recovery 2014 new home sales were 15 to 20% below analyst expectations. look at single family housing starts and permits. they were masked by the misallocation into multifamily. we've hit a peak especially if oil prices have an effect on demand in the southern region which drives houses housing will have a net draw against gdp this year. house prices coming down i believe is the story for 2015. >> okay. now when it comes to interest rates with he could make an easy statement. low interest rates certainly arnce going to hurt housing. but the real question is everybody jumps to conclusions, we've seen refi activity i get it, these low rates have once again resurrected that chapter of the marketplace. s that has that run its course? >> low rates create some incremental depanned an pull forward a lot of demand into refinances and home purchases. which is why you saw a stronger than expected number today by a couple thousand housing units across the country. overall unless rates get down to below where they were the last refi and purchase cycle which ended in june of 2013 when rates popped up you're not going to get anything meaningful or durable. you will get high volatility in the mortgage markets. >> thank you very much. our time has run out. you covered a lot of ground. sara, back to you. >> thank you. >> thank you, rick. and with the dow down 370 points let's get over to jon fortt with a look at what is coming up on "squawk alley." good morning, john. >> good morning. we will be talking markets with the dow as you said near session lows 2%. nasdaq more than 2%. s&p near session lows. we will be talking about microsoft's results, that guidance that disappointed and finally, forget about the weather we're looking forward to apple, apple save the tech sector out after the bell today. we'll take a look at the preview coming up on "squawk alley." if you're running a business legalzoom has your back. over the last 10 years we've helped over one million business owners get started. visit us today for legal help you can count on to start and run your business. legalzoom. legal help is here. push your enterprise and you can move the world. ♪ ♪ but to get from the old way to the new you'll need the right it infrastructure. from a partner who knows how to make your enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come. . heading south on 8th avenue. what's this guy's deal? new jersey. otherwise just emergency vehicles. times square coming into view. by the way, it hasn't snowed a flake since i started walking. just letting everybody know. not not often do you get this opportunity to walk through times square in the middle of the street. that may be a life experience. the huge billboard. pretty. how long did you shovel for today? >> all night. >> all night shovel. >> 5:00. >> you guys did a great job. look at this. that's amagds. >> thank you. >> how ridiculous is it the subway is not running? >> it's very bad. we need to work. >> we need to work. everybody has to get to work. >> we can't go home. >> you can't get home. >> you made it. >> 6 million take the subway or rides every day. the city people need to get to work. i don't know how that got added to the list of things that get closed during a snowstorm. hopefully next time wons be closed. >> i love how you're always reporting. not breaking deals reporting on the street. >> it was fun. a beautiful walk and fun to talk to people in the same boat as i am. what are we watching here? >> besides the weather, watching the currency market. everyone and their mother is blaming the strong u.s. dollar and the currency impact. what's happening in the markets right now is the dollar is weakening pretty significantly. the euro above 1.14 perhaps the corporate executives can breathe a sigh of relief today. the problem is the prognosis the dollar will have a very strong year and we should note thompson reuters put out a list 18 companies in the s&p have reported guidance. of those, all 18 of them have disappointed. disappointing outlooks. that's been the theme. >> certainly has. this morning. we see broadly, of course with the s&p down over 1.5%. we are having a poor day due to earnings. it's fundamentals. people reassessing what the p/e they should be paying for the companies given the move specifically in the dollar affecting some of the multinationals. >> with the dow down about 360 points, over to you for "squawk alley." >> thank you very much. welcome to "squawk alley." on an eventful tuesday morning. the blizzard hammering the northeast but a bigger storm if the markets. stocks fall the dow down about 364 points. this is the worst percentage loss for the dow since june of 2013. biggest point loss in about four years. almost fours years. today's action largely the result of weaker than expected durable goods. rough patch of earnings and outlooks at major dow companies in large part because of the strong dollar. joining us this morning for the full hour zillow ceo spencer rascough with a new book today "the new rules about real estate." thanks so much for taking the time. >> thank you. >> jon fortt, kayla tausche as well. your take this morning, spencer? you're a real estate guy but thoughts op the degree to which 4 x and some of the macro data ha
i know and i said under the marijuana licenses we needed to do a better job. i will do a better job on that. the health connector is on its way to being fixed. that was an error and we need to do better with technology. >> moderator: thank you. falchuk: is easy to describe the things have gone wrong and said i would've handled it perfectly, differently if i were the governor. .. limited powers and we have been following a model of intrusive big government that is doomed to failure. doesn't matter who is at the top. i am running because the system is broken and i have create jobs that solve the problems. we don't have the technology within the state to do this. we know how to use technology to create efficiency and we would have avoided the website integration issue. there is so much we can do if we break from the status go and we are not doing that. that is why we needed an independent voice. >> here we sit a year into this and we have no visibility into what went wrong, what could be done to fix it and no one knows the total value of the price tag other than north of $500 million in taxpayer money and we are the only state in the country where no one lost their jobs who was part of that. >> i am the only one on the stage who worked with kids. kids who i met who said you handled by sex abuse case when i was a child and i am 30 and i go to college and i still have nightmares but thank you. this is why i came up with a plan to fix this system. charlie reverted $2 million one year. >> moderator: do you want to give him a chance to respond? >> i would not have chosen not to fix the agency as opposed to litigate. >> moderator: you will make up the time. go ahead. >> i have been clear that case didn't have merit. rather than spend millions of dollars on outside lawyers, let's end on a solution that is one-size-fits-all. that is what we need to do and i know how to do it. >> this is had fundamental challenge i am running and founded a new party because we need people to deal with these issues. this is dealing with children who have lost their lives and children who have been at risk. there is an argument and you have been having it with taking out ads and attacking each other and talking about the issues that are serious things. we should be able to work together on solving the issues. it is disrespectful to voters and the lives lost to talk about them in this case. >> moderator: anyone want to respond? >> i agree. the super pac is criticizing me for doing what is in the best interest of commonwealth. >> both of you have had plenty of super pac opportunities to support what you are doing. i sent out a challenge saying to you think we should amend the constitution to not allow super pacs and no word. >> moderator: let him get a word and we will get back to you. >> i read there brief in 2010. it is written by a non-profit children's group that settled cases with 15 states and fixed what is wrong with child welfare. there is nothing more important than making sure the child welfare agencies are doing what they should be doing. the right thing to do is fix it and move forward on a settlement instead of litigated. >> it is the poster child for out of control government. it tramples parents rights. the justina case created outrage and that girl would still be in dcf control if it wasn't for the pressure brought by millions of people across the country. dcf should be shutdown. >> this is not something financial engineering or prosecution will solve. we need roll up your sleeves reform on this. i am the only one with a plan. why? because i listen to people. we need to change the system completely so it serves the voters who are the most at-risk people; kids. >> so charlie has read the brief but i have sat with the family and people for years and i am the one who has put out a plan, jeff, with all due respect, to say we need an a division within the agency that just protects kids. when your caseload was cutting the budget we were seeing the uptick in the sexual abuse cases in suffolk county. >> no one is questioning your work as a child advocate across your long and distinguished career in the public sector. >> i am. >> i am not questioning her work. it is work she and all of us should be proud of. but on the choice you made with respect to that case i simply believe and i think the history has borne me out on this that massachusetts and the children served by that department would have been better served in the commonwealth have moved instead to fix what was wrong that at agency instead of litigating that case. because here we sit with an agency, and i have a plan, too, by the way, no one is disputing that, everyone agrees the agency has major issues and we are litigating a case filled five years ago still. >> moderator: final words. >> we made the right decision. what the lawyers looking for millions wanted to do was one-size-fits-all. it wasn't right for massachusetts. >> this is important that we get on. this is a serious issue but we are getting in the weeds. i think a lot of voters would say i don't know what they are talking about. >> moderator: go ahead >> the next governor should be a weed wacker. one of the biggest problems in massachusetts is we have not had leadership on deacon hill that is getting down to the weeds, into the details and on the front line to find out loss going on and making sure what we say is happening. >> moderator: we had three rebutles and i want to move on >> i want to get in on this. i don't know how you can be talking about children when every single one of you support the killing of unborn babies in the women -- womb -- >> moderator: i am going to move on but you can return in your open period later on. in a recent pole, a majority of respo respondants said the economy and taxes were the issues of most importance to them. when you are governor will the taxes go up, down or say standostay the same? >> i believe we ahead. >> i am saying don't go if they don't have all of the candidates. >> voters have a right to see who is running. i don't control what they do. >> moderator: you can get back into this later on you have like. >> if i am elected governor, taxes will go down substantially. i would like to give back every dollar i am able to save by streamlining and downsizing government but i cannot do it as past as i would like because we have $129 billion in debt and we have a responsibility to pay it down. for every dollar we save by downsizing and getting rid of waste, fraud and abuse and we take half the money toward the debt and half to the taxpayers. >> the middle class is hurting right now. their earnings power is down and i believe we ought to increase earned income credit and ought to roll the income tax back to the 5% as people voted but we ought to do it through attrition. i think that makes a lot of sense. i have a plan to attract businesses to communities throughout the commonwealth, creating jobs like i have created jobs by the thousands. we need to do that throughout the commonwealth and you do that by doubling the historic tax credit and get rid of the inventory tax because that is a job killer. we need to have specific incentives to move into the d t gateway cities. >> taxes under baker will go down. we have proposed tax cuts for the inventory, businesses and people on public assistance but the most important thing is we put out a detailed, specific, economic development and growth plan. the greatest thing you can do is make the kinds of decision that will create growth and jobs across the commonwealth. my first stop was with the emerging technology center outside of 128 and a partnership between manufactureer -- manufacturers -- and the people >> moderator:. thank you. rebutt rebuttal. >> if we don't invest in our education, particular computer science/s.t.e.m. we will not have the workforce even if the jobs come. i talked to a business saying they moved south because health care and energy is high but they moved back because they want people with a good high school education. >> the amount of money my wife and three children pay for health care is driven by how much it cost to go to the hospital. this was the deal with partners that martha is trying to get approved and they have been raising prices relentlessly and addressing that is the bes tht k thing you can do. >> we need to create full trance transparency around health care. i cannot think of anywhere else where you can go to four different institutions within a couple miles and it can vary between $300-$400 percent. it bothers me you can learn more about a refrigerator than you can about health care. we should get serious. >> it was under charlie baker's administration that partners was allowed to be created and then there is an administrative ov overlay and that is one reason the cost went up. the agreement we reached caps and lowers cost. >> moderator: go ahead and exchange. >> you closed the barn door after the horse left. if your deal is letting it grow, and staying money from people's pocket slowly, but the damage is done >> that is not what the deal does. it puts price caps on what they can charge. it is held accountability for better quality and other than filing a suit it is a better result for consumers >> i read the deal. in there i see what you are talking about that is slowing the growth. the distortion has already happen happened. partners is looking west and the distortion will continue. >> the problem with the system is systemic. you folks are talking about picking at things around the edges. the system is corrupt. we are talking about the most expensive nanny state in the entire world with the exception of england. massachusetts is outrageous. we are spending money we don't have and the prices just keep going up and up and you ask for more and more taxes. >> you and i both worked in health care. you at harvard pilgrim for a long time. you and i know how complicated the contracts are. we need to change the delivery model and emphasis primary care and community health care centers to bring down the cost. it is proven if we manage our health care it will save a considerable amount of income. >> i agree we need more in primary care. i believe the transparency piece can be done quickly and should be done. and by the way every study being done shows the single biggest factor driving up hilary clin n clinton -- health care -- in massachusetts is the difference in way. and i don't think that is credited to bureaucratic insiders. the way to deal with this is to make everybody's post their prices and i don't think that would be that hard to do. >> we are talking about the values that drive you when you make decisions as governor and i have this question for charlie because we are talking historically. how is it and what do you say to people when you turned around pilgrim but left 35,000 seniors off and tripled cost and tripled your salary. >> i walked into a health care plan that covered thousands of people and owed tens of hundreds of millions of dollars to hospitals and other proird providers. if harvard pilgrim went down thousands of people would have lost their jobs and important health care institutions would have gone away. the fact we saved, and there were a lot of people involved, jobs for people and important health care institutions here in massachusetts and i believe was a time of setting the market back. >> your salary went up and how do you explain that to people that lost their care? >> my salary was set by the boa board. it was consistent with market value over all. it wasn't something i negotiated on. i am so proud of the thousands of jobs. >> moderator: we have a break at a hand but i will give you a few moments. >> charlie saying the prices going up because of the cost of the hospital visits is true but they are in the hands of the leadership and we need new leadership. >> moderator: let's take a break, have a sip of water and when we return the wbz gubernatorial debate will continue. please stick with us. welcome back to the wbz gubernatorial debate live from the studios in boston. let's resume the debate. we will get back to the policies stuff in a moment. but here is a question that hopefully quill give us a little insight into your character. what was the most difficult decision you ever had to make in your professional life and why did you decide the way you did? >> it was the decision to go about founding a new independent party and running as governor. i departed from a successful business career and talking with my wife and kids who are supportive, i believe the system isn't representing people and i felt the way to change it wasn't to just run but to build a new party saying everyone is equal and everyone's civil rights need to be protected. we have an opportunity to inspire people. when we see 16% of people voting in the primary that is a terrible sign in the democracy. it was a tough choice but i feel honored to be part of this. >> moderator: mr. lively? >> that is a tough question. i have made a lot of career choices that were difficulty to make. a more challenging one in recent years was closing down a successful law firm in california in order to go back on the mission field. i gave up a substantial salary. my wife and i run an inner city mission now. we set-up a church called holy grounds coffee house and serves the most disadvantage people in society but it was worth it. >> moderator: mr. mccormick? >> i would say starting up a company to treat als. it was a struggle and ne neurological diseases are extremely complicated and having trials that made no sense to anyone was a gut check moment. it was a huge investment and my wife and i felt it was the right thing to do because we believe it will help als patients but we thing the findings in the laboratory will lead to other neurological diseases like parkinson's. >> moderator:. thank you. >> career achievement? when harvard pilgrim was in trouble we decided to exit the marketplace and that involved tens of thousands of members. that was easily the hardest decision i ever made. and we made sure to make sure everyone in active treatment stayed. we made sure every provider who did business for us got paid and we made sure every person in the organization had an opportunity to find other employment as we went through the process. that was a classic example of having no way out and no good choice and we had to make it to this day. >> the easy decision is after law school and working in a big firm and making a call to go into public service. the hardest decision was working with tom riley on the child abuse unit. i wanted to do homicide, i wanted to be in the courtroom trying cases for victims and this was the hardest job and decision i have had. i had not done child abuse cases before. it was a time as charlie said that number of cases were growing, including physical abuse cases, so we started working with doctors with broken limbs and fractured skulls and one 8-year-old ended up in the emergency room and i had that case. it made be a better district attorney and prosecutor. >> moderator: i should have noted this was a question submitted by steve in arlington. would anyone hike to follow-up or rebut thought they heard? >> i want to say congrats to jeff. one of the big things i heard this summer after the ice bucket challenge because of the money raised on that clinical trials are ahead by 3-4 years. what we are able to do in massachusetts with our life science and people like jeff willing to invest in it means it is an economic driver for massachusetts and people's lives will be better. >> isn't it odd the only one with biotech experience was disinvited from the biotech meeting. >> moderator: let's turn back to issues that made the top five issues on voter's mind. u.s. terrorism. yesterday, an associate on the fbi's most-wanted terrorist list that is believed to be a key isis operative and boston is one of three u.s. cities where the feds are focusing efforts on recruitment of terrorist. here is my question: is massachusetts a magnet for terrorist in some way? if so, why? and what would you do as governor to pro-actively identify them before they act out? >> yes, i think it is. because it is a liberal state. the place where radical islamist are going are radical countries. the north -- netherlands, sweden, uk -- and they have going to the states with the great depressiest amount of power. they know they can get away with more where people don't have guns to defend themselves. they are going to places with the strongest gun laws. they are going to places where the government is focused at the highest and there is no local focus. >> moderator: thank you. mr. mccormick? >> i don't think we are a magnet other than we are a very cosmopolitan area and we have a lot of influence on what happens around the world. people from abroad want to get an impact so of course they going to go to the kinds of cities they think they can make that and be seen. they are not going to go to nowhere. they are going to the major northeastern cities. for example, john, i think what why need to do as governor is work with our federal government closely. those agencies don't talk well at all. obviously our state agencies don't either. and a lot is coming down to use of technology and vigilance. >> i would agree i think the cosmopolitan nature of boston has something to do with it. we have a lot of people coming here to go to school, to works, to visit here and why are a great location for someone to get to and from a lot of places here. as a result as governor there is no priority that is higher than the protection and safety of the people here. as governor i would make sure my administration was in constant contact with federal, city, national securityy agencies and i would take a personal interest in making sure we did everything we could to stay on top of everything going on in the cyber community, and in the community generally. >> i remember like it was yesterday. i was district attorney on the second floor into the tallest building in east cambridge on 9/11 and we knew after the second building was hit the country was being attacked and we had to leave that building. as a result of that, and i know this as district attorney, since that time in the state level and improving communications we have a terrorism task force and we stay in touch all of the time and we need to make sure we continue that communication and look at better threat assessment tools because new york, boston and all of those cities will be and we continue to deter threats and respond as we did in the boston marathon as soon as we can and keep the communication going. >> moderator: thank you. >> the world is a dangerous place and the government has an important observation to make sure everyone is kept safe. i am worried about the war on terror and the civil liberties being encroached on. as residents of massachusetts we were told stay in our home. when you saw the militarized police in the streets this was a w w worrisome develop. we are called the land of the brave. our civil liberties shouldn't be negotiable. >> moderator: rebuttal anyone? >> on that friday i went to where all of police were. we understood the judicial systems would work and i worked to get search warrants in cambridge. i know we have to have a plans between the way we -- balance -- get information and collect it but we are dealing with borders and people coming out and sharing information and doing threat assessments under the rule of law. >> moderator: response? >> as the rule of law has been read to allow the government to snoop on people's e-mails, conduct wireless in ways -- >> and we need to respond with the rule of law and mnot be su subject to terrorist threats. >> moderator: i am going to get you in and then mr. lively is waiting patiently. >> let's go back to public leaders and officials needing to be forth right and open with people about the decisions they make. i happen to think on this particular one, most of the people i know and have talked to about the issues around surveillance and phone calls and wire taps and all of the rest, the big issue is this was going on and no one in the government was telling them about it. i think people are not only brave, i think they are old enough and mature enough to have a conversation about this. >> i want to inject one thing to my original comment. that is the problem with immigration. we need to close the borders from illegal immigrants. we need to stop bringing so many radical islamist into our country through the legitimate policy. if you look and see where the radicals are going they are going to the place with the most liberal policies regarding immigration. >> i think we need a system that is fair to people here including residence and that means you need the rule of law and the ability to make sure we have information you can assess and protect and there are times when you cannot tell everybody what you are doing in real time but i believe government information should be made public at some point. >> 61% of the counties in the commonwealth are founded by immigrants. people don't have a sign on them -- i have friends all over the world that come here. >> legally, i hope. >> our government does the best job to keep terrorist out of the country. no one would disagree with that. but that is a function of agencies working together, states working with the federal government, it is a complicated issue. >> i talked to enough folks in law enforcement to follow up there is situations when the federal government isn't telling people at the time state and local level about things going on in their own community. we have a huge disconnect about what the feds and states/locals know and that has to change. >> moderator: briefly if you have anything else and then i want to move on. >> things wouldn't have to be hidden if he had not brought so many trouble makers into the country. >> what we face and the challenges faced are not going to be fixed by in stistilling f in people. >> moderator: i want to return to health care in a different perspective here. you will start here mr. lively. if republicans win back to whitehouse in 2016, it is entirely possible they may try to repeal at least parts of the new federal health care law. if you are elected, you mean be in office as governor at that time, are there any aspects of that law you would encourage washington to change or are you satisfied with it as-is? >> i think socialized medicine is an absolute disaster for the country. i would completely repeal obamacare and rebuild from the ground up. all of the things i am talking about. when i say eliminating, i am not talking about that because we have to have the agencies. but let's stop following the far left ideas. >> moderator: mr. mccormick? >> i am running to bring people together. we had the most inclusive health care system in the united states and we should have emphasis on that. with 42% of the state's budget we have to do it much more aggressively than we are doing it nowi. we have to take those models to the next levels and decrease the cost of care. >> mr. baker? >> i think the most important thing the next governor will have to do with respect to what happens to the affordable care act is try to make sure most of the important decisions that matter, with respect to health care and health care coverage in massachusetts, are made by people in massachusetts. the main reason i supported the waiv waiver, not going it was going to blowup, was because i wanted massachusetts to continue to be in the driver seat and control its own destiny. it is a big employer, important issue and one that people take personally. i would like the commonwealth, if there are changes to be made with respect to the affordable care act, to have the latitude and ability to make decisions about how our health care system works that will benefit people in massachusetts. i feel terribly loosing control of this to a person who has never been here >> if your child as a brain tumor you want them at children's hospital. if your sister is suffering at breast cancer you want her at a good hospital in massachusetts. people come from all over the world to get health care here because we have health care that is focused on quality care, excellent care that is extensive. we have been able to put together with a republican governor, democratic legislature, our business community, providers, health care, and consumer advocates, a health care reform that said let's cover people, keep it quality and address cost now. that is what we are doing. it will not happen overnight. we need waivers but we have the right plan and compo know what we want to happen here. >> we have to change the economic model of health care in massachusetts. states like maryland put in place a fee schedule that is passing the risk of care on to hospitals so they can be more efficie efficient. every time you pay a higher insurance premium or deductible it is because of partners becoming a monopoly and the government allowing this to take place. we will thought get different results going down the same path. i have a specific clear path in changing the economics of making hospitals make money off when you are well. >> we have to have a governor bringing people together. we have world hp class physicians and nurse and administrators and technology. it is going to take everyone, including providers and payers, that come up with a common solution. this doesn't make sense if we are all fit and bankrupt. >> the dollars being sent to those hospitals because of the way they can distort the market is the issue we face for economic development. i am will to call out partners for what it is and takes the steps that will save billions. >> i think the insurance corporate model versus the government socialist model is a false choice. there is a middle path of non-profit risk pools that are less costly and people are not restricted to the doctors and hospitals they can go and where the members are stakeholders in the billing process which has a downward pressure on cost. >> as we move away from cheaper service and trying to get into the communities more affordable and integrated health care this is the one way we will be able to address mental and behavioral health care. it is a huge issue in massachusetts. it is expensive because we don't deal with it -- expensive -- and it creates a nightmare for those suffering and their family. >> four people on the panel talked about waivers and there is one that could do that. we have a broken website. we used to to have the best and now the worst. we have spent hundreds of milli millions of theres and disrupted care for million. >> i have worked with how it happened here. we have appointees who are independent on health care and the best on the board. i will stand up for my employees on the health connector board. >> moderator: do you want to rebut that? >> one member of the board was an independent director that questioned a lot of the decisions made and they canned him three weeks ago. this is an example of a one-parone-part one-party government. there is a lot of lack of transparency coming from one team on the field. >> we were the only state in the country that tried to and provided the model for what happened at the nation lenation ice -- national aisle. >> this is another serious problem the left has gotten us into. we should not have to have waivers. just the fact we need them demonstrates it is a broken system. >> moderator: let's move on to another question here. we are doing great. at least i think so. voters themselves can make laws using the addition process and the voter's decision have not always been carried out by the legislature mostly in the failure to roll back the tax percent to 13%. if voters repeal the gas tax indexing and the casino law will you honor their will and if not do you favor the repeal of the initiative process? mr. mccormick? >> i do not favor the repeal of the process but i think it should be used judicially. we cann we cann we cannot legislate by refrendum all of the time. and i don't know why you think if voters pass you can say you can file legislation to get them legislated back in. that doesn't make sense. that is why we vote. >> i was one of the person that collected signatures to push bag the automatic gas tax so i am going to vote for that. i am voting against the casino appeal and not because i love them and i think we should have one, it should be in springfield. if the voters chose to reject them completely we will have a discussion about the springfield site. if it doesn't go anywhere we will leave it at that. i supported getting there question on to the ballot and was glad when the supreme court came out saying it should be on the ballot. you collect 125,000 signatures you belong on the ballot. >> if we are going to fix the roadss -- roads and bridges -- we need that tax. i think that is one good investment in what we need to not provide in boston and cambridge but around the state the economic plan i laid out that will invest in our kids and businesses. in terms of questions, we knew it would go to the court. no one was disadvantaged by that. i agree with charlie. as the voters voted in springfield if it can be part of a larger plan i support that if they want it but let's wait until november. >> the size of that, if the voters go and appeal the entire casino process, you will go to the legislature and try to put the casino back in and that doesn't even seem realistic. we have examples of laws that are passed and not implemented. it is supposed to be the budget updated ten years and the last time it happened was ten years ago. we talked about chapter 257 for human service workers for the state hasn't lib lived up to the obligation. >> moderator: thank you. mr. lively? >> barbara, i am with you. i think massachusetts should do more to support citizen legislation. i lived in oregon for 15 years and the citizens there can legislate directly. here they can veto. the citizens collected well over a hundred thousand signatures to put gay marriage on the ballot and the left prevented them from going to the ballot. >> if i can clarify. i am in favor of repeal so we are clear on that. but one thing we need to look at is what it will do to lottery revenue. we will have hundreds of communities affected by that. if you advocate local aid, the numbers will be eye popping for come communities. >> i know to respond to evan and i know charlie agrees. i am proud to be the first to challenge the defensive marriage act to make sure in massachusetts people can marry who they love. i stand on that decision. >> i never said i felt otherwise. >> you didn't. >> moderator: go ahead, mr. baker. >> since she referred to me i will address that. >> moderator: we are talking about a different issue so let's conclude that first. >> my whole point in supporting one casino is what the collateral impact would be. i walked had sight in springfield. it was a sight torn up by the tornado and it will create main streets in a place where we don't have any and a part of the commonwealth where the unemployment rate is twice the rate around the country. >> a lot of people don't haven't the casino. the last thing we want is exploiting the weakness of others for personal gain. that is what casinos do. >> the legislature created the framework and the voters vote for the cities and down and that should be the end of it. the side that loses has to move on and join with the side that wins. >> all i know is if we don't have the income from the gas tax we will not be able to grow the in jobs and fill the jobs >> we will if we downsize the government. >> if the legislature wants to raise the gas tax the legislature should vote to raise the gas tax. i said this was a bad precedent. the idea of the tax going up every year. question two raises it deposit on bottles every five years for every and ever. this isn't the way to run a cost-efficient government. >> i don't think this is the slippery slope you make it out to be, charlie. we are talking about the business leader support and if we want to move ahead in massachusetts we need the predictable income. >> the adjustments make it work like the sales and income tax and works more like a percentage. there is a law on the books lowering the income tax gradually. let's be real about what is happening. >> my response to that is the voters in 2003 wanted the income tax to be 5%. to some extent the legislature created the slope, which is better than nothing, but if you asked 60% of the voters in 2003 who said they wanted a 5% income tax they would say we are long overdue on delivering for that. >> we need a group of people who can look at the facts and make good decisions and are forced to think out of the box and about change. we need a break from the status quo. >> and >> moderator: on that note, that concludes the debate. thank you for watching. go to cbsboston.com to watch parts or the full debate. and follow us for thorough campaign analysis. most burped importantly get out and vote on november 4th. tonight we will have live coverage of the wisconsin debate between scott walker and mary burke. here is a look at some of the ads running. >> i am scott walker. i am pro-life but there is no doubt the decision to end a pregnancy is an agonizing one and that is why i support legislation to increase safety and provide more information for a woman considering her options. the bill leaves the final decision to a woman and her doctor. reasonable people can disagree on this issue. our priority is to protect the health and safety of all wisconsin citizens >> the midwest is coming back >> the economy is improving. >> significant economic recovery is out pacing all states. >> but in wisconsin, scott walker cut taxes for the top, slashed education and we fell behind in job growth. tax cuts for the top and dead last in jobs. scott walker is not working were you. >> thanks to our reforms the average family will have an extra $322 to spend. what are you going to do with your savings? >> buy school supplies. >> 96 gallons of gas. >> taking a trip to see the grand kids. >> new tires for the trucks >> that is over 2700 diapers. >> my opponent wants to undo reforms and keep your money in madison. i want you to keep it. >> what is $11 were you and wisconsin? how about a pizza? scott walker thing thinks that is what buys your plan. businesses got tax cuts and millionaires got $14,000 a year. for you? enjoy your meal. millions for them. pizza for you. >> this week marking the first of two debates where scott walker is seeking a second term. joining us from milwaukee is bill glauber who is following the story for the junior cen centinal. thank you for being with us. two debates. both on a friday night. why? >> i think it is because that is when they can get the airtime and clear the stations and that is how the wisconsin broadcasters have done it for years. always a friday night debate. >> explain the format and what you are looking for? >> i wrote 1990's format. a moderator for each person, 90 second answers and 30 second rebutles and long opening statements of two minutes and closing statements of three minutes. ... is a volatile and they could switch, anything can happen. >> the fact this race is so close does that surprise you? >> no, what does and. this is wisconsin and wisconsin is the definition of a purple state, although it's purple in a different hue i would say because you have deeply blue milwaukee and madison, and then you have read surrounding those areas. so it's a polarized state and you're always going to have a close race here whether it's in the statewide races are, excepting for the last two presidential elections, usually a very close presidential state. >> what about mary burke? what is her background? what does you bring to this race and how does the walker campaign view her? >> she is bit tough to pin down by the walker campaign because she's not a politician in terms of it's not in her career. sa, a business executive, a philanthropist. she's on the madison school board. this is her first statewide race and it is taken the walker team a lot of time to try to attack her and to sort of drive up her negatives. it finally happened a little bit when there was a jobs plan she released that turned out to have been sections were used in other plans by the democratic candidates. it was the consultant fault of ms landed in her lap. >> would've issues we been seeing in these campaign ads, the tax cut wisconsin voters were able to get a few hundred dollars a year and the walker campaign pointing to that is something that's been positive for voters in the state and burke campaign saying it's too little, too late. >> they have been saying that the burke campaign, the main issue in this race is jobs, governor walker promised 250,000 jobs would be created during his first years in office, his first four years. that hasn't happened. so they are going to be doing with numbers, labor statistics during the debate, and it's basically a view of the economy. isn't working or is it not? >> governor walker is talked about his potential 2016 presidential campaign. clearly has to get through this campaign first. what are you hearing in wisconsin? >> yeah, he is. he's been looking at that race for a long time. it's been obvious. used in everything that you do if you're going to run for president. running around the country giving speeches after the recall election in 2012, has written a book, is definitely a guy that some people see as a person who could unite republican party but again yes to get through this and then the other question mark out that he would be if paul ryan decides to run for president, what would scott walker do? but right now they're really focused on winning the governor's race. race. >> those two are good friends, correct? >> walker and ryan have known each other for many years. yes, they our friends. and also ryan's previous who is head of the national republicans also comes from wisconsin, together real wisconsin connection at the highest reaches of the republican party. >> bill glauber from milwaukee, right for the journal sentinel. thanks for being with us. >> thank you. >> republican incumbent governor scott walker at his democratic challenger mary burke debate tonight. c-span will have live coverage at eight each and. a compilation of recent poll shows governor walker pulling ahead by less than two percentage points. >> debate coverage continues over the weekend. the u.s. senate race in iowa to fill the seat of retiring democrat tom harkin. >> now to the first debate between illinois democratic governor pat quinn and his republican challenger, bruce rauner. governor quinn has served as governor since 2009. of the then governor rod blagojevich was impeached and removed from office on corruption charges. "the cook political report" lists this race as a top -- also. this took place in peoria, illinois, courtesy of wtvp and runs about one hour. ♪ ♪ live from the wtvp studios on the peoria, illinois, riverfront this is the illinois gubernatorial downstate debate. this program is produced in partnership with the public broadcasters of illinois and the league of women voters. >> moderator: good evening. i'm jak tichenor. i will be the moderator of tonight's debate between the two major hearty candidates for governor of illinois. the candidates are incumbent democratic governor quinn of chicago who is seeking his second full term as chief executive, and republican nominee bruce rauner, a businessman. libertarian candidate chad graham of peoria is not taking part in the debate. he failed to receive at least 10% support in a nonpartisan poll prior to the event. the minimum required for participation by the league of women voters of illinois. our candidate will be questioned by a trio of journalists. unmanned, blaine wilson, and jamey dunn. we will start with a one minute opening statement from each of the candidates, he would've which was determined by an offstage quintiles. the first opening statement will go to governor quinn. what makes you the best qualified candidate for the job? quinn: thank you, check. good evening. but it took the oath of office five years ago it was a tough time for illinois. we had one forme formidably cond one of the going to jail. we had a great recession caused great harm to many people who lost their jobs. we had a huge budget deficit. as i got sworn in as the people for their prayers. i'm grateful for them. we been able to make our decisions to help our state move forward. we're able to cut our budget and remove unnecessary funding by about $5 billion. we've been able to make important fiscal reforms and greater state better. along the way i had to suspend the legislators paychecks including my own. we got the job done for the people. right now our state has unemployment at its lowest levels in six years. jobs are up, unemployment is down. it's very important we keep together and work together, investing in education. we've been able to increase our investment in education. i think the best way to go is to stay in this direction and do the right thing. rauner: good evening. thank you to the panels. thanks to the lead. thank you the people of pure. thank you to the viewers here at home joining us tonight. my name is bruce rauner, here because i'd like you to work for you. i love them out as i want to look to become the best wednesday in america. i've been blessed in my career, terrific results first working for illinois teachers and police officers by investing their pension money, then by giving back in our committee, donating to our schools, our red cross, our veterans services. we've driven results and i want to say now to turn our state government around. the last 12 years our state has lost its way. a small group of chicago machine politicians got control of our government in springfield and they have led us down a bad death. high unemployment, crime, low wages, deteriorating schools. highigh unemployment. we've lost our way of the state. we needed to terrific on the one who can try big change. i can't be brought -- bought, bribed and intimidated. i'm not going to take us on our pension and i'm going to dedicate my work to restoring the prosperity for the families of illinois and bring back the american dream for every family by growing our economy and having the best schools in america. >> moderator: it's time for questions from the panelist. the candidates will each get one minute to answer the question. question comes from amanda for bruce rauner. >> i hope this will be an easy question to begin the evening. in this age of hyperpartisanship, compromise is often seen as a dirty word in some political circles. which member of the opposite party who is currently either in or running for office do you most admire or feel you could, in fact, work with, and why? rauner: interesting. through the process over the last couple of years as i've been running for governor, i've taken time to get to know members of the general assembly personally. republicans and democrats. i've spent time to get to know the democrats. i look forward to working close with him to solve problems on a bipartisan basis. i like jak franks, 40 working within. troy hutchinson, later south of chicago. i look forward to working with her on education and other issues. i have a proven record in the private sector working with people from all backgrounds to solve problems and get things done. i was asked by the mayor in chicago to take over the changes that were needed at mccormick place as a board member to make sure we are competitive for convention business. we've made big changes and restored conventions. the mayor asked me to take over the tourism bureau and put in a new board, new staff, and today she covers one of the fastest growing tourist destinations but i will work with the democrats, republicans to solve problems together. >> moderator: governor quinn. quinn: i get along with everybody. i believe in civility. kurt dillard, someone from my hometown, unlv head of the regional transportation authority. my mom worked at a junior high school that kurt went to. we don't always agree on every single issue, but we've worked on bipartisan important reforms. the pension reform was bipartisan. we have democrats and republicans working together. i think it's important to do that, and the best way is to do what we have done. when we get our state, back on the job track and out of the recession we passed a bipartisan bill for jobs in illinois, for construction jobs, rebuild roads and bridges. and our water systems and the schools. we did that in a bipartisan way. i worked with the legislative members and leaders of both parties spent any other member since senator george is no longer a senator lex. quinn: he still a member of the other party. that's what you as. i think jim gergen, a leader of the republicans in the house, he worked with us on the pension reform. i enjoyed working with him. >> moderator: mr. rauner, anyone you like to add to that? rauner: there are many members and the general assembly who i've gotten to know. i will work very closely with them on a personal basis. >> the website was opened up to questions by the public and the number one topic that they submitted by far was about jobs, not surprisingly. with that in mind, caterpillar has plans from a roar to decatur and is one of the largest economic drivers in the state. the company has delayed announcement of a new corporate headquarters which hopefully will still stay in peoria. some engine manufacturing has moved out of state. if you're elected governor what would you specifically do to ensure that manufacturing firms across the state state and create private sector job growth in illinois? >> are manufactured is up. we have worked no one would catapult the john deere and navistar. especially auto manufacture because with someone auto supply jobs in illinois as well as countries like chrysler. when i became governor chrysler and belvedere had 200 jobs. they now have 4500 manufacturing jobs. same way with ford on the south side of chicago. they had one shift, now they have three around the clock. south of year, mitsubishi, new product line. i've worked with each and every one of those companies there i think it's important of skilled workers, well-trained workers. we provide job training wherever possible, incentives not only for big businesses for for small business. there's a reason why so many small businesses have begun and growing in illinois in the last five years. we emphasize education and working together we these companies. that's the best way to help our companies grow. rauner: the simple fact is since governor quinn came in office illinois has lost over 40,000 manufacturing jobs. i was very honored to receive the personal endorsement of the ceo of caterpillar early in this election, doug oberhelman. he has been an outspoken critic of the business climate in illinois. illinois is hostile to manufacturing firms with our regulations and taxes. as long as that's true we can't grow our economy and we can't solve the many problems facing us in illinois. manufacturing jobs on average have about $64,000 in pay and benefits. they create another two and have jobs on average. manufacturing economy is critical to i will work closely with manufacturing firms like a caterpillar to make sure they stay in peoria. i want to make sure caterpillar opens their headquarters here by making sure the business economy is strong and thriving. i'm honored to be endorsed by the manufactures association, the illinois chamber of commerce. we need to make illinois or business and pro-growth to fund our schools and our pensions and turn our state around. >> states would play a large will in implementing the proposed federal world cut carbon emissions but do you believe climate change is happening and is man-made? >> i believe we need a broad-based portfolio of energy options in illinois and in america. i do not believe betting too much on any one sector is prudent. we need broad-based and we need the energy independence for america and i'd like to see that also for illinois. i believe we can have renewable energies resources here. we could happen should a for for the department of our wind farms, solar energy, renewable resources. i believe we can be prudent in our energy development for more traditional resources. we have incredible energy opportunity in the southern illinois with coal, with oil and gas, with hydraulic fracturing. it can be a massive job creator and tax revenue generator if you have a broad-based forefront of energy options and they'll push every capability in that regard threats i've never what i do think we have to reduce emissions i was to take on climate change. the winter we just had a terrible tornadoes last november nearby and watched and other places in illinois. it was an alarm signal to all of us that severe weather is something we have to pay attention to and reducing emissions is part of the job for all of us. since i've been governor our state has erected many, many wind turbines all across illinois. i believe in wind energy and solar energy. i've been on the roof of the shattuck wave in chicago where they have solar collectors, world-class. we have to believe in energy efficiency and we've invested in debt. our state is the only state not on a coast that is in the top 10 of energy efficiency states in the country. we been able to do that in my time as governor. we invested in energy efficiency. it's one of the best ways to reduce emissions, help grow jobs. these are clean energy jobs that create good paying jobs for people by reducing the need for energy wherever possible. i think the state can be a leader in this area. we have good workers were well-trained. >> moderator: amanda has a question for governor quinn. >> governor, too many incumbents are running for office and were concerned with reelection than voters. that's a quote from you in 1994, january, when you were campaigning term limits for illinois. now you're running for office which would be 10 years as governor and 16 consecutive years in the executive branch. what has changed? for you, mr. rauner can you often brag about your lack of government experience. name what time you have hired a novice to serve as executive level as the ceo, and how did that go? quinn: i led the effort for term limits in 1994, collected a half a million signatures. i believe having term limits for each office is a good thing for illinois. i think i demonstrated early on my support for term limits. i've never waiver. in 2008 when there's a vote for constitutional convention one of the issues we used was importance of term limits for each and every office. also have been able to pass a constitutional and for recall in illinois as well as reducing the size of the legislature, to constitutional amendments i put on the ballot and got past. i don't think anyone should be in office for too long. i think it is important to have reasonable term limits for each and every office and i work hard on the. i'm disappointed that my opponent didn't help us in 1994 when we are petitioning for term limits. we went all over the state. he had a great opportunity to join us. he refused to do it in and all of a sudden this year, election-year he is a born-again term limits advocate. i think it is a good policy and look forward to getting it passed. took me 30 years to get recall done but we got it done and six we need term limits. i will never give up on this issue. pat quinn had the chance for six years as governor t drivability general assembly for term limits and has been completed silent on the issue. i will drive term limits with the general assembly to get on the ballot. let the voters decide. that's what is most important reforms we can make. that along with redistricting reform such i will push as governor can transfer and the culture. you asked asked the question er about experience. i've been a ceo for decades. i've land and built one of the most successful most respected investment organizations in the world, driven great results for the taxpayers. and i've driven great results in many other organizations in the not-for-profit world as well. i've worked in and around government for education reform, pension reform, for good government in the many regards. i've proven ability to solve problems come build talent and i will work on a by person basis to do it. >> have you ever hired anybody with a little experience in anyone sector to work for one of your companies? rauner: i think we can look at rick snyder in michigan he was a venture capitalist like me became governor, he won his first election which i will also do, and disturbing missions around very well. look at rick scott was a successful ceo and health care company, he won his first election. we can look at michael bloomberg, a successful ceo in business, he won his first election, mayor of new york at december the important and dramatic reforms in new york. business leaders, ceos can solve problems and get things done. it's all about executive leadership, teambuilding. >> moderator: i will have to stop you. governor quinn, we'll give you 30 seconds to wrap up. quinn: my opponent talks the successful results. he's been involved with 12 different bankruptcies involving other companies, and there have been six of his executives indicted and convicted and sent to jail. two are under indictment now. they have 150 lawsuits against their nursing home chain, and $1 billion worth of claims of wrongful death in those nursing homes, lodged against his company. so seems to me those are not terrific results whatsoever. >> moderator: let's get back to the foreground. >> let's turn to education. statewide advisory question number three on the november for the ballot asks if school district should receive additional revenue based on enrollment from an additional 3% tax on income greater than $1 million. do you support the proposal? if so how would you ensure that the money will go to schools? if you don't support the proposal, from what source would you seek additional money for education? rauner: first of all, the politicians in illinois have said every time they want to raise taxes it's for school. we put the water in illinois to fund schools. the money doesn't end up in our schools. our current governor racer income taxes 67%. the nays have it $9 from our school funding. politicians use schools as an excuse to raise taxes. i am opposed to putting for the income tax on the premise of illinois. we already have income taxes that are too high. i would rather like to see income taxes rolled back to where the work in 2010. and other tax reforms to generate additional revenue. the biggest reform think becoming a pro-growth state where growth generates tax revenues. i am strongly a believer we will soon increase overall in education funding. other things, wasteful spending can be kept but education must be increased in its support but i will make that a top priority as governor. quinn: when it comes to education, funding, my opponent make something. we increased education funding in the classroom by about $500 million from independent fact checkers have indicated that. we made the teachers pension every single get a car to my arrival that didn't happen. i paid attention to an increase funding in education. i think we need to do more. there is a referendum i signed to put on the ballot asking whether or not millionaires should pay higher income tax and all that money by constitutional amendment would go to the school districts and classrooms of illinois. i think that's a good idea. my opponent who is a billionaire doesn't want to raise his income tax but he wants to slash funding for schools all across illinois. his budget plan would slash or education budget by $4 billion but it would lay off one out of six teachers and cause great harm to everyday people. he wants with his planned 1 million-dollar tax cut for himself and education funding slashed all across illinois. i don't go for that i think it's a good opportunity for the people of illinois at the ballot boxes in a message to the millionaires and billionaires they ought to pay more. >> moderator: next question is from jamey to governor quinn. quinn:quinn. >> based telescope dishes can ct make it on state aid a loan because there sacrifice are so low that they can't provide the minimum amount of spending it for people. a new proposal by democratic senator andy minard would distribute more state dollars to districts based on the ability to pay. do you support his plan or is there better way of ensuring local bishops have the funding they need to provide a decent education to every student? quinn: we need to increase education. we have to fund schools more. one way to do it is the referendum we just talked about. another what is the budget i proposed earlier. it would put more money and classroom education than any other time in illinois history. also put more money into early childhood education as well as scholarships for students to go to college. >> do you support . quinn: without proposal i think it needs a lot of oversight and review. it passed one house, the senator did not passed the house. it needs more debate. i do not favor reducing funding in a particular school district. to its disadvantage. i think a much better way to go is what i just propose, increasing funding for all school districts. i think that should be done first and foremost. >> moderator: mr. rauner. rauner: i haven't said the details on the bill, and from what i've read i probably would not support that particular bill although i do believe we should come up with a new state education funding formula. we are idly 48 out of 50 states for state general revenue support for education. that's not right. we should increase our state support for our schools. my wife and i believe education is the most important thing we do together as a committee. there's nothing more important to when you look at the challenge we face as a state and as a nation, unemployment, low wages, high crime, poverty. the challenges we face, education it is not the full solution but it's a major part. my wife and i did the dedicate our lives to improving public education. we are very active in this issue. governor quinn on the other hand, has been in government for decades. he has been zero on education, completely lacking any in regard in education, except is increased earned income taxes and then cut education funding. we need an education governor and i will eat and that problem. >> you both claim the state cannot afford the current level of retirement benefits for public employees. do you think the framers of the illinois constitution made a mistake by including the pension protection clause that says retirement benefits shall not be diminished and should not amend the constitution now to remove that amendment? rauner: i personally don't think that constitutional in which is a mistake at all. i think pensions are a contractual obligation, and what is greek you should be paid into an honored by all parties. i was opposed to the pension changes that pat quinn put through last november because i believebelieve they were unconstitutional. i don't believe it's right to change the payment to retiree after they already retired. that's what governor quinn did in that pension reform bill. i don't think that's the right thing to do. what i have argued from day one in this race is i think both the fair thing to do and the constitutional thing to do is to freeze the current pensions where they are today. don't change anything from what is a crude. pay those benefits as they come due in the future but starting tomorrow for future work, both for current employees in future employers, we should create a second pension plan that's more flexible and affordable. doesn't save a lot of money in the short term, saves billions in the long run. quinn: its importance to my opponent wants to privatize pensions in illinois. a very risky 401(k) plan that has $100 billion hole. i don't think that's the right way to go in illinois. the provision in our constitution protecting pensions is a good one. we did pass a bipartisan pension reform bill that isolate but it will be before the courts, supreme court ultimately and they will make a decision on the regarding our constitution. i want to go back to wanting my opponent persist in this dating. we have raised funding for education despite all the hard times, we have raised a fund for classroom education almost $500 million, half a billion dollars. we have paid attention and that's every single year for teachers and all public employees. governors before we did not do this. i've done it, i've complied with the long-term investing in a pension our pension system properly and that's why that's the best way to go to move illinois forward. >> governor, as the supreme court does find that pension law that you did sign unconstitutional because of that clause, should it be removed from the constitution? quinn: my dad taught me don't take an aspirin into you get a headache. we don't have a decision in the supreme court are i don't think it's wise at all to take something about the legislature and i feel our constitutional provisions before the court asked. if the court acts in a way that is contrary, we will take the necessary steps. but the bottom line is where to deal with liability problems that i inherited. i didn't create this problem but on solving the problem by putting the proper amount every year into the pensions. >> statewide question number one on the governor for the about us if the men wage in illinois for adults over the age of 18 should be raised to $10 an hour by january 1. the congressional budget office says that a minimum-wage up $10.10 an hour would cause the nation to lose a minimum of 500,000 jobs. you describe yourself as a jobs cover. it's about question is a privilege seek a change at the 10-dollar level? why or why not? quinn: that study are talking about, they speculated it would be a job loss. there've been other studies, very solid academic studies that indicate that raising the minimum wage is the best way to help create jobs and help our economy. 70% of our economy is consumer spending. i favor raising the minimum wage. i got it done in 2003. we will do it again in 2015, genuine. there's a ref and on about the i signed into law to give people the chance to vote for a $10 an hour minimum wage. my opponent all across illinois went across the state sank eliminate the minimum wage. a person taking in $53 million a year running around illinois sank eliminate the minimum wage. he is an against minimum-wage. i am adamantly for raising the minimum wage but it's the best way to thousands of people who do our jobs, work hard, living from paycheck to paycheck. let's give them a raise. that's the best way to of social justice. rauner: pat quinn has been governor for six years and she's had a super majority of his party in the general assembly, and he has to increase the minimum wage in that period of time. if you were serious about that he could've gotten it done. he is playing political football with peoples lies and with our economy. here's the way to do with a minimum-wage. illinois today is not competitive. we need to grow our economy. we need jobs. pat quinn has been a failure on jobs under his administration. we become the lowest state of job growth in the midwest. we are failing on jobs. there are two ways to be competitive and raise minimum wage which i support. one is to increase the national minimum-wage about illinois to we are all at the same level and below is more competitive. today our society the other way is to raise the minimum wage over time as high as $10 but do it in conjunction with pro-business reforms, tax reduction, workers comp and tort reforms will small business owners can afford to pay a higher minimum-wage, competitiveness is there and that will help all families. >> i have a two-parter as well. mr. rauner, you like to point to success of republican governors and other states, but chances governor sam brownback cut income taxes and never to make the state more business friendly and now two years later job growth lags than the rest of the courage and the state has had to cut funding to explain that your proposal to lower taxes and cover state revenues would have different outcomes in illinois. and governor quinn, you rejected your opponents proposal to extend the sales taxes on services even though a sales tax on services could be crafted to avoid being recessive. i'm stuck, regressive. why do you post that many of party see as a needed change to make the states revenue structure stable in the future? rauner: governor quinn today is playing political football with this issue as well. in the passive support a sales tax on services -- >> i would like you to address the cuts in kansas and the revenue. rauner: exactly. i don't agree with the tax policies that were put in place in kansas but i don't agree with the. i would not do that. what i've advocated is a look at our entire tax code and we reform our entire tax code can make us more competitive. we got to grow our economy. what we can solve our problems by doing is just raising taxes on families like our current governor has been doing. we need to grow. we need a pro-growth tax code. rapidly growing states have a broad-based and low rates. but i believe we should work our rates down but broaden the base. we should expand the sales tax to include some services that are more business oriented rather than on low-income working families. we need to close tax loopholes. we need to modify all the tax code to become pro-growth to get the revenue we need. quinn: i believe taxes should be based on ability to pay. the principle as old as the bible. nobody likes paying taxes. i don't think we should have a tax system based on ability to pay. my opponent in proposing this service tax, including garbage picker, everyday people have to pay a tax on garbage pickup where they adopt a child, how they will made. those are unfair taxes. the folks are millionaires and billionaires always want to shift the burden onto everyday people. my opponent's plan will give himself a $1 billion tax-cut. it will shift the burden onto everyday hard-working people who will have to pay a tax on the garbage picker. that's not right. we ought to have a fair tax system that invest in education. my opponent's plan will cut $4 billion out of our education budget. how do you grow jobs if you're cutting one out of six teachers jobs in illinois? and slashing classroom spending all across our state. our kids need to learn and we need a proper education budget funded by the income tax. >> governor quinn, your campaign supporters have suggested mr. rauner is trying to buy the black vote. for example, with a $19 donation to a credit union on chicago's south side. how is that any different than and that's in taxpayer-funded construction programs, for example, our programs like the neighborhood recover initiative? quinn: i believe in competing for everyone's boats come and go in this state. right you're not far from washington illinois and i've been to washington illinois on many occasions after a terrible turn in that demolished 1100 homes in this area. i think it's important our state rise to the occasion to help people in dire need in a disaster in this case. with respect to the violence that occurred in chicago, it's important we act. i think we have to make sure and i will never apologize for making sure we help keep families safe and we keep kids on the right track to i was glad with the jackie robinson west little league success. it should when parents work together with the kids for a common good, rate things can happen. it's important we invest in those kinds of things. afterschool programs. weekend programs for kids. summer programs. >> mr. rauner, can you explain why you haven't made an investment to the southside community federal credit union before running for office? if you are elected as governor do you plan on continuing to use your pocketbook to make those sort of investments? what do you say to those that could be a conflict of interest? rauner: it's not a conflict at all. i'm using my personal money. pat quinn has been trying to buy the election using taxpayer money both in his and her eye program and his other programs he's been right on a seat using taxpayer money to try to get voters influence. it's wrong but that's politics in illinois. my wife and i have been very involved in the african-american community in and around chicago and other cities for decades. we are major donors to early childhood education into black community. charter schools in the black community, teacher training in the black community. i personally donated to find a full professorship at morehouse college in atlanta, georgia, which is dedicated to educating african-american lead throughout the united states. my wife and i care deeply about the african-american community here in illinois and around the u.s. we've been involved for decades. it's not politics. i've learned about this particular credit union o on ona camping trip. someone brought up to me at an event. it sound like a good program and i made an investment and i'm honored to have done it. >> in talking to business leaders across the area, they express much more concerned over worker's compensation and the tax rate. with that in mind, to reduce worker compensation costs would you support a bill which establishes a state fund to create a competitive marketplace for employers to purchase cheaper insurance policies as 20 of other states have done? tress . rauner: , i've driven 145,000 while in virtually every county meeting with tens of thousands of voters. small business owners have told me their number one problem is the workers compensation system. it's broken. it's full of abuse. i will make it a priority of governor to drive real workers comp reform. that concept you've laid out in your question is interesting. i don't know enough to say for sure that that is a program i will pursue but it sounds very appealing based on what i've heard about so far. i know we can drive workers comp reform a look at what other well-run states do. our politicians in springfield, including governor quinn, said they did workers comp reform of years ago and around it was it wasn't real workers, before. it reduce rates a small bit but even today, the ceo of caterpillar who is trying to rest with whether to build its headquarters here has told me workers comp costs caterpillar five times as much more today in illinois, five times as much as over in indiana. they are growing the jobs out of illinois. quinn: we -- illinois retail merchants. the reforms enacted have reduced the amount of money paid for workmen scop by our business by $450 million, 19% reduction be we are interest in working more but i got that done. my opponent talks. we get done. i want to go back to one think he just mentioned about the african-american community and his care for them. he has 51 executives at his investment firm. not one, not one was an african-american. i don't think that's right but i think if you really care about the community of illinois, everybody, nobody left out. nobody should be denied an opportunity to work in investment from. there are many well qualified african-americans but i think it's important we understand our state goes forward because of our diversity, because we are strong. we have a diverse population and i don't think it's right to leave folks behind. that's exactly what my opponent did. >> witches were a competitive marketplace for cheaper policy? quinn: we need to look at is having as much competition and workers comp as possible. i've directed are drugged up insurance to try to ensure these insurance companies are truly competitive. the more competition the best rates we can get. >> mr. rauner, would you support that? rauner: it sounds i could very appealing program. i've got to study and give a definitive answer but i think so but that could make sense. >> governor quinn come you supported cuts to the medicaid system that was supposed to say billions but the changes have failed to meet th this painting targets but we mr. rauner has said he opposes the expansion under the a formal correctness some states -- how would you ensure that the poor in illinois have access to medical coverage while also keeping medicaid from squeezing out funding for other areas such as education? quinn: we did have to restructure our medicaid program. it was difficult to we passed a bipartisan bill. it was able to make great economies. this past year we are able to restore a number of the programs to our medicaid program because our economy is doing much better. i did sign the bil bills to make sure that we got money from washington to ensure many more people in illinois and our health care system under the affordable care act the 685,000 people have received health coverage under the affordable care act which i support. my opponent would've denied that funding. that's what he said. he would have said to thousand of thousands, hundreds of thousands of families who now have health insurance under this law that he would deny that just the way they did down in texas and over in indiana and wisconsin. >> how do you plan to keep the cost in check ask. quinn: the reforms have done exactly that. they're very good reforms that keep the cost to a reasonable level. at the same time we receive more money from washington to cover more people. i think it's important we have far-reaching health care coverage as we can. my opponent would've denied that. he would've denied 400,000 people -- transform mr. rauner needs an opportunity to answer that. rauner: i would not have expanded medicaid under the of for look at the way it was done. it's the law now. it's here. i don't advocate rolling it back. what i do advocate is restructuring the program to eliminate the waste and fraud. it is a stunningly mismanaged program under governor quinn. i met with nurses who work inside the department and deal with medicaid. they have told me they wanted to meet in private because they were afraid they would get fired for sharing with me what's going on. the waste and fraud and our medicaid program is out of control. some of the came to light when there was a private investigation that was required under the legislation to check on a moment abuses in the system. they were finding as many as 40% of enrollees were not entitled to get benefits. governor quinn stopped that private investigation. there is waste and fraud that is costing taxpayers huge amounts of money. we need a good medicaid program. i support a substantial high quality well-funded medicaid program but we don't have that in illinois. what we have is massive mismanagement. >> certainly both of you like to tout your accomplishments and, frankly, i don't blame you. some of my colleagues in the press, however, have done a good job i think of displaying some of your failures in both of your leadership positions. you as a ceo and you as ceo of the state what is your biggest regret or mistake? rauner: i have just terrific pride in our accomplishments. the problem is in business, not every company succeeds. that's unfortunate. i wish that were true but that's free enterprise system. some companies succeed in something. venture capital, helping start and grow business is risky. not every company succeeds. unfortunaunfortuna tely, occasionally, rarely some executive engage in bad behavior, unethical behavior. that's unfortunate but that's a fact of life. where we found it to be true we tried to take action to correct it and punish those responsible. over all our track record of success is destiny. one of the top track records of an investment firm in the united states. we've invested on behalf of illinois pensions and a 22 other states for the attention. we generated well over double the stock market returns but we were honored to work for teachers where we generate almost 25% confident annually. we've also managed money for corrections officers, police officers and government workers and the done an outstanding job in generating retirement money. quinn: i am not perfect but i don't think any human being is. if i have one regret along the way as governor, i suspended the pay of legislators and my own pay in order to try to get important fiscal reforms that moved our state forward. if i had to do over again i would have done it earlier. i think it would have saved more money. it's important always to take responsibility of anything that's going in the wrong direction in state government. you got to take responsibility. you've got out, put in reforms. i've tried to do that in every challenge i've had. i think that's the way to go. by contrast my opponent never takes responsibility for the things that went wrong in his empire. the nursing home scandal when people lost their lives, $1 billion worth of verdicts for wrongful death of seniors who were killed in the nursing home's. all he does is come up with a money. he never took responsibly, never do anything to straighten it out. i think it's important to understand that six of his executives are now in jail for their bad behavior. >> what current state services does illinois need to reduce, eliminate them or privatize at a savings in order to help the state meet its fiscal constraints? and please be specific. quinn: privatizing, i think he got to be careful. i honor the work of our public employees. my opponent in the primary demonizing public employees. i on all of those who are firefighters and police officers, all of those who work for the public, teachers. certainly not for privatizing our teachers. and all this about the charter school but i believe in public education. i think that's a we should invest in. i think it's very, very important to understand that tonight my opponent who is a billionaire who took in $53 million in just one year, he's not for raising the income tax at all on millionaires like himself. instead what he wants is to have the same tax rate that he has for a minimum-wage worker and he wants to reduce the minimum wage spend what service would you cut? quinn: we've got a number of services, $5 billion of debt in our state since i've been governor in the budget. our budget level today is at 2008 levels. at the same time i've had to close 50 facilities and for difficult. my opponent goes around the state insists reopen the facility. that's no way to save money. rauner: unfortunate under governor quinn, illinois has been one of the worst run states in america. we have rampant this spending of taxpayer money. massive waste in the system. one large example is the department of central management services. it's a bureaucracy that is supposed to run state government. even governor quinn's own people, his own staff have said there's over half a billion dollars of wasted spending in the procurement process inside central management services. governor quinn doesn't do anything about that because that's part of the cesspool of cronyism and patronage that is so endemic inside our state government. he relies on that for his election, relies on them for campaign cash. that's rampant throughout the department. he's been caught increasing patronage hiring illegally inside the department of transportation, changing patronage and cronyism corruption can save a lot of money. experts estimated we pay over half a billion dollars in a corruption tax because of the type of bad behavior of the quinn and rod blagojevich has engaged in. >> changing to retirement benefits as i can should the state continue on the current pension payment schedule, or should the state consider extending it into the future to lower the amount it has to pay? and should instead consider lowering the funding level from 100% target to 70-80% target to ease the strain on the budget? rauner: could you repeat? >> should stay continued on the current pension payment plan that we have asked for as the schedule, or should we consider extended can refinance into debt and taking some of the pressure off? and should look to when a person funding level or should stay consider reducing to a 70-80% funding level to ease the strain on the budget? rauner: i believe the right answer for the pension is to create a second pension plan for the future. that's constitutional. it's fair to the workers and the taxpayers back but benefits aside, the way we make payments now she would change that? rauner: here's the problem. the politicians in illinois have been playing kick the can down the road for decades. we shouldn't do that anymore. it's not fair to the workers. it's not fair to the retirees but it's not fair to the taxpayers. what our politicians do is make promises to workers, then don't honor the promises by paying him. we've got to change the. i believe a fair thing to do is freeze the current pension system, honor the obligations that have been a crude and they didn't you create a second pension plan. the second plan can have options for employees. more defined contribution, more defined benefit but it should be very different than the one that's been historically done. more affordable, more flexible, more employee control. that's the key. quinn: i have paid attention to every single year i've been governor but on the first governor in anybody's memory to do exactly that. previous governors did not pay the proper and that's why the liability grew to $100 billion. we passed the pension reform bill. i signed it. it's now before the courts. this time we paid the appropriate amount every year. i am not for what my opponent is advocating. when you read between the lines and read all the details, he wants a risky 401(k) system that does not have any proper funding, that will cause great harm to public employees, and the people of illinois. that whole crowd in wall street that cause such great havoc american economy, they would was coming up with these schemes. >> should we consider the schedule in which . quinn: on comply with that right now and i pay the proper amount every year in order to be actuarially centered on the first governor to do. i think of to do that for our public employees. but also for the taxpayers. we enacted some reforms in a bipartisan way that will be the best for the people of illinois. >> governor, i know that you propose what you say a balanced budget and the relies on an extension of the current income tax levels but that didn't happen. you yourself called the spending plan submitted by the general assembly in complete and senate postpones the tough decisions. mind is a small veto, you signed into law nonetheless. why did you not veto it or college of us wen in the back io special session? didn't have anything to do with his campaign for reelection? quinn: the budget is 300 safety five days a year exercise. we had to go back to the budget for this fiscal year after november 19 when they resume in springfield. what i wanted to do was make sure our schools are open and everyone was receiving proper health care. we had to start the budget year on july 1. i believe that are budget that i proposed to legislature is the best one for illinois. the three credit rating agency said it was affordable, reasonable, it will pay our bills, properly invest in education and health care, help our veterans and it would get illinois to a good spot. using the income tax to fund our government is the fairest way to go. my opponent has a tax on services like picking up your garbage. that's what billionaires do. you take tax breaks for themselves, 1 million-dollar tax break in his case and he puts attacks were an everyday people. that's not right. in the course of this budget year we've got to get a fair budget to properly invest in schools. >> feel free to address some what the governor has said, but outside of the own campaign nobody seems to build to make the number of india budget blueprint at a. you said you want to give more money to state parks, education, higher education. while at the same time cutting revenues and pulling back the income tax to 3% in four years. let's try again. make that add up, please. rauner: we've got to set our goals and our priorities and then managed to do. we need a competitive tax code. we will get there. we need to reduce the income tax. we will get there. we need to grow our economy which is a single most important thing we can do and we are failing miserably under pat quinn to grow our economy and create jobs. nothing else will get fixed unless we are growing and creating jobs. i will drive the. i've been a business builder my whole career. here's the tragedy in illinois. we have been control now for 12 years by a group of chicago machine politicals, pat quinn, rod blagojevich and mike madigan. those three, that trio of terrible government has control our government for 12 years. it's led to massive debt, deficits, unemployment, brutally high taxes, the worst run state in america. we need big change. we have to combat this on a bipartisan basis with outside the box thinking and drive real results. we can't fix our problems just by raising income taxes on the families of illinois. that won't solve our problem. >> mr. rauner can you propose reopening prisons. governor quinn, you have closed some prisons. broadbenrod and todd the openind closing, what do you propose to truly rehabilitate inmates in order to reduce recidivism? rauner: so, we need to reform our correction system in illinois. it is broken and it is badly mismanaged under governor quinn just as most departments of our government have been under pat quinn. we have a tragic situation in illinois. we have unsafe prisons. we have correction officers with their life and personal safety at risk. we have inmates with their personal safety at risk because we haven't properly staffed and invest in a correction system. we also incarcerate nonviolent offenders very often here and we do a very poor job relative to other states for providing alternatives routes to deal with nonviolent offenders, ways they're more likely to receive help and avoid falling back into lives of crime and helping them find ways to get back in society and be productive citizens. we don't think outside the box. we don't do good innovative programs like other states do. we've got to change your system. out of quinn is getting on this. our corrections officers are at risk. our inmates are at risk. quinn: union representatives direction office have endorsed me, not him. with respect to our corrections system, we have reduced the number of repeat offenders to one thing we is is what's called adult redeployed. we invest in the front and try to keep people out of our state prisons, alternative ways of punishing people for bad behavior so they'll have a life of crime. we have invested in that. i did and are budget. in addition when people do come out of prison, we have programs of reentry to help people have made and the fans paid their debt to society can get a job, go on the straight path and we've been able to do that as well. we have invested great in that. i signed bills to give employers a tax credits to hire ex-offenders. we've had expungements of nonviolent crimes don't people get a job. i think those are very important things. iin the arab juveniles will greatly reduce the number of juveniles who are incarcerated by using these creative techniques. my opponent is wrong. he has proposed a budget that would make radical cuts in our corrections budget. >> moderator: the candidates are not going to make closing statements. the order of which was determined by the earlier drone. governor quinn will make the first closing statement and but i appreciate the opportunity to be. i thank everyone for listing. i particularly thank all those who volunteer for important causes in illinois. we are near washington, illinois, and i was so inspired by the people who volunteer to help folks get back on their feet after that terrible tornado. the heart of illinois, the heart of america is the heart of the volunteer. our state we met lots of people volunteer to change direction. when i came into office we're going in the wrong direction. we are now going in the right direction. we had our unemployment go down faster than any other time in 30 years, straight declines in the unemployment. jobs are up. that's what we want to have. my opponent is someone who is a job outsourcing -- outsourcer. he is opposed to raising the minimum age and he wants to cut our education budget. i don't think that's the right way to go for illinois. i want to of a future for our kids. but i want to invest in early childhood education. in k-12, and opportunity colleges, and our four year universities and in our scholarships. that's the right way to go. rauner: i'm honored to be here with you tonight. again, thank you for all of you here in peoria for hosting us. it's about to be. i look forward to going to work for you. i'm here because i love illinois passionately. this is home. we raise our six children he. i was born and raised. i have built businesses here. i love illinois. and i can't stand to see what pat quinn and rod blagojevich have done to our home. our homes are at risk. the future for our children is in jeopardy under the failed leadership, the corruption, cronyism, the patronage, the job losses, the burden high taxes. we are failing as a state and i won't let it happen. we need bipartisan solution. we need real leadership. we can make illinois the greatest state in the greatest nation on earth. and i can drive that process. the people of illinois are fantastic. we have the hardest working families, the most fertile farms. we have the best location to what are the heart of america here. we can drive with strong leadership that solves problems on a bipartisan basis and brings a real work ethic and integrity back to our government. i'm excited to go to work for you. >> moderator: this a terrific studio audience but you've helped to applause. let's give a big round of applause to both of our candidates. [applause] >> moderator: thank you again, governor quinn and republican nominee bruce run at the we appreciate your time. we want to thank our panelists. this program is a production of illinois public broadcasters in partnership with the league of women voters of illinois. thanks for watching, and goodnight from peoria. ♪ >> our campaign 2014 coverage continues with a week full of debates. tonight live at eight eastern, the wisconsin governor's debate. >> in illinois 17th congressional district, a debate between the member who currently holds the seat and the member used to have the job. democratic congresswoman cheri bustos and former representative bobby schilling. the one term republican lost his 20 don't really bid to cheri bustos by 19,000 votes. the district is in the northwestern part of illinois. the rothenberg political report roll call rates the race as a democrat. this is about half an hour. >> it's the big myth to -- midwest rematch. >> it will be a very, very fiery campaign. >> make it promise i will continue to fight for jobs. >> cheri bustos and then she'd be in 2012 former congressman bobby schilling spent it did allow for me to step back, i call my two-year break. >> my enthusiasm is as much as was were first announced this race and we are ready to get going. i want to make things happen. >> they return to the same studio there in two years ago for the only debate in the 2014 election. >> your voice, your vote. the 17th congressional district debate brought you by wqad and to dispatch. >> good evening. i'm immoderate for tonight's 30 minute discussion of issues concerning the 17th congressional district in illinois. tonight we welcome the two candidates running for this western illinois district. income is democrat cheri bustos, elected in november 2012. prior to her term in congress she worked as a newspaper reporter, work in the health care industry answered on the city council. she is married and the mother of three sons. that challenge is bobby schilling, who serve in congress and 2011 to january 2013, best known as the owner of the quad cities pizza business. he worked in insurance and investment fields and data container company. before the. bobby schilling is married with attention. -- 10 children. spent visiting run on public television. i expect full coverage in the dispatch rock island newspaper plus right now you can follow along on twitter at hashtag 17 debate. each candidate's campaign staff agree to some ground rules to tonight's discussion of issues but the topic of our questions and most of the questions themselves come from our news aid viewers, the readers of the paper. each candidate will get a minute to answer the question with the opponent in getting one minute to give their views. after that i can ask a follow-up question to clarify an issue. each candidate would get a 90-second opportunity for closing state at the end of tonight's program. moments ago we had a point tossed to the website if
year. that was higher than last year. there was a spike in short-term money rates that weighed on sentiment today. china's central bank refused to injex cash into the money markets for a second straight session. japan, the nikkei was down by almost 2%. the hang seng was off by 1.3%. and the shanghai composite was off by 1.25%. we'll see if that weighs on market here this morning. steve, right now, i'll send it over to you. >> thanks, becky. in corporate news, jpmorgan reportedly nearing a roughly $6 billion settlement to settle claims with mortgage backed securities in a run up to the financial crisis. in separate news on the bank, jpmorgan's $13 billion mortgage settlement with the government kind up costing the company lows her to $9 billion after taxes. a number of buyout firms, meanwhile, are reportly exploring a deal for all of part of safeway. the name includes cerberus. activist investors jana partners says the company shares are undervalued. it held talks about reviewing if strategic eye cob. boy, taking advantage of its gain in shares since he bought shares of the company only 14 months ago. he tweeted yesterday, sold block of netflix today. i wish to thank read hased hast ted sarandos, nflx team and kevin spacey. that's the thing. we want to see that. i bought the dvd collection because i -- and i have netflix but i don't know how to -- >> i'm going to get netflix as a result of that and quarterback. >> you know, i started you know what i started watching in a big way? and it's just incredible. i've never saw modern family before. >> you know, i just started watching it in the last couple of months. >> because it's a big -- you know, usa has -- usa is smart. they play really -- seinfeld for years got -- >> reruns? >> yeah, i guess the re ruruns. but the kid is like now i noticed in one series, when they go back to back. it's really smart and really well written. so politically incorrect, though. i don't want anything to seep into my mind. you can say anything on sitcoms today. >> yeah, you can. >> but i had trouble initially. you know, i metal bundy. >> have you, in real life? >> on venice beach. and i called him al and he got so mad that i called him al. >> and did you do this and stick your hand in your pants? >> we passed one way and we passed him again. and he used an epithet. i felt bad. it was 15 years ago now. but i never thought he would get out of that type cast. he did. he's a cool guy now. well, you would hate to be type cast as steve liesman. >> i love being type cast as steve liesman. >> he hated being type cast as al bundy. >> it's difficult to do that and come back as something else. >> some can. >> what would joe kernen come back at? >> i can't. andrew is going to be like a media mogul. this is stepping stones. he's so successful. >> you're stuck. >> it's ta late for me. there's ascending, descending. >> and where are you? >> stwiming as fast as i can. >> we like it here. we feel comfortable here. >> i do. and i love modern. how brilliant that was to buy the reruns. because you can -- usa, you can get huge numbers. >> the economics, all this money, all these different outlets, they're all bidding up for reruns of shows that they start to bid on after two episodes. what happens is that money get piled back into creating the shows. that's one of the reasons we're in what a lot of people think is a resans of telecoms, sitcoms and everything like that. it's like a golden age of television. the cool thing used to be being in a broadway play. now all these great actors and actresses want to be in television. >> that is where the money is. >> that is where the money is and it's where the prestige is, too. >> writers are really smart, creative from modern family. there was one part last night, the book of phil-osophy. he's married to the daughter. one is when you're stops with reading. >> my mother had a watermelon on the back seeing when she was pregnant. >> netflix, it closed down. it had like a 70 point swing or something like that. >> then people started foefting on reed hastings himself. >> we talked about that. >> it reminded him of 20303. maybe as i said in a little bit, thought twice about what was going on. talking about big distinguish, we have big news coming up this morning. our guest host is american businessman dal get better. we'll be joined of two on groovon's sessioners. >> that's big for my wife and our -- i mean, we're huge fans. at the the only conservative entertainment person on the planet? he's a different kind of -- >> let's get a check on the markets this morning. we've been watching the futures, especially after everything that's happened in china and in japan overnight. there is some of that impact weighing on our futures this morning, as well. dow futures off by about 81 points. s&p futures off by about 10 points. oil prices this morning, wow, they are continuing to slide down another dollar to 97.21 for wti. >> good. go down. >> that's kind of like a tax relief bill. >> that sounds like it's something bad. >> down 97.23. >> it's potentially bad for some i couldn't say explanation. >> jim tissue was telling us $85 is basically -- in north america, $85 is where it becomes profitable. so if it falls below that, you have issues. >> the benefits are much -- if it goes below that, it's much better. it's a tax cut for the entire world when it goes down. >> it could lead to turmoil in the middle east, though. >> it use. >> the saudis basically take care of it at $100 to take care of all the social obligations. >> we're on a track, i think, in 2015 we'll be importing like 2 million barrels. it will know nothing. >> it will be nice for us to not be quite so tied to what happens there. >> this thunderstorm warning, 2.499% is the yield on the ten-year. the dollar this morning, as you can see, it is down against did yen. it's up against the euro and the pound. and gold prices this morning, down by about 10 bucks. >> remember how crazy we said the person was that said 2.1% was next? >> yeah. below 2. -- who said that, by the way? >> i can't believe. and then did you see the stock market was up yesterday, supposedly? >> because of the jobs report being good enough -- >> we didn't know they were going to -- >> to create jobs but -- >> we didn't know they were going to taper already? >> we've been talking about that for a long time. >> they finally figured that they weren't going to -- with three months. >> it's a little worrisome right now and i don't know how the fed feels about this. but the market is kind of getting away from the fed, making its own conclusions. the goldman call, the barclay's call which we reported yesterday, march 2014. we don't know what bernanke and other folks think about that. >> well, wait a second. what is yellen's first meeting? >> her first meeting, i believe, would be march because i think bernanke would be in office at the january meeting. >> and there is no february meeting. >> so march would be her first meeting. >> i don't see why it's such a agree crazy call. >> it's not a crazy call. but remember how things got away from the fed in june? >> right. >> they spent the time summer redirecting it. >> the ten-year is not a problem any more. >> that's right. >> at all. i expect it would be a progress the other way. >> i mean expectations for tapering. >> we're going to have to do it again. we're going to have to go through that move up in the ten year again. oh, no, it was 2830. now when it backs to 2-2 -- >> i wonder what this means for moore of us. right now, it's time for the global markets report. ross westgate is standing by in london. ross, are you seeing some of the turmoil there that started out in asia overnight? >> we have, indeed, becky. we closed at five-year highs for european equities yesterday. we had nine straight days of gains as you can see xwhiend be right now. we are down, six to through decliners outpacing advancers at the moment. you could say we've been overbought in the last nine sessions. the ftse down 31, 0.5% lower along with the german market. the ftse mib down 1.4%. what's been going on this morning, a lot of focus has been put on to the ecb. because they are now launching their stress tests. they're going to become the regulator for about 128 eurozone banks this time next year, november next year. and ahead of that, they're now launching the stress tests in the run up to that and they've basically come out and said we're going to want banks to hold 8% of common equities tier one capital using the basul 3 definition. they've been laying out the broad framework. we've had two sets of stress tests condifficulted by the financial crisis and getting stressed in a number of bank who went bust, as well. so a lot of pressure on the ecb to get this right. show you where we stand with tech sectors. barnlgsz rts weaker sector here in europe. as a result, travel and leisure up and chemicals are up. number of stock necessary focus this morning, as well, just quickly run through these. heineken, down 5% today. this is just the latest company to dmran about the strength of the euro. today, we hit a two-year high on euro/dollar. we just got numged up to 1.58 for the heineken, as well. talking about a week. cation demand, that stock up 7%. they're talking about maybe we need to unwind or losing our gm alliance, as well. and one final note, for all the royal watchers today, the duke and duchess of york are chri christening their son, george. we had a viewer who wrote in, joe, this is for you, listen up, a viewer wrote in and said they would choose you as a god parent. >> that's really nights. >> i don't know why. >> that's really nice. >> but maybe you could tell us -- >> might be a little bit of a problem. i was raised catholic. i'm trying to do the whole episcopal thing now. i don't know, when you're raised catholic -- it's certainly a lot easier. but i will do that if they want me to. i need to raise the child as search of england, right, ross? >> yes. you know what? it seems like it's been a while because i saw pictures of kate. she looks like -- she looks awesome. she looks like she never had. now they're finally doing the christening. okay. that must be a beautiful -- i can't imagine how the royal family -- must be a lot of pomp and circumstance in that, too, are on the ross? you know what? i'll do it. i will do it, just do be there. >> good man. >> the person that wrote in was not actually william or kate, right? it was someone who has no -- someone who has no influence on them or their thinking or -- okay. so you're just yanking my -- you know, you shouldn't do that. it's not fair. i got excited. markets are going to continue to adjust the flood of quarterly results yesterday after the s&p 500 hit another all-time high. here on set, collin moore, global chief investment officer at columbia management and thread needle investments. kind of a cool name. >> threaten the needle. >> let me start with collin. did you think that yesterday's job number changed people's viewpoint on tapering? i was already expecting taper not until sometime next year. >> i don't think it changed it much. i think the market had moved on to march/april as being the highest probability. thing interesting thing was, they had spend so much time trying to sort of get its communication policy sorted out and we've sort of ended up now back in confusion again. because i don't think there is a way to direct people's emotions. i would go for march or april in i was going to determine one? >> when everything seeps -- >> i mean, is there anything else that matters or can you just assume 85 billion, you know, financial assets are going up? >> it would be really nice to be talking about earnings and stuff. i think i caught your comment just before i came on set and that is the sort of -- the labor number wasn't too much. the market went up because it's pushing out tapering and we're back to focusing on that again. and it has to stop because i look at tapering. it's going to go away because the economy is recovering or the economy is not recovering because it's losing its effectiveness, the purchasing. >> why would you say that, though, when the ten-year is back to 2.49, the markets are back to new year highs. it seems like it's working. >> i don't think the primary case because to drive the markets up. we were mostly getting the economy to be going faster. and i think it was initially quite effective, but i think it's one of those things that in the second and third and fourth tranches it loses some of its power. so i would actually start. i don't think we need it. >> let me just get michael for a second. michael, are you a single issue voter in terms of whether stock prices go up or down just based on the fed? >> no, i think it's really important to be focused on corporate earnings which are doing better and, in fact, i note that the difference between the economy and the s&p 500 is that the s&p has substantial earnings coming from outside the u.s. which is beginning to turn around, even as the u.s. is doing well. but i'll tell you, they should be starting to fairly we're at it lowest self-since november 20308. why is that month family to me? what was november of -- oh, now i remember. the elections. that's the last time we were this low. so it's been higher than that the entire time? >> a couple months after the real collapse. >> oh, all right. i just remembered them -- >> a lot of things happened then. >> and the adjustment for the participation rate is higher. for every three people that are working today, there's two people -- did you see that today? that's a horrible stat. >> but did you see what it said? >> you read it today, big boy? that's great. >> if you look at the number of americans of working age who are working right now -- >> half of it is because of demographics. >> oh, okay, good. the other half is because of unemployment insurance, disabled, food tamps. >> zovptd to work, man, i can watch modern family all day long. >> not because of the federal government. >> i'll never have to work again. >> joe, there have been a lot of studies on the issue of whether or not things like unemployment claims keep you from going back to work. >> we need to go back to a nation of achieving, not receiving, all right? we need to go back to a nation of achieving, not receiving. >> at best -- larry summers, at best it extends like a ten-week unemployment stand by a week. it depends it, but there's to evidence that the level of claimants -- these toes po poe a brings to bridge to self-sufficiency. >> people feel better when they're working. >> yeah. the percentage of young people getting jobs or not, the numbers are distorted by those who are retiring. >> nothing is in a vacuum. >> we are having a persistent problem about the number of young people finding jobs, that is really a big issue. >> some of them are going back to school. >> and we are. >> the other thing is, people retiring -- what was the other thing? people retiring. >> and staying in school longer. which is what you would hope to do and should do in part because they were bsh. >> yoke you'll, the the best entitlement is the job. how about that? that's another good expression, isn't it? >> absolutely. and the problem is, there aren't enough jobs right now. and what the fed is doing is limited. they don't have the ability to create jobs. that's really more of a fiscal issue that the treasury and the rest of the government has supposed on. >> the jobs will not are the foam are and and the where job. 3/ . how quickly could you be up in boston? >> we can go to lunch or something. >> anyway, thank you. we appreciate it. coming up, very excited. apple unveiling new products ahead of the holiday shopping season. coming assumer and investor romg calm up next. good morning mou. locks hikes auto one o. game one tonight in boston, there is 2 potential for some rain for game time with the cards and the red sox. looks like that rain should start to pull out as we approach the first pitch. regardless, it's going to be a chilly one with temperatures stuck in the 40s. good news for red sox fans, bad news for the cardinals. last time these two faced in the world series where it was chilly, red sox went on to win both of this game been temperatures will be 5 to 10 degrees grofr avg today check identi. check out wa we'll find in nashville. 54 degrees. atlanta, 61 for the afternoon. that's check off your national forecast. more "squawk box" coming up next. 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(vo) meee-ow, business pro. meee-ow. go national. go like a pro. time in and out for the executive edge. this is our daily segment focused on giving business leaders a leg up. apple unveiling a new ipad air and new max ahead of the company holiday shopping season. announcing free upgrades for the life. the ipad air is a full size tablet about 20% thinner than the previous generation of tablets. it weighs one pound and starts at $399. it has a retina scan. >> that's true. how quickly are we migrating here, electricky? >> fast. >> i would like a thinner ipad. i want a battery that lasts longer. >> one pound? >> the new mac book pro, joe, has the haswell chip. >> ur obsessed with this thing. >> i am absolutely obsessed. >> what does the haswell chip do? >> it's a new more see efficient processor that extends the battery life. i edit these files from the show and i have to plug in but now with the haswell chip and the 1 terabyte of memory -- the most important thing, in my opinion, is apple taking on microsoft office with the free apps. have you been been on, looking at the office and say where is my excel, where is my powerpoint? none of that stuff is available for word on the ipad. >> right. and that was microsoft's decision not to make it available. i think they may have changed their mind since then, but -- >> is it available now? >> i want to say it is, but i'm not 100% sure. in hindsight, that was a mistake, clearly, to not have made it available. >> what is excel again? a pred sheet, joe. you do most identity in your head. you're like a russian engineer or a scientist. >> it's like if you were in school and you missed certain stuff and you never -- i missed that. i don't know what you were just talking about. i've never used excel. i don't know what you mean by -- so there's -- >> really? >> yeah. i don't know what you just said. >> okay. >> so there are -- >> excel is -- >> they charge for that? >> an unbelievable amount of mope. there was loet yumm notes when the computers first came out. >> word is different, as well. >> word is a word processing program. >> we should probably go to this next -- >> folks should probably write in and help joe out. >> becky, does anyone file before april 15th, anyway? >> yes. the irs says that the start of the 2014 tax filing season will be postponed by a week or two next year because of some tax -- it's going to end up meaning a delay in your tax refunds and the agency is blaming all the complications from that 16-day frerl shutdown. the tax filing deadline will still by april 15th. so you don't get any relief on the back end of it. but the people who normally file at the beginning of january, they're going to have to wait longer for those checks. it tends to be people living from pay they can to paycheck. >> remember i asked mccain to check on my -- i still vice president gotten anything back. my accountant was on hold for 85 minutes and finally gave up at the irs. maybe he called the obama care phone number. >> no. if it was during the government shutdown, that was a problem. >> no -- >> i actually tried calling boehner's office. >> they probably have a pretty big backlog at this point. the irs was a key part of all the mortgages and everything else, the things that were delayed because of that government shutdown. >> well, yeah, it's bad when you can't get your -- and i'm afraid to complain about it, but i just did, i think. because then you get audited. no, the irs would never do that. >> never you. when we come back, john harwood is going to be joining us from kentucky where senate gop leader mitch mcconnell is coming under fire from a an opponent. but first, don't miss ecb president margo draghi on "squawk on the street" coming up at 10:00 eastern. at a ford dealer with a little q and a for fiona. tell me fiona, who's having a big tire event? your ford dealer. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. get up to $140 in mail-in rebates when you buy four select tires with the ford service credit card. where'd you get that sweater vest? your ford dealer. welcome back to "squawk box." politicians have returned home to their districts. john harwood joins us from kentucky. this is the home of senate gop leader mitch mcconnell. john, mitch mcconnell has issues at home to deal with. >> he does. he has a challenging general election. he's got a primary and a visit here to louisville, which is a little chilly and windy this morning in late october. reminds us that even though the shutdown and the debt mess is in the rearview mirror, the political energy behind it is not. i talked to matt bevin. he's the guy running against mitch mcconnell, tea party candidate in the primary. interesting guy in his mid 40s. successful investment manager. his family had a bell company which for years made the bell that rang the opening and closing of the new york stock exchange. and when i talked to him about the outcome of the fight, it's clear, first of all, he's not impressed by the polls. second of all, he was not impressed by the threats and warningings about default. here is matt blevin. >> there was no threat of default. as often is the case in washington, there was these foe crises that are forced upon us, whether it's the default, the fiscal cliff, many of these things are chicken little like, the sky is falling, which, in fact, that is not the case. i would run against him because the american people are tired of having these cryises poured upo them. there's any amount of pork that gets hoisted about. in the american people are tired of it, the voters of kentucky are tired of it. >> the one thing that we've seen since the shutdown ended and the debt limit was lifted was almost unanimous sentiment among the republican party that in addition to hurting the country, the shutdown hurt the republican party. what about that don't you get? >> i understand exactly what polls are telling us, but you have to look at the source of those. i also see that the very man who supposedly was responsible for this hurting just received an eight-minute standing ovation when he went home to his state. this is not a state that's unrepresented of how people believe in this country. the fact is the american people want men and women to stand up and represent them. >> and, of course, joe and becky, he was talking about ted cruz who got that ovation when he went home to texas. matt blevin is running against mitch mcconnell on the basis of immigration. he says that mcconnell is an amnesty supporter. he's not. he's running against him on foreign policy. says mcconnell and republicans wanted to go to war in syria. that american people did not. it will be interesting to see how this plays out. mitch mcconnell is an institution in ken kep. he's been in a long time. he's going to raise a lot of money and run a very effective campaign, i expect. but this is a talented well spoken guy for a first time candidate. i thinks has the potential to be more than just a speed bump as mcconnell's aids have indicated. >> the utah guy didn't get a warm reception at all. mike lee. when he went back. and they contrast that with the reception that senator cruz got. mcconnell's last challenge was from the other side, some hollywood actress. remember? >> she was considering. she didn't. >> ashley judd. that didn't last very long. >> no, i don't think -- i just get the feeling that, you know, when you go to my hometown, you fly into kentucky. i know kentucky. i'm still kind of surprised about central florida, john, and louisville. and how badly -- i can't believe that and clemson. number three and number six. be i don't know, john. i think he's okay. >> although people would have said that about luger. >> if you're going to make me lay down a bet right now, i'm betting on mcconnell, yes. but i'm just saying that this guy -- you know, you've seen a range of tea party candidates crop up over the last couple of cycles. some of them have been so bad that they helped democrats win races in states like indiana, states like delaware, and i just -- nevada, as well. that's why harry reid was there to fight ted cruz because sharron angle was such a lousy candidate. but i think blevin has some skill. >> we'll see. all right. >> he also has some money to put intiet race. he says he thinks it will take $4 million to $8 million in the primary. he won't say how much he will put in himself. but he has the money, he has the potential to partially sell funds if he would like to. john, thank you. >> you guys should stop talking because this is bad. >> but why would we need a spreadsheet? >> reports and crunching numbers and all that stuff? >> if i need help with that, i go to you or alex. >> okay. coming up, what panera bread is telling us about the state of the american consumer. plus, eli lilly posting results a couple minutes ago. earnings beat the street by 7 cents. rev 23450us were roughly in line. the drug giant cfo will join us first on cnbc at 7:00 eastern. mine was earned orbiting the moon in 1971. afghanistan in 2009. on the u.s.s. saratoga in 1982. 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>> certainly, the consumer had an under pressure in the third quarter. it's not tend of the world. in fact, the focus of the press release from management seems to be more on issues of throughput. that said, getting more people through at peak periods than it was on any specific macro issue. we see the same issue about 12 to 18 months ago with chipotle. and we think it's playing out with panera, as well. >> what does that mean, getting people in and out the door or just getting them in the door to begin with? >> it's getting more people in through the lines. it's trying to serve more people during the peak of lunch and dinner periods. >> so their growth has been stunned stunted just by the idea that you can't get people in and out any faster? >> that's exactly right. and what we've started to see, even here in midtown manhattan, we've started to see more people getting hired to put more orders through the line. >> if you look at mcdonald's, it's a different issue, correct? this is a situation where people are coming in the door, but then they're maybe buying things on the dollar menu instead of the more expensive items? >> that's right. mcdonald's core customer is more xkly challenged than those at panera. panera's sales have held up quite nicely, even through the recession. we think this is clearly much more of a glitch in comp growth. we expect that to resume much more towards it's historical range of 3%, 4 wers, 5%. >> so panera, if they hire more people and get people in and out quickly, does it last more than a quarter or a year? >> more in the range of two to four quarters. in the longer term, we think it results in the resumption of a more solid top line growth. >> what do you tell people to do with panera? if it's down already 4.5% to 5%, do you tell them to go out on and this wait. >> i would remember biology on the dip. there's still pretty strong unit growth. they're adding about 125 or so unit these year. we think that could accelerate. and there's still untapped potential for international, which the company really hasn't scratched the surface of yet. >> can mcdonald's turn it around, too? >> mcdonald's seems to be more of a play on europe at this point. mccdonald's gets more operating from europe. that could be the way to play it. >> carbs. the last thing i need is bread. company name, panera bread. >> they have chicken noodle soup that's pretty good. we're going to talk to the profit, next. care of business. they always have. they always will. that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others. listening, planning, working one on one. to help you retire your way... with confidence. that's what ameriprise financial does. that's what they can do with you. ameriprise financial. more within reach. that's what they can do with you. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. trust your instincts to make the call. to treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron. we're getting sick of you and your lack of action. all workers are going to receive back pay. many will will be able to keep unemployment checks. >> businesses need to step up. citizens need to step up and a enough. >> my estimate was 2 millionle jobs haven't happened because of this uncertainty. >> we need to get a deal. today on cnbc, follow our tour of champions. it gives the chance to pitch the big idea to the world. entrepreneur and investor, host of camping world. marcus, tell us how everything is going to work. >> six companies are going to come on. they've been here before as part of the power pitch. they're going to try to be the champion at the end of the day. they're going to get 30 seconds. at the end i'm going to ask a lot of hard questions. >> that's not elevator pitch time. >> they may get 31. that's not a lot of time. >> tell what they win? >> they'll become the champion. i'm not allowed to give them a prize. i may still do it. >> why can't they get a prize? >> i don't know. at the end of the day, the biggest prize is they get to tell their story in front of of millions of people. some of the companies in the past have raised a significant amount of money after being on here. >> we're going to hear from a competitor to pandora. a new app to allow people to get grocery store information while they're out. we're going to hear from the muz, the hr company working with staffing. we're going to hear from a company called bio light. they make a small tin can that lights on fire and generates you power. it has a world purpose. >> it could be good for the apocalypse. >> it's used in third world countries to generate forms of electricity. >> we have a you small pet company. i think it's going to be a good set up. >> company for small pets? >> it's an online company that sells pet accessories not just small companies. >> nobody is making anything. no manufacturing. couple of tech companies, the service would be the pet company and the can company. >> we're going to learn more today. they may actually make it. >> make it as in? >> manufacture it. they may the forevmanufacturer. what's going on when it comes to small business with the ability to get financing? the cloud ventures out there -- crowd funding out there. what about the banks these days? >> there are a number of banks. you have the va and chases of the world that have gotten aggressive. have they? because of crowd funding? >> they believe it's their moral duty to get out and provide that. i received hundreds of e-mails saying when is spa going to open? i don't know why they thought i'd know the answer. >> there's financing for small business now. is that different from a year ago? >> banks are getting more comfortable with understanding small business is the foundation of the country. numbers aren't big. you have to have collateral and guarantees and things. if people put up their home and pledge, banks are willing to take a chance. >> the winner on the closing bell. >> thanks. >> great to see you marcus. >> if you could give a prize, what would be the coolest camper you could give? they have to be custom made or do you have one that's unbelievable? >> i don't tell the unbelievable ones. if i could give a prize and it could be a camper, i would customize a mobile office so they could go around the country and sell their product. >> i was thinking for me not them. we have an all star lineup. earnings and cfo of lie lily and caterpillar. we have former fed chairman allen joining us to talk about monetary policy. government shutdown and janet yell len running the central bank. pnchts our guest today is dan gill bempt he's going to talk about his plan to bring back detroit. we'll have help from cofounders of groupon and kid rock. 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(vo) meee-ow, business pro. meee-ow. go national. go like a pro. from detroit to washington, we are rising above with quicken chairman dan gilbert. thoughts on revitalizing the city to what washington needs to do to fix the budget. former federal reserve chairman and author allen greens span is here. we'll get his talks on when the debt limit will happen. what's in the pipeline for eli lilly? we asked the senior officer as the second hour of "squawk box" begins right now. good morning everybody. welcome to "squawk box" here on cnbc. i'm becky quick. andrew will be back tomorrow. we've been watching the futures this morning. they've come under pressure. chinese and japanese stocks sold out after concerns of banks issues. dow futures down 70. s&p off 8 points. in our headline, it's a big day for corporate earnings highlighted by dow components. we're taking a look at what's been happening with numbers. we're expected to get numbers from caterpillar and boeing around 7:30 eastern time. we'll have those reports as soon as they hit. also talking with caterpillar chief executive officer doug overhem talking to us at 8:00 eastern time. carl has sold his stake in netflix. cut from 9 1/2%. icon said it was time to take chips off the table. maybe that's why you saw the stock sell off yesterday. it had indicated up higher $40 in the premarket. it was that and cceo about the stock. >> i'm making this up as i go. quinntupled? >> australian government plans to raise the country's debt ceiling by two-thirds. they're pointing the finger at united states as the reason. the country needs some but not all borrowing capacity. officials say they're not going to a allow themselves to get in the position the united states is in now. steve -- >> landmark case involving the worse municipal collapse in united states history. the federal judge will decide -- you see arms going. they're still going back over quinntuple and quinn triple? what's the difference between them? >> three and a half. >> we're talking about detroit organizing under chapter 9. what's nine, joe? they're still talking about it. scott cone joins us now with this important story. >> reporter: good morning, steve. this is a pivotal phase in the case and important day in deciding the day what was one time america's greatest town. detroit is set by decades of decline and decay and population decline. 17 $1/2 billion in unfunded liabilities. bankruptcy was the option. unions say it's a run around the pension. they want to block this chapter 9 filing in court. it will come down to stephen rhodes who's been moving this case along with speed since the city files bankruptcy back in july. judge rhodes will have to decide on a few issues. first of all is the bankruptcy filing constitutional? unions say not just the michigan constitution bars pension and benefits but they say chapter 9 of the bankruptcy code is unconstitutional under the u.s. constitution. they'll have to decide whether the city negotiated in good faith with creditors. that's a requirement before you file bankruptcy. they say the city never did in good faith. the city manager says yes, he did. should the pensions be off limits? the bankruptcy code doesn't allow for vout of the pensions. the emergency manager appointed by mission governor schneider is kevin ore. he said in the speech earlier this month that a bankruptcy would provide important benefits. >> we've had some offhand conversations with some of our stakeholders. they have said, look, we know things have got to change. it gives us an opportunity to have a structured environment with federal court supervision for very real problems. >> reporter: this trial phase should take six to ten days. if the judge approves the chapter nine reorganization, that sets up a whole new round of fights where they decide how creditors will be handled. the idea is to get the city's finances reorganized by march. that's an ambitious schedule. if you think detroit is alone, think again. you'll be hearing from us in a couple of weeks in a program called "broken cities." the problems are happening elsewhere. we'll show you on cnbc and cnbc.com. >> that's why this case is so important. all these other municipality, creditors in all cases are watching this. this is going to set the template for how ever other city is dealt with beyond this. >> reporter: that's absolutely right. particularly this pension issue. pensions in detroit are not particularly generous. $18,000 for a regular employee. that's not a huge benefit in any event. other cities have been looking at this. their pension costs have gotten out of hand. they're going to look to see how that's handled in this case. it. >> there's a story in the front page of the business section of the new york times talking about extra payments made, traditionally 13 month pay out if the fund was better than 7.9% in the charter, they would make extra payment because engss weren't all you that generous. that has in turn robbed billions of and made this come more quickly? >> reporter: right. that's a huge part of the pension funds in cities elsewhere. instead of saving for the rainy day, they give it out to pensioners. that defeats the purpose of having a pension fund that's going to pay out over years and decades. >> scott, do you know what the time period is? >> reporter: the judge is likely to rule very quickly. he has said to parties don't prepare post trial briefs which everyone takes to mean he's going to rule if not from the bench shortly after that. then as i said, it sets off this whole other issue assuming he approves the bankruptcy. that's not a given. assuming he does, it sets off a whole set of issues about reorganization. how the different credit tors are handled. not just the pensioners. it's all the creditors. about 3 $1/2 billion out of 18 $1/2 billion in unfunded liabilities. there's a lot to sort out if the bankruptcy goes forward. >> scott, thank you. this is an incredibly important story. scott will cover all day and beyond. our guest host is determined not to let his city go to ruin. he's trying to revitalize the city through the private sector and capitalism. dan gilbert is founder and chairman of quicken loans also the rock ventures and owner of the cleveland cavaliers. he's with us the rest of the program. this is a day we've been waiting for. you are i believe the largest owner of land in detroit outside of the government itself. something like a billion you've put in? >> it's something like that. there are certainly others besides ourselves vested in detroit. general motors among them. i tell you what, it's an interesting day. with the bankruptcy is a lagging indicator. us in detroit for a long period of time we knew it was coming and was going to happen. just a matter of when. you never knew for sure. pretty much in your gut knew. this bankruptcy is a painful process. once we get to the other side, it will remove the overhang like gm and chrysler. i think in a few years people won't be talking about it anymore and we're off to the races. >> does it leave the people out in the cold? >> that remains to be seen. nobody knows yet what the state may or may not do. certainly the governor has never said he's going to do anything. >> in term terms of stepping in -- >> i'm not on the in side of discussions. my feeling is they're not going to lose 100% of pensions. i don't think that's going to happen. i'm sure there's some save of that. what percent, nobody knows. >> the debt would be wiped out? >> i think that's the idea. >> that would be the bottom line? >> that's what the emergency financial manager has said. we've got to wait and see. >> can detroit function as a municipal entity without access to credit markets or is it able to come back relatively quickly into credit markets after reorganization? >> certainly a period of time it can function. the emergency financer manager put a plan out. the plan has significant investment, a billion five i think. i don't have the exact number for safety removal. in the plan he filed he's got investment. >> to get rid of empty houses and clean houses up? >> exactly. coming out of bankruptcy, the city itself operates better and hopefully hopefully the blight. >> you make it sound easy. part of the problem has to be you've got neighborhoods where there's a couple of houses with people in then. you can't wipe out the entire neighborhood and say we're not going to service anymore. >> that's a different issue. under any scenario you want in the future, removing dilapidated homes works. there's no scenario you could paint saying keep 50 here. when people say to me what about this or that? i say that's the market forces as you mentioned before, capitalism. market forces will take over. one of the things people haven't talked about lately or about regarding this issue is that you're going to have big piece of land and a major metropolitan area with water, sewer, cable, phone and paved streets at relatively inexpensive land prices. that's unprecedented in the united states history. who knows. that may be more attractive than people realize for rebuilding. >> that's right. harlem was in a bad situation decades ago. they offered the people the chance to buy apartments at $250. they tried to get more police on the streets. people that bought the places are looking at places valued at over a million. >> it's crazy. will it be that way in detroit? we're hoping. >> you're out there -- there isn't a block you don't own property on? >> we're focused on down town. that's an issue. you can't have a booming healthy downtown in dying neighborhoods nor have booming nab ining neig in a dying down town. i can't think of one city in the world has one without the other. we have over 11,000 people down there now. neighborhoods, we've got to help there too. that's the city and state's job and government's job, but wherever we can help. there's other private businesses and foundations we're very involved in. we'll hopefully make it happen. >> we've heard from jeffrey canada who's joined us in the past to talk about harlem and what happened there. part is police presence, part is good schools. how do you get the funding on a grand scale? you talk about two of the big three. blight, crime and education. you don't get to crime and education if you don't get rid of the blight. you cannot have a safe city with 80,000 delilapidated structure. we've taken kids downtown and said come downtown, look what's going on down here. stay in school do well. you can get a job downtown. they go back to their neighborhoods and walk past the criminal elements. how long does the high last for them? in any scenario, for those two to succeed, you have to get rid of blight. >> a lot to talk about, the mortgage picture and what's happening with interest rates. fortunately we have you here the rest of the show. >> can't way. next we're also talking to kid rock. that's coming up at 8:40 eastern time. coming up next, the cfo of eli lilly. derica rice joining us when "squawk box" comes back. still to come, former new york times best selling author allen greens span, the fed's next move and forecasting. it's only on "squawk box," profit from it. drug giant eli lilly reported the result, drug maker earned $1.11 a share for the quarter, 7 cents above average. good morning. good to see you derica rice. >> good morning. >> 6% revenue gross not bad. that's 2 percentage points. that's unit growth as well as pricing able to raise prices on drugs shras well. >> 60% of that was volume driven growth. that with good cost containment across manufacturing and operating expense areas lever e leveraged that to 41% bottom line. >> i'm looking at progress on new drugs. i'm starting to think eli lilly is more of a cancer company. i used to think of it with ssri, cymballe at that, prozac and mental health. it seems you've transformed the company to some extent? >> we're excited about the breath of our entire drug development portfolio. we have 39 molecules between phase 2 and phase 3 development or mid to late stage development. it spans areas such as auto immune disease, cancer, diabetes. still in the space of neuro science. one of the strengths of the firm has been that type of breath. >> you're trying to off set the decline in some of your old numbers:to still get a revenue gain is pretty good. animal health took up some of the slack for declining sales of your drugs. what's going off patent? >> we've had strong growth in animal health. that combined with our entire pharmaceutical portfolio. we have four new drugs for approval around the world. we look forward to launch those next year. that's been the key in terms of corner stone of our invasion based strategy to managing our way through this period of patent ex ppirations coming outf this with strong and expanding margins getting back to the way we used to be. >> it's hard to ignore what's happening in health care obviously with the news the past month on the affordable care act. you have expressed disappointment with the center for medicare and medicaid for the final decision whether it provides coverage for imaging agents for i guess involvement with alzheimer's and things like that. are you worried about reimbursement getting tighter as cost controls become prevalent after the fca. affordable means more affordable. >> there's no doubt in today's environment that payers are going to take a more stringent approach to formula access. the key to getting beyond barriers is going to be invasion which is what we focus on. you have to bring value, meaning clinical differentiation and outcomes to patients and physicians resulting in benefits to the payers. for us that meant focussing our invasion based strategy and how we different yat today's stad of care. we believe our molecules are first in class or best in class. it gives us that opportunity to achieve that type of differentiation to allow that access. we believe going forward in terms of environment itself, we believe choice is important for patients and clinicians to provide the best outcome for patients themselves. >> speaking of neuro science because i still think of cymb cymbalta. are there new developments in the treatment of depression or schizophrenia at this point? >> we know both in the area of schizophrenia and depression, there are many patients who either go not well treated. we continue to explore that area of research to find that next invasion that we believe we can bring value patients. in addition to that, we have drugs and development in the area of alzheimers disease. we started this quarter in mild patients. we look to have a read out in the 2016-2017 time frame. >> that's one we need. basic science still needs to continue obviously. derica rice, appreciate you spending time with us today. dividend now is about 4%. you're also going to buy back more stocks. there's a way of returning cash to shareholders in a couple of ways. >> absolutely. we've been pleased with our performance thus far. as we've managed through our expiration and putting out a series of mile markers or milestones we hoped to achieve, we're ahead of where we thought we'd be at this stage. it gives us the opportunity to return excess cash we were building on our balance sheet back to shareholder in addition to maintaining our dividend at the current level in 2014 and beyond. >> okay. give our best. he went to the wrong st. zavier. thanks. still to come, alan greenspan. i don't know who is more excited, joe, becky or me. greenspan is celebrating the launch of his new book. we'll hear about it and talk about fed tampering. fed tampering could be pushed to 2014. 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cat or boeing? >> you keep going. >> let me start with boeing which is earnings per share of $1.80 full year 6.52 estimate. that's the high end of the range. revenue 22.1 billion dollars estimate of 21.684. >> that's a beat on revenue? >> that's a beat on revenue. with boeing, it's about backlog, deliveries. normally he'd be here talking telling us that delivery is the most important thing to look for. 2013 commercial airplane deliveries have been increased. >> 635 to 645. for 2013 total commercial airplane revenue to $53 billion. >> caterpillar $1.45 a share. revenue coming in light. street looking for 14.35 billion. if that's not enough, the company is revising the 2013 outlook looking for sales and revenue to be $55 billion with profit per share. they're now saying 55 billion versus the street estimate. they're now talking $5.50. lowering the revenue and outlook. the ceo says this year has proven to be difficult with expected sales in revenue $11 billion lower than last year, 17% decline. drop from industries that's mining. they expect industries to be down 40% for the full year in power systems and construction, each down 5%. they say not only is mineing down from 2012 but the demand for equipment has been difficult to forecast. orders for new equipment began to drop in mid 2012 and continued at low levels. we have doug on at 8:00. >> the mining company was bought almost at the top. still would work out. >> that's been troublesome. >> truly a tale of out cities. boeing is up $2.20. the $1.80 is a 16% gain in earnings per share. in the full year number i gave you 6.50 to 6.65 was raised by the company from 6.20 to 6.40. also they're increasing 787 production to 12 per month and 14 per month by the end of the decade. now 11% gain in revenue. >> these are dow components. boeing up in the premarket. caterpillar down $3. you'll see the percentage drop. >> are they in different worlds? >> it's mining. >> it's totally different worlds. >> boeing is on the heels of 787. >> mining is a big story for caterpillar. >> they're optimistic about growth in 2014. >> we'll talk to doug about that. nkts our next guest in the federal reserve 18 1/2 year, helped make our nation's most significant economic decisions over the last century. joiningsi joinings us now alan greenspan here to discuss his new book "the map and the territory." chairperson, wonderful to see you. >> great to see you on set down here. so many different places we could go. we could talk to you easily until tomorrow at this same time. >> i have time. >> first thing i want to talk about is just to needle my associate here mr. it's so difficult. you can have people with opposite opinions. both win the noble prize. that never happens in chemistry. >> he just figured out that all the work he did analytically comes down as it always seems to to human nature. you' deferring to psychology. it's hard to figure anything out in economics? >> no. >> is human nature more than analytical and factual? >> let me summarize quickly. all of us can go back a long way always understood there's a lot of irrational affecting the gdp and market. we all assumed in fact almost general that those were random and would essentially wash out. therefore you could set up your economic models or any model you want looking only at the effects of people acting rationally in their long term self interest. that was a general proposition. that's what they were teaching in universities and basically what economics was all about going all the way back to last two centuries ago. we missed the timing badly on september 15th, 2008. all of us knew there was a bubble. a bubble in and of itself doesn't give you a crisis. the dot crime crisis, there were losses you could barely see in the gdp. october 19, 1987 the dow went down 22% in one day. by far the record of all time. i thought we were going to run into all sorts of problems. nothing happened. now to be sure it was touch and go for a while. the fed opened up to spigots. you can't see it in gdp figures. bubbles per se are not the issue. it's turning out to be bubbles with leverage. leverage is critically important obviously because it's the only way you can get the issue going forward. the bottom line is this. i said to myself when i saw what happened on september 15th that there's something fundamentally wrong with the way i and a lot of my colleagues look at the economy. so i tried to go on what looked so much like to me like a detective story trying to unwind layer by layer. the first layer i tried to unwind was the fundamental premise of everyone looking out for their own long term self interest. i was shocked, surprised and delighted at how many of the aspects of fear, euphoria, time preferenc preference, all things we do. how systematic those systems are. for a model builder, you don't care. >> what you're suggesting is that the old models said you cannot settle at a steady state that is irrational. you're saying we can settle temporarily at an irrational state. that's new to economic thinking. >> it's new to me. >> since daniel in '79 started doing experiments and wrote the great book not long ago winning the noble prize for economics in his work of psychology. >> can i just add on top of that do you think it's because people look to short term best interest versus long term that causes part of this? >> it's a little more complex. i think steve raids the issue of dan con elman. i found his book fascinating. the trouble with behavioral economics which is what that is about, by itself it cannot give you a model. it's essentially saying in classical economics, there's a conception of how events occur and are distributed. we have sort of a normal distribution in those old models which say everything is random and by chance. but what the behavioralists show it's quite different than that. we talk about the fat tale. that told me that something f d fundamental is different. >> does that play into greed? >> you've analytically proven that. >> i don't know what the actual multiple is. it's three or more and what happens is, if you're looking at this distribution of outcomes, fear is hugely more important than euphoria or greed. you can see this by the way business cycles function. they go up. bubbles go up slowly and then go bang. it happens all the time. it will happen in the copper market. >> this explains the hang over we're in from the last financial crisis. >> there are a lots of different issues. >> the other thing i want to get to. as many points as i can. one that's interesting is entitlements drain savings from a society and make it more difficult to grow. it's a vicious circle. then you can't pay for the entitlement when not growing. >> this is an unfortunate set of circumstances. the people who receive social security benefits for example believe they are receiving their own money back, the amount of money they put in plus their employer plus interest. they think it's earned. it is not. the reason it is not is because it's a social security trust fund severely underfunded. same thing is true with health care. a variety of those. because they're underfunded, people are getting actually subsidized pension. if you told people that this was welfare or charity or something like that, they wouldn't want it. i have a lot of documentation in the book that indicate words matter. >> we're going to take a break. this is similar to what we've been discussing how much the promises that our young people are going to need to keep to elderly people. there's nothing left. the elderly people where we are now were eating everything so there's nothing left. >> it's eating your seed corn. >> we'll be back. stay with us. we'll take a quick break. when we come back, we'll have more with alan greenspan. in the next hour, we have kid rock to talk about the bankruptcy hearing. 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(vo) meee-ow, business pro. meee-ow. go national. go like a pro. we are back with alan green span. we always reference growth. a lot of our problems would be solved with growth, even entitlement problems. we've got to figure out how to get there. when you took over the fed, former chairman never talked about you. you've given the same privilege or respect to ben bernanke. i figure the same with janet yellen. i don't know what i can get you to say about the last six years of future of fed chairwoman. one comment you made about yellen was that she's very smart. when you didn't understand something academics were saying you could go talk to her and she could explain what academics are saying. i don't know whether that's a compliment or not. when i need to know what an egghead is thinking, i go to janet. what do you think of janet? >> first of all, goodly part of the analytical judgments that are coming out of risk management and a like, come out of the academic community. most of them are academics. look, i'm an academic in a sense. i've got a doctrine and do all other things academics do. i even taught for a while. i understand 90 or 95% of what they're writing for example, but there's a small amount i don't know and want to know. i often found i would go to janet when i didn't know it. she did. she explained it to me. that was helpful. she's a very bright lady. i think she will surprise everybody. >> how? >> good or bad? >> positively. >> in a good way. we don't know when we're going to taper here. i don't know how you want to address that. >> if you talk about when we should taper or whether we already should have, you're commenting on recent fed policy. can you make general comments? >> let me talk to you about the economy. we're missing in my judgment, at the moment, two things about what's going on in the economy. first is the significant decline in not only domestic savings, gross domestic savings. as i show in the book, in some statistical detail, it's not my data, it's the bureau of economic analysis data. there's a significant decline in net savings as well. in the last year or two, net savings change has gone to approximately zero being up in the area of 10% of gdp. you can't do anything with that type of system unless you're borrowing money from a broad. that's the only other alternative if you want to finance domestic investment. >> is that people paying credit cards off more than ever and consumer debt is more than the mortgage. they would rather pay off the cash on a credit card instead of earning in a bank? >> when you look at data. household savings rate is going down. i go into this in detail. look at it in income -- it is generally true households overall. i'm focussing solely on the question of macro economic effects. the macro economic effects of this are very important because unless we want to open up to taking off our $5 trillion net do we don't have the funds to maintain capital investment. capital investment as we all know is the critical issue in growth of productivity. >> do you see numbers like this, zero? >> i don't know what you mean by net savings. >> gross savings. what i suggest you do. there are tables in that book. i don't want to get into the details of it. >> it has gone up since the crisis. what dan is saying is accurate, leverage at the consumer level has come down. credit quality has come up. all those things are true. you're under the calculation i'm not aware of. >> i suggest you -- unless i could put a chart up here, it's difficult to do. >> we could talk until tomorrow. the problem is we're going to owe money to people we're borrowing from on the growth we're trying to a achievement interest rates better stay low. dr. greenspan, we never have enough time. good luck with the book. >> here it is. "the map and the territory." thanks dr. greenspan. when we come back, we have more from dan gilbert. caterpillar ceo on the company's latest results next. the company issuing a warning. we have madison square garden ceo and groupons cofounder and light bank key manager. they'll join us along with eric lefkofsky. and then it's kid rock. that's all coming up this morning. more than a new interior lighting system. ♪ it is more than a hot stone massage. and more than your favorite scent infused into the cabin. it is a completely new era of innovation. and the highest expression of mercedes-benz. introducing the 2014 s-class. the best or nothing. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. 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[ male announcer ] open an account and get a $150 amazon.com gift card. call 1-888-280-0149 now. optionsxpress by charles schwab. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business. this hour of "squawk box" made in the midwest. >> student doesn't stair you in the face. >> illinois based caterpillar out with earnings. doug oberhelman joins us to talk about the quarter. the debt battle and how to win it back. then our disrupters of the morning the grate minds behind chicago based groupon lefkofsky. >> and gilbert has enlisted the super star kid rock. we'll ask about his push to save the city. >> what does opportunity look like? it looks like detroit. >> the third hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc. first in business worldwide, i'm joe kernen with becky quick. a long way to the other side of the world, andrew is off today. dan gilbert founder of quicken loans. more from dan to come. becky has deadlines. >> dow component caterpillar out with results a minute ago. the company missed estimates 31 percentages, 1.45 earnings. caterpillar cut the full year forecast and blamed problems on the mining industry. chairman and ceo doug oberhelman says it's been a difficult year. he'll join us. boeing also raised full year forecast and increased plan dream lieper production schedule. drug maker eli lilly revenue came in inline with expectations. right now need to look at markets this morning. we looked at weaknesses in the futures. dow down 75 points. most because of what happened in china overnight. change high come positisitive s. in europe weighing in on the markets. france down 1%. gains for dax. >> dow numbers are down. cat pillar is down. boeing offsetting that. caterpillar posted earnings below wall street expectations. joining us now to talk about the results caterpillar chairman and ceo doug oberhelman, in terms of operating environment and caterpillar, this has been the toughest year in your tenner, no doubt about it. >> there's no question. this has been a tough and painful year. i'll be glad to see it go at the end of the year. having said that, we're getting the opportunity to take a lot of cost out, work on internal. when you lose $11 billion off the top line, it's lard to recover. our employment is down, we've been seeing activities to reduce costs. i'm pretty happy with that. near a record in cash flow. brought back $2 billion of stock this year. our debt was stronger than before the recession. our balance sheet is bullet proof now. we're ready to go. we need a recovery in mining. i've seen it come and go over my years. the rest of the business is hanging in there. >> mine as good worse than the analysts thought. you can see they still missed trying to gauge your top line and bottom line. i'm sure it's worse than even your internal forecasts as well. why? where is it? where is the geographic location? to viewers, explain what could be so weak about the mining business and whether it's commodity prices or what? >> commodity prices are good. we're seeing in existing mine, production is up year over year. as the big miners have cut back and stopped their big projects, they've looked to save unmany. we were watching mining production all year. rates kept coming down and down. that's the story. mining is going pretty well. i've had numerous conversations with our big mining customers last couple of months. in terms of existing mine production, more sales for us. we've seen that tail off this year. that's what's been the biggest miss we've seen. we thought mining production would allow parts business and new products it had not. >> what caused them to cut back on new mines and just focus on the ones they already had? what has changed? global economy slowing down a couple of years ago, the period of underperformance? what causes minors to cut back like that? we saw the mines really explode as india and china grew, famous bricks. world of economic growth through the big recession outside the u.s. and europe was pretty good. they got a little bit ahead of themselves. markets got ahead of themselves in terms of what supply and demand really was. when they cut back on new minds and expansions, that also impacted their investments in existing mines. we frankly felt that. that's the root cause of the problem. the customers i talked to lately are still very much. we're restaging the business in construction mining and energy in a way to reduce cost so when we see a return to revenue it will be a nice time for us. we'll be smiling again when that happens. right now looking at mining continuing to falter into 2014 frankly. >> doug, you said you don't know if it will be next year, five years or ten years. it makes a big difference to investors. if you had to put your finger on it and pick some time between now and the next ten year, when do you think that will come? >> what we're seeing in construction equipment is nice upturn now around the world. that should continue into 2014. our energy and power systems business is very strong. we're seeing a record year in industrial gas turbine business, local rail and locomotives. that's strong and doing well. that should continue to pick up. we see 2014 flat this year. both those increases off set a bit with the mining reduction. at some point becky, we're going to see a return in investment. these miners are going to have to replace trucks and dozers and loaders. they're going to have to pick up the after parts market, purchase from us as they service their machines. i'm hopeful. i'm not going to make forecasts on mining. my bet is it's sooner than later. i hope late '14-15 we start to see that. >> you talk about the busy nszness next year. what about expectation for global growth. is it better than this year? also wonderring how the near term solution in washington has affected your business and if washington should be doing things to make your business better? >> great question. we see global growth picking up a bit in 2014. i'm going to answer your question differently. i think government policy has led us to anemic growth. doesn't allow much reinvestment and doesn't allow employment gains. we're all dealing with that. head to policy, rhetoric better over the next three to four years, who knows. one of the things that could help us all is a couple of wins out of washington. immigration, tax reform, something to get our confidence back. i know you've been talking about that this week. >> give me a policy, doug. >> last three or four years, something the government did to keep growth to 2% in your opinion? >> every year in the last three years we've had the debt ceiling battle, budget battle, every single year. there's been a huge explosion at some point in the year that doesn't drive confidence. i think that's been in the way of a lot of growth recovery. underneath the economy is trying to grow. signals are good. we're forecasting the growth to be up next year. here we go in the fall screaming and yelling from washington which scares everybody. when you get that a side, maybe tax reform, confidence built up, we could see the economy come back stronger. >> how much did that expand your mining operations? i know it should have could have, would have. it's about timing and long time i'm sure you're positive on that acquisition. how much did it expand your mining? do you wish you hadn't bought at this point? >> well, here's a little fact. a year before we bought, their total sales were $4 billion. our sales in mining are between $8-9 billion lower than '12. we've seen a worsening for our traditional mining products, trucks and big loaders. two years into the acquisition, it can look good or bad. we made that on a long term basis. the reason we bought bucyrus was to put us in global equipment to cover 70% of mining needs. long term it's going to be very good. we've got to struggle through the cycle in the meantime. i'm not making bets on when it will come around, but it will. late '14-15, things could look different. i'm sure they will. >> great business for us to be in. >> stocks up a lot. once you get back on track, the onward and upwards and name like cat pillar such a great american icon. we're pulling for you. >> thank you, joe. you look at operational metrics we're dealing with. our china business is up 30% year over year. all china is up. we're leading the market in hydraulic excavators. we've got to be in china if 10 to 20 years down the road we're going to in that business. i'll talk about the explosion in regulations and obama care and all other things that -- >> he didn't get on those. >> he could. >> you know the answer. we're going to break. i want to clue him in to some of that business uncertainty. >> he blamed the fight over the deficit. >> that was one thing that came up. >> first thing he came up with. >> we're going to break. i'm going to talk to him. >> the big line up is coming. >> ceo of the madison square garden talks to us. we'll talk to the current ceo and cofounder of groupon. kid rock will join us to talk about his ideas for detroit and also our guest dan gilbert is next. ♪ ♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh welcome back to "squawk box" everyone. we have a special series we're calling america's favorite stocks. s&p closed a high yesterday. nasdaq closed at a 13 year high. we start out with amazon shares up 40% in the last 12 months. the company is set to post results after the bell tomorrow. amazon missed expectations in three out of four quarters although that has not impacted the stock. analysts say revenue is the likely key to watch. investors should focus on growth and higher margin areas. same as netflix. it's the growth now spending for the future. our friends on "squawk on the street" continue this talk and look at apple later this morning. let's get back to our guest host, dan gilbert, founder of quicken loans. what happened in terms of may interest rates shot up, what did you see? >> the overall market business is down from peaks in late spring. we're doing pretty good. we're happy with what's going on at quicken loans. purchase market has been strong. a lot of people are paying cash for homes. >> full cash, 100%? full cash. those are hedge funds buying single family homes and pulling them. we're seeing an increase. in various part of the country you see a significant double digit increase in home purchases. >> how sensitive are consumers to interest rates? the annual is below 2.5%. >> you've seen the decrease in mortgage rate, almost 50 in the last 30 days or so. it's more sensitive than you think. i think just like alan was saying, a lot becomes more emotional, irrational exuberance or less. when you get a spike, production falls off. it eats it's way back as people realize it's not that huge of a spread either way. >> is this making it harder with loans? >> it will soon with mortgage rules. consumers have complained, a lot in a rational way in a year or two. you often get the broad brush that comes in. instead of picking it off and saying this area, this area, this area are the problems. a lot of times they broad brush it and say we're going to tighten all credit standards. ones you're tightening have no connection to default rates. it will probably get worse with the qualified rules. >> how about at quicken, are you moving down the credit score or making only the highest quality loans? >> in one of the reasons we survived as an entity and were able to thrive because we avoided the vast majority in the last unnamed decade between 2000-10. we're really sort of -- >> what are you not taking? >> sub prime loans. if we were participating, we wouldn't be around. no one that significantly participated -- >> i saw advertisements for underwater -- >> those are harp loans. >> you're getting help to do these? >> it's the freddie mac fannie mae to get people who are underwater -- this is interesting. you have millions of people who are underwater still even though home prices have come up. >> you'll you still refinance? >> the government has said if people are making payments when they're under water that are up here and done it from 2008 to now, why wouldn't they make it if we lowered their payment? it's a good bet. the government's hands or whoever the lender is or bond holders, whoever takes the ultimate risk including us. we do have risks. there are millions of customers today. our guys will tell you. people hang up on our people sometimes. i hear this from other lenders. the mortgage stuff has been so -- >> it sounds like a scam when you call. >> we know you're under water. we'll lower your rate from 6 1/2% to 4%. click. >> we federal express or air born or ups people. we've had people in certain areas go to people's doors because we want to help them. >> that would be a good use for the shake down that we're seeing now. >> $13 billion. >> with jp morgan and bank of america. >> if some of the money is supposed to go there? they have a lot of money. >> they have plenty of money. >> it's going to districts in play for 2014 for the house. that's the whole government fight. >> they have a lot of tarp money left they haven't been able to give away. >> they say i have money. >> this isn't costing anything. yeah there's a guarantee involved still and a risk but not even a cost. >> good news. people should hear more about it. >> interesting stuff. a look from madison square gardens, iconic arena getting pay billion makeover. and and a comprehensive batch of tests next. don't miss "squawk on the street" at 10:00 eastern. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. get up to $140 in mail-in rebates when you buy four select tires with the ford service credit card. where'd you get that sweater vest? your ford dealer. trust your instincts to make the call. to treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron. a confident retirement. those dreams, there's just no way we're going to let them die. ♪ like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. that's what they can do with you. that's how ameriprise puts more within reach. ♪ three years and a billion later t iconic madison square garden gets a major make over, a place i grew up. bridges surrounding the arena. join us now for the exclusive first look. ceo and copresident. what does this mean for the experience at msg? >> it means everything. our fans told us how to transform this building. we set out three years ago on how to transform madison square garden. friday we'll unveil the first public event and the next play the bob cats. >> talk about bridges and other changes. >> well, we have many firsts of a kind amenities here which is what madison square garden is expected to have. it's a state of the art one of a kind arena, measure by which every other arena gets looked at. we're revealing the new lobby where everybody comes. we've made changes for every fan, people in the first row to people in the last rouchlt one of the changes, the chase bridges sus spened running down the court in the ice with seating creating a new seating angle, seating aspect never before and probably never will be anywhere else. >> let's talk about the venture out in los angeles. you're not just in new york now? >> we have seven venues in all. january 15th we'll open up the forum once again. we're in renovation of the forum. we'll revitalize it to its original glory. you talk about iconic venues you talk about madison jasquare garn on the coast. >> hank, how are you doing? dan gilbert here. in today's world where it's gotten so good on television to watch a sporting event, professional teams whether basketball, football, these things are necessary to make that game day experience differential from watching on tv, right? >> there's nothing liking live being here. we've seen the growth of media with all forms it's given more reason to come to the live experience. today when you go see the garden which is fully equipped with state of the art wi-fi, new score board, you really get the best of both worlds experience again with the sense of community, passion. nothing like you get when you come to madison square gardens. >> i forget where that rim is. it's like yeah, i could do that. if you're anywhere near a court you look at rim and they're playing above the rim. it's like this is amazing. hockey is same way. to hear when they hit the boards and stuff. there's nothing like live sport. >> also the speed. the thing i notice the most, the thing you don't get on television is the speed of the game. and athleticism. it's truly remarkable. >> i agree. >> speed and athleticism is like nothing else when you're here at the game seeing how fast they're going, crunch against the board, the slam dunk. it's really something special. no substitute for being here for the concert experience and seeing that live. live is different from anything else. live is dvr proof. live is the future and will always remain. >> my first concert, basketball game, hockey game all at msg. my parents used to take us to sit in the blue seats at the top. i was like $7 a ticket. i have to ask you. do changes mean higher ticket prices for fans? >> funny you say that. we brought blue seats back. we had a calling to bring the blue seats back. we brought them back. your point is great. we wanted to make sure we took care of everybody, every customer that wants to come. we have 26 price points for nicks and rangers, something for everybody. >> thanks for joining us. >> the garden officially reopens friday night against the knicks preseason game. dan is here and brought a bobble head doll. >> last night at the nba owners commission, the great commissioner of 30 years is retiring. they passed out the bobble heads. these are defective because they do this. i've never seen that before in the years we've owned the team. i'm trying to move it left to ri right, it won't go. this is clearly david. i've never seen that. you know what i'm saying? >> dan gilbert our guest host with us the rest of the program. let's get a check on markets in the meantime. futures under pressure. down 57 points. we've seen almost 80 earlier. this started with china and concerns. this morning we got news from dow component caterpillar, missed estimates and came in with earnings of $1.45. a slump in the company's mining business that gets the blame. doug oberhelman told us he remains long term on mining it's just a question of what long term means. stock is down 4 and a quarter %. american capital is buying cole real estate. shareholder remain silent get 13.82 in cash or each share they hold. the deal creates the largest net release of share trust. the company earning 2.10 for the shird quarter well point. well point benefitted from increases in membership as well as lower than expected costs for health care prices. >> petroleum up 0.8. that's going to roll off next month. >> done. >> can you touch the bottom of the net? >> i think i can. >> i have a hoop in my backyard. >> i have one to adjust the height. >> i don't let the kids do that. they love it so they can put it down so they can dunk all day long. >> i think i can do it now. when i see a real one, it's like that's not really there. >> when your watch your kids play on the court and then go see the grown ups play. >> try to hit a free throw, my first is like four feet short. i don't know. >> athleticism is unbelievable. two cofounders of groupon coming up. we'll ask them about invasion outside the valley. and kid rock talks to us about the revitalization of detroit next. ious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. our next guess, our disrupters changing the landscape. joining us, cofounder and ceo of groupon. now the founder and managing partner at light bank. welcome to both of you. >> thank you. >> we should point out the reason you're here, dan gilbert got to know you a few years ago. you're from detroit. you met them in mexico. >> i bumped into them on the beach in mexico. i had my family on a trip. i said what do you do? we have 10,000 employees and two years going public. oh yeah where you from? >> we're from detroit. oh really. when did you move? they both went to the university of michigan. if i was coming out at that time when i was an entrepreneur, i would not have stayed either. one of the reasons we're trying to do what we're doing is build this culture of entrepreneur ship and create the environment people like brad and eric, the next generation have a reason to stay and build business in detroit. nothing against chicago and what they've done, but they're example of we can't miss the next one. these guys care about their home down a lot. they're getting involved. >> you did start this business in chicago. why chicago? >> i think brad and i moved to chicago years ago and were in michigan, had a business in wisconsin, and made our way to chicago. once we got to chicago it was immediately like why would you leave? it has the core dna to build a technology business. young vibrant work force, university, culture. there was no reason to leave. for dan's point, detroit is on the rebound trying to get those things back. chicago has them. for us, it's been an amazing place to build a kpaechblt. >> -- place to build a company. >> they started a six day conference downtown last week. truly a remarkable six days filled with content, thousands of people talking about ideas from businesses and entrepreneurs and everything in between. they really are engrained and involved in a big way. >> we think about entrepreneurs and often think of silicon valley. >> it's happening around the country. >> it's a fact great companies get built all over the country. obviously silicon valley has the most. one of the reasons we start chicago ideas week is not just the focus on technology but focus on ideas and to bring lots of people together in chicago in an urban setting to explore and open their minds to be connected. to me that makes a great entrepreneur community. no question chicago is becoming more connected as a community. in detroit, dan is doing a phenomenal job creating the connected community where there are resources and a lot of dna of people there to help each other. >> dan has a site for brad and his company in detroit right? >> let's do a deal. >> for an expansion office or something. these guys care about their hometown a lot. we'll be talking. >> let's talk about groupon guys. i know you're in a quiet period. it's something other companies have picked up and copied since then. i wonder how do you maintain a mote around your business? >> the business has proven overtime to be more defensible than people thought. we were incredibly copied or cloned in 2010. there were like 5,000 worldwide. probably one of the most copied business models of all time. facebook launched deal, amazon launched amazon local. all this was really two and a half years ago to three years that offerings came out. sense then we've been able to maintain or grow market shares. what happens quite often, consumers start to get use to buying from a company, search on google, sell used products on ebay or whatever they do. as long as the company is delivering great value you get the net work mote around the business. >> how has mobile changed the business? >> certainly mobile has been the biggest story over the last few quarters. we had 7 million downloads, 7 1/2 million in q 2. our mobile concentration continues to grow. in terms of large commerce companies probably the most in terms of penetration, transactions more than anybody. you use it when you're out and about exploring your local market whether buying at a restaurant, getting a spa or doing a local activity. it's just designed for mobile. it's geo eccentric intelligent, knows where you are. it knows through the power of a deal how to explore a city. >> i do realize your in a quiet period. we want to thank you for joining us today. >> thanks guys. coming up, kid rock has been one of the strongest advocates for revitalization of detroit. kid rock will join us next. with fidelity's options platform, we've 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. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. >> kid rock purchased a motor city business made in detroit out of bankruptcy to revitalize the brand. joining us with more, robert james richey known as kid rock. is it mr. rock? >> mr. kid. >> the whole family we're huge fans, kid. can i call you kid? that's okay? >> call me whatever you like, sir. >> thanks a lot. >> don't take too many liberties on that though. >> i won't. >> the amount of stuff you do, i'm most interested in the $20 tickets to your concert and the $4 beer. that's unheard of. people are pointing out you're probably making a tenth of the money you could have made. this is kinds of stuff you do all the time for fans? >> i try to. it's a simple business model for somebody who wasn't in college and not a student who he probably should have been. the little bit of research i've done, sam walton had it right. bigger volume less price. we're starting to get the numbers back from the tour. it was one of the best summers i've had. >> as far as detroit goes, you're there to stay. you've bought a water front place to live. are you going to move your studio there? you're not just talking the talk. you're walking the walk trying to bring detroit back. >> i love detroit. the home i got here i stayed in last night and didn't have to fight traffic to here this morning. it was great. being able to speak from the residential side of things having had the home a few years now. detroit has got to come -- regulations, especially the neighborhood with the historic homes. i understand things have knob in place to keep things up. this cannot happen in a city where you're trying to get people back. i'm not downtown. i'm four or five miles east. you fknow, some of this regulation, like putting up a fence and gate in front of my house. there was a little bit of that going through it. i've had my house a attempted to break in a few months ago out in the suburbs. doesn't matter where you're at. if someone wans to beautify their home and make themselves feel secure no matter where you're at. at the hamptons, people have beautiful gates and things like that. i want to redo the siding, make it better. i've been blessed and want to put the money into it. sometimes it gets frustrating being in a city that you know needs the tax. >> i want to do things ahead of hit because i can be, i've been ble blessed. i know dan can speak on the business side. >> regulations are everywhere. >> professor rock, is that okay if i call you that? you sound like a business school professor. you were born and raised in the detroit area. you are the symbol for the city. you do things people don't know. kid rock helped us settle the symphony strike because we weren't able to raise the money. he did a free concert. what is your feeling on the street, a city that's been beat up so long? what's the feeling on the street in the detroit and surrounding area? >> being here all these years, i know this. there's no place on earth, and i'm not just saying that, no city with more style than detroit city. hands down that's a fact. a lot of people that come here from other places whether to start businesses, be artists, you've got a blank canvas. when we're young artists, we're broke. we need places to live cheap, do what we want, pay rent and find a craft. detroit is one of those places. see things like the urban farming. there's a sense of community here. not just the streets but the business world. i've stuck my toe in the water with yourself and penskes. everybody here is a tight knit community. the next five years to me looks like it's going to be the people. i don't think it's going to be the government. i think the government needs to do their part, but i think it's going to be the people. i'm hoping maybe i can have my torch and run down in the city and say look how beautiful a home i've made here. look how great all these things are and show positive things going on. enough with the negative. we've seen it all. books, movies, documentaries, everything on that. it's definitely been reported fairly honestly. know one is going to deny it. let's look at the future and make it positive. if we get people, kids, people like me that afford to have a nice home on the river. people race up north to northern michigan, one of the most beautiful places on earth. i'm driving south on the river, couple of jet skis there. there's no better bass fishing in the world than lake sinclair. >> now you're talking. >> can i ask about the music business. money is not in the recordings anymore. it's all on the road. that underscores what you did take a hit even on the ticketmaster charge, right, for what you could have been making in the place you make the most money? >> well live nation was great. rather than battle with guys, our ceo went into business with us. we laid everything on the table. i've never signed so many non disclosure statements in my life. we laid it on the table, got beers down to $4. we found getting the numbers back, people didn't mind buying the expensive beers to buy the bigger ones if they could afford it. people that couldn't, they bought the $4 beers. they could get pay good who cou afford it, they bought $4 beer. we're doing 18,000, 19,000 a night. and we made as much money as any summer tour, if not more. bands are coming to me and saying how can this be? you're splitting everything, splitting, parking, splitting the merchandising, splitting the ticket. now we have to get ticketmaster to play a little ball, be a little fair. dan, i was hoping you guys can do it. i know you're doing some interesting things in cleveland where you can charge a fair price. >> i didn't ask you to say that. but there is a company called veriticks. i want to thank you for everything that you do for detroit. when you think about our city and musicians, eminem, kid rock, madonna, motown and all the artists, what is it about the city that creates this environment of so many musicians? >> i was going to yell madonna ain't done nothing for detroit. >> don't count her out yet. don't count her out. >> no, i picture my mom in front of the tv saying, "bob, you don't have to blow someone else's candle out to make yours glow brighter." >> if you're in new jersey, mr. rock, we could use a little image buffing up here. >> he holds back. he doesn't tell you how he really feels. >> that's the way to do it. thank you so much, we appreciate it. big fans. >> thank you. >> thank you, bob. >> coming up, much more from our guest host, quicken loans founder and chairman and the man of detroit, dan gilbert. first, a premarket mover you should be watching ahead of the opening bell. 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[ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. ♪ welcome back to "squawk box." the futures right now were down 70. last time we checked, down 55, a little bit better than they were before. can't be the import numbers. maybe the earnings are a little better. the company will take control of a joint venture of samsung's business that makes lcd glass in korea. corning authorized an additional $2 billion in buybacks throughout 2015. >> still to come, our guest most dan gilbert. we'll give him the last word when we come back. and coming up on "squawk on the street," don't miss cramer's interview with howard schultz. and tomorrow, we'll bring you the numbers and instant analysis. and one of our favorites, guest host martin sass. it all starts tomorrow at 6:00 a.m. eastern. who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon. you'd do that for me? really? yeah, i'd like that. who are you talking to? uh, it's jake from state farm. sounds like a really good deal. jake from state farm at three in the morning. who is this? it's jake from state farm. what are you wearing, jake from state farm? 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[ male announcer ] another reason more people stay with state farm. get to a better state. ♪ let's gets back to our guest host, dan gilbert, for the last word. we talked about mortgages briefly. what do you think happens from here? if the fed pulls back and starts to taper, will that have a big impact on what's happening? >> it's hard to know what the long term rates will do to short term. rates are at an historical low, 50s, 60s, 70s, however long you go back. i remember when my father had a 5.5% interest rate on his house. he said, "son, you can be in the mortgage rate as long as you want, you'll never see this rate again." we were at 11, 12%. it's crazy that there are millions of homeowners who can refinance and think because they're underwater they can't. it's the government's interest, who has these h.a.r.p. programs. >> were you happy to hear they weren't going to taper for the feds? >> it's head winds and tail winds. we say rates go up, shouldn't stop business. it's a head wind and when rates go down, it's a tail wind and hopefully we can do business. >> thanks for bringing in mr. rock. make sure you join us tomorrow. "squawk on the street" is next. good wednesday morning, welcome to "squawk on the street." i'm carl quintanilla, jim cramer is live with howard
a pretty rough session in asia. the nikkei lower today. the ecb outlining their plan for stress tests. by the way, stay tuned for our interview with ecb president mario draghi a little later on. dell out telling two different stories, caterpillar, cutting the forecast, citing a difficult year. then there's boeing raising its guidance and upping its production schedule. >> and our live interview with starbucks chairman and ceo howard schultz. the company is looking to expand its empire beyond coffee. >> carl icahn selling shares. we'll discuss the best time to get out of a stock. >> boeing raising its full-year guidance. on the flip side, caterpillar is falling after posting huge numbers, missed the street by a very wide margin, cutting hits full-year outlook. ceo doug oberhelman was on "squawk box" this morning. >> i've seen cycles over my 39 years. this one is pretty acute in mining. the rest of the business is hanging in there. >> jim, he said it's been a tough year, he'll be glad to see it go, he's still bullish, long term on mining but he doesn't know if it's this year, next year, five years, ten years. not a great, reassuring message by observ by oberhelman this morning. >> a third of the job cuts have happened in the united states, their projection for revenue for 2014 is up 5%, maybe down 5%. doesn't look like next year is the term. >> no, it doesn't. and this seems to be a growing perhaps disillusionment with management at this point. you haven't mentioned the foray into china that jim has spoken with. jim, you're back with us. tale of two companies here. interesting we get boeing and caterpillar because you have made a point talking about both of this many going into different directions for some times. >> jim mcnerney, ceo of boeing, completely in the zone. this is a multi-year super cycle. he's already increasing the margins on planes, a remarkable quarter. caterpillar, i know they make the best machines in the world. i am never going to criticize their machines. the execution of the company is quite weak. the fact that they even at the very top said, listen, we don't know what the world looks like. the caterpillar of old always knew what the world looked like, always knew what the inventory position should be. this caterpillar is making the best machines in the world and is having trouble selling them. >> which caterpillar? the oberhelman caterpillar? >> it all stops at the ceo. how can we think otherwise? i have to tell you, i like doug as a person, he's obviously a terrific guy, but can you not be more wrong. in the top of all with the bucyrus acquisition, which was a mistake and then follow it with the chinese acquisition, which was supposed to solidify china and did the exact opposite. there are not a lot of companies in the world that make the best product that are not blowing the doors off now in china and europe, caterpillar is one of them. contrast that with boeing and mcinerney's level of confidence during the dreamliner incident, where he said this is going to be behind us. this is story of two tales of management, one has it, one doesn't, boeing has it, caterpillar doesn't. >> margin growth on the commercial side, the record back log, jim, $410 billion as $40 billion in orders come in during the quarter. just an amazing number out of boeing today. we'll talk more about it going on. in the meantime, jim is there for starbucks, expanding its footing into the tea business. jim is now joined by howard schultz, the chairman and ceo. jim? >> this is really a pretty exciting development. i was blown away when i walked into teabana. this is a totally redesigned, extravaganza place. this is quite different from what people expected. >> no question about it. when we acquired teavana, we acquired a jewel of a company that had 350 companies in malls of america. oufr, their business did not include any kind of a bar in terms of being able to make a beverage and no scores across the country. you talk the starbucks model, the espresso bar, the romance and theater of the beverage, stores in every community in america. what we plan to do is leverage the capability of starbucks in a completely complementary business we have been in for 40 years but now we're going to bring it to the country of america, all over every city, in canada and at some point i think we can braeng ting teavana to a well. this the beginning of a thousand stores over the next two years. >> all-time high this morning, starbucks. this is a needle mover within the next, what, one, two, three years? give us a sense of how big the tea market is versus the coffee and how many you think ultimately there could be of teavanas? 19,000 starbucks. could it be contained bit same four walls of starbucks? >> i don't want to get ahead of us. this is one store we have a lot to prove. tea is twice the size of coffee globally. most don't realize that. it a $90 billion category hot and cold that is ripe for innovation. if we take the foundation, which is sourcing and blending the world's finest teas and bring the capability, the discipline and romance and theater of what we can do at starbucks, there certainly can be a global opportunity for teavana over the next number of years. >> using the word romance and theater -- i'm not a touchy, feely guy but this is a warmer experience from a traditional starbucks and a more architected enterprise. >> i think there's a zen-like experience in here. i think tea is a completely different category, different experience and different beverage than coffee. however, we're going to bring things to this category that people have not expected. the quality of the teas, the education we're going to provide, being able to make tea at home, and this will become a daily ritual for many people, the same way coffee has, but it's a different consumer, different customers and what i love about it, it is completely complementary to the starbucks experience. same capability and core competency of our company. >> food important. which of the -- what are the synergies in terms watch you have here versus starbucks and what will we find that you would never put in starbucks? >> i think the acquisition of la valange gives us the ability to have the compatibility. you're not going to bring coffee here. we want teavana to stand on its own merit. will you see it next to a starbucks store? probably not. however, the capability the company has in terms of real estate division designs and with our global partners, especially in asia where tea is so popular and robust, this is a good occasion. >> you're making a splash from day one, not necessarily the way i would expect starbucks to roll out. >> well, teavana has a great history. we're ready for broadway. we want the opinion leaders and sophisticated people in new york to see this store. you'll see many other stores in high profile neighborhoods across america. >> the chinese government seems to be at least, we don't know, tv, not happy with your cost structure there, believing you're overcharging. you've done a breakdown of costs. it seems comparable. >> let's clarify the situation. first off, we've been in business for china for 15 years. we just crossed 1,000 stores there. we have a very healthy business and i think the health of that business has been based on transparency and trust with the consumer and the chinese government. i've spent endless amounts of visits in china meeting with government officials and building relationships. when this happened, i think we were taken back because this is not the way starbucks does its business. what we've done in the last 48 hours have been completely transparent. our cost structure in doing business in china and the investments we've made to build that businesses to have a thousand stores, almost 20,000 employees and investing ahead of the curve gave us a position where we had to charge a little bit more than some of our other markets. we've explained that and i think the people who did the story understand it and i think the story is now hyped us. >> it's reported this morning 60% decline in china profit. very clear the chinese government has not embraced it, we know that young, kfc, a fine executive, thought maybe we'd be through that already. government resistance. what are you hearing back? >> we are in an acquire period. we'll announce earnings next week. i want to be a little careful there. i would say our business in china continues to be strong and we're cautiously optimistic about the future. we haven't seen anything that would significantly change our outlook in china. >> teavana opening, the continued rollout unbelievable, same-store sale numbers, you made it clear there was no cannibalization, but you're also trying to drill down on watch. you've had some luck trying to get people to come together with your petitions. where are we on that? >> i think all of us in america have a strong feeling that something is not right, that we're looking at a government that is not functioning the way we would hope. i think the government shutdown in the last two weeks demonstrated a complete fracturing of leadership and i think in many ways, and i hate to say this, but it was shameful. i think all those people in america who are affected by this did not have a voice. in two and a half days we put a passive petition in our stores, almost 2 million people signed it, we physically delivered it to congress last week on the heels of the opening of the government. what we need as a country and what the american people need is a long-term, comprehensive, bipartisan, long-term budget deal. we need a new fiscal policy, we need a new tax policy, we need a new immigration plan and people in washington have got to understand that the constant bickering, the constant disrespect is not serving the american people. we need citizenship over partisanship. >> where does that fit in to an international company that truly is, as you call it, the fly wheel where you're trying to build the energy and then expend it with a lot of different places. how does the political fit in? some would say this is really a great worldwide enterprise. how does howard have time for it? does it take the eye off the ball, should shareholders be concerned? >> well, i think that we're living in an age right now where responsibilities for business and business leaders are -- need to be different in the future than perhaps they have been in the past. and we need to not be a bystander in this dialogue, in this process, in which we're watching the government and our elected officials let us down. i also think our brand, not that it gives us license to do things, but as long as we're being civil and respectful and we're not taking a political side but we're trying to offer an opportunity and a platform for people to use their voices and recognize that this is a democracy and we do have a choice and a stake in all this and perhaps starbucks can be the platform, but in addition, we have core principles and core beliefs. i stood before our shareholders that we were in favor of same-sex marriage and in favor of giving health care to partners in a gay relationship. that's who we are. in the last month ago we asked people who had a legal right to carry to say, listen, we don't think starbucks should be part of the gun experience. we're not trying to be political but we're trying to recognize as a company that has stores in every community and serving 70 million a week globally, we kind of have a pulse on what people are thinking and doing and we want to offer them an opportunity to leverage our platform and their voice. >> i want to circle back to teavana. it's such a great extravaganza. never mind being a houseman for a stock that's had unbelievable performance, teavana, two stores, five stores, we see a hundred, what is the pace of this particular opening? this is an expensive store. i'd like to know how much it does cost and this a different store that i would think would be hard to recreate all over the country. >> well, first off, the unit economics of teavana when we acquired it was very, very attractive unto itself. then you add the beverage component, which will drive incrementality. and then add location, we think this can have as good or better unit economics than what we acquired in the mall, which has been 2-1 sales-to-investment ratio. we're opening another in seattle in 30 days and then we'll see. clearly we've acquired this company to leverage its asset, the equity of its brand, the global $90 billion category and we're going to build a global teavana business unto itself and you'll see we'll leverage the fly wall and mobile platform to drive traffic. >> thank you very much, howard schultz, founder, ceo, chairman. we'll be speaking to you again tonight on "mad money." david and carl? >> thanks so much. when we come back this morning, another big interview, this one with fed chairman bernanke's european counterpart, ecb president mario draghi. we'll hear what he has to say about bank stress tests. we are seeing weakness largely coming out of caterpillar. we'll see if boeing can upset that when we get the opening bell in about 14 minutes. a lot more "squawk on the street" is back in a moment. these like into powerful investment strategies. for a university endowment. it funds a marine biologist... who studies the peruvian anchovy. invested in the world. bny mellon. with fidelity's options platform, we've 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. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. carl icahn has sold roughly half his stake in netflix, a 4.5% position from what was a 9% position. he said it was, quote, time to take some chips off the table. can't blame them, of course, for having done that. 58.40 was his average price. by the way, he still own as good deal of the stark. nonetheless, it's hard not to think he was a potential seller there. the stock climbed towards almost 400, he said was his target, though his sales took place between the 10th of october and yesterday. i mean, he made -- he's made well over -- i think it's about $1.7 billion was the total value of the position as of yesterday. then you take his cost out at 5.5 million shares at 58, can you do the math at home. you get it. it's one of the best investments he's ever made. >> and not his own idea, by the way, which he's willing to admit. we were talking yesterday morning as the stock was coming off the open, some $40. we joked wouldn't it be funny if icahn came back and said i still haven't sold. in fact, he came back and said just the opposite. they did say reassuring things about growth targets in this country, could be $70 million, $90 million and the international possibility is even greater than that. >> he seems to -- carl was a great investor and trader and know when is to potentially take a profit. seems to be at odds a bit with the thesis of the portfolio manager. yesterday was a strange day. we did start up -- we didn't get an early tweet from icahn. maybe that should have been a sign where he said i still love it, thank you. he said as the volume ramped up yesterday, we did all start to wonder is he potentially selling here. but that was quite a reversal. one key question, who are the incremental buyers at netflix at this price, other than those covering shorts. >> we're getting conditioned to wait for his tweets. after four straight dates of record highs for the s&p, first first and foremost on art cashin's radar? we take another look at as we kick off wednesday. 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they had a 17% gain. they raised guidance nicely by more than 20 cents to $2.74. finally, we had some other decent reports overall. norfolk southern had a decent report, lilly had good numbers, they had good zyprexa sales. and even wellpoint benefited from membership. i know caterpillar is a lot of the talk today. i'm a little more concerned with the tech guidance, the lack of revenue on the tech side is going to be an issue today. back to you. >> thank you, bob pisani. jim krcramer is back with us afr that great interview with howard schultz. lumber liquidators, yet again higher. i guess the fish and wildlife investigation into i think it was lumber from perhaps places it shouldn't be coming from and particularly scarce trees doesn't seem to hold them back at all, does it? >> no. lumber liquidators, i like to make a little joke about it, but it's a metaphor for the moment. if you have high growth, people suspend a lot of judgment. lumber liquidators like whirlpool very much skewed towards housing and toward the part of housing where the discretionary spending is still ramping up. when you have high growth, bob pisani talked about low growth in tech, whether it be retail, whether it be in tech or machinery or aerospace, people willing to pay up for it. it's a bifurcated market. if you want growth, they don't have, they just don't want it. >> you look at boeing, particularly the margins, the stock up 6.4%. there's the growth story. conversely, caterpillar, bob just told us lowering guidance dramatically, although the stock getting hit. i'm not sure it's lower than when are jim chanos told us they were shorting it back in july. >> from what i see infrastructure being built around the country i think will be fine. circle back to mcnerney, the ceo of boeing. go back to where the stock was at 68.69, we had very big dreamliner pull back, he said we're sticking to our position, we're going to deliver weeks have a 25-year plan. mcnerney is the rock of gibraltar. he did say there would be margin expansion but he's surprising. >> with this level market expansion. there is a sequester going on. they have a heavy mulilitary business. mcnerney may be the best there is. >> that netflix turn around yesterday was interesting to watch. let's talk about it right now. stock is up about 1.5%. we know eicahn position down by more than half. unclear whether he's still ladding the fundamentals of the country but i'm curious as to what you make of the turn around itself of the stock price, whether there is significance beyond a big seller out there and interesting day in trading? >> i think carl made a very good point. carl's very old school. he's old school in the sense that bulls make money and bears make money and come on, i've got an unbelievable gain, what am i supposed to do, give it away? that is an attitude that growth managers don't ever have. they figure this stock is cheap, they can justify any price. carl is enough of an old school guy to recognize, you know what, there is a price where i won't pay. i think netflix in the end, nothing's changed about being a hit driven story, nothing's changed in terms of being age--o able to say when it opens in this country, that country, there will still be no growth. the reversal will make it that others say will i take a little off, too. i think you will agree with me, that this is icahn's moment, whether you like him, hate him, apple, netflix, he is the arbiter of prices here. >> he certainly can be and your point's a good one. it's a high class problem to have the gains he had, over 400% in 14 months. so you got to think what can i take off and how much. frankly i'm surprised they didn't try to get rid of all of it in some way given those incredible gains. >> well, you don't know. remember the way he took profits in hayne. i wouldn't be surprised if he does the same thing with netflix. as i said, you're not going to be able to have any -- it's not going to be clear when he gets out of the rest because of his filing situation. but, you are know, sometimes we hear enough managers come on cnbc and say i just had a big gain. you know what, i'm taking some off because i believe in giving -- that losing a gain -- in other words, giving back any sort of profit is a sin. boy, icahn is so old school, it's refreshing. >> yeah. it's amazing, too, how much he made in that name versus how much he spent on dell and didn't make that much money. that deal, by the way, closing any moment now as we head toward the end of this month. jim, stand by. i know we're going to come back to you in a bit. we want to get to this big reit deal today, something you're interested as well. american reality capital to acquire cole real estate, about a $6 billion deal when you don't include debt, $11.2 billion overall. that's the name i wanted to focus on because that of course is the acquiring company. can you see this being well received by the marketplace at this time. having spoken to a couple of investors in arcp, they're applauding the deal. they're in the triple net lease business. don't know what that is? you're not alone. think about the likes of a walgreens, which is one of their key tenants. they'll buy a walgreens and lease it back to them or at&t or those strip mall based stores and the like. with the acquisition of cole, this will become the largest player in that business. previously arcp would be a significant player. now it will be the largest reit. now it may get a multiple as being the highest. it had a high difficult lend yield and had a lot of debt. it is bringing the debt-t debt-to-ebidta ratio down. it is increase being its dividend to $1 a share and we'll see where the yield settles out. it is a 7-plus percent yield. cole had a 4.85% yield. we'll see where the yield is for this thing. but these are the things people are focused on. it's the net debt-to-ebidta ratio coming down, the guidance from $1.13 to $1.19, what the multiple on that should be and the increase in the dividend creating this category killer, if you will. that's at least what many of the proponents of the deal would say it is. for cole shareholders are you can take cash but most will probably want to take the stock since it's up nicely. also borrowing costs will come down for the entity and one would expect it will continue to acquire as it rolls up in this triple net lease area. but one of the biggest we've seen in a bit of time, especially with the performance of that equity right there. >> very large. by the way, jim, before we say good-bye to you, what is coming up tonight on "mad"? >> we're going to have more on howard schultz and we're going to palo alto network, which is a high flyer. fra frankly, this is a rerating off some of the reits. they've been skewed to the shopping mall reits. nick is trying to say we got to get more liquidity, this should be the benchmark reit. i think the call does solidify that. you're absolutely right. people will be saying that is the real estate trust i want my portfolio, not necessarily stub toe after jc penny, not simon. >> it's a different model. they are looking for investment-grade tenants that they're doing these sale/lease-back tenants. that's a pretty sizable amount for the reit area, isn't it? >> i think the reit area has land respect in the investment community. i think nick is very conscious of that and wants very much to be able to see his company included in a lot of indices. interest rates back to 2.5% on the 10-year. this should be bought, plain and simple. >> it's so interesting you mention that. i think inclusion in the s&p is certainly they're hoping for as well. so, again, something i've heard, too. jim -- >> jim, were you able to order anything from teavana? >> i had the miragea chai latte. i got to tell you, the calorie versus the capuccino that i like, it's half of that. some of these drinks do not have any calories at all. in the demographic way that people think about health, this is a winner from the younger's person's point of view. >> i'm anxious to try the lemon grass chicken kale rice balls. >> the menu looks good. >> 6:00 and 11:00 eastern time. >> when we come back, an interview with ecb president mario draghi. stress tests for bank on the agenda today but first brian sullivan is in north dakota today, home of the bakken. good morning, brian. >> reporter: good morning. your menu there is slightly different than ours is here. we've all told the bakken story, the oil, the pipeline companies, they've all done well. we want to introduce you to some stories about how people are getting very wealthy up here. it has nothing to do with the stock market. some young guys making millions of dollars. that story ahead. they're still bullish on the bakken. revolutionizing an industry can be a tough act to follow, but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business. welcome back. i'm sharon epperson at the nynex. oil prices under pressure. lowest prices since july 1st. in fact, here in the u.s., inventories are already at the highest level we've seen in 15 weeks. meanwhile, demand overall for petroleum at the lowest level since june. this is having an impact definitely on the wti price and it's causing the spread between brent and wti to widen to the widest level we've seen since april, about $13 right now. traders will be watching very carefully at 10:30 a.m. for the latest report from the government on u.s. oil supplies and we'll have that data for you live, carl. back to you. >> unbelievable, the series of metrics regarding oil. thanks a lot, sharon. a town synonymous with the bakken has struggled to keep up with its own massive growth. i want to get more from brian sullivan, who is in williston, north dakota. what a week to launch this series of coverage. >> reporter: it really is. i'm going to give you some more unbelievable statistics here, carl, following up on the back of what sharon did, which is this. they're producing so much natural gas here that they're actually burning it off. it's called flairing. in fact, by some estimates, about $100 billion a year or something like that, is actually just being burned into vapor because they don't have a way to get the natural gas out. they lack the infrastructure for the pipeline, for trucking, for rail. so, again, burning so much natural gas and producing so much that they actually have to burn it off. but we know the oil and gas story he, it is alive and well, 5,000 gallons produced in 2005, 960 produced now. and there are people getting wealthy that have nothing to do with the stock market or oil and gas stocks. in fact, we met a young guy, 32 years old named andy ness who run as crane company. listen to his story. >> that one right there, value is about 400,000. >> sounds like given the strength of your business, you could pay that off pretty quickly? >> they are an hour live rate machine. but can you definitely pay them off pretty quickly here. you can virtually work 24 hours a day around here. >> you know, carl, that guy and his partner, who is also his cousin, they drove down to dallas. they drove the rig back from 45 miles an hour. they now have nine cranes. these guys are mobile, they're in their early 30s and there's stories like that everywhere. it feels like the wild west. feels like a boomtown and people just trying to figure it out. you can work like he said, 24/7 and still not get all the work you can get done. >> would you say, brian, you're more wowed by what you've seen there in the bakken or the permian earlier in the week? >> good question. i would say definitely here because the permian had a boom back in the 80s that they kind of already built out here. the hotel i stayed in last night, perfectly nice place about ten miles outside of town, brand new place, down a dirt road, it was half a file down a pretty bumpy road because they built the hotel before the roadroad roads. they're trying to grow. all day we're going to be bringing you stories on the bakken. we have a brooklyn developer who is getting 3,000 a month to rent out parking spaces for people's trailers. we have a lot of amazing stories for you here. carl, let's not forget, williston, north dakota is the hometown of which legendary basketball coach? >> i knew you were going to ask me -- >> phil jackson. >> i wouldn't have gotten that. >> phil jackson from williston. >> when we come back, the new ipad lineup. should you buy what and certainly selling when it comes to the tablets and the phones. up almost 2,000%. we'll hear how chairman and ceo stephen holmes plans to grow the travel lodge and days inn a little later on. tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. always go the extra mile. to treat my low testosterone, i did my research. my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron. take a look at the dow. we have a few dow components in the green, led by boeing. just a blowout quarter as they raise guidance, beat the street, raise production problems. look outside where prince george will be baptised there a private ceremony. just happened to take that shot just as the queen arrived. guest list here very, very exclusive. with that we talk to simon hobbs with more. >> exclusive is the word. they don't usually have it in this small chapel where let's not forget 16 years ago the body of princess lay. usually it's in westminster cathedral, but the parents, will and kate, have said they want just a low key ceremony, with only 50 people invited. there you see the king of england. also the supreme governor of the church, he's wearing a replica of the same christening ground that 60 other members of royalty have worn. that picture now will now travel around the world and will sell an awful lot of magazines on what is a very special day in britain. >> that is one good looking kid, i will tell you that. the prince, by the way, prince george will be baptised at st. james palace, being conducted by the archbishop of canterbury. some of the most senior members of the royal family were not even invited. >> only five members of the royal family are going to be there. this is very important for my home country. this is a new generation of royals that is distinctly trying to break with the past and get a new informality as you have with so many families to connect with the people and they of course have done that wonderfully well in the eyes of many britains. >> we are going to speak with mario draghi as we hear more about the ecb and stress tests. the s&p down about 10 points and the dow now down 80 at session lows. we're back in a minute. and this will be your premium right here. sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. love this guy. okay, does it bother anybody else that the mime is talking? 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[ male announcer ] staying warm and dry has never been our priority. our priority is, was and always will be take you to washington, d.c. this morning, a live shot where the speaker of the house, john boehner, and other gop leaders will speak about the affordable care act in a few moments. we'll bring you the highlights from that when it happens. meantime, some of the insurers are expected to meet with senior white house officials and secretary sebelius later on today, including humana and wellpoint. wellpoint did have earnings today, trounced the street, 2.10 versus 82. unlike unh, which had a rough week last week. it will be a key day to keep an eye on some of the insurers today. >> sebelius under pressure given the botched role of the online element of the exchanges. it certainly didn't go well at first. >> ecb president mario draghi is speaking out about european banks. >> jeff cutmore spoke to draghi earlier this morning. he joins us live from frankfurt and has the highlights. jeff? >> yeah, a fascinating conversation with mario draghi. the banking system in europe has been running sore on economic growth and finally we have what looks like a comprehensive plan to try and resolve some of the banking problems. we've got a whole agenda here on how they are going to scrutinize the balance sheets of 128 of europe's largest banks and ultimately next year there will be a stress test. let's listen to some of the conversation i had with mario draghi where i asked him about the risks involved in this process and whether ultimately there was a chance that the risking might push europe back into recession. >> the recovery is still in its infancy. it's gradually progressing, but it's still weak, uneven and fragile. the banking industry in europe, especially in the euro area, is the main channel of financial intermediation. that's different from what happens in the united states. almost 75%, 80% of total credit goes via the banking system in europe, while in the united states only about 30. so banks are crucial in this part of the world, and they are the main source of credit for small and medium-size firms. that's why it's so important that we make everything that's needed to make them function well. and so we have to see now whether the latest credit figures that will come out tomorrow will show modest pick up because so far we had every weak, very slow credit data. to reach this target is to make sure that banks have clean balance sheets, that have enough capital. ultimately the private sector find it is convenient to put money into this industry. that's the key issue. and if that's -- if this objective is reached, we will not have to worry about them deleveraging. >> reporter: let me then follow up because it's been half a decade almost since the financial crisis began, and we're still talking about misbehavior in the banking history. it seems that the bankers have not confessed to their crimes of hiding their mistakes, and they have also, it seems to me, been willing to carry on taking the compensation and the remuneration that they generously get in their industry. so is this the final point where we get it across to the banking industry that it must reform and that what it has done in the past must never be repeated again? >> i certainly agree with your last statement. what's been done in the past must not be repeated again. many things have been done in the last three or four years. money to the extent of 5% of gdp of european gdp, has been put into the banking system. it's less than in the united states but it's a lot for the taxpayers. things have improved in the banking industry, but no, this is not the final point. it's just the beginning of a new way of doing final things. i insist on the primary objective of this exercise is transparency. when i said the private sector money must find convenience, must have trust in the soundness of the european banks and the quality of their balance sheets, i mean this -- the process must be absolutely transparent. to this extent, we've designed a process where there will be several actors playing at once. you'll have the ecb, you'll have the national supervisors, you have other national supervisors, which will be part of the joint inspection teams that will actually supervise various countries. so you'll have a blend of different nationals. you will have private sector parties advising the ecb but also private sector parties advising all the national competent authorities. so the process is being designed as to be maximum transparency. >> so when you leave here, obviously you're going to go to brussels and be at the heads of state meeting, this important council meeting, and you're going to have a job to do to sell to these heads of state what you've proposed particularly when it comes to the backstop. and we know the germans seem reluctant to underpin the backstop, we know the brits seem to want to sit outside of the regulation and we know the spanish, the italians, the greeks can't afford to pay for this. so when you go there, firstly how do you persuade the germans and the others that they should get aboard and that they should provide the backstop and, secondly, when you look david cameron in the face, how do you persuade him the banks in europe's largest financial hub should be on this journey? >> let me reassure you about the backstops. the last european council in 2012 already had in its conclusions the explicit leaders' commitment to have adequate national backstops in place. but the key challenge is not really to use the backstops there. it is to make sure, as i said before, that private money is willing and confident about being used in the banking industry. the transparency, the strength of the design of this exercise, the coverage of this exercise should by itself make the leaders reassured that taxpayers' money, if needed and we all hope it's not going to be needed, is going to be properly used. to prime minister cameron, you are asking me a difficult question, but i'm absolutely convinced that the u.k. should stay in the union not only for its size and might of the financial sector but for its history for u.k. europe. as i had chance to say in london, we need a more british europe and a more european britain. >> reporter: so a fascinating series of comments from mario draghi. i think this key issue, what the united states was able to do with its banking system is hold out this pot of cash and say this is what we will use to recapitalize the banks, if necessary. and this is the problem with the backstop story. right now we do not have the germans and others signed up to contin continue using public funds to fill up any black holes that remain in the banks' balance sheets. back to you guys. >> simon hobbs, back at hq, it's all taking place at a time when this euro run just a shade below 138. that's incredible. >> jeff, i think it's a great interview. i think it raises some really interesting questions on a number of levels. i come back to that central message that these given. there will be three sets of eyes. this will be a water shed, here on in the private sector will trump the bank. it comes back to the question you're raising again and again, where does the money come from, hundreds of billions of dollars? do the germans get their way so that even the senior bond holders take losses here? >> reporter: yeah, i think, simon, that is the key question in all of this. i think ultimately the way that they are positioning the credit structure for a bail-in process would be, yes, the bond holders do have to take responsibility. ultimately they want to see the private sector carry the burden here because it's very difficult to sell the idea of more taxpayer funds than someone after you've done the shells, done the bond holders, you get to the point where you start talking potentially about those who have departed in the bank. we saw that with cypress. nobody wants to go down that road. but ultimately that does remain an issue here. mr. draghi seems to think if the process is rigorous enough, he will get the germans to sign up to allow taxpayers' cash to be the final backstop, if you like, to recapitalize those banks that can't do it themselves. >> all right, thanks you very much, jeff. great work getting to draghi and simon, thanks for adding to that. the s.e.c. is releasing its crowdfunding rule. eamon? >> reporter: the whole debate has been how do you divert capital to smart startup companies in an effective way without attracting fraudsters? now they are putting in place some of the proposed regulations to keep investors safe. it looks like what the s.e.c. is doing is taking a very shallow approach to crowd funding. a company would be able to raise only a maximum aggregate amount of $1 million through crowdfunding over a 12-money period and there would be a cap on investors themselves, include investors over a 12-month period would be permitted to invest only up to $2,000 or 5% of their annual net worth or income, which ever is greater or 10% if their annual income is equal to or more than $100,000. here the s.e.c. looking to allow for crowdfunding but maybe putting caps on it and limiting the sides and amount to protect investors. we'll take a wait-and-see approach as to whether there is fraud in this new system. a lot of folks, i've got to say, feel this effort coupled with some of the health care provisions in obama care might make the united states a much more friendly place for entrepreneurs to start companies. that removes some of the biggest hurdles for new companies to start up. >> talk about a brave new world. thank you very much, eamon javers. when we come back, we'll find out if the new air will keep stocks ahead. and should you be cashing out of triple-digit gainers? we'll talk more about that when "squawk on the street" continues. we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ carl icahn selling more than half his stake in netflix, pocketing about $1 million in profits so far, thanking reed hastings and kevin spacey in a tweet yesterday. netflix isn't the only stock with huge gains this year. which other stocks should you think about cashing in on? dominic chu. >> reporter: here to look at some of the other star performers and what they've done this year. do these stocks have the room to run further or is it time to take some winnings. the ones that have had serious momentum, first is priceline.com. this stock has been on fire, up 75% year to date and trades at 35 times earnings, trading near record highs. we've seen a similar price move for high end burrito maker chipotle mexican grill, also trading near record highs. one of the huge moves so far this year comes by electric car make are tesla. it may be moving so many momentum very short term but shares are up over 400% this year and just about 13% below its record high. best buy, boston scientific, those two stocks have doubled to tripled in value so far this year and they haven't made a profit over the last 12 months. we asked money managers when they decide to make a sell decision for a winning stock and take some of those profits off the table. hennessey funds co-manager brian peery use as quantitative approach. they only sell stocks when they meet a variety of criteria and when the criteria are no longer melt, they get out of them. >> doing also a lane has predetermined targets. great traders like carl icahn, they play the odds. they make buy-and-sell decisions doing lots of homework. back to you. >> apple's ipads may have had good reviews but did it impress investors. guys, good morning to you. >> good morning, carl. >> what did you make of yesterday? did it offset any of the worries we've heard all throughout the quarter that they're cutting orders on phones, that there's going to be tight supply going into the holiday season? >> well, carl, i think first of all it was a much longer event than what we've seen over the last couple of years because they had a slew of announcements to make. i think most notably is what they closed with, which is what you referenced, the new ipads. i think by and large we were pleased with what they announced in terms of the air and ipad mini retina display. i think most importantly, however, customers are going to respond favorably and we think that's going to support the stock for the next 12 month. >> how about you, channing? what did you think as a shareholder coming out of yesterday? >> we thought it was good enough. we've been waiting on a catalyst really for the last nine months. we have pointed to the two launches, the ipad launch and iphone launch. the technology is not faster chips, better design, better operating system. we think it's good enough to spur demand going into the holiday quarter. i think the key that we're looking at, if you look at gross margins, have been the achilles heel of the stock in the last nine month. we feel pretty good about margins rising into the next quarter. we expect margins of 36, 37, expect that to rise to 38, 39. pricing has been a big surprise. we think pricing was higher than analysts expected. while that hurts emerging markets, it going to help margins. if you look at the cost structure, we think that's much more stable this year. material costs have gone down. i've seen more cost efficiencies, leaner inventories and demand is very strong. i went to get a 5s, they were out. the product mix should be more toward the margin 5s. we think with inventory, cost structure, the margins are going to go up. we think that will surprise investors and move it up to the $600 target. >> scott, i wonder, what would you rather see, a true wiz bang technological advance, the kind that channing references or a big balance sheet move, the kind that icahn would like? >> i think over the longer term people want to see new categories and new exciting products. but by the same token, it's pretty fair to say apple is notably overcapitalized. honestly, we think they can do both of those this eveninngs effectively, especially offer next year. your prior segment was talking about this notion of a seller like carl icahn and netflix, but he just started the position in apple and i think that's an opportunity here, the catch-up trade where apple is down year to date but the market is up over 20%. we see notable valuation advantages to apple right now and our 12-month target price is not all that far from channing's at 590. >> channing, a similar question to you, to the extent you're in the stock and as scott made the point and many others do, including mr. icahn, they are well overcapitalized, even with a good return to capital with buybacks and dividends, do you expect there will be more? do you agree with mr. icahn? >> i think there needs to be. i think we'll see that. i think the key for a long-term investor is what's next for apple? if we look at the smartphone category, if we look at the tablet category, they're going to become more mature, they're already doing that, it's harder to innovate. when you get to mass adoption and technology cycles, you're going to come down and see margins under pressure. we're looking morality quarter to quarter. if we get to 600, we're going to have to take a real hard look at that weighting in our portfolio. you used to have a couple quarters where you release a phone, great thing. now you have a quarter or two to see what samsung comes out. competition is increasing. we're somewhat skeptical of technology on your wrist. sounds great, commercials for samsung are great but i think that's pretty much where it stops. i don't think that's the next category killer. the tv, we'll look at that. we don't expect the operating margins that the phones have and the tablets. it's going to become tougher. the old days of seeing the big advances are probably going to be more challenged for apple going forward. a lot of that also might be the law of large numbers. it going to be tougher seeing large gains going forward. >> we'll see what they come up with in 2014. thanks a lot, guys. >> thanks a lot. >> shares of boeing flying high today as it boosts its earnings forecast and jetliners drive the company's profits higher. we'll tell you how you should play the dow's single best component to date. back in a minute. tdd#: 1-800-345-2550 trading inspires your life. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. [ dings ] ♪ [ male announcer ] every thought... every movement... ♪ ...carefully planned, coordinated and synchronized. ♪ performing together with a single, united purpose. ♪ that's what makes the world's leading airline... flyer friendly. ♪ shares of boeing soaring after the company beats third quarter estimates, raising its 2013 earnings forecast. phil lebeau is live in chicago and as always has the details. phil? >> reporter: strong numbers across the board. when you look at what shares of boeing have done since the grounding of the dreamliner, you'll be stunned. earnings last quarter better than what the street was expecting by 25 cents, easily beating the street. on the revenue side, up 10.6%. strong numbers for boeing. what drove that strong performance? the commercial sector of that company. that division did better than expected. the company also boosting its guidance for all of 2013, going up to 650 to 665 per share, an increase of between 25 and 30 cents, depending on which analyst you're listening to in the past. they're also raising their production plan, on schedule to deliver ten by this year, and 14 per month by 2020. look at shares of boeing, the best performing dow component today and the best performing dow component since january 17th. the stock up 69% since the 17th of january and that's when the faa grounded the dreamliner after a couple of battery fires. and at the time, remember a lot of people were saying to jim mcnerney, hey, are you worried about what's going on with the dreamliner, do you have to dial things back? he said no, we'll be okay. conference call in ten minutes. >> some people were calling for his head when those problems were just starting. today the stock back to our history, still 1952, you can't find a stock trading higher. unbelievable. >> another dow component not doing so well. caterpillar down sharply, about 6% after third quarter numbers tumble 34% year after year. is it a sign of bigger trouble for the industry? we'll talk to some of the dans of the analyst coverage community in just a moment. ♪ ♪ ♪ [ male announcer ] the new twin turbo xts from cadillac. 410 available horses. ♪ room for four. twice the fun. ♪ ♪ a confident retirement. those dreams, there's just no way we're going to let them die. ♪ like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. that's what they can do with you. that's how ameriprise puts more within reach. ♪ the energy department on oil supplies for the past week ending october 18th. oil supplies rose by 5.2 million barrels, according to the department of energy. that is greater than what was expected. many analysts were looking for an increase around 3 million barrels. we're also looking at a decline in gasoline supplies that is much greater than analysts had anticipated, about three or four times greater than what some were previous districting, 1.8 million barrels in terms of gasoline supplies. fuel supplies rose by 1.5 million barrels. we are looking at oil prices. not at the lows of the session right now but close to it, down almost $2, under $96.50 a barrel. of course this is good news for the consumer as we're looking at lower prices at the gas pump but this surprise decline in gasoline supplies could change a little bit in terms of what we're seeing in the gasoline futures market, at least in this session. >> caterpillar down about 6% after a qe miss, a bad one. the chairman and ceo, doug oberhelman was on "squawk box" earlier this morning. >> we saw the mines really explode as india grew, china grew and economic growth through the big recession outside the u.s. and europe was pretty good. i think they got a little bit ahead of themselves, the market got a little bit ahead of themselves in terms of what mining supply and demand really was. >> joining us this morning, managing director of machinery and multi-industry analyst at jpmorgan and a senior analyst with longbow analyst, who clearly has plans for this evening at 7:00 as the cards take on the sox. i wonder who you're rooting for. >> go cards. >> even though nothing was terrible, nothing was good about the mining. is there any silver lining here today? >> this was an ugly quarter but mining was what we expected. the surprise was the weakness in power systems volume and poor profitability of construction. the only silver lining is that construction equipment at the deal level has turned up and that's just a stage at the end of inventory liquidation. that's the key to earnings performance next year for caterpillar. >> anne, they were very sketchy in terms of recovery. do you believe the iis isnvento issue gets settled in 2014. >> i believe the inventory issue gets settled in 2014. the biggest issue was they talked about pricing being under pressure. if pricing is under pressure, they didn't really explain why. if it's the japanese on on the back of the weak yen, if it's the chinese because they're looking for export markets. there we have a new structural risk, in my opinion be, and we need to understand that better when we get through the conference call. >> it's easy to look backwards but management has taken a beating over the timing over bucyrus, and over it would have been hard to make it worse. does management have any credibility because of that very large deal done a long time ago? >> i don't think they helped themselves today. i think we were all willing to give them some credit if they had been able to manage the pull-through, as they call it. we're all looking for about 25% pull-through profits and clearly they did a lot worse than that today. so i think the issue going forward is this such a high fixed cost business that you'll never be able to deliver on the margin side in an environment where volume is weaker than you expected? i think the credibility did not get helped today at all. >> eli, finally you say the reward-to-risk ratio still 2-1, price targets 104, unless that's changed recently. >> no, that's still our view. earnings, it's not hard to get to 6, 650 in 2014, based on the inventory liquidation. in this mark, 15 times is just not an aggressive valuation. you know, all industrials are under pressure in the short term. everything in the market is paying for looking out. mining had a super cycle. the super cycle is over. it global growth that will drive it. it always comes back. it's just going to take time. we knew '14 was going to be down year week had that factored in. >> i know you're rooting for the cards. are you willing to say in how many games? >> we have the cards in six. >> they're calling it an ideal match, one of the best series ever. great to talk to both of you guys. thanks again. >> house speaker john boehner speaking out on the problems with the obama rollout a few moments ago. hampton pears is in washington. >> reporter: the speaker and house republicans are saying there's mounting anecdotal evidence that people will and are losing their health care coverage related to the delays in signing up. there's more and more mounting anecdotal evidence there. republican leaders also saying they're going to press for a delay in that mandatory penalty tax that kicks in after the first of the year for people who don't have health care coverage. >> clearly there's problems with the web site, but i would argue that the problems go much further than that. how about the report over the last couple of days of the hundreds of thousands of americans who are finding out that they're going to lose their coverage because the plans they had today don't qualify under obama care. >> speaker boehner went on to say if the current debacle with the web site continue, you could have more people losing coverage than are successfully signing up up for obama care. tim price, republican from pennsylvania, said there could be the possibility that hhs secretary kathleen sebelius testifies on capitol hill next week. if that happens, that would turn into some must-see congressional tv. back to you. >> let's send it over to dominic chu with a quick market flash. >> the second biggest supermarket chain is getting a boost after saying a private equity firm might have interest in safeway. and the activist investor had jana partners take a 6% stake in the company and is pushing for ways to unlock shareholder value. so swy up to the tune of 7% today. >> keep in mind that could be part. we'll see. >> when we come back, two startups going head to head and only marcus lemonis can determine the winner. card that doesn't charge you foreign transaction fees saves me a ton of money. 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[ female announcer ] research suggests cell health plays a key role throughout our lives. one a day women's 50+ is a complete multivitamin designed for women's health concerns as we age. with 7 antioxidants to support cell health. one a day women's 50+. all right, it's time for the power pitch tournament of champions. six startup founders will get 30 seconds to power pitch their big idea to the world. each of the six already delivered a power pitch that got high results from the judges. this time the competition has one ultimate judge. it's a tough one, entrepreneur investors, multi-millionaire marcus lemonis, host of cnbc's primetime series "the profit." he'll take it from here. >> entrepreneurs need to show me three things, people, process and product. today these contestants need to show me the same. first up in round one, elias roman of songsa, a music play list service. he's facing off against an app that turns a smartphone in your own personal grocery adviser. each of you will have exactly 30 seconds to deliver your power pitch. take your place at the podium. you're up first. when the clark starts, give me your best effort. i'm not looking for an infomercial. >> it empowers people to be healthy three better food. consumer ignorance have led to obesity and december like never before. it develops simple tools that helps individuals develop health plans and employers almost immediately reverse the years of bad eating habits, it will be used by millions to make healthy food choices and to track their progress overtime. eating healthy is not impossible, tweak your diet, tweak your life. >> thank you. i'm a big believer in eating healthy. i've invested over $5 million in healthy eating. the key word i used was invested and i expect a return. how are investors going to get a return on their investment in your company? >> it's very simple. the diet market or wellness market is huge. it's valued at tens of billions of dollars a year. our approach is very different than anything that's been done so far because we focus on getting people to eat real food, not to count this or that or focus on nutrient cards. >> how many active users? >> every month we touch about a million people. >> how are you monetizing those people. >> our users convert to free to paid apps at about 10% conversion on iphones and almost 4% on android today. >> are you profitable today? >> we're going to be by the end of the year. >> going to be or are odd? >> we're very close. >> i'm worried about the revenue model. i'll get back to in a minute. >> elias, you have 30 seconds to show me what you got. are you ready? >> i'm all set. >> relax. you'll be fine. >> we use six data points to predict what you're up to, entertaining, exercising, camping and an expertly curated play list. with no marketing at all we've grown to 5 million month live users. we've developed a way for advertisers to serve ads that users actually enjoy and built an experience where people tell us exactly what they're doing so we can make it better. that's a powerful foundation for curating content and products. >> i'm going to let you have more time if you want it. you don't want it. >> that's the story. >> are you profitable today? >> we are not profitable today. >> one of the things i noticed in your biois you have one key investor, amazon.com. tell me about that. >> we brought in a lot of strategic investors, the manager of lady gaga and justin bieber as well. >> is this amazon's play of getting in the music space? >> i can't speak for amazon. we're totally rethinking how music fits into people's lives, taking all the work out of figuring out what sound you need for each moment and building the next generation of intent-based marketing. >> i noticed you don't have advertising on the free app like pandora so how the heck are you paying the bills? >> we do have advertising but it's native. instead of a nike ad interrupting your run, it a situation called working out with nike. they're conveying a product messaging without interrupting the experience. >> visual messaging on an audio app? >> yes. >> thank you, guys. unfortunately one of you is going to go home. look, what i love about what the two of you do is you put the entrepreneurial forefront. you both put money in your business but you're both still losing money. which one will bring advertisers and consumers to the market first? eating healthy is important but there's a lot of ways to research eating healthy. and getting music is important but you have a lot of competitors called pandora, spotify and itunes. hemme, you have a great product but i'm not going to go forward. elias, you'll go the next round. >> coming up, the power pitch tournament of champions continues during the "fast money" halftime report. >> when we come back, walmart is getting in on the tablet wars, kind of. you can now trade in your tablet at walmart. we'll tell what you that may mean for the dow component in just a few moments. after your company's gone public? and the capital's been invested? or when your company's bought another? is it over after you've given back? you never stop achieving. that's why, at barclays, our ambition is to always realize yours. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you open an account. retail giant walmart announcing it's adding tablets to its electronics trade-in program. it's confirming it will said the new ipad air for less than the apple price. court is at hq with that. >> it's about gaining the foot traffic and the valuable tablet customer for the world's largest retailer. less than 24 hours after the launch of the newest ipad, they launch the trade-in program, hoping to grab the consumers eager to trade up. customer disreceive up to $300 for the current tablet, which is then immediately applied to the purchase of a new tablet. the trade-in needs to be done in stores at one of the 3,600 walmart or sam's club locations doing this program. walmart says customers were looking for a tablet trade-in program after the retailer launched the smartphone trade-in program. the new ipad air won't be available until november 1st, but at walmart, $20 less, priced at $479, and the mini will be $399. if the new tablet costs less than the trade-in value, consumers will receive the balance on a gift card, which gets you shopping in other categories. while it's been weak in the recent quarters, they say tablet sails as a subcategory are growing and it's doubled its assortment of tablet, important timing for the holiday season. many forecasts suggesting it's likely to be very tablet chris marx and on a recent conference call, haully said a million customers have participated in the layaway program, and the top layaway is the nexus tablet. we'll see if we see the new apple ipads in there, as well. >> the tablets becoming the bellwether for how retail will shape up this holiday season. >> it really is. >> thanks, courtney. it's the company behind ramada, travel lodge and day's inn. it's up almost 2000% since '09. we'll talk to the ceo about how they plan to keep the stock traveling in that direction. and look at a few of these, a beautiful starbucks in japan, and now expanding beyond coffee and into tea. we'll hear what howard schultz had to say about that move. woman: everyone in the nicu -- all the nurses wanted to watch him when he was there 118 days. everything that you thought was important to you changes in light of having a child that needs you every moment. i wouldn't trade him for the world. who matters most to you says the most about you. at massmutual we're owned by our policyowners, and they matter most to us. if you're caring for a child with special needs, our innovative special care program offers strategies that can help. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business. welcome back to "squawk on the street." check out medical device and supply company c.r. barr, moving on up after the company reported earnings that beat estimates, the sales helping to power results, and separately goldman sachs and piper jaffray upgraded the stock. >> all right. a lot of individual stories going on. thank you, dom. one deal is corning. in the deal to acquire samsung stake, just amazing the association of the company in the tablet space, or the phone space, is resulting in what is no a two-year high, an 11% move almost, or was for corning at 1,691. gilford securities out today saying investors should assume that corning will be more involved in the development of future products released by samsung, david. we know how competitive and highly watched those things are. >> without a doubt. also worth mentioning, a couple of other thing, broadcom, we haven't mentioned this, we've gotten a lot of earnings, broadcom, it was not a happy earnings report to say the least, and it's down over 7%. you can see it there, continued concerns about margins and just erosion overall. >> and the sort of bleeding over to the altera, and a real bifurcation. operating margin at northrup and general dynamics out today, up 120 basis points and 90 basis points respectively, offsetting the worries of declining backlogs. look at the charts. if somebody had said to you, we have a sequester coming, that's not how you envision that chart at the beginning of the year. >> no, that was unexpected, i guess you would assume, given the pentagon budget is under pressure. did want to mention the banks. jpmorgan drumbeat is still there. this is for private securitization, and you may recall bank of america reached a settlement with a number of investors with its securities or those with countrywide, as well. they may have done a good job. there's continued overall pressure on the financials. that may be part of it when you look at least some of the banks heavily involved in securitization, which amazingly enough, here we are, five, six years later, still dealing with the consequences. >> all right. european banks getting a lot of attention, too. italy is beginning to have a tougher time closer to the european close in about 30 minutes. we'll see what that brings. david, be on your way. >> i will be on my way, carl. i'll see you tomorrow morning. if you're joining us this morning, here's what you missed earlier on. >> announcer: welcome to "squawk on the street." here's what's happened so far -- >> it's more important than euphoria and greed. and you can see this with the function. bubbles go up very slowly, and then they go bang. our balance sheet is bulletproof right now. we're ready to go. we need recovery in mine, which at some point will come. i've seen cycles off and on over my 39 years. this one is pretty acute in mining. the rest of the business is hanging in there. the level of confidence during the dreamliner incident, where he said, listen, this will be behind us, don't think about it, it's a tale of two stories of management. one's got it, boeing. one doesn't, caterpillar. now we're going to bring them to the country of america, all over -- in every city, in canada. and at some point, i think we can bring it to asia, as well. this is the beginning of at least a thousand stores over the next few years where we can do for tea what we've done for coffee. [ bell sounds ] the recovery is still in its infancy. it's gradually progressing, but it's still weak, uneven, and fragile. -- could blame him -- good wednesday morning, live here at post 9 at the new york stock exchange with the check on the markets. the dow continues to lose some steam, as we're off 72 point, the s&p is off 11, back to 1,743, after hitting the record highs earlier in the week. two stocks to watch this morning. that is caterpillar and boeing. the shares rallying after third quarter numbers beat estimating. the airline raising the earnings for the rest of the year. caterpillar slipping, they did miss on earnings and revenue, cut the full-year forecast and revenue outlook, as well. a lot more about those names later in the hour. fitting that the road map begins with boeing and cat. if we go behind the numbers, what are the companies telling us about the state of the economy? we've got some answers. plus, one judge about to decide the way forward after the largest municipal bankruptcy in u.s. history, detroit's future is on the line as a federal judge decides whether the city can reorganize under chapter 9. we'll find out what that could mean in a few moments. and starbucks brewing up trouble in china, accusing the company of price discrimination against chinese customers. the ceo responds to the accusations later this hour. first up, though, a tale of two dow components. as we said, boeing third quarter numbers up 12%, pretty strong commercial aircraft business. caterpillar posting low number, mostly on mining weakness. earlier this morning, the ceo did join "squawk box." here's what he had to say. >> i'm hopeful that i'm not going to make any forecasts here, bullish forecasts on mining, but my bet is it will be sooner than late, and i hope late '14, '15 is when we see that. >> tom is with ogle meyer asset management, and keith joins us. good morning. >> good morning. >> thanks for having us. >> cat, mining has its own separate issue, but he is -- cat is appearing to throw cold water on what people are hoping is some new legs in the industrial cycle. aren't they? >> well, it's not the industrial cycle, it's the mining cycle, carl. i think when you look at the industrial sector, we have it as an outperform sector. it historically does the best in expansion market. everybody looks at it a mining sector. global growth, even on an up tick, is going to be light. so the industrial favorites aren't necessarily in mining. >> john, people obviously mining was a big problem for cat, but power systems were no good, construction was no good. can we say this is limited to a mining story? >> that's really hard to say, carl. you know, the way we look at it right now is cyclical companies are cheap out there. chemicals in particular. mining, yes, i agree with tony, it's facing cyclical headwinds. you know, in the longer term, the stock prices are pretty attractive at the current levels, and there are some kind of secular tailwinds to support the stocks over the longer run. >> we have seen some things, john, in the past couple of day, the number of new 52-week highs on the s&p. >> right. >> getting up to 100, maybe a little more than 100. all year long, when it has gotten to triple digits, that has tended to signal a bit of a short-term decline. is that the cycle this time? >> you know, again, that's really hard to say. in the short term, i would be -- we're kind of constructive here. there's some supportive factors right now. there's the 10-year bond, traded up. so the cost of capital is down, trading at 2.50 now. the dollar has sold off a little bit, so that provides a little bit of a tailwind. and then, you know, also, you have oil prices trading off, which provides a stimulus to the market in general. i agree with you, the market has traded up significantly, so it may be due for a pause. >> tony, give me levels here. 1,750 was a year-end target with the big banks, and we got there with a little cushion, as well. but when you look at what oil has done recently, you look at what some of the leadership has done, where are we, what will the last few months of the year going to look like? >> ultimately, you'll have a little bit of a correction. that's not predictable. the big mistake we make at strategist, as investors, is we try to provide the next 2%, which is ridiculously impossible to do. i see no reason to change the target. that's not the focus, carl. the focus is that the market gods give you the ability to buy a pullback when you have historically low inflation, negative real fed funds rate, historically steep yield curve, improving money availability, positive trajectory of earnings. that's something we keep fighting. until that change, and the only thing that typically changes a multiple expansion is when the fed ties interest rates to the point where the stock market predicts a recession is down the road, we're probably a year, two years away from that. if we do get a correction, i think you follow the sectors that have been performing better, you know, since the valuation low in 2011. >> yeah, do you believe -- speaking of not just rates increasing, but when we have the taper discussion again, tony, do you think that's a june phenomenon? >> it's probably going to be a first quarter phenomenon. at the end of the day, carl, it doesn't matter, because as long as the short-term interest rates are pinned, you'll have a steep yield curve. the only thing that's led to a recession post-world war ii is an inversion of the yield curve. if you have thin short-term interest rate, i don't care whether it's the fed-manipulated yield curve, at the end of the day, it will make banks more willing to lend. and that won't change for a year or two. >> what areas do you like most, john? >> oh, boy. well, right now in u.s. stock, we like certain cyclicals, think they present compelling value. lionel basal is one particular name. and generally stocks in china. we think they're trading at attractive multiples and have a secular sort of tailwind behind those, as well. and then, it's hard to give universal -- universally applicable advice to people, but for people that don't have any gold in their portfolio, i think it makes some sense. we think zero is not the right allocation, that people should have at least 5% for a lot of different reasons that i won't get into, because i know we're time constrained. >> getting back to 1,350 was an interesting move for a lot of people who have been watching gold. john, tony, thank you for your time. good to see you. >> thank you, carl. looking at netflix this morning, trading higher. obviously, a huge swing yesterday. the stock did plunge. carl icahn revealing on twitter he cut his stake in the company, making more than $800 million in profit from the stock he sold. he said it was time to take chips off the table. cramer did talk earlier on "squawk on the street" about the move. >> look, i think carl made a very good point. carl is old school. he's old school in the sense that bears make money and pigs get slaughtered. his rationale was related to the idea, come on, i have an unbelievable game. what am i supposed to do, give it away? >> meantime, as of today, you can trade in your old tablet at walmart. customers can receive up to $300 to be applied to the purchase of a new tablet. starting on november 1st, options include new ipad air for $479, cheaper than the price apple announced yesterday. joining us this morning, steven levy for "wired." ian scherrer is tech writer for "wall street journal." good to see you. >> same here. >> taking a poll of what people thought of the technology, the advances, the general consensus this morning has been good enough, not bad, but certainly not whiz bang. you agree? >> yeah, three narratives going on here. the ipad narrative, where apple really did some impressive things in slimming down its ipad, calling it the ipad-a, or getting it to one pound is amazing. they did a good job on that. the and the ecosystem narrative, where apple is saying, come to the bigger system here. that's why they're giving away the applications now. and a third apple narrative, where, when will they come up with a big game-changer there? and we're still in ysuspense about that, about the next product area next year, where they'll try to take a new area, make it easier to use, and dazzle us in something like television set or watches. >> ian, your best guess about what that is, what steven was just talking about? >> i mean, at the end of the day, we've already reported that they're working on a television and a watch. but as was mentioned earlier on cnbc, even that it's not clear how far those will push apple. at the end of the day, what they're focused on is getting as many iphones and ipads into people's hands as possible, and expanding the product line, selling older versions of the ipad and iphone at lower prices to kind of get people in the doors, and keep them buying into the ecosystem, which, as steven said, is one of the most important things for apple. >> yeah, and the mavericks move, steven, is a big step in that direction. you go on twitter this morning and you hear people ask, why would i ever pay to upgrade to windows 8? why do i need excel if i'm going to get these things for free, if i enter their ecosystem, right? >> and it continues the trend that's going on there. mobile drives everything. it used to be what we wanted from our phones and later tablets was saying, well, i want as much as possible as what i have on my desktop. it's the opposite. the operating systems of desktops are emulating the way we work with mobile devices. so it becomes sort of seamless. you do something from your phone, your tablet, and just move it to the desktop, and it doesn't really matter what device you're using, it's all one system. >> one thing, ian, that strikes me is that every other week or so, you do tend to get a headline that raises fresh worries, right? this month, it's been oh, the 5c is underselling the 5s 2-to-1. reuters many coulds out and saying they're -- how much weight do you put into those? >> as apple said, it's hard to tell from one data point what's going on in the supply chain. it's important to look at, you know, we're trying to figure out day to day what's going on. at the end of the day right now, the indications are that maybe the 5c is not doing as well as the 5s. and, you know, part of this again, we're getting back to they're trying to expand the product line and get people in the door. if it's not working, the question become, where are the next legs of growth come in? that's why you see so many people concerned about the headlines. how much to discount them, at the end of the day, you know, you have to look at it as a day-to-day tracker-type thing, right? we'll see at the end of the quarter how they're doing. >> right. >> but early indications are early indications for a reason. >> steven, as we head into the holiday season, and we obsess over this even more, is the real tale going to be the mini? is it going to be the tablet? or does it continue to be an iphone story where margins are fattest, for instance? >> well, i think the tablet will be important. this is as much an upgrade story, you mentioned the walmart thing, i don't know how many people will take the couple hundred dollars there. but certainly, apple really wanted the people who were early ipad users to say this is the time, now that i'm going to upgrade, jump in and get my second ipad there. and i think with the air, i'm dazzled they got it down to one pound. that's a good incentive for the early ipad users to say, okay, time to give this to my cousin and get the new one. >> yeah. the engineering is note -- it's just an amazing feat what they continue to do, whether or not you like the stock. g guys, appreciate the guidance. you might not know the company. you definitely know the brands. ramada, day's inn, super 8, howard johnson, all part of wyndham worldwide. we'll ask the ceo if the market is strong. [ male announcer ] what if a small company became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. dow's now down 84. taking a look at the utes, utility sector, the best performer on the s&p this morning. dom has more on that. >> pretty much only one of two sectors flat to up on the s&p 500 so far today. some of the real standout individual movers that are helping to power the gains are american electric power, up 2% in trading, giving you the dividend yield around 4.5%, and also dte energy, up over a percent, a dividend yield there of 4%. duke energy share, 1.5% to the upside here, a higher dividend yield there, as well, 4.5%. and consolidated edison, a yield of over 4%, as well. remember, investors often buy the utility stocks to get the fatter-than-usual dividend payments, but as a whole, the sector is up 12% this year, underperforming the broader s&p 500s 22%, overall gain, carl. back to you. >> all right. thank you for that. let's send it back to headquarter, simon hobbs is standing by with an interview. >> yeah, one of the standout stock market starts of recent years, wyndham is out with its earnings, saying it's one of the largest hotel businesses, and helping people rent out vacation properties. here in a cnbc interview, stephen holmes. good morning. >> good morning. >> they think it's a strong quarter, the analysts, but you described it as excellent. >> spectacular. each one of the business units performed at a double digit growth in ebitda, and overall 25% increase in eps. that's a good quarter in my book. >> are you really the largest hotel chain? >> yeah, what you count them by the number of hotels, yes, absolutely. >> you have 18 brand, maybe, depending on how you count them. what's happening in the united states? you're at the economy, midscale level, trying to persuade the hotel owners to carry the brands. what do you see? is the consumer hanging in there? >> the consumer is doing very well. the consumer in the u.s. is more and more inclined to travel for leisure than they have in the past. we continue to see good demand out in the marketplace. what we see with our brands is all of our brands have growth opportunity in the u.s. the two largest brands we have, super 8 and day's inn, are fairly saturated in the u.s., and we're growing them more rapidly internationally now. but in the u.s., we sigh wyndham growing very rapidly, microtel. >> if people love you, they love you because of the cash flow, free cash flow, $705 million so far this year, for the share buybacks. where are we on, say, return of equity and the amount of your stock that you've now bought back? >> we've purchased back about $3 billion worth of stocks since we -- >> what's the free float at? >> boy, it's probably about 15%, 20%. >> wow. >> i should know that off the top of my head, but i don't. it's a significant number. we've been doing it continually since we spun off -- listed on the new york stock exchange seven years ago, so it's a continuous effort for us. >> we'll talk about the reaction today. you had the stellar -- the stellar performance over the year, which people remarkable. mkm analyst describes you ashavn executing on earnings. and recently, you have this softer patch. one of the reasons for that is because the loan loss provisions became an issue in timeshares, as i understand it. you had some fairly unscrupulous behavior in florida, and you're putting that behind you. coming out of that, the timeshare business is one that you're increasingly trying to make asset-light. you're trying to revolutionize that business. how are you doing that in layman's terms? >> well, if i could, i'll comment on the loan loss provision. >> okay. >> that's something that hit us last year, and we've been talking about it very openly. some people doing some bad thing, and they've been convicted and just waiting to be sentenced. so there's really some bad things going on that impacted our business somewhat last year. interestingly enough, though, that business unit covered that pressure that we felt last year, and we still delivered on our numbers. >> okay. >> this year, it's improved because it's removing that additional loan loss from last year. with respect to the asset-lighter model we're going to, it's a way of growing our business without having to deploy capital. the traditional model for timeshare is you build timeshare units, timeshare product, the build cycle might be 18 to 20 months, and it sits on the ball has sheet, and you deliver it and sell it. and now we have other people delivering it for us, and in time. >> we are in a fees-for-service business. that's what we do. let's talk about the reaction to the results today. i mean, you're down. today, you've -- but you have had a strong run-up, up 10%, 12%, and jpmorgan raised the target for you to $78 a share, i think. one analyst said to me, maybe buying back your stock and being disciplined on cash flow is no longer enough. maybe -- i don't know whether you're just a victim of your own success. how do you feel about the reaction you're getting to what you describe as an excellent set of results? >> well, i've been doing this for quite a while, and there's a lot of times where we go out with just inline kind of expectations, and the stock goes up. other times we have terrific results, like we did this quarter, and for today, or for this morning, the stock is down a little bit. who knows where it will end at the end of the day. and as i've said to people in our organization, i'll say it to other people, our job is to deliver the results. the street is going to determine what the price is. we can give them all of the information to make the right decisions, and i think in the long term, we'll be -- we'll be in great shape. >> good to see you again, mr. holmes. thank you for toing. >> good to see you. >> the chairman and ceo of wyndham worldwide. >> all right, thank you very much, simon hobbs. let's go to julia boorstin who has news on linkedin. hey, julia. >> carl, if you try to log onto linkedin or access the mobile app, you may not have been able to. many people reporting across the country they've not been able to access linkedin's either web product or the mobile app. linkedin telling us, quote, our site is experiencing issue, our team is working on it, and you can follow the updates on linkedin. it's inopportune, because i'm at a linkedin mobile event, starting at noon eastern, making mobile announcements. it's a big deal for the company as it tries to expand its mobile footprint. so to have the app and website not functioning properly, not good timing. back over to you. >> absolutely. looking at the shares down 3%, not too far off the 240, 250 level where it was not too long ago. thank you. a landmark case about to go in front of a judge that will decide the future of the city of detroit. so what happens next after the biggest municipal bankruptcy in u.s. history? 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[ male announcer ] open an account and get a $150 amazon.com gift card. call 1-888-280-0149 now. optionsxpress by charles schwab. call 1-888-280-0149 now. stick with innovation. stick with power. stick with technology. get the flexcare platinum. new from philips sonicare. >>. >> the next step for detroit is coming soon. starting today, a federal judge can decide whether the city of detroit can reorganize under chapter 9 of the bankruptcy code. what could this case mean? we're live in detroit with some answers. good morning, scott. >> good morning, carl. in many way, the very future of detroit is at stake in this trial. the judge will decide if the city is eligible for the bankruptcy protection it filed for. the city argued a short time ago, and had statements that detroit is insolvent by every standard. thce of evidence, he said -- and the protesters out in front of the courthouse as the trial began, including a handful of protesters from the occupy wall street movement who came from new york to show their support. and many of the protesters here say the real culprit in detroit's demise is wall street. >> we got sold out! >> the city of detroit, along with other communities throughout the united states, were targeted there predatory lending, and when the tax base is diminished, the city has to borrow money. >> we're not responsible. we should not pay. i live in the city of detroit. i pay taxes in the city. i own a home free and clear and is worth nothing because of what the banks did with the foreclosure crisis here. if they don't have money, it's because gm move the plants, took jobs out of the city. >> reporter: wealth, that won't be decided here, but what will be is whether the bankruptcy filing is constitutional under the state and u.s. constitutions. did the city negotiate with the unions in good faith, and should those pensions be offlimits as the michigan constitution says? this phase of it, this trial to decide the eligibility, will go on about a week to ten days. if the judge approves it, says the city can go forward, then there's a whole new fight about how creditors are treated, but that's still not until around about march. back to you. >> a big story and lot of lessons for other cities. we'll talk to you more about that. scott cohn in detroit. and many rejected the opinions of analysts during the shutdown showdown. honeywell and at&t, among the biggest donors, and they would have seen a major hit to the bottom line. we'll talk about that with representative scott garrett, about if the influence is fading on the hill. bny mellon combines investment management & investment servicing, giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon. 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[ bell sounds ] and it's been a rough day for a lot of investors over there. let's bring in simon hbos to talk more about what happened in europe. >> yeah, for sure, carl, we have the winning streak there, people saying we were technically overbought, but we've gone dividend with some stocks. there's a concern about earnings. some of the big companies disappointing. you saw with heineken warning about the beer sales in central and eastern europe, and sml, which is -- i'm sorry, the largest semiconductor play in europe is worried about smartphone sales in asia. and they're publishing the details of the stress tests. so some of the spanish banks will find it difficult to make that. you've also seen some of the italian banks. a lot of banks in europe are down today. and we had the head of them on earlier. and apart of where the cash comes from and who has sacrificed senior bond holder, the question is whether they will keep the 1 trillion euros that they're sitting on beyond three years. i think what he says here is a hint that they might. >> the recovery is still in its infancy. it's gradually progressing, but it's still weak, uneven, and fragile. so banks are crucial in this part of the world. and they are the main source of credit for small and medium-sized firms. that's why it's so important that we make everything that's needed to make them function well. >> finally, just a quick mention, prince george was baptized today in london, in a relatively private ceremony. there you see her image industry the queen. what i find fascinating about this kid here, 3 months old, carl, is he's being baptized into the church that he will one day be the head of, because, of course, since king henry viii split from the church, he is lead the entire anglican group. >> all right. a great picture. thank you very much, simon hobbs. bob pisani is looking at the markets and the outlook from some of the companies. >> tough visibilities. three trends i want to talk about today, partly from earnings, partly from the current economic situation. we told you about the rather poor -- put up the stock, the rather poor guidance from some key tech players, cree, altera, and right now, the full screen, getting inline earnings, but the guidance, the weak revenue guidance is a real problem. two things are happening. the expectations are too high, and normally we have good visibility in the fourth quarter, but it's not happening. poor visibility a major problem overall. oil keeps dropping. did you notice, it was $110, and now, put up oil, collapsing, down to $96. great news for consumer, great for companies using oils and natural gas, bad news if you're an energy stock investor. so look at all of the energy name, big energy names moving to the downside. the third trend i'm seeing is interest rates. the ten-year yield is collapsing. we were at 2.75, and now down to 2.48%. that's a big drop. it's been a big help for people investing in interest rate-sensitive groups. so just the last few days, the utilities are rallies, reits are up nearly 4%. all of these are very, very nice moves in the group overall. as for the earnings situation, let me say this, caterpillar's guidance and move to the downside is being offset by boeing. i know you're focused on caterpillar, but not too much. finally, carl, the stock exchange mergers are happening. department of justice just approved the bats and direct edge merger, two about to merge, and close in the first half of 2014. i think that will be fairly pro forma, so they rival the nyse and the s&p 500. and mitch mcconnell helped the country avert a debt default. his reward, attacks by a tea party republican accusing him of surrenders to democrats. good morning, john. >> reporter: good morning, carl. you know, it's rare for any senator to get a free ride anymore, because the atmosphere is so toxic in washington. mitch mcconnell's got a democratic opponent in allison grime, a tea party republican in matt beven, but he may have made friends with the deal he made. >> i met him, he's very nice. i think mcconnell did exactly what we had elected him to do, and he negotiated for the state and for the whole country. >> i think that he actually looked at it and did what he has really done often, thand is sort of hang back till there was a possibility of an agreement, and then act to actually get, you know, something done. >> he really stepped up. i actually thought. you know, it would have -- it may actually hurt him here some. >> reporter: hurt him, because matt bevins calling it a surrender, and after many years in washington, just won a new face. >> i think both sides are a little disgusted with mitch mcconnell right now. i have quite a few friends that are republican, and they haven't been very happy with him either. so i hope this guy has a good chance. i remember meeting mitch mcconnell when i was in 4th grade. that's how long he's been in the office, so, yeah, i think it's time. >> reporter: of course, matt bevin has vulnerabilities, running as a fiscal responsibility candidate. and he means it. the eligibility age for medicare and social security may need to be raised as much as seven years. >> look at the demographics associated with it. it was -- when these programs were created, the recipients on average live add few years beyond the point at which they're eligible. now they're living as long as half their lives after the point that they become eligible. decades and decades. this is what's making it unsustainable. >> so what would you -- >> again, we have to walk before we run. whether it's two, five, seven year, the fact is we need to move it in a different direction, and we have to start now. >> reporter: i'll be shocked if mitch mcconnell doesn't go after him for that statement. one postscript, matt bevin's family company for years made the bell for the new york stock exchange in and out of session. like many in the tea party, he says the republican party has gotten too closely aligned with large corporate interests at the expense of everyone else. >> i can't get over the sound bite of meeting mcconnell in the fourth grade. thank you for that. analysis from the "washington post" shows that big business provided significant financial support to the lawmakers who voted against raising the debt ceiling. business groups, particularly the banking segment, warned of dire consequences of default. republican congressman scott garrett voted no. he joins us from capitol hill, a member of both budget and financial services. congressman, good to see you again. good morning. >> hey, it's good to be with you, thanks. >> what do you make of the "post" story, citing honeywell, at&t, u.p.s., all of the -- the kinds of companies that are coming out and saying this would have been terrible, apparently lobbyi ining dollars all for na. >> had we not gotten the deal at the end of the day, you mean? >> no, they would come on our air, ostensibly, saying default would be bad for business. and yet the congresspeople to whom they gave money in the re-election cycle voted for something that might have led to defaumt. >> yeah, well, i guess it goes to the issue of those people who say politicians are bought by their contributor, i guess in that case, it's not the case. you know, i was listening to the lead-in to me coming on air right now, in the interviews, and what have you. the people that you don't ever get the chance to interview, right, are the people who are actually going to actually pay the price of all of this, the people who will pay the debt. the fact that we didn't reach any real agreement, we just kicked the can down the road again, the $17 trillion we, had the $1 trillion we're adding to it, the $2 trillion adding to it for obama care. really, the people you need to interview. i know it's hard. is to talk to your kid, my kids, grandkids, they are ultimately the ones bearing the ultimate price for the fact that congress cannot do anything about its entitlements and reform in that area and the extra costs we're throwing on future generations. >> it's difficult to get the future generations on the air when they're not born yet. >> some of them are born. some of them -- >> although my 4-year-old, trust me, you don't want to see on live tv. >> the point of that, it's almost as like the senators and other people who voted in favor of this deal went to their 4-year-olds and took their piggy bank from them and said, i'm going to take your money to pay for the expenses that we're incurring today in this congress. so that's really not fair. but anyway, you were saying. >> well, if the strategy then was right for republicans the way you're describing -- >> yeah. >> -- why is mcconnell having the problems he's having in kentucky? why does mike lee get trounced by both the "washington post" and the "journal" as the poster boy for the republican who led the party down this road and is now going to pay some kind of political price? >> yeah, so i guess -- i mean, he stood on where he believed, on principle, he was trying to address the issues, i guess, i just raised a moment ago, is that congress really needs to step up to the plate and try to address entitlement reform, really needs to make sure they don't keep adding additional costs to the system. and the administration, as you know, was nowhere in that negotiation. heck, what was president obama saying? we will not negotiate when it comes to entitlement reform. so, yeah, they'll be attacked consistently now going forward. i guess the question now going forward, though, is to all those who voted, yes, what is their solution, so maybe i'll be back on this program in a couple months from now when they strike the next major grand bargain that puts us on the road to fiscal sanity and gets to a balanced budget. i'm not quite holding my breath for that one, though. >> you are on the committee, and obviously we look to you for insight on that both today and down the road. congressman, good to see you again. >> good to be with you. >> congressman scott garrett. when we come back, howard schultz speaking out on the controversy of prices in china. hear what he told cramer earlier on "squawk on the street." with fidelity's options platform, we've 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. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. plays a key role throughout our lives. one a day women's 50+ is a complete multivitamin designed for women's health concerns as we age. with 7 antioxidants to support cell health. one a day women's 50+. coming up on "the half," the greatest trade ever, carl icahn's sellout. and john najarian said someone big was getting out of netflix long before it was icahn. find out what unusual activity he's seeing today, and we'll talk to john sculley about where the stock goes next. carl, see you in a few. >> option monster sees all, knows all. >> yes, he does. all right. starbucks drawing the ire of the chinese media over prices there this week. chinese state television accused starbucks of unfairly setting prices higher in that country, discriminating against chinese consumers. jim cramer spoke with howard schultz and he asked him about the accusations. >> so when this happened, i think we were taken back, because this is not the way starbucks has done its business. what we've done in the last 48 hours is completely transparent. our cost structure in doing business in china and the investments we made to build that business, to have 1,000 stores, almost 20,000 employees, and investing ahead of the curve, gave us the position where we had to charge a little bit more than some of our other markets. we've explained that, and i think the people who did the story understand it. and i think the story is now behind us. >> plus the report this morning, 60% decline in chinese profit, very clear the chinese government has not embraced them. we know yum, kfc, david novak, very fine executive, thought we'd be through that. it hasn't happened. government resistance. what are you hearing back from your 48-hour period? >> we are in a quiet period. we'll announce earnings next week, on the 31st. i want to be careful there. i want to say our business in china continues to be strong, and we're cautiously optimistic about the future. but we haven't seen anything that significantly would change our outlook about china and the opportunity that we think we have in china over the long term in the last 48 hours. >> a lot on your plate. tea bon opening. you've made it clear there was no cannibalization, and that's been put aside. but you're trying to drill down on washington. you've had some luck with your petition to try to get people to come together. where are we? >> well, i think -- i think all of us in america have a strong feeling that something is not right, that we're looking at a government that is not functioning the way we would hope. i think the government shutdown in the last two weeks demonstrated a complete fracturing of leadership, and i think in many ways -- and i hate to say this -- but it was shameful. and i think all of the people in america who are affected by this did not have a voice. in two and a half day, we put a passive petition, almost 2 million people have signed it. we physically delivered it to the white house and congress, on the heels of them reopening the government. now that we're facing this again in january or february, what we need as a country, and what the american people need, is a long-term, comprehensive, bipartisan, long-term budget deal. we need a new fiscal policy. we need a new tax policy. we need a new immigration plan. and people in washington have got to understand that the -- that the constant bickering, the constant disrespect is not serving the american people. we need citizenship over partisanship. >> and jim will have a lot more with howard schultz tonight at 6:00 p.m. eastern time on "mad money." >> earning news moving the news. panera taking a hit on earnings today, down almost 5%. stay tuned. the earnings squad is here to break it down for you in a moment. welcome to the "earnings squawk," helping you trade the stories you may have missed. i'm melissa lee, and joining me is dominic chu and herb greenberg. herb is fired up about this one. this is true. the stock is up big time, but truly of less worse is good. >> well, you know taeshs interesting, yesterday talking about it, we said some investors would look at this as an inflection point. the company came out. the guidance was not good. its enrollments, it missed. but one thing, it said it would cut costs. they see this as a turnaround play, as a value play. the cash is there. the question is, will it be, how long will it take? >> it's not just -- it sets the tone for all of the for-profits. this is the first one, and cocoa, and it could be a good story. >> enrollment down 22%, and that's better from the third quarter of 2013. the student base next year will be smaller. this is an interesting move here, 25% gain in today's session. let's talk about cree share, because also a wild move, trading sharply lower after a second quarter loss in earnings, and the l.e.d. bulb market, they're commodity, and there's pricing pressure around the retail complex. walmart is marketing its own l.e.d. bulb for nine bucks. >> l.e.d. bulbs are coming into their own. on cree's call, they're focussing on the quality. and i've been in the market for new bulbs for a house in san diego, and as you go out, the lightni lightning, the brightness, there's a lot of discussion about that. remember, l.e.d. bulbs are still, in the past year, they've come into their own for landscaping or for use in your homes. so cree is sort of in this in-between spot. >> yeah. >> when you have the private-label guy out there, and what's the quality of his bulb versus their bulb, and that's what they're trying to draw attention on. it's not working one. >> i just buy the cheapest one. >> you'll look wonderful in either one. >> the conference call is interesting, because they addressed the exclusivity in terms with home depot. that expires in april. they skated around the issue. >> they said they're not going for the margin. >> exactly. you have to wonder, as an investor, you want to see them looking at other channels, especially as walmart is going hard into their territory. similar stock movement in cree, and then it recouped. so a wild mover. and panera, fourth quarter earnings, and, dom, you're following this one. >> they come out, the sales come in maybe a little lower than some analysts' estimates. but they cut the forecast. this is the latest of the restaurant-type chains to say maybe the consumer is not spending as much as they used to. >> the same-store sales company, i just have to get this out, they said that their manager, they took a look at -- they've done a self-examination and found the managers, and this just stopped me in my track, have focused on efficiency and cost benefit at the cost of business, and when you see a restaurant company saying that, wow. >> yeah. not a good sign. tweet us at #earningssquad, and back here tomorrow on "squawk on the street." coming up next, new development on fines for jpmorgan. we've got the details. that's next. ♪ ♪ [ male announcer ] more room in economy plus. more comfort, more of what you need. ♪ that's... built around you friendly. ♪ welcome back to "squawk on the street." i'm kate kelly, with new developments for jpmorgan, for whom the bill keeps getting bigger. not only is it facing tentative fines from the justice department for $13 billion to settle a bunch of civil cases. now comes word a longstanding private investor suit could result in a payout of almost $6 billion, a significant addition to the running tally. some back-of-the-envelope math showing that jpmorgan is eyeing in the ballpark of $30 billion of various settlements, and that's not including criminal cases that are not likely to be a part of the justice department accord in the works. still, they're not as bad off as bank of america, which the "wall street journal" estimates to be facing two times that amount in various mortgage claim, including a $9 billion pact with the same private investors that are still awaiting a judge's approval. i cornered ceo jamie diamond, and he said he's eager to put the matters behind us. >> we're going to move on. >> and as he works his way to a final deal with justice, expected sometime in the coming days, there may be one thing working to his benefit. that is tax law. experts say some portion of the $13 billion payment may actually be tax deductible, although not clear how much. >> people will have a field day with that one. thank you very much. >> you know it. >> kate kelly covering the jpmorgan story. the dow is currently down 59 points. let's get back to "halftime report" and scott wapner. >> thank you very much, carl. here's what we're following today. nailing netflix. our own john najarian. >> somebody was getting out, and somebody very big was getting out. >> yeah, our own john najarian is on the case. what opportunity is the doc diagnosing today? power play. why two of the traders are fighting over first solar and what you should do with the stock up 126% in a year. we do begin with more on billionaire investor carl icahn selling almost half of his stake in netflix for a profit of $1 billion. and considering he bought it for 58 bucks a share and sold for close to 400, some are calling it the greatest trade ever. we want to tak
threat to projects and homeland security counterterrorism program. he will be speaking on treasuries war, the unleashing of a new era of financial warfare. one final reminder. when this panel concludes we have to clear the room just like we did yesterday so the hotel can set up for lunch about 50 minutes and then we'll come back in and start our lunch program. gives me great pleasure to introduce our moderator this morning, mary derosa, distinguished visitor from georgetown law. thank you. [applause] >> thank you, everybody. i'm very excited to be here as we have a really terrific panel. we are here to talk about cybersecurity, and how we address these significant and growing threat from criminals, hackers, terrorists, anarchists, and other nations who are spying on us, stealing from us, intruding, disrupting and potentially attacking our private sector government infrastructure. i don't feel like i have to say very much about the threat, gives a lot of background, particularly in this crowd. not too many years ago, if you started talking about cyber, cybersecurity, most of the eyes in the room would have glazed over. and not that people didn't care about it but it was technology, didn't feel like the kind of national security issues we are used to dealing with. but now i suspect everyone here is paying a lot of attention to cyber and the issues because of the threats that we're facing have only increased and increased quickly. and the efforts to address them are progressing. i think it's fair to say a little more slowly. so today we are very lucky to have a panel of people whose eyes have never glazed over on the topic of cyber, or probably anything else. and these people have been thinking about cyber intensely in many cases for many years way before it was cool. so really, the collective experience here and expertise is really impressive. we are going to focus this panel on the relationship between the u.s. government and the private sector in cybersecurity, what are the challenges, where have we made progress, where we are on the right track and where we might need to do some rethink in in those relationships. so let's get to it. i'm going to introduce the panelists, and then we'll run this as a conversation. the panelists bios, i'm going to give you some information on the other lot more impressive stuff in them, so please read them in the materials. i'll start with leonard bailey. leonard is a special council for national security in the department of justice's computer crime and intellectual property section. he was also recently an associate deputy attorney general, and responsible in that capacity for managing criminal and national security cyber policy for the department of justice. he's had a long career in the justice department working on crime and cyber issues. leonard received a jd from yale law school and a ba from yale law school. steve chabinsky is senior vice president of legal affairs, general counsel and chief risk officer of the internet technology firm crowdstrike. is also an adjunct faculty member at george washington university, and the cyber columnist for security magazine. prior to joining crowdstrike, steve was at the fbi for 17 years, culminating in his service as deputy assistant director in the fbi's cyber division. prior to that he organized and led the fbi's cyber intelligence program. he's also served in the office of director of national intelligence. he's a graduate of duke university and duke law school. laura donohue is a professor of law at georgetown law, and director of georgetown center of national sigir and the law. she writes on national security and counterterrorism law and the united states and the united kingdom, including on emerging technologies. professor donohue has held fellowships at stanford law school center for constitutional law, stanford university center for international security and cooperation, and harvard university's john f. kennedy school of government where she was a fellow in the international security program as was the executive session for domestic preparedness. she received her a.b. in philosophy from dartmouth, her m.a. in peace studies from the university of ulster, her jd from stanford law school and a ph.d in history from the university of cambridge in england. wow. jim lewis is a senior fellow and director of technology and public policy at csis where he was nice enough to hire me i while back. at csis, he writes on technology and security, and international economy. jim has authored more than 90 publications since coming to csis. he's an internationally recognized expert on cybersecurity, whose work includes the best selling securing cybersecurity for the 44th presidency. before joining csis, he worked at the departments of state and commerce as a foreign service officer, and as a member of the senior executive service. he received his ph.d from universittheuniversity of chica. and last but not least we have daniel sutherland, who is the associate general counsel for the national protection and -- national protection and programs directorate of the department of homeland security. in this capacity he is the primary legal adviser to the undersecretary for nppd nppd. he leads a team that provides legal services to the office of cybersecurity and communication. the office of infrastructure protection, the office of biometric and identity management and the federal protective service. he previously served in a senior national intelligence service at the nctc, and prior to that he was at homeland security providing legal and policy advice to three secretaries of homeland security as the first officer for civil rights and civil liberties at the department. he started his federal career as a civil rights attorney at the u.s. department of justice, is a graduate of the university of louisville and the university of virginia school of law, and he's also an adjunct professor at pepperdine and george washington university. so, let's get started. i'm going to start, dan, with you. our topic today is the relationship between government and the private sector on cyber, a key element of that relationship is the effort to share information, to promote sharing of information between the private sector and government, about the vulnerabilities, threats, and intrusions. can you talk about what from the dhs perspective, those efforts are trying to achieve and how they are working? >> good, thinking. i'll try. i'm going to describe some of the information sharing programs that my client administers, and that will hopefully set up the other panelists to talk about some specific approaches to those issues. i think information sharing is one of those terms that can make anybody's eyes glaze over. so i'm going to try to put it in plain english to the extent that it can, what these programs are about. dhs has very broad responsibilities and cyber, from the coast guard role in cyber, to cd and ice with electronic border searches, to the secret service investigating cybercrime. it's central to dhs cyber role is the work that my client and the national protections and program director it does. it focuses on increasing the security and resilience of critical infrastructure, federal and non-federal for both physical and cyber threats making a connection really there. i know we're talk about private sector. let me briefly to you but what we do in the federal critical infrastructure because i think it will help in the discussion. our role there can be hands-on direct as we work with our colleagues and other federal agencies. we provide technical capabilities to allow other federal agencies to protect and secure their network. for example, we have a service called cdm, or continuous diagnostic mitigation which is a scanning program that allows them to diagnose vulnerabilities in the system, allows them to understand how the networks look and where vulnerabilities might lie. then we also have a capability that's referred to as einstein chooses signatures or indicators of known malicious activity and when a signature is recognized it allows the networks to filter that so that malicious activity doesn't internetworks. information from both einstein and cdm then are gathered and fed back into the system so everyone is learning as we go through. and there's a parallel there i think what we were going to talk about in terms of information sharing. in terms of the private sector, how we partner with the private sector, we are working with people in the private sector to help them withstand attacks and recover from incidents. let me break that down just a little bit. we help companies understand the risks and manage their risks. for example, we provide bulletins with information about threats and vulnerabilities that we have use from a variety of sources and put these bulletins out publicly. you can find them on a website. they are broadly distributed. we also have a suspect teams. we help companies assess their networks, make recommendations how they can improve their securities. that's pre-incident, left of the boom. second, when a company is a victim of an incident, dhs provides help in assessing the scope of that incident and advice and recommendations on mitigating the incident. and then finally, we think information about incidents, we dissected, understand it, analyze it and then push that information back out to others in the system. again there's this continuous learning cycle and information really has to be that kind of continuous learning cycle and i think provokes some of these issues we're talking about. i think it's helpful to think about, to understand the information sharing is not a monolithic concept, and that produces i think some the difficulty we hav have in comino grips with all of us. it may be obvious but i need to point out that there are different types of information that we may want to share and for different purposes. there are different degrees of sensitivity in the information that we have. some classified, so i'm classified. and that, therefore, promotes a variety of restrictions. there are different rules for sharing, depending on who's doing the sharing and who's doing the receiving. i think we'll discuss that as we go along. so let me just finish by giving you kind of a spectrum of some of the information sharing programs that we're doing. there's a wide spectrum. first, we do work in the area of vulnerability alerts. we send bulletins to a broad range of people who get this information. as i said, it's even on a public website. the information could be already publicly available but not generally known, and the goal is to allow a broad range of entities to use that information in developing network security. on the next part of the spectrum is more focused or more targeted information and more targeted relationship. in this context we often have actual written agreements between us and entity we are sharing with. in this context we share threat information, but we also taken a step further where we can do with the referred to as operational collaboration. so you're not going to sharing information but also sitting and working through issues. we have the national cybersecurity and communications integration center, the nccic which is an operations for where people have these agreements are able to sit and liaison and have a kind of operational collaboration. that bilateral sharing, the term they use, which is both back and forth, us government and private sector back and forth, and having multilateral if x. as it goes to private sector it's starting out. so the last part, and i'll finish it, in terms of the spectrum, broad public audience, more tailored and their audience is a specific audience, program called enhanced cybersecurity services. this includes classified data. we've negotiated agreements with a select set of certified providers who have demonstrated the ability that they can handle and protect classified information. the information shared is more sensitive, obviously. under this program those companies are able to package that information and use it for a broader range of helping others and the private sector to protect their networks and security. so there's a range of information sharing programs, again, for a variety of purposes, with restrictions in data, and with different purposes that were trying to accomplish at the end. i hope that's kind of a good overview of some of these information sharing programs. >> perfect. thank you but i'm going to turn delivered and see if you can, from doj's perspective and your expense, add to that. >> sure. so let me start by saying i submit the information sharing in the arena of cyber is both difficult and necessary. when i say that it is necessary, i say that it's necessary in a way that it may not be quite as necessary in other areas. what i mean by that is, when you're dealing wit with a cyber incident, determine first whether you have a cyber incident takes information. in other areas, for example, terrorism, you would open a window and you would see a bomb crater. he would seek some sort of carnage. they would be summon him to shut other problem that you do need to address and respond to. cyber is different. the best indicia of some sort of activity we have been cyber is communication. communications that are doing something or affecting the network in various ways. and it would so happened that in our legal regime, communications are regulated, or access to them are regulated. necessarily. they touch on first amendment, fourth amendment issues, privacy concerns. and so you're necessarily deal with an environment in which you are trying to come as someone who's dealing with cybersecurity, gain access to protected data. so we need to get this information in order to determine whether something is happening, but it is in some ways by the force of law made more complex. the complexity is then -- i'll amplify on something dan was talking to her for a moment. this information sharing cuts across different entities. so you have sharing that has to happen him on private entities. high-end large the constraints that people speak of in that area are largely things like antitrust concerns, although i must say we have difficulty talking to industry and identifying exactly what those antitrust concerns may be when they are action assuring cyber threat information which is what we're talking about. then, of course, you have sharing from the u.s. government to the private sector, and that's something day and was speaking to, a lot of product that's going out to the private sector in an effort to help them better protect their own networks. and then there is the effort to get information from the private sector so that the government is in a better posture to respond to and mitigate any incident that occurs. and, of course, that is the area where we find perhaps the greatest to the golden. that's where you have your fourth amendment concerns and again, the web of regulatory statutes that approach, the wire tap act, the statutes. there are statutes that we have sent out there to regulate how the government gets information. in the cybersecurity space while we have attempted to figure out how to do legislation, this is a challenge. putting all this together and figuring how and when the statutes that normally operate give way in the interest of cybersecurity while at the same time protecting civil liberties and privacy. and that becomes a line drawn exercise which i think will be a push and pull for a little while still to get just right. i'm something of an optimist, and so i'm hoping we have made some headway in those discussions in at least identify certain issues. i think there are some issues that come out and have been teased out that relate to things like minimization and how that -- types of applications of information that's obtaining. i will just finish by saying, i think really the difficulty in information sharing is the ability to reach into the soup of data that is content, not content, metadata. i mean, reaching into that suit and, one come extracting a good image of what it is that might be a hazard to deal with, and at the same time identifying what you need to do about that hazard. again, complex but very necessary. >> great. laura, leonard has raised some of the legal and privacy issues he sees with information sharing and i'm wondering if you could give your perspective on that and any concerns or additional thoughts you have on that? >> thanks very much. so, i'd like to broaden this just a little bit to address this question, which is looking at cybersecurity generally. there are more than 50 statutes already in place that deal with cybersecurity. the problem is that since 2002, there hasn't been kind of a comprehensive cybersecurity bill that's successfully gone through congress. and the reason this matters is because there are many different aspects of cybersecurity that needs to be addressed. we talked a little bit about information sharing and along with that goes protection of the critical infrastructure, dan address. but there are also other huge issues on the table like reform, fisma, introduced in 2002. it's under pressure right now and being criticized because it focuses more on procedure and compliance than on risk analysis. it's expensive. there's a data deluge going on in terms of federal agencies. so they're expecting a 47% increase in data by 2015. there are concerns about fisma. there's concerns about the criminal realm. so we have seen proposals to deal with breaches, exposure of data as well as cybercrime. to our international efforts. there's emphasis on research and development. there's cybersecurity workforce bills before congress. and the points to be made about all this legislation is, even for those of us who follow was fairly regularly, there have been more than 100 bills and three years. more than 100 bills introduced. what's interesting, and this goes to leverage point, in terms of starting to reach a consensus or least agreement on some of the issues, that number and you introduce is decreasing. in the 111th congress there were more than 60 bills introduced. in the 112th congress there were more than 40. and in the 113th congress there were over a dozen, right? so we have seen actual volume, thank goodness, starting to taper off little bit. but the reason why it hasn't been addressed yet, and there hasn't been broad agreement in part really turns on this information sharing and protection of critical infrastructure question. the our for concerns here. first is the legal barriers. leonard reference some of these. they are are a married a statutes in place right now that actually protect privacy and would have to be create their seven have to be overcome for information sharing. they range from communications privacy to children's privacy, privacy of financial information, privacy of government collections, medical records, miscellaneous records and activities, confidentiality and so on. many statutes in place. many of these could actually be changed or amended, but then you are still left with the constitutional concerns that prevent. so their first amendment concerns about the protection of speech. associational privileges, political privileges related to that, anonymity and public space. there are very six fourth amendment issues that present with regard to both search and seizure, and perhaps we will talk later in the panel about how the fourth amendment concerns come down in light of emerging technologies and what really appears to be on the supreme court growing tension between trespass and those who come down using application of the reason lex dictation of privacy. the fourth amendment concerns, fifth amendment, he had due process concerns that are raised here. young ninth amendment issues, so there's a number of constitutional issues that. there are in addition to the legal barriers the second major kind of tranche, concerns about liability and misuse of this information. so this tends to be another huge area where there are various proposals and we might get into these later in the panel. the third major area is the protection of trade secrets and other proprietary information. this tends to be a big sticking point. and, finally, there are institutional and cultural factors that relate to secrecy and confidentiality in terms of doing business. there are a number of solutions that have been considered for these different areas but so far we haven't had a comprehensive bill that has managed to make it through both houses. it doesn't look like we're going to have one this year or in the near future either. >> okay. great. i want to turn to steve, and you obviously in your current capacity have a kind of window into the way the private sector views a lot of these issues. and maybe you can comment on the information sharing programs that we've been hearing about from the private perspective, sector perspective. what are the concerns to? i think of the predominant concern is a question of why we are sharing information. what is the strategic value of information sharing. there might be some tactical advantages here and there to the information sharing that you are today. but it's really on the margins. and so what we hear a lot, i would kind of equate it to selling vitamins, exercise programs and band-aids. nothing is wrong with any of those. i like the mall. i take my vitamins, don't exercise as much as i should and use a band-aid when i get account. but we're not in that environment. -- when i get a cut. that are militaries and action organized crime groups. this is not a resolution for vitamins, exercise programs and band-aids. and, in fact, what you find is that it's really not a resolution for victims to constantly be playing defense and shoring up their systems. it's just not possible. it's never going to be possible for an agency or a corporation to become impenetrable to the vast number of threats that we see today in our inter- operable dynamic environment. it might be possible if we bunker down and didn't connect to other systems, and we retain static environments, but that's not the situation we are confronting here. and so what we're seeing is a failed strategy where our security gets worse every year, because we been predominantly focused on vulnerability mitigation. we've been predominantly focused on information sharing, in which the government warns the private sector to kind of hide under the table, to lock the doors. and then when that doesn't work, there are more warnings. the private sector is looking at the government saying, i don't mind being warned, i like being warned that there's incoming, but i had hoped that while you are warning the actually going after the bad guys and taking them off the playing field. whether you're in school and you have these drills, that's a bomb drill in the old days, right? that's okay. i could hide under my desk for five minutes, five hours, maybe five days, but it's been 15 years so come on. this is not going to get better. and the problem is that we haven't put our resources into threat deterrence. in the real world we would never operate like we're operating in cyber where we constantly victimized and we victimized the victims, right? until then they haven't done enough to protect themselves, cost of having information for protection that we see has very limited return on investment. at the end of the day if we don't change the playing field, threat deterrence, to make it so that the bad guys can't keep trying and trying and trying, right, with no negative consequences, this is the way it's going to end every time. and so we do need environments where information sharing is fostering a new strategic paradigm that focuses on better detection, early detection of the bad guys, better attribution, figure out who they are, and then real penalties. so that when the government actually knows who the bad guys are, they can do something about it. we can't be in a situation where the government has all the information it needs to say exactly what foreign country or countries are robbing our industry blind, and then 10 years, 15 years later it's the same or worse situation. you cannot allow that environment to continue. and so we need a complete shift over threat deterrence and attribution does matter. penalties to meditate when you think about the real world we don't go around trying to become impenetrable. at our places of business we do have locks on doors, locks and windows, but after a while if there are break-ins we shifted to threat deterrence. we have alarms. we have cameras and those alarms and cameras do nothing to make the environment less than triple. what they do is they shift the burden away from the victim and they make information sharing about going after the bad guys. the alarm is for early detection. .. vitamins, band-aids and the like but we are hemorrhaging right now. and it cannot be the case that when you come and see your place of business completely rated, maybe the integrity of your products or changed, you might not have availability for the first question is how do i clean this up? what is my management strategy? the question has to be why is someone coming after me and what are we going to do about that? i think to myself the godfather movie where you come home one day and find a horse head in your bed and your immediate reaction is and how am i going to clean this up? that's what's happening here. it's quite preposterous. why is this happening and how are we going to change this? so, what i hope changes over the next few years is that we really need to stop further victimizing victims come increasing their cost to no metrics of success and start shifting towards threats deterrence models and the government an governance any that there will require. >> i had more questions about band-aids but i think maybe we should, you know, since steve has raised this very interesting and important topic -- i would like to get, leonard, your response and hear from jim and anyone else. >> much wisdom with what you said. the one thing i would say is that i mentioned earlier it's hard because it is a multidisciplinary problem. it cuts across private sector, government, it's international. and i think that the challenge that we have understood in the last few years is we have to be able to walk and chew gum at the same time. so, why go we are doing all of the vulnerability litigation activities, we should also be dealing with the threat actors, moving those threats. we should be on the prevention side building safer, more secure software and hardware that doesn't invite intrusions, right clicks we should be able to on the back and mitigate and recover quicker because we aren't going to prevent every instance that happened. being from the enforcement agency in the department of justice, i would -- [inaudible] the notion there would be more resources would be something we would be very much in favor of. but i would also say that we do in fact go after the actors. we enjoy greater success in the international realm. we are getting large-scale data breach actors and eastern european countries. we are gaining cooperation with countries in the prosecutions and also obtaining them for prosecution. so i guess the only thing i can take issue with is that there isn't a threat mitigation activity happening on the other side. there is much to be done. again because the complexity of networks and the way they work and the ability to get information in the international environment. but, that work is in fact occurring. i would be very much in favor of going after it in a more concerted way. the only thing i would toss out is we also do know as it was said that this does work. there was a prosecution of alberto gonzales who was one of the most successful data preachers on the planet and still may hold that record convicted and sentenced to 20 years. but when he and his reign were taken off the line according to the verizon report, there was an international drop noticeable in the data breach activity, so we do know in fact going after the matters i would say we are doing that. i was looking that more. >> i would agree with you. >> i told mary knox to put me first and i'm kind of regretting it now. and frankly i don't do cybersecurity conferences anymore because for me it is a lot like groundhog day. think of the two levels of opponents into the alberto gonzales th they are the feasibe in a there are measures to defeat them. think of the high-level opponents. they are 20 or 30 criminal groups largely in russia that have the fsb equivalent, pardon me, rushing intelligence service. they are unstoppable. there is nothing you can do. if they want to get and they are going to get in. they are going to be on your tail in 30 minutes. can you beat that? we have a hard set of opponents into different strategies for dealing with them. the u.s. has a strategy and it's really touching. i feel really glad. it has three parts. it has a diplomatic strategy that's been published by the white house and we are doing pretty well. some of what steve was talking about in the budapest convention on cyber crime. we have made good progress on the diplomatic side. we are in the snowden turbulence but i know we are going to talk more about the international stuff later. on the military side we are doing quite well. we are one of the three best in the world. you can read or strategy. it's top secret but you can get it on the guardian website. [laughter] >> i tell people i don't work for the government any more but you're doing pretty well on the military side we have discovered surprisingly a shortage of resources. we don't have enough bodies to know how to do this and said there is an effort now to crank out the body. the place that we are cranking those on the domestic side and there is a whole lot of reasons for that. the main reason that was political gridlock and i think that you've heard that from all the panelists. this is our third constitutional crisis in the last century. and when we are in the little periods of unhappiness, nothing is going to get done. so congress isn't going to pass any legislation. the next congress probably won't pass any legislation unless there is political change. so what do we do in the interim? we offer magical solutions. so information sharing is a magical solution. see the formula and then maybe it will be better. you don't want to say on cybersecurity i know it's a problem. i'm not going to do anything. but they will share information. i told you in 30 minutes you are going to be tough with insurance quex so, when you talk to people, what has changed? it's getting attention, so talk about your eyes glazing over. i talked to an investment firm in new york a little while ago and the ceos that i really don't want to know and i don't care. if i make my mark into the money i'm expecting i don't care if someone else makes money off of it, to mac. he got excited. but, you have the sea level attention and that will change things. information sharing is a good topic to think about some of the obstacles we have been developing a private response. and i'm not holding up the government as an example or anything at the moment. there is a real reluctance to share information among the companies and you can work. there was an fcc ruling last year promoted by senator rockefeller that basically said that people -- when something bad happens to people of course the response from the company was to find bad. it turns out nothing bad has ever happened. so, i personally am relieved to hear that. the issues that come up on legitimate issues for companies and the ones you are familiar with day our liability and risk. there is a risk to the shareholder value if you report a significant loss of intellectual property, significant loss of financial data. now how do i know that these occurred? because the nsa spies on other people. and so we see what the other people have collected from the american companies. of course it prevents us from seeing here is the big bank. they lost this amount of money. we saw it but we can't say anything. so, the public debate is misinformed in some ways because of the scale is not established that precisely. there are legal obstacles, information you have heard about that. i don't know about the antitrust. all the companies say antitrust. i don't know how true it is. there are few sectors that have made some progress and i would look at financial services and telecom. they made progress because it is in their business interest to do better at cybersecurity. other places, very little progress. so the energetic 12-year-old could probably be a good cyber attacker. i've had some unusual experiences and the one that was the most unusual for me i was in a big international conference, and windows may have to shut down -- october 17 in asia and for the first time, i saw people expressing pity for the united states. we were not the sphere of superpower anymore. they were feeling sorry for us. i think while we are in this political situation isn't going to change. and until the political change occurs, we are going to see progress on cybersecurity or information sharing. outside of the same as the executive branch can do without the authority. the only caveat to that would be if there is some sort of a unavoidably disastrous event, not a cyber pearl harbor, please. but some sort of a big events maevent maybe involving wall std something like the 2003 blackout and you will see the congress react. but until that time, the classic example is the bill says the cispa put together by robert. it's a good bill. there's a matching bill in the senate but is speaking developed by senator feinstein and i think senator campbell us. the odds of the bill passing even though it would remove some obstacles to the information sharing coffee odds of it passing is a good bill. we needed it has a good chance. that might be a good way to end only overview of cybersecurity. >> kind of depressed right now the laura -- spinnaker don't think it's going to go anywhere. it's seen as a magic bullet and this is as steve noted it's kind of victimizing the victims in some sense. where i disagree is about congress that is really what's going on that we are in an unhappy period and the reason i disagree is that there are some very serious legal and constitutional concerns. for instance take steve's suggestion about the capabilities of the pdb 20 that jim just mentioned. we have some very difficult legal questions about the covert activities of 1947 national security act and under what conditions the exceptions in the act are dealing with intelligence collection or traditional military activity either planned or operational. the extent to which it falls within that so if it doesn't fall in the covert action than what happens in congress qwex how does the authorization have to go? i think there are some difficult questions there. with regard to the fourth amendment issues and privacy concerns there are some very difficult questions that have to do with once you have order to collect information and the verdict of the government on behalf of the government, you are subject to the fourth amendment concerns so the fourth amendment issues are quite significant and have to be addressed. then there is an elephant in the room that we haven't addressed which is yesterday morning's headline which is the nsa is collecting information on private information, and i think there is a healthy level of mistrust between industry and the government and the idea that information sharing can somehow take place in the silo universe where nothing wrong with beat him without exposing the companies to liability or hurting them in some way. i think this ignores the considerable concern that certainly yahoo! and google and others are expressing about information sharing with the government. >> the one thing i would add to that is i don't think we have a problem in the offensive operations because we've carry out offensive operations. what is wrong with these people, why haven't they published it yet quacks that we have carried out a sense of operations. some of it you may have heard of. i was talking to one of the people responsible inside what is the legal thing to do. he said we tried it under title x that we would do it under title 50. we don't have a problem carrying out the offensive operations. that said there is no such thing as cyber deterrence so there are issues that congress needs to work on and most of them are domestic but in terms of the military capabilities i'm not cynical about congress. i'm cynical about this congress in terms of our military capabilities, the military isn't waiting for happy words from capitol hill. >> leonard, i think he wanted td to respond. and then dan, i will see if there was anything else you wanted to add to the discussion. >> i had a brief point to make. i think when i say that cyber is hard having done this for a while i think one of the reasons it is particularly hard i'm sitting in a room with highly educated people, abstract and difficult thoughts but i would wager that for most of you everything that happens behind your keyboard is magic. [laughter] what is that information exactly quacks what is the computer doing while you are operating having a conversation on privacy and information sharing in this context that is fact based and rational is very difficult when there are different parties with different interests and have that discussion it is very difficult. but the fact you have a baseline community who don't exactly understand what we are working with makes it extremely difficult so much of this discussion about privacy information is being had and a mediated environment. we need people to tell us whether the information that we are leaking is important or not and whether it is private or n not. but there are other aspects of this. particularly in the information sharing bucket where we are trying to figure out what information can or should be shared, getting the baseline of what that information is, just what it is is very difficult in the tech phobic world. >> i have trouble seeing you down there but do you have anything to add on the privacy issues and the legal concerns that have been raised? >> it started with dubai have something to contribute to this discussion and i hope this is a point that this audience would appreciate. my title as associate general counsel, not the director of strategy and policy or in ppp so the think tanks and people can debate this our role is to help the clients figure out the way to move forward here. in terms of privacy protection and information sharing, the information cornerstone has to be trust and confidence in one another. as a privacy protection is absolutely critical and it has to be built into the whole project. i can talk about that a little bit more but underlining this whole conversation has got to be a level of trust and confidence and belief in one another that comes back to privacy protection that we think is the key elements that dhs can bring to the table. >> i want to look more what can the private sector play and can the private sector play an active role but before i do that, just this week the nist released the standards and technology released its preliminary cybersecurity framework and the public seeking commentcomment so this is anothr element of the domestic strategies of the government working with the private sector on the cybersecurity. i wanted to maybe get from you to start the framework is in part of a response to a failure of legislation last year. do you think it is a useful effort and, you know, where do you see -- where do you see it going? >> it's interesting because at the end of the debate, when you speak to the individual senators they understand the problem and would like to do the right thing. a few of them are ideological. we know that from the budget debate that some of them want to do something and they felt a lot of regret that they failed to pass a comprehensive bill. the bill had a lot of problems and i know that as well as anyone for a whole set of reasons. but behind the scenes after the two boats failed, there was a big effort with senator mccain and others to try to resuscitate something and they were unable to do that. as part of the reaction the white house in august, early august decided it would put out an executive order that would use existing authority over the regulatory agency he has control over and hopefully influence other regulatory agencies to set standards for what adequate cybersecurity would look like. so that's a good plan. the paragraph that you want to look at in the executive order is paragraph number ten this is one nist develops its framework for regulatory agency should compare it to the existing regulation and see if they are adequate. please do this by 2015. so we are not on what we would call a quick cycle but it's probably the best we can do. we have to hope that the revolutionary guard is patient. what does it mean to? i was talking to the nist people who are working on it at the beginning of the process and i said how much have you actually written and they said only 12,000 pages. so what do you do? do you open it up whenever there is a crisis? the framework attempts are a very concise document. it's only 44 pages long and it's best to think of it even now that nist does things is an annotated bibliography of steps you can take to improve your network security. it doesn't actually tell you how to do but it's like getting a menu in a restaurant and you get to pick that maybe the draft will change. one of the implications for this audience have been two major changes this year that while we shape the landscape. the first is international. the second is the nist framework that inadvertently and much to the shock and horror creates a positive buddy of providing due diligence. and if you're not exercising due diligence, you should be liable. and that is the path we are on. this has been a goal for a decade for many in the field. how do you get companies to say this is what you must do? we are at the point that we can say duties and you will reduce the risk by 80% or more in if you aren't doing them why? so due diligence, liability that is the implication of the framework. right now nist has pretty much done -- there's a handover into the dhs will get to implement this in some fashion. >> laura and then dan. >> executive order 1636 was introduced and now rockefeller introduced legislation in july that would make the statutory requirement. i'm assuming from your remarks that you are opposed to that. >> i got a note saying please don't trash us in the press because we took out all the hard parts of the bill. our bills aren't going to pass this congress they took out the part that they put the executive order in. i admire senator rockefeller. he has been pushing this since he was the chairman of the select committee on intelligence. he's doing a great job. he knows what to do and he's trying to do it but i think judging from the remarks that got him from his staff he doesn't think there is a chance to get any bill passed they had to strip out the parts that would make the executive order. >> where do things stand in the framework and how do you think this will help. >> i think that jim has described it very well in terms of the timing. the framework is out for public comment. people were supposed to comments by december and there've been a number of workshops building over time so it's not surprising in a private industry independent will be issued finally in february. but if i could expand on it and add another angle to it in this environment congress isn't able to pass legislation to try to encourage federal agencies to do what we could under the current authorities nist developing its framework is one way that we could make a contribution essentially to establish a set of best practices that would allow people to see where they need to be shooting to. at the same time another part of the executive order including the dhs to try to think through a certain set of incentives that could be developed to encourage adoption of that framework so it's been an absence of regulation how can we incentivize that type of behavior? and that was issued by and developed by the white house report on it sentenced in a very thought-provoking area. i will mention some of the areas that were suggested. the problem with this being in the ability of the federal agencies to do and much would still require congressional actiocongressionalaction that ts such as building a cybersecurity insurance framework industry so that underwriting practices would drive this. there is a preference basically meaning if there is a technical assistance for certain companies to benefit from by adopting the cybersecurity framework and this framework that they would have added some level of preference for that liability streamlining and other incentives there is an interesting complement how we incentivize people to get their. >> i'm a huge champion of nist. i think they are incredible at what they do. not a day goes by that we are not taking advantage of something that came out of nist. but the task they were given here doesn't end very well for the security -- >> for the reasons that we've already described. you look at the executive order and with a mandate is and it talks about regulation, regulatory. it doesn't talk about going after the bad guys you have to tell them that they are coming. then it talks about best practices. this is best practice in a dynamic environment where the best practice today is to feed it tomorrow by the enemy who pickets and shifts so what we have seen in the area of security if you are focused and again this goes back to focus its not that good this labor hygiene isn't good. it's in the name. it's good. it's that it's ultimately ineffective or effective only at the margins, no more effective than saying i'm going to have some good best practices for immortality. it doesn't ultimately end well and so what you are seeing here -- [laughter] is for the private sector it is the law of diminishing and negative returns that happen. the first problem is every dollar that is being spent on security is not getting the same value it used to. at the beginning you have sort of the base layers and you are getting more than your dollars worth and it's going to be you are spending a dollar to get a dollar but that is diminishing the return. we start building the best practice and the enemies overtake that which beams the efforts increased the problem so we are spending dollars and making the problem worse which is hard for good people to accept when good people that smart people put a lot of effort into something they can't believe that it's making the problem worse and would be the same as that for example somebody said we have a good way to keep bad people out of this hotel. let's build a 20-foot brick wall because our understanding is the bad guys can't jump that high so we spent about $2 million to build about brick wall it works a week or two independent bad guy spends $50 buys a 30-foot ladder and the government pats itself on the back for warning us the landscape has changed and has a 30-foot ladder that can overtake your best practice so you know what you need to do now for your best practice? a 40-foot brick wall. you see where this is going soon as inexpensive $3 million for the foundational problems and the cost of inflation i'm going to be prepared for the governments warning about the 50-foot ladder that only cost the bad guy $100 so what you are seeing on the constant focus having the victims spend more in an environment that is dynamic where you really can't keep up with it and the dollars we are spending ar our making the probs worse you would forgive the private sector for wondering how this ends. but nist come into this is why i love them, nist recognized this issue and when they sought public comment, they actually asked for comment about metrics of what the success looks like in its environment. they said there's an actual majority of success but that was a problem that they were dealing with. so, for example if i am getting scammed, my system is being scanned for intrusion, a thousand times a minute and i could walk 999 of those each minute but one gets through each minute of the day that completely penetrates my system and exposes everything t to confidentiality and availability harms. is that a successful security system? your answer to that matters because there is no best practice that is going to get anywhere near that but it's going to cost a heck of a lot and i am completely on his side that we have to go on the front row and do it better than ever before. or legislative proposals have to focus on that and we have to start thinking about what the role of the government is. this might be where you are heading that we've talked a lot about the fourth amendment and privacy concerns. on the government centric view of this problem but the private sector through its own technologies and its own market forces, through its own transnational organizations including nongovernmental organizations can help define those rules for their own groups that on this system and on this environment this is what we have consented to. these are the rules of the road. we have to think about what the government'governments role to n helping the private sector had a professionalized industry level and for the nongovernmental organizations which already controlled a lot of the governments and how we improve security in that model. we shift towards threats deterrence. as part of the element of the national power that we have all grown to view as government centric condit nomadic information, military, economic and law enforcement the private sector has some of those capabilities as well using the government institutions whether it is to better enable them to do civil losses and a tradition that feeds into the law enforcement system, whether it is a name and shame campaign that can impact the economy of the nationstate and viable companies that are benefiting from stolen intellectual property we have to start thinking that way. >> i think that you have something to add to that? >> i think you're right because all of this sounds like government centric. there are five approaches that have been taken. new institutions are needed, new procedures are needed to get this. you have to limit the disclosure of certain information to other entities. the privacy concerns but all of these are governmental focused. none of them transfer the power agency to private industry and empower them to defend themselves against such a threat. >> we could have a lot of fun talking about private sector but a google representative said they had th have the same capabs as nsa. i said that's cool i didn't know that you had nuclear submarines in the collection satellites. but put that aside for a moment. don't underestimate your opponent, please. and don't underestimate your capability to deal with those opponents because they are not bound by our lot. in th a metrics point it's a god one that ceos have different metrics. so when you go in with a set of miniature x. you know you are not going to get a sale. that is the angle that you have to take your beginning to see them do this calculation of risk and the question i usually ask now is does your board have a risk committee and most of them say yes and i said i as the race committee considers cyber risk and the answer on that one is mixed so that is one of the measures we can use to see how this is changing is the board thinking about risk when it comes to cyberspace different metrics and that is why this has been a hard problem. >> one brief point. i've always been briefed in supportive of my colleague here. one thing in discussing this issue is what we see in a cyber at this point as it is just another extension nation of activities of crime that of activities that are constant that in reality we are not going to eliminate. it's not going to disappear from other countries and neither is crime. from an agency that is dedicated to minimizing the as much as possible, but no one i think actually says it will be eliminated. i think in this environment we are dealing with the threat mitigation so we are going to mitigate the threat. vulnerability mitigation. we are not going to eliminate the vulnerability unfortunately. the one thing i have on that is another area we have agreed for example you don't drive cars when they can explode if it is unacceptable. having claims that kind of tumble frotumbled from the sky s unacceptable. having computer hardware that is immediately subject to our vulnerable to intrusion is unacceptable. actually, it's not. we have accepted that as a model. we accept that there are updates provided to our computers because they in fact are perhaps inherently subject to some vulnerability. so i only make that point to say that we are in an environment where we have all these problems and as much as the world we can simply eliminate them or give to the place we can eliminate them, i think that realistically we are going to be dealing with strategies to mitigate these problems. >> before we open up to questions i want to get a little more specific on what the private sector should be able to do and maybe if you or anyone else can kind of jump in on this because there has been a lot of discussion of actions the private sector could do in its own infrastructure are moving outside of its infrastructure to try to get back. it is this a part of what you're talking about as a greater private sector role in deterrence and i guess from others are there reactions to that specifically? >> some of these issues are discussed in a way that is very evenhanded to address the issu issues. >> i have no financial interest in this, so i actually can see that. i would rather start on the highest end of that question where the private sector should be and touched upon some of the comments that i made earlier, which again would require a sort of paradigm shift. a paradigm shift in which we try to realize that the internet and technologies from a security perspective have differentiations. it's not the case that the top-secret computer that i used to use for the government should be the very same computer with the very same protocols that i could buy into any electronics store. that makes no sense and it has obvious consequences in terms of moving data between the top-secret in secret and unclassified networks and we heard a couple of years ago how the consequence on one occasion led to the don't know if little is the right word but multiply infected with malware which not only has an effect on confidentiality but it could have actually destroyed our information-based. so the first thing is to try to figure out what the technological solutions are and that's going to be a private sector challenge. it might be funded by the government but by and large as an r&d opportunity to come up with hardware, software and protocols that differentiate between security and privacy models i think that there might actually be a happy coincidence here in which some of the areas we need the greatest security happenetab into the same areas t require the least amount of privacy which is interesting if you think and certainly an opportunity for where we should start. when you think about the power grid and the environment, a very low or should i say nonexistent requirement for anonymity and you should be known to the biometric level of who you are. so, what we see is that the technologies that have been developed in the interoperability really have focused after that to the internet, the first consideration was interoperability. on the bandwidth to focus was on speed and after that the focus of the engineering community was on privacy so we have the best minds in the world to focus on the attribution so i think of that in the first level where can we have better systems that are interoperable, internationally got promoted environments for detection and attribution that are consistent with our civil liberties and privacy requirements. one of the problems we have coming up with international agreements between the government starting with the cyber crime convention in europe which to this day can't agree between the allied countries for law enforcement purposes. for the way that doesn't include major players in the space. it could be resolved by the private sector in the government model that would say if you want to operate in this platform with this hardware internationally that the government model actually has private sector cyber emergency readiness team's death camp transport and locates the data and stabilize the situation so you got the detection and attribution that can be used for a penalty on whomever the adversary is that did that. it might be blocking some people out of a system or turning it over to the government. it may be civil lawsuits or engaging in name and shame campaign's. whatever the issue is, the model that we are looking to words may not be in an agreement on the government fundamentally but in international agreements between solar communities of interest in the private sector. i was often reminded of the government and now in the private sector when i'm speaking with a company, they are likely in place in excess of 150 countries. if i could bring ten transnational corporations together, i have a good international strategy. so that's the second thing. third is to think through the government's models are. we are looking at non- governmental organizations that are handling the domain issues looking at internet protocol and how that's managed but you don't have the similar nongovernmental organization that is actually formed and federated for the purpose of security and that is what we can consider so how does that leave us without the larger strategic vision? what you are seeing now depending on where they are we saw an internet company and security company abroad that actually broke into a china pla infrastructure in hong kong getting in and looking for the infrastructure in the publishing that for the security of the community saying here is stealing your data. to look at that from the perspective of the united states, looking from that vision point is you broke into the system. you didn't be strolling in the damage it but that is an unauthorized access and you may have gone through that system into publishing a committed all sorts of other harms including violating surveillance and traffic statutes. depending on your worldview of whether that is the case now or not, the dialogue has to be whether or not that should be the case and how those types of activities if they lead to the positive goals that we want how do you do that in coordination and cooperation under the guidance of nationstates and the lawful systems and what comes of those? there is a debate on the active defense site certainly i've never been in favor and i strongly oppose anything that looks like vigilante is some getting out into getting a flash as a pure matter of presents, but i think that there is a lot that doesn't fall into that category and when people speak about active defense, there is a group that immediately drives towards escalatory models and i don't know if they think that is what is likely to happen or they are just throwing that into them it is to disturb the rest of the conversation in a disingenuous way. but regardless, there are things that can happen right now that are possibilities for detection and attribution that are both on the network and off network. a lot of the bad guys are operating on networks that have no protection of passwords where they are pulling information back. they are keeping it there until they go back and obtain it for further use and i've never heard anyone say if there is an open access point that has your information but you can't go and get it back. but the area that i think is most for consideration by the group of lawyers and from that policy perspective is where does the real world vie worldview of self-defense and defense of property and life have its cyber analyzed. we really haven't in the past scene that areas where something would be traditionally or technically unlawful when it's done in and on proportionately as justified and that would be true of someone who steals someone's property running down the street if someone were to say are you able to tackle somebody and hold them down on the street for a period left 15 minutes you would get the answer that would be assault, battery and kidnapping. if i put in context and said they were making off with property that there was no law enforcement present and the purpose was to get them in place you would say of course that can be done and that would be justified. a lot of areas the private sector is considering now is what is the ability to stabilize the situation to restrain certain evidence in place with three straight and reengage the government unless the private sector acted would be met with irreparable harm. >> i want to get to the audience but i think we have a couple of people that want to jump in on this. >> there are different levels of protection depending what the domain is but to say you have no privacy interest in the electricity there is a case on point with thermal imaging you can't collect information from a home that indicates high use of growth lights for marijuana use because that is under the fourth amendment. if it would indicate you can figure this out from all that information i think would be open to challenge. the fourth amendment protects persons of that information against searches you have to have a probable cause and supported by the affirmation described particularly. >> that is directly addressed to me. i never suggested that there wasn't a privacy consideration. i was talking about the electric power generating grid itself as having high security. i am talking about the actual grid, not smart grid coming to the home. i don't challenge that in any way. >> i'm going to talk really fast you know i'm not. i have a different experience from most people in the united states that i've been conducting with the permission of the government regular talks with the chinese ministry of state security and the people's liberation army about cybersecurity. the participants include u.s. government officials. one of the reasons we worry about escalation in the calculation and interpretation is because the chinese have brought it up. at various times they have said things like there is no such thing as the private sector. companies are acting at your behest. of course that's why they say it. they've also said if we show up and ask for fbi cooperation, if we find someone doing something and we bring a case to the fbi will you cooperate they said yes we will cooperate and investigating and perhaps prosecuting that company something to bear in mind the legal framework for this internationally is changing. the group of government experts in the un without a paper that was endorsed by the secretary-general and the general assembly that said international law applies to cyberspace and the national sovereignty applies to cyberspace. the un charter applies to cyberspace. there are borders i borders in . get rid of that old.com stuff taken by the residents of the territory. this is the international standard. think about how the world will change in the next three years as people begin to move down this path of moving cyberspace from being this vision of the borderless comments to just another extension of the national framework for international relations and national security that we have now. >> why don't we see if we have any questions. >> university of north carolina. trying to combine some of the points that were made around the presidential directive, the planes of the sort of band data being insufficient and how we need to do to her would have been addressed in large part by the president actions that authorize offensive and defensive but often cyber operations and the headlines ran with there being a target that was associated with this revelation the president authorized. i don't know if there is any kind of constitutional issues that it was just by the president alone but regardless, that would seem to be exactly to the point of there being a failure of the deterrence by the government. so it's not -- maybe this gets into the issues i don't understand what's happening in my computer in terms of very abstract but it sounds like a cyber effect operation, the target list, the government doing something directly to detour and if not, why not. is there something about the mechanics that don't be quite to the actual deterrence? >> of the debate hasn't caught up to the larger international debate. >> discussion in the u.s. hasn't caught up to where the international discussion areas and in part that is because the normal diplomatic stuff is classified. it would be useful if the state department was a little more transparent. i think they are trying that the issueissue is delivered directlw people are beginning to interpret the conflict as they apply to cyberspace. the first is can redefine what an actual attack is? yes and it's consistent with a definition that we have and this grows out of the experience with others there has to be violence and damage and casualties and death. there are areas of ambiguity. everyone admits that there's a general sense this is an attack that would've justified the military response if there is a desire to see this carried out in the provisions of the un charter and things apply into self-defense. most of what we have seen doesn't qualify as an attack. from the perspective of the international community it is not an attack therefore military response is not justified and we have tremendous literary capabilities that they ar but tt going to deter the crime and they didn't deter the crime or espionage of the cold war why are we surprised now? >> if i could pull the thread on that because the cyber offensive capability is the nationstate ability regardless of what the incoming threat is. this is our ability that could be against a bombing. it's not necessarily the trick to a cyber threat. when i talk about deterrence although that could be one piece and with limited potential limited set of circumstances as a part of a greater mix of military power that we might have, i try to put that into the wider context of all of the elements of national power so that is part of that, but you still have to diplomatic law-enforcement private sector capability that combines a deterrent effect so it's one small aspect to answer your question and one that is limited in its availability for use. spinnaker just as a sourcing note you might want to look at the un experts were the work that will become public out of the organization for the security cooperation in europe. >> thank you for a wonderful, wonderful panel. so, as you know in groundhog day bill murray does become a better person and gets the girl. so there is a good ending. [laughter] melissa hathaway gave a presentation about her perspective of where we are on the cyber for the bush administration and the obama administration and one of the core authors of the comprehensive cyber security initiative which many of you are familiar with and her sort of plea was she has been at this in 2,008 like many of us and she has been kind of taken aback by the lack of an international strategy that of the united states seem to be pursuing into country game for what you have to say and what you think of as a group as you raise the issue you raised its like the quiet negotiations jim has been involved in the what do you see as the best model for an international set of standards or norms or convention that we should be heading towards as part of the information sharing you are acting all over the world under a range of information sharing issues not just in the united states. i would be curious to see what the brainpower on the panel thinks. and i do hope that you will look at the cyber playbook as many issues that you raised are discussed for the committee. >> i'm very positive about this. remember keith alexander is an army general so every morning he recites the army and the key line is i will never accept defeat. so i will never quit. he says that it's true toothpaste durables on his chin because he is singing it. we are going to win this one but it's going to take a lot of time. it would be on the diplomatic side. the terrain is changing for a couple of reasons. the u.s. has experienced a range of setbacks and the influence is diminished. we do have a diplomatic strategy. it's not necessarily entirely public, but it is available at the white house website. >> i've been trying to remember why we did this and i went back to these issues in the clinton white house and for some reason, we split them. we have a secure public network group and the e-commerce working group. it was one of the two crossover people. why did we split them? who knows. but you now see issues of cyber security and internet governance with overlapping considerably and is a part of that, you have the control over content issues and you have the issue of transporter data .-dot helped by the window in revelation so every country has the same reaction. we did, to mac. most countries that is their opening position so that is kind of the debate we are having now. how do you manage your in a period of transition moving to a world where cyberspace will be treated like every other, like disease or whatever. how you manage the transition so that we don't lose the key values and yet we could have a more stable and secure environment. so i do think we have a strategy. you could say perhaps it isn't public enough, but the larger political influence i will make it more difficult to achieve. >> so, in light of the recent legislations with encryption, the standard-setting, the high level of cynicism overseas it's not just a brazilian visit that's canceled. there's very serious opposition to what the united states has done overseas. i was in cambridge at the time it's remarkable the extent of anger towards the united states and we often forget that when we are here domestically but the revelations have been a significant setback to the diplomatic efforts abroad. i also think it is too early to see how that will pan out. if it's going to pan out that the united states is able to lead from behind and that we could regain a leadership position but i think we will see a significant fallout for some time to come. >> i think like jim on this issue i'm an optimist. timtime is on our side. the development of the international norms will follow. so when they start to negotiate it was the countries with a certain amount of technological gain already. i think what we are seeing is some of the norms that have driven the other doctrinal advancements will become more possible. when someone brings up letters of mar mark in this context but there are certain types of international attitudes towards hacking and intruding upon networks that likely will gain purchase and make it easier to perhaps create international doctrine. .. there's actually time a cyberdistress. so even before we get our internationals prodigies in-line as melissa was talking about yesterday, do you have any ideas going forward on how to get these desperately sufficient stakeholders on the same page? that to me seems critical before we can get everything else going. >> i don't like talking so much. first of all, the privacy community try to conflate the because it's the republican chairman who said he gotten more letters on soap than any other issue last year. >> can you just save what so but is? stop online piracy act. i was about to make a bad joke. i won't. so it was an act that would have diverted people who were typing in give me free version of mickey mouse. it would have diverted them to some website that said stop coming or violating federal law. it messed with the dns. a bad idea. conflating them -- this is sort of how things work in a democracy because we are not politically difficult situation, maybe it's moving a little more slowly. but i do think we will bring people around. when you talk on the hill, five years ago we probably all had this experience. five years ago they would take out of my way, kid. why are you bothering me with the sabres of? now they get it. we are on a path to fix these things. you will have significant objections, though. one of the things we are not dealing with one economic think tank hack, what i say is snowden is not accidental. it's planned, and nonstate actor and warfare against the u.s. so we have a new conflict. were not doing so well in dealing with it right now. these are things we have to overcome. i'm positive we can overcome them. >> i'll just pick up the part of your question related to developing levels of trust and credibility between all the players in terms of privacy protections. there are some models to procedure. i have a personal or unique respect on this. i was appointed as the president in april 2003 to be the first officer for civil rights and civil liberties at the department of homeland security. it was a first. this had never happened in this position never existed in any government agent eve before. on the same day, secretary appoint a chief privacy officer. we headed out together in this uncharted world, trying to figure out what to make of it and how to develop some traction. try to figure out how to get through the policy world to develop some traction. i have left the department of security in the last few months. i've been really struck by the structure of privacy that has been built-in. i walked past a cubicle three times a day and does so in so privacy officer. the privacy impact assessment here the idea of having a privacy impact assessment within the organization assess the privacy impacts of your program was foreign to us in april 2003, foreign. i remember my colleague introducing this idea for the first time. and now if you look at our website, we've got probably a dozen privacy impact assessment just on cyberrelated programs. we have five unmanned same program itself. these folks to training, cyberspecific training. outreach, advisory councils. so i think -- my point is i'm optimistic that there are models we can build upon in the silver liberty and levels of confidence. we need to adapt those across government and a lot of private entities to have that kind of embedded appreciation for these issues. there are ways to proceed there. >> everybody on the panel -- leonard, steven m. or i'll have something to contribute. >> very brief on that question. this for me comes back to the point i made about information of people understanding to elegy. that is to proselytes on that issue as much as i can because i do believe the earth has not figured out in front of the public on this. they have business concerns that will drive them back from being that the bleeding manage at doing certain things. one of the frustrations we face, working closely with our colleagues at dhs, for example, several years ago when people were very, very can turn that there would be system that would be filtering their e-mails, trying to find a malicious coder thinks that shouldn't be there. we spent a lot of time asking people come in to you have an e-mail account? you know that spam is not getting to you? how do you think it is not getting to you? there was a lack of appreciation that the very technology server talking about where things are broadly implemented in the private sector and used as just baseline common sense security measures. but there's a lack of appreciation for that. i do think that part of it is trying to develop a more tech savvy world, where people understand the way the information is out lamented. an appreciation for why it is different part of this whole enterprise are implementing us, including government. >> this actually gives me an opportunity to an unhappy know happy note for my perspective. despite certain pitfalls that you see here and there over time, the government and private sector are working remarkably well together every day. even some of the players he mentioned daily are working with law enforcement, with the government. those might not make the headlines, but they are happening all the time. the program started in 1996 had 55,000 people today meeting throughout the country, building the type of stress that this story that doesn't change on the event here they are. the task for his working with the defense industrial base together with nsa's information assurance director of the csp program goes on and on. so my main point is that you're in the government work well together. we align for the right goals. i don't see a problem in that regard. >> laura. >> the outcome i want to respond to dance points. there is a real danger here that we think by checking the box to address the underlying concern. i'm thinking about privacy. we have the oversight or an. no resources, no money. the idea we have one, great. but what can i do? we have the records notices come up with exceptions for national security are routinely used by dhs and others but through biometric program to the privacy act is almost 40 years old and no longer does what it was set to do. we have a foia with exceptions for national security that are routinely used to deny even request for legal reasoning as to why somebody has engaged in certain activity. now we've seen with judge reggie walton's release, judge eakin in august of this year that you can release the code reasoning without providing too much information about the underlying issues. what we found out is a secret court has secretly carved out the supreme court itself has never recognized. so when you say look, we are doing a lot of privacy, it is hard not to be too cynical about that when you see there's this underlying deficit. there is a problem in another population if you're trying to get buy-in from them. there's a certain amount of cynicism and concern about the level to which democratic governments can continue if you don't know what is happening in your name and what your elected representatives are doing. >> okay. we have about two minutes left. if somebody has an easy question. [laughter] >> hi, i hope it's an easy question. it's actually two. one there may not be an answer to yet another is how the liability issue that was mentioned with regard to the new framework they pay out. i wanted to ask also about the broad community of hackers, many of who see themselves as security researchers, who reports early days when when i find vulnerabilities. i would like to know what the panel thinks of that community in their place for sort of a crowd sourcing, if you will, of vulnerabilities. what do you think? >> who wants to jump in on that? >> take the financial sector as an example. there's about 20 different laws that relate to customers privacy information. in terms of liability, you have graham leach bliley, 1999, the credit reporting act. you've got the electronic fund act. protect information against government access. you have consumer acts. there's all different ways in which liability is incurred it have to be addressed is some sort sort of a long-term comprehensive cybersecurity package. >> on the second portion, i'll give you descriptive and normative answer. descriptively, those people are breaking the law. 10 thirtieths computer fraud and abuse act. that's my provision for self-help or forward doing it really to help everyone else. there's not anything recognized in the law currently that would assist those people in behaving or having their acts rendered lawful. normatively, i personally think there are concerns about opening up the landscape to say different parties determine themselves. what most they can take, what data they can retrieve, what costs they can impose on others when it's taken from their network. anyone who suggests to you that conduct team and intrusion and perhaps retrieving or deleting information a network that you're unfamiliar with this simple and without risk is probably selling you some thing. there are great risks adoring not. the question is if we build that into the law, are we actually creating a more or more less resilient, secure cyberspace? many of us feel it's perhaps an open door to a less secure and stable environment. >> chen says he has a -- he might just be tiny one. one thing to track as the cost of buying these sorts of vulnerabilities. the guys who did it tell me the has gone up a sickly about 50 k. for a new one and i was 100 k. there's more competition. the people complain the most are researchers in china is the mps comes to them and says you know to the state to give it to us for free at discounts of other chinese guys trying to move to singapore. interesting marketeer not that visible to you. i think it's going to become easier. think of where we were on the panel knows this. we know so much more than we knew five years ago. we are getting to the point where you will note to the company that's had a significant problem. here are things you could have done to reduce risk. why were you doing them? when that happens, you'll start to see the collection. >> alright. i hope everybody will join me in thanking the terrific panel. [applause] >> thank you. an administrative amount meant if you would clear the room, as he did yesterday, you can make her personal belongings on your seat and we will be back together in 45 minutes at 1:00. [inaudible conversations] >> present obama laid the traditional reits are in day ceremonies at arlington national ceremony today. >> after tour after tour after tour in iraq and afghanistan. this generation, the 9/11 generation has met every mission we have asked of them. today we can say that because of their heroic service, the core of al qaeda is on the path to defeat. our nation is more secure in our homeland is safer. there are men and women like the soldiers come assumed to be better in another few months ago. chukar he hoped. to curry deployed to iraq twice and survived not one, but two, three separate ied explosions. when she was well enough, she deployed again. this time to afghanistan, where she was often the only woman at a forward operating base. she proudly wears the combat action badge in today's chukar is committed to helping other wounded warriors recover from the trials of war. hoping the troops, she said, is when i am all about. my fellow americans, that's what we should be all about. our work is more urgent than ever because this chapter of war is coming to an end. soon one of the first burning survived in an 12 years ago, brigadier general daniel you will lead his camp pendleton marines as they become one of the last major groups of marines to deploy in this war. and over the coming months, more of our troops will come home. this venture a troop levels in afghanistan will be down to 34th rouson. by this time next year, the transition to ask him a security will be nearly complete. the longest war in american history will end. >> mrs. kennedy is very well known at this tile icon, admiration of fashion sense. mrs. kennedy put a lot of thought in her wardrobe when she was representing the country both at the white house and while traveling abroad. she would think about what colors would mean something to the country i'm about to visit. so for her visit to canada, she chose this cardan as a gesture restocked for the red of the canadian maple leaf. i really admire the thought that mrs. kennedy put into her wardrobe. she also knew the advantage of choosing a color or style that would make her stand out in a crowd. >> up next, the commerce department farm on investment. the panel includes michael froman and the ceos of caterpillar ntm w. north america, and the transatlantic trade and investment partnership in a free-trade pact with the asia-pacific region. black >> good morning, everyone. secretary kerry, thank you or much for that excellent, excellent speech and thank you for joining us on the second day of our summit. we had a great day yesterday with president obama, as the kurds and panelists and all the networking and matchmaking opportunities that went on. today promises to be even better. so let's get dirty. i am very pleased to announce the start of our first panel entitled, why select the u.s.a. using the u.s. as an export platform. we have a great lineup, including my friend u.s. trade representative michael froman, will house some of tennessee, blood ludwig willisch, ceo of bmw north america and doug oberhelman, ceo of caterpillar. but i'm going to let the moderator go into a more detail on each of our panels. so let me introduce who will moderate today's panel. neil irwin is a "washington post" columnist and economic editor of a widely read blog in the post. at the wall while, you can get the post news on and analysis. neil is an author who has covered the federal reserve and let the post coverage of the financial crisis. ladies and gentlemen, please give a warm welcome to our moderator, neil irwin. [applause] >> thanks so much. we heard from the secretary we've been through an area in which the small piecemeal things to which individual countries. now we are in a moment were big overarching trade agreements are negotiated across both oceans with europe and the partnership. with great panel to discuss these things. first, bill haslam is from a state that has succeeded on the world stage as an exporter. pockmarked another of america's great success stories is caterpillar, the giant exporter of mining and construction equipments. doug oberhelman is the ceo with us today. [applause] caterpillars a great story of an american company of exports to the world. we also have the leader of the great european country that makes a great deal of stuff in the united states and we are proud to have -- under this all over again, ludwig willisch, ceo of bmw north america is still with us. [applause] the man who's negotiating these trade agreements on both sides of the atlantic tonight dates, the u.s. trade rep is ambassador michael froman. [applause] were going to start with a few comments from each panelist. governor, we'll start with you. >> thank you. it's not to be here. by the governor tennessee for three years. one thing people ask you is what have you learned. the answer is a whole lot. one other quick things you learn is this, international trade agreements directly impact the job of the state governor. when i started running like i said several years ago, but certainly would have been one of the key issues on my horizon. it is definitely true. let me give you a little context. in tennessee, were proud of the fact that we still make things. they make a lot make a lot of automobiles. we make a lot of furniture, which people thought has gone from being produced in the u.s. we had a company just last week announced a removing jobs from china back to tennessee to produce things. they make a lot of medical supplies. i can go on and on. we are proud of the fact we make things. as you see from some of my comments, the ability to make and sell those things is directly impacted by foreign agreements. in context, we export europe about a $.3 billion a year, about 2 billion to china. penny was talking about foreign direct investment in the u.s. in tennessee we have about 880 different companies located in tennessee, largely led by japanese companies. came to tennessee 30 plus years ago and a lot of automotive industry suppliers has sprung up around them. she said there is one point that in million americans working in manufacturing jobs. in tennessee, even though were about 2% of the population, we make up 6% or 7% of folks in manufacturing this nest of foreign ownership. we are proud of the fact that the four years running we been laid in state strengths. we are part of the fact we have the largest cargo hub in the u.s. and the second-largest in the world due to a small company called fedex, which happens to located in memphis that we enjoyed the advantage of. we have four international export development not this in the u.k., germany, mexico and china. tennessee exporters are estimated to grow if the tariff treaty how things to be taught to bow. we think our experts to your poker about 35%. close to $2 billion would be a date with that agreement would be passed. we ranked second in the nation for the manufacturing jobs created over the last year. first in the southeast and per capita income growth and gdp for the last 12 months in the southeast in the top 10 in the country. interestingly, we ranked second -- where the second-leading state for medical equipment supply export. about 11% of the nations exported medical equipment happens out of tennessee and even though 2% of the population. as in most business numbers like that, there is a recent fedex dominates in that business. in medical equipment, if you need a coming at it right then. having fedex is a hub in memphis is great. let me give an example or three large companies that export out of tennessee and why it's important and widely tariff treaties we talk about our particular portman. upper east tennessee has about 7000 employees. it took global headquarters. they export about $1.5 billion a year. if pettitte said trudy is passed, that would increase chemical sales for exports about a hundred million dollars a year to europe. we think eastman would get their share of that. nissan is the headquarters for nissan and the americas in their plant in tennessee is their largest in the western hemisphere. about 14% of the vehicles that they produce are exported. smith and nephew is one of the medical equipment suppliers we talked about in memphis and the value of their worth is about a billion and a southern medtronic and much medical equipment suppliers. on a lighter note we have few other things. we exploit this brown liquid that people seem to know no matter where i go by the name of jack daniel's. i say hi in the governor of tennessee. i matter what country they kojak daniels, dolly parton, we got it. we have some other nice things we export. were fairly well known for. not just country. i sweeter now come on make 300 million m&ms every day. unilever announced baha'is untruth and in tennessee. with its chemicals, autos, sugar, we have you covered. before he turned over to the stakes we talk about in terms of free trade agreement and the impact. soon after coming into office on the hobby was a cannot locate an suv plant somewhere. it's about a $1.3 billion investment. they ended up locating them in mexico. ceos decide they will tell you there's a lot of reasons for governors when it locates understated because of incredible sales of the the governor did. because someone else can wear lots of reasons why went somewhere else. at least one of the reasons here was the terrace to import -- to export from the u.s. 10% to europe on a 30 to brazil. we are relatively confident one of the reasons that $1.3 billion a that went to mexico was because of the tariff agreements. we think full implementation would increase tennessee auto x berths to europe by about 900 million. the panelists from bmw can talk a lot about the added cost of that and why that is true. a few numbers to wrap up with. countries we have free trade agreements with. our per capita exports are 16 times the countries where free trade agreements as those that we don't. after nafta, our experts to mexico and that the times to canada three times after the agreement was stuck with chili, our exports to chile went up 10 times our experts are chemical equipment must tell you with repeated previously set. i'll come back to the point and made with. as a governor, were not involved. we don't debate them in the house. those treaties have incredible impact on the things we do. look forward to discussing it more. >> we have an hour. i'm hoping to hear you pitch from locating in tennessee sometimes in the next hour. >> yeah, thank you. governors come in thank you for a great review. we have a fairly strong presence in nashville with our financial services business there, 700 employees. the big business and no one is happy and really likes tennessee for lots of reasons. >> can you say it one more time? >> i'm often, can really compete for the u.s. on a level playing field basis with everyone else said why don't we build anything? in fact, we felt a lot here and it's time it came from athens, georgia last evening because yesterday we cut the ribbon on a brand-new greenfield factory 850,000 square feet. 1400 people strong when it's fully operational at the end of next year. these will be small bulldozers and small excavators that were formally only produced in japan. we brought those to the united states for several reasons. one, we can compete from
getting reports on home sales. andrew, good morning. all the way down at the stock exchange. >> facebook shares getting a boost hitting record highs. the social times beating the street. the company says it saw an increase for both advertiseres and users during the second quarter. we'll have more from analyst dean munser. second quarter results fell a bit short. cheaper service plans offered to customers without subsidized cell phone cut into margins. we're going to talk to an at&t analyst in the next half an hour about that. there could be a bit of good news in there, too. qualcomm beat estimates on the top and bottom line. the current quarter profit forecast came in below estimates. in unrelated news on the company, a chinese state run newspaper reports china apps's anti-trust regulators report qualcomm has a monopoly. also, gilliad, take a look at this, posting better-than-expected earnings in revenue after the close. the company says its new hepatitis c drug has sales of $3.5 billion in the quarter. that beat estimates. the $1,000 treatment has caused controversy with some questioning whether the high cost will place a huge burden on government-run health plans and private insurers. two more stocks to go through here. shares the customer reviews websites achy's list hit hard in extended hours trading. earnings missed the mark. the company spent more a sign of customers and its revenue forecast fell below estimates. and the final stock to watch this morning, trip adviser, it's a company i use all the time, the online travel research company reported a lower than expected quarterly profit as selling and marketing costs rose. those shares as you're seeing right there up following on that news. joe. >> i just don't know. china, if they accused me or a company -- wouldn't you immediately take that as sort of -- >> a grain of salt? >> you'd say that proudly. that's a term you might not want to use today as much but with a big salt lick. and then gene munster was one of those top guys when we had spitzer on and he was talking about the ranking of analysts, not based on ii, but he's i think on the board and they look at whether these guys can pick stocks or not and how they do medium to long-term. >> that might be a better thing. yeah, yeah. so we were able to get him. yep. you are down there. >> i am. >> we were not really saying why, but you've got -- i've decided if i'm ever -- you're going to be on jury duty. >> jury duty later today at 9:00 a.m. >> so you get to be here. >> and the courthouse is just -- >> a ten-minute walk. >> but i was driving in thinking about it. >> no rest for the weary, by the way. >> i was just thinking there's no way they're going to excuse you. because if the defense attorney starts talking to you, he's going to see you couldn't convince anyone of nil anything unless it was a lawsuit against a corporate ceo or a corporation. then the prosecutors are going to want you on the jury. so either way, tier going to want you pup wouldn't convince any of the bad guys, but you will definitely go after -- >> can you come down to the courthouse this afternoon and just tell the judge about all my various issues because i feel like that might help me get out of this. >> a character witness. >> it depends on the case, on who's picking and which way it goes. >> andrew, are you going to criminal court or a grand jury potentially? >> first of all, if it's a grand jury, i don't think i'm allowed to tell you if it was a grand jury. am i? i don't know. i don't think it's a grand jury. >> i think you are. you can't tell me if you're on one. >> yop. if it's a criminal case, i know you're going to go back to the early childhood and see if there's anything that would excuse the person for whatever they're doing now. but then again, if it's a whistleblower against a corporation, i feel bad for -- you know what i mean? >> in washington news, senior white house officials say president obama is going to support anti-inversion legislation proposed separately by congressman sandy levin in the house and senator carl levin in the senate. the legislation would mandate the companies must be more than 50% owned by a foreign entity. the president supports making this retroactive in may. the topic of tax inversions could be a major part of steve liesman's exclusive conversation with president obama today and the two will sit down for a conversation. you can see that exclusively at 5:00 p.m. on cnbc eastern. >> i saw long strings of this last night. >> but the best that this will do -- the best it can do is maintain the status quo because no one else can leave. but all the corporations that are doing business over there with their facilities and all the loopholes that are already in effect, it doesn't solve any of those things. so it's not like actual reform. it will keep anyone else from doing it and people will say, well, that's the best we can hope for now. well, you're not going to get this. they say we can't do big reform because we can't do that. >> your point is you might as well go for the big reform. >> but in this cynical age that we're in right now, i can just tell you with an election coming up in november, if you are the party on the side of raising the minimum wage and on holding corporations to paying taxes, someone in the white house could definitely say this is an issue. we'll come down on this side. and it's cynical. it might help in the election, but it doesn't help us. it doesn't help the country and it doesn't help us get beyond this 2% growth that we're stuck in. and no one wants to cry for corporations right now. all you're doing here, andrew, it's almost like someone who commits a crime, you're going to say i'm going to put them in jail so they don't commit the crime any more. but you can't educate them and -- but someone who cries out for help and tries to commit suicide, you can go and make sure you take away all the sharp objects and take away all the drugs, don't let them on the third floor of any buildings. but if you went in and -- >> your point is it's not dealing with the problem. >> but you're going to see it and they know exactly what you're doing because it's another way to try and -- >> i'd like to point out if you can't get it done and you're acknowledging that, you might as well go fosht overall tax form. i think it would be a positive thing where capital wants to come here. >> joe, there's one sense of cynicism, and maybe i'm misreading it here, i don't think the president or anybody i know doesn't want some form of wholesale reform, broadly. the question is, you have the basht and you can put on a band-aid or let the patient die. >> you're thinking you're going to get the house to go along with the band-aid. you're not. it's not going to pass. andrew, it's just another -- how many of the -- this is not new. i've seen six years of this where you know it's not going to happen, but it allows you to talk in this grandios way that you would like to do if those other people weren't stopping you. the first thing i said last night is fine, let's attach this bill to the next obamacare repeal bill. they've done that 50 times, knows it wouldn't pass, put these two together. >> and maybe that will -- >> you know it's not going to pass. you know it's not. >> maybe it won't pass. >> not maybe. it's dead on arrival. >> well, then we've decided that everything in washington is -- and basically nothing can get done. >> basically, that is true. >> if that's the case, maybe we are in trouble. >> you know what? we're arguing and we're just talking at each other again. it's going going to be decided with an election. one side or the other, the leadership is going to have to change. the people are the only people that can do it. >> we had that conversation two or three years ago and the last election we said we'll have an election and then therefore the next four years -- >> nothing changed. nothing change. >> nothing changed. >> nothing changed. it got more republican in the house and this time around it may even get remember in the senate. we'll see. is and once that happens, you may need another two years. but at this point, the two sides are not going to come together on anything, on any of these issues, anyway. >> i don't disagree with you. >> so what i would do is hope for leadership on both sides so you could say, i've suggested 25/28. let's do this quickly. if we're going to stop them, let's tie it to something that makes us within three months you've got to come up with something that addresses the -- you know, that we're not territorial, that this global -- think of the money that could come back in. if you're happy with 2% growth, that's one thing. but like a lot of -- that's the other thing. people don't tie the slow growth to corporations not doing well. they say corporations are flush, look at the stock market, but then the job market should be better. we should expect more than two-thirds of new jobs being part-time. it's not a plush market. >> but it won't create jobs. the last time they allowed a temporary corporation holiday for these things, it was called the jobs act and their point was it actually ended up going -- >> we didn't lower corporate taxes, though. >> it was ta temporary holiday. we're way above everybody else and that's -- you've got to -- there's no time like the present. >> i can only hope the leadership -- we will see what the president has to say later today. >> unfortunately, he doesn't -- after all this, me and you and -- we have no influence on any of these things. liesman, either. he's on his own. >> i think we have a little more influence than you think. the president is coming on our network hopefully for a reason. let's tell but other news now, joe. the faa has listed its ban on u.s. flights to israel. the faa made that decision yesterday. the faa ban was criticized by the israeli government. martin fletcher joins us now from tel aviv. martin. >> hi, andrew. yeah, so the faa overthrew the ban. not all the airlines have resumed their flights yet. of course, the europeans who follow the faa in banning the flights, about 30 airlines altogether, international airlines stopped flying into and out of fell avetel aviv. now they're waiting to see what the european advisers instruct them to do. there were more rockets fired from gaza which came towards tel aviv. again, they fell harmlessly into the ground. some were interrupted, intercepted by the iron dome. but it does pose a continuing slight threat to the airport. now, the former mayor of new york, michael bloomberg, is here. and he's taking some of the credit and, actually, some of the israeli analysts are giving him some of the credit saying that he was a very loud voice in israel's favor, telling the faa to overthrow the ban, toying on the american government saying it's unfair and unnecessary. he's saying if there was a threats to nfj mroom bloomberg is get can credit for focusing the attention on that issue. all of this is taking place in the back drop of focus on the talks of john kerry. he's a very important part of aimed at reaching some kind of cease-fire agreement. as we were reporting yesterday, it does seem to be firming up the idea of a five-day humanitarian cease-fire, during which a longer cease-fire would be worked on. but the two sides, hamas and israel, are still far, far apart, the fighting is intensifying. 30 more palestinians killed overnight and israel saying it needs time to take out that rocket -- the panel infrastructure which is so threatening to israel. so pressure put towards a cease-fire, but intensified in fighting, andrew. >> martin fletcher. becky. >> andrew, let's focus on the markets though morning. we did see a mixed session. s&p futures are up after 2 and a half. dow transports were at a record high. you did see a drop for the dow yesterday mostly because of boeing. in the oil markets, it's down by about 42 cents. $102.70 is where wti stands. and the ten-year note, yesterday the yield was down to the third day in a row to 2.46%. this morning, a little higher, 2.482%. yesterday the euro was down for the fourth straight session to below 1.35. continues there today. the euro is trading at 1.3475. the dollar is up against the pound, too. finally, take a look at what's happening with gold prices. $1,390 an ounce. back to the big tech story of the morning, facebook's shares hitting record highs. joining us now is gene munster. and i wasn't here yesterday, gene, but joe was just talking about one of the best records we've seen out there. >> i appreciate it very much. >> what was happening, where you call the stock. >> kind of a low barging, but congratulations. >> thank you. i'll take it. >> gene, you looked at facebook. these were monster earnings. you had to be impressed by what you saw, too. >> absolutely. there's two things going on and working for facebook. their core business is phenomenal. pricing is up over 50% user on year. and the second piece that's going to drive this stock in the future is they have a number of shots on goal of products they're not monetizing today. so you have a good, strong core business and you have opportunities in the future. and i counted seven different things that they have that aren't baked into the street number that's they're going to get into in the next few years. so investors are always about the future and that's the unique set up about owning facebook, even up 6% this morning. >> yeah. in fact, right now, it's up 7%. it keeps pushing higher. i know that you have an overweight rating on this, but as a result you're raising your price target? >> that's right. and right now, we assume a 27 multiple on next year's earnings. i think that that multiple, the long-term earning eggs growth rate is probably going to be 20% or 30%. so i could see that multiple increasing. i think given the number of things that they have in the hopper, you know, whether it's video or instagram, they're getting into commerce with a buy button. they have whatsapp, i think that's going to continue to power that earnings growth rate which will keep that for the foreseeable future. >> what is your growth rate? >> we're at $90. >> what was is before? >> $77. >> so it's already sitting at the price target. that's why you're decreeing numbers. was there anything in the report that concerns you or does this look like it's firing on all cylinders at this point? >> there's nothing that's concerning. we surveyed 12,000 teams twice a year and their engagement has been fading with facebook, increasing with instagram, increasing with whatsapp. so that's still kind of this -- was going on in the younger demographic. i think the reality is they grew users 14% year over year and they have a lot of room to increase, engagement and monetization with those users. >> i saw yesterday, it was a comment that zuckerberg made in the conference call where he said there are over a trillion posts now to try and get your head around how many that is. i was trying to figure people in a stadium, how big that stadium would have to be. does that matter or is that not even a metric that you look at? >> no, that matters. i don't have anything to put it into context but it does matter and that plays to engagement which all gets back to with that big engagement, they can find different way toes make mopney. they have strong leverage pricing which gives them room to slowly move into these other products. when you say slowly, they're not going to corrupt the experience. so i think they're in a unique place to continue to grow the business based on that. >> gene, last week we heard from janet yellen who made comments about some of the areas in the stock market that could be overpriced. one of the ones she mentioned were some of the technology areas. of course, people start thinking of social media. other stocks in this arena. did any of that resinate with you? do you agree with any of the sentiment? >> i think just some of the vertical moves in some of these tech names is always concerning. i think at the end of the day, as we look back at the ones that have had big moves, the real core businesses, the ones that will be around for a long time like google and apple and facebook and amazon, those moves higher don't concern us. it's some of the smaller companies that don't have the management team and the moves that are more concerning. >> you mean some of the ipos that have recently come out? >> it could be some of the ipos and some of the ones that haven't done so well. i think i would just say this, stick to the core strength names and i think you can't go wrong, even if they're up at all-time highs. >> so all four of the ones that you just mentioned, you like amazon, apple, google? >> yes. we like them all. >> gene, i want to thank you very much for talking to us today. great talking to you. >> thank you. coming up, we're going to till what twitter is doing. they're releasing their diversity figures. a new study ranking the happiest and unhappiest cities in the nation. new york where em right now, taking one of those titles. we'll tell you which one when "squawk box" returns. es, if it becomes simpler... if frustration and paperwork decrease... if grandparents get to live at home instead of in a home... the gap begins to close. so let's simplify things. let's close the gap between people and care. ♪ i'm spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job to over 30 of the web's leading job boards with a single click; then simply select the best candidates from one easy to review list. you put up one post and the next day you have all these candidates. makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter.com/offer2. breaking news, we are getting reports of a missing plane that was flying from a west african country to algerie. contact has been lost with the flight. it has 110 passengers and six crew members aboard. company officials are trying to find out what happened to that flight. we will have more details as soon as they're available. right now, it's time for the executive edge. twitter releasing its diversity figures. nearly 90% of twitter's workers in the u.s. are white or asian. men make up 70% of all the staff and 90% of technology staff. twitter is taking steps to diversify its staff. this follows what we've heard from yahoo! and google who first came out with some of these numbers. >> yeah. i don't -- how does a -- >> does it surprise you that an engineering company and a technology company -- >> i guess they're saying you have to be proactive. because the company organically grew into what it is for whatever reason. now it's in a position where it needs probably to foster diversity and actually take proactive steps. >> you don't just end up with the perfect diverse workforce. >> but their numbers were not as good as facebook or google's, i don't think. >> now, you're right. it's a smaller work tors and google and yahoo! probably have other employees that they've pulled in. it's tougher to find engineers and it takes a much bigger search to fit that profile. >> the engineering issue is a larger issue just in the country in terms of actually just being able to find the talent first, but then also just the education issues and sort of you look at sort of the skew of how that even looks right now. >> the one thing that -- usually you come out here and spend, you know, four or five hours. and i can see your mood lighten when you get out of new york city. and today, i just figure as the most miserable city on the planet for people that live there, the most unhappy -- and i don't know why. you can step in dog crap. you walk out your doosh, people don't -- you know, there could be someone ready to throw you under a subway train at any stop where you are. all 18 million people packed together on top of each other. i don't know why you people are miserable there. but normally we can count on you to come out here and spend a little time just to get away. >> it's almost sad. >> is it that he has jury duty or -- >> i said that i'm not getting -- >> i'm sad i'm not getting to sit next to you. >> but that's a break. it's a respite. it's manhattan affective disorder. it's called m.a.d. and it's something that you usually deal with by coming out to the garden state. which is named very aptly. >> let me read the story. >> you deserve this for what you said about new jersey in the past. >> we haven't explained what the story is. we're going to fully explain sglipt you don't need to explain it. people know people are miserable in new york. >> let met just read you what the story is and get into it so you can understand it. it says the city that never sleeps has now been ranked the unhappiest city. the study asked people -- here is what the study asked people. in general, how satisfied are you with the your life? it ranked answers from income housing prices and age and other factors that might influence how people could be. lafayette, indiana wab was prompted to be the happiest city in the country. however, i would suggest to you the way the questions were posed, new york city is a city of strivers. >> nur oeurotocism. >> whatever they're doing, sitting next to the cows. i'm just happy i'm here with the cows. not in new york on a fast track where if you can make it there, you can make it anywhere. >> so annoying. >> yeah, just too dumb to know. >> joe? >> what? >> we are here in the bastion of capitalism. >> you hate capitalism. that's why you're unhappy. >> but this is the city of strivers, this is the american dream. >> i did miss you two while i was gone, i have to say. it really isn't the same not getting your mornings off to -- >> stop the presses. people in new york are miserable. the new study, people in new york might be unhappy. >> the problem is it's how you define happiness. >> no kidding. if you're drinking $1 sthous bottles of wine at night, it's a pretty good place. otherwise, you've heard of the concrete jungle? >> have you taken the subway in august? >> can i just read you -- >> the subway in august is fine, too. >> this study says our interpretation of the fact is that individuals do not aim -- this is in new york -- to maximize self-reported well being or happiness as measured in the surveys and they willingly endure less happiness in exchange for higher incomes or lower -- >> do you want that for your children? i want any children to be happy. >> now you're arguing for the 1% big fat cats. now they're striving for -- now they're striving for success. make up your minds. >> this is the american dream. i'm living in it right here. >> this is a nightmare for me just listening. anyway, m.a.d., seasonal affective -- >> it's heard of s.a.d., not m.a.d. >> that's manhattan affective disorder. i can't even say that with auto straight face. it's cured by coming out and taking a ride down the turnpike down that soprano drive. >> your ride home every day. i was thinking that when i drove down the other day, i said you know what? i see what joe is talking about. you put on the blinders and you go -- >> and we do, all that waste that comes from the 14 mm million people, we do take it away from you and take it somewhere. >> 14 million or 18 million? 12 million at night, 18 million -- or is it 12 and 8? i forget. >> usually you get to come out here and i can see your mood lighten. now you're not going to get that today. >> i'm lighter than light today. >> you have to go to jury duty. >> jury duty is a little too much. >> are we still doing this? do you want me to read this? okay. four square is rebranding itself. the social media app is best known for letting people tag their locations, apparently. the company unveiling a new app today. tun branding will shift the app away from checking in instead. and the goal will be to help users search for nearby places and better compete with local search platforms, like yelp. that was one of the things where i read it and really don't know what i was saying. andrew, i will say last night i learned how to -- on my iphone, double click the button to where little things come up and you get rid of them. and i had, like, 30 things that were on and -- open. >> yeah. and i'm told that that hurts my battery and that i need to -- >> it doesn't hurt your battery. we can talk about that during the commercial break. it doesn't hurt your battery as much as you think. but looking on the bottom of your screen, quarterly results just hitting from ford. phil lebeau joins us now. >> andrew, ford beat the street in the second quarter earning 40 cents per share versus the street at 36 cents. revenue from the automotive division coming in light of what it was expected at 35.3 billion versus 36.3 billion. record quarterly profit any quarter for ford in north america, 2.44 billion. and in europe, which has long been a problem not only for ford, but all of the auto eshg mas. first quarterly profit in over three years, $14 million, and they expect to lose money in the second half of this year, but that is important that they have finally posted at least one quarterly profit in europe. five of six regions, they posted a profit. south america continues to be a problem not only for them, but all the automakers. and they have raised their cash flow guidance for the year. it was expected to be substantially lower compared to last year when they brought in 1.6 billion in cash flow. now they're saying it's simply going to be lower. so a little bit of improvement there. full year guidance has not been changed. we're going to be talking with bob shanks coming up in a little bit. ford beating the streets, coming in at 40 cents a share versus the estimate of 36 cents. guys, back to you. >> phil, great. we will talk to you about the events coming up in just a little bit. when we come back, the story behind at&t, cheaper cell phone plans taking a bite out of revenue. tonight, don't miss steve liesman's exclusive interview with president obama. catch it at 5:00 p.m. eastern here on cnbc. as we head to break, take a look at yesterday's winners & losers. ♪ ♪ eli lilly will be reporting results. we are looking at numbers above expectations. 68 cents a share versus 65 cents in the year ago period. and the revenue number was 4.9, 4 billion. that's above estimates, 4.899. the company acknowledging that the results were hurt by patent expirations of cymbalta and another drug. the company earned 68 cents in the year ago period. >> revenue was down 17% n second quarter. they say it was partially offset. >> this is what they're dealing with. the numbers that the company earned last year for 2013 was $4.15. that's the company makes its numbers this year, it will earn $2.78. so $4.15 to $2778. this is not unique to lily and any pharmaceutical company that's in the business has probably had its share of patent expirations. it's hard to replace a drug. you have it for a certain amount of time. it's probably unique. i guess the difference is a drug company is expected to have a constant pipeline and be constantly replenishing with new innovation. it's a tough battle. >> it would be nice if you could patent a smartphone so no one could compete, but you can't. with drugs, it takes so long to develop them, you get a patent protection for a while. >> like a razor. >> we would still be using one blade instead of 14. who can get a close shave with one blade? oh, andrew. >> we're going to talk at&t. the telecom giant reported yesterday, craig is joining us now. the surprise for you, given that they did seem to miss estimates, i would say marginally, but i don't know where you come out here. >> well, look. the results are actually a little worse than they appear because the accounting treatment of these new equipment installation plans is much more favorable. so the surprise isn't just that they came up short. it's that with the big accounting benefit or the tailwind from accounting, that they actually didn't do much better than they did. so really the discounting is actually quite severe. >> and my understanding is that the argument they are trying to make is that they are making a deliberate shift away from subsidies. is that what's happening here? >> well, only partially. it's true that they are. but there are about 16.5 million customers by our calculation that have effectively been given the discount as if they were paying the full price for their phone when, in fact, they were still on subsidy plans. it turns out that's a temporary price cut, if you will, because sort of what at&t has done has griffin the last half of what the customer owed on the last phone they got. but it is aggressive discounting. that's why you're seeing better retention is because you've cut customer surprises. >> i'm trying to see the silver lining. i'm thipg thinking this is higher lifetime revenue if they can keep these people. >> well, not exactly. look, the switch from paying for a phone via subsidy or paying for a phone via up front price isn't terribly significant, right? it just takes $20 a month, say, from the price of service and moves it into $20 a month for the price of equipment. the accounting treatment is very different. so what at&t is doing is they're giving that $20 a month discount on service to 16.5 million customers who actually didn't buy their own phone. they're just cutting their prices. >> greg, between at&t and ver vison, you like verizon better? yeah. verizon i think is operating much better. the challenge for verizon is they've been able to maintain much higher prices. and the question is with everybody cutting underneath them, will they be able to sustain that price umbrella? >> two things, the iphone in the fall, how does that change the game for you? is it a better thing for verizon, better for at&t or does it matter? i don't know what the change in the way customers buy it is going to be that significant. i think a lot of people have been worried that the transparency of pricing under the new plan may be harmful to hand set sales. i'd make the court case. in fact, when customers are paying full price, eye croironi they calk out the door paying less that's they can finance the whole thing and that may accelerate the sales of smartphones. >> and finally, directv, does this make sense to you? >> not to me. you're taking two platforms that have fundamentally separate cost structures, two separate sets of delivery equipment, two separate sets of workforce, and you're trying to cut the price on the bundle of the two of them, but there are no cost savings to support the integration. so strategically, it's very hard for a combination of a phone company and a satellite company to truly be competitive against a cable company where they do everything that they do on one cost structure and one platform. >> greg, it's a longer conversation and a greater debate. for now, we're going to leave it there. thank you. appreciate it. when we come back, we have veteran auto reporter paula grossi joining us to talk about results. and ahead, gm which is expected in the next hour. stick around, "squawk box" will be right back. will mean making it lighter. one day, factories will work with the cloud. one day... is today. we stathat the kid on thehought back of the bus might have a song that he has in his head but he just can't get out. with the technology of cloud, we change all that. i can sing something into my device, up to the cloud it goes, back down it comes, sounding better. we break down the walls of creation and we give music creation for the masses. ♪ ♪ unlock the creativity in anyone. with the ibm cloud. the ibm cloud is the cloud for business. ford motor posting better-than-expected earnings minutes ago. joining us, paul androsi, managing director at reuters. but so much more, so much more. you are mr. autos, you've written books, you're one of our go-to guys. what are your thoughts on, you know, with you're seeing? it's better this year, i think, than anyone thought just in terms of total vehicles. >> well, yeah. absolutely, joe. i mean, the -- i think the most amazing thing from the ford results this morning is that the first quarterly profit in europe in thee years. now, look, it's a small profit, but given the fact that europe has been a huge drag on forward earnings for the last few years, they're all coming out in north america. what it means is that all their cost cutting and their painstaking work that was done under steven o'dell who heads their mid east operations has finally paid off. >> gm already makes money in europe, don't they? >> no, no. opal is still a problem. >> so europace a problem for both of these guys, then, right? >> yeah, it has been. it has been, definitely. >> i guess they make money -- where does gm do best? a lot of buicks are sold in china, right? >> yeah. gm is still ahead of ford in china. although i was surprised that china -- ford is gaining momentum in china after a late start. and that is a surprise because they've come on stronger faster than most people expected, considering that gm was in the market years ahead of them. now, gm is still outpacing ford and china, but the gap is starting to close. >> andrew, are you with us? i don't know if andrew is with us. i'm going to get him to ask you about hyundai. because i like the way he says it. >> you just want me to pronounce it. i'm here, voe. >> you're sandbagging me. now i just said it the right way, so now you know. did hyundai report, as well, paul? >> yes. hyundai was out this morning in asia time and, look, this is their biggest quart ily profit decline in several years now. they're down about 7%. and one of the things that's hurting them is the flip side of what's helping the american producers is the strength of the korean currency, the would n, whereas the dollar is not strong on international market. so what is helping hyundai is hurting detroit. >> i know that -- i watched the korean report -- >> when did you get fios? >> i moved to this. >> oh, temporarily. >> and i don't like it. i don't know how to use it. >> i have both. >> look, if i brought my family in and let them talk about verizon, we would be in trouble. they're throwing stuff and -- yeah. i'll tell you what i worry about, paul, more than anything. that is that we've thrown everything we have at the economy and it's worked pretty well with housing and auto sales. i worry that we don't have any dry powder if things were headed the other way. we can't go back to qe. auto loans are -- people look at those and think those are scary. >> well, that's one possibility. subprime lending has moved from house to go autos. so that is one issue. i think, you know, one of the things that really is happening now is that the age of the fleet, the average age of the american car and truck on the road is still 11 years. but, you know, a year or two from now when that average age starts to decline, people could keep their cars longer. that could hurt sales momentum. the other issue frankly for these companies overseas is what about an emerging market like russia where there is -- it's at a growth area, but the political turmoil there is an issue and also that's having an effect on the russian economy. >> you know, paul, we said that you were going to tell us whether we should buy these stocks. i don't know if you do that as a reuters guy. but ford has kind of been -- you know, not a lot has been going on with any of them i'm not go buy or sell, but i will say this, one of the interesting things about ford is, they have invested a lot of money in the last couple years in a major new product offensive that will start being unveiled this fall. with a new ford mustang, and especially the new f-150 pickup truck which is really a largely all-aluminum body. and that's -- it's a lot more expensive to produce, but much more lightweight. so there's a lot riding on that pickup truck, so to speak. and if that takes off, i think ford would be definitely worth a look from an investment standpoint. >> all right, thanks, paul. appreciate it. >> okay, see you guys. >> when we come back, starbucks is set to serve up results. we'll get a preview right after this. s that man? dad: he's our broker. he helps looks after all our money. kid: do you pay him? dad: of course. kid: how much? dad: i don't know exactly. kid: what if you're not happy? does he have to pay you back? dad: nope. kid: why not? dad: it doesn't work that way. kid: why not? vo: are you asking enough questions about the way your wealth is managed? wealth management at charles schwab welcome back to "squawk box." starbucks set to report right after the bell today. joining us right now is morningstar consumer equity strategist with a bit of a preview on what's to come. rj, just sort of head line numbers, what should we be looking for? >> i think there's a couple things to focus on. i think looking at the u.s. comparable store sales numbers probably the most important thing. been a story of have, and have-nots this quarter. we've got the likes of chipotle knocking the cover off the ball. starbucks will be one of the positive traffic growers for the quarter. i also want to see how their food and beverage program, some of the expansions they've done there. looking for about 6% comps out of the u.s. segment. i think that's going to be a key number there. also looking at the channel development segment, that's a higher margin business than the retail business that's been growing at an accelerated pace. like to see some acceleration there, possibly above 10%. and lastly looking at the operating margin for this company. i think 200 bips of margin expansion is possible. i think these are the key things to look at. >> they raised prices over the past year, in part because coffee prices or coffee bean prices have gone up. how much should we focus on that? >> i think it's something to keep a look at. but i think some of the attention has been a bit overblown. coffee costs represent about 15% to 20% of the overall cost good sales for this company and only 10% at the store level. so i think that, you know, it's something that obviously will have an impact. but i think it's something that they could mitigate through pricing increases and other levers they have at their disposal. the other thing is there's usually a lag effect because the company locks in prices, usually 12 to 1 months out. not going to have much of an impact on fiscal 2014. might be an impact on 2015, particularly in that channel development segment. but something that they can offset with price increases and other things going on. >> r.j., real quick geographically, they had a great quarter last year in china, or the last quarter was great in china. >> i think you'll see continuation of that progress in china. i think that they've struck a chord with the younger audience, younger demographic in china. i think that's going to drive it. europe will be an area of improvement for that, too. i think they'll be one of the winners for the russian spaces. >> r.j., thank you for being with us. when we come back we're going to talk, because morgan stanley's greg fleming is going to join us and eli lilly's ceo is going to join us, as well. announcer ] there's a gap out there. that's keeping you from the healthcare you deserve. at humana, we believe if healthcare changes, if it becomes simpler... if frustration and paperwork decrease... if grandparents get to live at home instead of in a home... the gap begins to close. so let's simplify things. let's close the gap between people and care. ♪ i'm spending too much time hiring and not enough time in my kitchen. 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"squawk box" gets behind the wheel of earnings central. quarterly results from ford and general motors. and a first on cnbc interview with the cfo of gm. plus, an earnings season house call from the ceo of drug giant eli lilly. and, an earth-moving conversation with the chief executive of caterpillar. the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin who is down at the nyse today. our guest host for the next hour is greg fleming. he is the president of morgan stanley's wealth management and investment management divisions, and greg, it is great to see you. >> great to see you again, becky. >> thank you for coming in. >> we wonder when he comes in, he decides this is like the big victory lap. morgan stanley's results, which were great -- >> wealth management. >> it's all him. >> that were actually -- >> we don't do this just to reward you although it is a plumb thing -- >> we do it because who knows more -- you will be able to tell us about what the people that you serve, the wealth management, how they're feeling, whether they're, you know, whether they're still worried. whether they're full-in and think the market's never going down, and that gives us a good read on consensus. where we are in terms of the age of this bull. >> it does. we have 16,400 advisers, 4 million clients and $2 trillion of client assets so we have great insight into what people are -- >> can they get through to you? >> all the time. >> i'm going to call and pretend i'm somebody. >> see how long it takes? >> we should do that right after the show. >> did i say what it's concerning mr. -- mr. fleming is currently busy. can i -- >> he's a little busy right now. >> make sure you leave the legitimate callback number. >> honestly, how are people feeling right now? what is the sense you get from your clients? >> you know, i think that the u.s. economy is improving, and that ripples through what our advisers are seeing and what clients are seeing. you know, there's really two pieces to it. the underlying economy, which people are feeling better about, at least here. and then markets, which are challenging in the sense that the fixed income side of the equation, rates are clearly going to go up. so the asset allocation around that remains a big hurdle for advisers and clients. >> some day slowly. >> but the concern being out there for a financial adviser counseling a client, you've had a very good run in the stock market. you've got interest rates at effectively zero. so that calculus is a challenge for our advisers and clients. >> high net worth clients what is the average that these people have under your management? >> we have many, many clients with more than $1 million with us. and, frankly, it cycles up from there, $10 million, even beyond that. >> you've rewarded brokers for getting bigger clients and try to weed out some -- but you still have mom and pop people, serviced by your financial adviser. >> totally, joe. in fact, we have incentives for our advisers to grow. >> to get more. but you're not going to turn anyone away. it just might not be as lucrative >> for morgan stanley wealth management if you've got over 16,000 financial advisers, it's a big umbrella. we have a lot of our advisers that are now working with their clients in an advisory capacity. we have over $760 billion in these advisory accounts. but we still have the old commission based model and we're happy to have both. >> it is challenging because one, when you do asset allocation and you need diversification to minimize your risk, a very powerful part of that is usually mfixed income. you almost feel handcuffs which pushes you out the risk curve where you could be way too heavily exposed on the equity side. it's very challenging. >> the exact challenge. this is where investment professionals, whether it's institutional, hedge fund, our financial advisers, think is the big challenge across the investing landscape. >> we're going to talk more about that in just a moment. but we do have some something to talk about a developing story at this hour. we're still awaiting more details on that missing air algeria flight that was bound for algiers. swiftair is the operator of that flight. it says it lost contact with the md-83 jet which was carrying 110 passengers, and six crew members. company officials are still trying to determine what happened to the flight. by the way the faa has lifted its ban on flights by u.s. carriers to and from israel. that ban had been first put into effect on tuesday after a hamas rocket landed near tel aviv's ben-gurion airport. it was extended up to 24 hours yesterday afternoon. but the ban was lifted last night. also, we should tell us, automakers are in the spotlight on a very busy morning for earnings. ford reporting second quarter profit of 40 cents a share, four cents better than the street was expecting. revenue did come in a little on the light side. the company posting, though, its first year profit in three years and a record north american profit that stock is up by about 12 cents. andrew? >> also we're talking tax reform today. senior white house officials say that president obama will support anti-inversion legislation proposed separately by congressman levin in the house and senator carl levin in the senate. legislation would mandate that companies must be more than 50% owned by a foreign enity to escape u.s. taxes. the president also supports making this retro active back to may. now the topic of tax inversions will be a major part of steve liesman's very big, exclusive conversation with president obama today. the two will sit down for a conversation you can see exclusively right here only on cnbc at 5:00 eastern time. joe? >> start saying we're talking tax reform. this certainly is not tax reform. >> it's a form of tax reform. >> i guess. >> we would like to have a larger tax reform package for all of the corporate taxes, and possibly even individual taxes -- >> would be nice to actually instead of just putting in more disincentives, it would be nice to incentivize things. it's a fully -- it's a negative half-empty approach to what we're doing. at best it maintains the status quo and we should do so much better, which is what we should hope for, andrew. did you see -- no, anyway. let's move on. eli lilly, second quarter earnings beating the street by three cents a share. revenue also topped expectations. eli lilly stock has been doing well, even though it dealt with some daunting patent expiration issues. but it's done well this year. outperforming the rest of the broader health care index. let's get more on the company's second quarter. joining us now, we're going to call you doctor today, dr. john lechleiter, chairman and ceo of eli lilly and our host greg fleming continues with us, as well. it would be nice to get this little period out of the way, won't it, john? in terms of, you know, earnings being below last year because of the patent expiration cliff that you've had to deal with? >> joe, we've had several years, as you know, first of all, good morning. thanks for having me on the show. we've had several years starting back in 2011 with our product zyprexa, which we lost the patent late last year and through this march where we lost evista. we've had several years where we've lost patents. it's been a roller coaster ride. we said we would continue to invest in r&d, we would continue to advance our pipeline. we launched cyramsa a couple of months ago. we have other launches planned, regulatory filings planned so we're working our way through this period and we aim with these new product launches to begin to resume growth as we come out of this year. >> you know, we have had a discussion lately about a lot of things. i want to talk to you about pfizer and inversions and things like that, as well. but first i want to talk to you about this controversial -- not controversy, but a debate about what a drug company really should be when you look at the allergan situation. there are people that say it's so hard, and takes so much to develop from really from a lab bench to the bedside, so hard to do that that if you want to be a profitable company that maybe you ought to let that happen at universities, or at public/private partnerships, or even at the nci or something like that. and then once you see that there's potential, then go in and maybe develop them. but, you know, there's two ways of approaching drug discovery now, and pharmaceuticals -- do you ever feel like you're spinning your wheels by spending so much money on research, john? >> no. by no means. i mean, i think there are different ways, joe, of approaching this. certainly a lot of interesting ideas, a lot of interesting concepts. targets, even molecules come from academia. come from small companies. you know, over its history, lilly has had many, many of its products as a result of partnerships. insulin, which we launched in 1923, was a result of a partnership between lilly and university of toronto. so i think we all exist in this ecosystem but we really believe that lilly we need a strong research organization, external researchers want to work with a company that has experts in the field, whether that's diabetes, alzheimer's disease, cancer, so we're going to have to continue to invest in research. but i think the way that we do research is changing. >> you made acquisitions that were very important to the growth of lilly, though, too, and i would imagine those will continue a biotech companies, a research company? >> we've made acquisitions, we bought icos in 2007, we bought imclone in 2008. there's going to be at least two molecules out of that imclone pipeline that will launch and become products for lilly. so it is a combination. we will continue to look for opportunities to do those smaller kinds of acquisitions, and licensing, but we don't believe the big, large-scale combinations are the right thing for lilly right now. >> john, it's great fleming here. along those lines, lilly and you really have stood out for doing some of these smaller fill-in acquisitions, but really sticking to an organic growth strategy with some real success, obviously, over the last couple of years. and the stock's reflecting that. that's something that you're likely to continue going forward, it sounds like. >> i think so, greg. i mean, for example, look at our animal health business. we were number four in the industry not so long ago. it was a $500 million or $600 million revenue business. we've done about one small acquisition a year culminating in a large acquisition we announced in april, our intention to buy novartis animal health so when that closes, early next year, we will be number two in that industry, but if you look at our growth, the growth has come about half from those acquisitions, and about half from our organic internal pipeline. >> john, i should point out, people have even looked at you as a potential target, after pfizer's deal for astrazeneca fell apart. it's something that i've seen speculated in certain places, certainly nothing that i've seen substantiated but have you heard from pfizer? >> no. we've not heard from pfizer. we don't aim to be anyone's target. we've made it clear that we believe the best path for eli lilly and company is to remain independent, to continue to invest appropriately in r&d, and generate the kind of growth that shareholders expect. so, we've been clear, becky, back to prozac days that we believe that there's no evidence that supports the long-term benefits of these large-scale combinations. certainly in the short-term, you do see benefits. but our business has longtime horizons. and i think, you know, we're thinking now about our products in the next decade. so, i think keeping that long-term perspective in mind is important. >> i'm sure the people of indianapolis want to see you as an independent company. can i ask you, though, john, what you think about some of these inversions? it's certainly gotten a lot of these tax inversion deals that have gone on. is that something lilly would ever consider? and what do you think about some of the drug companies that are? >> well, becky, i can't comment on the motivations of particular companies. i heard some of the earlier conversation. i heard greg's comment, look, the current u.s. tax system puts u.s. companies at a disadvantage relative to ous competitors. that's a simple fact. and i think some of the companies that are acting on these inversions and doing these inversions are simply trying to level the playing field. if we've got a concern about inversions, we need to tackle our tax code. this has been something that business has been asking for for many years now, and i think it's time to reopen that conversation and to move forward. >> yeah, you're just -- you know, they'd say you're just a businessman. you know, i've even seen it put forth, john, that it's not even to be more competitive. it's to have more money to buy back stock, to tie your compensation to the stock going higher, and to allow you to pay more dividends to shareholders that already have a lot of money. i just read that a couple of days ago. that was even in the wall street that it's not even about competition. so it's not -- you know, you must -- i'm frustrated at this point by the whole idea. and to just -- it almost seems like -- could you outlaw a company from moving to texas? if you were in illinois? i mean, is that next? or can you outlaw an individual from changing his state of residency because of -- is that the way to handle people that move from state to state in this country? because that's what they're talking about doing now with you know, not allowing companies to try and go where the taxes are lower. why not lower the tax -- isn't it blaine to them taxes are too high here versus the rest of the world? >> well, again, i think what you're saying, and what i tried to say earlier is, you know, let's not look at symptoms, let's look at the root cause. >> i keep saying that, too. palliative, but they would say, you know it's -- they would say that you need -- if you're going to do corporate tax reform down the road, if the entire corporate tax base is gone by then, if it's already left, then what do you have to even reform at that point? >> they're trying to make it retro active. >> they're trying to. but the house will never go for this. it's not going to -- yeah. that's the argument, john. there won't be anything left at this point. but since this can't pass, and reform can't pass, if you're going to like work on something, and there could be a miracle, why not -- why not hope for the miracle that would actually incentivize people and do more than just the status quo? actually bring back manufacturing. bring back some of the money that's already moved offshore. not just the company's redomiciling. make the whole place a better place to attract capital. >> well, certainly lilly right now is not contemplating any tax inversion move for the simple reason that -- >> you stick with lilly. >> -- a large-scale acquisition. >> can i jump in? john, i have one question, though, for you, as a company that is based in the united states. do you think that you benefit at all from actually being based here? >> absolutely we benefit from being based here. i think we benefit, number one, because there's no better place to find talented people than here in the united states. this is the center of biomedical innovation. there's no greater university system or network than we have here in the united states. we need to get the r&d tax credit put back in place. we have an r&d tax credit but frankly we need to look at that. because other countries have more generous r&d tax credits because they're trying to attract what we have. so, i think this is a story in our industry about keeping something that's very valuable, where we lead the world, and putting in place policies that enable innovators to take the risks and get the rewards that are required to really bring these new medicines, these new alzheimer's treatments -- >> john, is -- do you get the highest margin on your drugs here in the united states because there are no price controls? >> well, i think the united states remains today, joe, one of the last countries where we have a modicum of free pricing. okay? obviously when we sell our drugs through the big insurance companies here, and the pharmaceutical benefit management groups here, we have to compete, we have to provide discounts, we have to show that our medicine is better than another drug they could put on their formulary so it is a very competitive process. but yes, in general, we get better prices in the u.s. for our medicines than we get abroad. and guess what? the u.s. happens to lead in biomedical research. we have 4 million people in this country employed in this industry. >> that's why we innovate. >> so maybe there's a connection there. >> that's why we innovate. no innovation where they're cut. we've downgraded you to a mister. just want to let you know. i didn't know why we had you as a doctor because i know you're not an m.d., and it's just that's the way -- that's the protocol with the media -- >> somebody said to me the other day what are you a doctor of? >> organic chemistry from harvard. i'm not taking that away from you. just on tv for some reason we save it for medical doctors. but, because usually, you know, because you see some of these doctors, god they got mail order you know -- i don't know. john lechleiter, thank you. >> thank you. >> appreciate it. andrew, he did not mention, you know, in thanking things, it wasn't -- he didn't say he was grateful to the government itself. i think it's to the people in this country, and -- >> right. >> that have actually -- the government has actually just served the people, and the commerce that the people have -- >> the people. >> have built. >> everything that the people have built. because the government did not build all of this -- >> right. but we pay the full fare for our drugs. we. we pay it. and we pay it for everybody else through our taxes. we do. >> we do. and each of us pays for the roads that the government finally does build if we ever do get. >> we do. >> if we ever do get a highway built. >> we do. coming up, maybe we could talk a little bit about this with greg fleming. morgan stanley greg fleming on the pulse of the investor. check out shares of nokia. a big boost after company reported quarterly results and raised their full-year profit margin forecast. (trader vo) i search. i research. i dig. and dig some more. because, for me, the challenge of the search... is almost as exciting as the thrill of the find. (announcer) at scottrade, we share your passion for trading. that's why we rebuilt scottrade elite from the ground up - including a proprietary momentum indicator that makes researching sectors and industries even easier. because at scottrade, our passion is to power yours. here we are. when we come back we're going to talk to greg fleming on what investors really care about right now. stick around. "squawk" will be right back. 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where do you see alternatives and how do you see this shaking out? >> well, actually we have seen a growth in alternatives, particularly for our clients that have more wealth with us. so that's been a trend that's really been reinforced by the low interest rates. >> things like real estate or commodities? >> even the hedge fund universe has been, as they say, democrat rattized so you can invest in limited hedge fund. there's a lot of products that have done well through the cycle because of the search for yield, given where rates are on more traditional fixed income products. but the asset allocation around this for the advisers and clients is really a challenge. the whole experiment that the fed's ongoing with, you know, qe coming to an end, and rates, joe joked before, but rates are going to go up. the question is when does it start. >> what's the experiment that you just talked about, the qe itself or getting out of the qe? you su sound like you meant getg out of the qe was an experiment. >> it is, first time ever. >> getting in was an experiment. >> that's right. >> we don't know what's going to happen. >> that's what i mean. you seem to feel okay about the whole experiment, and it's not going to end badly? >> well, i'm hoping it doesn't end badly. but i think -- >> too long? >> any time you do it for any time something's happening for the first time, this is the first time we've ever seen this in certainly modern economic history, getting out is tricky. they haven't even gotten to the hard part which is how to start taking rates up and allow the economic expansion to continue. >> look how sanguine you are about the economy itself and we are at once in a century accommodation mode still, zero interest rates, still 31 billion a month and it's been five years in ary coverry. that's what the people, and druckenmiller or grantham or whoever you want to talk about, those are the ones who say something is looming, but when they make a mistake and stay this long, and they've got no track record to say that they've anticipated things in the past. why do you feel -- >> a couple things, joe. first of all one of the reasons they needed to stay longer was because this was a very different cycle. right? i mean we had the biggest credit bubble pop ever. the deleveraging effect from that has gone on for years and is actually still not done and will go on for more years. and that's been a -- a depressant on economic growth and on the ability to snap out of this as we have in previous recoveries. so it is a different cycle. but i do agree with you. and i read some of what druckenmiller was saying and my personal view is that rates do need to go up. one of the things that if you fast forward a couple years down the line, at some point, and i am optimistic -- really... so our business can be on at&t's network for $175 dollars a month? yup. all five of you for $175. our clients need a lot of attention. there's unlimited talk and text. we're working deals all day. you get 10 gigabytes of data to share. what about expansion potential? add a line anytime for 15 bucks a month. low dues... great terms... let's close. introducing at&t mobile share value plans... ...with our best-ever pricing for business. welcome back to "squawk box." we do have an avalanche of earnings hitting the wires throu including 3m and caterpillar. >> general motors earning 58 cents a share in the second quarter. that is a penny shy of analyst estimates. revenue of $39.6 billion. also shy of estimates of revenue coming in at $40.58 billion. overall net income $200 million. here are the two pieces of news. general motors is taking two special charges in the second quarter, one of them for $875 million. that will be going towards future liabilities they expect to incur for recalls of current gm models on the road approximately 50 million vehicles. that's one charge. the other charge, $400 million, this goes specifically towards the compensation program for the ignition switch recall program that's being run by ken feinberg. again, first time we're hearing from general motors how much it expects to pay out through that feinberg program. $400 million. guys i'll send it back to you because i know you've got more earnings to come. we've got chuck stevens first on cnbc coming up in about 15 minutes. guys, back to you. >> all right. phil, thank you. let's tell you about caterpillar. they came out with earnings of $1.57 a share. that is better than the $1.52 the street was expecting. there are some charges in this, though, looks like a negative impact of 12 cents a share. >> adjusted it's $1.69 which is well above. >> that is well above. $1.69 would be wow. >> the sales number if we assume that's the same as the revenue numbers, 14.15 and they're expecting 14.46. >> hmm. >> but sometimes like we had on yesterday where sales, may be something else that adds to revenue, so we'll see at that point. >> doug says they're pleased with the second quarter results. especially the improvement and profit. they increased the bottom line to the resource industry segment which was principally mining. the three things tributing to the strength, diversity of the business, substantial success and operational improvements, and the strength of the cash flow and balance sheet. >> wow, it's down. >> let me look at the outlook. do you have the numbers up for this? the 2014 outlook for sales and revenue has been reasonably consistent with the preliminary outlook that was provided. updated for 2014 sales and revenue, a range of 54 to $56 billion. the previous outlook was for 56 so it's a little bit below also. the range of expectations is tighter and the midpoint of the outlook is slightly lower. most of the change midpoint of the range is in construction industries and reflects weaker sales in china, cis and africa and middle east region. >> it's not mining? >> no. >> 6.23 is the estimate. what's disconcerting, 6.23 is the estimate for the year and they've just beat the second quarter handily did >> exincluding restructuring costs. they say the profit outlook is 6.20 a share. >> that would be mean it is -- >> 6:20 versus 6:10. >> they just beat the 1:52 by maybe you'd say i don't know which number you're using for the "b." >> excluding -- >> tempering third and fourth quarter. >> and it's construction this time not mining. construction industry, weaker sales in china, cis and africa and middle east region. >> just leave the stock up and you can see it trading. who wants to look at us? i don't. there it is. 1.87. we can leave that up and see where it's trading and i can see it too and we're all happy. 3m i'm getting a little glitch on my machine. now i have it finally. 3m looks like -- $1.91 is the bottom line number that appears to be clean of everything else on sales of 8.13 billion dollars. and that is right in line, $1.91. the estimate was 8.087 for revenue 8.13. so that's a little bit above. and we also have 2014 full-year guidance of 7:30 to 7:55 and the estimate is 7:46. so most of those things are -- >> stocks down by about 44 cents, too. >> that's 0.3% so not a lot happening there. 3m recently makes a lot of those stuff that goes into tv sets, right? they're not just post-its, and scotch tape and stuff like that anymore. they have a big division that makes electronic stuff. so the sales of consumer sales $1.14 billion. industrial 2.82. and safety and graphics 1.49. foreign currency is going to reduce sales by 1% for the year. coke talked about head wind earlier. >> increasing head wind. >> yeah. increasing head wind. so 3m at this point down about 44 cents. >> has had a nice run. >> it has had a nice run. dow component, right? >> yeah. >> barely but it is. >> here's a nice little kick for you. let's get down to andrew at the new york stock exchange. he has a special best. andrew. >> thank you, becky. american airlines just out with earnings moments ago. revenue a bit better than expected. joining us now for a first on cnbc interview doug park irceo of american airlines. i believe doug this was your best quarter in american airlines' history. now with the merger also announcing a billion dollar stock buyback program today, correct? >> yeah, it's great news, andrew. it is indeed the best earnings in american's history by a wide margin. $1.5 billion excluding charges of profit was really excited about and also announced a capital deployment program which includes share repurchase, as well as the first dividend in american airlines since 1980. so off to a great start with the merger. the company's doing really well and we're really excited. >> i want to continue to talk about the numbers but one geopolitical issue but the faa has lifted the ban to fly to tel aviv. you had a flight or you do fly to tel aviv. you had said if the ban was lifted you would continue to fly. delta has not said the same thing. are you going to fly? >> we still have to assess that. the ban was just lifted. the reality is, you know, it's an assessment we need to make. we -- the faa lifting the ban is a necessary but not a sufficient condition. we canceled flights before the faa put in place the ban. and ferried aircraft out of tel aviv on the day before the ban was lifted. so, you know, we -- our team is in the process of assessing it. we don't have another flight. our flight from philadelphia to tel aviv doesn't leave until late tonight and we'll continue to work with it. we're hopeful we'll be able to resume service. but we have to make sure, as all airlines do, that the conditions are, indeed, safe. we've been working with the faa. so of course the conditions that allowed them to lift the ban certainly give us some encouragement. and we -- we're privy to the same intelligence they've given so we'll keep working through it. nothing to announce yet. we're hopeful that flight will leave today. >> can you take us behind the scenes? what's going to happen today for you -- what is the threshold, what are those conditions, what is the information that you're going to look at that's different, perhaps, than perhaps what the faa would look at? >> well, first off, that it's entirely safe. obviously the faa has come to that conclusion. and we're working -- we've been working with them on the same intelligence they have. but we also need to make sure our people have the same view. we have pilots and flight attendants that are going to be flying that route that need to be certain of the same things. we're not going to fly the flight unless we're absolutely, positively certain it's safe. we're hopeful that will be the case. but we haven't come to that conclusion yet. >> doug, fleg greming has a quick question for you. >> doug, how are you? >> i'm well, greg. >> great job on the integration so far. and i think the stock really reflects that. it's been quite a run. one of the things that you have ahead of you i think over the next year or so is a systems integration. i was just curious as to how big a challenge that is in your industry? we've come through one in my business over the last couple of years, and it's quite a hurdle. >> yeah. it's huge in ours, too. and indeed, one of the biggest issues still lies ahead. and we're well aware of that. we certainly have a lot of work ahead. while we're pleased with the results so far there's still a lot that lies ahead. much of the system integration, like getting to a single reservation system, single operating system are the big work that lies ahead. we have a plan in place. we have a team that's done it before. but you're absolutely right. those are the big issues still ahead of us. we've got another year and a half or two years to get through all of that. >> doug, what answer has american come up with for those annoying, insufferable screaming brats in first class that bother andrew? the ones that are under a year old, that you know, they're smells, sounds -- >> it's under 3. >> or under 3. andrew suggests steerage. have you come up with a -- some type of solution for where to put these annoying little rugrats? >> no, joe, we -- indeed, you know, we're -- our paying customers that are flying in first class, with children, are great customers of ours. >> thank you, doug. >> thank you. and those of us that have raised children know how hard it can be sometimes. i'm certain those parents are doing their best to make sure your experience is as pleasant as can be. >> i know. there's just some people that don't really appreciate that, i think, doug. >> doug, let me just say this, i want to get back to the dividend issue. you have the picture up there. because you have your first dividend since 1980. but i will say that you have now the best first class and business class from new york to the west coast with those new -- you know what i'm talking about, doug, right? >> of course i do. >> by a mile. i mean, forget about delta. forget about united. it is the best. but then, my question then becomes, if you're going to sell that product at a premium price point, you know where i'm going with us,. >> no he doesn't. >> i don't. >> you don't know where -- >> people don't think that little kids need to be in steerage, andrew! they don't. >> okay. look, thank you very much for the pitch on the product. the a321 transcom product i agree is the best product in the market, and it's being extremely well received. and, again -- and it's quiet up there. as you have your own -- as you have your own seats try the product, it's great, and indeed the vast majority of our customers are taking care of their children. >> doug, let's go back to the dividend. it is the first dividend that the company has declared since 1980. how, and why, are you doing this? >> oh, because the company is off to such a great start. and you know, the earnings today, $1.5 billion in earnings. shows the success of the merger thus far. it shows and indeed gives confidence based on our prospects, to do things -- to understand that we have enough capital to invest in the products, we continue to do things like this transcon product that's so popular to our products, but still return some of the capital to our shareholders and debt holders and fund our pensions at a higher level than the minimum. it's one other indication of what a good start we're off to. i think also another indication of how this industry is being transformed and the fact that this is the first one at american airlines since 1980 is telling. one that we expect -- that we hope to have in place for a long, long time to come. the business is much better and american airlines is doing better than most. >> doug, final sort of policy/newsy question. a plane has gone missing this morning, algerian plane. we had the malaysian plane go missing earlier this year. would you support some form of changing the way the transponders work of having sort of a consistent signal, and the investment that that would take for the airlines? >> we'll work with the faa on issues such as that. it's, again, i have no knowledge as to the current situation with algiers. but yeah, it certainly is an issue that i think we need to work through as a industry as we move forward. >> okay. doug, congratulations on the earnings. always great to have you on the program. we appreciate it very much. >> thanks a lot. >> check out futures after some key earnings. you can see some green arrows right there. dow looks like it would open up 30 points higher. "squawk box" returns in just a moment. still to come, did recalls hurt gm's bottom line? we go under the hood with the company's cfo in just a bit. "squawk box" returns after a quick break. having the cloud allows us to rapid prototype a lot of ideas. being able to pay as we go was crucial for a start up. having to fork out a lot of money up front was risky. you can launch a feature really quick, and if the feature doesn't work, we haven't lost anything and we can have something up and running in days. and this would not be possible without the cloud. we are now supporting over 25 million users each month. ideas can be tried and tried again on the ibm cloud. the ibm cloud is the cloud for business. that's keeping you from the healthcare you deserve.. at humana, we believe if healthcare changes, if frustration and paperwork decrease... the gap begins to close. so let's simplify things. let's close the gap between people and care. ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end july 31st. share your summer moments in your mercedes-benz with us. we're expecting a major onslaught of earnings today and continuing positive trend could drive market levels higher. our guest host today is greg fleming. he has some thoughts and we're in a world, greg, and you deal in wealth management, and we know how well people that own the assets are going. and we also know how well many corporations are doing in terms of profit margins. and yet, there seems to be something that's stuck in neutral, whether it's gdp or whether it's wage growth, or whether it's just the feeling that we're all moving in the right direction, and moving forward. and what's missing. >> you know, joe, i think that, again, people forget that this time it is different. this cycle is different. >> from the financial crisis? >> yes. the credit bubble that was created was the biggest that was ever created and will ever be created in our lifetimes. >> it was bad in the '80s. in the late '70s -- >> the deleveraging -- >> now i heard something this morning between 2000 and 2007 the amount of household debt that was taken on -- >> i know. but you look at the $ >> $40 trillion. >> in terms of energy, in terms of a misery index of 20% prime rate. >> why we're coming out of it slowly and the reason we're coming out of it slowly is because there's this deleveraging that goes on in the economy and continues to. the underlying economy is getting better. from a market standpoint it is a challenge to figure out where you are. this is why i keep talking about this. our financial advisers, they're advisers today. our biggest growth business on the asset side is providing advice to clients for one fee, $760 billion in assets. >> -- clients on lending. you need to be an adviser in a world that's as confusing and cloudy as this world. >> different than transaction based before. why was it the financial crisis that spurred these changes? >> helped reinforce it, becky, because the notion that you can do your own investing, it's a very complicated puzzle for anybody today. one of the fastest growth parts of the wealth management business, if you looked at the wealth management business ten years ago it was primarily the old transaction model had that existed for a long time. whoops. today, it's -- >> did the lights go out? >> the lights did go out. they're back. >> the sound didn't go out. today it'ses avice on the asset side and the liability side. the business looks dramatically different -- >> is that partially because the public doesn't trust wall street in the same way? they don't want to be paying transaction base because they feel like they're getting bilked for it. >> i actually think the surveys that we do say that our clients are very, very happy with the advice they get from financial advisers many of whom they work with for decades. >> so what's your corporation's need to get more -- to spend the money they have. to -- to expand employment? to build new facility -- >> joe -- >> stay where we are -- >> i'm not saying stay where we are. we could have a -- >> it's rationalizing things and getting rid of people. >> but it's something -- >> there are some top line driven deals in m&a. it is changing. the tone in the board room is different. so there is increasing momentum here. >> i agree with you. >> you just wait around -- >> we could faulk about policy at a different time. there's lots of policy particularly in washington would change. >> maybe you'll ask a few questions of the next guy. the chief financial officer of general motors on the company's quarterly results and how much the recall has impacted the bottom line. in the next hour, we dig into earnings from caterpillar with the company's ceo. plus, our recap of earnings out earlier this morning. including 3m, eli lilly and ford. and then amazon takes center stage after the bell. did its prime service help the company meet analyst's expectations? we preview tonight's big report. "squawk box" is back after a quick break. for more on gm's quarterly numbers phil lebeau joins us with a special guest. phil? >> thank you very much, joe. i want to bring in chuck stevens, the cfo of general motors s. he's joining us from detroit. chuck, thanks for joining us. you guys reported earnings today coming in at 58 cents a share, a penny below analyst estimate at 59 cents a share. but i think what everybody's focused on are the charges that you're taken related to the recall decree's and all the recalls you've gone through. the total impacts here, at least 1.2 billion for those recall charges and then special charges of another 1.3 billion? >> let me start out phil by talking about the overall operating performance if i could. i think, you know, looking for the recall charges that we took in the second quarter along with the special charges, the key message is we had very strong core operating performance. especially in our two key markets, north america and china. excluding the impact of recalls north american earnings were up roughly $2.4 billion with a margin of 9.2% which would be the fourth straight quarter of year over year margin improvement and really shows the strength of our new products given the challenges with recalls and the resiliency of the north american team. from a china perspective, earnings of about half a billion dollars in the skd quarter up 14% year over year with net margins at 10%. so again very strong performance in our two key markets. relative -- >> so chuck let -- >> relative to the charges -- >> go ahead. >> go ahead, phil. i was going to ask you -- >> i was going to say relative to -- >> sorry to cut you off here. but the main charge that question that i think a lot of people are going to be asking about, the compensation program, $400 million is what you're setting aside for the program that's being run by ken feinberg could increase by another $200 million. how did you come to that estimate in terms of that's the amount of money that you expect to pay out? >> yeah, i think a couple of key points on the compensation program, phil. first and foremost, it is our objective to ensure that we address and take care of those people that have been adversely impacted by the ignition switch recall. that is the most important message. second there is no cap on this program. ultimately, the cost of the program will be independently determined by ken feinberg and ken feinberg alone. the $400 million charge that we stock in the send quarter is our best estimate of the potential exposure based on the data that's available to us and work that we did with outside third party actuaries. there's a wide range of potential outcomes associated with that. but the $400 million is our best estimate. as we work through the program we will continue to update that exposure, either up or down based on the results. but at the end of the day, again those results will be determined by ken feinberg. >> and chuck one last question, and just to put a point on that you also say in your release it could increase by another $200 million. how many vehicles did general motors sell to people who came in with a recalled vehicle and said, i don't want in anymore, give me something else? >> through the second quarter, that population of customers that were imed by the ignition switch recall we have old over 6,600 vehicles to those customers. >> those are people who said i'm done with this and i want a different, a newer vehicle. chuck stevens, cfo of general motors. >> correct. >> first on cnbc from the headquarters of general motors in detroit. andrew, back to you. >> thank you, phil. before greg fleming goes we have a quick question for you greg. there was a story out last week this is reuters reporting that morgan stanley this is your group wants to cut its compensation for its financial advisers and i wanted to get your view on what what that story is all about and the ratio of moving from 60% to 55% and how you might try to do that. >> you know, andrew, without getting specifically into the story, one thing that we're very clear on and i've been talking about them here we've got best in class financial advisers, so we pay competitively against anybody and in fact, for our advisers that grow we think we pay better than anybody. so we're going to continue to do that. the 60 to 55 was a statement that james gorman my boss put out talking about how over a couple year period as we grow our banking and lending business, as we recruit less because we we're not losing advisers and we're not focused on recruiting the ratio will come down in and of itself. >> nobody gets 60 that's not -- >> it's a 40% on commissions -- is that a 40%? >> but when you add in all the different pieces we pay for growth we pay for partnership, when you add all those pieces together our ratio right now is 58%. we're going to continue to pay competitively andrew and raising the margins in this business not on the back -- >> digging in caterpillar earnings. ceo doug oberhelman joins us first on cnbc to discuss results, the economy, and more. that interview is next right here on "squawk box." what would happen... if energy could come from anything? or if power could go anywhere? or if light could seek out the dark? what would happen if that happens? anything. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. is caused by people looking for parking. in a city that's remarkable that so much energy is, is wasted. streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years. we wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then there's a mesh network that takes this information, sends it over the internet so you can go find exactly where those open parking spots are. the collaboration with citi was important for providing us the necessary financing; allow this small start up to go provide a service to municipalities. citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally citi is there every step of the way. so the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin who is reporting from the nyse. the futures, you can see, 8:30, and then new home sales coming out at 10:00. we'll take a quick look at the futures. 31 points or so. it was -- >> it was a quiet day yesterday -- >> you can't -- >> i hear that, too. >> okay. >> it's okay. i look like i have -- yeah. andrew? >> we've got a developing story this morning, guys. here's what's happening. there is a missing air al gearie flight. it's swift air the operator of the flight says the contact was lost with the md-80 jet. company officials are still trying to determine what happened to that flight. we should tell you that the faa has lifted its ban on flights by u.s. carriers to and from israel. the ban had been put into effect on tuesday after hamas rocket had landed near tel aviv's airport. and in chicago news, senior white house officials say president obama, he's going to be supporting anti-inversion legislation that would mandate the companies must be more than 50% owned by a foreign entity to escape u.s. taxes. that topic will be a major part of steve liesman's exclusive conversation with president obama. he's doing that today. the two are going to be sitting down for a conversation you can see exclusively right here only on cnbc coming up at 5:00 p.m. eastern time. steve will join us for a preview in just about 15 minutes. becky? >> andrew, thank you. in corporate head lines, 3m's earnings matching wall street's estimates. revenue just a little bit better than expected. that stock right now up by about 18 cents. and shares of nokia getting a boost after the company raised its full-year profit margin forecast. you can see that stock is up by about 8%. >> caterpillar's earnings topped consensus. joining us first on cnbc with more on the quarter is doug oberhelman, chairman and ceo of caterpillar. it's nice to have a company, doug, that has varied and sundry businesses. that does mean at any given time it's hard to have all of them firing on all cylinders. so some of the problem or weaker parts of caterpillar in the past are better but weren't you -- construction was pretty good awhile back and now that was a little bit weaker this time, right? year over year construction is up significantly over last year which we're happy about. overall we had a great quarter, very solid, on slightly less sales as you said, joe, down 3% on the top line year over year but excludeing restructuring our profit per share is up 14%. i love the way our company is operating right now. you kind of mention the diversity of our businesses. certainly mining was really tough last year and it was a miserable year for that. construction was up. it's doing fine. energy and transportation are doing fine this year. what we're faced with here, though, is basically two years of flat on flat top line. it maybes it hard to operate. but we're doing great in finding ways to be more efficient. be lean in our manufacturing, and lots of other things operationally that will really pay off down the road. i'm just really happy with where we're positioned right now. >> mining is better, isn't it, doug? that's what i was alluding to. is mining still the drag that it was? >> mining is still very slow. but, what we are seeing for the first time in a long time, really, since 2012, is our second quarter mining business was up very slightly from our first, that might be a green shoot. and our parts sales have actually now responded a little bit quarter over quarter as well, year over year. we're seeing some of that. i think we're past the bottom in mining for sure and looking forward to more. i've been with a number of mining customers the last few months. and they are a bit more optimistic. it's not turning into our numbers yet. but at some point it will. we'll be ready for them, for sure. >> doug, we saw that you beat significantly for the quarter one of the things that we were looking, though, was at the outlook because when we saw the stock trading down just after the release came out we were trying to figure out why. the only thing we could point to was that the range of expectations in terms of your revenue outlook for the full year is a little tighter. the mid point is a little bit lower and you blame that on construction industries, some weaker sales in china. the cis, and the africa/middle east region. were we wrong to assume those were construction sales there that were weaker? >> yeah, that's about right for the second half. remember, in 2013, our sales, our total sales and revenues were 55.7, 55.6 billion. it's awfully hard to call $700 million out of $55 billion sales. we see softening outside of the u.s. the u.s. is doing fine. we're looking at inching along recovery here in the united states that's continuing, and ongoing happens to be the strongest in the world, weak compared to the past. we've seen more weakening certainly in brazil. china has fallen off a little bit from the first quarter even with the enhanced stimulus they're putting through to it. >> and i guess, that's our big question, too. because we look to caterpillar kind of as a gauge for what's happening around the globe. that's how you would say that the united states has been going strong, but you have seen weakness in china and brazil? >> i'd say that, as well as kind of a flat situation in europe. it's not fallen off certainly, we're past the bottom there, as well. i just don't see a lot of growth. we're seeing an engine of north american growth not able to overcome some of the outside u.s. these are small gyrations at the moment. if you look at the three halves we're looking at a pretty flat environment which, for us, is for any company tough to operate in. our balance sheet is strong. we announced a big buyback at $2.5 billion more in stock. that's $4.2 billion this year. because of our great cash flow, and really the performance of our company. >> it was just that you beat by -- you beat expectations this morning by so much more than had been -- but you came in really strong numbers for this quarter. if we assume that you have a beat this quarter do we look for even more weakness than the street is already factors in for the second half i guess we're trying to figure out why the stock is a little bit under and i guess i wonder why you think the stock is down. >> not down that much anymore. >> it's hard to say. i'm not going to judge that stock market. what we're trying to do every single day is make sure that what we do within the four walls of our company is our bullet -- we don't know what's going to happen out there. i heard your story on the airline crash or missing airplane. every day in the news there's something out there that's uncertain for us. we see it all the time. i would say that in the case of the second half it might be a little bit weaker. but we're kind of splitting hairs here. stock moving 1% or so i think is pretty neutral. >> doug would you be more incleaned to bring capital back here and keep it here if we did do a full-on tax reform for corporations? you think you'd have more would it net net result in more jobs in america, more facilities being built here just by caterpillar just from where you sit? >> there is no question joe that a comprehensive full-blown tax reform in this country is absolutely needed, and will absolutely stimulate growth. it will have all kinds of positive impacts. it has in the past. it will this time. we are so distorted, so dysfunctional it's no wonder that's a big break on our economy. that should be the number one policy issue out of our legislators today, to get this economy moving. and we can't seem to get any traction on that. this idea of highest tax rate, i remember when i joined you heard me say this before almost 40 years ago i did tax analysis. we were the lowest tax rate in the world. today we're the highest tax rate in the world. that influences where we source what we -- we're also only 5% of the world's consumers here in this country. r59% of the world is out there. we've got to find a way to do this better. tax reform has to happen. >> you see the news of the day they're just going to put like a stopgap measure that also probably doesn't have much chance of passing. but it will give democrats the opportunity to run on that. in november that once again you know that the republicans want to let companies leave, and avoid their taxes and they don't want to raise the minimum wage so it's going to be a way of just posturing for november but it's going to be put forth as something that's actually possible even though i don't think the house will ever go for it. and it also takes away what i hoped would light a fire under their collective rear ends to do the big thing if more companies watching these companies try to do this should be an indication to them that they need to change it but it's not. it's just an it just means that they need to preclude them from leaving. >> i agree with you on the prior part. but that's not -- tax reform is not the only one. our infrastructure bill, also known as a jobs bill, also known as a highway bill, is in jeopardy. >> right. >> we've got to get that approved. all of the contract base in this country my customers are worried about that. can you imagine not funding roads and bridges halfway through the project? we should get rid of that fund it indefinitely and move on. there's lots of things dysfunctioning really holding us all back. we've somehow got to find a way to get out of this. >> we had richard anderson yesterday from delta who just once again was very clear he thinks the exim bank is unnecessary, that it helps his competitors that don't need him abroad, helps them buy planes from boeing and doesn't think boeing or airbus or any of these manufacturers doesn't think that that we need to address airbus subsidies with the ex-im bank. does the ex-im bank help you? >> i don't agree with that assessment. the exim bank helps us to some degree. we're not a big user but i'll tell you there are 60 countries out there that have exim banks. export credit agencies. on a lot of big deals around the world that are tough transactions. we're up against the japanese export credit agency. the europeans, the skanld navians, the chinese, they're all competing for those deals which means jobs in our country that we export, and i am mystified in this low job creation environment how many poll significances, and for that matter, anybody, would jeopardize one job over a credit agency that has contributed to taxpayers, it's not been a drain on taxpayers, i'm all for going after all those other countries and wiping out their export credit agencies through wto or some other mechanism that's fine with me. but why would we shoot ourselves in the foot and give up one job here in central illinois for one of our mining trucks for a big deal in india because we can't speed against our japanese or european competitors. it makes no sense to me and the fact that that bank is self-sustaining is also part of the equation here. so i'm mystified with the entire argument. i'll tell you something else, joe, of all the things in washington that we're picking on, why are we picking on the exim bank. this would be a perfect one for you to take on. >> i don't know that the whole guideline for what the each side thinks is sort of i'm it's like a bizarro world i'm not sure how to interpret it anymore. i mean it used to be that republicans would the chamber of commerce or the business roundtable would always march in lockstep, and it's not that way anymore. and eric cantor, he's out because he was so business friendly. so figure the figure that out. i think it's a crony capitalism notion and we need to let the markets work. if you by example, you know, don't have subsidies from the government, where they pick winners and losers, maybe they're just hoping that in a purist world that there shouldn't be any of this. it's just another example of crony capitalism. >> that's what it is. right? >> you said it a purist world. we don't live in a purist world. and any time we talk about going after punitive measures to do this, we pay the price with our jobs right here in the midwest, or wherever they are trying to export. i'm with you on that piece of it. >> where's andrew? he's gone? oh, he went. that's right 8:00 he's already on his way to let someone off the hook that committed a crime somewhere. >> serve. >> most likely. >> to go serve. >> yeah, to vote not guilty on whatever the guy did, most likely. yoen way doug oberhelman, thank you. >> doug, thank you. >> always a straight talker. >> answers every question complete ply. >> play in peoria, isn't there an expression? you're based there aren't you? >> i'm sitting in peoria, illinois, right now as we speak. the weather is perfect. it's a great place to be today. and i'm happy with our company. i'll tell you that joe and becky. >> i love -- >> thank you, doug. >> american manufacturing, and you know we need it. and i just wish we'd try and help out here. don't hold your breath, doug. thank you. >> when we come back, a wave of tax inversions taking place over the last couple of months. the president taking interest, and now saying that he would support anti-inversion legislation. we'll talk about that next. right now as we head to a break check out the "squawk box" market indicator. kid: hey dad, who was that man? 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i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. welcome back, everybody. president obama will be supporting anti-inversion legislation. that topic is a major part of steve liesman's exclusive conversation with the president today. the two will be sitting down for a conversation that you can see right here on cnbc at 5:00 eastern time. steve joins us from los angeles this morning. also joining us right now is alex brill, research fellow at the american enterprise institute. but steve why don't we start out with you. why don't you set things up for what we should be expecting for this news? >> you know, first of all i think mr. oberhelman from caterpillar is going to be kind of happy about this interview because i really want to get to the issues that he was talking about and address things that are on the mind of business leaders out there, which is why haven't we done major tax reform? why can't we do some of the things that seem to be the ones that everybody agrees would be those that would increase output in this country, would increase jobs, would increase, the welfare of middle class americans, and all americans, really. so i think that's one place where we need to start. and this issue of tax inversion, it's an interesting one. it's definitely gotten the president's attention. i think just from a strictly administrative point of view, if suddenly you see your tax base leaving the country, the corporate tax base leaving the country you have to address it. but joe made some interesting points in an e-mail with me earlier which is why hand this off and as i talk to another scholar from aei yesterday -- >> why hive off the issue of just inversions. >> and why not go after and why not use this issue as a wedge to bring about major tax reform. and i was going to say another scholar i talked to yesterday from aei who a friend of joe's, asked this question, which is, well, if you're going to do this, does that send a signal to corporate america that overall tax reform is dead, and you're only going to deal with this one issue? so i think that's important. you know, we'ring with to get at issues of growth. there's really not been, as far as i can tell, an economics reporter who had a chance to sit down about the president and try to us is out some of his broader economic views. >> i'm thrilled that we get to use this focus -- >> the way you're talking, steve, i'm getting a little thierry. i'm counting on you. i'm thinking maybe there's hope. i want you, please, you're listening. i see that. you got to get him to try and listen. here was the point that i finally and i've been you know i people don't wear about me and i feel like why do i even bother to try to convince people because it doesn't matter what i think anyway. i'm going on vacation on friday so i don't really care. but here's here's the thing. if i don't think you can pass it the pay that they're talking about it. but even in the best case scenario if you did pass it you're preserving the status quo. you're making sure no one else goes away. but all the things that we want to do to make it better, to incentivize capital to come and to stay and to make this the best place in the world to invest and to create jobs, it doesn't -- it's like a half empty solution. it's just the best it does is preserve the status quo and i want so much more. so much more. >> well, joe, i mean i think there's always hope but you understand the political dynamic. i mean the president i'm sure is going to say something along the lines of, hey, i've been proposing broad tax reform for a number of years. i include id in my budget every year and then he's going to kind of blame the republicans and then we'll call up the republicans and they'll blame the democrats and we're back to that old status quo. >> does it have a chance of passing the house? >> you mean just the tax inversion part or tax reform? >> the tax inversion part? >> i don't know, joe. i mean i think -- >> i can tell you it doesn't. >> well, let me just tell you that the senator levin bill which is the one i read last night, not the other levin bill, makes it a two-year proposition so it's kind of interesting along those lines in that he says this thing would expire in two years, while we do tax reform. so, whether or not -- and the question becomes joe and you should answer this question yourself, which is, is there something of emergency here? do we need to katie, bar the door here, in order to stop these inversions from happening? and do it now? i'll tell you that i talked to a senior white house official yesterday, who raised an interesting question about this issue of reputational risk. he says that essentially, companies have not done this because they're afraid of the impact on their reputation. and all of a sudden everybody's doing it, that reputational risk thing has diminished. >> we got someone maybe can explain it better than i don't know >> alex tell us, is -- are inversions, are you unpatriotic as a company if you go with an inversion? that's been written. that's been expressed. >> sure, these tax deals that there's been a wave of in the last few months has picked up the activity of inversions have picked up have nothing to do with the star spangled banner, with apple pie, or patriotism on the part of ceos or executives in any of these companies. these deals are strategies to minimize tax liabilities, on foreign -- sourced income primarily for america's multinational corporations. for a handful of them. and they are a response to the fact that lawmakers in congress and the house and the senate and the president are sitting on their hands and effectively doing nothing about the tax code while all agreeing at the same time that the tax code is broken. so we can agree that the system is broken, the tax rate is too high, that worldwide nature of the tax code is wrong. but no one is doing anything to do it -- to fix it. and worse than that, i think the democrats are actively -- are actually slowing the process down. >> why? >> and that's one of the reasons why democrats, i think, are choosing to latch onto this issue, and they're saying, it's not our fault that the tax code hasn't been fixed. let's blame somebody else for what's happening somewhere else. >> right. good election issue. who's not -- >> who's not going to say that the president's right in november on this? that he's, you know, here are these guys, they're no better than draft dodgers. i'm reading that. and he's trying to stop it. he's trying to do the minimum wage and here are the republicans are again stopping -- but we deserve better as a country. this is not about a two-year election. we need to do something that would create some jobs for people. >> if the president put this energy into tax reform that he's putting into these inversion deals we would have a more active and real debate about tax reform. right now the tax reform debate -- >> steve we've seen this movie before for the past five years. remember how many other things that were proposed that never were going to go through and here we are. >> and you know, the other thing that this is not about, is it's not about the money. because these bills to fix quote/unquote fix or prevent inslergss might raise 15, 20 billion dollars. >> steve, good luck. you know we're counting on you. >> thanks, joe. >> all right. we'll be right back. tomorrow, the president's take on tax inversions. and global risks to the economy. steve liesman brings us the best of his interview with the president of the united states. "squawk box," starting at 6:00 a.m. eastern time only on cnbc. we never thought we'd be farming wind out here. it's not just building jobs here, it's helping our community. siemens location here has just received a major order of wind turbines. it puts a huge smile on my face. cause i'm like, 'this is what we do.' the fact that iowa is leading the way in wind energy, i'm so proud, like, it's just amazing. in today's market, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. when we return, joshless claims data that could move markets. plus a preview of tonight's quarterly results from amazon. "squawk box" on cnbc is coming right back. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. white chocolate loversividual. don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow the consumer to customize their chocolate. we needed a scalable cloud solution allowing them to select what they are looking for. now there is endless opportunity to indulge. customization is made with the ibm cloud. the ibm cloud is the cloud for business. welcome back to "squawk box." we have a 19,000 drop. yes, 19,000 drop on initial jobless claims. last week was revised to 303. didn't come out at 3, 290, 284-k so we definitely see that initial jobless claims are dropping. now, is it because we've dropped all the people in line for people that need to make claims, are they just stopping, or is this going to be a robust job market? the correlation. you do the math. certainly seems we're doing better on jobs but this is an unexpected surprise. 2.5 million on continuing claims. back to you. >> thank you, rick. you saw vice president biden yesterday, i think he said historic jobs creation that we've seen! let's go to walmart and the news announcing the departure of walmart u.s. ceo bill simon. >> bill simon, right. >> he was on cnbc about two weeks ago. >> yeah. i mean -- he's been with walmart for eight years. they say that they're naming greg for inthe president and ceo of walmart u.s. what's interesting about this is walmart's u.s. same-store sales have suffered recently. that's been one of the pressure points that they've been watching in the business. i looked for the -- for the fourth quarter, the sales in the u.s. were down by 0.4%. some people, some analysts have suggested that they have a significant decline in the company's pricing advantage that they used to have, in some markets it's completely disappeared and makes for much tougher sledding for walmart to figure out what to do with that. bill simon was part of the team, putting forward the idea of the smaller store expansion. some of the neighborhood markets and some of the express stores. although some on the street have suggested maybe a better way of doing that would be to buy family dollar or some other way of going at it but if you look at this transition one of the things that has suffered recently is walmart's u.s. same-store sales. >> all right are you gone santelli or is he still here? >> i'm waiting very patiently, joe. >> on tuesday -- >> so what did biden say again? somebody woke him up? he said something. okay. >> no, on tuesday he said in his words, quoting, businesses are hiring at historic rates. never been -- >> and people are dropping out of the labor force at historic rates. >> never had this type, 52 consecutive months of private sector job growth. so -- >> and you know what? there's some factual effort there. but i would definitely put a little asterisk or roger maris under it. how many years have we been in this funk? of course we're going to wake up. >> "the new york times" quoted, in fact in june, part-time jobs accounted for two-thirds of all the new jobs in june, according to "the new york times." >> that's the historic part! bingo! that's historic. >> yeah! >> of course. so he wasn't fibbing and he didn't fire a gunshot up in the air when he said it, did he? >> no, exactly. for reaction to these numbers in the market in general let's bring in chief investment strategist at demo capital markets, and senior capitalist at bank of america global research. have you gotten more bullish brian? >> no we're steadily bullish. >> you think this is a long-term secular bull? you know all the talk we're hearing about bubbles and correction necessary and you know, fed's going the opposite way, watch out. you don't buy into any of that? >> no, we don't. i think that 2014 will end up being the transition year as we wean ourselves off of monetary policy, and move closer -- >> successfully. >> successfully. and closer and closer to the fundamental rules of investing, which are, as the economy improves, the stock market improves, interest rates go up, and i think that's the big chasm that many investors have to really deal with the second half of the year, is to really understand fundamentally that interest rates are going up, because the economy is improving. and it's this talk of inflation that seems to be a scary thing. but remember, inflation means pricing power, and pricing power meengs earnings growth and earnings growth means stocks go up. so i think we're in a bit of -- a teetering point here, because stocks have gone up a lot. and we think that we need a bit of a respite. stocks are rarely linear for long. so when i go and talk to clients around the world, and i talk about this, we're five years into a 20-year bull they look at me like i have three heads. i think most people are very bullish 12 to 18 months out but nobody believes a 20-year secular bull. and so, given the way that we are imagining our companies, you have the ceo of caterpillar on. you're talking about still in a conservative manner, managing our businesses and financial services, we're still very, very conservative, that should make you very bullish. >> where are you, michael? >> i think the economy is showing signs of improving. and i think that there's obviously some questions about overvaluation in various parts of the market. i'm not feeling we're in the midst of a big bubble that's about to burst. >> you just said a 20-year bull based on really, if we were -- if it was 1981, you might be right. >> well, think about this. >> well, i have thought about it. >> in 1981-82 was really the last directional change that we saw in interest rates, right? >> right. >> we are in the midst of the next great directional change. >> there were a lot of other things happening back then. >> we had inflation and we had coming out of a double dip recession. but what mr. volcker had to this side pocket, in terms of a friend and a co-worker was ronald reagan in the white house in terms of fiscal response. in this directional change in interest rates we don't have a fiscal response yet from -- from the white house. >> right. well, michael, if this were to happen, i mean, it -- do you -- would you agree that we've had a -- a lot of what we've seen in the rebound has been in spite of washington not necessarily being very kind to the private -- you think -- what do you think washington is doing to the private sector? help or hurt the private sector? >> there's no doubt that if you're going to have a downgrade of the debt and you're going to have a fiscal cliff and a government shutdown and all the uncertainty around that that can't be good for business -- >> regulations, taxes, health care? >> the whole thing. it's obvious washington has not been particularly friendly to the economy generally speaking. right? the fact that washington is calm right now is probably not a bad thing. >> not doing anything wrong. >> the fact of the matter is we've got the other side of the midterm election, this might start up again and we've got to deal with budget and debt ceiling issues shortly thereafter. >> -- just the budget -- >> i think those have been really acute ones. >> you don't think not addressing entitlements -- >> i think that there's a lot of reforms that could happen. there's obviously a lot of ways in which the tax code could be improved. i don't see it happening any time soon, unfortunately. >> we're stuck with what we have but it's not that bad? >> we've been able to grow somewhat in spite of it. the fact of the matter is we had your guest on earlier talking about how when you come out of financial crises, you have slow growth. we also layered an awful lot of bad luck on top of this, whether it was washington or europe or you know, the arab spring, raising oil prices not once but twice tsunami in japan remember back in 2010 that cut growth for a bit. there's a lot of bad luck that happened. if we could have normal luck we'd actually be okay. >> all right. well, we hear the same thing from a lot of people. and that's that it may not be perfect, and it may be in spite of what's happening but the economy's getting better, and you don't see any clouds on the horizon. it's been pretty long recovery, too. >> slow and steady, however, you know, at some point we're going to have a bit of a surprise that you know markets could pull back. but that does not dissuade the longer-term trend which remains very positive for u.s. stocks. >> all right. thanks to michael and brian. >> up next, amazon ready to report after the bell. we're going to preview tonight's report. plus, some of the news out from walmart bill simon stepping down at ceo as walmart u.s. greg forrin will assume that role. more on the future of the retailer. you make a great team. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. welcome back, everybody. amazon is out with quarterly results after the bell today. joining us for a preview of what to expect is michael graham. michael, what are you looking for with these numbers this afternoon. >> good morning. i think that amazon should have a really good quarter on the top line. you know we're looking for 21% revenue growth in the quarter. i think that should be easily achievable given some of the trends that we picked up during the quarter. i think the real sticky point for the quarter is going to be what amazon says about margins going forward. this is a company that really should be operating at a profitable level with 7% to 10% operating margins longer-term, and they're way below that right now. so investors are really hoping that at some point in the near future we can start to see the margins recover. >> investors have been very patient with amazon. they've allowed jeff bezos to kind of come up with this grand plan of continued expansion. what you're saying suggests, like the patience may run out. do you think that's the case or are you just hoping for a change? >> you know, i think in this stage in market sentiment the fear from a lot of investors is that patience is going to run out for the time being, and you know, it seems pretty clear from management's commentary and from their strategic direction that they're not really focused on delivering margin expansion any time soon. there are some long-term things in the hopper like expansion in china. they're bringing prices down in their aws division and these are all things that really lead us to believe that margins are not going to recover sort of this year or next year. >> aws is amazon's web services. their cloud positioning. is that why you have a hold on the stock? because you don't think that they'll be delivering on higher margins? >> it is. i mean, i think that amazon is a wonderful company, they're revolutionizing -- revolutionizing shopping. and i think that you know, over time they're going to deliver a lot of value. but it's this margin dynamic that worries me a little bit. i just think we might be losing patience here in the short-term. >> michael, is there a chance you could be wrong though, because investors have given jeff bezos a lot of leeway in the past. is there a chance that they won't deliver on margins and yet the stock will keep climbing? >> well, that definitely happened last year. you know, the stock had a great year, and you know, there was no margin expansion during the year. and i think that that call in the short-term becomes a little bit about market psychologist, and it's honestly tough to -- it's tough to call but i do think what we've been seeing in the internet sector in particular is this has been a year when, you know, companies that are profitable and are good stewards of capital and are delivering on margin growth, those are the stocks that have worked the best. amazon stock has had a tough start to the year. it's recovered nicely since then but you know, i think this is a sort of a key quarter for the company. >> when you put it in a sector, what sector do you put amazon in? >> well, most people who look at the stock compare it to other internet stocks. it, you know, you could compare it to retail stocks. it's really not a retailer. you know their core competencies are building a brand,icallying customers in to the sight, and then fulfillment, you can think of it as a logistics company, an internet company from that perspective. it's a wide ranging enterprise. >> okay. michael thank you very much for joining us today. >> all right, thanks, have a good one. >> coming up a new ceo just announced that walmart u.s., we're going to get an update after the break. plus jim cramer from the new york stock exchange there's been a lot of earnings. going to tell us which report matters most to the markets. 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[cheering] the fastest in-home wifi for your entire family. only from xfinity. could help your business didavoid hours of delaynd test caused by slow internet from the phone company? that's enough time to record a memo. idea for sales giveaway. return a call. sign a contract. pick a tie. take a break with mr. duck. practice up for the business trip. fly to florida. win an award. close a deal. hire an intern. and still have time to spare. check your speed. see how fast your internet can be. switch now and add voice and tv for $34.90. comcast business. built for business. bill simon stepping down as the ceo of walmart u.s. greg foran will be assuming that role. courtney is here and she's got more details on what's been happening. >> so i spoke to walmart this morning and they said that bill simon is leaving. i think it's no secret that bill simon wanted that top walmart job. the job that doug mcmillan now has. doug mcmillan is a lifer. he's been at walmart for many, many years. mr. simon has been there for about eight years. so certainly has had a decent run in the position that he's been in. but he has not been in the walmart family for his entire retail career. mr. foran apparently runs u.s. -- or i'm sorry, walmart asia right now, and mr. mcmillan is a big fan of him. mr. mcmillan was the ceo of walmart international. so presumably he knows greg foran fairly well. seems to have a lot of confidence that he's stepping in. mr. simon will stay until august 9th, and then after that, will be retained by the company on a consulting basis for at least six months. they say to ensure a seamless transition. still a lot of questions and a lot of executive move arounds, i should say, at walmart over the last couple months, under doug mcmillan. >> it has been interesting watching what's happened just with some of the u.s. comp store sales. they've been under some pressure. even recently i think in the last couple of weeks. the company saying that even though we've seen that improvement in the job market it hasn't translated into sales improvement for the u.s. >> that's exactly what bill simon said when we spoke to him. i believe it was the second week in july when we were down at walmart headquarters. so a little bit of pointing the finger perhaps at the american economy rather than what they've done or haven't done. but still those camps have not been impressive. they've been flat to down for a number of consecutive quarters. so that possibly could have had something to do with this. we don't know. all we know is that he left at this point. >> courtney, thank you. courtney reagan. >> let's get down to the new york stock exchange, jim cramer joins us now. faber's going to be in today, isn't he, jimmy? >> oh, of course. >> you know, facebook i think is going to be worth $200 billion if it goes -- >> past amazon. >> past amazon, and i think we may need a few annoying facebook comparisons from david, like boeing, plus, united health care, plus alcoa still doesn't equal facebook or i mean that's. what do you think? i mean is this -- it's it's am. >> i'm introducing a $3 number for 2016. i've been using 2.50 for 2016. i don't know how this doesn't go to 90, quite frankly. don't know how it doesn't go to 90. >> i guess i should get a facebook. do you go on there still? >> i do. i like twitter more but the visionary -- zuckerberg, said, listen, it was a good quarter. sandberg is doing, who is using it. and then you get the nuts and bolts. just like they figured out mobile. they do the best conference call i've heard of. this went from the worst to the first. >> yeah. wow. okay. so pick out like some dow components and start adding them up and figure out what you can buy, either facebook or boeing plus intel. i don't know. >> well, look, the fact is, the company is earning a great deal and amazon is not earning a great deal. that's what people don't seem to get. it's the fastest growing big capital stock other than gilliad and somehow this company is going to meet resistance from the payers. so you're talking about a company that is an earnings juggernaut. >> it's not google yet vis-a-vis the ipo. but it almost being looks like it's on its way, which is unbelievable. >> in the end, they are spending -- z man is spending a fortune on the next ten years. they are plowing money into current in the next two years and they are printing money. i mean, this company is just -- it's who everybody wants to advertise with and they started out with mcdonald's and procter & gamble. >> we've got to run, jim. any other -- >> capital was disappointing because of the mining. geez, mining. the u.s. was overshadowed. 6% nonresi. i like what they said about the united states. i think the u.s. is being overshadowed and i don't think it should be. >> i hope we never lose power. that would be an apocalypse. if you can't do it -- >> trust me, remember the other power outage, the only thing people cared about was powering their cell phones. >> but if there's an apocalypse, boeing other otherwise. >> boeing and alcoa still below. coming up, we will have a recap of this morning's earnings. checking out the future, you're being looking at green arrows. dow futures are up 30 points above fair value after the s&p closed at a record yesterday. 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[male announcer] glucerna. delicious shakes and bars... in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. another busy earnings. dominic chew is joining us with a score card of what we were just talking about. >> a third of the s&p 500 companies have reported their results. two-thirds of them have reported better than expected erp. that's pretty much in line with how earnings' season has gone up to this point. one out of every five have missed estimates. here's where you're seeing the profit growth come from. the top three sectors. tech we might mention quite a bit. it's expected. tech stocks are showing the best profit gains so far. as for the sales or top-line growth, take a look at the tech sector as well. it's second place health care number one there. also, interestingly enough, consumer and discretionary stocks, despite all of the negative comments about those consumers being in a funk, the retail is posting solid revenue gains. things are growing. maybe that's a slight -- i don't know if it's a silver lining or copper line. >> or just improving picture. >> picture. >> i guess also if you look back, i don't know what happened a year ago but last quarter you had the weather that pushed into things. maybe that upushed some sales out. >> you look at the retail stocks and they have done well. at least you are showing that things are getting better than they were last year. of course they are going to be better than they were the last quarter. what i think is interesting, though, on the retail side of things, consumer spending picture makes up two-thirds of the economy but technology, it came out of nowhere it was like fourth or fifth in terms of performing sectors. it's also important because it's a fifth of the s&p in terms of market value. >> microsoft could help. amazon, do you have any idea? >> that's interesting. you guys have gone through all of the expectations. for a guy like me, i go through the trading. on average, for the past eight quarters, so recent memory, amazon shares on average have been flat, up half a percent the day after earnings. but the options market is pricing in a 6 to 7% move in the stock afterwards. so traders are already placing their bets on what could be a volatile number here. >> do people get long facebook going into this? >> it's interesting. you look at facebook shares and they were already on a nice run. they were on a tear in the past month or so and now, of course, we see the open record highs for these stocks. but it's so important for some of these names because when we talk about facebook, it was one of those momentum stocks of those names that go up and down way more than the overall market does. all of a sudden now it's showing signs that, hey, we're at record times. >> can i "friend" you on facebook? >> you don't have a facebook account so you can't. >> if i was, could you be my friend? >> i'll be your friend in real life, too, not just on facebook. >> that sounds so pathetic, will you be my friend. >> rickie fowler is playing nine holes. >> i don't have a lot of time but it's one of the ways that i can find relaxation. >> did you see what i told him, that i am able to shoot my age? >> but you are well known as one of the best golfers. >> they will just put new a cyborg any way. >> dom, thank you. >> that's it for us tonight. president obama tonight is sitting down with steve liesman. right now it's time for "squawk on the street." good thursday morning. welcome to "squawk on the street." i'm david quintanilla, jim cramer. ten-year yield creeping up to just about 2.5. the lowest in eight years