president obama's new round of sanctions, warning that measures would back fire and bring u.s. russian relation toes a dead end, causing serious damage. as for the russian market reactions, take a look. stocks in moscow were down sharply in early trading. you can see they're down by 4.3%. later in the show, senator bob corker will be joining us. he is a member of the foreign relations committee. he's been calling for tougher sanctions on russia. we'll have more of that coming up. right now, let's get over to andrew with more of today's corporate stories. >> good morning, becky. ge, former parent of this network, reportedly seeking buyers for appliance unit. it tried to do this back in 2008. it scrapped those plans, though, given the financial environment at the time. ge's ceo jeff immelt promised investors to divert interests that aren't seen as core. the company is set to post quart ily results before the bell toll. we'll bring thou to you. if you have a dishwasher or a washing machine or -- you know? it's -- they're not going to do that any more? >> they've been trying to get out of this for a while. >> i know. i know. >> it's not profitable. it's low margin. >> it's an old american iconic brand. >> like westing hois. ge isn't in lighting any more. remember ge, we bring good things to -- >> i know. >> it's just that they -- people know they want to get out and so i don't think they've ever gotten -- >> they never feel like they can get the right prior to price. >> someone could do something. we've seen it, whirlpool and those manufacturers. someone could -- it's a global -- i'm sorry. you could sell it anywhere and it's a pretty good business. >> is it haier? >> yonl. i winner wish we could put something together and, you know, rationalize the operations, stream line some things and do some advertising marketing. i bet you we could make a go of it, ge appliances. you know, it's hard service. >> service is hard. >> service is really hard, warranties and getting people there. the may tag man, he didn't really exist. >> i don't think there was ever a ghie waiting for you to call. but what if it goes with the taxes? is that going to be a problem, if they sell it to their foreign buyers? one of our viewers wrote in saying he was disappointed in andrew saying basically you're calling 47% of the country that doesn't pay taxes they can't be patriotic. so half the country is unpatriotic. that's sad. >> isn't there some other way they can be patriotic? isn't there -- can they salute the flag? can they sing the star-spangled banner? is there any way you can be patriotic without paying taxes? >> i thought it was very clever. someone wrote it is very -- >> it is very clever. >> that andrew has put 47% in the country in the unpatriotic -- >> thank you. >> let's talk about ge. doing a reset there and microsoft now set to announce 6,000 job cuts today. the company's new ceo nardella outlined plans for a leaner business in a public memo last week. many of the cuts are expected to come from the newly acquired media business. liberty says it doesn't intend to make an offer for the rest of it, air to commercial broadcaster, itv best known for broadcasting britain has talent and joe's favorite, downton abby. >> shares rising this morning. >> and then, k, there is rupert murdoch. we broke the story here first on "squawk box." time warner has rebuffed its $80 billion takeover bid. there are no talks under way, but murdoch is unlikely to walk away anytime soon. i don't know if you saw it, jeff put out a video prompt to the proposal. so, you know, they actually videotaped jeff yesterday, i believe at time warner center saying we don't want to do this, we've decided against it. but most importantly, he said we believe our empty growth plan is better than anything that fox would ever basically be in a position to offer. >> there's not enough money in the world for you to buy us. there's the makeup girl and then there's the guy going, take three, jeff. and time warner, but it's a media company. so it's like they -- >> so the response that they actually gave to fox was a couple of tersly written -- >> ride. >> but the shareholders -- actually, i believe the video was made for internal purposes. >> that makes sense. if it's for employees, you get that. now they're going to run it on cnn as a reality show. that would be good, couldn't it? they are not sure what to do, so -- murdoch puts time warner on wish list by andrew ross sorkin. can you summarize -- i don't feel like reading this. you wrote it. can you tell me, is there anything in here that you don't know that i haven't -- tell us. >> i would -- >> as you would love to know, we broke all of this news on "squawk box." >> no, it's every single -- >> you should not go there. you called it exclusive. >> anyway, i'm already upset about that. >> we wait all this time for you to timely break a big one and then we don't get credit. page b-8, what do i need to know about this? >> i'm just trying to -- >> no longer. >> blooper, i would like to see that. god, would i love that. but -- >> so we need to say a couple of things. >> tell me what's in here. >> the two big issues, the nonvoting stock seems to be something that most of the shareholders do seem to care about, which i was surprised by given that 70% already own it. because of the -- you think if i like rupert stock, why do i care? that's is a big issue. and they're saying it's a big issue. >> why wouldn't you accept the -- >> if you chose to put that am of money, and you also say to yourself, rupert murdoch may not be around forever and what does that company look like after and, therefore, the controlling shareholder. >> is that a negotiable point? >> i don't believe it is. i don't believe it is. and i can for better or worse, price will win out on anything. so the bigger issue is can they get to $100? most of the investors i get to yesterday said give me $100. i'll give you a deal. >> what if they don't care about the voting any more? >> a little less interesting. i think the price is going to be more interesting. most important is watching the stock with 21st century fox. that went down yesterday. and so the extent that that stock can hold up or goes higher, that makes others a lot easier. for them, for this to actual happen, fox has to come to the table. and the question is what they have to offer just to get to the table to at least negotiate. in part because while they threw out that number of $1 billion, they believe there's a lot more if they can see what's going on. of course -- >> with due diligence, you mean? >> if you're time warner, you don't want to let them -- >> david makes a very interesting point. we talked about this with jerry on yesterday. >> jerry levin. >> former ceo of the company and he talked about this as being a backwards deal. david said how technology is impacting all of this and where google is. by the way, if you're jeff beszos and you want to be in the content game, do you want to buy this? >> say fox really needs time warner and them it doesn't. the media has no idea. they just write every possible angle and story and conclusion on both sides. we've covered it all by now. we don't know what's happening and what is the end result. what is the bottom line? does fox needs to do this and does rupert always get his man? >> i say rupert always gets his man. i suspect something happened. >> billions of dollars. billions in synergies, right? >> probably. and if you decide you're shutting down down, one thing that is so interesting, she at least comes to the additional differently, to the point all the different creative pieces. if you do saturday go r gettel those things. >> this has caused a val owation for cnbc. >> i saw six to ten. >> after or before? did you add that to the 80 or is it included in the 80? >> it's included in the 80. >> and hbo is worth $20 billion. 25 billion if you consider the future revenue of billions. >> yeah. >> that sort of pressured the deal to compete with that. showtime with andrew ross sorkin and the executive producer, everything has to compete. united health is a dow component. nike, goldman sachs -- what else? visa. >> is kraft dow or -- >> kraft -- >> you've got to quit changing these things so much. is westinghouse out? okay. chef ron? mobile? >> anyway, outlook quarterly results, at least google and apple are in there. earnings of $1.40 a share. obviously you put them in. beating the street's estimate of $1.26, revenue topping consensus and the company is raising its full year revenue guidance above the street. and lots of big moments during yesterday's delivering alpha conference, thinking any miss reguests. then he brought out bill ackman. >> timeless moments. the two had, as you know, a very public war over herbalife. i started to say it correctly and i had to quickly say it incorrectly. for the last 18 months, it's been 18 months that you've seen it basically every day. at least we talked about it at one point. they hugged it out on stage acting like old friends. and ta was interesting. to me, it looks like icahn thought ackman had a mouth -- and it looks like ackman thought -- or looked like he had head lies. >> although they said a lot of nice things about each other. >> oh, look, i don't want to touch your lip. >> bill went for the hug. i think carl was a little more reluctant. i think -- seriously? >> sometimes that's awkward. >> wow, two guys like that in a situation like that? >> now they've made up. i'll tell you, ackman is a good looking dude. especially with the -- what is it? stuff in the eyelashes? i love his eyelashes. >> it's natural. >> he's even luckier. his eyebrows, your eyebrows are to his eyelashes as -- those are the -- i mean -- >> your hair? >> to my hair. meanwhile, i sat down with stan druckenmiller. he warned the audience that said policy should have us worried. >> to face fed policy since not only unnecessary, but fraught with unappreciated risk, when ben bernanke and his colleagues instituted qe1 in 20309, financial conditions and the real economy were in a dysfunctional meltdown. the policy was brilliantly perceived and a no-brainer from rafk/reward perspective. but the current policy make no sense from a risk/reward perspective. five years into an economic and balance sheet recovery, extraordinary money measures are likely running into sharply diminishing returns. >> now let's get to kate kelly with some of the other big highlights from delivering alpha. and the first thing stan said when he took the stage was how great the conference has become. >> i know. i was amazed at his stature. >> he made some similar comments before the financial crisis, a couple of years before. >> about the fed, not about cnbc. >> we have a clip, for sure. >> big time. there are clips everywhere. so that was nice. >> yeah, no, it was a great clip. >> and on the record saying -- but you know, he warned not to get too excited because it's not systemic. but it's registered at this point back in 2008, what caused all the problems systemwide. at this point, it's not systemic. >> and you know what i thought was interesting about what he said was the longer we go on with quantitative easing, even if we're tapering, the greater the downside risk is. >> what it is or how advanced it is. >> right. and it was galvanizing. i think all the debate about the lower interest rate regime and what it might mean in the future, that was one of the most interesting story lines yesterday. >> and my question was the demand whole from this once in a lifetime or once in a century financial -- well, not one in the century, but this huge collapse warned that even to this point -- >> right. >> the fed maintains it. >> and he thinks it's past the point of futility. >> but at a point where the downside is obviously some day may come back to haunt us. >> yeah, no, absolutely. can i talk about a couple of other key moments. let me be the judge of that. >> ken griffin on 2008 and -- >> you're not doing the hug again, are you? >> cooperman and christie. >> lee was amazing. she didn't see chris christie. >> you missed one of my favorite moments of the day. multiple moments, really. >> but john was tough. john can be very tough. sometimes not quite as -- >> john harwood, right? >> i don't think he's quite as tough when the president copped a fly and he went oh, mied go, you're wonderful. >> he kept the equal lyilibrium. he said you were obnoxious enough to ask me again. but it was a very good matchup. anyway, one of my favorite moments of the day was ken griffin talking about how citadel came back from the brink. in 2008, they lost millions of dollars in a matter of weeks. and they managed, interestingly enough, not only to sole advantage the business in general, but to make back their high water mark and their hedge funds four years later. here is his recollection of what happened at that time. >> that was a very dark moment for us. as a firm, we had gone through almost 20 years of never experiencing a loss and as you're well aware, in 2008, we lost about half our equity capital in 16 weeks. cnbc had the van parked outside of building trying to get the bankruptcy footage if we had failed in 2008. >> what a dark moment, you know, overall. and just the cnbc van being a galvanizing symbol, i'm sure. but that was interesting, i thought. and he sort of talked about taking stock of what needed to be fixed in the business. one thing they did was they slipped it into level one assets. they got out of level two and three assets, things that were too ill liquid and too complex in their view to have on their balance sheet. i also enjoyed hearing from lee cooperman, who is sort of an eternal optimist. and faber called him on that and said when was the last time that you were bearish on the markets? he did acknowledge that we were going through a series of cycles. here is where he thinks we might stand today. >> bull markets are born in pessimism, they grow in skepticism, and they mature in optimism and -- in euphoria. so we've passed pessimism, we've -- the past skepticism. i think we're in the stage of optimism, but i don't think we're in euphoria. >> so, interesting what he says there, right? because janet yellen, obviously, the other day talked about overly high valuations in biotech or tech echoing what some hedge fund managers have said, as well. david einhorn, david loeb. >> he was asked about that yedz and he said what does the fed know? >> i just heard from different people that her staff argued to put that in there and that she wasn't so sure about it. i guess they thought if these things pull back. >> i said at what time is the buy, sell or hold segment that yellen is conducting. i have a couple of stocks that i was to ask about. that is -- that's a -- to me, it's a rookie mistake. and don't ever do that again. even greenspan came under pressure talking about the whole marketist. but to talk about individual sectors of the market? are you kidding me? nobody cares what she thinks. we care what she's going to do. >> she thinks. >> spooking of valuations, i thought -- if that's what she thinks, is this an argument to be pulling back? >> right. that was enough, you know? >> okay. >> don't you think? so it's an indication she's going to raise rates more quickly than we thought? >> you don't think it was an indication of that? >> i do, yeah. >> i think it was cover. i think it was cover if something blows up. >> i thought one moment was druckenmiller. he said it's sort of get to go be nerve-racking in some of those markets. we see high pollutant valuations. >> there are about eight charts and every one of them, charts go from low on the left to -- and every one of them was way up here. he's like, we're at zero and everything is up here. >> right. right. exactly. >> every ounce of his intuition tells him -- yeah, that was a good quote, too. >> kate, thank you. >> it was great. thanks to you guys for bringing great coverage. >> when we return, the shock wave in the media industry. will rupert murdoch up the antifor time warper? can a mega risk like this get done in today's environment. on this day in 1955, the expansion of magical empire. disney land opens to the public for the first time and the rest, these, is history. "squawk box" returns in just a moment. time warner is the latest in an industry that has seen its share of consolidation. we have george, international business editor at the hollywood reporter. hey, guys, thank you for joining us. the big question, is the anti-trust component, some folks i've talked to on the time warner side, people close to the matter trying to suggest that they're going to be making a big issue of that. do you think it is a real issue, george? >> well, i think, you know, there are no official rules in terms of box office market share, things like that. but combining two big studio versions alone, that's faced some concerns with a time of industry people. and i think you'll hear those concerns echoing in washington, as well. the same is probably true on the tv network side. some people will say and producers have a tough end in the future, selling the program to a bigger type. so we do expect quite a few people to make a big market move. >> andre, you can be the judge. >> i think that's right. i think there's a number of issued raised by the transaction. the anti-trust agencies will be concern, the fcc will be concerned. and the way the anti-trust agencies work is they identify relevant lines of commerce where the two companies compete and you have the issue of cnn and fox news, you have the issue of -- >> cnn and fox, take them out of it. i think you're right, that's a hot button and i think fox has decided let's not even go this. but to the extent studios are an issue, do you think there is that much overlap? >> there is. there is overlap and there's going to be concern. with movie studios, we're talking about -- i guess there's six major movie studios and acts of acquisition to be reduced down to five media studios. so it's a concern. under the anti-trust laws, one aspect of it is -- there's a couple of anti-competitive theories that are used in the anti-trust. and one is the latest in conclusion or coordination. so something less than outrate colusion. but potential for coordination going on in the future. >> i understand when you're going from four to three, six to five, is that a bit of a stretch? >> that is correct. 4/3, a big problem. 6/5, normally not as big of a problem. but under the anti-trust law, it's still an issue and a concern that the agencies will -- i think the same thing goes with tv networks, as well, because the most five major tv networks, competition would be reduced there, as well. >> andre, what does this mean for all the other consolidation that's taking place in the market? comcast, the parent of this network is obviously trying to do the deal with time warner cable. that's an issue about type, directv has its own transaction with at&t. that's on the table. the scc is going to have to look at those and justice is going to have to look at those deals. now you add this to the pile if, in fact, there would be some form of an agreed deal. does that say that the pile deals -- anyone who was worried about contend and power before, do us look, these guys are going to be getting bigger, too? how do you look at that? >> i think that's exactly right. i think this is the response to the distributors, combining at&t.directv, comcast and time warner cable, they can merge and have more bargaining power against the content providerses. content providers have a lot of leverage as it is because the distributors need to content. obviously, the content provided distributors to get to that american household. when they say comcast, time warner cable merging together, going to have a lot of pipes, all these households around the country controlling, you know, nearly 20 out of the 25 major metropolitan markets. i think this is a response to that saying that if the anti-trust agencies and s.e.c. are going to allow that consolidation to happen, then i think this response here is -- this should be allowed, as well. >> george, culture question. most of the people that i know that i spoke to yesterday that live in and around the world of time warner, culturally, say they are averse to working for rupert murdoch. what do you make of that? >> well, i think it's an individual and neutral decision. but i think in general they talk about any deals with fox, the issue of rupert murdoch always comes up. i think one of the tags and i lead with those concerns is because of chase carrie, who has a good relationship. i think he could play a big role behind the scenes that are in keeping investors and the other people looking at the deal, confidence and focus on proper business in our decisions. and, you know, they could take a little bit of the heat on the political side off the review here. >> so you were -- you were able to detect some type of media chasing or animosity towards someone perceived to be conservative? are you serious? the mainstream media seems to be pushing back on maybe having a -- boss? where did you pick that up? really? >> now you're implying that maybe the mainstream media may have a -- >> i'm not talking about the cnn component. >> no, i know. i know. >> he talked about -- >> i talked about everybody. i said most of the people at time warner think rupert is either a devil or a close friend of the devil. >> i'm curious, the hollywood folks who work for -- >> right. they hold their noses and go to check their paychecks. >> is that what -- >> yes. unless you're mel gibson or something or join voigt, willis, adam sandler. i know there's like six of them and a couple other -- jessica simpson, i think, and you have to go way down after. >> okay. >> there's like eight of them total. just 16,000. >> we're going to thank george and andre for helping us through in this morning. i appreciate that. we'll continue the conversation here. >> becky, you're going to go to that, but given our conversation yesterday, this is mandatory for you and for any viewer that's interested. >> jack lew's free america plan, it's basically talking about if we don't fix the tax system, if we make it illegal to do these things and what the unintended consequences will be, mr. lew doesn't know much about economics. treasury secretary, it just came out. asking no push to do it. >> the economics say the real thing that has to happen is the tax law has to be changed. >> he's not going to do it in the next few years and this is going to continue to happen. but if we did make it impossible for them to be done, wouldn't foreign corporations buy more of them here? we need capital to be attractive here. >> we'll talk more about that when we come back. also, the dow hitting a 15-year high. where investors should be looking for value right now. 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[ male announcer ] don't wait. call today to request your free decision guide and find the aarp medicare supplement plan to go the distance with you. go long. welcome back to "squawk box." dow component united health reporting 16 cents ahead of the $1.26 estimate. it boosted its full year revenue forecast. toymaker mattel ends three cents a share of the quarter. estimates below 18 cents. ceo brian stockton says mattel is now positioned for better performance in the second half of the year. and beyond. that's weird. there is that big of a myth. stockton not necessarily affected. it looks like a big moon there, but the chart goes from 28.75 to 2 39.75. if you were wondering about how that stock has been trading in a dollar range, there you see it, it's been up and down based on a dollar. did you know barbie has four friends you can buy? >> ken. >> who? >> piper. >> stacey. >> stacey is a friend? >> yes. >> and who is the one with the brown hair, the brunette? t. >> i don't know. >> and there's only one guy, ken? >> there's a dark haired guy, too, but i don't know his name. ken is the blond and then there's another one. >> barbie sales have been uneven. that's been part of the problem with mattel. how do you update -- >> well, did you know that they have a barbie news caster? they've been trying to give her different jobs along the way? plus they have holiday barbie sales which are pretty hot. >> for christmas. >> korea. they're collectibles. it's like 50 bucks. >> you know a lot about this. >> i know because of the girls. they like the holiday barbies. >> but the -- >> oh, with the big hair, yeah. >> anyway, another record close for the dow yesterday. boosted by m&a news and quarterly earnings, our next guest says stock valuations are stretched and vulnerable to even bad news. russ is the global chief investment strategist at blackrock. i want to be careful with what you're saying. you think things are getting expensive, but you like stocks better than anything else, right? >> i think that's fair. our view right now is stocks are no longer cheap. they're particularly stretched in the united states, but they're not so stretched that these valuations in and of itself are indicative of a market top. now, that said, if what you're worried about is more of a garden variety correction, then yes, i do think stocks are vulnerable, not just because of valuations, but because volatility at these levels tells me there's not a lot of bad news discounted into the price at least not as of today. >> what's a garden variety protection? is that 8%, 10%? >> it's been so long, i think we've forgotten what it looks like. historically, it's about 10%. >> so you would not be at all surprised by a 10% pullback, but at the same time, if somebody is trying to figure out what to do with their money today, you'd say go ahead and try to allocate the stocks? >> we would. again, we think the stocks will be the better value for long-term versus bonds and cash. but i think you want to pick your spot. within the u.s., the large cap, the mega cap, the cyclical name looked to be the best value. the other point is that when you look outside of the united states, the valuations are not nearly as stretched. so we do think that there are actually some bargains still to be had in both developed asia and in emerging markets. >> are you talking japan or beyond japan? >> we are talking about japan. japan has just pointed year-to-date was a very crowded trade coming into 2014. everyone loved it. it's underperformed for the year. but this is one of the few, maybe the only chief market left in the developed world. it's trading about 1.2 times value. it's a 55% discount in the united states. now, japan for a variety of reasons should be cheap. it's not clear to be this cheap. >> when you talked about some of the things that you think are getting lofty, a little pricey, you look at some of the segments janet yellen pointed out this week, right? >> we have. janet yellen was trying to get at making a clear point which is we get it, we being the fed, that we know that there is some impact of having -- for long. we think it's justified. but yes, there are parts of the market based on equities and credit that feel stretched and arguably, they're stretched because they've been in this period of very unusual monetary policy. >> so the grand sum with all of these things, what do you think about bond prices at this point? >> bond price res clearly expensive. this is one of the reasons we still stick with stocks. but i think it depends on what part of the bond market you're looking at. in particular, it was the short end that's the most vulnerable. that's the part of the market that will react as investors start to discount that first rate hike, which is likely to happen sometime in 2015. >> russ, thanks a lot. great talking to you. >> thanks again. coming up, how does the nation's largest homeland review the housing market right now? 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>> getting close. >> some people calling it fresh highs and suv. i don't know if it's fresh. >> it is. it is the 15th high this year. >> but a new high says it all. there's no fresh highs or roton highs or -- brand new high. >> single best idea. next, checking into the luxury hotel business from the plaza in new york to the savoy in london. fairmont has more than 80 locations worldwide. we have to pay attention here, andrew. i don't think -- this is not -- you have not utilized like a swiss hotel have you necessarily or a fairmont? this is another luxury chain to consider. >> the fairmont? >> yes. >> love it. >> which one have you been -- >> i've been in many over the years. >> not surprised. jennifer fox will join us right after the break. and we are waiting on morgan stanley to roll out results. should happen during the next hour of "squawk box." ♪ ♪ over 1.2 billion eyeballs are on us during the two weeks at wimbledon. true tennis fans want to know what's happening. they don't want to just see what's happening, they want to know and understand why it's happening. anybody can just put data up, but we want to get a reaction, make it far more interactive. we rely on the cloud to provide that immersive digital capability. give fans more then just the game with the ibm cloud. the ibm cloud is the cloud for business. once there was a girl who even in her laundry room.ry. with downy unstoppables, she matched her one of a kind style with one of a kind scents. downy unstoppables in wash scent boosters wash in the wow. summer vacation season is in full swing. we've already conducted the interview with this next guest. >> during the commercial break. >> fairmont hotels has more than 80 locations worldwide from the beaches of barbados and bermuda to the heart of new york city. with us on set, jennifer foxx, president of fairmont hotels and resorts and international president of parent company frhi. jennifer, not -- i needed to just get up to speed on all the different brands that are under the fairmont umbrella. what are they? i haven't been to a -- >> rappels. >> haven't been to one rote. >> that's your ultrahigh end luxury. >> in asia, right? >> absolutely. fhi specializes in the luxury upscale segment and we've got three greats brand, our super luxury brand, then the fairmont and the swiss hotel brands which are our luxury brands. so we really specialize in that high end luxury travel. >> which includes, i guess, it's services is a very top of the list of all these things, right? service where you can't even -- you're not even expecting, butlers and things like that? >> absolutely. absolutely. many of our hotels we have butlers, particularly the savoy in london which is renowned for its butler service. but we specialize in high-end travel experience for that luxury traveler that wants something different and unique and is willing to pay for that experience. so we really do specialize in the high end. >> and are you in an expansion phase now, or a phase where you redo all your hotels? where are you right now? what makes sense given the future that you see in the world? >> now is the time to be in the luxury travel business. consumers now, they're really willing to pay for luxury. there's been pent up demand for people to travel to these unique destinations. so we're very much in a growth phase as a company. we're currently at 110 hotels around the world today, going in the next five years to about 170. so we've got about 60 hotels under various stages of development all around the world. so very much in a growth phase looking for destinations that really appeal to the luxury traveler. so that we can satisfy their travel needs wherever they go in the world. >> when we have more midscale or mid to upper scale people that run these hotels we talk about occupancy, and the rebound from 2008, and 2009. take really long to ask this question, as we picture -- do you even -- are those metrics that you follow with rev down at one point, was occupancy down and now are you full again? >> oh, yeah. >> it's come back all the way? are we at a ten out of ten? >> no absolutely. certainly during the financial crisis the hotel business is very cyclical so we suffered just like any other market suffers. but the great news is there's only good news in the travel business right now. and business has rebounded very, very strongly. particularly that luxury consumer. they've got a high disposable income and they don't want to spend it on jewelry and they don't want to spend it on new cars because they've got all of that. what they really want to spend it on is unique experience and travel experiences and multigenerational travel experiences so in the luxury set now, we've experienced great growth, great occupancies so the world has really come back. and we're getting to enjoy that right now. >> what were you doing during the financial crisis? did it stop all construction and expansion or did you expand even though you were suffering in terms of customers? >> look, really slowed down. it didn't stop completely. you know, actually, you know, that old saying never waste a good crisis. there was some owners and some developers that continued to develop their product. some projects went on hold but the great news now is all those projects that went on hold are now -- have all started up again so we've got 13 hotels opening in our system over the next 12 months. the next 15 months. so we've got just, you know, massive growth right now, because, you know, the market's about to get strong again. >> raffles -- >> first of september. >> in september, andrew. >> i think we should do the show from there. >> i'd love that. >> we'll good about that. feel positive. >> move everybody over there? >> the election's done. i think -- someone told me to wait for the election to make sure everything is okay. >> what's great about istanbul, it's now one of the real hot destinations. europe is always hot for north american travelers. paris, you know, where we've got raffles, london where we've got the savoy. americans just love to go to europe. but istanbul is the hot new market. and we've got a swiss hotel already operating there. this fantastic gorgeous raffles opening on the 1st of september, and then early next year we're opening a fairmont hotel. so raffles istanbul is going to be one of the hottest new hotels. >> was it an existing building or did you go from the ground up? >> this is a brand-new building. it's a fabulous new building in a center where you've got performing arts center and great restaurants and amazing shops. all the top luxury brands are there. so, it's really going to be quite unique. and we're actually opening with very strong occupancy. which is great. >> you keep files on who comes and what they like. that's what all luxury is doing now, too. if you come back they'll greet you when you're checking in and know you and know your tastes and everything, right? >> what we're finding is one of the big trends in the industry today is personalizations. you know, you want to be treated different and your needs are different than my needs. so what we want to do is identify what those unique needs are. and then satisfy our guests on a really, really personal level. really making that personal connection with them so that we know them and they know us. and then when they stay with us around the world, you know, we satisfy their needs wherever they stay in our brand. >> okay. so you've got all her personal contact information? you can send -- >> i'll send it her way. >> e-mail that over to me. because you've got that -- when you sat down, it was -- so you'll send that to me? >> during the commercial break. done. >> thank you. >> i would be delighted to be your travel adviser any time, anywhere in the world. >> thank you for coming in. >> it's my pleasure. thank you for having me. >> when we return, more highlights from the delivering alpha conference. also, wells fargo chairman and ceo john stumpf is on his way to the set. he is our guest host for the next hour of "squawk box." we'll be right back. the cadillac summer collection is here. ♪ ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style. 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a "squawk" exclusive. wells fargo chairman and ceo john stumpf is today's special guest host. the head of the nation's largest home lender unveils his outlook for the housing market and the economy. and the finale of delivering alpha. >> hey, good! >> carl icahn on the set with bill ackman. the second hour of "squawk box" begins right now. good morning, and welcome to "squawk box" on cnbc, i'm joe kernen along with becky quick and andrew ross sorkin. the futures are down this morning. i'm not sure what -- we're down 83 points on the dow. we're finished now with yellen speak. i'm not sure what we've finally decided after a couple of days of that. after anything is new or old. the ten year threatening to go under 2.50. >> i heard from mark grant this morning saying look out for 2% on the ten year. >> and i don't know how to -- i have no idea what that means. we did our pimco friend, they have a new term called the new neutral. that is that the rate without the fed on fed funds globally is going to be very low for years to come according to them. i don't know why. >> he thinks when the fed actually starts raising rates they're only going to go to about 2% instead of 4% or 5%. >> for years and years and years. >> let's get to some of our head lines this morning. it is a busy day for economic numbers. at 8:30 eastern time we'll be getting june housing starts and the weekly report on initial jobless claims. housing starts are expected to post a 1.4% increase. jobless claims are seen rising by 6,000 to 310,000. at 10:00 eastern time, the monthly philly fed survey will be out. and dow component united health beating the street's estimates with its latest earnings. also raising revenue forecasts for the year. the health insurance -- insurer's results were helped by a jump in membership for its health care plans as well as growth in its pharmacy services division. >> delivering alpha concluded last night with a hug on the stage. carl icahn and william ackman, they are friends again, hugging it out. billionaire investors who've been at odds over nutrition and diet considerable herbal i've made up yesterday. scott the judge wapner presided over the truce. >> andrew, amazing that 18 months ago ackman and icahn were yelling at each other on the phone. right here live on cnbc. yesterday, they shared the stage at our own delivering alpha conference and talked with carl. then, there's bill. bill came out. there's the hug seen round the world. i asked both of these guys how they were able to put all of the bad blood behind them. here's what they said. >> they called an assistant picked un, he wasn't in the office. i said tell carl i'm calling to forgive him. and it was a true story. and she said oh, you know, i think he'll really like that. okay. so he called me later that afternoon, and we chatted for 45 minutes, and you know, what we talked about, we would be on herbalife in about 30 seconds. >> i do respect bill. and you know, i was thinking about it before bill called i said, you know, it's almost crazy that we're at these loggerheads, because i've heard you say different things about different companies, and you are one of the few guys that really does speak out. if you don't like the guy -- there aren't too many guys that can do that. i respect what he said here and there. what the hell am i fighting so much for? and then you called and i said hey, great. i called him back. said it's blessed to forgive. you know. that's how we left it. >> so ironically, maybe these guys who hat first seemed so different, it's not activism old school and activism new school, maybe these guys are sort of from the same school. their m.o.s are a little bit different, but they're after the same thing, andrew, becky, joe, at the end of the day. >> which is? >> trying to get what they want -- >> the same money -- >> you can't just say money? >> of course it's money. but, you know, i think as carl said -- >> it is more than that. >> they keep score. >> they definitely keep score. >> the money is a score card. >> joining the score card. >> did you ever see the two of them teaming up? i've been surprised by -- >> i don't think it's out of the realm of possibility. they're both in fannie and freddie now. which is interesting. i don't think -- i wouldn't put it past them. >> carl complimented among the valeant structure -- >> that's really what started it all. carl did an interview with david faber, at a conference i think, and carl was complimentary of bill in the valeant/allergan thing. at a time when everybody else was seemingly really critical of how that whole thing came together. bill saw that. and reached out. made the first phone call. and here we were yesterday. >> kind of cool. carl's like whoa, you can do that? i can buy that? and -- >> right. >> we have a ceo here. i actually want to ask him what he thinks of that but we'll get to that -- >> wait a minute i build this big position up -- and this is awesome man. this is woo-hoo! carl would enjoy -- it wasn't done exactly like that. i don't think he bought it and then went to -- but did raise a few eyebrows. >> a lot of eyebrows. right? >> perfectly legal. >> will it remain that way? that's the question. a year from now will it still be? i don't know. >> i would say probably still will be. i mean it's two private equity firms decide to collaborate on acquiring a company and making a bid for a company, is that so different than a hedge fund guy and a -- >> you just wonder if all -- >> i mean the vote -- they're just -- >> but i mean all the criticism that came up after it, if that's going to influence any sort of new regulation, or whatever with the s.e.c. on how these things are constructed. >> all right. >> scott, thank you. >> all right, thanks, guys. >> our guest host this morning is at the helm of the nation's largest mortgage lender. also its most valuable bank. john stumpf is the chairman, president and ceo of wells fargo. great to have you here. >> thank you. nice to be here. >> wells fargo has been on a tear for a very long time. you just came out with earnings, and this is a little bit of a crazy point, but for the first time in 17 quarters you didn't actually beat expectations. you came in right in line with expectations. and after a track record of 17 quarters in a row of beats that had some people kind of scratching their heads. jpmorgan came out, downgraded the stock. i guess the question becomes, is it -- can you continue to have this kind of growth that you've seen to this point? >> yeah, we really had a good quarter. and we're proud of the 17 -- >> you met expectations. >> exactly. and we had a terrific quarter and sometimes, you know, the numbers are what they are. and we thought they were pretty spectacular. if you look through the numbers, you know, growth in loans of 8% or 9%, deposit growth 9%, fee income, both fee and non -- net interest income growth. so we thought it was a strong quarter. and you know, the economy continues to improve. and where we are in the economy, the real economy, you know, things are going, you know, actually quite well. so we're optimistic about the future. >> i mean the stock check says it all, too. that stock again has been on a run. but if you look at the mortgage revenue it was down 39%. obviously a lot of that is from weak financing. >> correct. >> kind of blend through. maybe everybody in america who wanted to refinance has? >> 75% of originations in the second quarter were purchase money. 25% were refinances. so, you know, that's almost the flip from a year or two ago. so you're right, i think mortgage is a little bit disappointing in this regard. we didn't have as much volume as we had hoped going into the second quarter. still a quarter that was good. $10 billion more than the first quarter. but there's lots of different things going on in housing that i think are holding us back a bit. >> like what? >> well, later household formation. there's this view that credit's not as available. which is true. in some cases there's lack of inventory. other cases, there's borrowers can't qualify student debt has some influence. so, little things add up to be big things. even though housing is up, you know, 8% year over year, probably not as strong a selling season as we would have hoped but we're still quite bull, on housing. >> i always think of wells fargo as being such a great read on what's been happening with housing. i know you've been doing some different things with the bank. should we look at you as a competitor to jpmorgan and others down the road? >> well, i think we -- we're a real economy company. so if you think about, you know, people think of us as mortgage and we're proud of that business. we love that business. but there's 89 other businesses. we're the largest auto lender. we do more commercial real estate. more energy. more middle market. more small business. so we're in lots of those spaces. so, the extent that others are involved, though, sure we're going to be there. but think of us as real economy. >> what can you tell us about the real economy right now? how does it look? >> i actually think it's stronger than people think. you know, obviously we're all surprised with the first quarter gdp. who knows what second quarter will be. i think it will surprise on the upside. so i think things are better. if you take the boom years, so-called boom years from 2000, 2008, and separate and take out of that the excess what happened in housing, the rest of the economy today is better than it was then. i mean look at the sectors. energy is booming. way better than what it was then. you know, autos, they might sell 17 million new vehicles this year. i mean, that's the best year we've had in six or eight years. manufacturing's coming back. ag's doing pretty well. commercial real estate. i mean every place -- i was in atlanta yesterday. you think there was a crane convention there. i mean, you go to almost any city, it's cranes everywhere. >> you just said, you know, credit's available to most people now. and we have this weird bifurcated notion, at least just in recent weeks i've started to think this way, that not everybody can get credit but now i'm hearing that because of the fed's low interest rate environment that they pushed out the risk curve, pushed a lot of people out there, and that there's a lot of lending similar to what was done before the crisis to businesses that aren't -- that are like "b" at best. "b"-rated, and that you know the banks have been induced to give people that don't really deserve credit at this point, and business this was a druckenmiller report yesterday. so which is it? credit is too available to people that don't deserve it? or it's not available to people that want to get it? >> i think you need to talk about the asset class. so if you look at home lending. because of still the unknowing of whether there's put-back lists. when a loan transfers, the risk transfers, most originators have some credit overlay, and what that means is, fannie, freddie, fha will guarantee loans down to a certain fico credit score. most banks are saying we won't go down that low because we're not sure about that being put back to us. so, i think there's some more work to be done there. >> so the small guy really still can't get mortgage loans but the big guys may be getting loans that they shouldn't be getting that could come back -- so the next time that there's a big mess, it's not going to be in the housing market, it's going to be in business loans? >> well, i'm not sure that business loans -- i wouldn't say that surely it's competitive. and where it's most competitive is where there's the most available lenders to a situation. if you have a $5 million cni loan, industrial loan of some type, you have large banks, medium sized banks, small banks, non-banks, everybody can do that. and wants to do that. surely there's a lot of competition there. >> we were hoping that that sector would come back, by the way. now that it's coming back people are saying it's kind of -- >> i don't think it's over the edge. >> you don't? >> i don't see that. >> it's not because we're at zero -- >> i think it has nothing to do with interest rates. i mean, if someone wants credit, and needs credit and can use it whether it's priced at 1% or 2% or 3% -- >> they're going to get it? >> they're going to get it. and they're going to want that. but, i don't see us going that far. >> this is -- >> we'll talk more about whether you think the fed is doing something somewhere that shouldn't have been juiced. i mean no? >> i'm not a big fan of qe. at this late in the game i'm happy they're tapering and i think we should have rates normalized to what the economy is. >> there's a difference between it not doing any good and it doing some horrific that comes back to haunt us. i think you're more in the benefits are eliminated. you don't know if it's going to come back -- >> the benefits are limited. and also 10,000 people retire a day in america. they never -- >> they need savings. >> what kind of risks are they taking or others taking to try and get a return. so i think there is some inherent risk in that. >> fortunately john's with us for the rest of the hour. we've got a lot more to talk about. >> absolutely. when we return, digital security is a big issue for the financial sector. next the president of mcafee tells us the measures and new innovations being used 20 protect corporations and the consumer. first bullish quarter for private equity firm blackstone just out with its second quarter results. take a look at this. blackstone's results were helped by a jump in performance fees which nearly doubled and investment income which was up 81%. you'd like that in one quarter right. the stock jumping in premarket trading after that release. you can see it right there up about 3% in the premarket we'll talk about that when we return in a moment as well. in india we have 400 million people who don't have electricity and i just figured that it's time i do something about it. what we're doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. i think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when it's needed by the consumer. a smarter energy system is made with the ibm cloud. the ibm cloud is the cloud for business. all right. welcome back, everybody. morgan stanley just out with its earnings and it's continuing this pace of banks that are beating expectations by a long shot. you've got morgan stanley coming in with 94 cents a share versus the 55 the street was looking for. revenue better than expected $8.6 billion versus $8.1 billion. this continues the trend we had seen earlier this week with jpmorgan and others who beat by quite a bit. take a look at that stock. >> probably went up already on some of the other numbers. it's a bad market today in terms of overall. but it is indicated now up 33 cents or so. i don't think there's anything wrong with those. >> the beat on the fixed income side which we think is such a mess. >> lower -- you know, probably lowered expectations on fixed income. >> a billion dollars actual versus 9.63 and on the banking side 1.4 actual versus 1.2 estimate. let's talk about cyber attacks because it's a topic increasingly disturbing a lot of people. speaking at delivering alpha yesterday treasury secretary jack lieu called on business leaders to take the security threat seriously. >> look at how much of our life we conduct through our ipad, iphone, smart device or our computer. it's our banking, it's our basic utilities, it's a lot of our personal information, our health records. there is a very high level of concern that we should all have that cybersecurity, cyber hygiene is taken seriously by all of the providers that we do business with. >> for more on this issue we're joined now by mike deceaser, president of mcafee which is now part of intel security they just renamed it and leading security technology provider. do we not even talk about mcafee anymore? >> one second real quickly. can i correct that? morgan stanley 60 cents versus 55 cents. because you had to take out the positive dva, and subtract the discreet tax benefit of 31 cents that came with it. so it's a nickel beat, not a mile beat. >> got it. all this math makes it so much more complicated. let's talk about security. it scared the heck out of us for a second. how many attacks do you think we don't know about that are legitimately a problem? >> you know, i think it's interesting. when you see the news of a stuxnet or one of the more high profile attacks in most cases those -- those attackers have been in the organization for an extended period of time. and when you finally realize they're there that becomes the event that we know about. but there's -- the technical sophisticate of the threat landscape these days has green for sure. >> how much do you -- how often are you attacked? >> i think constantly. in fact, it's one of the big risks in the company we're investing a ton of money, we're working closely within the industry, with government, and we actually have, you know, groups that we hire to actually try to benefit probe -- it's a big area. >> jack lew yesterday said banks and others, a lot 6 other companies need to do a lot more. but banks in particular i thought were doing so much at the forefront. >> i think we're doing a lot. but you never know if enough is enough. >> how much does it cost you, jpmorgan's laid out like a huge chunk of money. >> it's millions. i mean many millions. we're hiring people and our board's very involved in this. so this is a big -- this is a big area. big area of risk. >> what is the most susceptible part of the sort of technology value chain right now? either by industry or if you're a ceo watching this program you should actually say to yourself, i got to pay attention? >> i think when you look out there, all corporations are trying to become part of this connected world. and they want to do business online. your consumers expect to be able to transact. i can't remember the last time i went into the bank, i'm a big customer and use the bank every day. i just use it online. i think as people come online with that comes, you know, the security threats that go along with it. >> what is the threshold for going public? meaning, if there was a breach of ten people, ten accounts, do you say anything? does it have to be a breach of 100,000 accounts to -- at what point do you -- do you go public? >> i unfortunately you go public when the customers know that they have been breached. because in most cases you look at target most recently. you have to notify your customers their credit card information has been breached. >> right. >> so you know, it's again, as we do more and more business online, and your financial information is exchanged online freely, it becomes very obvious when you haven't been breached. >> a good answer to that is you err on the early side and on the low side. in other words you want people to know, and you want to be as open and honest as possible. >> public policy question for you. >> yep. >> there is a big issue about how much information businesses should be sharing with the government. >> yep. >> and how much information the government should be sharing with business about security, and who should be responsible for all of this, right? we have police that ostensibly police the streets. businesses basically have to have their own security guards at the moment. >> yep. well i think -- >> what's the right answer? >> there needs to be more here. i mean you look at big corporations like wells fargo that have your own research departments, and that you know when you're being attacked and the rest. then you have security companies like us, and we have our own research departments. then you move in to washington, d.c. and you see the three letter agencies and they've got their own research and the ability for us all to come together, there needs to be a better and stronger public/private partnership here. the ability, if we can share freely what we know about attacks environments we can do a much better job of preventing those attacks from happening. >> i actually agree with that. the other thing is third parties. that's a big area of risk. so, you know, third parties have access. we do business with them. access to the system. people, you know, bad people get in through that avenue so this is a big, you know, school of thought and discussion at work these days. >> we got to go. self-less question what kind of phone do you use and e-mail outside of work? >> i use iphone and apple's e-mail. >> safe, you think? >> there's no platform that is 100% safe. you just need to take precautions on -- i'll give one piece of advice. if there's one thing that you do change the account number on your bank often. >> change the account number on your bank? >> the password -- the credit card is an example. if they send the same number to you and they change one code the bad guys get very good at how to just keep searching new codes. you want a new number periodically. a new reset periodically. use the same password for everything in your life but change it on your money. >> you have to ask for that? >> you do. you have to ask for that. >> that's an additional cost for your business. >> okay. >> are you talking your account number, your user number? >> your credit card numbers. the numbers that are on either on your atm card or the numbers that are on your credit card. >> not the actual account number. >> oh, okay. >> that makes sense. >> okay. >> okay. >> thank you. >> appreciate it. >> when we come back we have much more with our guest host today, wells fargo chairman and ceo john stumpf. stick around we'll be right back. tdd#: 1-800-345-2550 there are trading opportunities tdd#: 1-800-345-2550 just waiting to be found. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 bring what inspires you tdd#: 1-800-345-2550 out there... in here. tdd#: 1-800-345-2550 out there, tdd#: 1-800-345-2550 there are stocks on the move. tdd#: 1-800-345-2550 in here, streetsmart edge has tdd#: 1-800-345-2550 chart pattern recognition tdd#: 1-800-345-2550 which shows you which ones are bullish or bearish. tdd#: 1-800-345-2550 now, earn 300 commission-free online trades. tdd#: 1-800-345-2550 call 1-888-648-6021 tdd#: 1-800-345-2550 or go to schwab.com/trading to learn how. tdd#: 1-800-345-2550 our trading specialists can tdd#: 1-800-345-2550 help you set up your platform. tdd#: 1-800-345-2550 because when your tools look the way you want tdd#: 1-800-345-2550 and work the way you think, you can trade at your best. tdd#: 1-800-345-2550 get it all with no trade minimum. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 open an account and earn 300 commission-free online trades. tdd#: 1-800-345-2550 call 1-888-648-6021 to learn more. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. 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. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. when "squawk" returns we've got much more with our special guest host wells fargo chief john stumpf. and auto nation trading near an all-time high. see how mike jackson he's been rolling out quarterly results. we're going to do that in the next half hour. back in a moment. ♪ ♪ ♪ [ 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. 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[ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ welcome back to "squawk box," everyone. earnings central is in full swing this morning. dow component united health's earnings and revenue both beating the street. the company also raised its full-year revenue forecast. morgan stanley reporting second quarter earnings of 60 cents a share. that is a nickel better than had been expected. revenue also topping consensus. that stock is up by just over 1%. and blackstone shares also getting a boost this morning after the private equity firm's results were helped by a jump in performance fees which nearly doubled investment income was up by 81%. that stock is up by 2.7%. >> that's amazing. 81% in a quarter. separately let's talk about the tax system. under fire from new jersey governor chris christie yesterday at the delivering alpha conference. >> we have a wretched tax system in this country, both federally, on the individual and corporate levels, and at the state based level in lots of places, including my own state. which disincentivized growth, which disincentivized entrepreneurial job creation. and which make us less competitive with the rest of the world. way have to get around the table and redo this tax system. >> let's talk tax reform and more with our guest host john stumpf chairman and ceo of wells fargo the nation's largest mortgage lender. you agree with chris christie? >> well, i think the tax system was need some review. and wells fargo's case, 97% of our revenues in the u.s., 97% of our people are here, and we are one of the nation's largest taxpayers. our tax rate in the second quarter was 33.2 or something like that. so we, you know, so we're paying a lot of taxes. i'm -- you know, i think there's a lot of debate around this issue. whatever the case is i want to make sure that we incent companies to do business here. >> right. >> and create jobs here. that's the end game. >> you know, the other person that we had at this conference yesterday was jack lew who has been talking about tax invers n inversions. where do you stand on what we should do about that? >> well, again, we should have a tax code that is pro-america and pro-growth. so, whatever that means, let the policy people decide that, but it does not help american families, american economies, and so forth, to have jobs leave here, or companies leave here. >> when you think about his business, though. >> he's in a different business. >> you're not going -- you're a u.s. -- >> correct. >> you can't do any of these things. >> the problem is because people move over there for cheaper labor. there's a lot of reasons to have facilities -- >> or if they're satisfying customers in another part of the world. it makes sense to build this stuff over there sometimes. i mean there's a lot. but we shouldn't make it the tax code shouldn't be adding to all the other pressures to move offshore. >> joe, that's exactly the case. >> thank you, john. thank you. >> talk to -- address him. >> talk to me. it's okay. >> because then you're going to be talking to the hand if you talk to him. >> i think we all agree, don't we all agree that we want america to be successful? >> yes. >> and to grow jobs, and to have a vibrant economy here. and whatever that takes, i think -- >> here's the thing -- >> -- realistic to want to be more successful than some of the other countries in the world. >> that's -- the question i have about tax reform and i want tax reform, i want to make sure these companies stay here and they want to stay here. not because they're being blocked from staying here or anything like that. though frankly i might -- to me there is a patriotic thing going on here. >> oh, please. that is -- >> no, i find it very disturbing that we have companies that are leaving our shores to go abroad, even though frankly they're not really going abroad, because the ceo is still living here, to me if you have a drug company and you're going to move to the netherlands, as i was saying yesterday, want to move to the netherlands, great, but sell us the drugs in the united states, all the medicare payments that we're going to pay, sell us the drugs in the same rate you're going to pay sell them in the netherlands. >> apples, oranges and cucumbers all mixed in here. >> but if you do apples, oranges and cucumbers in the netherlands -- >> there's price control over there. there's no drug innovation over there. you want price controls here? >> corporate tax rates over there are very low. bus guess what? the individual rate over there is much higher than it is here. >> that's what druckenmiller said yesterday. saying that you're not taxing corporations, you're taxing both the playees and the shareholders more of the corporations. all you're doing is freeing up corporations to compete globally by lower being taxes. people will pay as it passes through have those people pay. >> but the sort of the immediate practical question on the inversion issue is -- let me say the immediate question on the reform issue is what is the right number. right? ultimately that's what this becomes a debate about. and i keep using the issue of mylan, top right 35%. you say you pay 33%. her effective tax rate being the ceo of that company she's paying 25%. >> you're talking corporate taxes now. >> corporate taxes. people at you know, obama's, his top rate is 28% manufacturing, 25%, he's proposing two different rates you talked about 20%. she thinks that she can get her company down into the teens. and then the question is, is 20% -- does 20% become the right number? and then what do you do? >> you wouldn't move a company for three points. >> i think it's more than what the rate is. it's what makes it up? so i mean there are some people who have some benefits, you know, there's acceleration of whatever. right. and when you start talking about rate, that's only one part of the debate. because, -- >> that's why it's so hard. >> this is very difficult to do. think how many times in this country we've gone through tax reform. and what was it, 86 the last time? these are very hard things. >> and took a couple of years to get it together from 1986. it didn't happen overnight. >> you'd need a very engaged president committed to doing this. this is not his priority. it's not going to happen in the next two years. you need true tax reform leadership and that's not something that seems to be the most important. >> the lobbyists getting involved -- >> that's why you need the leadership. it's going to be hard to do. >> you need both sides -- >> and you're going to rip out all the loopholes and everyone's going to jump in. >> right. >> needs to be done, though. >> i don't disagree -- >> if you go lower you have to also get rid of all of the other stuff. and that's where the tough thing is. >> right. >> we all can agree on a rate. >> both sides have to agree to do it. >> you say keep research and development special, keep xyz special. even manufacturing. >> and every industry is going to have very compelling arguments why -- >> the real estate guys have their own thing. the energy guys -- >> the world has somehow done it and they've figured out that to attract business you can't be the highest, you know, tax rate in -- we see it, if you want to look at it -- >> i think it's apples and oranges. i look at the nethserlands and ireland, they have their own issues and own problems. they're bringing certain corporations revenue in but they're -- >> can't you look at the states though and realize that states that don't disincentivize businesses have all the businesses coming into those states. >> no. i would argue that texas long-term is going to run into some serious problems because they haven't actually created -- they won't create enough revenue to actually be able to maintain some of the social programs that they're going to have to promise ultimately. but it's a longer story. you may disagree with me on that. >> we do. >> we do business in all those states. and i've lived in texas, and now i live in california. and yes, there is a different view. but, both states are doing, you know, texas is doing exceedingly well. >> extrooply well. >> and energy has a big part to do that. >> -- reform and everything else -- >> it's an easier place to do business. there's no question about that. but we also love california. >> okay. >> we're going to continue our conversation with the ceo of wells forgo in just a little bit. >> auto nation ceo mike jackson on the company's quarterly results. we'll also ask him about the possibility of a tie-up between volkswagen and fiat. yeeks. and at the top of the hour, media in the spot light. john malone's liberty global buying a 6% stake in itv. rupert murdoch pushing to get his hands on time warner. two great media names join us at the top of the hour. we actually won't have rupert, and john malone. but two other great media names to discuss the recent wave of activity in the sector. it's estimated that 30% of the traffic in a city is caused by people looking for parking. 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. so tell me about that at&t best-ever family pricing thing. its ten gigs of data to share with unlimited talk and text, and for a family of four, its $160 a month. $160 a month? sign us up. um, maybe we sign you up at the store after this. right, 'cause this is the... food court, yeah. it's the food court. at&t's best-ever family pricing. for instance, a family of four gets 10 gigs of data, with unlimited talk & text, for $160 dollars a month. ♪he cadillac summer collection is here. ♪ during the cadillac summer's best event, lease this 2014 ats for around $299 a month and make this the summer of style. ♪ making some head lines key corp buying tech focus investment banking capital markets firm pacific crest securities terms not disclosed on that deal. the transaction expected to close, though, in the third quarter. becky? >> auto nation the country's largest dealer reports its second fiscal quarter this morning. earnings of 83 cents a share ex items. that misses the street by four cents. revenue came in roughly in line. mike jackson is the chairman and ceo of autonation. he joins us right now with the results. mike, good morning. what happened? >> well, becky, good morning. great to see you. what happened, i'm very happy to report that this second quarter is an all-time record for us. 83 cents. up 14%. and by the way, that is our 15th consecutive quarter of double digit increase. as far as you're referring to what happened with the analysts, we did meet the revenue expectations. as you know, becky, as we discussed we're in a major investment period in our brand in digital capabilities. we have not given analysts any visibility as to exactly when the cost of those investments will fall in our reports. so, from time to time we're going to have a disconnect with the analysts on a quarterly basis. i would observe over the last four years for the full year we've exceeded analyst expectations. >> you know, mike, you actually said 100 million. so if they had been paying attention they could have figured it was coming. but you know, why don't you help these guys? they're not that good anyway at what they do. you said you're going to do 100 million. and then they don't factor it in. so then you blame them that it would be easier just to tell -- you give no guidance. why don't you tell them, we're doing some of these investing in digital that we told you about. why don't you factor that, instead of yelling at them after they say you missed by four. give them more visibility. >> first, joe, first, joe, i think they do a very good job. second, i'm not yelling at them. you brought up the subject, i didn't. but, i will say the reason why we don't give guidance is when you do, you give up a lot of flexibility as to how you do certain things. >> right. >> and i don't want to be nailed on the cross on the quarterly basis that every decision i make i says well what's that going to do this quarter. >> but then you -- >> in which case you -- >> you open yourself up to this kind of thing, charts that make it look like it was below. but the 100 million. what does 100 million dollars represent total in pennies per share, mike, just so you're spreading it over what do you think, how many years or quarter? >> yeah, oh, that's -- that's well over a dollar. >> it is? >> earnings per share. >> see what i mean? >> over the next several years. so it is a significant number for the company, but -- >> you're just going to see -- >> i'm not going to give you any more insight as to exactly which quarter occurs. >> hopefully analysts are watching, they're seeing that it's a dollar over a couple of years so there's going to be times -- are you sure it makes sense to make these investments >> what are they actually going to accomplish, mike? >> well, we're ahead of schedule with the where we thought we'd be with the brand launch of autonation. and i think the evidence is in in unifying the company under one brand from coast to coast has worked extremely well. >> but it cost money. >> particularly the inflection point was in our digital capabilities. and what we see, what the consumer expects in the future from a company, especially a retailer is one seamless experience. not an online experience. and an instore experience. one experience. that they can move seamlessly back and forth between their digital efforts and being in the start. both are still relevant. today there's a big disconnect as to you lose a lot of what they're doing in the digital work when they enter the store world and we're going to bridge that gap. and we will launch our transactional digital website at the end of this year which will be a big step forward for this company. >> it is good to see a company that is making investments in the future, too. mike, we have been talking this morning a lot about auto loans and what's been going on, because john stumpf is our guest host today from wells fargo. they do a lot of auto loans. he's talked about the healthy side of the business. you've seen some pretty good numbers in terms of consumers buying, too. >> first i'd like to say, good morning, to john. his team at wells fargo does an absolute fantastic job, particularly in the auto -- auto business. it's our number one banking relationship for financing, our customers. >> well, thank you, mike. we appreciate that. >> and extremely professionally capable. i was listening to john earlier today and we basically have the same view on the u.s. economy that there are, and i, you know, we've been talking about this for years, there are bright spots that we didn't have back in '08 or anine, whether that's energy, autos, housing, that are giving an underpinning of strength to this economy. certainly the financing we have available in auto lending today is the best of my entire career a lot of that is because during the great crash everyone saw that the car payment went to number one in the household. there was no major defaults or fault lap around auto lending, so, i'm not making a moral judgment to pay for your car before you pay for your house. your children's education. it's the right thing to do. but from a business point of view, lenders see the attractiveness of the auto business, and it's very supportive of today's business. >> hey, mike, you know, when we -- you look at the growth rate of the company, and there's a reason the stock is at $60 now, i don't know, five bucks or something a couple of years ago. but it's at $60. but we do count on you, you know, if it goes from $298 to $340 to $385 that's what people are looking for. we figure out what the growth rate for earnings per share is on the company is that 340 for the year can you make up this four cents are you going to -- i know you won't give any guidance but that's how we assign a multiple to what to sell your stock at. are you going to continue to grow in the way long-term that because you're at probably 20 times earnings right now. >> so, i'm not going to give forward guidance. so i'll just make some observations about the past. 15 consecutive quarters of double digit growth. the last four years we have exceeded the analyst guidance when we fall out of favor for whatever reason and the stock is down, we thought it aggressively i will observe i repurchased over $7 billion worth of stock at just over 17 a share over my tenure here, where stock is now trading at 60 so i'm not losing sleep over -- from time to time. the stock goes down, that's the days the buying opportunity because they have great confidence in the future. >> it's a commentary on trying to gauge these things quarter by quarter and ceos that try and do that doesn't make any sense to do it quarter by quarter. it's commentary on the way it's done -- >> we're building a great company for the long-term, and those shareholders who have stayed with us for the long-term have done extremely well. whether it's eddie lampert or michael larson with investing bill gates' money. they're two pretty smart cookies. it's worked out well for them. we have this business model where we make money no matter how difficult the environment is. we have investment grade balance sheet. the only one in the auto retail space, and when the stock is out of favor we buy it back aggressively if i just look at the second quarter. you know, again, we spent over $65 million on share repurchase. so if you're long-term -- if you're living quarter to quarter maybe we're not the company for you. but, again, just look at the past four or five years. i think our track record speaks volumes. >> mike's a terrific leader. autonation is a great company. thank you for those nice comments mike. we're really bullish on autos. i think this will be the best auto year in the next eight or nine years. there may be 17 million vehicles sold this year and autonation is one of the great names in the space. >> jackson can tell you to the auto how many we're going to sell. >> between 16 and 17 isn't it? >> we'll even break down which model. >> between 16.4, 16.5 for this year, something like that. >> all right. >> we're the nation's largest lender in this space and we love that space. >> mike, thank you very, very much. >> great seeing you. >> we'll talk to you again soon. coming up we have more from wells fargo ceo john stumpf on the state of financials in the mortgage industry and at the top of the hour we talk media deals with activate co-founder and former mtv executive michael wolf. also "new york times" columnist jim stewart. later in the program we have senator bob corker reacting to new russian sanctions, tax inversions and volkswagen's job expansion in his home state. "squawk box" will be right back. [ male announcer ] the mercedes-benz summer event is here. now get the unmistakable thrill... and the incredible rush... of the mercedes-benz you've always wanted. ♪ [ tires screech ] but you better get here fast... [ daughter ] yay, daddy's here! here you go, honey. thank you. [ male announcer ] ...because a good thing like this... phew! [ male announcer ] ...won't last forever. see your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. but hurry, offers end july 31st. share your summer moments in your mercedes-benz with us. let's get back to our guest host for some more thoughts. john stumpf is chairman and ceo of wells fargo. i'm not going to talk about wells fargo specifically. but i'm reading, you know, some of these major banks that are, you know, so far apart. i think bank america, what they offered 13 or something, and that's not enough. when is this period over where the federal government becomes part of the solution, really, rather than i don't know, trying for punitive measures to punish a industry because of i don't know, public opinion? >> well, it's hard for me to make. you know -- >> you think you're doing a great job. you love them all and regulators are your favorite people, right? >> i wouldn't say they're my favorite people. but they're surely part of our life. and it's hard for me to spectate, and i won't, really, on somebody else's activity. >> what was citigroup? seven or eight? what's going to happen with bank america? they're at 13 and they're arguing, right? >> they're arguing. >> 13 is not enough apparently. and then -- but where have we decided where does the money -- >> oh, yes i did some research. >> you did? >> basically the money just goes back to the treasury. it's not -- there's no -- it doesn't go to some doj budget or somebody else. >> you might say this is patriotic for -- >> it's almost like taxes. >> yeah. >> this is almost like john might have a different view -- >> i don't believe that. >> you don't believe it? you don't believe shaking down the industry is patriotic? >> shake down is not patriotic. >> you know, i think -- >> one thing -- >> people should remember not all mortgage companies are the same. did the same things. i mean i think about our company back in the go-go years of 2000 to 2008. there was a time when we were the largest mortgage company, 2002 or three, and someone else said i want to be largest. and i'm going to do "x," "y" and "z" and we said we're not going to do that. we're not going to do negative am loans. we gave up millions of profits. so you know there's different -- >> but some of these companies, john, speaking of patriotism, some people would call it patriotic that they help the federal government when the federal government needed help by bringing these companies with problems under the fold, and rationalizing the operations and helping the government devolve some of these really big problems. now who's going to do it next time? who's going to be there next time we step up to the plate -- >> i think that's a legitimate issue. so i think needs to be balanced. but again -- >> you think they think about this eric holder, you think any of these people think about -- >> i don't know what he thinks. i don't even know him. but you know, again, it's really hard for me to comment or speculate on what's going on there. i mostly am concerned what's happening in our shop, with our team, and that's how we go forward. >> so far so good with wells fargo. all right, so in terms of the federal reserve, where would you like to be? when woo you tell janet yellen to first raise the fed funds rate? would you say early 2015? >> well i don't think i would tell her anything but i like the fact that she has talked about when she'll be out of the bond buying business. >> can you believe that we're even -- >> acting like this is something that we're -- actually gratified that we're finally going to stop this extraordinary thing. it became qe infinity. remember they first announced a couple of discreet purchases. then they went to qe infinity and we're actually gratified that they're ending that. that's where we are in life? >> i'm happy we're ending it. i'm not a big qe fan. this -- imagine it's six years since the downturn and five years since the recovery started, and 10,000 people retire a day in america at rates that they never thought they'd have. >> all right. >> i like to see more normal activity where rates reflect the strength of the economy. and be higher. >> john, thank you. >> thank you very much. >> come back soon. >> great to have you. we believeg 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. who don't have electricity 400 million people and i just figured that it's time i do something about it. what we're doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. i think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when it's needed by the consumer. a smarter energy system is made with the ibm cloud. the ibm cloud is the cloud for business. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. rupert murdoch is on the hunt. the fight for content is heating up. we talk winners, losers, and future players with former mtv coo michael wolf. and pulitzer prize winning author and "new york times" columnist james stewart. plus jack lew, pushing congress to crack down on tax inversions. >> we need to act on this question of inversions and we need to do it now. >> senator bob corker responds, and talks jobs in america. the fight against the deadly consequences of diabetes. "squawk" makes a ceo call to drugmaker novo nordisk as the final 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. here in studio with buddy austin goldsby the economics professor and former chair of economic advisers. my gids know him. they mentioned adam smith to you. they tried. >> joe. they tell me you aren't getting your vegetables and it's been a tough morning. >> am i not regular enough? >> i don't know it seems like you're grumpy. so i brought this apple and i'd like you to eat that. >> there's a worm hole in that apple. >> that's nice, thank you. >> it came from your green room. >> did it really? that was for you then. here. here. try it. is there a label on the other side of that? >> it's delicious. >> all right let's tell you about some of the corporate earnings dominating today's top stories. united health beating the treat on the top and the bottom line. revenue rose by 7%. it was boosted by membership increases that stock is up by about 1%. morgan stanley beating the street as profit more than doubled. as expected revenue from bond trading declined, some positive comments coming from james gorman on the conference call and that stock is up 1.8%. also shares of blackstone trading higher this morning. earnings more than doubling after the firm turned in some big gains from sales from its private equity portfolio into the rising stock market. performance fees nearly doubled. investment income up by 81%. that stock is up by close to 3%. >> let's talk about the deal story of -- day two now. though rejected the surprise bid by rupert murdoch or rival time warner underscores that a large media company, they're in the mood for some major consolidations, begging the question, what does the future of media actually look like? joining us is michael wolf, managing director co-founder of activate, former president and kroo of mtv networks and former yahoo board member also james stewart columnist at the "new york times" and a cnbc contributor. good morning to both of you. >> good morning. >> i'm going to start with michael because he said something to me during the commercial break which surprised me. he said this deal is happening, or this consolization is happening but for a different reason than you think. what would the reason that we are not thinking about? >> the argument that everyone's making is you got to be bigger to deal with the consolidating cable industry. i think that there's another piece of this. which is actually being bigger to take advantage of all the new outlets into the homes. so, yeah, we're having some big cable offers. comcast is going to be a national operator. we got a whole bunch of other people coming along, verizon, sprint, netflix, and -- and by the way an international. so there's a huge amount of community that a big company can take advantage of. >> james, your -- jim. jim, james, we could do both. great to see you. your sense of the cultural distinction between time warner and fox and how much of a friction and disconnect that is going to create or be? >> well, i think we saw with the takeover of dow jones that murdoch's style here is to kind of let things going on their own for awhile. then he moves in and puts his own people in and he puts his own stamp on things. so i think that's probably what we could expect here. by the way, if he's the owner, you know, who could blame him. he wants his people. he wants his philosophy. he wants people he likes doing the business. but i would expect pretty soon everybody at time warner is going to be replaced. >> michael, is this a fait accompli? i mean, the disclosure of the talks unto themselves, does this now mean that time warner gets taken over by rupert murdoch? does it mean somebody else comes in? is it possible in three months from now we could -- they would have made an offer, decline the offer and that would be the end of it? >> it's not clear. i mean there's a history of media companies making offers for other companies and deals not getting consummated. remember the comcast deal they made a bid for disney and that never got done. later on they bought nbc universal. where we are today. but i think that there's -- i don't know. i mean it's going to see whether time warner's going to be in place. and other companies. >> do you buy the argument for why they're saying we think we're worth more as a standalone company no matter what the dollar on the table is? is that a strong argument or does that get whittled away at some point? >> there's certainly going to be opportunities for larger companies in this business. they can create a lot of value on their own. and especially given the much-watched programming that they have. sports is very important. and that's what a lot of people want to watch today. but, it is clear that there is a lot of -- a lot of synergy that's going to happen between these companies. >> jim, jump in. >> yeah, well, you know, i think strategically this makes total sense for all the reasons that michael has mentioned and probably some others. but i think there are going to be some big regulatory hurdles. these companies are direct competitors in almost every one of their businesses. competition is going to go down. i don't know that the market share thing is going to fly by the usual antitrust rules. but you're not talking about cementmakers here. we're talking about content creators, news providers, people who shape the intellectual debate. that's going to be a big issue. and having murdoch control all of that or having any one company control all of that is going to be a huge flashpoint. i don't think regulatory this is going to be easy. >> i think it's an historic parallel which is after the telecom collapse in 2000, there's a huge effort to consolidate, and basically it was a game of musical chairs. they allowed a series of huge mergers, and then the department of justice finally said, whoa, wait a minute, this is too consolidated. we won't let it continue. so we'll see if they let them all go through. >> jim, you were reading about antitrust issues for a very long time. we'd be going from basically -- going from like six to five. maybe five to four in certain places in terms of the competition. no? and isn't that different than going from four to three or three to two? >> it's different. but these are -- these are two of the biggest -- just looking at the movie studios these are two of the biggest movie 1250ud yos. i don't think if you just use the strict numerical approach like i said we're talking something here that's very culturally sensitive, it's very important. all the very visible authors, writers, stars, they're going to be up in arms about this. this is taking away competitor, it's going to make it tougher for them. that's part of the scale argument for doing the deal. what makes this a really great deal is what's also going to make it a very difficult thing to put together and get by the regulators. >> michael explain this in terms of the dominoes that would happen from here, or what this forces others to think about, what does disney do? where is google? is jeff bezos and amazon who claim they want to be in the content business, do they matter in this? what does -- i mean sort of just play it out for us. >> well, if you look at all the entertainment companies, the place that they're earning most of their revenue, and their profits, is coming out of cable programming. and at the same time, they're getting a huge amount of revenue out of netflix and now out of amazon. so we shouldn't be surprised to see other companies, viacom, discovery, all getting in the mix, either being sold, or buying something else. disney is now huge. disney has lots of different revenue streams, including sports. and disney monetizes better than anybody else. we're at a point now where he who monetizes the best owns the rest. disney is owning all the big film franchises. >> just real quick. you know sumner redstone. >> yes. >> when he heard this news what do you think he thought at this point? >> probably like what's the next deal i can do? >> and is there -- but is there a deal for them to do, either viacom or cbs? >> there are going to be deals for everybody to do. the question about what happens to cnn -- >> jim, when bezos you mentioned him when he bought "the washington post" i remember some columnists, one was for fortune but i read this piece and i just had to laugh but it side, bezos has expressed some libertarian sentiments. before he's allowed to buy "the washington post," he needs to declare politically where he stands. what's that guy's name, allen -- oh, my god. anyway, how much of what you're saying now, and you just said -- >> -- who i like -- >> well, it was the most preposterous -- it was so sanctimonious and pompous. but how much of this right now is about working under someone perceived to be perhaps too conservative for hollywood? too conservative? you're looking at antitrust or are you really looking at a conservative guy having so much clout? >> well, i think that's going to be an issue. how can it not be? i mean should it be an issue? i don't think we should have a political litmus test for who can own companies or run companies. but the fact of the matter is, murdoch is a very controversial figure. he is politically conservative and there's the whole hacking thing. >> the nine out of ten of the other ceos running all these other media companies that are rubber stamp liberals in the first place nobody asked them for their credentials. i guess to join the liberal club you got to declare yourself. that's what you're saying. >> look, this is going to end up in washington. washington is a political culture. the regulatory bodies are influenced by politics. ee cannot pretend that politics is not going to ultimately play a role. >> i think sloan wanted to say declare yourself as a liberal or you can't buy "washington post" because we're going to keep it going the way it's always been run and you better be liberal or you're not going to own this paper. >> wait a minute. he does own it. you know murdoch owns a lot. i don't know that all this noise on the political front has really stopped murdoch from getting to do what he wants. but we'll see. >> but the "journal" has not disappointed you has it, jim? >> no. >> it's still a pretty good paper. >> it's a terrific paper and i think there are a lot of people worried that he would destroy it essentially and that hasn't happened. he is an investor. he needs to make money. he knows that quality sells and i think he's done a pretty good job. >> we need "the new york post" to offset the daily news anyway and "the new york times." right? >> but this goes to the whole issue that you know you need many outlets. you need many providers of content to have a healthy, vigorous, political culture in this company. that's why media companies are not the same as cement producers. >> don't view this as murdoch is conservative. look, fox business and fox news, they're more conservative, but let's remember the fox network really pushes the edge in terms of programming. >> thank you. >> there you go. >> michael, thank you. jim, thank you. >> sure. >> talk to you guys -- >> when we come back, our guest host austan goolsbee on jobs, the company and much more. later treasury secretary jack lew calling on lawmakers to stop tax inversion. senator bob corker is going to join us, also to talk about jobs in his home state thanks to volkswagen. check out the "squawk box" market indicator. you can see the dow futures down by about 50 points. s&p futures down by just over 9. ♪ ♪ ♪ [ 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. offers end july 31st. you wouldn't have it she any other way.our toes. 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 medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like 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 experiencing cialis for daily use and a free 30-tablet trial. that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. breaking news for you. we have been waiting to hear what microsoft's plans are under its new ceo. finally an announcement comes. he is talking about simplifying the operations and he's going to be eliminating about 1800 positions. 18,000 positions over the next year. of the total, 12,500 professional and factory positions will be eliminated through what they're calling the synergies and strategic alignment of the nokia devices and services business that they acquired back in april. they say that these layoffs will be mostly complete by december 31st of this year. fully completed by june 30th of next year as a result the company will be taking some pretax charges of somewhere between 1.1, to 1.6 billion dollars over the next four quarters. that includes 750 million to 850 million for severance and related benefit costs and about 350 million to 800 million of asset related charges. again we've been waiting to see what had happened in recent days he talked about how he does like xbox, how that is there to stay. there had been so many rumors floating through the company. 18,000 positions will be eliminated over the next year and that's coming through what happened over the nokia devices andselveses business was acquired. also, treasury secretary jack lew making head lines at yesterday's delivering alpha conference. jim cramer asked him about fed chair janet yellen's comments on valuations. >> is it ever right for a federal official to comment on substantially stretched valuations of stocks? whether they be small cap, or whether they be security, or whether they be social media? >> jim i think it is appropriate for us to comment on policies and trends. it is not appropriate for us to comment on individual market movements. >> so you don't think necessarily that the smaller biotechs and the smaller social media stocks are overvalued or do you think that's just none of your business? >> i think there are a lot of people in this room who ought to be making sensible judgments about proper evaluations. >> our guest host this morning is austan goolsbee. that was jim making a reference to what janet yellen had said where she talked about how biotechs and even junk bonds concerned her and were overvalued at that point. what do you think about this? this is a big deal to have a fed official -- >> about her saying that? look when i saw it it looked to me like it was a, not a throwaway line, but just an example. that she was saying, fundamentally, the overall market doesn't seem overheated. there might be a couple of little areas, maybe biotech, maybe this, i do think, because the fed chair said it everybody's just kind of putting their glass -- what? what did she say? did she say about biotech? >> and you know what, given -- i'm not going to say anything about all of our parade of guests on cnbc, but, i'm not convinced that yellen is any less qualified than half the people we have on here. >> no, you're right. you're right. >> she might even be better. she might -- >> i'm saying that she's not less qualified than these people that we have on. >> he's trashing the rest of our guests. >> oh, okay, you had too many negatives. >> you got to -- you know you got to start listening. you didn't understand -- >> your presumption was -- because she's a fed chair i'm not saying she's any less qualified than any of these other clowns. >> if you're the fed chair -- >> you shouldn't be -- >> i stepped in it many times. >> we -- >> lower level than we remember. >> than the fed chair that- >> we pointed that out. we pointed that out. >> whatever she said, she could say some industry if she say wow, it seems like a lot of people are driving new cars people would be like, what does that mean? she's saying autos are overvalued. >> -- got in trouble for saying he didn't like broccoli. >> right. and it was not a rookie mistake but she'll learn maybe sometimes it's better not to comment on a lot of different things. >> it's probably true though her basic point was perfectly valid where she was saying what we should look at is the overall. don't just select one little sector and say oh, that one looks like it's overheated or frothy and therefore the whole market is a bubble. >> there are a lot of people focusing on what she's doing right now. the other comment that, you know, the fed also noted that if things continue to improve at a faster pace than they've been expecting, they may have to raise rights faster, too. and, that is maybe something that i think hasn't gotten nearly enough attention. >> that's probably true, though i don't think that will come to pass. i think the fed has rather established over the last four years that they continually say next year it's going to be even better than we think it doesn't come in and happen that way. because i think they're counting a little too much on consumer spending and housing rebounds. >> particularly when you look at the unemployment rate. that's come down faster than they expected. >> that's true. though a lot of it joe will tell you is from dropping out of the labor force, and low labor force participation. it is true, maybe the summary would be if you start to see sustained inflation, the fed will act. it's the number one -- it's in their legal mandate. it's the number one thing in the mind of central bankers. right now what allows us to be in the environment we're in is that there's very little sign of sustained inflation, and so there that's because they think there's big output gap and they're trying to address it. >> i like your spit take by the way. austin's going to be with us for the rest of the hour. when we come back, senator bob corker on new sanctions against russia, tax inversions and jobs. and later what can congress do to help those with diabetes afford health care? the ceo of november vo nordisk is here to talk about the affordable care act at why he says it isn't so affordable for those with this disease. 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alpha conference. among the newsmakers nelson peltz the activist investor hinting at a possible proxy fight at pepsi arguing the stock has moved not because of what's gone on at the company but because of suggestion for corporate improvements. >> i give them no credit, because the stock was supposed to, according to them, earn $5 in 2012. they missed a little bit and they earned $4.10. last year they were giving high fives because they got to about $4.34 in 2013. so, the stock is not moving because of earnings when the company should have been earning $5 two years ago. the stock is moving because people, shareholders, see the wisdom of what we're saying. >> and peltz told us he most definitely still wants to break up that company, splitting it in two. i know, joe, you think that salty snacks go with soda. he comes out on the other side of that debate. >> i don't understand investment banking and synergies and rationalizations and stuff. but, you know, salty snacks, drinks, you eat the salty snack. you drink -- you know it just seems to me. that one i get. >> coke's done very well. >> coke has done well. how about when this -- when smucker bought the peanut butter. >> you thought that was genius. >> you know, does it make sense to you if -- >> i agreed with your first thing that you don't understand investment banking synergies and all that. >> you can't see when smucker bought jiffy you didn't think that made sense? >> all i know is the fact that you're watching tv while you're eating salty snacks doesn't mean the tv company should get bought by the pea net people. >> that may be true. >> seems like it's a little more complicat complicated. >> the guys do make a compelling case for pepsi staying together. i even think it may be -- >> we had -- >> he actually went -- >> he owns coke and he went after buffet on the stage yesterday, saying, he said you asked buffet about this -- >> buffet said -- >> he said you tell us -- always tell us the conflicts of all the analysts who come on and all the investors, you don't say when he said that that he's the biggest shareholder of coke, of course he didn't. but his argument was of course they want to keep pepsi together because he wants -- >> because it worked too well. >> that was his argument. >> that's crazy. >> it's cute though. that's good. must have been a good moment. i was exhausted. i didn't see -- was it on tv? >> it was on tv. but you were also on tv with stan druckenmiller. >> yeah, profited handsomely from the financial crisis, has one of the best track records over the past three decades. yesterday he told me that the fed's decision to keep rates so low for so long is bothersome. >> to say his fed policy seems not only unnecessary but fraught with unappreciated risk. when ben bernanke and his colleagues instituted qe-1 in 2009 financial conditions, and the real economy, were in a dysfunctional meltdown. the policy was brilliantly conceived, and a no brainer from a risk/reward perspective. but the current policy makes no sense from a risk/reward perspective. five years into an economic and balance sheet recovery, extraordinary money measures are likely running into sharply diminishing returns. >> and that's the key thing there, austan, is that if it's just diminished returns, but you're not doing any damage, i can see that, do everything you can, congress is gridlocked. you know, if you get -- help the employment rate at all. but if there are dislocations somewhere, where all of this is going, where people are doing things they shouldn't be doing, i can see his point. >> i can see his point. and i don't think he's wrong in the direction that as the unemployment rate is coming down, and as the economy is getting better, the risks of a very aggressive posture go up. but i don't think that's a secret to the fed. i mean, you've seen the fed governors themselves saying that. >> austan, we'll talk to you in just a minute. we'll have senator bob corker when we return. june housing starts, boy that's -- i'll tell you, this is a miss. 893,000. we're looking for a one handle. 1 million. last month, we also had a disappointment on the revision. we lost the one handle. literally, a whisker over 1 million originally released. and now 985,000. so, even with the lower revision, the 985 compared to 893 is a miss if we look at the initial jobless claims, they're 302,000. so that is a drop of 3,000 because there was a subtle revision putting it at 305,000. all right, let's look at permits. permits, boy let's see here. permits, month over month, 963,000. i had to look twice. those are two misses. now granted the permits gives you a maybe better glimpse down the road, so 963,000 is a miss from the 1. -- we were looking for a million 35,000 and last month actually was the one positive in all this data last month was upgraded and didn't grab the million handle, originally released at 991, only a bit away from a million. now it's a bit over a million. so that's down 4%. yields, yields are going to crack 250 here. a handful of basis points away from challenging our recent low yields. many will point to geopolitics. chinese buying. i'd point to all of the above. back to you, andrew ross sorkin. >> rick we're also talking about microsoft this morning. they just announced job cuts a short time ago, and on the phone to talk about it, 18,000 jobs. what were you expecting. >> that's clearly much higher than what we were expecting. we were like most people thinking about 5,000 to 6,000. this is a pretty significant cut, and i think it tells you that sachen is trying to put his own stamp on the company and he's not going to let nokia become a quagmire in terms of dragging down the potential efficiencies in the business and driving some margin expansion. >> in retrospect does the nokia deal make sense or not? >> i think it still makes sense in terms of microsoft's goal in this platform and productivity strategy that he has put out there. it still makes sense to have as many windows powered devices as possible. but i think what he said in the letter, which i think was telling in retrospect, was the fact that he said responsibly we're going to market windows phone responsibly. and i think what he's done here is say that we can do that without having to spend, perhaps, as much money as people originally spent. >> what's the breakdown this morning in terms of factory jobs versus, you might describe as professional jobs? >> it looks like it's about two-thirds coming from the nokia and factory side and about a third coming from, i guess, what you would call core microsoft. so i think that's about what you'd have expected but clearly this is on a much sort of grander scale. >> do you worry that there's talent that will get lost in all of this? >> there's always a chance of that happening. but microsoft ran very -- that might not be -- but bloated a good word for it for a long time. there's been a sense with investors for a long time that this, you know, that this was coming down the pike. and so i think, there's always some risk that you lose some very good people in this kind of transition. but if you're going to move to mobile first doing it now and getting it out of the way at the beginning -- >> final question for you we talked earlier this week about the ibm apple app deal. how does that relate to what's going on at microsoft these days? >> i don't think that's going to have too much of an impact on it. microsoft's already putting office on apple devices. i think the fact that apple's in the enterprise sort of coming through the back door of the enterprise microsoft's well aware of that -- >> kirk what's more interesting, if we put intel over microsoft, the wintel juggernaut is back. it came back when no one thought there was any chance. suddenly intel is up 50% and microsoft's up 50% in the last year. >> yeah, well i think with microsoft you've had two things. i think one people have finally recognized that most of the earnings power from microsoft is coming from the corporate businesses. it's not just about the device side and the pc side. so that recognition's been positive. >> look at that. >> and having a change agent at the head of the organization has obviously been important and having people just come back and look at the company dpen. this thing went flat or sideways for ten years so the fact that you now have someone who is driving the business in the direction where the secular trends are going has been really important just in terms of bringing new investors or old investors that have ignored it back to the table. >> all right. thank you. >> thanks a lot. >> tax inversions were a hot issue at the delivering alpha conference yesterday. also, we had jack lew, secretary lew also sent a letter to dave camp and it's a subject of a huge piece op-ed piece in the journal which just nails it, that depends on where you sit. where you stand on where you sit. joining us now is republican senator bob corker from tennessee he's a member of the senate banking housing and urban affairs committee and austan goolsbee is here senator and off camera i had a conversation with austan just saying begging him that if he had any influence there that if the president would just lead on tax reform, that everybody would be helped. if we made this country the place that treated capital best again and stopped disincentivizing companies we'd get job -- all the stuff that he wants to happen will happen. austan told me there's not a man on the planet right now that could do this. that could get tax reform done right now. it's impossible to do. >> well i disagree. i love austan. it looked like he had written the op-ed. now that he's out of here he's even saner than he was while he was here. he was a great public servant -- >> it's a little bit. i noticed that, too. there's hope with him. >> now look, our nation desperately needs leadership. and it's not just leadership at the white house, although that is the most important. it's in congress. we're going through a period of time right now where some of the most you adishsly stupid things are happening. what happened in the house yesterday with the highway bill is just incredible, what probably is going to happen with the veterans bill in the next couple weeks. but this effort to create a hotel, california, if you will, for corporations when all they're doing is seeking their own rational, they're taking rational steps what we need to do obviously is lower our corporate rates and have a territory cal system, and we know that that would generate tremendous growth and it just pains me to know that the solutions are so commonsensical and yet somehow we cannot do it. joe i'm hoping that maybe, maybe by it the 2016 election americans will be demanding people in office who offer commonsense solutions that make our country stronger. right now, there's so much pandering that takes place. >> i know. >> and it's just -- it's painful to watch. >> austan can give you his reasons. because he's right about a lot of them. every single sacred cow that each individual corporation has that they want, whether it's r&d, whether it's this, whether it's depreciation, whatever it is, they're all going to be squawking on the right, the left doesn't want to do it anyway. >> yeah. >> the president would have to lead but that means he'd have to make friends with people that he can't stand in congress which he'll never do. so, you know, but austan is saying even if he did it wouldn't work. >> let austan tell you that it's hopeless. >> look it should be clear. i am friends, and a big fan of senator corker and i wish there were more people on both sides that had this kind of sensibility. my argument is, the president has tried to lead on this issue. the treasury released a pretty good plan that would get the corporate rate down and you close a lot of deductions. the problem is, it's not really loopholes. if you want to get the rate down to 25%, you have to go take some flesh out of depreciation r&d, a bunch of things that then the corporate sector itself says wait a minute, that's not the kind of corporate reform we want to do, and if the corporate sector is not for corporate tax reform it can't go anywhere. nobody can lead it if there's nobody following. >> yeah. look here's this is i don't make political statements, here's my hope. i think there is a chance that republicans will win the senate. i said the same thing to the president the other day, who called about another topic. that is if that occurs, austan, then republicans have to be responsible. in other words, republicans would control the house, and the senate, and could not point at democrats. on the other hand, the president would have to then be responsible. and what i'm hoping is for the good of our nation, that over the course of the next two years, should that occur, the two parties like happened back in the mid '90s, would have to come together and both take ownership over things where sacred cows as you mentioned are taken on. i really feel something is happening in our nation where more and more people do want to see responsible problem solving. i don't think it's reached yet that critical moment. but for the good of our nation, and for the good of the people that we represent, for the good of our children, i hope somehow, austan, the 2016 race something happens where we become people who act in the best interest of our nation and not just looking towards the next election. >> senator do you take -- you don't take any umbrage that companies, u.s. companies who have long been beneficiaries of being based here and often depending on taxpayers to pay them to leave the country? >> well they have a fiduciary responsibility to the people that invest in their countries. and states all over our nation have recognized that if they can create an environment that can attract companies like we just did in tennessee with volkswagen -- >> i'm not talking about states. i'm saying leaving the country. >> i got it. but the point is these are global companies, and the patriotic thing for us to do is to create a system in this nation that encourages growth here. >> agreed. >> so it's difficult for me to say when you have a global operation that's operating obviously all over the world, and we, ourselves, our policymakers, have created a situation which incents them to leave. in other words we're telling them to leave our nation and go to ireland, or go to some other place, it's difficult for me to blame them for doing what is rational relative to the stock holders that they represent. >> you're basically making the argument that individuals if they don't believe tax rates are higher they should just write a check that you don't do things that if corporations want to be global competitively, they have to do it they have to do -- they don't decide i'm going to be a much less competitive corporation but i'm going to feel good about -- >> -- bound to what the corporate rate is around the world. >> exactly. >> you go to the islands of -- i think there's no taxes of any kind there. >> here's what say -- >> always going to be -- >> there's been criticism that the private sector is being hampered by all this stuff. and people say not really. and that's not hurting the recession and businesses are treated fine. now, it's gotten to the point they're actually leaving and we're going to lose tax revenue. it's gotten now to the point where it's so important that you finally sit up and take -- >> i don't understand why nobody here is taking umbrage of the fact that walgreens -- >> because it's a riddiiculous point -- >> they're taking our medicare part "d" money. >> are you listening to this senator? >> we pay fair market rates where other countries do not. it's a completely different story. >> no. to oppose this preventing the inversions is going to run into a thing that makes people really upset. it combines everything they hate about the tax code. leg lobbying for big corporations. moving stuff overseas, perceived unpatriotism of -- >> i think -- bizarre things to talk about. >> i agree as a fiduciary they're not relevant. but the world is the world. >> we got to ask the senator about volkswagen. what's the situation, senator? what do you want to say? >> huge very try. we not only were able to attract the 1350 jobs, which were on the table from day one, but after the election certification on april 21st, we in earnest began talks on april 24th, and not only were able to get the 1350 jobs, but 650 more jobs, and the first, the first research and development facility for an auto manufacture in the south. so it was a huge victory. our governor and the economic team he has did a great job. i was, you know, privileged to be able to help see it through. and it's a huge win. 2000 jobs directly impacting chattanoogaens and tennesseans and again establishing tennessee as the place of auto manufacturing in our nation. so it was a sweet victory. and the path we took while i know the nation watched and you know it was a little bit controversial, joe there was no other way to get to this place without taking the path that we took. so, very gratified and very happy for those 2,000 families that are going to be so directly affected. >> senator before we let you go, russia has fallen off of the sfront pages over the last three weeks or so, we've forgotten some about ukraine but today we hear these new sanctions that are out against russian companies. >> yeah. >> also hear that russia hacked into the nasdaq at one point and i just wonder do you consider russia a bigger potential foe or china? >> well i mean you know first of all on the sanctions, becky, hallelujah. we've been pushing for this for months. i've got to give the administration an attaboy when they do something good. this is outstanding. the stock market was up 33% in russia since march. now we're actually doing something that's going to impact them and try to change behavior. but, both are problems, becky, so we have this issue of the middle east, which is a totally different issue. and then we have these two countries, which you know we cannot accept a bitter peace with russia. we cannot allow them to act in the way they are just to continue to do business with them, as many in europe want to do. so, i'm thankful that these sanctions were put in place. if they don't change their behavior a whole more will be put in place i think that putin has found himself in a really terrible place where he stoked this nationalism within the country and at the same time in doing so has to continue to support the rebels in reern ukraine and as damaging as country. so hopefully he'll figure out some way of being sane again. but we need to help him with that with sanctions being put in place if he doesn't change his behavior. >> all right, senator. >> thank you. >> i hear the music. >> austan, we love you. >> i miss you, senator. >> i wish you were back here. we need some sanity, hopefully we'll see you again. thanks a lot. see you later. >> it's just liberals want these utopian that we'll never have it's like asking a fish to fly. or asking a bird to swim. it's not going to happen that way. >> there are zero percent tax rates so -- >> you're saying don't do it because of the rates at the bottom. the fastest intern. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. reward card withu a new volkswagen turturbo.ged so why are we so obsessed with turbo? because there's nothing more exhilarating than a powerful ride. and you can get that in places you might not expect. like the passat. and also in the fun-to-drive jetta. in fact, volkswagen has sold more turbos than any other brand over the last ten years. that is a lot of turbo. vo: hurry in and you can get a $1,000 turbocharged reward card when you lease a new 2014 passat s for $219 a month. developers are all about speeds and feeds. it's all about latency. it's all about how fast does it run. i often sit with enterprises who ask me about how mission critical and how's the performance of the cloud. and i tell them, if you can make gamers happy, you can make anybody happy. speed is made with the ibm cloud. the ibm cloud is the cloud for business. with more than a half a billion people expected to be living with diabetes by 2035, novo nordisk, which is the world's biggest insulin maker is saying the affordable care act isn't actually affordable for people with diabetes. joining us now to talk about the growing pandemic is lars sorensen, ceo of novo nordisk. in what way? what does the aca do that isn't up to par as far as you're concerned, lars? >> well, good morning. what our concern is, that the individuals that have now signed on for the exchanges will be waking up to a situation where they will, in some instances, be faced with deductibles before their insurance kicks in. and that is perhaps going to change their behavior in terms of continuation of their medication. and their willingness to seek medical services, and that is concerning when you have a chronic disease like diabetes. but of course we need more facts. it is early days for aca, and we are just cautioning that there might be some pushback on the ability of the individuals to get the care they need. >> i wonder how many other chronic diseases that are going to be facing the same situation under the aca, i mean did -- i know we didn't know what was in it till we were going to pass it, then we were going to read it. i know all that. but did anyone talk about this beforehand? >> i think we tried to raise tre issue. many other fapharmaceutical companies, patient organizations did the same. this accounts for all chronic diseases like asthma, like chronic heart disease, all chronic illnesses where individuals need constant medication and monitoring and medical services, but, of course, i mean, we're raising a flag, and you could see this in the article also in the "washington post" this morning that it's an issue, but we need more facts on the table. >> and you need to convince people that, i mean, an ounce of prevention is -- whatever -- a pound a cure. will be more expensive. it's a pennywise pound foolish solution because it comes back to haunt you. >> absolutely, absolutely. the issue that diabetes is a disease which, in fact, for most parts could be prevented all together, but when it occurs, good treatment, constant monitoring, access to good medical services is important to avoid the late complications which is debilitating for the individual, which is costing the u.s. health system 10% of the overall costs. >> right. we have to decide what is appropriate for the federal government or for the aca to cover and what is affordable and then figure out, you know, i mean, the really necessary stuff should be covered, but there should be other things to figure out a different way because it's just not going to work this way. >> isn't that the case? the affordable care act was criticized by its critics for putting too much emphasis on preventative care, chronic disease management, and that it was too generous. this is the argument on the opposite side, right? it's saying let's invest more in preventive care so people don't have to pay out of pocket so they get their blood pressure check and stuff like that. >> correct, correct. in doing so, we can prevent late complications of diabetes, prevent premature death that occurs with stroke and heart attacks, and so it, to me, makes a lot of sense in trying to think how we could fix the system and the insurance schemes such that it does not prevent individuals from getting the continuous care they need. >> appreciate your time today, thank you. >> thank you, thanks for having us, thanks. when we come back, we have jim cramer on the earnings of the morning. 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. but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. 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. let's get down to the new york stock exchange where jim cramer joins us now. you were there a long time yesterday, jim, on a lot of panels including secretary -- what did we finally decide that -- did he know about yellen's comments? did you tell him about it? i'm not sure he knew where you were going with that at first, do you know? >> i'm not sure myself. he had a face about it, and if he knew someone commented that maybe who shouldn't have commented, but at the same time, you just don't know because i'm not sure where he was beforehand, and remember, it was not yellen saying it in the senate, but in a federal reserve report. either way, i thought he made a lot of sense. that's me coming from the stock side saying why were those particular groups picked on? to say, listen, we're tough on inflation? if that's the case, the world would say, wait a second, it ain't twitter. >> right. i finally decided she's a great economist, qualified as the people we have on here, they have. wrong for five years saying the market's too excepensive. give it a shot. >> she gets a pass. she doesn't need to. we grill them. >> true. >> i love the -- yesterday, what he's saying, feds' off their game. i want to hear what the fed has to say about that than whether the fed likes the new anticholesterol drug. >> we came out of yellen into -- i thought that was just really perfect timing, juxtaposition of everything. anyway, morgan stanley looks good, jim, i think, yeah? >> yes. john stump is to banking as gorman is to investment banking. simple models, not a lot of risk. >> we have to go again, jim. see you in a few minutes. ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style. i'm spending too much time hiring and not enough time in my kitchen. 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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. i want to thank austin for being here today, great talking to you. >> great seeing you guys. >> join us here tomorrow and it's time for "squawk on the street." good thursday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber back from delivering alpha. the news flow not letting up, job cuts at microsoft, last wave of bank earnings, time warner day 2, covering it all, a spill at the open after three straight days of intraday highs. bond action, 10-year back at 2 .5, europe in the red
known the canadian pacific will come back with another proposal. a merger of the two were great a real wrote transcontinental reach. railroad transcontinental reach. for the first time, someone has contracted ebola inside u.s. borders. the victim, a health care worker in dallas, was caring for the liberian man who died. a hazardous material crew has begun decontaminating the apartment where the woman lived. authorities say she was way protective here but at some point there was "breach of protocol" that may have led to the infection. the cdc warns there may be more cases. possibleunately, it is in the coming days that we will see additional cases of ebola. this is because the health care workers who cared for this individual may have had a breach of the same nature of the individual who appears now to have pulmonary positive test. to the world health organization, there are nearly 8400 cases of more than 4000 deaths stemming from the ebola virus so far. turning to hong kong where a truck and cab drivers are losing patience with the pro-democracy demonstrators, for the second time says the rallies began last month, police had to come between the protesters and those who wanted a menstruation to end . hundreds of people try to break through barricades. hong kong's chief executive warned the government won't allow demonstrators to occupy the streets for much longer. >> to get about football and forget about hockey, how about based all in the national league playoffs? home run in the bottom of the ninth get the st. louis cardinals a five to four win over the san francisco giants. the series now tied at one game each. in the american league, kansas city and baltimore. how about those royals? they won the first two games. that is exciting. >> when was the last time they went -- million years ago. looks the royals again tonight. i will be watching monday night football, san francisco at st. louis. for those more kind of baseball, feel free. >> let's get a data check. >> equities bonds, bond market closed unchanged off the stunning friday close of 2.28%. reaching 3%. not there yet. on to the next screen. now over the 20 year average, a big deal. 21.24 shows the clear and present angst. there is bond market closed. brent crude, nowhere near nymex, the still under 90. is 1228.gold to 30 year bond, not back paul volcker. we just rolled over once again through it in the long-term linkage to the possibility market. pretty consistent trend there, even with the bobs along the way. we want to bring in our guest host. 500 lasted posting its biggest weekly drop in two years and futures has stayed the course, indicating a lower open as well. give us your take on the state of the markets. is the fed driving this or reacting to this? fed's reactor. we are problems of global growth, especially in europe. not just wrote growth, but inflation problems, too, so concerns about deflation and you put that together and the markets of the world are taking a pause and a little concerned. we're doing some technical damage in the meantime. it will take a while to repair this. the 200ve gone down to day moving average on the s&p 500. the first time in two years. i was stunned how fast we got there. but no question about it. 5%.e only down s&p 500 we were down 7% in january. or percent in april and august. -- 4% in april and august. we will come out at some point because we're not going every session. >> dr. phil called me this morning and took the out the ledge. though, we are down 4%. ubs came out the wonderful earnings. he said, everybody calmed down. we're going to go up 10% in earnings. what is your earnings view? does that push aside all this juvenile political -- >> tennis a big number. if we can get high single digits i'm a happy man. i think we are seeing economic improvement in the u.s. manufacturing side is doing well. that should allow earnings to be ok. the wrinkle of courses we sell some stuff to europe and the dollar is up and both of those will have a bit -- >> i'm good a load up on the double leverage. >> cash, cash, cash. go triple. i am glad you are here to talk us off the ledge. your vice-chairman of raymond james financial. give us a little perspective. bob mentions the dollar, up about 9% over the past two months. at what point does that hurt u.s. exporters ability to produce earnings? >> it is hard to know when it does that. i do think we have an advantage versus europe in terms of manufacturing costs. that is the compensating factor. we have had great return on invested capital at our markets. there is a lot of efficiency. we have a relatively inexpensive labor force and tech savvy. you add those up, and i think this is a fair amount of room. ,> the cover this morning george magnus, and we all adore, a ubs, happen to know the imf has revised the forecast six times the last three years. everybody is like, it is going to get better, it's going to get better. then doom and gloom will stop the equity markets always come back. do you still have that believe? >> i think part of it is structural. with the aging baby boomers, having to the capital of the market and other markets being less and less attractive and scary to investors, any of the strong dollar in the united states, all of those things combined, in my view, are driving demand for u.s. equities. tax you wrote in your latest piece, which is a good one, a company -- >> he wrote a good one? really? >> he wrote a good one. it was my weekend read. you said thesness, only thing that can effectively to real u.s. markets is a slowdown in u.s. earnings growth and it sounds like phil is in there is the appreciating dollar . fred is not even sure that has an impact. is that the way to look at it? >> it is never quite that simple, but i think you hit the nail on the head. are we going every session? very high probability, no. this is a pause. it will eventually refresh. we just don't know exactly when. >> is is columbus day enough? i heard over the weekend -- >> bob doll is matching. >> it has been a better than good year for bill ackman. off some 30%. today, celebrated selling shares in amsterdam. he spoke to bloomberg this morning. making its ipo debut. >> we're not for sure how the way, but not a bad business model -- hathaway, but not a bad business model. we will only invest in the public markets, but we will buy large estates of public companies like we have in the past. this will enable us to have a capital base that manages -- matches the duration of our investment. >> do you think more like warren buffett than carl icahn? a betterk that is choice. in terms of investment strategy, we're much more like berkshire hathaway then icahn. >> joining us from amsterdam now, king of the junket, hans nichols with us with pershing capital. why are you in amsterdam? in amsterdam?man take his company public or one of his funds public, just for regulatory reasons, easier to do that in europe. a choice between amsterdam and london. he chose amsterdam over london. when walking year, i walk through the red light district. it was a nice prelude to what we are going to get from bill ackman. when we spoke to him after the ipo, he gave us a giant strip. he is talking about a 45 to 60 day window where they will announce what they are going to spend $6 billion. he gave us a couple of hymns. a u.s. company, a company thinks has some real value to unlock on. that is an indication -- sometime in late november, we will get the full strip revealed and see where bill ackman is going to put a $6 billion. >> you are a racy guy this morning. is this the beginning of something? is this a treatment activism or a one-off for an -- bill ackman? is raising one fund. he's going to permit a capital, and that is really what he is here for. when he talked in about what it means to be an activist investor, the term here, it actually originated here in some ways, 1608 unit your first crybaby shareholders, upset with the way the covenant was run and started being a crybaby. i asked if that was applicable to family -- to have any said, maybe carl icahn with thing, but he would not think of himself as a crybaby activist. , i recommend studio 80 in amsterdam as you try to make your way out. with william ackman. we may hear more from you this morning. >> coming up, we will stay with this -- he always make something good out of it. pursuit of a big acquisition. we will discuss. in theof csx rising market. which brings us to our twitter question of the day -- oil injuring a bear market last week. >> big time. >> we will be right back. >> good morning, "bloomberg surveillance." we say good columbus day morning to all of you across the nation. scarlet fu and adam johnson with me. >> csx can move 110 afraid 430 miles on one gallon -- >> how do they do that? hybrid. canadian pacific was a piece of those profits and launching a hostile bid. that is according to "the wall street journal." csx apparently has said no. question, here's number one. how realistic is to think a cross-border deal in a highly competitive market can actually get approved and get done? >> it is her friend l index question. it is sbc. >> the market is concentrated. why would they even try? >> sometimes these things have confounding outcomes. sometimes they get approved anyway. it is really hard to know. sometimes it is corporate efficiency going on. it is part of its price control, so if you look at the dynamics here, canadian pacific does not play in the united states to the extent. it is really a question of how to combine business will operate. >> i think it is cool with apple, facebook, twitter, twitter, twitter, apple, apple, apple. this is real world. the bloomberg story was great on the premium the ua should of tiny canadian pacific to the lesser cold effected valuation of east coast csx. >> canadian pacific is a much smaller company. what is curious, our guys at the market makers team spoke to hunter harrison, the gentleman who runs canadian pacific about a month ago. here's what he had to say about competition. i don't think there's a choice. i think if you look down the line, there's not going to be more real roads built. we have got to start doing more with less. >> who merges with whom? >> i think you can look at any east-west, nation. >> so it is either you pass plus --up plus csx. >> not very to get to comply with the law and to stay within the bounds of competitiveness of the act, but, look, that would create a lot of capacity right there, just the mergers themselves. is your wheelhouse, looking at big companies, mostly american but in some case across the world, how hard is it to pull synergies out of these big mergers like this? >> not all that hard. as he put out, it is not that true d. >> not that tricky. >> there aren't that many choices. when you put something together like this, immediately, you have all kinds of costs they go away. the synergies can be huge and grow fast. text burlington northern had to abandon a takeover because of objections from u.s. railroad. >> the stb. >> the track record is not so great. >> csx is supposed to announce earnings tomorrow morning. i believe that would be before the open. listen to that train whistle. record third-quarter earnings. is that part of the story? >> absolutely. back to what we're saying earlier, the economy is doing better and lots of pieces are, particularly manufacturing and capital investment, energy story , and all of that fits right into the rail story in many ways. >> we first saw that from mr. buffett when he bought burlington northern santa fe. >> the transnational, they went after burlington northern pre-buffett and when after canadian national 14 years ago. there's a president here. i am fascinated by the way ackman has to us around. canadian pacific has been a dog of docks, already worried about what color the bridge is painted. it is stunning. >> didn't ackman bring in hunter harrison? >> he did. i was reading some comments about mr. harrison from a couple of years ago. he said, the sightings are used efficiently. this is a guy who really tweaks the operation. >> that is what they have done as well. there we are on the railroad. how about cars? coming up on bloomberg television, chrysler chairman joins street smart this afternoon at 3:00 p.m. stay with us. it is "bloomberg surveillance." ♪ morning, "bloomberg surveillance." i am tom keene with scarlet fu and adam johnson. >> this comes to us from "the wall street journal." now the general counsel to court kurdestan. that is part of the problem, now that we have created this bureaucratic structure in iraq that we are afraid of. the news of the moment where turkey will coalition air flights to land in turkey and use their air bases without question over the weekend, the situation there deteriorated. the other is within the book that everyone knows i love so much, "the kissinger -- the kissinger book, "world order." he talks about the naïveté of the u.s. wanting a world democracy. >> we assumed our system works for everyone. >> and we should accept the limitations that it doesn't? >> he says that is a tough decision, but what we're doing is a challenging path to take. >> here's the other wrinkle i find so intriguing. fred, feel free to weigh in here. in the turks view, the kurdish forces as terrorists. they control the one supply line, which is why they effectively let kobani fall. they would not let arms go to these people they view as terrorists can even that the terrorists are fighting isis, which is another terrorist organization. >> it all goes back to shifting alliances, doesn't it, bob? >> there are multiple sides to all this. it is hard to know, do i agree with you or have a view and half of adam? who was on whose side for which issues? wild to watch. >> do you think any of the is what isl angst responsible for taking the s&p 500 down to the 200 day moving average in like two weeks? >> it is what is on the list along with all of these other things. i think the market is said so far, every time there's a geopolitical crisis, does this effect u.s. economic and earnings growth? market creeps the higher. now it is saying, you're throwing this one at me and i says that me and russia -- i can't take them all at once. >> it may not affect the u.s. economic outlook, but it affects what is going on in europe. yorty have inflationary environment there. on the brink every session. >> i just want to comment. i think the contextual approach we take to a lot of nationbuilding is completely artificial. we, the u.s. look at iraq. iraq has never been a country. this was dictated by artificial borders that go back to lawrence of arabia. same with bosnia. we have this naïve approach that somehow we are going to impose democracy where there is not literacy. frankly, much more important, there are hatreds that go back hundreds of years. it is a cultural context that we do not bring to the table. clocks are we arrogant? and think we're ignorant naïve. i think we're wasting a lot of resources on an outcome that it is not going to be favorable to us. >> and lives as well. tomorrow marks the start of earnings season for the big banks. >> really? >> what to expect from the third quarter. we will come back with more "surveillance" after this. ♪ >> good morning, "bloomberg surveillance." the bond market closed today. i did not want to come in. scarlet said, please. top headlines are open. >> we're going to start with canadian pacific railway and -- was rebuffed. it the overture occurred in the past week. unclear if another will come. csx said, we don't want to merge with you. they would've had a market capital of about $62.5 billion. the stock is up. stay tuned as to whether there are some sort of other bid. moving on. $4.9 billion order for boeing. they will deliver 50 single aisle 737's to indonesia. the order comes as the southeast asian carriers by it more plans to serve a growing market of about 600 million people. the highest selling aircraft in the world. norway is the biggest energy company, sells it share in oil field. but no more. that is now going to malaysia's $2.25as of about 2.25 -- billion. >> a quick look, data check. that shows the recent angst. brent crude 88.34. scarlet, hold my hand. we're covering the markets. banks are out this week. it is terrible. swoon, i say. -- jpmorgan is down 4.3%. we need bob doll. right there, hysteria. jpmorgan down 4.3%. >> the world might end tomorrow, if not yesterday. markets are volatile. we know that. we haven't had a 10%. the elusive to percent, for how long? >> three years. summer of 2011. >> it is amazing where only off 4% an all-time high in people thinking the world is about to end. sloggy.llowed the >> it is slow because of the cross currents in the economy and the absence of lending until recently, starting to do better. watch capital markets activity this quarter. volume subject of a little bit. we've had a little more about -- volatility. banks, thistors and bench reduction, cost cutting will be another big thing. no one looks to invest in bank shares over the look at cost cutting, do they? >> they're looking at if they're going to expand lending, it will capital markets activity improve. surface, there are a lot of people at banks and that is where the costs are. if taking it more efficient -- which many have -- it helps the return. >> the credit trends have improved but we're seeing diminishing reserve releases over the last couple of quarters. that instantaneous boost of the bottom line is not quite there anymore. >> well said. that is one of the issues. >> i think there are a couple of other factors. we were talking off-line about the mckinsey study, which shows systematically and improvement in return on invested capital. that does not help the lending environment, right? >> for sure. >> the feds a common native this accommodative doesn't help. oil is down 23% to 25%, yet i don't hear screaming of the soul recommendations on bigger midsize well. why is that? >> it happened so fast as last 20% of people are just trying to catch the breath on this issue. i think the offset that is getting talked about a lot more inappropriately is the boon that is for u.s. consumers. big tax cut would be the equivalent of what we've seen in the oil -- >> i agree. exxon mobil is down about 10%. >> and where is it trading now? >> it is gone from 40 to 85 no last four years. just terrible. >> and that is in the face of a stronger u.s. dollar. >> you don't think they managed the dividend grooved? the five-year is 9.99%. >> and yields 3% and just closed at least trades at about 11.5 to 12 times earning. is that cheap? >> i don't think oil prices are going a ton lower unless we are going to have some worldwide depression, so that is probably a pretty good place to be. it is a low beta stocks. in the bull market phase, it went up and lacked the overall market. as tom pointed out, has gone down less than -- >> bob, you know that the bull market is getting older but still has legs. does earnings season speed things up or slow it down? earnings are the again now, that is what we have to focus on. i can't argue for a lot more pe, so the 20 plus over the last five years for the stock market has been e and pe. if pe is slowing or finished, it is all about e. still up. the game is done over. we're seeing a lot of innings. the easy money is in the rearview mirror, unfortunately. >> how sustainable is a person earnings growth going into next year? bit of ak that is a stretch. i'm closer to six. be almost every other financial asset class out there. >> my morning must read. nice essay on his perennial call about -- central bankers have purchased short-term relief of long-term instability. fred, this goes to the age-old fear of higher yields. if we get a little bit of lift off and rates, what does that do for the equity spirit? >> it should not, long-term, or even intermediate-term, do great damage to equities. the bond market -- let's face it. higher yields, bonds get out. >> you talked about lower oil prices hoping the huge body of america. a little bit of yield provides comfort for the banks, right? >> absolutely. higher rates in general would be good for the equity market. banks in particular. and we get higher rates. --k to the earning story >> you start penalizing savers. >> exactly. >> rip up the script. bob doll, do share buybacks continue? >> they do. probably at a store pays because companies are now hiring some workers. they're doing some capital expenditures. they're not just buying back stock in raising dividends. probably at a slower pace. >> i am calmer now. >> coming up, just how much is europe underperforming u.s. and are we at an inflection point? of the day question ties this all up into one nice package. us.t we want to hear from you. this is "bloomberg surveillance." ♪ >> good morning, "bloomberg surveillance." we willt 20 minutes, know about the nobel prize on economics. michael mckee will give us good perspective on that. it is time for single best chart. here's the nobel prize winner with scarlet fu. >> yeah, right. the weakness of european stocks. it is from jim polson of wells capital management. it is a ratio of the eurozone stock index to the u.s. index. just a ratio. it means european stocks are underperforming. the line appears to have bottomed in the summer of 2012. before recovering a bit. trading range has been established clearly. we're the lower end of the range again. the question now is, our european stocks about to break below this range and establish the relative lows? jim paulsen says this could be a buying opportunity. we hasan debate whether investors should go buy it, but fred, to your wheelhouse, advising companies, among others , should u.s. companies be buying european companies? is this an opportunity to do cross-border deals? >> they have to do it in the context of the european economic outlook versus the u.s. economic outlook. i think the european outlook is by definition inferior because they have higher burdens around -- labor costs and labor productivity are much lower. you have tremendous government costs. we complain about government and the cost of doing business in this country, but it is worse in europe. their basic demand for products both in europe over time is this to be less because negative population growth in certain inept for migration from different ethnic groups -- we seem to be fighting a lot. >> bring up that chart again. this is the total exxon chart were exxon does better. all you need to know about is 5.5% total yield them a 3% next on yield. are we going to migrate toward european-like yields? >> let's hope we don't get there because that means we would have the same sclerosis as europe does. >> their high yield is not a sign of a good thing, is what you're saying. clocks i don't think so. europe has structural problems. in the short run, what is the ecb going to do? are they going to finally get ahead of the curve? for have not all -- harder them because of the political constituencies. wanting they did right was get ahead of the curve, put the pedal to the metal and help us avoid recession or worse, deflation. europe is faced with the same challenge. .> the ecb is playing catch-up the response is different now than two years ago given mario draghi is more aggressive and euro is falling. >> mario draghi is aggressive, certainly and talk. -- certainly in talk. >> i want to go to our photos. istially, the first one hardly loose. it is pretty serious. kobani, on the border between .yria and turkey smoke rising afternoon attack on the islamic state. 50 airstrikes have been launched since last monday. 50. not happy with those turkish tank set up and sitting there, not firing. >> the idea here is, we're on two fronts with anbar province west of baghdad as well. i thought this got lightly over the week and how serious it is. we see that with the news this morning, the turks will finally allow the coalition of the planes down in turkey. >> the islamic state has also carry out suicide attacks just what the baghdad. i think about 75 miles north. >> moving onto to our number two photo, south koreans releasing balloons caring anti-north korean pamphlets. over 200,000 leaflets, 300 bucks, and $1000 cash. >> in those balloons? >> yes. and south korea, they fill the bulletins with helium and the pamphlets. the balloons go over to north korea and explode at a certain altitude and the pamphlets fault. a the balloon on the left has bob doll monthly. and kim jong-un has not been spotted. >> he has not been seen in about six weeks. there is concern he had gout was unable to walk and was having surgery, that we don't know. with mr. tomme fun lackey, age 94, a wing walker. he is seen here on a 1945 by plane. he has broken the record for oldest man to walk the wings. >> and he doesn't wear a helmet. >> no. why would you? >> he wants to feel the wind blowing through his hair. f-16,er flying in an would you get out there on the wing? >> it is amazing. pilot andt the f-16 said, i have no fear. and he said, really? to my credit, i was not afraid, but i was a little nauseous when we landed. an hour and 15 minutes of doing loops. we went to 9 g's. >> how did you keep anything down? it is pretty common to fill your helmet. >> i did not eat for 20 hours before that flight. that is how. >> that is the salvation. >> i want to point out, do not miss our politics show. that is today at 5:00 p.m. >> your interviewing christopher columbus, right? >> it is columbus day. this is "bloomberg surveillance." streaming everywhere you are. we will be right back in two minutes. ♪ >> commodities tank. a perfect time to talk to our children. bart chilton.- what a story. theill speak them about markets, high-frequency trading. a good time to speak to bart chilton. time for company news. >> twitter users in france can now tweet money to the followers. the company has teamed up with s money. the new service will be available to anyone with a bank account and a twitter handle in france. >> fyi, mine is -- >> keep that up. hackers targeting snapchat, said to be planning a massive online leak of his many as 200,000 photos and videos. many of them nude. the company admits images were compromised. delete some 18,000 web links in the u.k. in just over a month. the daily mail reports written's have asked the search try to remove links to more than 53,000 pages under the eu's right to be forgotten laws. the report says most of the requests are from criminals and sex offenders. that is today's company news. there was a distinct theme there. divorce.ate splitting up companies for the sake of "recognizing shareholder value." ebay spinning off paypal, hp splitting up into. , why is it suddenly that cfos assume institutional investors can a longer do -- deal with some of the parts of a business and they have to split ?t up and make it "easier" >> boards are now being proactive. it goes back to the split up of i.t. chief years ago and well before that, we had disparate value. one of my favorites is emc. vm software get spun off in the valuation has just exploded. it is a software company, not a hardware company. >> and to be fair, that hasn't happened yet. >> the complete spin off hasn't happened, but the pressure on --'s board is >> this conversation is critical. what is the catalyst? low nominal gdp, persistent nominal gdp. the revenue line for these hopes and dreams isn't happening. do something. >> you hit the nail on the head. loan a little gdp means i'm struggling to grow. if i am the ceo or the board, have to be creative. i made by a company to try to make it happen -- >> what about bonuses? >> it may have something to do with that. other words, if your cfo, you're going to be graded on the stock price. >> ceos and boards are also graded on driving stock prices. we're talking about disparate value. here's a company and it is growing at 7% or 8%. it isn't big enough to be a standalone public company within it that is growing at 18%. >> paypal. >> yes. it makes sense. some of these spinoffs make more sense. some make less sense. but some are absolutely compelling. >> we got some headlines that her --ut is buying done acumen occasion's unit this morning. -- a communications unit. fred, is the point of the spinoff to create the conditions for the sale of a business? if ebay splitting up paypal, added that both are now up for grabs. >> that can be a factor, but i think the real factors creating a criminal value. i don't -- i may not want to buy ebay, but i certainly want to buy paypal, as an example, an investor could take deposition. >> this is what is called a moore's trust. the way of reading this, net scout is not going to buy danaher. that may be some of the legal issues, but bob doll, they have their own way of doing business. they are bringing in net scout to merge with a communications unit. is what it looks like to me. >> the question then is, what do they do with that unit? rail discussion earlier, is it to cut expenses or limited overhead and as fred said, boost volume? >> the reversed moore's trust enables them to basically divest its business without tax burdens. that is the purpose of the structure. >> do you see what you learn on "bloomberg surveillance"? we got interpretation from fred lane. >> does he bill us by the syllable? >> i hope not. having you here on monday morning with a lot of news, gentlemen. >> let's get a report. how about a forex report? the bond market is closed. stronger yen, weakness in the dollar over the last couple of days. 1.12.a back to we're still not going to get near 70. the russian ruble still a train wreck. we did see the effect of that on mr. putin. there's a bit of a turn in the currency market. can we go home? >> no. we're not bond traders, and we can't go home. >> we have futures moving higher. >> do i get to go early? >> no. when the futures opened last night at 6:00 p.m. for trading, s&p futures were down 12. >> steady recovery. >> she said it is columbus day. that means to shop. >> that's your interpretation. coming up, bart chilton. we will see you then. ♪ >> this is bloomberg "surveillance pickup >> unrest in hong kong. cap guy first stormed the barricades. equities chair and as yields test new lows friday. oil continues on a freefall. pharmaceutical giants race to find a vaccine for the ebola virus. this is bloomberg "surveillance," live from new york. i'm tom keene. joining me, scarlet fu and adam johnson. let's get to our top stories. a less than spectacular trading debut for pershing square holdings. went public in amsterdam. shares down as much as 11%. ackmannterview, bill spoke with hans nichols about the investment strategy. >> we are not berkshire hathaway, it is not a bad business model. think about a long-duration investment strategy. we will only invest in the public markets and by public companies. this will enable us to have a capital base that matches the duration of our investments. >> do you think of yourself as warren buffett or carl icahn? >> i'm friendly with mr. icahn, in terms of investment strategy, we are more like extrapolate and icahn -- like than berkshire hathaway than icahn. wasslamic state says it behind car bomb attacks in baghdad, more than 40 people died in shiite neighborhoods. forces are consolidating their heart i chunk of western iraq and trying to capture the capital of anbar province. shutting down a merger proposal. canadian pacific approached csx but was rebuffed. ceo hunter, cp harrison floated the idea. harrison spoke on "market makers." >> i don't think there's a choice. if you look on the line garnett going to be more railroads. we've got to start doing more with less. m? merges with who >> any east-west combination. someonehe first time, has contracted ebola in the u.s. a health care worker in dallas was caring for the man who died. a hazmat crew has began decontaminating the apartment where the woman lived. she was wearing gear but there was a preach of protocol that may have led to the infection. the world health organizations says 4000 deaths have been caused so far. a mystery jet. stream known for jets such as the g650. roll out a plane on tuesday. the company will not admit it is holding an event this week. those are your stories. very good. a lot going on. data check with the bond market closed. futures up six, bonds closing the ugly friday 2.3%. euro-dollar 1.2688. this morning.own that will be a theme later with bart chilton. about 20.n, vix we have a nobel prize -- it is a single winner. who is that? >> jean tirole. member of the toulouse school of economics. a book called "inside and outside liquidity" in 2011. >> more liquidity. french economics, going back hundreds of years. there's a different character to french economics. you see that with thomas picketty. michael mckee has never been on bloomberg surveillance. other candidates, familiar names. hong kong, michael mckee prepares for a discussion with mr. tirole. in hong kong, scuffles breaking at in the central business district. masked men charging protesters. an escalation. we want more perspective from andrew davis. what do we know about a man trying to break through the barricades and attacking protesters? are they cap and truck drivers asare they hired thugs, students alleged? >> probably a mixture of both. againstre cab drivers the processors, who want to open the barricades so they can drive routes more easily. there were some guys with knives theazor blades to cut ties students used to put barricades those guys are pretty scary looking and the police were quick to wrestle them to the ground. just people that are really becoming more and more annoyed with the student presence on the streets. it is disrupting traffic and causing long rush hours, disrupting transport. t drive from one side of the city to the other. three weeks now. >> give us an update on the deadlines in place. eung has said he will not step down. almost zero chance china will change decision to vet candidates. the students are holding firm. sad seems to be willing or have anything to negotiate. the hong kong government says even if we wanted to negotiate, this is beijing's decision. you are talking to the wrong people. students want beijing to drop its insistence that they vet candidates for the election and they want cy leung to step down. if he steps down, maybe that would be a way to save face. toy are not even talking each other at this point. they seem pretty far apart. nothing seems to be going on, at least publicly. maybe behind the scenes. in terms of deadline, the police said they will start sharing some roads. have given protesters until wednesday or they will open the roads with trucks. we will have to see how serious they are about that. it could get ugly. >> we see that now with the truck drivers and cab drivers. thank you for giving us the latest on the ground in hong kong. >> you know it is ironic, you have the police protecting the protesters, who are protesting the government. the police are part of the government. >> has come full circle. >> three weeks? around incan get their cars. movie stars and famous people have to take the subway. >> if you are just a resident, that is where the protests are. you can't function. 48e a deep breath, wait hours before you sue in the u.s. 18 banks meeting in washington as part of the imf. in case any of them will face a 2008-like meltdown. bart chilton was commissioner of the safety seat -- of the cftc. you're saying it's ok to go gently and not ever regulate. >>-- not overregulate. >> whatever you can do without regulation, that is good. in 2008, there was not enough regulation. wall street take advantage of that here and we all know the outcome. and this case, we had 18 banks who have agreed to go ahead and stay any immediate resolution of a bankruptcy or a failure, that's a good thing. and it will be followed by regulations. we will not have a lehman ,rothers like circumstance everybody has a claim on the money right away. at royals market -- it roils markets. there are still court cases on lehman now. this will improve systemic stability. it is a good thing. about do you think only 1/3 of the dodd-frank legislation has gone through? >> a point of personal privilege, the cftc did 90% of the rules. in general, there are five. , office of comptroller of the currency, fed, the fdic. are comforted. what we do in the u.s. and packs all around the world. they need to harmonize. that is why the 18 banks are taking a voluntary step, which will be followed in the future. >> bart chilton, former commissioner of the cftc. tom? >> we will come up with a nobel prize announcement. from the university of toulouse. >> he covered banks. this is on banks and regulation. >> a theme for our hour. do not miss mike mckee speaking to us about a nobel prize awarded to jean tirole, 2014 nobel prize for economics. ♪ >> good morning. bloomberg "surveillance." michael mckee and my favorite moment of the year. the award for the nobel prize. statistics,eritage economy tricks, the history of reigns supreme. jean tirole takes the award. >> you did not win. the call list. scientificole, director of industrial economics at the university of toulouse. it is the swedish prize in economic sciences. >> now we have that out of the way. that in some was categories, large organizations dominate. the theory in the past was how do you regulate these? it was mostly one-size-fits-all. you might put price caps or size caps. his work and game theory shows that does not always work. you need to regulate industry by industry and see how each industry is regulated. >> i go back to the book on oligopoly, perfect competition and monopoly and the strange thing in between. >> these market failures are the subject of his research. he's worked in a number of areas, including industrial organization and banking. this is for his work on large organizations. >> perfect i do have -- perfect day to have bart chilton. about well timed. what can we learn from the europeans about better market structure? >> they've done a lot. they are a stagger step behind the u.s. in doing regulations. they are close on our heels. they have some rules that are better in some regards. the question going forward is how you harmonize these things to ensure global markets are more seamless. >> what else do we need to know about jean tirole? >> he has a doctorate in mathematics. and a doctorate in economics. >> is the nobel amount he wins close to what piketty got off "capital." >> definitely not. >> mike mckee on jean tirole. sergio marchionne, 3:00 p.m. on "street smarts." future cuup 5. bloomberg "surveillance," good morning. ♪ >> good morning. bloomberg "surveillance." i'm tom keene. adam johnson came in on columbus day. >> a warning from fed policymakers. stanley fischer says a slowdown in the world economy could undermine u.s. expansion and lead to a delay in raising rates. he may be, and -- he made the comment at the imf meetings in washington. most expect the rates to raise next year. truck drivers getting set up with barricades in hong kong. had to come between protesters, who want the and theators to end, demonstrators themselves. hong kong's chief executive says the government will not allow demonstrators to occupy the streets much longer. it's been about three weeks. warren buffett rules out the berkshire hathaway plan. he lands to license the name to europe and asia. 1400 u.s. estate agencies expected to use the berkshire happily home services brand name next spring. those are your top headlines. of francerole wednesday nobel prize in economics. known for organizational research. out of the university of toulouse. looking at regulation and how financial systems should and should not run. er thisrole, sole winn year. different from the three last year. >> i want to point out i'm very impressed that you are familiar with this gentleman. rochetow jean charles better, they work within the same department at jean tirole. >> does it mean anything that the nobel committee would go to france on the heels of mr. piketty? spread it around. last year they did investments and i could this year it is more towards banks. futures have fallen 20% since mid-summer, forcing saudi arabia to rewrite contracts with asia to the lowest level since 2008. san and iraq following formally served as advisor to saudi arabia's minister of finance. at what price point do the saudis start to have difficulty finding their own expansion plans? >> at these levels, saudi arabia as well as the uae, they are predefined. brent,ven is that 92 for the surplus is sustainable. uae.r brent for the they are sitting on huge foreign assets. >> you advise the saudi royal family. as prices decline, they have a margin. what is the plan? what would your advice be? downe question is how far do they go and for how long do they stay down. if they go to $50, which i don't think it will, then that could be an issue. what they're going to do is cut down on the capital expenses. 750 billion dollars of foreign assets, in case of saudi. gdp's foreignof reserves. qatar, 200%> it is pretty sustainable. >> you and i have had the privilege of speaking in riyadh. the generalization is everybody is old. how is the transition of the family going to go in the next five years? this is a critical issue. issue everybody wants to discuss. everyone has an opinion. if you talk to people based out of saudi arabia, they tell you this is the most critical issue, what happens to the succession. i would say the succession issue is settled. there is somebody who's going to take over. been decided. eventually, there will be people that will be willing to serve and serve the country well. >> color the recent threats in riyadh. are they looking south to yemen? looking south to iran. something new? something new. yemen has always consistently been a problem. iran is always an issue. what happens to syria and iraq, something the saudi leadership has pointed out. you need to deal with these countries. they were not dealt with appropriately. there is concern and hence the role of the u.s. coming back into the region. as well is of the saudi's and other countries. >> we are joined by bart chilton, former cftc commissioner. .> i'm just curious when we have circumstances where insee prices going down, 17% six months, does that create incredible competition among opec members? do the dynamics change over there? >> definitely. the dynamics have to change. the problem we are in now is that there is a supply-demand disequilibrium. at some point, opec has to deal with this. saudi arabia plays a role. the saudi's and the other are happyin the gulf with prices at these levels. they could go further down. i'm not worried about it. i do think these are good levels for producers and consumers. >> john, thank you for joining us. "surveillance," a nurse in dallas has contracted ebola. tormaceuticals rushing create a vaccine to combat the disease. why has it taken so long to get a drug to market? we discussed. this is bloomberg "surveillance," on bloomberg television, streaming on bloomberg.com. we will be right back. ♪ >> this is bloomberg "surveillance." scarlet fu with tom keene. some company news. canadian pacific railway posing a merger with csx and is robust. -- is rebuffed. unclear if another overture is coming. the combined companies would of $62.5rket all you billion. a $4.9 billion for boeing. 50 747s to indonesia. a growing market. shares of fiat chrysler ready to make their debut on the new york stock exchange. under the ticker fcau. chrysler-fiat forms the world's seventh biggest automaker. 4 in the u.s. market. coming up on bloomberg at 3:00 p.m., chrysler tow chairman and ceo joins trish regan. bart chilton with us, former cftc commissioner. critical of high-frequency trading for years. calling the cheetahs. hoping a group of high-frequency traders will call for regulation. eyes glaze over all this. are we closer to good markets? we've never had better markets. they are more efficient and more effective, they are safer. they are less expensive for the retail investor. it is all good. >> why is michael lewis ramped up? >> it was a great book. my favorite michael lewis book is "blind side." >> what is the number one issue mr. lewis missed? he said high-frequency traders are a pariah. they are part of markets. the thing we need to do, how do you set the rules and regulations for their involvement. how do you deal with the larger question, the question mary jo white has raised at the sec. we gone from having the market -- the new york stock exchange and having 45 different places to trade, including dark pools. how does that work? >> where will we be in a couple years. i audience understands that 45 places to trade is not good. torybody does not want merge. would you suggest we should have fewer players and a consolidation of the industry? >> i think so. it will happen naturally because of markets. i don't think we will have 45 places, maybe 20 or twice i. it is a good thing. at some point when you have all the dark pulls that are less transparent, they report trades andyou do not see bids asset prices. there will be more transparency, that is always a good thing. >> how do we get trust back? we remember the day we went down. how do we get the trust back to mom-and-pop in the market? >> it has to do with transparency. when we go back to 2008, it was because we could not see what was happening in the $600 over-the-counter market. totally off regulators screens. that has changed. we are safer than we were. >> jean tirole winning the nobel prize from france, if he goes to england and has one player managing the team. what is wrong with the london model versus 45 players in the u.s.? >> the london model relies upon laissez-faire principles-based regulation. >> that worked out. >> didn't it? ultimately, it is a balance. he do not want to be regulatory -- you do not want to be overzealous in your regulatory approach. >> what is your wish list for president obama? >> capital and margin requirements done. everybody should have requirements clear. once we get that done, we're going to be protected. >> bart chilton. we will discuss the chicago cubs. sox guy. >> adam, please. >> orioles-royals tonight. audi watching football. s&p futures up. last night, they were down about .75%. 10 year not trading because bonds are closed. 1.5%.lat, oil down in 2.5 the lowest price years. >> this is bloomberg "surveillance," here with tom keene adam johnson. let's talk about ebola. it is being transmitted stateside. pharmaceutical companies are fast tracking efforts to produce an effective drug. glaxosmithkline hopes to have 20,000 doses of its experiment by year end. on a is vice president of u.s. public policy at glaxosmithkline and joins us from philadelphia. thanks for joining us. a nurse in dallas has contracted ebola. how does this change the way the private sector and public sector address this crisis? what do companies like glaxosmithkline need the government to do next? >> it is tragic that this nurse did contract the ebola vaccine. the country has to make sure they are following protocol for treating a person that is highly infectious. that was a very unfortunate .ncident that happened what we are seeing with our vaccine candidate, which is not a treatment for ebola but would prevent people from contracting the disease. we are seeing a consortium of coming together, private and public sector, regulators, and charitable organizations, to try to accelerate the development of the vaccine silica it could be used with high-risk individuals. >> glad you drew the distinction between a treatment and a vaccine. exponential about a growth for an epidemic. what is the ramp-up capability for manufacturing? andsk has a large footprint bar security. we do have the scale and scope to develop the vaccine in the case we need to go to large scale production. part of the funding we are getting from some of these charitable organizations is allowing us to plan for that development. right now, we are planning to produce 10,000 doses to help support the clinical trials. we are in the planning process to look to see if we have to go to larger skill production how we can accommodate that. >> i want to be careful given the stress you see in texas. is there a vaccine right now? >> there is not. this is the most promising vaccine, it was effective and nonhuman trials. we did expedite the process to move into clinical trials. >> what are we waiting for? when you speak to your team at glaxosmithkline, what are we waiting for? we need to make sure the vaccine is safe. it has not been used in humans. we cannot compromise safety. it would not do anyone any good if we were to introduce a vaccine that caused side effects. the first phase is to make sure the vaccine is safe. the second is to make sure it doesn't generate the immune doesnse -- to make sure it generate the immune response. >> the first time i've heard anyone from the pharmacology industry explain. >> spelling it out is important. i want to bring in bart chilton. >> i was working for senator tom daschle when anthrax was in our office in 2001 following 9/11. , know that at hhs and dod they're spending $5 billion a year. they have problems working together. why has it taken so long? is it because there is no commercial application other than the government? people are wondering what is going on, what is the deal with the timing? >> there are multiple infections in the world. it is hard to predict when one infection will really take off and cause a serious outbreak as we are seeing with ebola. dod has been working on this vaccine candidate since 2003. now that we see that ebola is prevalent, we are accelerating the process. part of the challenge is particularly around what disease is going to take effect. and making sure we had a process in place so that when we see these types of epidemics, there guidance from a nasty a perspective. there is support from a manufacturing perspective. there is a lot of policy opportunities as a result of the situation. >> chilton donna altenpohl -- , vice president of u.s. public policy at glaxosmithkline joining us from philadelphia. >> talking about commodities. we have the former cftc commissioner, bart chilton. we'll be right back after the break. ♪ >> you are watching bloomberg "surveillance." and johnson with tom keene scarlet fu. six months, still no signs of any agreement between amazon and their e-book war with hachette. patience of authors like james patterson, who holds the record for number one bestsellers published by hachette. talking to erik schatzker in palm beach. >> you look at what has happened --etting into religious work religious war does not work. it is not working in syria. it did not work in ireland. amazon has created a religious war. writers are religious about books. they will take the blows and use whatever they have to do. they are not going to let folks get hurt in this country. joins us.hatzker i'm amazed. this is not business, this is personal. >> it is. one of the reasons we are talking about amazon and hachette this morning with bart chilton is because jeff bezos has his own cheetah analogy. he likened amazon to a cheetah and publishers to weak gazelles. it's darwinian. it's amazon's duty to take advantage of the publishing industry. james patterson finds this objectionable. needs to stepte it up. hachette, by virtue of its agreement with the doj of your e-book pricing and apple, has to tread carefully. end the hachette to siege by letting the drawbridge drown and attacking amazon. publicly attacking jeff bezos piec. he said he would be camped out on jeff bezos' doorstep and invite every author on the planet who demonstrate. >> why doesn't he do it? >> he's got a right books. he doesn't believe one man acting alone is enough. writers have formed a coalition called others united, 900 authors, philip roth and malcolm gladwell among them. what patterson says is that for bezos to payor attention, they would have to boycott amazon. to agree to take looks down. that's the nuclear option. i asked him are we close to that. he said probably not. two reasons. one, there's a lack of will. they're willing to speak out but not willing to vote with their pocketbooks. you have to wonder how well it would resume. jeff bezos would pay attention. research suggests books make up $70 plusf amazon's billion in revenue. >> that is james patterson's livelihood. >> erik, thank you. rga resources is acquiring atlas pipeline. more details after this. ♪ >> who should we talk to about markets in turmoil? i cannot think about anyone better than robert albe rtson. tomorrow on bloomberg "surveillance." looking forward to talking about the linkage in equities, bonds, currencies, and commodities. on tomrg "surveillance," keene. scarlet fu has breaking news. french. resources partners will buy atlas pipeline for $4 billion. resources will buy atlas energy for 1.9 delete dollars in cash and stock. offs had spun non-midstream assets, these are contingent upon one another. an m&a play in energy. other company news. in france can tweet money. according to the financial times. the company has teamed up with s-money, a division of group bpce. hackers at it again. targeting snapchat. said to be planning an online leak of as many as 200,000 photos and videos, many of them nude. wereompany admits images compromise, say a third party at is responsible. google deletes 18,000 web links in the u.k. in a month. the daily mail reports people removeked the giant to 60 3000 pages. most of the requests are from criminals and six offenders. that's today's company news from the files of "bloomberg west." 2011l down 25% from its peak. corn, 58%.. the only thing up in commodities is beef. live cattle's done a double in 4 years. what to make of commodities? bart chilton is purdue, indiana, he is with us on commodities. corn. oil, oil, oil, oil. it's a bear market. >> that's an ugly chart. how does a guy like you react over the midwest breaking of her grain prices. >> you have to make sure the supply and demand fundamentals are operating. it's a little troublesome in general in commodities. i'm pleased. certainly you get worried when you see such volatility. >> the media does not get this. hedgers is a huge part, speculators are a lesser part. who is getting hammered the most? >> i don't know if anyone is getting hammered. depends if you are going longer short. or hedged and you have some to back it up. the commercial people -- >> general mills. >> they're ok. it is the speculators, some have gone to the market. maybe dave gone along and it has not hurt them yet. if prices stay down, it will. >> in chicago, did you do this? >> the hand gestures. >> back when there was a pit. it's electronic. >> where are we with the efficiency of our commodity market? >> talked about it earlier. i think they are more efficient and effective than they had ever been. "surveillance" breaks -sclusive. gps.hn deere are guided by you can get a link to futures. you see rain clouds, you can sell contracts from your tractor. is there conflict? >> i don't think so. it is amazing what the hedgers do. i was in houston last year. they are looking at the wind. wind speed they expected, hedging every 15 minutes based upon whether the 20 miles an hour. these are dynamic. >> you are not as worried about the carnage in commodities because it is more efficient and open. find are, you had to problem and scoop up paper of the trading room floor. now you have an audit trail. >> instantaneous trading, that sounds like the demand is being driven by people who want to trade, rather than being offered first and picked up later. >> that's right. >> what you mean? >> people want to be trading at that speed rather than being made available and that relies -- >> is being driven by end users rather than guys -- >> by the structure itself. >> we talked about crude. are out of thes crude market. in 2008 and 2010, 12-1 long speculators versus end users. that is gone. it is fundamental traders. a lot less of the long speculators. the generalization of chicago being the head of the commodities trades, how do they look at china? in general. is a better china good for chicago commodities? for better china is good the world. it is obviously slowing. with regard to chicago, there in 85 countries. chicagoy looks to and the cme. i think they are doing fine. volumes are little bit down and prices are more volatile than we would like. >> who is the guy on the white sox that retired? >> i forget. >> paul? he did not get the derek jeter treatment. they do things in a more measured, intelligent -- >> we know that is not true. former oil, being a trader, i am nostalgic. you go to the oil pits, there are maybe 200 guys. them?y still have >> they are sitting around doing nothing. there used to be 5000. >> it is not as exciting. it is still efficient and effective and markets are doing ok even though there has been volatility. >> commodities. what carnage. adam, will we see a $79 on my next crude? >> traders are looking for $80. >> you take out the risk premium in oil and you get to $75 or $80. >> should we do the agenda? can i do the non-agenda? >> the fact that bond markets are closed. >> the way we open the bond markets, i would say with five, a higher yield off the friday carnage. see how bonds open tomorrow. a big deal. stocks.ly so for the s&p 500 stopped on its 200 -day moving average. yellow line. time we have seen the s&p 500 go down to that long-term trend in two years. >> wow. item, no earnings to know today. get ready for a slew of earnings tomorrow. three big banks, jp morgan, wells fargo, and citigroup. all on the same day because of the holiday. 7 companies within the s&p 500 overall. gerardt of value from cassidy at rbc capital markets. and today from bob doll. i don't have a strong opinion other than there are a lot of jobs involved. talking abouts equities, bart chilton was talking about commodities. our twitter question of the day, what offers the most upside? "stocks, easy money. commodities are eight crapshoot. " >> smart answer. >> "feels like we are easing into a recession." >> fed might not have bullets. >> monetary policy. >> "time to hold cash." this was you tweeting. your triple leveraged cash fund. chilton, former cftc commissioner. how are you making money? >> even in the private sector, i should not be investing in markets. us.art chilton joining thank you for coming in. bloomberg "surveillance" on radio continues. "in the loop" is next. ♪ >> good morning. we are alive from bloomberg world headquarters. we have a great program ahead for you. $1.5 trillion. that is a much we walked away -- wiped away last week. exceeding.rices are are we in for a correction? first, here is a look at our top headlines. u.s. stocks coming off their worst week in two years, growing concerns that a slowdown in the world economy could undermine the u.s. expansion. the latest comes from stanley fischer, who spoke over the weekend at the imf annual meeting in washington. >> we are not berkshire hathaway. that is not a bad business model. you think about a long-duration strategy. >> clearly, that is not stanley fischer. that is bill ackman.
and the nasdaq is up by nearly 31%. by the way, if those numbers aren't big enough for you, check out how far stocks have come from their march 2009 lows. the dow over that time period gaining nearly 145%, the s&p 165%, and the nasdaq nearly 213%. yeah. march 2009 lows, what a long way we've come. as you take a look at futures this morning, they're flat-lining at this point, probably unsure what to do after yesterday's big gains. as for the rates with the ten-year, at this point the ten-year is yielding 2.782%, so below 2.8%, but it's been rising and rising on the expectation that the fed is going to have to start tapering at some point, and that will eventually lead to higher interest rates. >> the obama rally's in full force. 2009. what happened in 2008? >> the election. >> yeah, that's right. here we are, baby. rich people are getting richer, though. that's the only problem. >> i know that's your new problem. >> here's my two anecdotes. yesterday, over at the gym trying to, you know, get rid of -- what's the name of that new issue? potbelly.com? whenever i see that, i think -- >> what? >> well, i just, i was running yesterday. i'm going to get this down to where i look like bradley cooper or something. >> when you put on your jacket, i had no idea how much -- >> you wait until i have the six-pack, when i replace the keg with the six-pack. anyway, so, a guy says to me, joe, double, right? double. okay, that was number one. because if people are talking about bubbles, the bubble's not here. it's only when you're not talking about a bubble that it finally bursts. >> sneaks up on you. >> this morning, i have another ocd, and that is that i have to top off my tank. i need to get it all the way up so that it stays on full for, you know, how -- well, you don't know, but it stays on full. >> thank you. yes. >> that's when you get -- it stays on full for a long time! >> the gas station guy said -- >> no, not the gas station guy. so, i have to get it up there. otherwise, if it starts here, it goes right down. so, i'm out of the car and i hear a guy -- >> i love these. >> i hear a guy, "hey, kernan!" i look over and he says, you say cab drivers don't watch or talk about the stock market. he's in a gw cab, which is right on route 46. >> yes. >> he's getting gas, and he says, i watch every day and i'm watching the stock market, i love the stock market, i love "squawk box" and i watch every day. >> yay! >> so, but he's not representative, i don't think. i don't think we're there yet in terms of where everybody -- >> right. >> but that does sound like things are starting to percolate. >> yeah, i think it's in the good stage where it's starting to spread out to -- >> maybe that means retail investors are ready to jump back in. last night, "nightly news" made a point about this, the first time the dow's traded above 16,000, so the word's getting out. >> but cab drivers. he said he was watching thinking -- >> is that true? >> thought i'd mention him. so, what does that mean? one guy says bubble, the other guy says he's watching. i think it means -- >> i think they're starting to -- >> still a ways to go. >> fourth or fifth inning? middle of the fifth? bottom of the fifth. fourth? doubleheader? >> so far from seven, eight, nine. that's the point. >> and up 25%. i'm not going to mention my call for -- >> it's not one, two or three, though. it's not first three innings when you look at the gains. >> we're somewhere in the middle of the game, but where, i'm not sure. and you know, people is thank you democrats are always better for -- >> that is true, by the way. >> if you want to live like a republican but you -- i can't remember. if you want to live like a republican, vote like a democrat. that's what they say. >> there you go. >> and is it because of stimulus? is it because of -- is this the obama rally or the bernanke rally? >> that's the other thing to think about. i would argue the bernanke rally is the obama rally, because obama, he wasn't the one that -- >> he wasn't -- >> i agree with that. >> you know who was the original decider and who was on jay leno and who was with chris christie yesterday. >> oh, i didn't know he with with chris christie. i knew about leno. >> you have to think about this -- >> 43. >> he's an artist now. >> i know, he's been painting. >> had mccain been on or a republican, hear this, it's possible that they would have replaced bernanke. >> oh. >> with somebody who probably would not have pursued this type of -- >> you might have kept bernanke the first time. >> and you may be right -- >> i think you would have been crazy not to have kept him in the midst of everything they had done. >> well -- >> you don't know the plot of your next book yet. i don't know the plot as to how we exit. >> i've got to work on that. >> see who wrote this piece about how qe is bad? >> no. >> a guy who's name is frickin' saving. thomas saving. how did they find a guy named saving to write a book about how savers don't -- >> are getting crushed? >> yeah. his name is saving. he's been unable to save. anyway, he wrote it with phil gramm. last but not least -- >> yes, sir. >> the one guy who wrote against -- if you like the rules, you can keep them. obviously not. the senate rule. one of the democrats -- >> well, three. >> there were three. manchin, in a republican state, and the other one -- i have disparaged carl levin before. i have to say, class yesterday. >> class, right? >> right, because he's a -- >> look, i don't think this is a partisan move. this is about protecting the institution of the senate, and the minority was always supposed to have some room there. now, it takes two to tango, and the republicans have done some stupid things with blocking and just refusing to put any judges through. >> but it was just as bad when bush was trying to do it. >> there are more -- there have been more -- >> they started it. anyway, here's -- the "journal" got a little pissy here. listen to this -- "obama care would have never passed if mr. franken hadn't stolen the minnesota recount and if prosecutors hadn't hidden the expulcatory evidence that would have showed that alaskan republican senator ted stevens," false ethics charges, but this hid some of it. but it says if franken hadn't -- the former comedian who's got the biggest mouth in the senate now -- if he hadn't stolen the recount, then there wouldn't be obama care in the first place. but you know what? obama care is -- the more that -- well, no, i just -- [ everyone talking at once ] you know, without obama care, we wouldn't have anything to talk about every day. >> this is true. >> but it does say that the rise above message is not getting through. this is about ramming it down -- >> do you think they listen to us? >> no, this is about not working together with the other side. this is a problem. this is bad for the institution. and by the way, a lot of the people who voted for it voted against it back in 2005, eight years ago when it was the republicans who were trying to do the same thing. everybody's changed sides. >> but obama now, after voting to raise the debt ceiling, he was also adamantly opposed to doing this as well. so, we know how politicians operate, but i was going to ask you -- >> just all these guys, tom harkin, a democrat in favor of it, says he's been waiting for 18 years, eight years ago said this was absolutely the wrong thing to do with the institution s . mcconnell who was in favor of it eight years ago is opposed to it. basically, they just traded sides. >> am i okay with what? >> here's what happens now, he's not going to get anything through legislatively -- >> yes. >> so, he's governing through regulatory measures now. >> correct. >> now, any of the regulatory measures that are challenged at the district court of d.c., he can stack that court so he can -- >> yes, he can. >> okay. the other thing is, polls have him at 37%, 40%, somewhere between there -- >> not a good -- >> well, no! he can't -- who's going to be -- how much below -- i don't think he had 47%, like romney said, but he's got 37%. he's got 37% that will never waver for him, so -- >> he can't go any lower! >> i don't think he's worried about it. >> he's a lame duck. >> not now! how many votes do you need to repeal obama care in the senate now? >> that's a good question. >> 51. >> well, 51 because they figure if they got the majority, they would change the rules to continue this nuclear option. >> because why not change the rules at this point? when you've lowered the standards. if you like your rules, you can keep them. let's talk about the markets a little bit more. we went off on a little bit of a tangent, but a good tangent at that. one of the big questions during the stealth rally, which we've been calling it, is who's actually taking part in this. let's follow the money. inflows of $4.28 billion in the week that ended wednesday, roughly in line with the four-week moving average. etf investors added a net $1.6 billion to their accounts. what about other investment vehicles? so, "the ft" reports that global money market funds are projected to lose 33% of assets under management next year. the paper citing moody's for that. the firm says that headwinds for money market funds include low interest rates, and of course, new regulations in the in the u europe. the thing about these numbers is who's participating, right? this goes to the cab driver thing and whether the cab driver's actually participating. that's a lot of money that's going into the market during this period. i would have thought people, given the conversation we've been having on this set, where everyone seems to be a little anxious, that would have been the opposite. >> i think it's new money. >> but there was a time when people liked to, you know, if they -- they see social media and take a shot at something, and the stock market, i'm not saying it's gambling, necessarily, but there was a time where you could dabble a little bit and make a little money and take a vacation, you know? it used to work, and now people are just deathly afraid of another move to 6,000 or something on the dow. i mean, i think we've got time to slowly get people back in before they become bag holders, which happens to bad -- >> that's your point, maybe fifth inning or something. >> yes. >> not seventh, eighth or ninth. >> are you seeing in the seventh? >> no, no, no. >> do you sing in the seventh? is that the seventh inning stretch? >> that's the seventh inning stretch. >> you sing "take me out to the ball game." >> i think you want to be out before you get there, because you don't want to be around for eight or ninth. >> and you want to be out before the full-figured gal sings. >> that's true. >> is that how we say it now? >> she's a lady. >> the plus-sized lady. before the plus-sized lady sings. >> what else is going on with stocks and bonds this morning? >> i don't think you can use the "f" word, right? >> you're skating very close to that right now. >> i'm drinking a diet coke. all right, we mentioned stocks and bonds, but what about the broader markets? i want to know what they said about gold, because we laughed when they said it, when they were saying it was going up, gold. goldman sachs is predicting a significant decline in gold in 20 2014. the precious metal is already down 20% this year and i could have sworn goldman was bullish on gold. >> look, david einhorn was bullish on gold -- >> i saw him yesterday. he said, well, i bought it in 2009, it was a pretty good trade. i remember him with his donut comments. we were up at about $1,500 on gold, weren't we? he was completely wrong with that. these guys never admit they're wrong. he's also got a new hairdo. did you notice that? >> no. >> i don't know. anyway, the firm says that bouillon is set to fall at least 15% next year. goldman issued a report of the top ten market themes for 2014. a warning of the growing downside risk for commodities. gold this morning -- this probably would affect the precious metal because goldman had some sway, but it's only down $1.60, but that's a new, pretty close to a new intermediate term low. not quite. i guess it could almost touch $1,200 to get down to recent lows. as for oil, which we're waiting. i paid $3.30 for premium this morning. we're waiting for this to help the consumers, but we didn't see it yesterday, that's for sure. not from target or from the others. finally, as far as currencies go, as the tapering, i think, gets closer, but maybe it isn't, but we're back above 1.35. it is a relatively quiet friday on the data front. two economic reports of note. the labor department is going to release job openings and labor turnover, the survey for september. that's at 10:00 eastern, not on our show. then an hour later, the kansas city fed survey. as for earnings, companies reporting this morning include foot locker, which for a while -- was that the one that was -- no. >> no, that was woolworth. >> and also, petsmart. someone the other day said people that have pets live longer, and i said, well, i'm going to live long, then. >> a lot of dogs. >> three dogs, a bunch of fish, a couple hamsters. there may be a shortage of data -- beta fish. >> i like the beta fish. >> you knew the second you went from -- >> true. but we still have plenty to discuss about -- i'm starting to know you. >> when you start with hamsters, it's just -- it's hamsters that got me. >> how did that -- >> i don't know. >> when did hamsters become some kind of sick joke? i don't -- >> it's not a joke. >> has it come to that in society, where little kids can't have cute little hamsters at this point without some disgusting nuance -- >> i don't know. i don't even know what you're talking about. >> so, we're bringing in a special guest this morning, not right now, but later. atlanta fed president dennis lockhart, he'll join us live at 7:30 eastern. he's also going to talk about the rebuilding of atlanta after being ground zero for the walking dead and the walkers. >> they've made great progress. >> they have made some progress, but there was -- it was a wasteland for a while, just people, right? >> well, they've done well. i think the cdc is doing much better than it was, too. >> cdc's a real -- >> that was a rough case. >> that was rough. it blew up. why don't we talk about the global markets now with the "global markets report"? ross westgate is standing by in london. ross, good morning. >> hi, good morning, becky. good to see you. yeah, not much follow-through for european stocks following that close on the dow last night. we're about 5-4 decliners out-pacing advancers, so fairly flat, but we are just about at the session lows. there was a bit of a kick on first thing this morning, then it sort of evaporated, the early gains. the ftse yesterday was pretty flat, and that's where we stand right now as well. this morning's gains down 14 points. the xetra dax is off 13. the big story this morning was a tick up in the ifo, institutes business climate index, europe's probably most important sentiment index that covers germany. 109.3, better than the expected 107.7. they say manufacturers are more optimistic and they're doing well on the back of stronger exports. that did just boost the euro up to the session highs as well against the dollar. the euro also up four-year highs against the yen. the kaycac is up. ftse mib down half a percent. breaking down the sectors this friday, pretty even steven, which reflection the normal sort of focus. basically, resources weaker once again. we are, we had that disappointing manufacturing pmi from china yesterday. that's followed through to today as well, and the dollar firmer against the yen. media, technology a little bit firmer. keep our eyes on technology with the launch of the xbox as well today and see how that does against playstation games. we also heard from mario draghi today as well, two days in a row. he's sort of saying they talked about deposit rate cuts yesterday, but with the ecb meeting, there was nothing more on that today. he was much more focused on putting together a single resolution for winding up european banks, and this big disagreement between germany, who don't really want any mutualization of debt and banks in france and italy who say we need to have a fund to do it. draghi today very much trying to toe a middle line and get some consensus around that, but that will be a big focus for european politicians before the end of the year. yields as a result today on bunds just a little bit higher as well post that data. but otherwise, fairly flat market right now. back to you. >> ross, thank you for that. we also have corporate news to get to this morning. the "wall street journal" reportion that charter communications is near a deal to get a loan to make a bid now for time warner cable. sources say that if charter turns to outside equity from sovereign wealth funds or other sophisticated investors, the amount would be less than $10 billion. keep an eye on time warner's stock, because there's going to be a lot of rumors floating around for the next couple weeks about whether they really are a takeout target. we talked about them as a possible one for quite a while now. >> expensive, right? >> it would be expensive, and -- >> the biggest ever, wouldn't it? >> no, no, no. >> $45 billion, $40 billion, something like that? >> from the biggest ever deal? biggest ever deal is vodafone buying management for $183 billion. so, there's a lot of room between -- >> yeah, but this for a cable company? $40 billion -- >> that's not bad. >> what was aol? that tha was -- >> that was $134 billion, right? you had to pay the premium for it. >> the kind of premium -- >> for this? 20%. >> yeah, probably. it's a pretty rare deal. >> it's a rare deal. in this environment? it's a rare deal, so, we'll see. >> what was the last one that was -- >> big deal of this magnitude? we haven't had a big deal of this magnitude in quite a while, so. no, i mean, vodafone buying the other piece of verizon. but that's not a real merger, so we'll see. also, this is a little deal but big deal to them. a jury awarding apple about $290 million in damages against the retrial of samsung. the decision restoring a large chunk of a historic verdict that the iphone maker won last year. samsung had argued it should only have to pay about $53 million, so to samsung, $290 million is a lot. to the coffers of apple, maybe not. >> right. >> maybe not so much. a decision on whether to approve bank of america's proposed $8.5 billion settlement with investors in mortgage securities is now in the hands of a new york state judge. a nine-week court proceeding ended yesterday. the judge now must decide whether it's reasonable for the trustee of the securities to enter into the settlement, which is binding on investors. all right, coming up. well, number one, you know, you read things in the "post." i guess when the "post" had that thing about the bag man and the they sullied the two guys, the boston bombers, that -- >> but did you see the front page of the "new york post" today? >> that's not what i'm going to talk about. >> but i was interested in that, the reprint of what they printed 50 years ago. >> the "daily news" did the same thing. it's pretty easy to print your old -- i don't know. >> interesting. >> when you're reading the "post," here's the top line of the main article. larry kudlow, the charismatic msnbc anchor -- >> what? >> larry kudlow, the charismatic msnbc anchor. so, you know, they've got -- number one, you've got the writer, number two, you've got the editor. number three, you've got -- it just, i mean, can you ever imagine larry, number one, our conservative friend, larry, at msnbc, number one? but just not knowing enough about larry kudlow to know that he works at cnbc? just read it with a grain of salt. when you read the "post," know what you're reading it for, for entertainment. it's like "mad" magazine. >> people make mistakes. it's a good newspaper and people make mistakes. >> oh, that's big of you. anyway, there but for the grace of god, the "the new york times." that's why. they won't correct this. >> i'm pretty sure that i've read things about myself that have said i'm from msnbc. >> i can't believe you're not! anyway, coming up, the ability -- i mean, that was your calling. anyway, the ability to talk on your cell phone during a flight. a major tech advancement or a coming annoyance. we'll discuss that next. but in all the stuff you read in the business section about us, about anything, i just, that's a pretty good example of how much you should -- i believe about, what, should you believe 50%? 40%. and fox sports news and they've already done stuff about me and can't get any worse. the saints handed the falcons a fifth straight loss last night. drew brees throwing a pair of touchdowns. the nfc south-leading saints improve to 9-2. the falcons fell to 2-9, officially eliminated from the division race with five weeks left in the nfl season. first as we head to break, let's check out the national forecast with the weather channel's alex wallace. hey, alex. good morning to you! tracking some showers this morning across parts of the northeast. and that's generally going to be the case for a majority of the day. just sort of in and out of light showers out there for us, generally going tomorrow north of d.c., up into new england dealing with that threat for the rain. a little rain and snow mixing in as well, getting into the green and white mountains dealing with that. then by tomorrow, it will be a drier time for that 95 corridor, but back through the interior, close to the lakes, snow showers for the start of the weekend. tracking a line of showers and storms rights now moving through the lower mississippi valley. with it, some heavy downpours and lightning. heads-up mississippi into louisiana. then back into the southwest, heavy downpours here into parts of arizona, including phoenix. and a winter storm taking shape. this is going to dump quite a bit of snow through parts of the rockies and then we have a potential for icing through parts of texas. that will continue into tomorrow as well. and continuing with our snow back across colorado and new mexico into tomorrow, there will be some spots doing pretty well. the ski resorts here, as you get into the san juan, could pick up close to 2 feet of snow. well, that's your national forecast. more "squawk box" on the way. welcome back, everybody. right now it's time for "the executive edge." this is a daily segment focused on giving business leaders a leg up. federal regulators are considering whether to allow airplane passengers to use their cell phones for calls and text messages during flights. the announcement by the fcc sets up a debate over technical and social implications. if this story sounds familiar, it's because last month the faa said it would allow expanded use of electronic devices aboard planes, but the devices are still not allowed to connect to any ground networks, but guys, the social implications here are, do you really want to listen to people talking on a cross-country flight for five hours? >> greatest fear. but you have the buds to go in -- >> little buds. i still don't want to hear people on the phone. i'm okay with e-mailing and texting until the last second. that part i'm okay with. the phone part a little less so. >> i wish i could have them banned in supermarkets. i wish i could say that the microwave is rotting the food or something, which is probably about as realistic as this. >> i have a different question for becky and joe here. and i know most of us often sit in the back of the bus during these flights, but to the extent you have an opportunity to sit in the front of the bus, where the seats are wider and things are more spread apart, especially international flights, do you think that those people should be allowed to be on the phone? >> well, you know, on the acela -- >> they have a quiet car. >> they have a quiet car. but in the other place where i know you demand to sit with your tickets, the front, you know, where you'll see all the muckedy muck going back and forth, people are on the phone there, in the most expensive -- >> it's loud. >> they do use them. and if i'm right next to them, it does sort of irritate me if a person is doing business for the whole three hours. it's like, oh, my god, but i do listen. >> remember, that's how that guy found out all the information, the reporter sitting there listening to them. i go back and forth because i can understand wanting to be on the phone, wanting to keep connected for business, maybe check in with the family, be able to make sure that a car can get you. it's not off the record, but i go back and forth, the idea of being stuck on a plane listening to people talk endlessly and having no escape, whoo. >> you would see someone -- petraeus, his wife was sitting behind him and i didn't know his wife was there and i saw him talking to some other young women and stuff, so i was watching that and i go, oh, his wife's here. but this all should be off the record, right? >> no, what happens on the acela stays on the acela? [ everyone talking at once ] >> i think it's on the record. >> yeah, it's fair game. it's fair game. >> hey, can i just -- you know, andrew convinced me, we have to be afraid -- like, "the post"? this is all i'll say about "the new york post," if there's one paper i read every day, no matter what -- >> exactly. >> it's "the new york post." >> there you go. >> it's the most fun paper to read out of all. if i miss the "post," i feel like i haven't read the newspaper. >> and page 6, it's that stuff you read -- >> you love it. >> you read it and you think, oh, my gosh, i can't believe they did that! unless it's about you, then that's not true! >> they put jamie dimon, they put pictures of people, make it fun to read. >> they make it fun. >> page 6 is by far the best gossip column. if you don't read "the post," you need to buy it every day because it is the best paper. is that okay? >> it's a great paper. i always loved "the new york times," but i read the "post" every day. >> not the "daily news," if you're sleeping, you can't sleep. you pick up that thing -- >> let me talk about the next story. new jersey is in the process of being the third state to offer internet gambling. a trial period began last night with some serious glitches. the most serious was some refused to believe some people were inside new jersey borders, when they were miles inside the state line. technical glitches, any time you have a new rollout, it's not surprising to see. >> that's true. what else happened yesterday? >> i don't really like this. >> i'm not a big fan of it either. >> i see the online gambling, it's just a bad idea. >> in fact, one of the stories we were reading today about it was a guy complaining that he couldn't do it. the reporter was following him around, i guess, as he went different places, tried to get on. they also said he was an unemployed bartender. the idea that you're making it easier, even though at this point, there are still some difficulties trying to get on -- i'm not a huge fan of gambling, but -- >> what i really don't get about this, if you think atlantic city's suffering already, how is this going to get anybody in the door? >> although the casinos who are located there are offering these things, so maybe it's still -- >> i get that, but i don't get the strategy. >> i think it's just to keep -- >> it's certainly not job-creation. we've always argued the reason we need this is to create jobs. this is not creating jobs. >> it's the technology. >> to say ideologically pure, anything that starts trending towards the nanny state and saying i don't approve of this type of behavior, therefore i'm going to try and do things as the state that makes you not want to -- i mean, it's -- >> it's hard to put blinders on, though when you see what it does to people's lives. >> they do it to themselves, though, sort of, and they're going to do it one way or another. it's like trying to stop smokers from smoking. you can try -- >> but we've done a great job of getting people -- >> but they do it themselves. they realize i want to get off. i want to stop doing this. >> well, but we've also made the incentives and the cultural incentives different. you don't think? because you can't go to a bar and smoke. therefore, if your friends -- >> but you can in certain places. >> but it's harder and more expensive. >> you can in the casinos in atlantic city. >> you need to go outside sometimes, but more and more, people just realize what's wrong with it, right? the kids. >> but i would argue the nanny state, if that's what you want to call it -- >> no, no, no. >> has made -- >> you decided that on your own. >> you don't think so? >> no, you're deciding that on your own. >> you think had none of those happened, had the prices not gone up, taxes not gone up -- ♪ know when to walk away >> let's go to break and then read "the post." the read on retail, the gap better than expected on profit and backing its profit forecast for the year. so, why are shares under pressure? we'll ask anjohnito willet list right after this. first, did your list of the top ten bans of all time make our list? this is your chance to find out, or you can post your own top ten for future consideration. check out the latest talking squawk blog at squawk.cnbc.com. ♪ >> bravo! >> i loved that! >> it was great! >> it wasn't bad. >> well, there were parts of it that weren't bad. >> it could have been better. >> it was terrible! >> it was bad! >> take itway. >> boo! the ocean gets warmer. the peruvian anchovy harvest suffers. it raises the price of fishmeal, cattle feed and beef. bny mellon turns insights like these into powerful investment strategies. for a university endowment. it funds a marine biologist... who studies the peruvian anchovy. invested in the world. bny mellon. welcome back to "squawk box." gap reporting quarterly results of 72 cents per share, beating the street by a penny. that's the good news, but there's bad news in here as well. we're going to talk now to oliver chan, retail analyst at citigroup. good morning to you. >> thanks a lot, andrew. thanks. >> so, okay, overall number good, but let's talk about some of the things that put a little pressure on the stock in the market afterwards, or, well, the market was closed at the time. but nonetheless, the big issue being that comp store sales did not look very pretty. >> yeah, comp store sales were plus one. what i would say is gap continues to illustrate great consistency. so, this was the seventh quarter of positive comps, but a plus one maybe wasn't what people were looking for in terms of the bar. i would also speak to the comments around the promotional nature of the atmosphere right now. >> right. >> and if there's one trend for holiday, it's everything's on sale, and that's what's happening. >> so, this margin -- i mean, to me, the two takeaways from that release is the margin compression sort of a la what you're hearing from walmart, target and everyone else, who says the next month is going to be a tough one. then you talked about same-store sales being up 1% at gap. that was true, but if you looked at banana republic, it was down 1%. so, the only thing holding this thing up in terms of the continued growth of this thing seems to be the online business. >> well, online is the major theme, and shoppers are definitely moving that way, and we do have a problem with mall traffic. mall traffic has been persistently negative, negative 1% to 4%, while online is growing at 20% plus. so, online and global are definitely key trends, you know, for retail at large, as we think about that. margins are a big deal. margins across the space. the gross margins are declining 100 to 200 basis points. and most of our retailers are expecting this trend to continue. >> do you think gap needs to shrink its footprint in terms of the number of stores? >> well, it's selective. i think selective store closures are pretty smart domestically as a whole. there are some pockets of good opportunities. you know, shoppers are gravitating towards deals, so the outlet channel is a compelling idea, but a lot of the success or failure does come down to the product. we are kind of within this fashion dynamic, and it's discretionary. >> okay. oliver, just real quick before you go, what's your target on this stock? >> $48 and 15 times. >> okay, so we've got a little bit of room to move. >> up side. >> we appreciate it. >> thank you. >> happy holidays. >> you, too. >> all right, thanks. when we come back, the latest xbox launching early this morning as fans lined up for hours. but how does the microsoft console stack up against rival playstation? jon fortt will join us with the answers right after this. and then later, a "squawk box" icon and rebel, billionaire entrepreneur sir richard branson. he is headed for space, but before he does, he's going to join us from his private island. that's coming up at 8:40 eastern. stick around. 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>> in the short term, i think sony's got a pretty good chance with the ps4, because they didn't have momentum heading into this console season. i mean, the xbox and now the xbox one had a lot of buzz. microsoft has been gaining a lot of momentum, but they made some key missteps about requiring at first the new kinect eye to be on, watching people, requiring online connectivity all the time. gamers didn't like that. sony's ps4 box is more of a social gaming appliance. it really focuses on the gaming aspect and it does its own marketing because it lets gamers pull other people in to watching what they're doing. it's good at multiplayer. so, in the near term, plus, it's 100 bucks cheaper. so, in the near term, i think sony's got a lot of momentum. >> but is that microsoft just kind of, like, you have to do it our way? why did they go that route? >> well, i think they thought they could. and also, you know how these companies are. they have this grand vision for how it will be if everybody does it their way. >> right. >> and they think, apple can actually pull it off, but they think if they can convince everybody and get everybody into the fold, it will be awesome. and sometimes, it backfires on them. but what microsoft's really doing is making a big play for the entertainment center. the xbox one, if you hook it up the way they want, it can really allow you to voice control everything. >> this kinect thing is amazing. the new kinect is even better. >> it really is. >> you know p 90 x, the gym thing? they have supposedly a new game where you actually look like you're on the screen doing it with tony horton or -- >> you can have him abuse you from inside the xbox. >> that is awesome. that's pretty cool. >> but for a while, you needed -- my son mentioned something about that, that he didn't like, that kinect had to be on to do something? >> they basically wanted to micro manage your experience. kinect has to be on, you have to be online the whole time. it's going to be watching you, feeding you ads, that kind of idea. >> is it overstating it to say that the christmas season has a lot riding on video games? and the reason i say that, there haven't been any new hardware, and that's hurt the software -- >> in like eight years, yeah. >> and it's a big enough part of what you buy at christmas to where really successful video game, or it could add like a full point on to whether it's a good christmas season, couldn't it? >> yeah, for the season overall, it is important. this is the sort of thing that's going to draw people into stores. >> because yesterday we got really crappy numbers about other stuff and there are worries about it. >> let's face it, best buy needs this. >> well, look how good best buy is doing. >> yeah, target needs this. the holiday season is six days shorter this year, right? so, that's why we're getting all this discounting. something like this that is a big draw into stores -- >> when did they change that? that's not fair. >> thanksgiving is later -- >> six days? i didn't even know they did that. they do that in the senate with the filibuster stuff? so there's six less days, the democrats voted -- >> it's the calendar. >> they voted to take away six days from the calendar? >> what is the eye? it actually watches you? could a hacker break in and be able to see you on these things, too? >> that's the worry. >> and everybody says no until somebody figures it out. really, it's for the gaming experience. you know, this one can recognize exactly who you are when you're playing the game, capture your motions, not pay attention to the people standing behind you, so you don't end up with them screwing with your game. if microsoft succeeds with this, they have more to gain. >> right. >> because -- >> can you cover the eye? >> you can do that. >> you can cover the eye, but then some of the functionality won't work, right? isn't that part of the issue. >> i don't understand why they won't let you turn it off, though. >> they have let you turn it off now, but at first, it was like, they weren't going to, and it was after pressure from the uproar online, they said, okay, okay, okay. after a couple okay, okay, okays, the message is a little muddy. plus, they have to fix the software. so, some reviews say the software's not completely baked at launch, they're still making tweaks to get this exactly how people want it. so, that's why sony's got a shot here at a lose of positive buzz. >> did you buy one or the other, or are you going to? >> no, since the kids, you know? i turned to my dad. remember back in the late '80s, early '90s when dad tried to pick it up, how does this work? there are too many buttons? that's me now. i have become that dad. >> i don't think you can overstate it. didn't the latest do $1 billion on the first day or something? you look at the cultural influence of these stupid movies and all the actors and how much cultural influence they have. it takes them it might take them overseas sales in three months to do $1 billion. the video game does it in -- >> we get excited about first-day sales, a million units, but if the ipad only did a million units on the first day of sales, we'd be like, oh, it's a disaster! so, relatively speaking, they're both roughly 500 bucks. video games aren't as big as they used to be. there are other things that have sort of exceeded them. >> but you think of old toys and kids don't want to, like, use their imagination. you can do unbelievable stuff with, parachute out of a plane. anyway. coming up, thanks, jon. no need to go to washington. we'll bring both sides of the debate to our set. political strategists sound off on everything from health care to the debt ceiling next. and then in the 7:00 hour, depending on where you are, in the next hour, one of our newsmakers of the morning, atlanta fed president dennis lockhart will be our special guest at 7:30 eastern. 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. welcome back to "squawk box," everyone. today, november 22nd, marks 50 years since the death of president john f. kennedy. you're looking right now at a picture of arlington national cemetery. this is where there will be a remembrance wreath laying ceremony taking place at 8:30 eastern time to commemorate that date. . we'll come back and check in a little later this morning. a number of political stories to discuss today. joining us now michael feldman, democratic strategist and founder -- i always say danny glover. is it glover or glover? >> thank you for giving me this opportunity to mention that again. >> it's what again? >> glover -- >> say it one more time. >> www.gloverparkgroup.com. >> and kelly conway is a founder and strategist, we still love you although we used to call you a lot during the elections. >> you did. >> now it's rare we -- but here you are again. >> but i watch every morning. >> excellent. michael. i just read this and i don't want to start anything with you, but -- >> go ahead. >> he says this with a straight face about obama care. we forget this was a bill that was litigated in congress for a year and a half and passed by both houses and signed by -- >> a single republican vote. >> i didn't forget that. did you forget there wasn't a single -- a third of the economy or 20% of the economy. every other huge step like this, you would think to not cause a schism in the country and you see the schism we have right now, you'd think you try to do this with at least one republican. >> it didn't actually start with health care. a divided congress polarized. look, we're in a legislative process. we saw the latest incarnation of this yesterday with the so-called nuclear option. there is no bipartisan legislation. the senate is stuck -- >> both sides are to blame for this horrible environment we're in right now. you've got to admit, you're reaping what you sewed. >> well, first of all, both parties haven't been able to get anything done in congress for a long time. >> you got obama care done, but look at the price you paid. was it worth it? >> well, i guess the question is if you're one of the millions of people who don't have insurance or somebody concerned about the drain on our economy. >> there were other proposals on the table that rahm was pushing, the pre-existing conditions open up states to competition. ways to getting it done in a bipartisan way. you needed al franken, needed the nebraska purchase, you needed, you know, scott walker came in and you needed to do it through reconciliation. it was an ugly way to get it done. >> there were a lot of ideas that began with thoughtful republicans who at some point abandoned those -- >> you kind of -- >> no, no. look, i worked in the senate 23 years ago. i worked for george mitchell when bob dole was the republican leader. and during those periods of time, thoughtful people could get together and actually compromise on legislation and advance not just the president's agenda, but the country's agenda. >> and not try to take over 20% of the economy. and force americans to buy a product they don't need and can't afford. >> well, actually, i think there are thousands of people in california who are signing up for it who do need it. i think there are people in the country who are uninsured. if you're one of the millions of people uninsured or had a pre-existing condition, you couldn't get health insurance and now you can, you're happy to have an option. and we can have a political fight all day long about how it was passed, but nobody's addressing the underlying problem. it's not like -- and kelly, i'll ask you, is there a republican agenda out there other than stop the president, make obama care the issue? >> yes, i know there's a new mean about your side. forget him, he's going to twist in the wind with or without us. i want to talk about the policy. i'm a policy person. and a thoughtful republican. look, there are three options moving forward. you either go to single payer, which is what a lot of people wanted from the beginning. >> kind of designed. >> and we're not going there now because there's no credibility for the president to push even farther to the left on that. number two -- i'm going to talk about three policies. single payer -- no, not talking about the votes, i'm talking about the president preening in front of the bully pulpit. the second one is to revert to the insurance centric system, which i don't think most people will do. and the third is to start over and look for a patient centric free market solution. a portability across state lines, tax equity, all the things people and republicans have been talking about for five years about health care. and, of course, health savings accounts. and look at some best practices within the states. the president isn't just losing republicans. he never had them to begin with on obama care. he's now losing in state insurance commissioners, democrats who are up for reelection in 2014. this is not partisan. if you try to make it about obama, i think you lose even bigger and your party will lose moving into 2014, 2016. forget him and focus on obama care. people don't have insurance who should have it. we all agree on that. and i think it'd be difficult for the republicans, any plan they have to take out the preexisting condition coverage. there are some useful elements that have been litigated as you said. >> i think there are. but to say it's not partisan and we're making it about obama is a little strange when, in fact, the entire gop strategy stated overtly by senator mcconnell at the beginning of the administration has been to stop the president. what is the republican strategy now? >> how can you stop them? just answer this question. the republican strategy now seems to be to abandon what's left of the legislative agenda and make everything about the repeal of obama care. >> michael, what happened yesterday is not moving towards these open relationships where you work across the aisle. >> i agree. i agree -- >> what happened to the senate is devastating for the senate, the body of the senate. >> it's a horrible development. i never thought i'd see it come. but what do you do when you're president of the united states whose legislative agenda has been thwarted. i think it's fair to say that president obama has done more reaching out. >> he's hardly ever -- oh my god -- >> oh, that's tough. you really think this president has reached out to the other side. >> he doesn't even show up in congress. when's the last time he visited congress. >> he was there two weeks ago. >> wow. it's that time of the month again, i'm going to congress. he needs to get there. >> behind closed doors. everything, the president, he's got the earnest americans behind him nodding on some bully pulpit with another of the same speeches. it's frustrating for all of us. >> we've got to thank kellyanne and michael. appreciate it. coming up dennis lockhart will join us. and it feels like your lifeate revolves around your symptoms, ask your gastroenterologist about humira adalimumab. humira has been proven to work for adults who have tried other medications but still experience the symptoms of moderate to severe crohn's disease. in clinical studies, the majority of patients on humira saw significant symptom relief, and many achieved remission. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. blood, liver and nervous system problems, serious allergic reactions, and new or worsening heart failure have occurred. before starting humira, your doctor should test you for tb. ask your doctor if you live in or have been to a region where certain fungal infections are common. tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. you should not start humira if you have any kind of infection. ask your gastroenterologist about humira today. remission is possible. another market milestone. the dow closing above 16,000 for the first time ever and spurring a global rally. we'll tell you where to ride the next rally wave and what areas you should avoid. fed speak to end the week. atlanta federal reserve president dennis lockhart is our special guest from janet yellen to taper talk, we're going to cover it all. and guest host southern company ceo tom fanning joins us for the remainder of the show. his views on energy independence, health care and the looming budget deadline. this is from one of the nation's largest energy producers as the second hour of "squawk box" begins right now. good friday morning, and welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin along with joe kernan and becky quick. our guest host, thomas fanning, chairman and ceo of the southern company. one of the largest producers of electricity in the united states. we've got a lot to talk to him about. energy, i actually want to talk to you about obama care and a lot of other things. take a look at the futures right now. see how things are setting themselves up for the day. dow looks like it would open up off about a point. let's get you through some of the morning headlines. dow coming off the first ever close over 16,000. yesterday's triple digit gain also wiping out the dow's losses for the week putting it on track for the seventh straight weekly gain. the dow is up more than 22% for the year while the s&p 500 has jumped 26%. we've got more on the markets in just a minute and i think we've sort of decided we're in the fourth, fifth, or sixth -- we have people who can tell us. >> paulson and bianco's here. >> what the innings are. >> yeah, jim paulson, not hank paulson. who's the other one, not john. >> there's a lot of paulsons. we also have other quick stories. the white house planning to push back the obama care sign up period for the second year of operation according to dow jones. now, the start of the 2015 signup period is reportedly going to be pushed back one month to the mid november of 2014. so think about a year from now. people would then have until mid january rather than early december to complete that process. also, charter communications reportedly closed to completing a funding deal to make a bid for time warner cable. we've talked about the potential for time warner cable to become a takeover target. the "wall street journal" saying a multibillion dollar agreement is close to completion but it isn't clear yet which banks might participate. and you can see time warner stock there. and what did we say? about $45 billion deal? >> $34 billion, what would you ask for? >> i think i'd throw 20% on top. however, somebody would say this thing has already run on -- the premium's already built in. >> right. >> you know what someone's going to do. they're going to look at the 30 or 60-day average before rumors emerged. and that's sort of where you probably got -- and then maybe you look for 25% premium. tom, what would you do? >> about what? >> you're selling southern company you'd say -- you'd need 100% premium. >> oh, absolutely. somebody's got to provide clean, safe, affordable, reliable energy for people. >> similar market caps, it's amazing. >> yeah. >> that's another good one. you can own four southern companies or facebook. we're going to start doing these annoying comparisons, right? i mean southern company. >> it's legitimate. you wonder how, you understand the growth potential. >> some day boeing might sell enough of these jets to be worth -- >> it is astounding when you consider the value of electricity to the economy and how important it is to grow. >> and i wonder, if we had a big -- we'll talk about this later -- if we had a huge solar flare, is it possible for one of your things to get knocked out for a year. >> highly unlikely. >> those kinds of things, they would tend to happen more like -- >> should i buy tuna? cans of tuna? >> absolutely not. listen, joe, we're in great shape. don't worry about that. >> yeah, sounds like. glass in bag, nothing to worry about here. nothing to see here. the dow very unlikely. that's all i got. very unlikely the grid could go down for like four years. >> no, no, no. >> the dow coming off a record close while the s&p 500 is two points below the all-time closing high. joining us now is jim paulson, chief investment strategist, and here onset we have david bianco. i'm sorry, david, but paulson, we've talked about him so much. when he's here, we talk about him. this is like his own pr machine, "squawk box." but the reason we talk about you is we're trying to gauge where we are because the market as you correctly thought and, david, i think, too. but as you correctly thought has been going up. and you always make the point when you go through what we went through, for years, people are scared. first, they've got to get it out of their system that the world's going to end again any time soon. and then there's a long period after that it's not actually overheated. it's just back to normal. what inning are we in right now at 16,000 in a baseball game and not a softball game? >> i think we're in the middle of the game. i think maybe in the fourth or fifth inning, joe. i really think this thing probably has another five years to go. and i'm talking about the economic recovery and that means the stock market probably, as well. and i do think it's because it's going to take that long before people get confident enough before they start doing stupid things and start blowing themselves up again. people are getting more comfortable. but i wouldn't exactly say they're confident or exuberant. and that tells me we probably have longer to go. i do think that next year is going to be kind of a volatile year maybe and flat a little bit in the stock market. i think money velocity's picking up, we just don't know it yet. and the initial response to that is the economy gets better and the stock market goes nuts and i think that's part of what's happening here. but ultimately, when we find out next year that money velocity's starting to turn faster, that will really change the conversation of the fed, make tapering a panic, if you will, and probably cause a correction in the stock market. so i could see the market running up, letsz sa's say the o 2,000. but if we have a flat year next year, i think we might proceed higher than the 2015 and beyond. >> we'll get to david. but if we had another five years without a recession in the economy, wouldn't that make this like a ten-year period without a recession? and recessions in the past usually they come from a variety -- you know, they only come from a couple of different places. and certainly we don't look like we're overheating from inflation. but you think we can go ten years without a downward move in gdp? >> i do, joe. actually, since demographics have slowed in the rate of growth in working age populations slowed down since the middle 80s, we've had longer recoveries. we used to have the variety of boom bust, but the '80s were -- that recovery was eight, nine years long. 2000s was six, seven years long. we're having longer recoveries because they grow slower, they grow longer. i think that's what we're doing here. >> you were here when ronald reagan was president in the '80s. >> yep. >> i'm joking. he's not your -- your hero's in right now. david, what do you think? >> well, my thoughts are similar to jim's, which i feel good about because i'm a huge fan of jim's. >> we talk about jim quite a bit on the east coast. >> it's like their own pr. >> it's important to recognize inventories are moderate, capex, balance sheets are great, the financial system is de-risked. i think this is a long last cycle. most investors want to know how much upside in 2014. my message to them has been you've got several years of a healthy return still ahead. >> obviously, i just have one different question, though. for this year, if you're an investor, we're coming up on december. >> right. >> why don't -- do you lock in your gains and are people going to get out? if you're a hedge fund? >> hard to get back in. >> no, i know it's hard to time things. but invariably, there's always -- december can be a dangerous month. >> andrew, many of my clients ask the same question and that's why we do have a 1750 year-end target. markets ahead of that. for longer term investors, i would say stick with the course. but there's a few pieces of unfinished business that we have to look to next year particularly getting a tapering, a continuing resolution. >> if you need that money before when. >> i think if you want to protect gains, lock up a good year, you can do it, but we would advise doing it with big cap tech rather than defensives. >> where are you on that, jim? you think there's going to be a little bit -- a tough december? people going to get out? >> i don't think so. >> don't they have to call it a day and get out? >> yeah. i don't think so. i mean, i don't know. it's sort of random when you're talking about 30 days about anything could happen, i think. it's really tough to time. but i think -- my gut is, andrew, that we go higher yet get even -- get more exuberant and then have maybe a little correction some time later next year. i just as soon ride through this. i get a sense we don't have a top and there's some indicators suggesting that, as well. i would like to stay more cyclically oriented. my favorite sector is material stocks. i think commodities might have the best year. i think stocks might be flat, bonds get killed. i think the ten-year yield goes to 4%. and i think commodities have positive returns. in stocks, you could play that in material stocks. >> can you play that in caterpillar? are they just too hard hit by what's been happening in mining right now? >> i like caterpillar overall. those types of stocks, becky. i think that's a good play. one surprise next year too on top of a panic tapering that's forced on the fed because velocity turns up. i think we're going to see capital spending come to life. you look around the globe right now, this is the first time in this recovery as a ceo sitting on unspent cash i can look around and go, look, u.s. is accelerating to three. i've got positive and rising growth in europe, in japan and reacceleration of the emerging world all entertainment. so we don't have fast growth. that's the kind that presents opportunities for ceos that haven't existed until now. >> david, final word, yeah. >> well, we think china's doing well, but we think a lot of the companies exposed will be under pressure for longer. but i do think capex picks up and like most of the industrial companies, i do agree quite a bit with jim. we do probably have a bit of a santa rally. but looks like we pull january into 2013. but the bigger message is it's been a great four or five years. those who have the courage to participate. we're telling them to stay in the market for the next several years. >> he's in minnesota. he's positive. i mean, it's like, i hear little christmas, you know, like parable. >> i also suggest the gophers are going to beat the badgers this weekend. that's how optimistic we are out here. >> gophers beating -- and you said it just like -- like you're in fargo, the gophers. they might do that this week, jim, okay. david, thank you. >> thank you. >> appreciate you. don't forget, you elected a wrestler and then a comedian. there's something in the water in minnesota. huh? >> we have a sense of humor. >> you certainly do. you certainly do. up next, guest host and southern company ceo tom fanning on energy independence, obama care and much more. a governor with a boa, like a yellow feathered boa. >> he used to wear that. >> hulk hogan, right? >> no. >> yeah, it was. >> no. >> i thought it was -- at the bottom of the hour, we're going to be joined by atlanta fed president dennis lockhart, the latest fed minutes. 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. 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. welcome back to "squawk box" this morning. take a look at shares of footlocker. they are on the move. beating the street by 2 cents. revenue also topping consensus in third quarter comp sales rose 4.1%. also, shares of petsmart are worth watching. the retailers earnings topping estimates, revenues were in line. the white house is under pressure to pick the pause button on obama care. how are ceos tackling the affordable care act. we're going to ask tom fanning, ceo of southern company and he's going to be named deputy chair of the atlanta federal reserve come january 1st. we want to get your views on tapering and the markets. we can go to obama care. but actually, i want to go one place first. you said during the commercial break after we heard from jim paulson who is very optimistic about the world that you're a little less so? >> look, i think we are seeing a recovery. what we thought would happen this year in fact did happen. we saw a flat first six months and said the second six months we're going to start to recover. but the recovery has been so much more fragile than what we thought it would be. it's been lower in nominal terms and more fragile. look at things like university of chicago that's had this uncertainty index. it's two to three times higher than what it's been in history on a nominal level and way more volatile. and why is that? i think there is so much event risk. when you think about the frozen politics we have and the cliffs and everything else we have to fight through. there's a lot to be done on the fiscal side that would improve the economy on a sustainable basis. w we're just not seeing it. and i think these kind of hurdles that stay in front of the economy will inhibit people from making long-term bets in capital and employment and a variety of other things. >> people like you, you mean? >> well, we have -- >> ceos not spending money to do what they need to do. >> but we're almost on the extreme case. >> i know, but all long-term investment. ceos have to think about things longer than a year. >> that's right. >> look, you know, i share the optimism, things are getting better. they're not getting better nearly the rate we have potential -- >> i know you're a ceo and not a market player per se, but does the dow at 16,000, tdoes that make sense to you? >> the potential is so much higher. >> he's just like some investor of his own money. >> i know. >> but listen, how i translate that question, would be how the southeastern economy going to grow and how do i put assets in place to make sure energy is going to support the growth we need to have to grow the economy. >> it drives me nuts, you talk about how fiscal things going on and one person's fiscal thing is the opposite of another person's fiscal thing. you don't want these guys to get together and vote for another $800 billion stimulus bill, do you? >> no. joe, i think there are so many -- >> is tax reform fiscal wise? >> i do want tax reform. >> you don't want these guys to get together and -- >> well, i wrap tax reform in there, wrap the whole kind of downsizing a government. >> that's what i mean. downsizing of government. other people want fiscal parties to get together. >> no, no, no, no. i've been on the record a long time on that. >> you're going to be on the atlanta fed soon. >> well, i'm on the -- >> but no, would you want -- would you be in favor of tapering? or do you think things are so fragile you wouldn't? >> well, so i want to leave that decision to yellen and bernanke and my friend dennis lockhart and all that. but i'll tell you what i see. >> right. >> and that is the potential for the economy is so much better than what we're showing. and the nominal growth rate is, you know, i don't know half of what we should see and there's so much event risk and volatility out there pulling the support out of the economy right now is probably not a great thing. >> but as an electric company, you have a very good idea about how consumers are doing. >> you bet. >> how businesses are doing. tell us exactly what you see at this point. >> well, it's roughly what we said. in other words, the first six months were flat. the second six months we thought we'd see somewhere around a 2% growth rate, we're seeing about 1%. >> do you think that was because of the government shutdown? >> it's all of that. i think people, you look at consumer spending. i think this whole event risk and shutting down the government and are we going to pay our debts. that makes people at a very elemental level nervous. and i think one of the greatest things. you talk about fiscal policy. we've got to be for growth somehow. what we've got to do -- and i think there are things we could do i could talk about later to give the united states where we can give ourselves an unassailable advantage to grow jobs and make american lives better. you know, 48% of the families we serve in the southeast. we serve 4 1/2 million. 48% of them make less than $48,000 a year. and those families want better. a better place to live, they want better medical care, education, kids to have a better life. and what we're seeing right now is so much uncertainty that those folks that are just trying to make ends meet are having to make tough economic decisions every day. and why can't we? we have frozen government and one of the things i want to talk about a little bit later is how the business community can step up and try and fill that void. >> this is the argument we have every day. we want growth. one side wants private sector growth, the other side thinks that most of that growth can be engendered somehow by government policy. >> i think it's pretty clear that if the government tries to step in the middle and supplant certainly the private sector, what you do is -- >> democrats at all. >> well. that is not clear at all. >> well, i would argue the good intentions of democrats there's a bridging strategy. >> the only type of growth you hear proposed by the white house is they call it investment, which means higher taxes to spend on stuff like infrastructure or whatever -- that's all we hear about. education. and there's nothing wrong. we need to fix the education system. >> that's right. >> that's all you hear about, the growth is going to be engendered by more government spending not by getting out of the way of the private sector. >> and the answer is clear and not higher taxes. >> of course it's not clear. they get a budget deal, they want more revenue. >> it's interesting, which is right, it's a bridging strategy. >> what? >> a bridging strategy. >> but how do you -- >> you get from here to there. >> it is a bridging strategy. but how do you get unaddicted to it? >> that's the issue. i don't disagree. >> you want to build the bridge to nowhere. you want to build a bridge where there aren't any rivers. >> we're building bridges at this -- on this table. >> building them, tearing them down and building them back up. up next, bill ackman is back. and check out the blog, this week our top ten bands list. share yours with fellow viewers. check out squawk.cnbc.com for more. still to come -- from taper talk to janet yellen, atlanta fed president dennis lockhart goes on the record with "squawk box." it's an interview you can't afford to miss. and it's only right here on "squawk box." as this. at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives. invested in the world. bny mellon. over the next 40 years the united states population is going to grow by over 90 million people, and almost all that growth is going to be in cities. what's the healthiest and best way for them to grow so that they really become cauldrons of prosperity and cities of opportunity? what we have found is that if that family is moved into safe, clean affordable housing, places that have access to great school systems, access to jobs and multiple transportation modes then the neighborhood begins to thrive and then really really take off. the oxygen of community redevelopment is financing. and all this rebuilding that happened could not have happened without organizations like citi. citi has formed a partnership with our company so that we can take all the lessons from the revitalization of urban america to other cities. so we are now working in chicago and in washington, dc and newark. it's amazing how important safe, affordable housing is to the future of our society. welcome back to "squawk box." william ackman is renewing his attack on herbal life at a conference today. it's been almost a year now since he shocked wall street with the $1 billion short bet against the weight loss company accusing herbal life of being behind a pyramid scheme. he plans to present his case a second time now likely with hundreds of power point slides. all over again at the robin hood investment conference in new york. herbal life has denied it is a pyramid scheme, which tries to make money by new members who pay fees rather than relying only on the sales of goods. >> he's covered that, has he not? he's covered a lot of his shorts. >> i don't know what he's done in terms of what he's done. >> that's painful. >> a painful situation. this has been a tough situation the whole year. yesterday, dan loeb -- what was the stock he mentioned? >> i don't know. >> they did, they did, they did. i'm going to tell you right this second. >> i saw einhorn liked micron. dennis lockhart joins us up next. and later, 'tis the season for celebration, we're going to talk about the beer business in a moment. on the need to fix our broken immigration system, there are signs both political parties in washington get it: washington is lagging behind the country on this... ...this issue has been around far too long... and yet, we wait. reforming our immigration system would dramatically reduce our nation's debt... grow the economy by 5.4% ... and take bold steps to secure our borders. on this, both parties say they agree: democrats... we are very very strongly in favor of moving immigration reform... and republicans... i wouldn't underestimate the house's ability to pass the immigration bill... and yet, we wait... americans are tired of empty rhetoric. it is time for every leader to come through on their promise... and fix our broken immigration system tell congress: the time is now. fix america's broken immigration system. welcome back to "squawk box," everyone. in our headlines this morning, one of apple's biggest suppliers coming to the u.s. it's going to be investing $40 million to build a plant in pennsylvania and hire 500 workers. that plant is not intended for specific customers like apple. but will have a general focus on the high-end of the tech market. the bank of japan chose to keep the current monetary policy in place after a two-day meeting. there had been thought that they would boost the economy after the economic growth slipped to 1.9%. that is half of the prior quarter's rate. and a new york state judge will now decide if bank of america's $8.5 billion settlement with mortgage investors should be approved. this comes after a nine-week court proceeding that ended yesterday. there is no indication when that ruling might come. >> i've got one quick mention because i screwed this up, ackman did cover 40% of -- >> i knew that. >> he did that back in october. and we should say herbal life stock is up. >> and herbal life, unless they're selling a bunch of stuff that people then like sit on it and aren't able to sell it to the end user. it seems like their results have made it harder to prove his case. don't they keep selling a lot of stuff? >> they do. they do. >> is that lending up some where in some channel and never getting to the end user where people take it? i don't think it's possible now. >> the question is herbal life hasn't told you some of the statistics. >> i like the candy bars. >> i want to clarify that. >> that's why i asked you. i thought he had covered some. we should also tell you the senate banking committee approving janet yellen's nomination by a 14-8 vote. that does send the nomination to a full senate. joining us now to talk about the future of the fed is dennis lockhart. he is the president of the federal reserve bank of atlanta. also our guest host today is tom fanning, the ceo of southern company. and will be named the deputy chair come january 1st. president lockhart, thank you very much for joining us this morning. first of all, your thoughts on janet yellen. >> well, janet's a very qualified candidate for this position. as qualified as probably any person who has been put up in recent years. she's certainly a highly respected colleague. i've gotten to know her very well over the last few years. and one of the things i emphasized isn't stressed so much because of the stress on monetary policy is that she's been a reserve bank president like me. so she knows something about supervision and regulation. she knows something about the different services we provide the financial system. she's really well rounded. >> we need to fix -- >> president lockhart, we're having -- no, it's on his end. we're having some problems with president lockhart's microphone, we're going to get this fixed. if we could take a break right now. when we come back, we'll continue this conversation with the atlanta federal -- atlanta federal reserve president dennis lockhart. we'll be right back. gonna be a . you're talking to the guy who hasn't approved a new stapler purchase in three years. but then i saw the new windows tablet, with a real keyboard, usb port, and full office. it's a tablet that works for work. plus, it's got apps and games, for after hours, of course. compared to an ipad -- way more value. these tablets are such a steal; i couldn't find a reason not to buy them. ♪ honestly, i wanna see you be brave ♪ customer erin swensoneason ordebut they didn't fit.line customer's not happy, i'm not happy. sales go down, i'm not happy. merch comes back, i'm not happy. use ups. they make returns easy. unhappy customer becomes happy customer. then, repeat customer. easy returns, i'm happy. repeat customers, i'm happy. sales go up, i'm happy. i ordered another pair. i'm happy. 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[ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. ♪ [ male announcer ] 1.21 gigawatts. today, that's easy. ge is revolutionizing power. supercharging turbines with advanced hardware and innovative software. using data predictively to help power entire cities. so the turbines of today... will power us all... into the future. ♪ welcome back, everybody. we fixed our technical problems, let's get back to president lockhart. you were just talking about what you think about janet yellen. go ahead, sir. >> yeah, so i get another chance to praise my colleague janet yellen. she's extremely well-qualified for the position. you know, she is a fine economist. but one of the things i would stress which is part of the job is that she's familiar with the reserve bank. she was the president of the federal reserve bank of san francisco, of course. that means she knows something about supervision and regulation. she knows about the various services we provide the banking system. she's extraordinarily well rounded for this position. and i certainly hope she's confirmed. >> president lockhart, we've been trying to get a feel for the economy and that's the one thing we've been talking to tom about this morning. what's your sense of where we are in the economy right now? and how things are chugging along or aren't? >> well, i think tom and i see the economy in a similar way. it's certainly growing, but growing at a slow pace. the anticipated acceleration and growth that we hope for in the second half of the year really hasn't materialized yet. i'm forecasting that we will see a pick up in 2014. but at the moment, seeing a slow growth mode. >> that doesn't sound like you think tapering should begin as early as december. >> no, i'm not saying that. i think it should be on the table at the coming meetings. chairman bernanke said that in his recent speech. and i fully expect we'll be talking about in december, january and march. the way i think about this is the -- the tapering decision should happen if it is going to happen when the economy is ready and when the market is prepared. >> we had, president lockhart, it's joe kernan. we had our buddy bullard on. and he convinced me. he made such a case that since nothing's going on inflation wise, we'll do this forever if we have to. he said, why not basically i'm paraphra paraphrasing. consequences to this. so as long as employment is this high and inflation is this -- unemployment is this high and employment is this low, why not? it says every month that it goes on, the exit strategy becomes more difficult and more dangerous. it's fine that everything's going along right now. but i just wondered, do we really know what lies ahead? and as the old expression, the guy that jumps off a 50-story building, you know, thinks he's flying for 49 floors. well, i do think there's a fair amount of uncertainty the longer term consequences of the balance sheet. at the moment, i don't think we're in the danger zone. i think it's manageable. the exit will be manageable when the time comes and the shrinking of the balance sheet in all likelihood years ahead of us, plenty of time to prepare for that, get the necessary tools in place. even running some experiments, that kind of thing. the reality is, we've never been in this place before and managing a very large balance sheet and ultimately normalizing it. and consequently there could be some things that happen that are unanticipated and there's some risk associated. >> is there any canary in the coal mine? any canary -- if there's nothing to see in terms of something coming, is there anything that would be, you know, a sign of real trouble? how would you know? you said you don't think we've gone along -- we've gone too far in this process. how would you know if you don't have a canary in the coal mine? how is it? >> well, you know, some things just aren't knowable. and, again, the way i think about this question is it's not any one risk or cost as we use that term a lot of financial stability, disruption of markets, trouble with downsizing the balance sheet. it's not any one thing, it's likely a scenario in which things come together at the same time and in a combination that's unanticipated. those kinds of things, that kind of scenario planning very, very difficult to do and particularly years ahead. and i have been one who has been somewhat favoring the idea of beginning to phase out and change the mix of policy tools, phase out the asset purchases. i'm simply one that -- to some extent works from his gut. the bigger the balance sheet gets, the more we're dealing with an unknown factor in the economic future of the country. so my message at the moment is we're going to remain very accommodative for quite some time. and all likelihood, a number of years but the mix of tools that we use can change. and that's where the tapering decision comes in. >> you said, though, the tapering decision is going to be based on two things. one is when the economy is ready and one is when the market is prepared. what does that mean? the market is prepared? >> well, i think with ef been trying to get across a couple of points that are very important and the market may or may not actually to the extent there is a mind of the market actually buy into these points. one is that there's a distinction between the great policy. the targeting of the federal funds rate and the asset purchases. those are two separate tools and they're not tied together when we make a move on -- for example, on asset purchases. it is not necessarily signaling that there's any change in the policy for the interest rate. >> right. in other words, tapering -- >> second point -- we've been trying to put across that view and it's not been broadly accepted. certainly not as you look at some of the reaction in the market to either the minutes or to discussion in the public about the possibility of tapering. but they are two separate tools. we have a mix of tools. we can put together, i think, a mix of tools that will preserve the very accommodative stance of policy for quite some time. >> hey, dennis, this is tom. appreciate you being on. you and i have had this chat before that value is a function of risk and return and how the fed thinks about that relationship. we've talked a lot in joe's commentary about the risk side. in other words, how do we feel about growing the balance sheet and how do we unwind? give a little more insight on the return side. in other words, gdp growth. in other words, unemployment when we're really facing significant underemployment. how do you think about those? >> well, the way i think about this. yeah, the way i think about it is, you know, there's a cost and a benefit to any policy, as a matter of fact, and there are winners and losers with any particular stance of policy. so with quantitative easing, we take on, perhaps, some long-term considerations, concerns, risks. but i think up until now certainly, i think the net impact of the asset purchases has been positive, certainly they have influenced long-term rates. the stock of securities that the fed now owns certainly puts weight in the economy on riskier assets and investment in riskier assets. have supported the recovery. but certainly it is supported what we've been able to achieve so far. i think it's worth noting the initiation of the most recent round of asset purchases in september of 2012, we have, in fact, made quite a bit of progress on the employment front. a lot of people have been put to work. we've had rather good employment numbers now for the last year, really. and certainly in the last three months it's over 200,000 jobs net per month. i think that all speaks to the total package of policy being somewhat effective. and so i think the benefits have outweighed the costs, certainly up until this point. >> president lockhart, i have a question for you, we love having you on this program, we love having all fed presidents on this program to learn how they think about all this. but i wonder what you think of the communication strategy of the fed. and how you think the markets take the varying different views of different presidents who make public statements or public speeches and what kind of conversations happen between you behind the scenes about what you're willing to say or what you aren't saying out there. >> well, andrew, let me take the second question first. there's very little coordination and we all really are independent agents and can say pretty much whatever we want. we have rules of the road that all of us conform to. but we do operate as individual voices. i think the -- let's say the well versed observers of the fed understand exactly what they're taking in when they listen to us. they're taking in individual opinions that are taken to the table for what turns out to be a consensus decision at the end of the day on policy. and then that in turn becomes a vote and the 12 who have the vote are the ones who actually make the final decision on policy. but we are speaking as individuals. and no one should take what i have to say, for example, as speaking for the fed. >> hey, dennis, we all thought you did a great job preparing the markets for tapering last time. and i think the stock market had gotten back to where it was so it was a perfect time. and i'm going to give you the benefit of the doubt you were anticipating the problems in washington and didn't make for a good time. maybe that was the fact that did it. but at the time i was worried that you guys got spooked by what happened in the stock market. and i'm hoping a 3% move in the stock market wouldn't cause you guys to rethink retapering. is it the stock market or the 2.7 or 2.8 on the ten-year that did it which could hurt the housing recovery. which causes you to -- like we mentioned earlier, the reaction in the market. which market are you talking about? hopefully it's not a stock market. >> no, it's not the stock market, it's a broad financial market that move interest rates and have ultimate influence on the real economy as economists call it. and it is the real economy effect that really matters at the end of the day. the housing market would be one. and other interest sensitive markets, just including general consumer activity. as i remember the period in september prior to the decision to not go forward with a tapering move, the jobs numbers had weakened. we could see the fiscal deliberations in congress coming. and so there was some concern about whether the jump in interest rates was really going to have an influence on the recovery of the housing sector. all of those things, at least, i took into consideration. tom fanning earlier was talking about event risk. well, certainly looking forward to october and the resolution of the fiscal questions in congress begin to look like a clear example of an event risk. so i think the decision to hold off has been vindicated, really, by what has developed and event risk may be with us again in january. >> all right. president lockhart, we want to thank you very much for joining us today. we appreciate your time and we hope to see you again soon. >> thank you, becky. >> okay. >> there wasn't a sole -- soul behind him in atlanta. >> i thought that was -- >> still photograph. >> oh, was that a still photo? >> i think it was a still photo. >> i didn't see a living soul. >> when we come back, we're going to talk about whether obama care is killing employer-sponsored health insurance. home depot and ge are just a few dropping their plans for employees. now a second wave of cancellations could be headed our way. you need a permit... to be this awesome. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. 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(vo) meee-ow, business pro. meee-ow. go national. go like a pro. we are squawking about the business of booze this morning. the warm rays of summer may be long gone, but in the winter, it's nice to get a nice craft beer. it's still the season for drinking beer. and after the success of its summer shandy, irish guys, right? >> yeah. looking to boost sales with a variety of fresh fall and winter flavors. we're joined with the brothers jake and is president and ceo of the company, jacob -- see, they make me keep saying this, andrew. can you imagine? which was a family business and a craft beer maker which is a tough decision to make in the first place. has it paid off? been good? >> absolutely. excellent partner, 25 years now and for a lot of reasons our family decided to go with -- back then, the second largest brewer in the country to partner with them so they could learn about being more creative and innovative about making craft styles of beer from our family. it's been a great success. >> i love -- i love beer, but it doesn't love me sometimes in terms of my -- that's the thing that wears me out. i don't know what to drink. i've never drank bourbon and hard liquor, i don't know about that. now i'm drinking white wine and i don't really feel, you know, like -- >> you drink white wine? >> yeah. >> it's hard to order white wine for me and i kind of hide. i like beer. i like beer, but it just adds to my problems. >> one of the things you have to do is always enjoy beer in a glass. pour it vigorously in the glass you release the carbon dioxide, you get rid of the gas, the beer adds more flavor when it's enjoyed in a glass. >> the other thing, by the way, you're not supposed to drink the beer cold. what i've said is i've used bottles cold. >> right. big difference. try to drink it around 45 to 55 degrees, which is a little bit warmer than ice cold. but you'll get more flavor, the aromas will be terrific and our styles of beer, we make a wide variety, they're all different. >> the first six go down so smooth that, you know, then i'm on -- >> god bless you. >> the other thing we always say at our club is we're always in search of the perfect beer. we hope we never find it. >> yeah. >> and it's fun to see how you come up with innovations around taste. >> tell us about it. >> this is shandy and you talked about summer shandy, the explosive style of beer we've been able to make and take nationally for the first time this past year. it's been a huge success. this is the fall version of summer shandy, which summer shandy is lemonade and beer. how would you describe this? >> it's not sweet. it's a little bit more tart, it's very bright flavor, citrus flavor and people are absolutely loving it. >> yeah, sold twice as much as what we expected. and then for the big beer drinkers, you'd love this because it's got a lot of dark, rich malts with it. with a little vanilla. and it's absolutely -- >> done with real vanilla bean which imparts the flavor. it's absolutely wonderful for the holidays. >> give us a cutoff on what we can accept from people. >> how cold are one of these things? >> you should try one. >> if you're going to have that, try the -- >> here's the thing, though. >> thank you. >> andrew -- >> this is good. >> yeah. >> you and i can drink together now. just the girls. >> thank you, cheers. >> my bottles are gone now. coming up, richard branson on the stage of his global business and the economy when we come back. honestly? no way did i think a tablet was gonna be a good deal. you're talking to the guy who hasn't approved a new stapler purchase in three years. but then i saw the new windows tablet, with a real keyboard, usb port, and full office. it's a tablet that works for work. plus, it's got apps and games, for after hours, of course. compared to an ipad -- way more value. these tablets are such a steal; i couldn't find a reason not to buy them. ♪ honestly, i wanna see you be brave ♪ at bny mellon, our business is investments. i couldn't find a reason not to buy them. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives. invested in the world. bny mellon. afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. think your company's health insurance plan is safe? well, a new study says as many as 100 million small and large business policies could be canceled next year. find out where the cuts could hit hardest. goldman's bond guru expecting job growth in the near future. calling it the housing handoff. how to prepare your portfolio. >> sir richard branson joining us to talk about the future of space flight and more. catching fire, the second installment in the "hunger game" series expected to be a big draw at the box office this weekend. the third hour of "squawk box" begins right now. welcome back to "squawk box" on cnbc, first in business worldwide. i'm joe kernan along with becky quick and andrew, my good sport, because the wine cooler jokes go all the way back to faber, 17, 18 years. >> i know. >> if you're in manhattan, i'm going to say you drink wine coolers. >> and you drink white wine. >> i go, make it two of those. >> i prefer chilled zima. has to be chilled. >> our guest host this morning, definitely, i can tell you are a beer drinker. >> he's like a bourbon drinker. >> i'm democratic with my desires. >> when they took it away, i saw you reach for it. >> i'm not proud of it. >> what are you going to do? >> more from tom still ahead. and he drinks because he knows the entire grid could go down at any second from a solar flare which he admitted earlier. first becky has your morning headlines. we're going to start things off with the markets. the u.s. equity futures today have barely budged but that's because after yesterday, we did see a triple digit gain to the first close. the s&p 500 has jumped 26%, you have seen incredibly big moves. >> okay. and we've got corporate news, as well. charter communications reportedly close to completing a funding deal to make aed by for time warner cable. it's close to completion, but it isn't clear which banks might be participating or if a formal bid will be made for time warner cable. that stock has run in anticipati anticipation, i would argue at some rate that a deal is coming. also, the console wars are officially underway with the launch of microsoft's xbox one. you going to get one? >> yes, both. >> you're going to get both. gamers in more than a dozen countries started snapping up the console at midnight. the predecessor, the xbox 360 was the top selling console in north america. but sony reported strong sales in the ps4 debut that happened last week. check out shares of sony and microsoft over the past year, and sony cutting $250 million from the entertainment business yesterday. some people giving some credit to dan loeb, the activist investor. we were talking about activists and what all that means. >> and a new report analyzing the impact of obama care is estimating that somewhere between 50 and 100 million jobs -- i'm sorry, policies could end up being canceled with small to medium sized businesses when it's all said and done. here now to explain it, the resident scholar at the aei who conducted the analysis. stan, i mentioned that report to someone yesterday who said that was -- it was vastly overstated. can you make the case? are you talking about the certain amount of time. isn't it a year? a lot of these policies come due at the small to medium sized companies. they won't be in compliance with obama care. >> next year. >> is it one year? >> it's in the coming year. so, look, the administration talking point has been that only 5 million people are affected and will see the current policies change. >> only? >> yeah. >> which is, you know -- even though they say, hey, we had 26,000 sign up, like that's a good number. >> yeah, exactly. >> but only 5 million will lose their -- >> right. exactly. they've gone to saying, no, if you like your plan, you can keep it to saying, well, look, it's only millions and millions of people. the point i've tried to make is that it's not -- it's not -- that's not even true. it's not just millions and millions of people. it's tens of millions of people. there's a lot of people in the small group market who will see their plans be canceled or changed over the coming year because their plans even though they predate the law will no longer have grandfather status. and a lot of the new minimal essential benefits and they'll be subject to community ratings. and even in the large group market, of course, plans will be subject to new taxes, like the reinsurance tax and things like that. >> couldn't companies just say, okay, what do we need to do? we want to keep it. to coming to compliance. isn't it possible on the exchanges that some of the plants could be the same price and they would come into compliance and there'd be no reason? >> it's possible. of course, 100 million individuals affected is the very high end of the estimate. it depends on, you know, how material does it change have to be to qualify as a cancellation. but it certainly, right, you go on to the small business exchanges. it's a bit of a lottery whether you have, whether you'll see plans that are similar to what you had, how the provider networks are different. and, especially, i think, for firms that have relatively young and healthy workers. they'll see plans that are much more expensive than the ones that were able to -- >> at this point, how much cheaper would it be for these companies. they need to pay a penalty if they get rid of their plans? how much would the plants have to go up to where they'd say, hey, i'm paying the penalty and you go on the exchange? >> well, it'll vary from firm to firm, of course. there'll be i think a more attractive option for firms that have relatively low pay. young workers, maybe construction firms and things like that. but i think -- a lot of firms, i think, in the end, are competing for -- especially more innovative firms with high skilled workers are directly competing with large firms that aren't faced with as many of these problems. and they will try and continue to offer health plans. and this will make it harder for them to compete for talent. >> is it a bad thing if a person who has an employer plan that's not that great. is it a bad thing if they end up in a really good plan on one of the exchanges at an affordable price? >> well, i think what is a bad thing is that they are not given the option to choose for themselves. it's obviously very subjective what a bad plan is. do i need a plan that covers me for acupuncture and maternity care? not really. i think in the ideal situation you give people the chance to choose. >> although, stan, right now if you are covered by a big employer, you are covered for maternity and you are paying for that. no matter what. >> for sure. >> and that's how it works and makes maternity care more affordable. >> oh, of course. and if the large employer wants to fund maternity -- wants to have all the employees to pay for maternity care to make the total benefit packages that it offers more attractive to the employees, then that's fine. what i'm just saying is, you know, you go from a situation with people who have plans and the administration promised them they'd be able to keep those plans. now they aren't and they're clear winners and losers and it's not true that only 5 million people in the individual market are affected as lots and lots of people with employer-provided insurance who will see their plans disappear or change materially. >> what's scary is if you remember when they were trying to pass obama care, they'd take one example of someone that had a pre-existing condition. and that can go -- you get so many mileage out of -- look when you do the personal story of this person that was affected by not having insurance. if you went to every one of those 5 million people, this is going to get really ugly for people that are mad. you're going to be able to find people in every state that are willing to go on record saying this is what happened to me and my plan was canceled. i don't see how you -- if it's 5 million there and even if it's only 20 million more based on -- >> yeah, seriously. >> i don't see how the pr battle gets won. >> especially because -- a lot of this will materialize in the run-up to the midterm elections. >> to november, i know. >> no, i agree. >> well, you know, it's fun -- i wish everything -- i do wish everybody could get great health care and everyone was covered. but being in the news business is going to be interesting for the next 12 months. >> that's for sure. >> and, apparently, andrew, zima is such pajoritive, not even andrew should be labeled. >> i don't know if they make it anymore. >> it is unfortunate. >> it's unfortunate? thank you. thank you. appreciate that. >> it is unfortunate that you drink zima. on monday, we're going to talk to the white hat hacker. this is another thing. the security vulnerabilities of the obama care website and advised congress to scrap the site and start over. david kennedy. >> this is another one. we had one on here yesterday. >> the whole thing is a mess. coming up, he's been called goldman's bond guru. going to join us next. he overseas more than 575 billion in assets. he'll explain how we could see job growth thanks to the housing handoff. and later, sir richard branson will talk to us about the future of space flight. 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. 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. customer erin swensonan do ordebut they didn't fit.line customer's not happy, i'm not happy. sales go down, i'm not happy. merch comes back, i'm not happy. use ups. they make returns easy. unhappy customer becomes happy customer. then, repeat customer. easy returns, i'm happy. repeat customers, i'm happy. sales go up, i'm happy. i ordered another pair. i'm happy. (both) i'm happy. i'm happy. happy. happy. happy. happy. happy happy. i love logistics. welcome back to "squawk box," everyone. equities may be on fire with the dow closing above 16,000 yesterday. let's take a look at how fixed income and the credit markets are performing. joining us onset is john biner, cio and co-head of fixed income. he overseas more than $570 billion in assets. and jonathan, we've been talking about what it means for the fed. what it's going to mean for the ten-year, bond prices overall. don't you think this is going to be something that can slide into easily if they start tapering? or is the market going to have a severe reaction? >> well, i think the actual tapering itself may not cause a severe reaction. i'm really hoping they're going to do it soon so we can stop saying the word taper. i would say the market is ready for a reduction in the asset purchases. i think the market is a little bit on edge, though. because in some sense the fed's been the biggest buyer of fixed income instruments for a while now. so investors are not sure of the price they see on the screen. is that the real price? >> right. >> once the fed starts to step away, you know, where are we going to settle out? >> it's going to be interesting. what do you think? is it creating a big distortion in prices right now? >> well, we do think that interest rates are likely to continue to go higher. it's a combination of positive economic growth view. and the fed through qe has been successful in keeping longer term interest rates lower than they would otherwise be. we do think we're going to key seeing rates go higher in the long end. >> where would the ten-year go? they would say they were going to start tapering, start pulling a little bit back. >> well, i think it's a combination of that and the data beginning to be stronger. just them coming out and saying we're going to taper, i think you're going to see pressure there. we could see that on the ten-year some time soon and could see a 4% rate some time before the end of next year. >> sounds like they decided to go out with that. to try to prevent the ten-year from going up when it happens. it's almost like they consciously said, hey, listen -- >> we have to coordinate this. i think they did. >> everybody says that. they all say the same thing. >> you heard from lockhart, too, who said the economy is ready. >> that's the thing. they directly control the short rate, they've essentially controlled the longer term rates through qe but don't want to stick with that policy. so they're in a bind. they're trying to keep longer term rates low for longer but it's going to be tough for them to do that. i found it notable i heard words like large unknowns, risk, experiment, hunch, those are words that don't give investors a lot of comfort. >> all right. what got me is that we don't see anything. we have no idea what we're looking for but we don't see any signs this is going to be a problem to unwind. but we wouldn't know what the signs were anyway. >> well, he did say he went on his gut, though. the idea that bigger is harder, we're in uncharted territory. it was an interesting conversation. we've been talking with tom fanning, our guest host and he was talking about how he sees the economy growing but at a slower than expected rate. i wonder how that plays out, where you're trying to decide where to put your money. >> sure, it's something we're always focusing on and trying to figure out where we are in the economy, where do we see growth going? inflation going and so on. look, we actually -- we've been in a period since the recession of this very sort of bumping around the bottom, 2%, we've sort of gotten used to this 1%, 2% gdp levels. we feel pretty confident, though, this is it, the time we start to accelerate. not into a boom, but something that may feel like a boom. something like 3%, 3.5% gdp starting in 2014. it's a big part of that. not that we're going to see big price gains. we've seen, actually, pretty big price gains in home prices. but we actually think we're going to start putting construction workers back to work. we way overbuilt then we way underbuilt and now we think we're going back to an equilibri equilibrium. >> yeah, we've been seeing a resurgence and then a pullback, resurgence and pullback. and the rate of growth has been roughly half of what we thought it would be. it is accelerating, but there's so much uncertainty out in the market. so much event risk that you're creating a fundamental for businesses that will create a sustainable economic growth rate to not show up. so long as there's that much uncertainty, people won't commit to long-term growth. that's my worry. i hope you're right. >> and i think you're right. in fact, i think the uncertainty has caused such anemic growth over the last few years. companies have been sitting on cash, cash has been piling up on balance sheets, but we're starting to see that uncertainty to some extent go to the wayside. i think the ending of qe, i think, actually, there's uncertainty now, but i think once we get beyond that, i think that's another thing to get past. we've had elections, we've had fiscal issues, you know, some of that has calmed down. so we do think combination of a less uncertainty and, you know, a lot of money sitting on balance sheets that basically needs to get put into the real economy and earning zero right now probably going to earn zero for another couple years, we think it's going to happen this year into next. >> i know this is not your topic, but goldman just came out with a big call on gold. did you see this? >> i did not. >> then i won't go there. >> i wasn't going to answer the question anyway. >> joe was saying -- >> it's a big company. >> you have a big call on gold going up and now on gold going down. >> were you involved in that deal? >> no idea what you're talking about. >> just wondered. >> bonds have a sort of implicit sometimes relationship. >> one last question for you, have you seen, we've been waiting for this great rotation out of bonds into stocks, have you seen that? what kind of money's going into bonds right now and what do you hear from your clients? >> well, it's interesting, i think you're starting to see it. you're seeing some, we've seen flows into equities, haven't seen in a while. but it's interesting within the bond market, there's a great rotation within fixed income. more core bonds, taxable bonds, high-quality tax exempt bonds which you think about what drives the returns. it's income. but those coupon rates are very, very low right now. and it's price appreciation or depreciation. when rates go higher, you see prices going down. we've seen negative rates of return and those high-quality bonds and long-term bonds this year. you start to see people moving away from the traditional and more towards the untraditional. people buying floating rate securities, bank loan funds have been popular, maybe too popular, we do like the asset class. but there's been tremendous flows there because you have rates that are going to float as interest rates go higher. and a big one for us and across the industry has been the so-called unconstrained bond fund. what these really are portfolios that don't focus on buying high quality long-term government bonds, they go across the entire global fixed income universe. they tend to use strategies to mitigate interest rate risks. even if they go up, these funds don't necessarily get hurt. we use hedging strategies to try to essentially cause fixed rate bonds to turn into floating rate bonds and they could be really opportunistic. so when there's sellers in the market, these funds can actually come in because they're not tied to a particular index. they can come in and generate a better return. so going much more flexible and hedging a lot of that interest rate risk is really what investors are focused on. >> are you credit sensitive there? >> yeah. so the thing is, these are not money market funds, they're not earning zero, which is good. but they also have to take some risk. what we're saying is don't load up on taking long-term interest rate risk. take other types of risks. it's some currency, it's some credit, it's some emerging market exposure. taking advantage of the distress in the muni market lately. it's risk. there is risk there you're trying to achieve a pretty attractive income stream and total return. but it's different kinds of risk. a great diversifier to what a typical allocation, a bond portfolio, which is essentially buying high-quality long-term bods bonds and sort of sitting on them. that strategy may not work over the next few years. >> thank you for coming in. >> thank you for having me. just moments ago, virgin group chairman sir richard branson tweeted the following, said, want to spend your big coins? how about a ticket to space? we'll discuss live o on @squawkcnbc. he'll join us in about ten minutes. [ male announcer ] once, there was a man who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade. okay, who helps you focus on your recovery? yo, yo, yo. aflac. wow. [ under his breath ] that was horrible. pays you cash when you're sick or hurt? [ japanese accent ] aflac. love it. [ under his breath ] hate it. helps you focus on getting back to normal? [ as a southern belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. uh huh. [ under his breath ] i am so fired. you're on in 5, duck. [ male announcer ] when you're sick or hurt, aflac pays you cash. find out more at aflac.com. welcome back to "squawk box," everyone. federal regulators are considering whether to allow airplane passengers to use their cell phones and calls. for calls and text messages during flights. this is an announcement by the fcc. it sets up a debate over technical and social implications. guys, we were talking about this earlier. those technical considerations are one issue, the social ones are a very different one because the question again becomes, do you want to listen to people talking the entire plane ride when you're trapped and can't escape. andrew and joe, i think you felt like i did about that. >> yes. >> yes, we did. >> and we -- we don't disagree on a lot of things, do we? >> no, but a lot of times we'll have a different take on a story, kind of bring a different opinion. >> this one, we're all in cahoots on. >> we both like white wine, chardonnay -- >> and zima. >> and this is the next question and i guess they've figured out, look, it'd be really tough for flight attendants. flight attendants, i think their union came out and is going to be opposed to this. they're going to have to police all this and it's difficult in the airs right now. >> how is -- >> so you can do it in the air? you don't need cell phone towers? >> because you run off of wi-fi. >> i think they're going to find a way so you're not going tower to tower, but i don't know every plane is equipped for that. >> to do that in coach. and most of the planes they added an extra seat per row. >> you have more people talking. >> in new york city, they don't allow you to do it in the subways. >> having said all this, i would love if i could be the one talking and staying connected to work. he is an original "squawk box" icon and rebel, sir richard branson tweeting the bit coins could buy you a trip to space. he'll join us in a few minutes to explain. this week "squawk box" is live with your top bands of all time. see which viewers made the cut. on the need to fix our broken immigration system, there are signs both political parties in washington get it: washington is lagging behind the country on this... ...this issue has been around far too long... and yet, we wait. reforming our immigration system would dramatically reduce our nation's debt... grow the economy by 5.4% ... and take bold steps to secure our borders. on this, both parties say they agree: democrats... we are very very strongly in favor of moving immigration reform... and republicans... we do want to make some progress in reforming our broken immigration system... and yet, we wait... amicans are tired of empty rhetoric. it is time for every leader to come through on their promise... and fix our broken immigration system tell congress: the time is now. fix america's broken immigration system. welcome back to "squawk box." let's look at some stock to watch in today's trading. petsmart reported third quarter profit of 88 cents per share, 2 cents above estimates. revenue, however, was slightly below consensus and below analyst forecasts. also, take a look at footlocker, beating estimates by 2 cents, revenue also beat consensus, footlocker, 4.1% increase in same-store sales was better than the 3.5% average analysts had estimated. comps. >> easier. >> better phrase, yes. >> and then united continental was upgraded to buy from neutral at goldman sachs. goldman says the airline is in a position to post outsized earnings and growth in 2014. and specialty grocer, the fresh marketer earned 23 cents per share in the fourth quarter. sales were also below forecast and the company cut its full-year forecast for the second time. >> "catching fire" already off to a massive start. how big will it be? and what does it mean for the studio behind it? julia boorstin joins us onset. i can't wait, i have tickets to go tonight. >> i saw it monday and i thought it was good. i really enjoyed it. it's already well on its way to setting some new records. it could be the biggest non3d opening weekend projected to hit as much as $175 million even in the u.s. this weekend. now, $175 million would make it the second biggest opening weekend of all time. fant fandango says it's top selling of the year with 90% of all this week's ticket sales and we don't have midnight sales yet. but analysts are expecting more than $30 million from last night's u.s. box office. now, overseas, the film's expected to bring in more than $400 million over its run where it will benefit from a bigger fan base for jennifer lawrence, the star of the film, as well as bigger fan base just for the franchise as a whole and the books they're based on. now lion's gate has been wise to extend the successful franchise. it's splitting the third and final book and series into two films. >> really. i didn't know that. >> and the final film is hitting theaters in november of 2015. the big question, what then? its recent "ender's game" film was fine, but won't spawn a successful franchise the size of "hunger games" or "twilight." warns of a potential earnings cliff coming up in the fiscal 2017 when the "hunger games" franchise wraps up. the question is, can the studio parlay the success of twilight and hunger games to consistent success with young adult films. earlier this week, michael burns came on the air and remarked that the rest of the studio is on the rise. >> we're not just a one-trick pony. we've got an enormous library, our television business is doing great. we have a new show we're kicking off with hulu, "orange is the new black" is doing great for netflix. >> the hunger games this weekend, the more powerful lion's gate brand will be to launch new franchises down the line. you're seeing it tonight, becky? >> yeah, the kids are dying to see it. we bought tickets long in advance. >> the first time around, you were kind of opposed to this because people were killing each other. >> well, i found the first film somewhat appalling. the first film was about kids killing kids. i wasn't that big of a fan. >> she won, didn't she? they've got -- >> it's kids killing kids. >> it's a twist because there's also this entire trying to keep the man down and her being the symbol of the whole thing. there's a lot of different layers. >> you said it was the second -- if you say it was the -- >> the first one will be the avengers. this will be the biggest non 3d of all time. >> what was the biggest? >> the avengers. >> what's that? >> a big marvel film. here's the -- >> the hulk and -- >> 2d films, tickets aren't as expensive. so this would be the biggest 2d opening and the second biggest of all time. >> i thought i l bought 3d tickets. it's on imax but not 3d. >> yeah. >> "the hobbit" they did three, they split the last one to do two. that's tricky, isn't it? >> they're smart. >> leverage it a little bit. . >> thank you, julia. richard branson making news this morning tweeting. explaining why he's getting behind the alternative currency. back with richard in a moment. 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. welcome back to "squawk box." we're going to speak to virgin group founder richard branson in a minute. but in the meantime, let's get back to our guest host tom fanning, ceo of southern company. wecht talked about -- we haven't talked about obama care in a real way with you. we're talking about these other issues. but has it actually impacted your business in any way? >> well, it absolutely is impacting everybody's business, right? when you look at what's going on right now, it's a disaster, okay. and, in fact, i'm so sympathetic, i think, to the problems they're having. i had 15 different jobs at southern company in my 15 years there. one of them i was cio. and we all know that means career is over. the challenges these guys face in putting these big complex systems is enormous. and if you think you're going to get the thing solved by the end of november, you know, i think that's a pipe dream. so this is going to be something in my opinion that's going to go on for a long time. so, the problem remains, what are we going to do about kind of health care? you can't solve the problem of america's long-term financial integrity without dealing with all of these issues, health care being one of them. we're seeing 8% cost increases. so we clearly need to do something. is this comprehensive change the right way to go? not for southern, not right now. it was interesting, i had another ceo talk to me about this. and he has -- we have 26,000 people, he had over 100,000 people. and his comment was any ceo that doesn't push their employees into the single payer system and let america subsidize them should be fired. well, i just don't believe that. you know. my company, southern company's not run by a spread sheet. the ability to attract and retain people and something as critical as health care for the deep technical talent that we need to make, move and sell electricity is a really critical strategic issue. it's not a spread sheet kind of issue. so, of course, there are really good things that come out of the notion of broader health care, but there are ways i think to get there. so how is it impacting us today? we are simplifying, streamlining our offerings. we are looking at ways -- we've adopted a lot of the features of the affordable care act right now covering preexisting conditions, portability, 26-year-old all that kind of thing. so there's i think a glide path we're going to have to adopt going into the future. >> no, i was thinking the other day, we were having another discussion where people argue what has caused health care inflation to subside over the last couple of years. >> the recession's a big one. >> some people say recession, other people say obama care's already working to hold down costs. and i finally realized since obama care basically caused the recession, it did hold down costs. it's not an argument anymore. not causing the recession, but causing it to remain. causing it to remain weak. >> weak. >> see how i brought all sides together? >> always. >> yes, it is obama care. >> listen -- >> the affordable care act isn't going to solve that. >> but isn't -- the question is, is the short-term pain for a long-term gain? the long-term -- and i imagine if you were to talk to people in the obama administration, they would suggest to you their thought is they're going to lower costs for everybody that ultimately maybe they do move to a single payer and more companies move people off and that's better for the economy. that's the argument that's made in certain circles, right? >> we believe health care is a huge differentiator on being able to attract and retain people. and i think we've been able to demonstrate year-over-year over year, this is a huge benefit. and it makes a lot of sense to -- and we can always improve. and there's obvious dominant solutions to improve this issue. like one is, we need a much more informed consumer. >> and it's -- andrew -- >> you think you compete on your health care plan? >> sure, part of it. part of it is a pension plan and everything. >> absolutely. >> if someone -- >> even with young people. >> if i worked for a company that said, hey, fatty, if you want to get a discount on your life insurance or this insurance, you've got to do things to get in better shape. if the government tells me that, but if the company i work for, you're perfectly entitled to induce me to a more healthy lifestyle. i feel like, no, i'm going to have two big gulps if i want. >> then it's your choice. >> and i'm at a company. when it's coming from the private sector. >> we've experimented with those ideas. you raise the premiums to everybody and give discounts to the -- >> the people with the right behavior. don't smoke, don't -- >> this issue of the more informed consumer is really an important issue. >> i wish there was a way. when you go to your doctor's office, they say we'll bill your insurance agency and let you know how much it costs. it's crazy. >> we're going to put a quick pause on this conversation if you could only because our connection to mr. branson has been met. here we are. we should tell you that virtual currency bitcoin has a new backer this morning making news right here on "squawk box." sir richard branson tweeting moments ago that virgin galactic is accepting bitcoin. and founder and chairman of the virgin group. sir richard, thank you for joining us. >> thank you. >> why accept bitcoins? >> why not? it's a currency that -- a new currency, new, exciting currency. i'm also invested in a great, exciting new payment process. there are a lot of people who got into bitcoin quite early on who made quite a lot of money and are all interested in going to space. virgin galactic is a bold, entrepreneurial technology. it's driving a revolution and bitcoin is doing just the same when it comes to inventing a new currency that, you know, we'll have to see how it goes. >> there's a lot of people who have done very well. >> it occurs to me that bitcoin or the value of bitcoin has been volatile. it's gone up and down in a very meaningful way. even over the past couple of months. when you accept bitcoin, i don't know when your first flight is going up. you don't know what it's going to be -- you just sold it -- you just sold a ticket using bitcoin, but do you know how much the value of that ticket is going to be worth to you one way or the other? >> yeah. the first ticket we sold was literally today, which was to hawaii, who made quite a lot of money by getting into bitcoin early on. as she's paid us in bitcoin, we transferred that money, actually, into dollars so if she ever, you know, a fixed price we can actually pay her the money back if she changes her mind about going to space in a few month's time in dollars at the time she paid it. so, you know, there's not a lot of risks for us as a company taking bitcoin. and i think it's, you know, it's fascinating to watch what happened with bitcoin. i think congress has been spending a week looking at it. they might bring in some regulation. i hope it doesn't stifle the innovation of new technologies like bitcoin. >> you're an investor in bitcoin. what is it you see about bitcoin? some people suggest the success means that the dollar ultimately has to fail, for example. that this is the equivalent of buying gold. >> well, i -- i wouldn't want to risk saying publicly that it's the equivalent of buying gold. i think the fact that there's a limit -- going to be a limited number of bitcoins out there and it'll ultimately be capped, you know, unlike normal currencies where governments can print more currencies, it gives it a sense of security. but obviously there are risks involved in new ventures like this. it has been only going a year. it soared up in value. there's been spikes and lows. but i think one day it will settle at a price that, you know, i personally believe higher than the price it is at today. >> do you see a day where you're not transferring? it's funny, when you said you were transferring the bitcoins into dollars, it made me think it's really not the future of bitcoin. how far are we away from a time when you wouldn't be transferring those bitcoins into dollars? >> well, you know, if we -- if we didn't have to give brief up to three months before the person flies, you know, we wo d would -- we could keep it in bitcoins and we could take a risk. but we'd rather, you know -- i've invested in bitcoins, i'm holding on to bitcoins and i can afford to take a risk with my own personal money in it. virgin galactic, we've got other shells and -- >> what price did you get into bitcoin at, by the way? >> a while ago. i think anyone who got in early on has done very well. but the people who bought last week have done well. >> right. >> it's -- >> and how many bitcoins does it take to get to space on a virgin galactic flight? >> it's a very good question. but if you could -- it's -- >> we convert back to dollars. >> if you convert $250,000 into bitcoins. the bitcoin is going up in value pretty quickly. not many bitcoins to go to space these days. >> richard, we've been talking about this proposal to allow passengers to talk on their cell phones while they're in flight. what do you think about that? we were a little concerned about the idea of having an entire cabin full of people all chatting away at the same time and being trapped there with them. >> well, look, it's been bizarre you've had to turn your phones off in the past when, i think, as the airline owners we know that the regulators know it's not an issue for safety. i think what's likely to happen if you'll have talking cabins like you used to have smoking in the cabins where people can talk and quiet cabins where people can sleep and not talk and that's the kind of thing we're looking at doing and introducing in the various virgin airlines around the world. >> do we pay more for the seats in the talking cabins or more for the seats in the nontalking cabins? >> on virgin you pay the same price on each seat. >> i imagine you might have seen the news. singapore air, which i know is in business with virgin is doing its last night from new york to singapore directly. it's an 18 1/2 hour flight. the longest flight in history. and it's apparently no longer a viable business. and i wonder what that portends for other long haul flights. >> well, look, i think the exciting thing with virgin galactic is we're building -- we're doing that for a purpose. and that is virgin galactic, we would like to do new york to singapore in one hour traveling around the world at 26,000 miles an hour. that will happen hopefully in my lifetime, it will definitely happen in my children's lifetime and say maybe singapore airlines has seen the writing on the wall and is getting ready for our virgin galactic flights. that will be the future and it will be incredibly exciting. >> you're still doing this, even after you saw gravity? >> i've got a funny feeling when your friends start arriving there in one hour, you're still at the airport waiting to take off. >> richard, real quick before you go, i don't know if it's right behind you right now but the great house on your island, i know you just rebuilt it. there was the fire, we talked about it about a year ago when it happened and i had the great fortune of actually seeing the old house. what's is look like? >> it is right behind me. it's rebuilt, it's beautiful. we've actually got -- [ inaudible ]. >> we should do the show from there. >> come and do the show from here. >> all right! >> you got a deal. >> sir richard branson, thank you for joining us this morning. >> save that tape there. >> we got an invitation. it's real. >> was that an invite? >> that was a real invitation. bona fide. >> bona fide. that's the word i've been looking for. we've been sitting next to each other for a while now. we finish each other's sentences. >> that's exactly the word i was looking for. >> coming up, your list of stocks to watch. is today friday? >> it is. >> that's so good. tem, there are signs both political parties in washington get it: washington is lagging behind the country on this... ...this issue has been around far too long... and yet, we wait. reforming our immigration system would dramatically reduce our nation's debt... grow the economy by 5.4% ... and take bold steps to secure our borders. on this, both parties say they agree: democrats... we are very very strongly in favor of moving immigration reform... and republicans... we do want to make some progress in reforming our broken immigration system... and yet, we wait... amicans are tired of empty rhetoric. it is time for every leader to come through on their promise... and fix our broken immigration system tell congress: the time is now. fix america's broken immigration system. 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. now get 200 free trades when you open an account. let's get done to the new york stock exchange. jim cramer joins us now. we like to get substantive stuff out of you, jim. there's not that much happening. you've seen gravity. are you going up in one of branson's things? >> no. i did fly virgin out of san francisco. it was just such a pleasure. >> really? >> yeah. pilot jeff came out to me, bought a lot of kinder morgan on my recommendation, talked about where he got in and the situation. just a terrific guy, terrific plane ride. >> if all you do is accept bitcoin and turn it into dollars as quickly as you can to make sure you don't have currency risk, is that a currency? >> the government didn't shut it down. i thought one of our arms of government would say this is a money laundering thing, we don't want to do it. this a terrific way if you're a bad guy to money launder. the government is not showing any foresight here. it's a shame because i'm sure if you got ben bernanke in a room, he would say this is a real bad idea. >> what's the game this week? there isn't one, is there? >> well -- >> i meant college. >> sunday night is unbelievable we have that, the pats. >> a giant redskin game, they should flex that. >> that's going to be like 30 million. >> it's going to be our biggest game of the year. >> a little more tom fanning before we end the day. back in just a moment. customer erin swenson ordered shoes from us online but they didn't fit. customer's not happy, i'm not happy. sales go down, i'm not happy. merch comes back, i'm not happy. use ups. they make returns easy. unhappy customer becomes happy customer. then, repeat customer. easy returns, i'm happy. repeat customers, i'm happy. sales go up, i'm happy. i ordered another pair. i'm happy. (both) i'm happy. i'm happy. happy. happy. happy. happy. happy happy. i love logistics. okay, who helps you focus on your recovery? yo, yo, yo. aflac. wow. [ under his breath ] that was horrible. pays you cash when you're sick or hurt? [ japanese accent ] aflac. love it. [ under his breath ] hate it. helps you focus on getting back to normal? [ as a southern belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. uh huh. [ under his breath ] i am so fired. you're on in 5, duck. [ male announcer ] when you're sick or hurt, aflac pays you cash. find out more at aflac.com. welcome back. our guest host today, tom fanning, gets the last word. last thought? >> we're talking about the economy, and affordable care act and innovation and all this stuff going on, it's fascinating that slow growth ran the economy, unacceptably high unemployment. now it seems people are starting to doubt and it's time for business to step forward. >> have a great weekend, everybody. see you on monday. "squawk on the street" starts now. ♪ we work hard, play hard, work hard ♪ >> good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. the dow did close about 16,000 yesterday, wants to add a little bit more. we wait for bill ackman to renew his attack on herbalife today.
join the conversation on twitter http://twitter.com/cspanwj or on facebook. you can e-mail us at journal@c-span.org. join us on the phone is david jackson who covers the white house for usa today. david, what is the white house mulling over when it comes to russia paying a cost for the continued intervention in ukraine? guest: they're trying to get their other countries to participate in sanctions against russia, which is proving to be did more difficult than expected . they're having a tough time with a global approach, if you will, toward making russia pay economically. they have already instituted or begun the process of instituting domestic sanctions, putting visa restrictions on russians who are deemed to have been involved in the incursion into crimea. there've also gone about the process of identifying russians who been involved in trying to freeze our assets and taking other economic actions against them. there's the talk about trying to cut off you his business with russian companies who may have some connections to what is going on in crimea and ukraine. host: what about the legislation approved yesterday, and aid bill to ukraine? what is the administration saying? guest: president obama propose that last week and basically $1 billion package of loan guarantees to ukraine. reticular lee in terms of energy because there's concern -- particularly in terms of energy because there are concerns. it is something the proposed recently by the president and congress is acting on it. i suspect they will approve it by the end of the month. russia is supposed to host the g-8 summit in june in sochi of all places. there's considerable doubt about whether that will take place because the other countries are talking about boycotting it. host: when it comes to the situation here and now in the vote will take place on sunday in crimea, has the white house given up? the line you hit the last 24 hours, 48 hours, the crimea is gone. host: i would not say they have given up. i think will be tough to stop the referendum. i suspect that most people in crimea will go ahead and vote to secede from ukraine and rejoin russia but i think what they're trying to do now is basically dispute or challenge the legitimacy of the vote saying it was slapped together at the last minute. that you can't really have a free vote with russian troops running around. the people are intimidated. i think you'll see the white house question the legitimacy of the boat, and that is why it should not be honored. there are doing it is illegal under the craning constitution. you mentioned secretary kerry traveling today to meet with his russian counterpart. there is a last-ditch effort to get the russians or try to get that crimean to delay this referendum on sunday by saying let's have negotiations and talk about having a more structured referendum, but i don't think that is going to work. host: reports in the papers today about the relationship with europe and russia, but specifically the german chancellor's relationship with president putin. it talks about how much she has reached out to the president in his recent days over the situation. what about the united states and its relationship with germany. has the white house let you in on our relationship with europe and what is going on there? guest: the president is making a series of phone calls to leaders throughout the world and one has been to the german chancellor angela merkel. he is also spoke to japan and leaders in the middle east, the usual suspects. he is making an array of calls to a variety of world leaders. i think the feeling is with angela merkel, she is the best relationship with putin. i think a lot of u.s. counterparts are talking to germantown to talk -- counterparts about his conversations. host: what is next on this, david jackson, over the next 24 to 48 hours? guest: we are going to brace for the -- kerry will be talking to his russian counterpart try to delay the referendum, but that is considered a long shot. i think most people in the white house are bracing for the sunday referendum. they suspect it will go russia's way and will try to operate in that new universe. meanwhile, the ukrainian prime minister was at the white house yesterday. he talked to president obama about a strategy moving forward. he also talked about trying to compromise with the russians on ukraine and china set up a more -- trying to allay the concerns and keep ukraine together as one country. i also think the white house will continue to pursue what it calls an avenue toward peace in terms of trying to get the russian troops to withdraw their troops from crimea and go back to pre-existing bases in the region. i don't know if the russians will go for that. all we know right now is the referendum will probably take place on sunday and will change the dynamics of the talks. host: david jackson, thank you. we want our viewers to weigh in on that. before we let you go, domestically, there is one more issue i would like you to talk about because the president today is going to sign an executive order on overtime pay. what would this do? guest: he will basically direct his department to look at the rules for how businesses pay their employees overtime. this stems from the concern many employers are exempting too many employees from the overtime rules, which really haven't been changed since the 1970's. they declare certain employees to be administrative types of employees, which means they are not eligible for overtime pay. there is concern in the administration these rules are being abused and people are not being paid fairly. the labor department will review these rules over the next several months and come up with some new ones. the aim is to make more people eligible for overtime pay when they work more than 40 hours a week. the business community says it will lead to less jobs and less overtime pay. but that is a dispute that will play out the next several months. host: who would be getting the overtime pay? guest: well, basically people deemed "professional or administrative" but wind up working 50 or 60 it hours a week but paid on a 40 hour scale. we could be talking several hundred thousand people or even millions of people who are in that category. host: david jackson, white house reporter for "usa today," thank you. the situation in ukraine tensions between russia, the u.s., and europe. president obama met yesterday with the interim prime minister of ukraine, and he talks about the situation in ukraine and his warning to russia. take a look. >> we have been very clear that we consider the russian move into crimea positivists basis to be a violation of international law, of international agreements which russia is a signatory, and a violation of territorial integrity and sovereignty of ukraine. we have been very firm in saying we will stand with ukraine and the ukrainian people ensuring that sovereignty is maintained. i think we all recognize there are historic ties between russia and ukraine and i think the prime minister would be the first one to it knowledge that. i think the prime minister and the current government in kiev has recognized into medicated directly to the russian federation their desire to try and manage through this process diplomatically. but what the prime minister is right on, they cannot have a country outside of ukraine dictate to them how they should arrange their affairs. and there is a constitutional process in place and a set of elections that they can move forward on, that in fact, could lead to different arrangements over time with the crimean region. but that is not something that should be done with the barrel of a gun pointed at you. and so secretary kerry is into medications with the russian government -- is in communications with the russian government and has offered to try to explore with his counterparts, foreign minister lavrov eight diplomatic solution to this crisis. we will continue to say to the russian government that if it continues on the path that it is on, then not only us, but the international community, the european union, and others will be forced to apply a cost to russia's violations of international law. host: president obama at the white house yesterday sitting down with the interim prime minister of ukraine, saying to russia there will be a cost if they continue on this path. this comes as he has sent secretary of state john kerry to london to meet with his russian counterpart to come up with some sort of diplomatic solution to what people are calling an 11th hour step from a effort before sunday's vote in crimea. here is the " kiev post." this was posted yesterday. martin dempsey has claimed in the case of an escalation of unrest in crimea, u.s. army is ready to back up ukraine and its allies in europe with military action. according to the website of the atlantic council, dempsey said he has been talking to his military counterparts in russia but also sending a clear message to ukraine and members of nato that the u.s. military will respond militarily if necessary. we turn to you this morning to get your take on this. john is first from california independent caller. caller: thank you for taking my call. i think this is incredible you have neoconservatives meddling in ukraine. president obama was supposed to be different from the neocon administration of george w. bush. obviously, he is not. we are taking this to the brink of world war iii. the neoconservatives can't stand russia because they did not go along with the wars against syria and iran. america better wake up to the near jacking -- to the neoconservatives hijacking our country. host: we go to pennsylvania republican. caller: this is what i've got to say. john was pretty much right on. the only thing i would say a little bit differently is, our government needs to distract us. first, it was the terrorist bombings of the world trade center which led to the last 10 years of worrying about al qaeda and all this other stuff. and now we go over there and we essentially whip up a civil war in the ukraine. this is what i have to ask the other viewers. who is this guy with the blue tie and heavy glasses and the bald head sitting in the white house talking to president obama? by what right is he the new leader of the ukraine? were there elections? is he the elected prime minister? and then we support these guys because, really, what we need is the -- the eu is looking to take the ukraine and tournament to the serbs of the eu, which is really the serbs of the west. then we send this guy kerry, who i'm going to big-name him as the voice with no name. he goes over there and all he can do is pray. these guys are a joke. host: bloomberg has the story posted yesterday. russia calls u.s. aid to ukraine illegal amid standoff for stepping off what bill had to say, russia stood by to post ukrainian president yanukovych and called possible aid illegal. russia considers the ouster of moscow-backed.co which a coup, an assertion rejected by the u.s. here are some tweets -- we are having you weigh in about what to think. president obama warning russia there will be a cost from the u.s. and our european partners. let's go next to carl, democrat in oxford, massachusetts. caller: good morning. thank you for c-span. i would like to say the united states, if it wants to do something for possibly offer humanitarian aid in case of refugees or whatever, in case it escalates. we should leave them alone. those people have a checkered past. there's nothing we can do. they have to figure out things for themselves. i think they will. like i said, unless the united states has economic interests there, but humanitarian aid for the stay out of it politically and militarily. those people understand each other. they will figure something out. thank you. host: the senate foreign relations committee out of the committee yesterday past and aid bill to ukraine. your is peter baker's piece in "the new york times." the democratic led foreign relations committee passed by 14-3 vote an alternative version . the administration and its allies contend the imf changes would raise loan limits for countries like ukraine while house republicans maintain they would weaken the american influence of the organization and expose taxpayers to more risks. the department has redoubled its efforts, arguing the country standing in the imf and the funds standing in the world are estate. those two issues tied together yesterday when the senate foreign relations committee voted on the legislation out of that committee. it is a little bit different than what the house passed. they will have to reconcile those two pieces of legislation. about the vote yesterday in the senate foreign relations committee, we covered it, so you can go to c-span.org if you missed it. josh rogan who covers the issues for "the daily beast" tweeted this that the committee approved ukraine's bill 14-3. senator marco rubio is critical of this aid bill and there are quotes in that -- posts in the papers today. marco rubio tweeted -- that is why he was not at the committee yesterday for that vote. back to our calls. north carolina, republican caller. go ahead. caller: i would wonder when the united states would learn. i am an old man. we went to korea and lost 57,000 people. then we went to vietnam. from there we went to iraq and then libya boast of bill clinton bombed kosovo. we keep sticking our nose where we have no business that. time after time. we never accomplish nothing but the lives of americans. thank you. host: steve, illinois independent caller. caller: i have been watching this fan out for four weeks. we already sent -- spent $2 billion in aid three weeks ago. two armored cars came in with the ambassador with -- host: where did you hear that? caller: our tv. host: which network? caller: our tv. russian tv. these guys are wearing masks. they are shooting. we have to stay out of this. mccain doesn't have a clue. our senators and congressmen just want to put our boys into harm. our young men and women into harm. they don't care nothing about our country, whatsoever. host: tim, arkansas, democratic caller. caller: we need to stay out of this conflict because we can't afford another war. if we go to war again, we would be so we after fighting russia. we might win the war, but we would be so weak that mexico would be tinted to invade his and take the land we took from them. as far as profiting wall street and industrial electric complex i'm totally against giving them enough money -- we've given them enough money in the last decade. host: here's a tweet -- you can join the conversation on twitter. you can post your comments on facebook as well. the front page of the financial times this morning has this headline -- it says the u.s. has announced the first test sale of oil from the strategic petroleum reserve since iraq invaded kuwait in 1990, in a move that underlines its ability to respond to any energy market turmoil as a result of the ukrainian crisis. the department of energy described a planned release of up to 5 million perils of oil less than one big percent of the six hundred 96 million in reserves is intended to access the systems capabilities in the events of it to structured. the white house would not associate the release with the crimean crisis. the energy department says the sale has long been planned for the time of year when refineries stock up for the summer driving season. analysts adjusted the announcement of the first test sale in 24 years within the signal to russia following its move into crimea. the timing of this makes it seem like a warning shot across the bow toward the russians. that in "the financial times." also on lifting the export on gas sales overseas. here's the headline in "the wall street journal" -- infrastructure there a problem from "the wall street journal." let's hear from james, maryland, republican caller. caller: good morning. we don't need to be in the ukraine. what is the teachable moment here, that we're going to try to negotiate and lose? we need to change our paradigm. if we want to give our armed forces a war to win, then let them fight the drug war in south america. we need to be building alliances with canada, brazil, mexico and our own in the sphere, and realize that is the foreign policy we need to be pursuing. not going into these countries were there is no return on investment. like the other viewers ideas on that. host: we will hear from another james in silver lake, indiana, independent caller. caller: good morning, c-span. i'm glad to talk to you on this good, bright morning. i believe ukraine could be helped somewhat, but i've got another question. how come we are letting 10 million to 15 million illegals come into the united states and we do nothing about it? this is like a tidal wave that is hitting ukraine. i would like to hear democrats views on this subject. host: peter is a democrat in bethesda, maryland. caller: good morning. can you hear me? host: we can. caller: i disagree with my neighbor who just called about two colors ago who says we should be focusing on the drug wars. that is a war that has been shown we cannot win. there's no point to go to south america. i completely disagree with him. that being said, on ukraine and putin and russia and the former soviet republics, this is a defining moment in our relationship with russia, nato and the u.s./russia, vis-à-vis russia. putin wrote the op-ed piece and it stopped the world from acting to stop genocide in syria. this is a man who sides with our enemies. he sides with israel. i am a liberal democrat. this is a man who is an autocrat. he is a dictator. a former kgb man. he sides with hezbollah, iran and syria. look what he is doing in ukraine. we need to get involved and help the ukrainians. this is not an issue of entering ukrainian religion etc. this isp trying to get the old ussr back into russia. host: on this military option, this is "the washington post" and it says -- that is what the united states looks like. a new poll echoing what a lot of you are saying, calling it today and on twitter, most say the u.s. should not get involved in the ukraine situation. take a look at the poll -- that from pew research, echoing what a lot of you are saying. the interim prime minister not only met with president obama yesterday, he also went over to the state department and was up on capitol hill knitting with congressional leaders there. senator bob corker, the top republican on the senate foreign relations committee tweeted -- he also met with robert menendez as well as others. today he will be up in new york to address the united nations. here is a little bit of what the ukrainian prime minister had to say yesterday when he was asked about the situation in russia and the actions by russia on the situation in ukraine and crimea. [video clip] >> this is not the crisis between ukraine and russia. it is worse. this is the global crisis. in case russia moves further this would definitely undermine the entire mobile security. and i am wondering about the goals of russia to draw the new lines, to revise the outcomes of the second world war, to restore the soviet union, or to preserve peace and stability in the region? and to stick to its international obligations? host: ukrainian prime minister arseniy yatsenyuk talking about the situation. he met with the president yesterday and the state department and will be in new york today to address the united nations. some other headlines this morning. "arizona republic" has -- the governor will not seek another term in arizona. that on the front page of "arizona republic." "wall street journal" has the missing airplane from malaysia on the front page am a flu on for hours after it was -- from page flew on for hours after it was lost from radar. a follow-up to a topic we discussed recently with the former chairman of the federal energy regulatory commission. he was talking about the power grids in this country and how they are vulnerable to sabotage. rebecca smith has this follow-up story in "the wall street journal" this morning. this on the front page of "the wall street journal" this morning. many of you might be seeing these ads in your papers. this ad has been running in the papers here in washington this week. 35 years ago on march 19, u.s. house went live on c-span. the u.s. house opened its sessions to live television cameras as a public service credit by american cable companies. c-span was there. we continue to televise every house debate live gavel-to-gavel and commercial-free. coming up on our 35 year anniversary here at c-span. back to our topic for you this morning. that is the situation in crimea. we will hear from walter, independent. caller: good morning, c-span. good morning, america. we need a check up. we could lose power from the high winds we are suffering right here in washington. we don't need to worry about terrorism or anything else. my lights are flashing just from the high windss alone. i love c-span. host: if i could stop you there to get people perspective, this is a tweet sent out -- this is what it looked like last night at 8:30 p.m. back to our topic. caller: the crimean peninsula. hundreds of thousands of russians were killed from world war ii and it was not that long ago, that we continue to forget the historical nature of these areas. these people, not just the majority of russians -- hundreds of thousands were killed in world war ii -- to retake the crimea peninsula from the germans. when we take a look at that and look at the fact we have no attachment there. as your article said, we are not prepared to step in there and become the russian daddy or uncle sam that they need over there. they need to negotiate with them, not with us. i pray to god that some of these chicken hawks -- a chicken hawk is someone who always wants to go to war, or they've never been or won't go themselves. i think for us to continually hop on the military expense expedition, it is something that we went through in iraq and did not win that one. we have not one afghanistan. we must not go in there with guns blazing, ships firing. if we can help them out logistically, then do so, that we must not give lead or treasure anymore to these expeditions. host: you mention history. there's a piece in "the new york times" -- she writes -- it goes on to say german news media has given prominent play to report that 12 extra f-16 fighter jets were sent to: whose air force already has 48 such a jets after six f-15's were sent to the baltic states last week and reconnaissance planes were deployed to poland and romania. that issue being played up in germany as the chancellor there continues to try to broker some sort of diplomatic situation between the two countries. peter baker wrote in a piece for "the new york times" about the situation and the tensions there between europe and the united states as well. he writes this in "the new york times" that was posted yesterday -- he said we cannot launch a military operation in crimea as we would expose the eastern border and ukraine would not be protected. noting russia has significant tank units near the border. the russians seemed uninterested because i to say to diplomatic solution to the crummy issue -- it goes on to say to diplomatic solution to the crimea issue. more than 80,000 soldiers, up to 270 tanks, 370 artillery assistance, up to 140 combat aircraft, and up to 40 helicopters and a to 19 combat ships and boats. as the u.s. put some of its military assets over in that region, that gives you an idea of what russia has as well. let's hear from david from california, republican. caller: good morning. my concern is, we have a statue of liberty in new york. if it wasn't for france getting involved in our search for freedom and independence, we might not be free today. i don't think we should jump into a war with russia, but we should stand up and at least be there for those people, and let them know independence and freedom still matters. host: what do you think we should do? be ready to respond militarily if needed? caller: just making the statement, just standing up and saying we are for the western part of ukraine's freedom. i know the eastern side sides with russia, but we should stand for those people. they want their independence. thank you. host: let's hear from chris tennessee, democratic caller. caller: this concerns that no one has mentioned china made their first default and how that affects russia's money how their dependencies are going to affect our economy. get stuck with real estate somebody is not going to pay for. this kind of faded -- evaded and nobody is really looking at global economic. thank you. host: you mentioned china. "the washington post" column today -- he theorizes vladimir putin may wind crimea, but will lose the world writing -- that in "the washington post" today if you're interested. more about germany's relationship with russia specifically, angela merkel's relationship with vladimir putin. this is the headline in " today's paper. you can see that on the graphic. it says her central role has captivated the german public used to london handling to politics. the government's approval rating while the tabloid is soft and low voice when speaking in her mother tongue, sometimes reminded her of a man of the stasi. hartford, connecticut, independent color. caller: good morning. i really feel strongly we should give more support primarily monetarily, to the ukraine. people do have their memories failed when they remember what stalin did to these people. i think over 13 million people died for him. so we can forget history. i think what bothers me most is the continue to give the liens of dollars to israel -- billions of dollars to israel who is the 11th or 12th richest country in the world, and we don't expect anything from them. they continue to build settlements. they do what they want. yet we continue year after year to give them billions of dollars. yet here we have a struggling important country that would love to be part of the west. i mean, what we went through with the cold war all those years, you know, this is a big country. this would be so important to bring them over to us and to a democratic, decent society. they need help. we need to give them a lot more money to get them on their situation. host: on twitter -- caller: hello. how are you doing today? frankly, i am on the other side of the question for most of your collars. i look at the long history of the ukraine and i remember the time when the ukrainians were starved to death by the russians, by taking all of the food out of the country after world war ii. i remember the time when the russians came down and took the crimea of the people to the sword in order to plant the russian flag in the crimea. i look at that historical picture, and i can't see as assisting putin in doing something like that again. if they wanted to have an honest referendum in the crimea, the duo put a question that says, do you want to leave the crimea and join russia or stay with ukraine or do you want to become an independent country? but that is not the ballot they have got. the ballot gives them the option to stay in the ukraine. host: all right. a follow-up on yesterday's topic for all of you in our first 45 minutes, we talked about senator dianne feinstein's speech on the senate floor alleging the cia had been snooping into a computer network set up for senate staffers on the intelligence committee. they were investigating through an investigation into the cia's torture techniques under the bush administration. this is the headline in "the washington times" this morning -- he came to the floor yesterday, and this is what he had to say about the accusations. [video clip] >> allegations in the past 48 hours have been discussed rampantly in the halls of congress and in the press. based on press reports today yesterday, and even last week allegations have been made regarding the central intelligence agency's actions toward the committee as well as staff and members actions on the senate intelligence committee towards the cia. the reason i feel compelled to speak on this matter is the following: although people speak as though we know all the pertinent facts surrounding this matter, the truth is, we do not. the republican committee members on the senate intelligence committee and staff were not involved in the underlying investigation of the detainee and interrogation report. we do not know the actual facts concerning the cia's alleged actions or all of the specific details about the actions of the committee staff regarding the draft of what is now referred to as the panetta internal review document. both parties have made allegations against one another and even speculated as to each other's actions but there are still a lot of unanswered questions that must be addressed. host: if you want to hear all of his speech, you can go to c-span.org if you missed senator dianne feinstein speech, the whole thing is there as well on c-span.org. on this accusation by the senate intelligence chairman, this is "usa today" headline -- so that in "usa today" this morning. also, their opinion page, editorial-page weighing in on this. the papers view coming conflict with conflict cia has a lot of explaining to do but the opposing view this morning is written by dean boyd, who said, we believe in strong oversight. he is the director of cia office of public affairs and he writes -- if you're interested in that, the debate goes on "usa today" has those two opinions. coming up, we will have two members of congress's perspective on the situation in ukraine. up first representative vicky hartzler and later, marcy kaptur . we will be right back. >> it is time to create new jobs , to build and rebuild industry and give the american people room to do what they do best. and that can only be done with a tax program which provides incentive to increase productivity for both workers and industry. our proposal is for a 10% across-the-board cut every year for three years in the tax rates for all individual income taxpayers for making a total cut in tax rates of 30%. this three-year reduction will also apply to the tax on unearned income, leading toward an eventual elimination of the present differential between the tax unearned and earned income. now, i would hope we could be retroactive with this. but as it stands, the effective starting date for these 10% personal income tax rate reductions will all four as of july 1 of this year -- will call four as of july 1 this year. let me remind you while this 30% reduction will leave the taxpayers with $500 billion more in their pockets over the next five years it is actually only a reduction in the tax increase already built into the system. unlike some past "tax reforms post quote this is not merely a shift of wealth between different sets of taxpayers. >> for highlights from 35 years of house coverage on our facebook page. >> "washington journal" continues. host: vicky hartzler republican from missouri, welcome back. thank you for being here. let's begin with the situation in ukraine. in your opinion, what is the best approach? guest: i think we have to be decisive firm, and fast with our response and come down hard on the economic sanctions that have been put forward are the president. we need to freeze the assets of russian citizens. we need to withhold their visas. we need to certainly not participate in the g-8 summit. we need to try to remove russia as a member of the g-8. i think we need to let them know there will be consequences on the international stage, and they will not have the same platform or standing they currently have now. host: we have read in the papers our military is preparing moving assets over to the region , additional assets over to the region. should our strategy include the option of a military response? if so, what type of response? guest: i think we have to keep all options on the table and project we are serious about this. but i don't think at this time we need to advocate for any particular military operation certainly, we would hope putin would see it is not in his best interest and is long-term trade interest, is long-term economic interest, or his standing on international world stage to continue in the same path. that is where i think we should stand right now. host: are we obligated to respond to protect ukraine after 1994 the ukrainian president wrote yesterday that ukraine agreed to give up its nuclear weapons in exchange for the guarantee from the u.s., russia and britain, that it sovereignty would be protected? guest: it was a political agreement. it was not an official agreement such as like nato that was approved, so there is a little bit of a difference there. we don't have legally the same obligations that we would to a fellow nato country, but certainly, it was an agreement they made in good faith. we should stand by them as much as we can, and look strong like we're doing, and change our relationship as russia -- with russia as a result of their actions. host: do you agree with the actions the president has taken so far? guest: yes. host: what else should we see him do? guest: we need to take steps to remove russia from the g-8 group and certainly stop any further negotiations with them as far as trade agreements. i think that makes sense. host: what will be the impact on the u.s., do you think, if we go ahead with economic sanctions? will we feel it here in the u.s.? guest: i don't think so as perhaps as much as russia would feel it from us. and certainly of the european union joined with this, they have more trade agreements and we do in some ways, some direct implications there. but that is where i think we need to expand our sales of exports of natural gas and other resources to help ukraine as well as the countries in europe to have another source for their energy. host: i want to show you what rand paul had to say yesterday. here's his argument. [video clip] >> i support the sanctions on the russians. i support the military and technical assistance. but i have trouble with the loan is since -- assistance in the sense that i believe it will be a gift and a benefit to russia. ukrainians owe about $20 billion to $30 billion to the russians. bailing out russian indemnity to the ukraine, i don't think is a way to punish the ukraine. or the way to punish russia. i think it sends the wrong signal. there are other questions you might ask if you're going to loan money to ukraine. i would ask for a show of hands of those who would personally i ukrainian debt. ukrainian debt is rated triple c minus. not one person in this room would buy it. there is no expectation they can pay it back. ukraine is rated as one of the least transparent nations in the world and one of the most corrupt nations. what senator mccain has pointed out with corruption is precisely why the imf quit sending money to the ukraine. i think while we are in a big rush to send russia a signal, i think sending russia or sending ukraine loan money that will go to russia's not a great signal. guest: he has a lot of good points, but i think would be up to ukraine and whether they would choose to use it to pay russia or to i more energy from us. it behooves them to give them some financial tools that they could use to give them some flexibility during this very critical time. host: the house approved a $1 billion loan guarantee recently. did you go yes on that? guest: i did. just to clarify, that is not new money. it was simply add ukraine to the countries that the state department has where they can give assistance to nations. that pot of money is already there. ukraine wasn't among the nations listed that could receive help from our state department. now it is. host: let's get to phone calls. oxford, connecticut, republican caller. caller: the biggest threat to our national security is america's collective fear of facing difficult realities and the inability of congress to a knowledge the sudden, straight of instruction of the third power of 9/11 is impossible unless primitive explosives are used. -- preemptive explosives are used. would you meet with building experts in finding out what really brought down holding seven? host: he is part of a group that calls in the this program were skeptical of investigation that was done by congress. you are fairly new to congress, but do you support -- have you looked into it? guest: i've not heard that. i am a member of the armed services committee and agricultural committee and budget committee. if he wants to send information to us, we will look into that. but i would disagree. i think one of our main concerns we have as far as a country and there being threats, a lot of it is our national debt, as was stated by admiral mike mullen chairman of the joint chiefs of staff several years ago. that is why we have to stand strong for reducing spending smartly to make government more efficient and effective. but while getting our priorities right. i have a lot of concerns about the defense cuts that have been proposed and believe we need to get our priorities back as a country, and provide for the common defense according to the constitution. that is where i think we need to focus our priorities here in congress. host: on the defense budget, the cuts that were proposed, what impact would that have on your district? you have military installations there. what would be the economic impact? guest: it has a lot because we have in air force base in their proposing to divest a fleet of aircraft that is housed partly at whiteman. we also -- they want to move the apache helicopter, take it away from the national guard units to active duty. that would also impact the air force base. in drawing on the troops will have an impact. we have a lot of army personnel there. overall, it will have a very real and significant impact. host: "the washington times" headline -- what have you heard from your constituents? guest: they're just starting to her about this. we're just starting to get feedback. obviously, it is concerning. it is an all volunteer force. we have to keep that in mind. people don't have to sign up and put their life on the line and served his country. when they do and you start drawing back benefits, it jeopardizes, i think, the future of and all volunteer force. host: here is a tweet -- guest: absolutely. you have other countries that have aircraft and we have to be able to meet those challenges. host: in "the new york times" there is a piece democrat from california, let the military run drone warfare. he says the cia should work on gathering intelligence, not operating drone warfare. where do you come down on this issue? guest: i haven't really thought about that particular thing, but certainly, the military does it well. that is their specialty. that makes sense to allow the military to take the lead on running aircraft or any other military piece of equipment. host: rachel, california, independent caller. caller: i went to back a caller that called in in the first segment. this is true. this is a project for the new american standard agenda sinus for israel. we will not support a war in syria. what that is all about, they want to push the war in syria because they want us to get as into a war with iran. this is going to be very dangerous. we should stay out of it. i am a syrian-american. i am also a russian. putin is a very good leader. let him do with russia when he wants to do with russia. george washington warned us to stay out of foreign entanglement and we are playing a dangerous game if we get into world war iii. ushijacked.com. >>host: rachel, is that where you're getting the information? caller: i'm getting it from there and also "the guardian" and also rt and also al jazeera. host: rachel in california. any response to what she had to say? guest: not really. i think there's a lot of separate issues should talk about from iran to syria to russia. host: any connection between what we're doing in russia and the situation in syria and israel and iran? guest: there is a connection obviously, and that we have been working with putin to alleviate the chemical warfare situation chemical weapons in syria. and certainly there is some potential implications and how we deal with syria and iran if we sever relationships with putin as a result of ukraine. that is something to consider in the whole scheme of the situation. host: cameron, south carolina independent caller. caller: yeah, how are you doing? i know a little bit about the region. i spent 15 years they're putting in the infrastructure in the eastern europe -- ukraine, romania, those countries. i'm not an actual expert, but i know what itis going on. i have friends there who did me words from the street, crimea and all that good the biggest question i have is i don't understand -- after watching the news from all of europe -- the bbc, reuters -- they are scared to death about this new government in kiev. the reason they are scared to death is they are extreme fascists, and they don't know what is going to happen. host: ok. congresswoman, what do you know about this new interim government in ukraine? guest: the only thing i do know an effort is that the new president is a baptist pastor from evangelical pastor, so i have heard good things about him . so this is interesting news that the caller had. we will have to look into it. host: south carolina, democratic caller bank at, walter, you are on the air. caller: hello. good morning. i just want to remind america that we keep saying we don't want more and we can't afford another war, but we keep electing people that's going to send us to war. when we keep electing republicans -- you listen to john mccain and all those republicans. if we keep electing republicans come we are going to be another war. host: ok. you want to respond to that, congresswoman? guest: the president is the commander in chief and he is of course a democrat who is negotiating with us and come as he should come as the leader of our country, and i know that anyone wants to go to war -- i don't think anyone wants to go to war and i don't know anyone who is calling for a good but we need to be strong with economic sanctions and let putin know that we are going to be strong for freedom and standby others in the world, democracies want freedom as well. host: what you read from this whole from pew research? most say that the united states should not get too involved in ukraine situation. 29% said take a firm stand against russian actions. guest: i think it is just, you know, confusion about what are the options, what should we do what could we do. i think most people feel for the people of ukraine. we recognize it is not right to have a country just come in and more or less takeover your streets, your military installations, your airports, just to be surrounded by soldiers and guns, people who didn't do anything. like our last caller, most people have war fatigue after being at war in afghanistan for 13 years. we need to try to look at other options if possible to avert a large-scale war. host: livingnolimits tweets in guest: a good start is what we passed yesterday, allowing up to a billion dollars of the part of money that the state department has available for other countries in need to give some financial assistance to ukraine to help them during this crisis. so that is a good start. we will have to go from there. a lot of it will depend on the reaction of putin and what happens in the future. host: bill is next in pennsylvania, republican caller. caller: yes, good morning gang. so nice to hear from you, you are wonderful. congresswoman, i just came from europe among -- came from europe, and i want to tell you something. the woman who called you before the russian woman, she explained to you what can happen. i don't think you should be smiling. i think you should be crying. i've been there, i was there for a month, i know what is going on. everybody is scared. everybody is waiting for the united states to come and get us. i don't know if -- i don't care if you are republicans and democrats, all the same, no difference between you. i want to explain to you one thing, ok? you are going to send money over there. you're going to put sanctions over there. you did it to iraq, you did it to other countries. what did you accomplish for america and the american people? zero, nothing. host: all right, let's get a response. guest: well, we certainly have done a lot for america in the meantime, but it is most important, our involvement in afghanistan prevented more terrorists coming to this country. that is where the terror camps were, that is where the attacks on 9/11 were conceived. we have a vital security interest to get involved over there. it has been a tough conflict. but we haven't had another attack on our land since that because of the service and second rise of german women and the investment we have made here. that is worth a lot -- service and sacrifice of our men and women and the investment we have made here. that is worth a lot. we need to get the economy going and jobs created and make sure that people have affordable health care, and there are any other things i'm focused on and others are focused on here that we need to address, including becoming energy independent. we have a full plate of things here to work on on behalf of the american people. i am proud to do it, certainly making sure that our nationstates safe if one of our highest -- is one of our highest and most important priorities. host: the papers this morning talking about the struggles the united states faces to ease the gas situation between russia and europe, if sections were to go through. the impact on europe, especially germany, would be tough for those countries. the headline in "the wall street journal," "are postal to export natural gas faces snags." many have been calling on the administration to lift the ban but even if they did, it would not impact the situation. guest: we need to act quickly to encourage the building of infrastructure so that we can export more liquefied natural gas. this administration has put up roadblocks to doing that. we need to push back on that as quickly as possible. host: "financial times" reporting that the u.s. will release oil stocks and what they call a test of ability to cope with the crimea crisis disruption. 5 million barrels of oil, less than one percent of the 696 million in the strategic petroleum reserve that will be tapped as a test, according to the "financial times." renée in mississippi independent caller. caller: how are you doing? i want to ask the congresswoman do you know that monsanto, the gm of company, the company that dropped agent orange all over vietnam and contaminated organic farmers' fields, have an ukraine but blackwater -- but blackwater cash b -- bought blackwater. they have basically become an army for the kiev regime. host: renée, where did you learn that? caller: i looked it up online. just look up "monsanto bought blackwater." host: what website did it bring you to? caller: just google it, look it up in the search engine, you can find it. host: ok, all right. congresswoman? guest: i will have to look into that. it's the first i heard about it. host: i want to ask your reaction to another "washington post" story this on a banq -- this morning. "key lawmaker favors ending nsa data suweeps." "dutch ropers berger is proposing to end the nsa collection of phone data with the system in which phone companies would provide the agency with daily alerts on numbers suspected of terrorist activity. significantly, it would not call for a requirement that companies hold the data longer than they do now." would you support this legislation? guest: well, we have to look into that. the phone companies have not wanted to keep any data up to 5 years, which the nsa does currently. that is one of the reasons the nsa has said for security reasons it would be good to have access to 5 years of back all information -- back call information. we have to balance our national security certainly with the private interests of companies. if we can achieve the capability to protect our citizens and be able to figure out who terrorists are calling and what they're doing in this country another way, i'm looking -- i'm open to looking at that. host: carl in madison virginia. caller: how are you all doing today? first, let me say i'm opposed to the u.s. getting involved in any kind of military option in ukraine. economically, i think your representative there said very smart things. i don't agree with her drone comments she made several minutes ago. i have a question for her. i would like her to make a comparison between the united states and russia, formerly soviet union. when something occurs internationally, for some reason, it seems to me both countries are similar in the fact that we like to think with their military first and diplomatic options last. and i'm done. thank you. host: ok, carl. guest: i think in this conflict you see its opposite in that russia has just gone in and did the military first and they didn't try to do any economic negotiations with ukraine. they just took over the area. we are advancing economic sanction ideas, diplomatic sanctions but i think there is a difference in leadership here. host: john, you are next in massachusetts. republican caller. caller: good morning, everybody. how are you today? host: good. caller: hello? host: you are on the air, go ahead. caller: i would like to ask -- step back a second and ask a question. do you believe that this country as a rule of law, and that the rule of law should be obeyed? we are kind of in the middle of an information age, and when we see the israeli post -- you can read it in the newspapers -- master soldiers supporting regime change in the ukraine and we are meddling in these foreign things, and i have relatives in poland, and the absolutely have to be -- none of them is married to someone that came out of kosovo. this foreign policy that we have is a disaster. and in the information age, if we have a rule of law, there is going to be some consequences pay for this. i believe there is going to be consequences paid for this. host: john, what do you mean? what are the consequences? caller: first of all, we have done some intervention and some things in the information age where we have been caught in various different operations, going back to the bush administration with the first bush, them encouraging saddam hussein to cross into kuwait and then dms to start throwing babies out of incubators -- ambassadors daughter throwing babies out a ping to and nsa and cia -- host: yeah, john, think we got your point. are the consequences to us doing what we're doing right now, the united states taking these steps, economic sanctions and otherwise? guest: i don't think so. this goes back to the 1994 political agreement, but an important agreement with ukraine where after the fall of the soviet union where the new countries were being formed and the ukraine had been part of the soviet union and had nuclear weapons, and they agreed to give those up in exchange for they could be a free and sovereign nation and russia agreed to that and the united states agreed to that and several countries agreed to that. russia is going back on that by invading, more or less, their country and taking it over. it is important for us to have our word means something when in 1994 we agreed we would support them. it makes sense for us to economically push back on russia's violation of the agreement. host: "russia calls aid ukraine illegal amid standoff." "the russian president called possible u.s. aid to the new government in kiev illegal. financial support sought by the u.s. for ukraine's interim leadership would violate american law barring it to any regime that uses force to take over, the russian foreign ministry said." guest: well, i disagree with that. host: why? guest: well, because the people spoke on that regard, and there was a violation of the former president hurting the people in the country, killing them when they try to very quietly disagree with some of the decisions that were made their. i think he lost his right to remain in power when you turn your forces on your own people. host: jerry in rhode island. caller: i would like you make a point without saying isolationist or anything because i think diplomacy with these foreign leaders from different countries is very important in that there's more educated people that study international relations and international politics that can understand the different idiosyncrasies that people have. the other point that i wanted to make is that we need to be more secure in our own country. for instance, the american bombing. one of the students was involved in a marathon bombing and i don't think we have the right security in this country to protect ourselves from terrorists. also with the plane disappearing recently, going over towards vietnam and so forth, should we be more involved with some of these larger countries like china and russia? because i think terrorism is affecting all of the larger countries. that's my point and i was waiting for a comment from vicki, please. guest: sure. well i think you are right diplomacy is very important and we need do everything we can to work with other countries to come up with a peaceful solution to challenges we have. terrorism is an international concern. that doesn't obligate issues certainly now with russia, when we didn't have -- that does come look at certainly now with russia, when we had them warning us of the boston mamas at a time working with us in that regard. that is why we might to settle this as diplomatically as possible and encourage vladimir pridgen did -- vladimir putin to do the right thing and withdraw from crimea and to allow the people to continue to be part of ukraine and for it to be a free and sovereign state. host: tom, frankfort, kentucky. democratic caller. caller: good morning. i hope you will give me time did i want to talk about the welfare of the nation first and then i want to talk about my own welfare. if the american people are ready to see tens of thousands of casualties in their ground troops, go on into russia and fight and see what is going to happen when we lose that many people. we got tired of losing people in vietnam. we lost 58,000. that is nothing compared to what is going to happen over there. secondly i am next marine -- i am an ex-marine. i served in the 1950's. the water that we marines drank and based in a tank platoon -- at camp lejeune was contaminated with agent orange and other chemicals. i am dying from ischemic heart disease. the veterans administration won't do anything for me. there is a lawsuit before the supreme court right now where a large electronics manufacturer contaminated the soil around their area, shut their factory down, moved away, sold the property to unsuspecting people who are coming down with cancer. if they lose that case, it is under the same law in north carolina that the federal government is denying. we marines, our lawsuits and our medical care will go down the drain, and obama has instructed his justice department to back the electronics company. we marines are dying, and nobody cares. and i hope everybody that's watching c-span hears me today because if we can't take care of our marines, we shouldn't be over there trying to take care of the ukrainians. thank you very much. host: that was tom in frankfort kentucky. guest: first of all, thank you for your service to our nation could i'm very sorry to hear about your health problems and what has happened and the allegations of what happened down at camp lejeune. i'm sure that your congressional representatives from north carolina would be very interested in helping you and looking into this and i would be happy to support them as a member of the armed services committee, because it is important that our men and women in uniform who sign up and volunteer for service, that they are taken care of and they are protected. i wish you well on that and look forward to working with my colleagues to help you in that regard. as far as going in to ukraine to my don't think anybody is proposing right now a military engagement of any kind to because of the concerns you outlined. host: kathy in middletown connecticut trade independent caller. caller: first of all, congresswoman, you said that putin chose military action instead of working economically with the ukrainians. not true. putin offered $15 billion to ukraine. also, you said you supported the ukrainian leader because he is an evangelical. it was an evangelical, bush, who lied us into a war that killed half a million iraqis, but i guess they don't count because they weren't born again. host: let's get a response from the congresswoman. guest: i think all life is valuable good eye not on the foreign services committee, but i've been reading about ukraine as much as everybody else, and that is the only information i had to answer that earlier question on the leadership. from what i have heard, he is a good man, somebody that is worthy of supporting. host: jacob in tennessee, republican. hi, jacob. oh, sorry, i have to punch. sorry about that. you are on the air now. caller: ok, ms. congresswoman i'm looking for a slight bit of clarification. earlier in the segment, you said there had not been another terrorist attack on u.s. soil since 9/11. would you clarify the boston bombing as a terrorist attack? guest: that's a good point. i would. that is a homegrown terrorist attack. i was meaning from an outside group coming in, like the people that took over the airplanes. but good point. host: robbie, iowa. independent caller. caller: hi. this agreement they reached in 1994 where ukraine agreed to give up their nuclear weapons and so the united states -- you think it is our job to take care -- why didn't the united states and russia and israel have to give up theirs? why are we making every other country not have nuclear weapons when we are the 2 biggest holders of them? guest: that's a good question. i wasn't involved in that and wasn't in office at that point. but i see your point. host: republican from missouri serving your second term represents the fourth district of missouri, on the armed services committee and the budget committee. we will go to steve in pittsburgh, democratic caller. hi, steve. steve, my apologies. you are on the air. caller: good morning. i wanted to comment on this state of the balkan states near the russian border. this all started with george bush, the invasion of georgia and then also with the invasion of ukraine. i think this all starts with peace through strength but i think there is a lack of leadership. this president is very weak as far as giving flexibility to the russian government and also withdrawing the anti-defense missiles from poland and the czech republic. i wanted to know your comment on that, rappers ended. guest: i agree. i think the president's foreign policy has been fixed at best, and his lack of priority for our defense and defense budget is coming back to haunt us. i think vladimir putin smells weakness. you are correct. i disagree with the president and that when he changed his missile defense policy in poland and backed off from the commitment there to allow them to have a more advanced system of missile defense that had been promised to them, and i think that the new start treaty was wrong. we end up losing a lot more than we gain in that in that we are having to draw down our nuclear arsenal and russia do not have that large of an arsenal to begin with and doesn't have to draw down hardly any of theirs. we are weakening ourselves at the expense, i think, of what is going on over there. with this defense budget that has been proposed a couple of weeks ago, we are going to be reducing our defense budget 1/5 over the course of 10 years, and you have china doubling their military budget, and the russians military budget going up 30%. they are prioritizing and building up their military at the same time we are drawing down. i think it is wrong and that is why we will continue to fight to replace these defense cuts. host: john in california, republican hoping -- republican caller. caller: thanks for the opportunity. congressman hartzler i can't believe what you are saying could you want to spend $1 billion going to ukraine, and here i am, republican out of work needing to extend benefits and you can't find money to take care of us but you can find money to protect corporate investments, tank of america general motors and russia. american companies that choose to do work there rather than build american products, probably because of epa regulations on and you can't find a way to communicate to the senate that they need to take care of americans first. callers all across the country are talking about the misled priorities and stuffed it as a former military guy, i know that we purposely gave saddam hussein new weapons and he ended up using them on his people. this idea that bush lied is an idiotic thing and i continue to hear about these people call about the tower blowing up and they have that going and not the voice of take care of her megan jobs come i can't believe it, and i wish you would talk to your senator for me and let her know that we need to vote extended benefits and find a way of paying for american stuff first. don't touch social security, cut government spending. when you think about every time -- host: i'm going to leave it there, because i will have the congresswoman respond. guest: you brought up a lot of good points there. we need to get our economy going and the jobs of the way to do it is to back off on a lot of the negative policies that are hurting job creation. you talked about the epa. there is a lot of regulation about agencies hampering job creation in our communities. that needs to be -- that needs to end and we need to be more business friendly. we need to have health care that is accessible and affordable. that means replacing obamacare which is hurting job creation. there are things we need you to unleash our economy and get a growing again and have people have jobs again. that is what i am working on. host: robert in toledo, ohio. independent caller. caller: hello? host: morning, you are on the air. caller: a few brief points. i've been following this for months. if she would listen to victoria nuland's taped conversation from the u.s. state department, she would understand that neo-nazis are involved in this. the government of united states has been well aware coup we are backing. we have spent -- who we are backing could spend $5 billion on the orange revolution. they are a neo-nazi organization. it is a simple fact. you can watch john mccain meeting with their later, and it is amazing how often john mccain meets with terrorists. host: robert, where did you see that? caller: you can look at it on many sources on the internet. the internet is delete -- the only place to get information anymore. media is useless. guest:. guest: have not heard of that before. host: what are you watching closely on the situation in ukraine? guest: we are going to watch what happens on sunday with the vote. there is a lot of coercion and pressure going on on the people in crimea. and then there will be a referendum in moscow, that they will have to vote on, whether to accept and have crimea become part of their country. in the meantime we will continue to let putin know that he will have consequences for doing this and that is not the right thing to do. he needs to respect the '94 agreement, he needs to respect ukraine's right to sovereignty and to be a free and independent country. host: this topical, but for the health affairs committee when secretary of state this this topic will come up before the foreign affairs committee when secretary of state john kerry testifies this happening. thank you from talking to our viewers. we will go next to marcy kaptur, congresswoman from ohio, democrat, ukrainian caucus founder and cochair. and later, the role of corporate money in washington with a "new york times" reporter. all that after an update from c-span radio. >> an update on the missing relationship from "the wall street journal." -- missing malaysian jet from "the wall street journal." the report that the airliner may have kept flying for hours has been denied. there is still no sign of the plane. laura diamond reporting finds that, in her words, "the u.s. has less than five percent of the was published but 25% of the world's incarcerated publishing." -- population." the prison population has increased 700% in the last 10 years. they account for a full quarter of the department of justice's budget could have been made are serving time for drug-related offenses, the majority of which are marijuana. while the number of incarcerated persons has skyrocketed over the past few decades, the amount of prison space has not expanded to accommodate it. this story from laura diamond. attorney general eric holder will be weighing in on the present operation today. he is expected to formally endorse shorter sentencing guidelines for nonviolent drug crimes. he will appear before the u.s. sentencing commission. that idea suggested the action -- the panel initially suggested action. general holder says that harsh penalties should be for the worst offenses. the commission isn't expected to vote until at least april. those are some of the latest headlines on c-span radio. >> c-span -- we bring public affairs events from washington directly to you, putting it in the room at commercial hearings, white house event, briefings and conferences, and complete gavel-to-gavel coverage of the u.s. house. c-span, created by the cable tv industry 35 years ago and funded by your local cable or satellite provider. watch us in hd, like us on facebook, and follow us on twitter. >> "washington journal" continues. host: congresswoman marcy captor is back on our table, democrat from ohio, sits on the appropriations committee founder and cochair of the congressional ukrainian caucus. i want to begin with your personal ties to ukraine. why did you found this caucus, when did you do that, and what is the goal? guest: first of all, i'm a founding member of the caucus. congressman sander levin of michigan and former congressman bob schaffer, now congressman jim girl lack, we all worked to create a presence inside our congress to relate to the newly elected parliament of ukraine after 1991. i have a very long history with ukraine. i'm a polish america -- i am of polish american heritage, but our grandmother and grandfather came from there, fled from thei re before world war i -- host: fled from ukraine? guest: it was a czarist territory than come but the bolsheviks were taking over. our grandmother came here at 17. because their one cow was taken away. when that was done by the bolsheviks, they couldn't feed themselves, so they came here with nothing. and now i 2 generations later i'm a member of the commerce of the united states. his is such a great country, and only because of the liberty that we have a mileage of stress my opinion on behalf of the people ever present, and also u.s. a member of the free press. this is so precious. this cannot happen in russia. cannot happen still. we hope for a. historian severin about what president -- historians who have written about what president putin has done have been fired from their jobs in russia. our nation is the standardbearer for liberty globally and let's never forget that. host: how do you view vladimir putin? guest: unfortunately -- [laughter] as someone who is caught in a time warp in the past. we have to keep our hand extended to the president in russia, because russian is a european country. her alphabet is cyrillic, as is the alphabetic ukraine. so would polls sou -- so it polls south -- pull south pulls to greece and turkey. but it has never known the liberty. there isn't a mindset for liberty inside the country among its leadership. some is developing, but after the thaw that came after the fall of the soviet union, you don't learn the behavior of liberty in one generation. you hope for it, but you realize the mindset of those who want complete power and control is still there. it is all she has ever known. and so it is important for us to listen to the demonstrators in maidan in ukraine, led by the young people, the new generation . it was students that led those demonstrations. ukrainian soldiers who fought in afghanistan joined. and just ordinary people who know there can be a better way of life. i traveled to ukraine -- not at government expense him and my own -- more than any other country in the world. my mother drove there in 1973 to find the remnants of our family. my, what we learn. i feel an obligation to inform. i don't think most americans know, because stalin was our ally during world war ii, that no place in the world suffered more deaths than ukraine and belarus. that region we are talking about. 14 million people in the 20th century, civilian people were starved to death. they were killed by stalin, the secret police. that continues today. that infiltration across the region -- the poles understand it well. our country was dismantled. we have to be mindful that the russians have always wanted to expand, and we have to make sure that the borders of nations are respected, and that they just can't plunder them. host: what is the extent of the united states obligation, in your opinion? guest: first of all, diplomatically and i commend president obama for everything he is doing -- we have to be a constructive force for democracy globally, and we have to play a leading role among the nations of the world. one of the complexities of the situation is that at the united nations, where the united states and russia and france and china are permanent members of the security council, russia can veto anything we try to do. the president in one sense is blocked because the u.n. can't fully act. but i do believe that the nations that belong to the united nations, that have large numbers of people who have fled or survived the carnage inside ukraine, need to gather. argentina, italy, portugal australia, canada, certainly the united states, poland, keswick stand these countries have people in them, hundreds of thousands of people who understand what happened inside ukraine, and there are more ukrainians living outside ukraine today then inside because of the terror that the people faced there. morally, the world does this region of the world. host: what about the 1994 political agreement? ukraine gave up its weapons in a change for sovereignty and that recognition from the united states, russia, and britain. guest: yes, the budapest accord where our country was part of an agreement, as you stated, to remove thousands of nuclear weapons from ukraine. it left ukraine defenseless. i can guarantee you the people of ukraine of how to fight, they know how to survive. as one of my relations said to me last july and it was so sad as i left him in the village of our grandparents, and he held his grandchild and he looked at me and said, "marcy, all we do is survive." we need to make sure our voices are heard by citizens like that. his grandson can lead a better life then he is meeting today. in the ukrainian countryside under this government that is just and deposed officially they were charging farmers, that crept government charges farmers and 19% interest rate. -- that core wrappe -- that corrupt government charges farmers a 19% interest rate. defense of the deposed president -- defense of the deposed president, 12%. the ordinary farmer cannot survive. their spirit is being crushed. the west has to see that, and we can do that the politically as their first approach -- diplomatically as our first approach and then with sanctions and militarily, we have to maintain our edge through nato to make sure that poland and lithuania, i'm so proud of them they are standing up. there was remarkable -- that was remarkable. liberty is on the march and we have to help her. host: "washington post" on gradients fleeing the country great is the united states accepting ukrainians that are trying to get out? guest: i think that knowing some of those borders, they can escape in many directions. how sad, but ukraine has had a hemorrhage, as has russia, of young people. they don't want to live there. everybody wants to come to the united states because of this great, great country. but they are afraid. they know their history. the sad thing is, the poor, the old women i see begging in the streets when i go there eking out a living, feeding the country, the older women are feeding the country. nobody sees them. it is so sad. but the united states would be one country that would grant political asylum, i'm sure. canada, the countries that i mentioned that understand. it is important for ukraine to fight for their country. the new generation to fight. but how are they going to fight? they were left to defenseless largely. there is a military, but it can't compare to russia. host: what was your grandparents's native tongue? did they speak it to you? guest: they spoke polish. polish catholics, there were many jews in those immunities, ukrainians, they got along. ordinary people got along. but the government was horrendous. and they killed, and the soviet polls -- i would have been dead, and the church our grandmother was married in, 168 poles were killed by stalin's forces in that church. i first went into that church in 1975 and it is remodeled, but there is a long history to what is happened there. host: derek is the first baltimore. democratic caller. caller: good morning to you represented a chapter. you know what, what really aggravates me is republicans -- they're just perennial backseat drivers. ronald reagan left a $6 trillion debt. bill clinton came in and pay down the debt. george bush came in, $7 trillion. let me tell you something, i'm retired from northrop grumman. i know defense. putin just got finished signing a bill that would allow the military for russia to spend $779 billion in the next 10 years in defense. the united states spends over $600 billion a year in defense and military, we have 12 aircraft carriers all around the world. host: derek, i'm going to jump and ask you to get your point. caller: my point is that she is exactly right. they keep talking about how the united states is drop. -- is strong. guest: as a member of the defense committee, i can guarantee you that this nation is the strongest military power in the world, and we guard our liberty with huge sacrifices by the american people and those who serve us and the weapon systems and the defense that we have built over the history of our country. today before a subcommittee secretary hagel is going to testify on the budget for 2015 and many of the difficult choices that we have to make in order to ring down our deficit but maintain -- and bring down our deficit but maintain the strongest defense of the world because america does have enemies. you should know, having worked for northrop grumman, you know them well. we have to be prepared. we have to be eternally vigilant in order to preserve the liberties that have been so hard won. some of the veterans calling it today, but over many generations, your relatives, my relatives, have given to this great country. host: on the energy issue guest: well, i'll tell you what, from the state of ohio, we have had a huge gaas boom -- gas boom in the utica shale, pennsylvania and so forth, we have access gas. there are huge discoveries in north dakota. first of a, we need to protect our homeland and make sure that competitive rising or mains in this country -- competitive racing remains in this country. and i'm a member of the energy subcommittee. if our executive branch can find ways to ease the pressure on europe through natural gas exports, and it is good business for us, then i say absolutely. host: kim in california republican. caller: thanks for taking my copy i have a son in the military, and i've got to educate the congress woman. i'm a republican but i'm about ready to leave the party. it is too neocon for me. i'm going to register independent. i would like to educate your congresswoman there. does she know about the project for the new american century and how victoria nuland, who is in obama's state department, was working for dick cheney, the godfather of neoconservatives, and she was meddling in ukraine for these neoconservatives who have had the agenda in russia forever? i heard the website mentioned ushijacked.com -- host: so you think this is an effort by so-called neocons to go to war with russia? caller: of course it is! host: then let's have the congresswoman respond. guest: i have been working with the state department and assistant secretary nuland to find diplomatic means to mobilize the nations of the world. i found her very responsive. and on that front, secretary kerry is working overtime on that very effort. i think that war with russia would not be in russia's interest, nor in the interest of our country. we have to be judicious, we have to be wise, and we have to be strong. and we have to be progressive in what we do. the world community is shocked at what the president of russia has done. we need to isolate him global ly. nations are catching up to that. at the u.n., in their own spheres of influence and so forth, russia is showing herself at this moment to be living in the past. i understand president putin's concerned about unstable states, but russia has a terrible history of the elimination of minorities. one of my concerns in the current invasion of russia into ukraine is how the cap tars will be treated in crimea. they say -- the president of russia says he is going to have an election, he has mandated an election this sunday in crimea. how would you vote if you had a gun at your head? who can say that is a free election? observers on the ground, monitors on the ground, they are not allowed in. it is a closed iron door. they cannot get in. it is important for the world community diplomatically economically, to make themselves felt. it is going to take a while to wind up, but remember, we engaged in the cold war for over half a century and we ultimately won. host: i misspoke earlier -- i said it was the ukrainians thing, but it was the tatars in the crimean region fleeing according to "the washington post." what do you make of that? guest: well, they know their own history. joseph stalin slaughtered them. he relocated them. many of them are muslims. and again, minorities are persecuted. some of the bravest moments at the maidan in kiev when you saw the people just coming up to demonstrate in ukraine that took such courage. i'm not sure the american people fully understand when the priests from the orthodox church , the jewish leaders, the catholic church, the baptists when mr. there on the square -- when they stood there on the square, for them to do that they were fully prepared to be shot. and then you saw later, a few days later, you saw over 100 people shot. where did the bullets come from? where were the snipers? you are dealing with a situation that is unfree. it looks free on the surface a little bit but the deeper you get into it you see how controlled environment remains. and the president who fled president yanukovych they called ukraine a cut have received -- kupchak receded he not only to people's liberty, he took the money. one of our jobs is to track down where the money is and get it back. host: a new pew research poll us shows that 56% says to not get too involved in the situation in ukraine and here is a tweet that echoes that sediment. guest: i completely agree about nation building in the united states. that is why i first ran for congress. that is why we now see the automotive industry recovering and we see america becoming more energy independent and home. we have a sliding agricultural system. that is not happen by -- we have a thriving agricultural system. that does not happen by accident. we are hoping in the energy sector that new jobs in states like my own will help to advance our economy and make it stronger . i think every member of congress, republican and democrat -- i am a democrat but i work on a bipartisan basis as much as i can -- has a focus on the economy. everybody is try to make it better here at home. in terms of meeting our obligations to nato, however we have within the regular budget our commitment to liberty lovers around the world, and america can't just stand by and not meet those commitments. i think our first pushes diplomatic, and we're not finished with that yet. economic sanctions that we approve this week, as those begin to lock in with our allies around the world, it won't happen overnight, but over time, we will make ourselves felt and russia will note that what she has done is not in her own best interest. we have to keep a door open to russia. if i could say word about ukraine, ukraine is a great borderland nation. she will pull west because that is part of her heritage, but she will also pull south and east. she is a great crossroads for europe and for asia, and we need to see her that way. we need to understand, her potential has been capped all these years. she is the bread basket for europe. she is that important a country. this is her century could she will writes, she wi -- this is her century. she will rise, sehhe will. host: go ahead, james. caller: go on the internet and google "ukraine neo-nazi," and there is many, many articles about the neo-nazis that have taken over the government and taken over -- they had a guy become the head of the military, another neo-nazi head of the justice department. these are neo-nazis that have the swastikas and hitler salutes and everything. it looks just horrible. i can't understand why the media hasn't been reporting this and the commerce people don't -- congress people aren't really explain this. guest: first of all, please understand that there is a great deal of russian propaganda that is paid for. the russian government does skew stories. i actually am as i've spoken out for ukraine, i have watched sometimes how they have skewed my words. there is a downdraft of propaganda. that is all part of the struggle that the situation involves. there is a party that is called -- that is in ukraine, and some of the individuals who have been associated with it you could say our right of center in the sense that they are intolerant of other people's religions, other people's points of view, and some have been banished from the country, actually. the party has been made part of the governing coalition that the parliament of the ukraine is trying to hold the country together right now. trying to conduct free and fair elections in may which of the world community must monitor good many of the nations i talk about should take a leadership role in that not just the united states, but countries across the world, so that there can be free and fair elections inside ukraine. there are bad apples in every barrel, but i think to call the situation in ukraine neo-nazi -- i mean, that country suffered so much under the nazis. if you go to ukraine and you talk to the people, the nazis turned our grandmother's church into a stable after they invaded . if you go to ukraine and you go to the river and look at the monument in central kiev to the soldiers in ukraine who fought against the nazis come it is one of the most powerful, most elegant sculptures that i've ever seen. i don't believe that that type of political movement can be successful in ukraine because of what she suffered under the nazis. so that is propaganda, and think about it, from the russian point of view, if you can twist something to talk about nazis and make not cease the enemy -- and make nazis the enemy, the ukrainian people would fight against it because they severed at the hands of the nazis. so it is a clever lyrical ploy, propaganda, but i reckon eyes there are some who have some points of view inside the country, but overall that is not what the ukrainian people are made of. host: do you still have family in ukraine? guest: many, many have died. some were starved to death under stalin. some were killed. the ones who are closest, one was a great uncle of ours who we discovered in 1973 as we drove into ukraine -- we were the only car on the road from poland to a town on the western side. he had to secretly go from the county that he lived in to meet us there, and we had written letters and everything. yet imprisoned by stallard for 20 years in the gulags -- he had been imprisoned by stallard and for 20 -- fightby stalin for 20 years in the gulag. his brother died in one of those camps at the hands of the soviets. there is a book by timothy snyder a great american scholar ideal university, called "-- scholar at yale university, called "bloodlands." i recommend it to everyone. it is just encyclopedic. it is a great book. host: why did your great uncle have to go into secrecy in 1973? guest: he had been held by stalin in the gulags for 20 years and so he was viewed an enemy of the state. they made him carry a card. if you travel by train from where he lived to try -- we did not know if anybody was left. we wanted to find out. relatives in poland, they rode and he finally found this in a hotel, the hotel that was monitored -- we were the only guests in this so-called hotel. he through a fortune teller who came to the hotel, and she was told that nobody was here. they lied for three days. finally my mother heard them talking one morning and she said, wait a minute, they are talking about us. i flew down the stairs. the hotel is now called the st. george hotel. we went with this fortuneteller, wound our way through the back streets until we went into her little apartment and we walked through these beaded door hangers into a tiny little kitchen and there stood this man -- it's hard to even tell you. it was unbelievable. 100 years of history came together in one moment and i knew he was our relative because he held his hands like our grandmother. unbelievable. but to have a government tear families apart, to create such carnage this is a moment for liberty that the free world has to seize, first diplomatically and then economically. no family -- and i am a survivor , two generations hence. how fortunate. but i look at people there who look like me and want to be free. and this is their moment. host: chesapeake, virginia. democratic caller. caller: yes. first, i want to say that i think president obama is the best president ever. and the second thing i want to ask a question about, i have two nephews serving in the military. one of them e-mails me about the republicans calling the president of the united states lawless, weak on national tv and they are disgracing america. are they trying to send us to war? guest: you know, there are some people who always pick war as the first option. and the american people really are not that kind of people. i think we will be patient. i think we will be strong. and we will work with our allies around the world. don't forget, we don't live alone on this earth. and when the president of russia invades another country, you think the other countries don't notice? what about greece? what about turkey? it shares the black sea, by the way, with russia and other countries in that region. the world is paying attention. so the united states and president obama -- i think president obama has handled this with such aplomb and he has a few other things on his plate by the way. i am proud of our congress. we did not sit there in stumps back in december in concert -- contrast with other countries. we passed a resolution that stood with the people who are standing up for their liberty in kiev and across that country. we did that in our country. we stood up for liberty here. and then this week we passed a resolution that would allow us to place additional sanctions on many of those individuals who violated the interests of the own country in stealing from it and using that money -- moving that money to save havens. usually in the west, by the way, so we can track those dollars. and the united states will be on the hunt with our allies for those who rob from the own people to restore those dollars back and help ukraine build her own country. it will take us time, but we will get the job done. host: richard klein tweets in -- do the ukraine people feel safe now? guest: know, the ukraine people do not feel safe now. they are fearful, the airfields -- fearful for their families. those who practice in minority religions i am sure are praying very hard right now because they simply don't know what will happen. the poorest, the weakest would not be able to leave. and i'm sure they are with trepidation, knowing the history of their own country. that's why i say to americans, what can you do? you can get on the internet. you can try to send e-mail messages. you can read, you can tweak -- tweet. through your churches you can link to other churches who are trying to help, the synagogues. whether the denomination is baptist, whether it is ukrainian orthodox whether it is roman catholic, whether it is greek -- all of these faiths are very predominant in ukraine. one of the ideas i had because easter and passover is such a huge celebration, both the fasting and the celebration of the resurrection for those who are christian, it is a huge moment in ukraine. and i hope that the world's religious communities will have the most giant procession in world history and invite the world community to come to ukraine. come to ukraine this year at easter time. ansd stand with the people there, profess for -- with the people, regardless of your denomination, and give them spirit. right now they need spirit to withstand their fears and realize their hope. host: are you going back anytime soon? guest: senator mccain took a delegation of senators. i am proud of senator mccain and the senators who went with him. i have the opportunity to join but i decided i did not want to go with eight male senators. i will wait for the house. [laughter] i am trying to get the word out that i think the religious leaders of ukraine, with the bravery they have demonstrated, should invite the world community to pray in ukraine at this easter season. what a challenge that the world could meet. and let's come across all borders. let poland help. let hungary help. let greece help. let lithuania help, estonia, latvia. all of these countries that understand, and certainly the united states of america. people would go on their own accord. host: tallahassee, florida. republican. caller: i think the congress lady is right on target. we've got to deal with bullies and dictators with power. it is obvious the only thing they understand. i was in strategic air command for over 20 years, starting in january of 1950, and i can assure you that the motto of our profession was correct -- peace is our profession. we have the strongest nuclear force in the world and it was defective. the only thing i have to disagree with her about is obama. i think obama is a weak leader. he's not focusing on the key issues. i think he's got his plate full on a lot of minor insignificant things but we got to focus on the main thing. and right now it is russia. and again, i think the lady is doing a fine job of we are lucky to have her on the committee. she knows what she's talking about. guest: thank you for serving in the strategic air command. i represent an f-16 facility in my own district. and the work that our military does -- the discipline, the patriotism, the self-sacrifice both individual and the military and their entire family. i have a young cousin who is married to a marine and he has been deployed several times. we are so proud of you. we are just so proud of you. host: we will go on to dan in georgetown, massachusetts. caller: good morning. i just want to talk a minute about the use of soft power in the united states. it seems like we have made a shift from using hard power in places like iraq and afghanistan, where we have walked into sovereign nations and basically overthrew their governments. and now we are turning to the soft power thing where we cause unrest in countries and the sovereign leaders are overthrown. we don't call it a coup, and then we support the new leaders that have been installed after a forceful takeover come a support them with our money. a question i have is, is the congresswoman aware of the recent fcc filing against the company archer daniels midland and then i have a question if i can hear a response. guest: i am afraid i am not aware of it but i'm happy to look into it. why don't you explain it to us. it caller: archer daniels midland company, there was a lawsuit with the fcc, where they were meddling with paying off leaders in the ukraine and venezuela. in the ukraine, they were adding money to a vat tax. you had mentioned how the people there were being charged too much money for their good. -- food. the sec filed a lawsuit. they were paying off millions of dollars of elected officials in ukraine and venezuela and they settled out of court so no facts would come out. like peanuts, $140 million. this just happened in december of 2013. and then we heard all of the callers talking about a high official in the state department, she in -- she actually in a phone conversation with you told me eu to fu -- to the eu, and in the common faith and she is laying out the preferred new leader of ukraine who happens to be in power now who we give the title of prime minister to when indeed it was a forceful takeover. host: i will leave it there, the sec has this on their website from december 2013. sec today charged archer daniels midland company for failing to prevent illicit payments made by foreign subsidiaries to ukrainian government officials in violation of the foreign corrupt practices act. guest: thank you for calling in. i will become more familiar with that case, but in general ukraine has been called a clip copper see -- cleptocracy under the former regime where it was not a transparent form of doing business. i mentioned how much farmers were being charged by the economic system inside the ukraine, 19% interest rates. they were forced to sell their land and the land was being unmasked by certain oligarchs and set the country. it is a very messy situation economically. and there are a lot of forces at work to control ukrainian farmland because it is globally pristine. farmers don't have the equipment like we have here. they don't have the best seed. and there were forces at work to control again this global asset that is so precious as world population increases. ukraine is already the third largest exporter of grain on the face of the earth, despite the horrendous economic system. i must say in terms of the government of ukraine now, what has happened under the constitution of the country their parliament by vast majority vote supported the new government of ukraine. and they actually voted and the party that president jan a quote which -- yanukovich, the corrupt one, they fled. even some of those who left, those who stayed inside the country, voted for the new government of ukraine. so, under their constitution, just as in our country, if something were to happen to the president our constitution provides for succession and it provides for congress to vote the legislative branch has his own power. the same is true for ukraine, and that is what happened. so the current government has been a firm. there will be votes that come in may to have a ticket, to have people run inside that country. and this is where the world community -- you talk about soft power, a very important point. the world community has to be there. the organization for security and cooperation in europe has to be there to help monitor the elections and the united nations, frankly, i think should be selling -- setting -- sending delegates. but of russia or china blocks it -- they have not been open societies in the sense of wanting free elections -- we need to guarantee the elections are free and fair and the world community can help do that. host: james, you are next in charleston, west virginia. democratic caller. caller: a couple of points. one thing -- ukrainian to need to fight for ukraine. not just americans. and also, for the congresswoman campaign finance reform. someone from another state should not be giving money to another congressman and another state that is representing people. like in ohio, where you are at, there should not be someone from texas sending money in there to beat you when they are not representing people in texas. but this has been our modus operandi for some time and it seems like we are a more divided country than we have ever been in our recent history. guest: you hit the nail on the head. you hit the nail on the head. that is exactly what is wrong inside the country -- inside congress. it has become like to political parties instead of a congress. we need to do what canada does, we need to do with england does, we need to get the big money out. in my last election there was money from texas that was put against me. i said, who are these people? they never met me. they don't know what i've done. it is frightening. and you feel like a duck in a shooting gallery if the big money comes in against you and you can't afford to buy the ads and so forth. a lot of americans wouldn't want this job because what you have to put up with in terms of those dollars. we are capable of reforming this system but none of those bills to do campaign finance reform has been even allowed to be voted on in the congress of the united states. and the ones that came up years ago that were supposed to be reformed, look at what happened. even more money poured in. so we need disclosure. i am all for disclosure. but we need to control the amount of money that are coming into the political process. we can do better in this country. host: congresswoman, you are also part of the congressional automotive caucus. i want to get your take on the gm story. the latest headline is that gm says the problem arose in 2001. documents revealed showed gm acknowledged that they first heard in 2001 it might have a problem with the ignition switches, now linked to 12 deaths. guest: i think that the industry, whether it is domestic or the global auto industry, has been trying to meet new standards, reduce the weight of the cars and there has been a lot of new technology that has been added. and it is all in the engineering. and with the electronic systems being installed and sensors to a level we never had back in the last century, there have been serious problems with acceleration, for example. rapid acceleration that you can't stop in the car. or this particular problem. it is not just the us-made vehicles but this is happening in other places because of the -- because of the fuel standard and so forth. i actually think what we need, and we have not been able to pass this yet, is we need to have a place in our country where we work with the industry to have failsafe backup mechanisms in the electronic systems on vehicles. and we don't really have that right now. there are singular chips that control different -- for instance, on the accelerator, if you really get into the electronics of it, they are not failsafe. and i think we need to move to that and help the industry transition. i can't speak to gm's particular situation but overall, the amount of electronics. think yourself on vehicles -- automatic door openers now an automatic locks and all the electronic components, every one of them can have faults. we need backup systems with each vehicle and do it in a cost-effective manner. host: democrat from ohio, appreciate your time. guest: great to live in a country where people can call in and someone from the press can speak freely and throw questions at us. this was achieved at a very great price and we love this country. let's make it stronger. a few -- host: thank you. coming up next, we will talk to michael smith from -- michael schmidt from "the new york times" talking about corporate money in washington but first a news update from c-span radio. >> war on the situation in ukraine from the organization for economic cooperation and development -- more on the situation in ukraine. members are halting membership talk with russia for the time being. the group hasn't given an explanation for the decision but many see it as a direct response to russia's intervention in ukraine's crimean peninsula. oecd promotes good governance and economic policy initiatives among the 34 mainly rich world members. here in the united states, jobless numbers are in and they show weekly application for the benefits dropped by 9000 last week to a seasonally adjusted 315,000, a sign the job market is picking up after a slump. the labor department says the four-week average of applications decreased to the lowest since early december. declined indicate companies are confident enough about the economy to keep their staff. as for consumer spending, retail sales rose in february after a decline in january. the commerce department says cnet -- seasonally adjusted retail sales rose 0.3% in february, suggesting consumer spending has parted to recover after being tempered by snowstorms and freezing temperatures that blanketed much of the country. and those are some of the latest headlines on c-span radio. >> i think what happens to hoover as the depression deepens -- and people did not know it was a great depression on day one. they thought it was probably a typical cyclical events. but when that pattern did not hold and when the depression deepened, hoover then found himself facing increasing pressure from the left or greater and greater expenditures, greater intervention in the economy. and he started to hold the line against that and became very much a fiscal conservative balance the budget, save the gold standard republican in the last year or two of his life. and that perceived rigidity on that part is part of the reason why he got attacked as supposedly not doing anything. he was quite activist before his time. on the other hand he was valiantly struggling against a total statist turn, such as esau coming in the new deal. >> editor george nash on the missing link in herbert hoover's memoirs, saturday night at 10:00 p.m. eastern and sunday at 9:00 p.m. on after wards. in a few weeks, military strategist and former assistant defense secretary will take your calls, comments, e-mails and tweets on the middle east and the wars in iraq and afghanistan. live from noon until 3:00 p.m. eastern. this month on booktv's book clubs, join the discussion on camille joseph's new biography of stokely carmichael. washington just -- "washington journal" continues. host: michael schmidt is a new york times correspondent -- talking about corporate influence in washington. he wrote a piece with these colleagues, hedge funds holding the leverage of power -- that in the herbalife will fail and lobbying to bring it down. who is william ackman and why is he the center of the story? guest: mr. ackman is a big-time hedge fund manager out of new york and made the billion-dollar bet herbalife is a fraud. and he argued it is a peer amid scheme and regulators need to crack down on it. not only regulators here but regulators in the state. and he has come here to make that argument in the hopes that this doc will go to zero and he will make a lot of money. that is sort of the background. host: he has come here to washington to make that story. howell hit -- did how did he bet the $1 billion? guest: he started shorting the stock in 2012. it took them several months to do this. by december he went public and said i am shorting the stock, and this is a great thing for america i am shorting the stock because this company is so damaging, it is so awful and it creates so much harm in the economy that if i am able to put it out of business, and i am able to get regulators to stop this country, it will be a patriotic thing for the united states. at what his argument. this is not just a bit to make money. this is something to help america. host: what is herbalife and what is their response to his charges? guest: it is a company that sells shakes and vitamins and different nutritional supplements through a network of distributors, which is a little different than selling them in stores, so that is why a lot of people may not know herbalife. the response is that we are not a peer amid scheme and would make a lot of profit and we are fairly transparent. and they push back on him and they invest a lot of money to make their argument to regulators and members of congress that they are above board and they are not what mr. ackman says. host: both sides are hiring lobbyists. what does mr. ackman wants and what does verbally at -- herbalife want through the lobbyists? guest: what mr. ackman once is what happened yesterday, an announcement that there is an investigation into the company. he wants the regulators to put as much pressure on the company as possible to provide more information about their sales more information about how they operate. what he believes will happen is the company he believes that has covered up so much, that as they do that, more and more will come out and it will show that a company is not what it says it is. herbalife says a we obviously don't want this to happen. we want to make our argument to legislatures and the regulators about how this is not true and how we are a fully functioning company, and mr. ackman is wrong. but what happened is they have both kind of going to congress and mr. ackman has been lobbying members of congress to write these letters to regulators saying you should really look into this. and the most drastic example of this came in december when senator ed markey sent a letter to the ftc and the sec about herbalife after being lobbied -- after his office was lobbied. he was not lobbied himself. but he said these letters on the stock went down 15% in less than an hour on the day he sent it. these were simply letters and called for these regulators to look into it. mr. markey does not have the power to look into it. but there is so much attention and so much uncertainty about this stock and about what is going on, that it totally tanked the stock in a short period of time. there is a lot going on, a lot moving. as we have seen, congress can have very, very big power on these stocks. host: from "the new york times" this morning, your colleagues who wrote the story. "the news prompted a selloff of the stock." guest: yesterday he would say it was a very good day because it shows regulators are interested in looking into what he said they should be looking into. for mr. ackman to win, there is a widespread belief the stock basically have to go to zero. so, yes, yesterday was a good day for him in a sense, but for him to win in the long term, which could take several years they have to go out of business. host: when you say "when" what does he get beside the victory saying this company is a pyramid in? guest: is billion-dollar investment will become a lot more money. i don't know exactly how much money he will make, but he will be doubling, tripling, whatever his money, from that. host: it is his money? guest: his hedge funds money. they manage $11 billion and they made -- made a billion-dollar bet on this and they manage the structure of what it is. there is not a lot of transparency from them about that. but they stand to make a lot of money. but as mr. ackman says, this is not just about the money. this is about america and about helping people and about saving people. host: how much money has mr. ackman spent on getting congress to prompt regulators to look into herbalife? guest: he claims he has been out spent about 10 to one by herbalife. he says his campaign with congress and that has not been that expensive. what we don't really know from mr. ackman is how much money they spent elsewhere on other things. because they have been paying nonprofit groups for their help in this. and they have been going around the country meeting with attorneys general to encourage them to look at this as well. so, there is a lot of this in the donations they made. they made donations to nonprofit organizations that we simply don't know about. we only know a sliver. host: why did mr. ackman go to these nonprofit groups, largely hispanic groups? what is their role? guest: he needs not only to book pressure himself on the regulators, but he needs to have the tums -- he needs to have the dem -- victims and people themselves putting pressure on the regulators which means he need average citizens the right letters to the state attorneys general. he needs to have these victims people who have been harmed, able to connect to the regulators and show the regulators how they have been hard. so these organizations help in that movement. host: why hispanics specifically? guest: well, there is a large percentage of the people that use herbalife who are hispanic. and these hispanic organizations here in washington say that they advocate for hispanics who have been harmed and advocate for hispanic causes. so he needs them to help get the victims and help mobilize against the company across the country. the issue is that mr. ackman says there are all these victims of the company am a but if you start to -- talk to state regulators they have not heard from the victims themselves. they say if this isn't a problem, why haven't we heard of it? mr. ackman says hold on, we have victims to make the argument to say, look at these people, look at what happened to them. we talked to some state attorney generals, and they said even when they brought the victims to us, the victims have not had strong cases and it has been hard to prove their claims and such. so it is hard to sort of understand, if there are so many victims of this country, why mr. ackman has struggled to get the victims. host: victims of what? guest: of the peer amid scheme. people who invested to become distributors of herbalife and went on to lose substantial amounts of money chasing larger sales and the company. as we looked at it in our story we were not looking at whether herbalife was a pyramid game -- scheme. we were looking at the narrow issue of how mr. ackman has mobilized in washington and across the country to do this. is herbalife a peer amid scheme -- pyramid scheme, but what we wanted to look into is what was going on here, which has not received a lot of attention, and that is the narrow avenue we used to going. host: is this something new corporate influence in washington? guest: of course not. that is not a new issue. what we find interesting and what is different is that it is a hedge fund that has a short position on a company. what we see a lot in washington is companies, big and small, who come here and say hey, this regulatory issue would really hurt us, or this law or these tax laws would really hurt us. but this is a guy who made a bet against a company who is not coming here to try to get regulators to bring down that company. and washington saw this with the for-profit universities that hedge funds were selling short on a few years ago, that they came here and worked through the department of education to crack down on it. but on this scale, and how far-reaching mr. ackman has done this i don't know if the word unprecedented is the most accurate, but it certainly is rare. host: are companies doing this now -- hedge fund companies, i should say, betting short on a company and then coming to washington? is this a new pattern? guest: i think this is fairly new and i think what mr. ackman is doing is probably the boldest and most aggressive. we don't know many other examples of hedge funds that have done this and we certainly don't know of anyone who has done it at the scale he has. host: this ftc inquiry, how long will it take? guest: it could take months, if not years, to get to the bottom of it. will the ftc shut down the company or will the ftc come to the company and come to some understanding that they have to disclose more information, that they have to restructure how they do business? i think the idea that an ftc investigation will totally wipe out this company ice -- i find it hard to believe. host: herbalife said we welcome the investigation. guest: i don't know what else they will say at this point. it's good you know how much business they do in the united states? guest: this is a global company in a lot of different countries. it significant portion of the businesses here but not all of it. there are in china, asia elsewhere. even if they are shut down in the united states, what does it mean from -- for what they are doing elsewhere? that is why some say mr. ackman is in a tough position because even if the regulators here crack down on them, are they going to put them out of business here question mark a lot of people don't think that will happen. and even if that happens, is the company able to go elsewhere? host: you mentioned senator markey writing a letter, his often. congresswoman linda sanchez writing a letter. talk about the role of these members of congress have played and have they had a big influence? guest: congresswoman sanchez what you have is she sent a letter, she says them -- she says, june 5 asking them to investigate herbalife. she did not make it public. on june 6, mr. ackman was at a midtown manhattan steakhouse and he was with other hedge fund managers and he was making the argument to them that they along with him should short herbalife and he said part of the reason why they should do that is because ms. sanchez sent a letter to the ftc saying they should crack down and investigate herbalife. the ftc had not received the letter yet and it was not public but you had mr. ackman in midtown manhattan making arguments to other people with significant experience host: investors? guest: hedge fund managers. not people invested with him but people managing other people's money. the letter is not public. the ftc has not even received it. and then when it comes out later that month, it is reported later that month -- still not out there publicly. on july 3, nearly a month after mr. ackman first discussed the letter, ms. sanchez put a copy of the letter in a press release on her website saying they send a letter to the ftc which indicated the press release june 5. even though it was july 3 they were putting it on the website. she backdated her own press release. host: the response from her office? guest: they said that when they sent the letter to the ftc on june 5 or june 6, they set by doing that they made it a public document. to us, that is not our interpretation of public. and the ftc hat even received it at the time. but they said we made it a public document, we can share it with whoever we wanted to. host: does the congresswoman stand by her request for an investigation, and if so, why? why would she make the investigation -- democrat from california? guest: she says her constituents, hispanics, are being harmed by the company. she said it is something the ftc should look at and that is why i called for them to investigate it. they have not retreated on anything they did. and as we learned, it is kind of a common practice in washington that if you are lobbying a member of congress, you can then get a copy of a letter that they are sending to an organization. the question is here, why is it that mr. ackman who stood to profit substantially from that letter was allowed to have access to that when the rest of the market didn't. but based on what we look at -- the question of whether it was legal or not -- it is legal. host: it is legal and it is a common practice for lawmakers to give a letter ahead of time or take language from a suggested letter? guest: mr. ackman told us they did provide members of congress with information about herbalife that they could use when talking to are sending letters to regulators. a letter from ms. sanchez was not very detailed. it did not have the specific that mr. markey's letter had but it did the most important thing for mr. ackman, calling for the ftc to investigate. host: cindy is from lincoln rhode island. independent. caller: my question is no airplane struck building seven on 9/11 but it came down -- host: i will move on because that is not our topic. mary and sarasota, florida. independent. caller: it seems really frightening from what i am hearing -- and i will certainly read up on it -- that our federal government is colluding and can even been -- be corrupted when a private hedge fund can attack a company for profit and use the federal government to be the frontperson. congress should investigate and the house and the senate should really investigate sanchez and markey for being a party to this. as far as losing money in a company like herbalife -- which i have never been involved with -- but certainly i sold avon when i was in my teens and i learned that i was not a saleswoman. i think some people are made for selling and some people aren't and you can't really blame that on a company like herbalife or avon or mary kay. host: i got your point. let's just take the first part of your comment. congressional reaction to your story and the pressure that mr. ackman is putting on regulators. guest: there has not been a lot of congressional reaction to it. i think it speaks to this is sort of how business is done on capitol hill. and we reached out to senators who we thought would perhaps find it -- would question this and they said they really don't want to talk to us about it. so we haven't heard a lot from capitol hill. host: is william ackman a republican or democrat? guest: i think he is a democrat. he is very close to cory booker and has given cory booker money over the years and talked about his friendship with him. and he did give money to the democratic senatorial reelection campaign commission on the day that mr. markey won the nomination for mr. kerry's senate seat about a year ago but mr. ackman says it is just a coincidence that that donation was made the same day that mr. markey won the nomination. host: talking about corporate money's influence in washington. cap, alabama. republican caller. the local -- caller: how much has mr. ackman donated in total to various democratic politicians particular mr. markey and ms. sanchez? i will take your answer off the phone. guest: as i was saying, he gave money to the democratic senatorial campaign committee on the day that mr. markey won the nomination. he has given money to mr. booker. he has given money to some republicans. he has not given money directly to mr. markey or to ms. sanchez. his sister did make a donation, a small donation, to mr. markey. but besides that, there is not a ton of donations that he has made. host: a viewer wants to know -- why doesn't the hedge fund manager's activity violate fcc rules against market manipulation? guest: a question -- harvey pitt has great questions about market minimization -- manipulation. it is a complicated matter that includes having to so -- show that the person was trying to manipulate the market knowingly and willingly did that. that would be a difficult thing to show, experts say. host: who are the regulators that are overseeing herbalife and those types of companies? guest: the sec would regulate it as a publicly held company and the ftc would regulate the function of the company and whether it was operating a pyramid scheme, and that is why the ftc looking into this is such a significant thing for mr. ackman because they are the ones who could take the action against the company. host: who oversees hedge fund managers? guest: that is a good question. host: ron in vermont. emma craddock caller. caller: -- democratic caller. caller: i don't know when it was, but isn't congress, they can't be prosecuted for dealing in the stock market? but you know, people say fascism could never come to america. guess what? this is fascism. this is private industry using government to enhance themselves. and, you know, my take is, my money is coming out of the stock market. because the whole thing is corrupt. the whole thing is games. host: all right. guest: what mr. ackman says is that he is doing something good for the united states. that he not only stands to profit, but he is doing something that will help the average person and will help ring down a company that has created such harm. so that allows him to make sort of a broader argument that i am not just here for myself i am here for everyone else. host: will he stand to personally gain financially if this company fails? guest: yes, totally. host: he said he will take the money? guest: he said he will donate all the money he personally makes -- his personal profits -- to charity. he has talked to perhaps giving it to victims causes or educational causes that help prevent people from getting ensnared in pyramid games. host: roger green wants to know who is investigating ackman's motives. exactly what is wrong with wall street, the same greed that caused the recession. guest: we don't know of any law enforcement or regulatory body that is looking at mr. ackman right now. host: talk about the history of pursuing this type of agenda. he has done it before. guest: he did it about a decade ago and he -- it took a very long time to play out and he was ultimately right and vindicated and he ultimately made a lot of money. i think that a difference here is he has been so public about this. he has had these public presentations. he has gone on cnbc a lot to talk about it. he has come to washington. he has websites that he has created to discredit the company. he has become such a public face against the company in a way that we very rarely see. that has made a germanic, in a sense. you have a hedge fund guy from new york against a company that is based out of los angeles. you have another hedge fund guy in new york, carl icahn, who has taken it -- taking the other side of the trade. you have a germanic background that you don't always have that makes it an interesting story -- dramatic background that you don't always have. it is something that is going on on wall street, across the country. herbalife in china and asia. i think part of that was something that really intrigued -- intrigued us. host: a viewer tweets in --the case of legalized bribery. we should be mad at the elected official selling government favorite not those buying it. when did mr. ackman decide to pursue this? guest: to that point, short sellers -- i think short sellers are demonized. it is not necessarily fair. if you had been a short seller on enron and was coming to the government and you figured out that bernie made off -- bernie m adoff was a fraud and you were able to bring it to regulators and they were able to expose that and crackdown on it before more people were harmed by them, that is not a bad thing. sometimes that gets demonized. if indeed herbalife is a pyrmanamid game and he is bringing it to light, that is not a bad thing. the questions people have about him coming in is how he is going about that. is he simply bringing the information to regulators saying, look this is a problem. or is he doing things around the edges in the system and trying to use the lobbying system to do things that maybe he shouldn't be doing? guest: greg is next from georgia. independent caller. caller: one comment is, if you look back at history, you can see where that during the spanish-american war, the sugar was the main thing and cuba we were trying to get at. we bombed the spanish fleet in philippines. here comes ike and he kills the shawl of iraq -- host: how does it deal with the topic? caller: corporate america and the government -- not the real government but the people running it in the shadows is coming up with these schemes to get all of this money, and they believe they are protected within the beltway. you have all of these people, these lobbyists, doing things for certain people, and you don't never hear where the money is going. host: ok. michael schmidt? go ahead. guest: it raises the interesting questions about lobbying members of congress that are age-old questions and are things that "the times" has looked at for many years and many people look at. one thing a call or raise before was about members of congress trading on this information. there has been a lot of attention given to the issue a few years ago about how members of congress were trading off the information they had and then there was a real movement to create legislation to stop that but it ultimately stalled and it did not change. "60 minutes" did a whole piece about the members have the information and they would trade on it, and there was nothing wrong with that legally. then they try to change it but nothing ever came of it. host: does the fact that it exists, there are financial analysts trying to read between the lines of what congress is saying and make sales based on that? guest: yes, the political intelligence farms here in washington who can get information from members of congress, from staff members about things that are bound to happen, they can pass that money onto hedge funds and to banks and others who have interest in that and they can trade off of that information. that is part of what is legal here in washington. host: a viewer wants to know -- stupid question, but can you give us a fuller description of selling short and how money is made through selling short? guest: it is a bit located but basically instead -- complicated, but instead of buying a stock and you borrow shares and you agree to sell it back at a certain point if it goes lower. mr. ackman sort of provided us with a lecture on this at one point about it because he said it is not necessarily an investment, it is more of a position and more of a that. but at a very basic level it is buying a stock say, at $100, and the lower it goes the more money that you can make as opposed to buying the stock at $100 in a additional sense and having it go higher and you making money as a goes higher. host: those that fell short on a company, do they have a history of identifying companies that are doing things wrong? guest: there are research firms, and this is how this all started. there are research firms -- generally the research firms look for stocks that are good to buy but they -- there are also research firms that look for stocks to sell short. some say spotting a fraud is easier to spot than a company that will make tons of money. this is how it all kind of started with mr. ackman. someone he had known who had been a reporter, he had become an analyst look at these things and brothers idea to him and said, look at this company. we think this is not operating above board. we think it is a fraud and not worth what they say it is. and that is sort of how this all got started. host: alexandria, virginia. republican caller. caller: the conversation is actually greater than what your guest is limiting it to, and i am sure he will look to the future to expand. congress passed what is called a retail investor protection act in 2013. as grand as the name sounded, it was actually nothing about that. it was just limiting to address something the sec was going to work on. but there are the practices of the pumpers and the dumpers, so many who take the data and are paid to raise interest in an item up and then they just suck out all the money. then the regulatory problem which began around 2009 when something called expungement was opposed to be implemented for special cases only within finra by the sec but has -- but it has become the arbitrator's new tool to go to the industry saying do you want to expunge this? expungement is really important for the listeners and the ones who say they think the system is gamed to understand. finra worse for the sec and the sec is lot a fortress, keeping a lot of people out from gaining data. what expungement is, the history of an industry person, and industry entity, it can be wiped completely off their slate. if someone calls up finra and goes to broker check to see if there are complaints about their broker-dealer or their advisor that history can have been wiped completely away so multiple people will use that same investor who has a history. there is a group that in a recent press release saying that one broker-dealer advisor had 40 complaints against them. 35 of which were expunged. so had this hedge fund had complaints against them or had related advisers or broker-dealers had complaints possibly involving past behaviors or even on this entity, there is a good chance that the trusting public going to a finra to try to do diligence the research is not getting the real story. host: what you do for a living? caller: i was a journalist. i now run my own e-zines and a focus on intellectual property and copyright, and the second one is focused on faith. guest: i think the question about congress doing anything in terms of regulatory-wise in the industry or for investors, i think the time for that has probably past in terms of the mood and the public support for that. coming out of the financial crisis that we did, i think we saw as much as what congress is going to do and probably congress would not do anything more unless there was something else that drastically pushed them to do that. another massive event in the market. i just don't see the temperature there being one that would leave that to happen now. host: a viewer tweets in --a clear demonstration of the wall street casino. another says it is based on capitalism -- based on bribery robbery, looting, plundering. got to get rid of this criminal, evil system. i don't know if we got to this -- you did, when mr. ackman decided he would pursue this. it was based off of a suggestion from an analyst. guest: he received information about this company, and they started -- because they were buying so much to sell short, it took them several months to do this and then i believe in october 2012, he is on cnbc and he says "i have a new patriotic short position." he doesn't reveal what the company is but he says it is a patriotic position and he will be revealing its own and it will be very inefficient -- beneficial for the country. it is then in december that he makes this public, and the stock takes a big hit as he makes his presentation that day. host: today's news on this is the front page of "the financial times" as well as other papers come a herbalife hit by u.s. pyramid probe. ftc scrutinizes nutrition group structure. kansas, independent caller. caller: mr. schmidt was asked earlier how much of the sky gave to the democratic party. we should also ask whether this -- he was also asked whether the guy was republican or democrat. he works for "the new york times" and it is obvious that he knows this guy is a democrat. the other caller asked homim how much he gave to the politicians and he never answered the question. host: all gone because i think he did answer the question. he said he also has given to ash guest: he has given to both. i don't have it all in front of me, but the most recent thing that was on there was this donation to the democratic senatorial campaign committee on the day that mr. markey had one. roughly for about $50,000. he has given to mr. booker, he has given to republicans. i believe he has been asked by senator schumer in new york to give money. i don't have it all in front of me. host: you did right and this story about democratic strategists going to california to talk to hispanic groups. who was the person? what was she doing? guest: what happened was mr. ackman has hired consultants in washington and around the country to help mobilize their it in this instance, what happened was that the messages were sent out to local organizations in los angeles that there would be this meeting him and this woman would be there to discuss an important matter. but it was not explicitly said it was herbalife. then when these people showed up at the meeting, it was all about herbalife and the damages this company has done and why people needed to take action against it. host: who did they hear from? and who is she? guest: she is a former clinton administration official who was recently tied into this campaign finance case, the federal case in washington that was part of a 2008 effort to raise money for hillary clinton. host: issue now a lobbyist? guest: i think she is a registered lobbyist. and she works for this organization that helped mr. ackman reach out to different latino organizations and other groups across the country. host: bill is next in marietta, georgia. democratic caller. caller: great guest. should have had kerry as a co-guest. i don't know why people continue to do this democrat-republican thing. it is all about corruption. here in georgia, there was a judge running uncontested. he designs and his next day his daughter registers to be the candidate who wants for his office -- he resigns. i would hate to be in front of that judge ever in the state of georgia. it is all about corruption. it is not about democrats or republicans or the aca. it is about people just being selfish and they are corrupt and they needed to be accountable. guest: if we had the resources to look at everything across the country, i think we would find a number of amazing and striking stories. i guess we're all limited by the resources and time we have. host: jacksonville, florida. republican caller. caller: thanks for digging into this story. i may believe herbalife might change its practices a little bit. i am very upset with ackman. if ackman's stockholders in the hedge fund makes a billion, who pays? i would guess if you look into herbalife's open market stockholders, you will see 401k 's, pension funds. selling short should be banned from the free market. this is not a free market situation. host: i have to let you know because the house is about to come in and gavel in. we have to leave it there. that will be your final thought. michael schmidt, thank you very much for talking to our viewers about your story. it can be found on new york times.com. appreciate it. and now, live coverage of the house as they gavel in this morning. [captions copyright national cable satellite corp. 2014] [captioning performed by national captioning institute] 2014.
finishing at 99-dollars-38 cents a barrel. the search continues for more than a hundred people missing after a mudslide destroyed a fishing village north of seattle, washington. eight people were killed when the slide, 15-feet deep in places struck, saturday morning. president obama is in europe meeting with leaders of the group of seven, that's the g-8 without russia. they may step up economic sanctions against russia for its annexation of the crimean peninsula. and disney is paying 950 million dollars to buy privately-held maker studios. the online video company has over 340-million youtube subscribers. trader glenn schultz of performance trust joins us now. hello glenn! >>hi, how are you? >>i'm doing very well. how are janet yellen's comments from last week playing now into this week? >>janet yellen's comments are playing into higher short term rates. when you look at, for example, euro dollars futures the red contracts specifically december of 2015they are pricing in about a 120-125 libor. so the market is looking at her comments specifically the comment in which she stated that she thought short term interest rates could rise or begin to rise as soon as 6 months after the end of the bond purchase program. that's what got the market moving in terms of short term interest rates and they pulled their expectations from the 2nd half of 2015 into the first half of 2015 and we're seeing that play out in terms of higher short term rates and what a lot of people in the fixed income markets call a bear steeper the yield curvethat is front rates going up while the back end remains somewhat stable. >> so what does this acceleration mean to you? >>what it means to me is that the federal reserve is looking at the overall strength of the economy. plus i believe they're factoring in the overall size of the soma portfolioso those are the open market operations. that's the portfolio that holds the bond purchases that the federal reserve has been continuing on over these years and that's now at 4 trillion dollars. so federal reserve economists have already estimated about every trillion dollars of asset purchases is equivalent to a 1% or so cut in terms of the fed funds rate. so as far as the federal reserve is concerned when you factor everything together they believe the target fed funds rate is actually minus 2.75% or so. so in their minds i think there is plenty of room for them to begin to raise interest rates and start to paint a picture of the economy in terms of a more normal state. one that responds to traditional monetary policy, follows the fisher rule, follows the taylor rule. and that means something like 1-1.5% on the short term rate. >>of course all of this is looking at the domestic picture. what about the russian conflict? are you concerned about that spilling over into the u.s. economy? >>i'm not too concerned about that spilling over into the u.s. economy. it looks like the western leaders are going to try to handle the russian problem, specifically the annexation of crimea, through diplomatic meansspecifically they're looking at sanctions. the sanctions are intended to hurt russia. quite frankly, i don't think putin really cares too much about the sanctions. i think the broader question iswas this a test of the western leaders? and did they fail? and is there an even broader agenda with respect to the soviets and putin in particular as far as reassembling the soviet empire. >>alright, we'll leave it there for now. glenn schultz of performance trustthanks very much. >>thank you. it was painful news relatives hoped would never come. those with loved ones aboard malaysia airlines flight 370 learned that new satellite data revealed by the airline and by malaysia's prime minister, that the boeing triple-7, missing for more than two weeks went down in the southern indian ocean. officials say there were no survivors. " it is therefore with deep sadness and regret that i must inform you that, according to this new data, flight mh370 ended in the southern indian ocean." authorities from australia, china and france say satellite images of debris floating in the ocean more than 15-hundred miles southwest of australia are consistant with "pings" satellites received from the plane, more than seven hours after controllers lost contact with it. still no word what caused the airliner to reverse course on its way from kuala lumpur to beijing on march 8th. there were 239-people aboard. we turn now to paul eggers for the latest on the conflict in russia. good morning paul. good morning, chuck. the g7 group of industrialized nations says it will not attend the sochi g-8 summit,and instead will meet, without russia in brussels this summer. leaders also confirm the escalating conflict will increase russian sanctions. more severe penalties for russia's annexation of crimea could send russia's economy into recession. bloomberg news reports russia's economy is expected to shrink over the next two quarters. analysts say if economic sanctions intensify...it could send shockwaves to it's financial system. back in the u.s...the oil market continues to react to conflict overseas. yesterday crude oil futures hit over 100 dollars a barrel due to russian worries, and supply concerns in libya. all five of bernie madoff's former employees on trial in the wake of his massive conspiracy have been convicted. prosecutors prevailed on all 33 counts against them. each was found guilty on conspiracy and securities fraud charges, among others. prosecutors argued that the five not only enriched themselves but also helped madoff cheat investors out of billions of dollars. the six month trial was one of the longest in manhattan federal court history. biotech stocks are under scrutiny and under performing. analysts say the downturn comes after a letter from three members of congress questioned gilead sciences' pricing of it's product "sovaldi," a hepatitus-c drug that's costs patients a-thousand-dollars-per- day. analysts say the pushback by government healthcare agencies spooked investors of other biotech companies as well. trader james ramelli of keene on the market, explains. "it shouldn't affect the broader space too much. i think the broader market is in a place where bad news is really going to make investors nervous. especially with something like the biotech sector. its come up so much so fast, that i think any little bit of bad news is going to send some of the weaker money headed to the exits." the nasdaq biotechnology index finished the day down more than three percent monday. roughly a month ago, that index, a gauge of 121 drug companies was up 20%. the nasdaq biotechnology index finished the day down more than three percent monday. roughly a month ago, that index, a gauge of 121 drug companies was up 20%. in our ipo watch...investors are eagerly awaiting grub hub's public offering. the food delivery company expects 7 million shares to price between 20 and 22 dollars per share-- for a valuation of 1.7 billion dollars. grub hub hopes to gain capital so it can expand to more cities. also....candy crush maker "king digital" is powering up for an ipo-- expected tomorrow. it's one of the most hyped ipos so far this year, and one of 14 companies going public this week. herbalife sees some new life after activist investor carl icahn gets three more seats on its board. shares of the nutrition and weight loss company jumped more than 6 percent yesterday after the anouncement. herbalife does face an investigated by the u-s federal trade commission over its business practices and has been labeled a pyramid scheme by investor william ackman. icahn is herbalife's biggest shareholder with a 16.8% stake. general motors struggles to keep angry customers from soiling its social media presence. the auto maker admits that faulty ignition switches have caused the deaths of at least 12 people and is the reason behind a recall of 1.6 million vehicles. now, g-m is trying to deal with the fallout: customers are taking to twitter and facebook to voice frustrations, fear and anger. the new york times reports the company is trying to walk a fine line on its facebook page and website between buiness as usual and dealing with posted -- and public -- ridicule. u-s manufacturing hits a snag. activity slows in march despite hitting a four-year high in february. what's called a "flash" or preliminary index number slips to 55.5 this month -- down from 57.1 in february. this is lower than the 56.5 number that economists were expecting. the good news is that any number above 50 still indicates expansion. bright spots are also emerging in the euro zone recovery. new data suggests that europe's economy is expanding at the fastest rate since 20-11. data is compiled from 5 thousand businesses in europe. the largest strides last month were made in france --as exports grew. business activity also rose in greece and spain. job creation is also rising. in january, the unemployment rate in europe stood at 12%. the latest unemployment data will be released, april 1st. there are signals from apple and comcast that a new level of cooperation could be on the horizon. the wall street journal is reporting that the two companies are in talks about a joint streaming service. the arrangement would see comcast give users special access on its cable system allowing them to bypass web congestion. this would be done via an apple set- top box. users would be able to stream both live and on-demand programming. there are also rumors apple could release it's new iphone 6 late summer or early fall. shares of apple closed up slightly on the news. microsoft will have to wait a little longer to acquire nokia. the $7.2 billion deal was announced in september and was expected to close by the end of this month, but the global regulatory approval process is still underway according to statements from both companies. the u-s and europe have signed off but asian regulators are reportedly still conductiong reviews. the deal is expected to close next month. after several years of eating more meals at home, americans are going out again. before the start of the recession 77.4% of meals were eaten at home. that percentage quickly grew to 80 once the economy faltered. now, new data points to that number leveling off. this according to market reasearch group n-p-d. still to come: money is shifting out of some of the market's hottest stocks. plus.... are fees attached to your portfolio wiping away some of your stock market gains? and... why the s-e-c is getting angry letters over ceo compensation. that's next after this in-the-know message on the trail for transparency, the securities and exchange commission has received more than a thousand individual letters on a new law requiring companies to disclose the ratio between the salary of its c-e-o and the median pay of it's workers. it's also received 127-thousand form letters on this aspect of wall street reform under dodd-frank legislation. for example, if an employee makes $45-thousand-790 a year, and the ceo's total compensation is 12-million-260- thousand, the ratio would be one-to-268. the ceo would be making 268 times more than the median worker. final rules could be adopted later this year. in the early days of dodd- frank, the finanical industry successfully challenged s-e-c attempts to include stricter rules covering disclosure of mutual fund fees. as a result, individual investors can remain in the dark on the true costs of mutual funds investing. in today's cover story, a closer look at how fees -- not performance -- may drive the popularity of mutual funds. front end load funds can charge a one-time fee around 5 and a half percent up front, then, 12-b-1, or expense fees, can add another 1% annually. and if that mutual fund is inside a brokerage account with a wrap fee, you could be paying another 2 % every year -- taking a big chunk out of your initial investment. "that's an excessive fee structure, in my opinion. lay person investors and even professional investors aren't aware of this at all. " james sanford of sag harbor advisors believes it is this structure -- that can pay brokers handsomely -- that keeps mutual funds so popular. " they can easily replicate the risk/return in an etf or closed end fund or basket of stocks. the problem with that is they don't get financial advisors or brokers paid." investors typically don't ask about fees when making investment decisions, according to financial planner and blogger roger wohlner. "not too much but i've been getting more and more lately as the topic was on the retirement gamble on pbs and other thigns out there. i've been getting more and more." information on expenses is in the fine print of the mutual fund prospectus but brokers do not need to disclose how much they earn from selling a particular fund. it is on investors, then, to ask more questions of their advisor on mutual fund fees and performance. " only 10% of mutual funds outperform the s&p 2 years in a row. so there's really no compelling reason to put your client into mutual funds" still, mutual funds do have proponents and maybe a place in your portfolio. the idea that expensive mutual funds hurt a client is underscored by a recent morningstar study, which revealed that expense ratios is the single biggest predictor of overall success. the lower the expense to the investor, they higher the return in their portfolio. morgan stanley is betting on merger and acquisition madness. the investment bank has revealed the stocks that are on it's radar as possible takeover targets. it expects 44 companies have a good chance of being acquired in the next year. separated into eight different sectors, some of the notable stocks include newfield exploration, dreamworks, and wellpoint. it is expected that 20-14 will be a huge year for tech acquisitions. coming up.. the nasdaq takes a turn for the worse. what's causing tech stocks to lose power? we'll find out later in chart talk. plus... tax strategies for retirees. the advantages you might not be aware of, and should know before april 15th. that's next with bill moller! so how are your taxes coming along. hmm i see. you know - in large measure, your income taxes are based on, you income. but if you're retired, that's a different matter, and you actually have some control over what you pay the irs. christine benz is director of personal finance for morningstar.com. retirees don't have one income stream, they have several. >>most retirees do. they might have social security, they might have pension income, and they might be drawing income from their investment portfolios. so they can think about where they go for income on a year to year basis. >>let's talk about that. i'm retiredwhat can i do to minimize my taxable income? >>you can be strategic about where you go for cash. if you are required to take minimum distributions from your traditional ira's and 401k'sand in 2013 those rmd's may be a little bigger than usual because we had better investment performance than in the past. you might think about taking money from your taxable account or your roth account where the tax rates will tend to be more favorable on those distributions. >>how about deductions? are there any options there? >>there are. what i find is that when a lot of folks are retired, the standard deduction may be better for them than itemizing their deductions. especially if they've already paid off their homes so they're not getting that mortgage interest rate deduction. i think a great strategy can be to bundle their deductions so that if they do have a lot of things going on in a given year, they can in fact itemize those deductions. for example, if you have voluntary health or dental procedures that you plan to undergo, cluster them in a single calendar year. you could also think about prepaying your property taxes so that you have more than 2 bills falling in a given year. you may make that itemized deduction threshold. >>so for property tax billsthat's a different kind of tax you're talking about. that's an exemption. is there an option there? >>there may be and it depends on your community and the way it might be set up for seniors. but definitely make sure that you are availing yourself of all of the tax breaks that are available to you as a senior and/or a long term homeowner. even if you don't qualify for a freeze and you typically do need income below a pretty low level to qualify for a freeze. you may be able to qualify for that long term homeowners exemption. >>hopefully the accountant knows about all this. christinethanks so much. >>thank you bill. thank you bill! coming up next... investors hit the pause button..... find out what sent traders running from some of the market's most watched stocks. that's right after this break! talking to veterans about the real issues they're dealing with can be awkward and uncomfortable. we think to ourselves, "i never served. how could i understand? they'll talk about it when they're ready." and then we wonder why they don't want to talk. but when their behavior changes, when they withdraw to themselves, increase substance use, or even talk about hurting themselves, it's time to act. because if we don't, our families and relationships will suffer. ask the hard questions. listen to the veterans in your life and show you care. make the call. it matters. when you recognize a veteran is in crisis, call the veterans crisis line at 1-800-273-8255 and press "1". in chart talk, big name stocks have taken some hits in this selloff. matt shapiro of mws capital joins us now. hi matt! >>how are you doing chuck? >>i'm doing very well, thanks. so what's causing this selloff? >>i think it's a little of the aggressive investors that got into the go-go phenom highly valued stuff actually kind of lost their nerve yesterday contributing to the selloff of tesla and biotechnology, small caps and really anything that was hot so far this year. >> are we waiting for any economic data is that partially what is contributing to this? >>i think the market has been a mixed bag of a lot of investors on the pause button right now. and the aggressive part of the market that actually has been doing well has been very valued. so there were some stories over the weekend speaking about the high valuation of the russel 2000 and of small caps we knowtesla, facebook has a high valuation. finally investors took a cue and ran for cover from a lot of that. that took the market down. >> everyone has loved tesla up to this point... what's causing this? >>it's really instability that's created when everybody in the media and everybody who's a speculative bent kind of investor starts investing in a company like that and drives the price up to really unsustainable levels. it's really mathematics and psychological behavior that causes a fracture in the market and stock dropping. >> do any of the uncertainties in the world have anything to do with this? >>i know that's a little bit of an excuse and i look at that more as just sort of the general neutral pause button kind of thing in the market. there's a lot of good fundamentals in the market when you talk about economic growth. transportation stocks are doing well. i think we're kind of waiting to get going this year and corrections in the highly valued part of the market for me really don't have much to do with the fundamentalswhich i think are really good. >> one would think gold would be doing better though... why is it not? >>because often times gold is positively correlated with people taking risk. so people ran out of biotechnology and tesla. and the people that pushed up gold this year on speculative interest ran out of that too. sometimes gold doesn't work the way people think it will. >>thanks so much matt shapiro. >>you're welcome chuck. that's a wrap for us today... coming up tomorrow...find out why dentists are the latest medical professionals facing a jobs crisis. we hope you'll join us. from all of us at first business, thank you for watching. >> announcer: the following is a paid program for the paint zoom. uh-oh! wasting another weekend working overtime on a painting project? the uneven coverage of that roller not cutting it? tired of battling with a brush? had your fill of spills, splatters, and running up and down ladders? say so long to those obsolete rollers, brushes, and paint tray catastrophes, because now you can paint like a pro with new spray technology that's so advanced, it's simple. introducing paint zoom, the amazing one-coat professional power painter that turns any prec
france, a mixed picture factoryhe world, tmi activity contracted. as 7:00, we get the weekly mortgage applications. at 9:45, the market u.s. .anufacturing pmi basically, either expanding or contracting. the 10:00, new home sales. that is the big one i will be watching. we will get png, six flags, boeing and delta before the bell. facebook and apple after the bell. president obama begins his tour releases itshe nfl 2014 schedule tonight at 8:00. >> we wait with bated breath. we just wanted to mention, the president has arrived in tokyo. he will be meeting up with the president of japan, prime minister of japan at seven: 15 for an arrival ceremony at the imperial palace and then have dinner with abe. >> look at the shameless plug for ana. walk up the latter thing. mr. president.y >> i don't think that is the president. >> this is in downtown tokyo, essentially. >> not necessarily downtown. it is about 2.5 hours away. >> it is the worst right. bumper-to-bumper, three hours. there is the presidential stairway. >> he has a lot to talk about. >> can i point out, it is somewhat reassuring to know even the president has to wait for slowness at airports. they don't have everything ready for him. >> let's do a presidential data check. a little excitement with futures on the screen. the euro has gone nowhere in like eight weeks. our next screen is more interesting. a quiet complacency. terrific vix.19, number. under 1287. i'm watching that carefully. look at the gold chart up to 2009. gold peak. this is technically a nightly chart. youower highs will stop >> really wonder if we are going to test these two weaknesses in gold. right now we are going to test the enthusiasm of scarlet fu to give you the front page. >> the u.s. is ratcheting up pressure on russia. sending 600 troops for exercises in four countries that border russia. u.s. airborne troops will arrive this weekend. everything is supposed to last for about a month. but they could stay there until the end of the year. >> that certainly sends a message. >> ukraine resuming its offensive to get rid of pro-russian militants in the eastern part of it country. on thoseeep an eye developments. our second front page, the corporate boardrooms, allergan, the maker of botox, fighting back against a joint takeover offer from valiant and bill ackman from adopting a poison defense. that means if any unapproved shareholders own 10% or more, other shareholders can buy discounted shares. bill ackman, they have 9.7%. >> bill ackman will be joining us at 10:00 a.m. today. >> the work on is a superb. i can't convey enough, if you're part of global wall street worldwide, you have to read matt levine in bloomberg view on bill ackman. bill ackman should read matt levine. >> you have described this as a seminal deal going back to the 1980's. 's idea.is levine we go back to the hostel, true hostile takeover. >> you wonder why more people don't do this and whether it will open the floodgates. no third front-page story, longer union-free. pilots voting -- to join air line pilots association. 70% voting in favor. , there will be contract talks. investors don't like it because the stock was up 2% and once the word got out about the vote, the stock dropped. >> why do i feel squishy if i know my pilot is making $37,000 a year? >> you would rather they make $80,000? >> well, i don't want to pay for it. did we say this on the show like a year ago? >> what? >> airlines are ridiculous. >> with the add-on fees. >> i don't like that. --i don't fly, but >> we scaled back. to saveat a g5 or g4 money. those are the front-page stories. >> that's good start of on the american economy -- let's get started on the american economy. ellen zentner joins us. mortimer singer is with us as well. ellen, i want to rip up the script. they talk about the american middle class. is it as ugly as "the new york times" says it is? >> i think you probably can't be described ugly enough. the middle class has been disappearing for decades in the u.s. if you look at wage growth by decades, consistently slowed every decade. keptt a credit expansion the middle-class alive until the financial crisis, and we decided to start paying down debt. specifically, in the article they target income so you would think that is wage and salary growth. in the middle-class and lower-income groups he is talking about rely almost solely on wage and salary income. that is tied to the weak labor market and wage growth that is been fairly stagnant. >> you did not show up with 300 pages of notes. defines ellen zentner middle-class? >> in the u.s., family of four making around $40,000 a year. by new york standards, that doesn't sound like middle-class, but when you go outside of the you island that we live on, can make a fairly good living for a family of four. unfortunately, other costs and costs of living have gone up wearing comes have not. after downturns, especially, e feel much more pinched and wage growth is barely keeping pace with inflation. >> middle income class in canada was behind the u.s. in 2000 the dow appeared to be higher. what is canada doing right? >> i think canada is one of those countries that did not quite experienced the global financial crisis to the magnitude that other countries did. that is not to say they won't have their own sort of correction at some point. you have a lot of concerns around, is there housing market bubble in some areas of canada and there is credit expansion there, but they have a stronger labor market that is closer to full employment them we are here in the u.s. and they did not suffer the downturn -- >> canada banks had a problem back in the-- 1980's. we are behind them. >> shameless plug. all whole new trend in journalism. getting smarter on a topic fast, whether it is of shot or quick take. >> our other guest host is mortimer singer. business development firm focused on growing in the retail industry. how much do you see a apparel companies, retailers focusing on the middle-class or have they had to decide, let's just go for the aspirational, the high-end or stick with the mass-market? >> the statistics sound pretty dire here. the global middle-class or those described as having disposable income is much lower than even described here now as being $10 world --ound the >> that is the global middle-class. >> disposable income of $10 a week. that population has doubled in the last 20 years. >> what is the store on fifth avenue? >> the japanese gap. >> is it the future of apparel middle-class? >> ultimately, just like j.crew, it is effectively an aspirational luxury. , not aot a luxury brand high ticket price, but effectively gives you the buy in to that way of life. >> very good. with us for the hour, mortimer singer and ellen zentner, james glassman will join us in the 7:00 hour. >> company news. we have word of the biggest junk bond sale in history. is lookinge company to raise 11.6 billion dollars in the offering that would easily surpass the present record of $6.5 billion set by sprint last year. theta is number one for third straight quarter, outselling every other car company last quarter thanks to rising demand from japan and china. sales increased 16% for the -- 6% for the period. massive job cuts over at barclays. the firm could cut 7500 jobs at its investment bank according to report. about 5000 of those job losses may come from the fixed income and commodities business. that is today's company news. this is something we continue to see out of the big banks. >> a shout out to meredith whitney, nail this 18 months ago. >> she did. and the headline, barclays getting out of the commodities business. d-frank.dod and to be clear, this is an analyst suggesting they will have layoffs. somebody always knows. coming up, we are going to double your earnings pleasure. apple and facebook report after the bell. this is "the pulse." "bloomberg surveillance." ♪ >> ellen zentner and james glassman on "bloomberg surveillance." warren buffett at 3:00 p.m. the major interview of the day, william ackman in the 10:00 a.m. hour. read matt levine's op-ed before you listen to a conversation with bill ackman. look for them today on bloomberg television. good morning, this is "bloomberg surveillance." fum tom keene with scarlet and adam johnson. it is a quiet day and earnings. >> no. apple and facebook reporting after the close. if you look at facebook's chart since its ipo in 2012 come the stock is up almost 65%. apple, kind of flat during the same period. >> a business insider did a great sum up of this. i'm fascinated to see what happens. this is the perfect order for them. to surprise everybody and use some cash. >> people are expecting some kind of decision on increasing the existing buyback plan, maybe to $30 billion. the dividend could go up 10% to 15%. >> i think that is a big -- my idea is it is a migration. we have heard on the show, take six or seven quarters. >> it sure does. walked into the apple store and i feel like that is the ultimate retail expense but if i look at the sales estimates today, the numbers will be reported flat. what is apple doing wrong? >> you know a lot about the fact they haven't come out anything terribly new recently. they've had eight quarters of slowing growth, except the last one which was a slight uptick from the one before. ultimately, their american business is huge compared to the rest of the world. there are still a lot of opportunity to push the chinese business. >> would you suggest the chinese or indian business would be less fourth quarter waited than in the u.s.? are they going to be a company that lives and dies october to january? >> many of those -- and india, the festival of lights is in the fourth quarter. ?? >> what about facebook >> the big issue with facebook -- apple, is whether they release units.wo larger screen that could result -- >> late june, maybe. out ofgenius on twitter greenwich, connecticut, the go-to guy, he has been blogging and tweeting about the new iphone and says it will be larger. they're going to take the screen all the way to the edge of the case. >> do i want a larger screen? >> i think at your age, you need a larger screen. >> harsh. >> even i have a screen twice the size as that one. back in the day, the tinier your cell phone could be, the better. and now it is getting bigger and bigger where it looks like people are holding their ipads to their year. -- ear. >> there's more room for facebook to advertise to you. more and more people are using these big phones and facebook has this dominant position as the most engaged mass reached. >> their 52% now and mobile revenue. >> the consensus is seen as achievable but user growth will be difficult, challenging because they're moving off such a large base. i go back to google and mobile growth, and negative 9%. >> you do wonder, given how the stock has performed. we talked about how facebook is up 65% since its ipo. high-growth tech stocks have stumbled of late. even if they do beat their numbers, will they get the uptick in the share price? not necessarily. >> looking at the past three earnings announcements, facebook has been anywhere from 15% to 35%. >> and how much their expenses have increased as well. $19 billion for whatsapp. >> you look at the stocks, if you did not know the title, you would say that is a great company. you look at the stock bingo, can i buy shares? >> another company with a great-looking chart is six flags great adventure. coming up, we're going to be joined by the ceo himself. >> there is rachel and colby. >> i have ridden all of those multiple times. this is the guy who brought six flags out of bankruptcy. clocks are you kidding me? >> they're going to dubai. what do you think? i like it. this is "bloomberg surveillance." comee everywhere you are your tablet, iphone, you name it. we will be right back. ♪ >> good morning, "bloomberg surveillance." i am tom keene. scarlet fu and adam johnson with me as well. adam has a busy morning. >> china's manufacturing segment struggling. factory activity increased just slightly. indicating contraction. different story in the euro where manufacturing and services expanded faster than forecast. almost a4 in april, full point better than estimates and close to a three-year high. any time you see the number of 50, that is expansion and below 50 is contraction. any faction and services in germany showed growth. manufacturing and services in germany showed growth. ols becomes the 26 major leaguer to hit 500 home runs. the washingtonites stood up and gave him a chair. it was classy. >> earlier in the game, pujols hit 499. use the third youngest player to reach the 500 milestone. >> "60 minutes" did a story on his great charitable efforts. >> did you see what happened last night at fenway? "yanksdline is great, edition torment." they all did very well. >> i will start sweating may 1. >> tom friedman writing today in "the new york times" -- in other words, we know what they want to do, but trying to get that to happen in the political party takes time. >> ellen zentner, with us. why hasn't oil moved? >> it hasn't moved because the world is a scary place, and we still have concerns about growth in many areas of the world. specifically, countries that drive prices of oil. concerns over what might happen, russia and ukraine, that is been more concentrated in the natural gas based in the oil space. there hasn't been something to drive a spike in demand or prices. >> what is driving is the outlook for jobs and the economy. we will be back with ellen zentner. ♪ on the island of manhattan and the bronx as well. 3 and 0. >> who is first place? >> thank you for mentioning that. neenew york yankees, first plac. that's do quick data check. not much to talk about. signs of aher, maybe better economy. gainers and losers. up 15% yesterday, giving a bill ackman a $1 billion paper profit so far. he's teaming up with italian to make a hostile takeover for the maker of botox. allergan is seeking a poison-filled letters to fend off this acquisition. allergan up. netflix, after its results yesterday, the results better than anticipated, but would everyone is focused on is the announcement of a price increase for new customers, one dollars to two dollars -- one dollar to two dollars. >> mcdonald's turned out pretty good 90 days given the weather. it is the great mystery of american economics, how the rest of the year will fare after the ugly winter. in recent years, it has been a summer swing. according to morgan stanley ellen zentner plus, looks good to robust. starting with an early may 2 jobs report. she senior u.s. economist at morgan stanley. am i right, 250,000 statistic for nonfarm payrolls? >> what we felt was march and april would be the strongest months for job growth because they would both have some of the payback from the three months and rohit had weather. in march, the weather was comparatively much better than earlier in the year, but still wasn't quite back to normal. the low level of jobless claims is something that informs that view as well. it fell or has fallen to very low levels. tomorrow when we get initial jobless claims data, don't be alarmed because it will jump probably around 20,000 on the headline. they typically always happens in the week that includes good friday, but it does reverse within a few weeks after that. >> the word at the moment is slack. slack, slack, slack. you push against that. he suggests the american economy is doing better than slack. >> there's less slack the latter private -- a lot of private forecasters think there's less. we think gdp has slowed to 2%.nd 2//// full employment is around 6%. some believe it is 5% or lower. we do believe there is less slack in the economy than the fed does. books i want your take on what is said about how the fed can improve medications. -- can improve. it makes more sense for all central banks to tell the world with the economic forecasts are competitive these inputs are quickly influence policy. >> aren't we doing that now? 19 dots we have to follow and guess and put of floating head about each dot in which longs to whom. it has been suggested, going more reliance on the materials unless reliance on the statement. he has said he would love for them to publish central tendency estimates instead of all of these dots on the map. give us a pinpoint estimate. >> this is critical. deutsche bank has a hugely optimistic call. do you agree on economic growth? arehat i would call, we optimistic on growth. we don't have accelerating in 2015 going into a rates hike. the fed has growth accelerating and 2015, typically as you get closer to the first of tightening, think housing, especially, interest rates slow. fairly growth strong, but not accelerating. >> you are the economist. your productivity at about 6.5-year high. and you have labor force per dissipation still at 35-year lows -- participation still at 35-year lows. >> productivity may be higher than it was as it plummeted after the financial crisis, but still fairly low historically. it looks like it is starting to climb will stop we need to be closer to 1.5% or better in productivity. the labor force participation has been the biggest focus after the financial crisis after shrinking labor market, smaller labor market, aging population, women that have gone back. childcare services spending drop because there are less women in the labor force. rates haveon dropped. more kids are going back to school or staying in school longer. there are a lot of moving pieces to lower the participation rates. that is one of the things that informs our view. the natural rate of unemployment has moved higher since the financial crisis. it was already on that trend. >> as we talked about the use of the word slack come a what does that mean to you and your clients when you advise them on what to do next? >> the consumer, as we talked about earlier, is sluggish in general. our whole notion is global brand, global brand. take your businesses around the world to benefit from just focusing on the united states and, frankly, the west. >> look at this chart. you talk about shadow labor. you take the ugly number and subtract regular unemployment rate. this is the differential between the 12 are sent and the 6% unemployment rate. to janet yellen plus defense, we have a long way to go back to normal. >> correct. it has been improving, but still fairly disappointing. she is absolutely right. this chart -- it takes some of the complication out of full employment, how much slack there is in the labor market. look at that differential and you can see what it means for wage growth. >> maybe we should just look at short-term unemployed? the sum have to look at of the jobless? >> i think we have to look at it all in. janet yellen was asked that question at her lunch and and said, look, i don't necessarily believe long-term employee or unemployed should not matter because they don't exert downward rusher like short-term unemployment. now there is a competing fed study that is just come out yesterday. inmate in the day before that says, no, both matter just as much. i'm glad she took a balanced approach. taking that spread between the broad specter of unemployment and the narrow -- >> bring back the chart. >> let's make it central. why does it have to be so complicated? yellen 1994 janet transcripts for fun bedtime reading said, we don't know where the natural rate of unemployment is, so let's look at wage growth. this way it takes out who is estimating natural rate of unemployment, who has a right and wrong. >> ellen zentner with a great chart. >> have a long way to go to get rid of that shadow were talking about in the chart. levinday, representative of michigan join us and said, it's different this time. you have to extend the and employment benefits will stop good or bad decision? >> i think the program has shrunk to such a small rate, they missed the boat on extending it by not doing it before or around the start of the year. i think it is a dead issue that is not going anywhere in the house. behink their time could spent better elsewhere. i think they missed the boat. implications for consumer spending. we want to bring something else coming up on "surveillance," businesses are starting to spend big as well. are we seeing the real industrialization of the american economy? our single best chart is next. and our twitter question of the day as we look at food prices, ingredient prices going up -- >> mostly it is vintage champagne. >> what does that fall into? >> it is being very pragmatic. >> is it a food group because there are grapes? ♪ >> good morning, "bloomberg surveillance." we need some top headlines this morning. >> ukraine moving closer to a new push to try and drive militants out of the eastern cities. the country's acting president has called on security forces to move against separatists after two bodies were discovered in the eastern region showed signs of torture. ukraine's president said they had "crossed the line." theu.s. is resuming some of military aid to egypt that was stopped last year. they comes after the with certified that egypt is abiding by its peace treaty with israel and working to combat terrorism. some military aid was suspended last year after each of them post-its democratically imposed -- elected president mohamed morsi. malaysia, international investigation team for the missing flight 370. malaysian officials said they were adding asset to the deep-sea search for the jet. crews are focused on the lack led -- asked leg of the search zone to find traces of the aircraft. amazing -- >> it just gets sadder and sadder. >> they still haven't found it. it is mind-boggling. to think about a plane disappearing like that. >> what is the single best chart? >> this is a good economics 14 ellen zentner and morty singer. it comes from robert albertson will sto. it tracks year-over-year in personal spending. they strongly recovered. hours and points out business spending as measured by growth, the yellow line, is growing at a similar level to personal spending despite the fact it is four times smaller than consumer spending. the question here is, are we moving toward a less consumer consumption driven economy? that might be one conclusion you could draw. he says is strongly reflects america's re-industrialization. >> i have aged looking at this question. are we finally going to invest? >> we think we will have stronger investment this year, but the two are linked. you will not have strong business investment without stronger consumption also. sort of the chicken and the egg. consumers spend more, so businesses have to produce more. >> they're basing it on consumers outside the u.s. picking up the slack? >> we're seeing manufacturing coming back to the u.s. because of needing shorter lead times. you can't have everything being manufactured in china. the cost of manufacturing in china is rising. >> how much is shipment? to make a pair blue jeans in china, how much is it to move? is it a big deal? >> the percentage depends on the price of the product. i would put 10% to 15%. >> did you say $300 jeans? are you kidding me? >> there are $500 jeans, too. >> how much are yours? >> they are not $500. >> at j.crew, there are $98. i just bought them. >> when they are on sale, they are cheaper. >> i will buy more than one pair. >> we will discuss more about business spending. james glassman will be joining us. >> last night on "the late show," david letterman had stephen colbert. >> i'm going to do whatever you have done. >> no, no, no, no. you don't want to do that. >> it seems to have gone pretty well. >> it has gone on. >> well, i am thrilled. >> i'm thrilled as well. in a situation like this, paul and i have been doing this for a long time, and they could have just as easily hired another boob like me, but they didn't. they hire a guide -- >> they hired a boob like me. >>every boob is like a snowflake, we are all unique in our own way. >> he is going to have fun. you are a branding guy. what is it about these two brands? what makes them so good? >> i think it is the spontaneity. as it pertains to what is going on today in our environment and industry, is the comedy or comedy in general has taken over music as the number one cultural touch point for the generation. that is why you're seeing a younger flow of these guys coming in to take those top spots in the big shows. >> they took a selfie with stephen colbert's iphone and posted that as well. there it is. >> there's a point at which selfie is going to become hackneyed. >> we have all done selfies, even with the old-school cameras, we just never called it that. >> the money that is involved here. the minting of money of late night or early morning. >> is it going to be colbert or colbert. >> none of us they up and watch this. i know that for certain. >> i'm going to miss his show on comedy central. i watch that when i am at the gym. >> there such a belief that will go out and find a replacement. there have to be 20 people lined up. >> let's hope it is something like tina fey or amy poehler. >> that would be great. up, the current state of luxury brands and how they can continue to grow in the face of economic headwinds, not just in the u.s., but across the world. this is "bloomberg surveillance." took irony -- ♪ >> it is a busy morning here at "bloomberg surveillance." our twitter question of the day -- really interesting discussion. here is scarlet fu with company news. >> we are tech-focused. netflix is going to france from introducing its online video service in the country by the end of the year according to a person with knowledge of the situation. they've been talking to french regulators about how to pay for content and comply with streaming rules in the country. to roll out internet tv service in u.s. this summer. they have in telling programmers that a late summer release date is possible. up walt already signed disney for the service and spoke to other networks including cbs. charter is closer to a deal to buy about 1.5 million cable subscribers from comcast. they will form a company with another 2.5 million customers according to people familiar with the situation. buys part of its deal to time warner cable. that is today's company news. >> global luxury spending could reach $1.2 chilean provided china keeps growing and luxury brands get better at selling at the front line. for helpingst premium fashion retailers develop their business, mortimer singer with his own brand which is a star in its own right, a big store on madison avenue get only last month finally went online. what has taken a guy like tom ford so long? point, $1.2 trillion by 2020, one quarter will be direct consumer online. the other is the multichannel customer. more likely between two times to five times more. effectively, these guys slowly but surely and quickly will all be online. >> your said burberry doesn't well -- does it well. what do they do write online? >> they have a digital marketing plan that engages the consumer and creates a viral sensation by making content which can be shared. they end up becoming media companies in a way, communicate in ways that grants never did. >> isn't there a contradiction and luxury brands going online? if it's online, for consumers that means it is available, every size and colors available at any time you want it. yet luxury depends on this being the heir of scarcity. rocks effectively, when they have a buy for the store online, they buy exclusive to that store that you can't find anywhere else. >> will they turn off people by having something say this is not available at this time? will they turn away potential customers? >> if it's not available, they just don't show it. the same thing, but a little different. quality? you convey you walk into a store in the carpet is plush, it smells good, sexy music, lighting. how do you do that online? ,> what they're using today coming back to the notion of developing content, is video. they are bringing the designers themselves from behind the curtain, to talk to the consumer. they're doing a matter of things to have fashion shows brought to the consumer online so you can effectively see the model walking toward you, doing a turn. >> in your world, after fashion week in new york and des moines and london -- >> milan, paris. >> what did you learn? retails the sum, for people, out of the show of all of it? >> i tend to be someone who doesn't think that whole circus really brings much to the question. i think it hinders the luxury industry. >> why is it? 's showsains the h&m them what is coming down the pike six months from now and it's up to the consumer two weeks from now. >> ellen zentner, would you do that? not going to buy from alexander mcqueen and wait for zarra? >> i don't, but i'm not your average consumer. one thing morning made an important point on, bur barry's interactive experience. it is the videos that get me to buy online. when i click and can see the model walking around and posing. >> today change the equation? >> and i was a ralph lauren. there were two of the pioneers of creating the content online. >> and don't forget the burberry executive apple, too. what about sports where? whenever we see what is going on a bloomingdale's, tends to be on track pants. high end, but track pants. >> activewear is the word. percent,own nine versus apparel in total at one percent. it is a lifestyle. people are crossing over to sharing the fact they want to take care of themselves. "i" cultureust an but an "we" culture. >> do you do soul cycle? >> i don't. >> something for all of us look forward to. >> our entire control room. >> we will look forward to doing it together, mortimer. thank you for joining us, mortimer singer and ellen zentner of morgan stanley. ♪ sustained economic weakness. china considers growth on a downtrend. i am going to six flags -- that will be when hell freezes over -- in dubai. i am tom keene. , scarlet fu and adam johnson. we will talk food through the hour. adam, we have a brief this morning. >> a mixed picture of economic data. -- pmi.n my economic data helped send the you on to a low. we should tell you france manufacturing -- factoring activity dropped. in the u.s., we have a number of economic data points. we just got the weekly mortgage applications down. 3.3% last week. we're going to get our own a manufacturing pmi. we ares before the bell, waiting for png, six flags, boeing, and delta. >> busy day. president obama beginning his four nation tour of asia. the nfl is releasing the 2014 schedule. that will be tonight at 8:00. scarlet, what do you have for company news? >> the maker of botox is adopting -- against a takeover gallon pharmaceuticals. pershing square has acquired a 9.7% share state. they have made a $1 million paper profit. jetblue no longer union free. they have voted to join in the pilots association. the union won the support of 70% of jetblue's pilots. investors did not like the move. a prediction of massive job cuts at barclays. it could slash 7500 jobs. about 5000 of the job losses may come from the fixed division. that is today's company news. it still gives pause -- the president of the united states will be greeted in tokyo by the imperial family at a state dinner. we will look for that in the coming days. margaret, what is the goal of the president? what is the number one goal as he comes to japan? goal is to try to breathe some progress back into the tpp. the other one is to convince the allies in asia and china that what has been going on in russia and the ukraine is not a roadmap is to proceeds. in china gets more aggressive with the islands. >> what does it mean to president obama? >> he have been trying to pivot to asia for several years and keeps getting pulled away for situations in syria or egypt and now it is the ukraine and russia. the pivot is supposed to be the u.s. and redirecting a combination of its economic prowessd its military towards paying more attention to asia, theme works and rise of china, and start bringing together japan, south korea, and some of these dollar some ofthat we have -- these smaller nations that we have growing alliances with. things keep happening. part of the trip is to assure all of these countries, including me for that he is -- the four that he is visiting that he is serious about redirecting energy. >> there has been a tension between china and japan over the past six months over those disputed islands. what is the obama message on those islands to japan? morning, the japanese open up their newspapers to see an interview with president obama in the japanese press, check hagel and john hagel -- chuck hagel and john kerry have been doing this islands time -- these are in minister by japan and that is the u.s. position. >> thank you so much. she travels with the president on his trip to asia. procter and out with its results. growth to be about 1%. ceo -- it is something the ceo talked about. there's more importance on productivity improvement, and that means cost-cutting. in terms of the numbers, core eps was 104. that be the concern since. >> not a busy earning day. stay tuned to bloomberg television and radio this afternoon. apple and facebook with the important technology earnings. right now, we go to food. i have given him way too much money. wonderful to have you here. we're going to talk food. of food rightne now. it is a time of angst? you talked about fashion looking good, eating healthy. we are in the organic industry. you look at that segment, there is a lot of excitement in that segment today. numbers came out yesterday, growing to 12.5%. the consumer will spend on higher quality products. >> where did coconut water come from? did you invent this? we invented a lot of those things. organic baby food, juice. >> gerber is not good enough. one hour is going to be big shameless plug. will spend for higher quality, but when they lose their job, is that where they cut back as well? you need to make choices. >> there are $700 billion of food sold within the u.s.. consumption. you come back and look at the companies like coke, we are not drinking soda or reducing soda. we are not eating ways potato chips. foods walk through whole and you look at a bag of terror chips, it is like 10 or $.15 more. the nine dollar tail green juice for nine dollars? a bottle of our blueprint green juice, there is six pounds fruits and vegetables. it is a meal. and i go to chipotle panera, i am spending more than nine dollars on my lunch. nine dollars for a bottle of juice that is six pounds of organic fruits and vegetables that go through a cold pressed. >> is the shameless plug a button broken today? what is your bestseller right now? i have a four kids and i love all of my kids equal. i love all of my brands equal. we have 2200 products and whole foods. we introduced infants and toddlers to their first foods and we have nine to 12 million mothers a month that are on our site, learning about our products. you have four kids -- you do not have to worry about the middle child. >> nordion dubai 24 pounds of vegetables -- nor do you have to buy 24 pounds of vegetables. our twitter question of the day -- what drives your grocery choices? price, quality, or convenience. tweet us. a data check. >> if i had a fourth kid, i would not have to worry about the middle child. futures are little bit negative. hydrocarbons down to a 101. >> a pretty reluctant job recovery. business is growing more optimistic. we will be joined by jim glassman. this is "bloomberg surveillance." ♪ >> this is "bloomberg surveillance." i am tom keene. hain celestial is a whole foods company. the beef is free range and free to roam. you have been hugely successful with upscale. can you go down skill? can walmart sell organic? >> they said 94% of their -- consumers would buy organic if it were available to them and affordable pricing. thebig thing is availability of organics. there are 4400 walmarts out there. buy think the consumer will it? if they have the choice, i think so. of a discount doesn't have to be? you have to shave off 10% or more? a 10% to 15% higher price right now. i say the consumer still will pay 10% more for an argument product because it is a much better product. there is no genetically modified ingredients and there are no pesticides. the concern is -- does walmart want to make it a football? >> when you look at the uproar , how impinged in hain celestial is america? >> great question. if you look at genetically modified ingredients, there is no science that says hey, because i am having a genetically modified ingredient that my kids will be smarter or going to harvard. if you look around the world, u.s. and canada are the only countries that allow genetically modified ingredients. how many kids do you know that are gluten-free? i am a big believer that food is the cause of a lot of issues. the consumer should know that they are buying food that is genetically modified. the largest provider of genetically modified free ingredients. do you make when someone does a juice cleanse? that gets married has to have a five-day juice cleanse. they get married and when they have babies. we feed them baby foods. over to whole foods, and you buy the fruits and vegetables that are in one of our juice cleanse, it is $20 if you buy them by the cells -- by themselves. >> i'm going to do a juice cleanse. sticker shock at the grocery store. ♪ >> an important day of important interviews. this is great. we are looking forward to them. mohamed el-erian and warren buffett. in between, william ackman. this, went a primer on will get you ready for that interview with bill ackman at 10:00 a.m. this morning. look for those three interviews. -- i havetreated tweeted it out a number of times. host, irwin simon, ceo of hain celestial. i have agreed to do a juice cleanse. >> that will be a painful week for you. a week? >> it could go nine days if you want to do it right. >> china's may factoring sector is struggling. her to sing manager index shows -- manufacturing increased weekly. a composite index tracking both indices jumped to 54 and april. that is a full point better than the estimates and close to a three-year high. inufacturing and services germany show growth. in that malaysia -- they are in appointing an international investigation team before flight 370. they're adding assets to the deep-sea search. crews are focused on the last leg of the search zone in an effort to find traces of the aircraft. america is forming jobs, but it has been a reluctant job recovery. james glassman is jpmorgan's senior economist. off of your middle market business leaders outlook. thank you for joining us. this is a report of optimism. >> it is. tough, smalle businesses get squeezed a lot. they have been klim planing -- complaining for a long time. bigger companies are talking about financing needs for capital expenditures and they're talking about converting some part-time jobs to full-time jobs. to shift yourh optimism on gdp? the economy will be speeding up. >> it is more color that the recovery is far -- broadening. it confirms the whole economy has momentum. >> they may be spending more, are they going to hire more? we're not seeing dramatic change in the hiring. it does look like they are talking about stretching some part-time jobs into full-time jobs. a lot of people are working part-time because their business is slow. if this is in transition, we will see more declines in part-time. >> this is the key of the ministry -- of the mystery of the second quarter. i am reading this correctly, the survey that you just did for jpmorgan customers on global economy, national and local economy, everyone is more optimistic. >> more optimistic this year than last year. what is interesting is where you know the most -- your own business, they are the most optimistic. about get further away what they know, they are optimistic, but less about their own business. you know a lot about your own business. it is interesting. i have never seen optimistic readings like this before. at a time when the economy is still in the fifth inning of recovery is telling that small and midsized businesses are -- >> does this mean gdp estimates are too low? the middle of the winter disruption, counterbalance to what happened in the first quarter. it is a reason to believe that the recovery has more legs to it. spendinge heard pickup. do you hear from these small and medium-size businesses? what do they tell you that the big businesses do not say? >> they are squeezed. they do not have pricing power. find regulatory issues and health care issues more challenging. the big guys do not. that is the big difference. we have not seen much change on this and they're optimistic, even though they face the same challenges. to guys like you, that is an important thing. what is the stock market telling you about the next four quarters of america's economy. >> the recovery is underway. we are going to get there. they smell the recovery and that is why we're doing what we do. it is not just about the u.s.. even though we worry about europe and china, is telling you that the global economy is back -- is back. consumption is up over 12%. that is mainstream, supermarket, you is -- you mentioned have a big operation in europe today. we see good growth in europe. thank you for your jp morgan report. ♪ >> good morning, everyone. 8.2% of people living in that view of new york city our juice cleansing as we speak are. i will be juice cleansing -- why am i doing this? >> it is good for you. >> it is "bloomberg surveillance." a beautiful day on the island of manhattan. a lot to talk about. to company news. it is number one for a third straight quarter. they are outselling every other company thanks to rising demand. toyota sales increased six percent. general motors and volkswagen selling about 2.4 million vehicles. deutsche bank is shaking up its latin america business. it is reducing its equities team and may cut its equities group entirely. staff as eliminate part of restructuring. a prediction of massive job cuts at barclays. they could/7500 jobs. about 5000 job losses could come incomes fixed currencies and commodities business. that is today's "company news." can blame drought, disease, and demand pushing food prices higher. fruits and vegetables are facing some of the highest food hikes we have seen. kale caesar salad's are hot, but berries are even up 14%. your juice clean is going to cost you. we are here with our guest host, erwin simon. foods' largest supplier. a drought in california has caused a lot of issues. almond prices have almost doubled. we just bought this rice company. today almonds have gone up 18%. imagine taking a 15% or 18% price. we are taking prices at three percent pricing. the big thing that we have come productivity. is we the biggest things are the largest producer of natural products. quick compare your dialogue versus kellogg's or some other packaged giant. at a 10% to 15% higher price because i am buying organic mo free. on the other hand, it is easier for me to get a higher price and easier for me to walk in and get price increases. why walk into costco and say i need a price increase on almonds, costco is one of the biggest buyers of almonds. they know i am not going in there to increase my margins. everybody's friend. my father taught me to hug your customer, your wife, yourself, you will be a happy guy. >> how are you doing with and wild oats coming together? makehey're going to packaged foods. >> there are challenges out there. one of the things walmart has to do a sources ingredients. >> are these price increases here to stay? see crops and here.es -- yes, i see it out of our cost products? we cannot sell all men but are and think the consumer is going to buy it. >> is almond butter something i.e. doors at something i put on my face. >> you put it on your toast. >> let's get breaking news. boeing reported its first-quarter results. consensus.ng the revenue coming in higher than estimated. its forecastsing because of the benefit of a tax settlement. talks a little bit about the backlog. $19 billion of net orders during the first quarter. >> jim mcnerney is an animal. >> boeing shares are moving higher in the premarket shares as well. >> good morning. "bloomberg surveillance." look for our digital products across a wide swath. bloomberg.com, bloomberg radio i am tomombergtv plus, keene. with me, scarlet fu and adam johnson. me.n simon with he is the chief executive officer of hain. 25% more people bought season passes and return more frequently and spend an average of seven percent more each time that they go back to the parks. the ceo of six flags joins us from dallas. we can talk about roller coasters and the expansion into dubai and a moment. which parks are doing best right now? >> many of our parks have not opened yet. we are early in the season. only five percent of our full years of attendance have gone to the part. it is a good start overall. we have seen a 25% increase overall. listening to erwin, we have seen an average per capita increase of seven percent in the quarter. this follows a string of records. fivefold.is up most importantly, our guest satisfaction is at an all-time high. >> we have walked around the park in new jersey. some of the stuff you do. >> we had a tremendous time. you have heard me say that innovation is in our dna. our people think it is in rides. this year, we have four new recommend -- record-breaking rides. in addition, when you look at our parks, we got that reading and we are proud of that. we're doing so much in the parks. we have all season dining passes and a membership plan that is a first in the regional theme park. informationweek stall the progress we're making them put us in the top hundred. >> there's this great article about how the american middle class is no longer the world's richest. how do you adjust your operations for this shift? one of your guests talks about the fact that global brands are moving globally. we have a tremendous brand in north america. we have a great value offering. we think there is room to grow on the price front. how wecareful about price. we want to make sure that consumers don't feel like they are doubts, but we're seeing nice increases in spending and we anticipate that to continue. about the broader picture, we will be more international. dubai expansion into smooths out the bomb that you usually have an first-quarter earnings. explain why dubai. >> we are looking at different asia, latins in america, and other markets. all focused on how we can take the brand globally. >> you brought the company out of bankruptcy. we appreciate you joining us. >> do not forget the five percent yield on our dividends. >> thank you. ackman'sl discuss bill latest takeover attempt. makers,"e on "market to discuss his position in alle rgan. ♪ >> good morning, everyone. warren buffett in the afternoon. betty liu will be speaking with mr. buffett. as is nothing compared to what she is doing this morning. >> mohamed el-erian. he speaks. >> what is your first question? >> i don't know -- why? had the perfect see where he can run the whole world. >> the story is well told. we want to hear from him. why did he leave pimco -- what happened between him and bill? what is he doing now? one piece of news that he will be sharing his his new book. he has signed a contract and i will be telling you who bought the book. first interview since leaving. >> the last time he spoke was in january. i was before this whole thing blew up. he has been writing commentary, but he has not spoken out on tv. beple like us are going to asking him what is going to be going on between him and growth. he has to talk about this. otherwise, it will be the elephant in the room that all is him from this on out. mohamed el-erian. you also be speaking with warren buffett. also, at 10:00, we will be to talk"market makers about his bid with allergan. this is a big, central figure in a momentum stock rise and collapse is a gilead sciences. they had first-quarter sales numbers -- first-quarter earnings numbers that were much better than next but did. -- dan expected. in i think it is a thousand dollars per pill. one rated biotech analyst. they are pounding the table on gilead, saying they got to cheapen the selloff. you see why he was right. >> the market is an indicator of where we are. it is amazing. >> a very busy earnings day. earnings after the bell. apple, zynga, facebook. tomorrow, coca-cola, time warner cable, microsoft, starbucks, and amazon. thery good glimpse of consumer over the next 24 hours. >> i am looking at how the stocks are trading. apple shares have changed little. >> market is struggling this year. we have cost -- we have crossed the flat line looking for direction. >> president obama beginning his four nation asian tour. what does he hope to accomplish? our agenda is up next. ♪ >> coming up tomorrow, looking forward -- bob nardelli with depot.r, with home the new activism that is out there. are we going back to the 1980's? much watch must listen. bob nardelli tomorrow on "bloomberg surveillance." irwin guest host is simon, the ceo of hain celestial. netflix is going to france. they will introduce its online video service by the end of the year. been talking to french regulators about how to withor content and comply streaming rules in that country. dish hopes to roll out its internet tv service the summer. they have been telling programmers that a late summer release date is possible. up walt disney for the service and has talked to other networks, including cbs. charter is close to a deal to buy about a million and a half comcast subscribers. comcast has said it plans to -- as part of its deal to buy time warner cable. let's get back to the store you were referring to. >> it was a wild story yesterday. fend offan trying to the joint hostile takeover bid from -- >> why are you looking at me when you say that? >> you are getting sensitive. >> it is the juice cleanse. >> our guest host has handled carl icahn in the past. shockingly, they are still on speaking terms. icahn will come into this because bill ackman is in there as well. >> carl likes a good fight and a good opportunity and he likes to make money. there is money to be made. when there is a fight to pick with bill, karl will jump in. i lived with activism for three and a half years. i had every banker wanting to be part of my team. you heard what they said before. get yourself a poison pill, spend lots of money on bankers and lawyers. i sat down with carl and said here's our plan and how we're going to execute it. at the end of the day, if you do not execute, carl will force you or want you to sell the company. that is good for companies that are not well run the need to take costs out. and we executed well. carl sold the stock at 80 and made over $430 million. not every company as well run today. we go to our interview with bill ackman at 10:00 a.m. this is my morning must read. spectacular -- from matt levine. good for valeant and pershing square, who saved some money and improved their chances with clever structuring. >> you can call this a hostile takeover. say -- am ieo and next? what am i changing my business? business is tough enough to be worried about who is going to attack you from a financial side. we say we do not run our business for every quarter, but we do. >> this is important. or owns your shares, are they complaining about what carl icahn is doing? >> they are along for the ride. >> they are a long-term player. up 30%, they are going yes. >> are they selling 30 days later? i am not sure about that. if they believe in a growth company, there are companies that are in there because it is a growth company or a dividend company. in is a growth company. there is activism and hostile takeovers. that is a big thing to look at. our companies are teaming up with private equity to go out after certain companies. >> how do you feel about a hedge manager going to a company and saying i am going to buy a lot of stock and i want to to buy it? how do you feel about that? companies today -- you have to execute. you have to have a great model. jim reid anderson talking before, he took six flags out of bankruptcy. that is the same with hain today. if you're green, you're growing. if you're going to rot. >> a great conversation with irwin simon. el-erian at 9:30. bill ackman at 10:00. buffett at 3:00 p.m.. those are going to be interesting. particularly bill ackman. look for matt levine again. >> el-erian is making his first comments since he left pimco. what he thinksow about europe and disinflation. to do now? you going mohamed el-erian, he is one of the brilliant minds of the bond market. >> warren buffett on, are we going back to the 1980's? >> let's get to our agenda. president obama arriving in tokyo. he is having dinner right now with the prime minister of japan. this was the first stop of his tour of asia. that does not include china. china will be the backdrop to all of this because of the disputes over different regions in the area. >> new-home sales. >> there is the president and ambassador kennedy. cool.t is new-home sales. we will see if they are cooling. yesterday, existing home sales were slightly weaker. what about new-home sales smr those numbers come out at 10:00. we are looking for 450,000. that will be an increase. in other two numbers we have the past two hours have been weaker. for -- reportures was fascinating. full coverage of the apple earnings this afternoon. the use of cash -- exercise come boring, no new products. people expect iphone sales have tapered off because s5.he launch of the galaxy people say a big screen will drive the next upgrade cycle and they will win back market share. >> we are going to hold ipad minis up to our years. do get a loth -- of pressure on this from board members? >> we are doing lots of acquisitions. we have doubled our employees in three years. opening an midst of office in india and adding 80 employees in india. >> do you need to plug a basmati rice? let's stay on that topic of groceries. our twitter question of the day is what drives your grocery choices. the first answer is discounts. the second answer, the number of ingredients in a given product. >> less is more, maybe. >> finally, convenience. i think convenience is a premium for me. >> where did cale come from? ? where did coconut, pomegranate. the stuff is been around for many years. kale. "bloomberg surveillance" continues on the radio. betty liu will be speaking with mohamed el-erian. warren buffett caps off at 3:00 p.m. have a great morning. ♪ >> good morning, it is wednesday, april 23 and we are live from bloomberg world headquarters and you are "in the loop." we have must watch television interviews. first up is my exclusive interview with mohamed el-erian. we will hear for the first time how he feels about his famous exit from pimco. it caused an uproar in the financial world. then activist investor bill acton will join what market makers" at 10:00 and at 3:00 this afternoon, i will talk with warren buffett. it all starts right here about an hour from now. here is a look at our top headlines -- according to david einhorn, we are in another tech bubble he is getting that she is betting against tech stocks that he thinks will fall up to 90%. does not say which stocks those are but you can figure those out. boeing has first-quarter earnings that beat estimates and sales rockets fell. -- sales profits fell.
immediately. a lot of moving parts here. it is completely overhauling and remaking this company. >> it just depends on which businesses fit in with the ones you have and how you want to position yourself for the future. we're talking to lickliter, aren't we? >> we are. from eli lilly. >> novartis is up 1.25% in reaction to the news, glaxo smithkline is up by more than 4.5% and eli lilly up by 0.5%. a couple programming notes for glaxo's ceo, sir andrew witty will be here. at 7:15 eastern time as joe just mentioned, we have an exclusive interview with eli lilly's chief john lechleiter. >> when there were rumors about more consolidation, they're all looking for ways to go into a somewhat uncertain future by a promising future as well. animal health, that's a big business. i was thinking about it upstairs. we love our pets. we'll pay anything for them. what's the worst that's going to happen? i'm sorry. it's heart breaking but you lose a patient, it's not quite the same thing. not quite the same thing. >> my uncle was a -- >> veterinarian. >> thank you. >> was he also in the army, a vet, too. >> he was a veterinarian. this gekko has a weak jaw. he has a weak jaw, what do i do? he said replacement therapy, $5. >> we had a russian tortoise. it was supposed to live to 150. when we went and got the news from the doctor that the prognosis was not promising, i just remember thinking we could do this, could do that, it could run up into hundreds and almost a thousand dollars to save this tortoise. my daughter is like we have to do it. it's like he's out in the backyard now. i'm afraid one of our dogs will dig him up. his name was rudolph. >> poor rudolph. >> you do your best. it's a lucrative business. eli lilly also is a big psychotropic -- a lot of mental health drugs. a lot of these dogs are walking around depressed. they do prescribe prozac -- >> for dogs? >> for certain maladies, obsessive compulsive scratching. >> i can see that. >> i think eli lilly saw synergies there. i want to talk about this. ackman -- >> this is the other part of it. >> i keep this company in business. more drug related news this morning, william ackman teaming up with valeant to make a run at -- >> valeant or allergan? the botox? >> don't they make contact lens stuff? >> that's the product they are most known for. >> i wear contact lenses. >> i'm sorry. >> i'm old! >> i'm sorry. this awkward moment was brought to you by -- >> no, that's what i was getting at. obviously, allergan shares jumping on the news, valeant said it expected to offer a mix of stock and $15 in cash for the botox maker which makes contact lens stuff. barclays and rbc are lined up to finance a cash portion. sources told cnbc that the total value would be slightly more than 45 billion. there's a step that got out of here. ackman looks at a company, says, you know, i'd like to get this thing sold and then he even identifies a buyer. this is a new and novel. he's already controversial. and pershing square has about $4 billion worth of allergan. it's the biggest investment ever, a 9.7% stake. >> i didn't know if all those shares were just shares of pershing square. this is a combination of pershing and valeant. >> they make rostasis. do they make the stuff that makes your eyelashes longer. >> i don't think so. brooke shields was the pitch. >> latisse. >> i think ackman keeps that company in business with his long, luxurious lashes. >> i don't think they're related. >> you sure? >> no. but i don't think they're related. >> but does he have -- yes. >> yes. >> we'll get to mulally eventually, right? >> we are. before we do, can i tell you about netflix? >> you may. >> netflix, we were waiting for after the bell got a strong first quarter result. the video streaming server beat expectations, 86 cents a share, 3 cents better than the street was expecting. netflix also announced they will be raising fees for new subscribers by a buck or two. that stock up by 8%, a began of 28 today's $377 a share. also during the webcast, following the company's results, the ceo, reed hastings had comments about his objections to the comcast/time warner cable deal and control of the internet. >> we're really concerned about what happens when the combined entity, if the merger were to go through, would have with, you know, over 60% of u.s. homes passed and eventually over 50% of u.s. homes subscribing to cable internet. that's a worrisome factor. we think it's more in the public interest to not have them merge or if the government goes ahead with it, to at least put some significant merger agreements, settlements in there. >> brian roberts is incredibly thoughtful. i'd say if there's anyone that you wanted to trust with controlling half of the u.s. internet, you might pick roberts. it's thoughtful, long term about it, reasonable. i don't know that we want anybody to control half of the u.s. internet. that's the real basis of our objection to the merger. >> and here was the response from comcast, which is our parent company. comcast says netflix's opposition to our time warner cable transaction is based on inaccurate claims and arguments. there's no company that's had a stronger commitment to the openness than comcast. we're the only isp that is currently bound by the net neutrality rules. we'll have much more on netflix and comcast throughout the show. they are scheduled to release quarterly results this morning as well. >> netflix is a competitor to comcast as well. >> yes. content company. >> that's what you'd expect him to say. >> originally because of the deal that was struck between netflix and comcast in terms of paying for faster access to it. >> he likes what he got to some extent. these are all -- none of these things are that surprising. >> no. >> that he would weigh in like that. i thought it was damning with praise, you know. if anyone would own 50% -- >> he said 60%. >> he's saying brian is a good guy but -- it's all sort of a par for the course. and of course there's going to be -- i'm not going to be a defender. comcast said there would be a lot of things that would happen with charter or whatever. >> with losing some subscribers. >> making it -- the bottom line, they really operate in different geographic parts of the country. so it's going to be, if you're going to use the normal metrics to measure it, it doesn't come under -- >> comcast's point has been there are so many other things they're competing with, whether it's verizon, fios, google. >> apple, amazon. the future is wide open. you know, whether -- i haven't seen anything in the digital world that costs more now than it did 10, 15, 20 years ago. you let the market work and consumers will, you know -- >> benefit as a result. >> eventually. we'll see. >> it is a big week. we have a ton of earnings starting today. a busy earnings season. we have annual meetings coming up. coca-cola will be holding its annual meeting tomorrow. ahead of that activist shareholder, david winters has been reaching out to coke's largest shareholder, warren buffett. he sent him a second letter urging buffett and berkshire hathaway to oppose the equities plan. he says that this is a situation where he really wants warren buffett to stand up and take his side on this. >> no way. this is a guy like 100 shares. >> david winters is a long-term investor. >> he has no money in it. he has $90 million in it. >> he's been a long-time investor. >> it's like 100 shares compared to what buffett has. this is $90 million on a $160 billion company. 90 million. >> he raises fair points about what warren buffett has said in the past about executive pay. he quotes from some of his own annual shareholders. >> on wednesday, we'll be speaking, tomorrow, with warren buffett. he'll be joining us after he dines with the winner of the annual glide foundation auction, the lunch that was auctioned off. the winning bid was $1.1 million. it goes to provide services to the poor and homeless throughout san francisco through the glide foundation. we'll be talking to buffett tomorrow on "street signs." he hasn't said anything yet. we'll get a chance to talk to him tomorrow. >> i would say he probably -- coke's been doing better. the last report was much better than people thought, too. >> it was. >> coke over the years trying to replace new coke and all that. >> a lot of money. this is a big step up. >> it's based on performance, the way that it works. we'll see. >> okay. we'll be talking to him tomorrow. we'll find out. >> i hope he's watching. i hope he listened to what his answer should be. >> i'm sure he was taking notes. >> okay. it's me? i thought we were going to do mulally. what happened? all right. because mulally, you know why, his entire career, as he's been ascending and doing better, he's still a young guy. i see where he's headed? >> where? >> cnbc contributor. i'm positive that's what he's -- >> we can only hope. >> different boards. he may serve on a few boards. >> now he is qualified. >> right. he's paid his dues. >> after a live -- lifetime. >> wouldn't you love to have him here as a guest host? >> yes, i would. >> as the pinnacle of an illustrious career -- >> training ground for this next gig. >> he's hoping we offer that to him. netflix, company reported first quarter results that beat wall street expectations. the movie streaming giant, they moved into that pretty fastily, didn't they? it announced it will raise membership prices later this quarter. for new subscribers. never thought, bill, it would be easier for people to deal with will? you've gone with it, your entire life, will power. you never get tired of this? >> it has positive connotations. >> you're right. the guy that does the motivational speaking, will power will be a good name for that. anyway, this was better than -- >> it's good to have options. >> how can this stock which you mentioned netflix to anyone, and they know what the valuation is. how does it get bid up another $30 based on any type of results? what did it show? >> look, it's a classic growth momentum name, right? as long as they continue to deliver strong subscriber growth, revenue growth, earnings growth, the stock will continue to work. we think the prognosis looks good for probably the next several years. >> i looked at it yesterday. just to see what the projected earnings were so be. i can see the story. i remember a couple quarters ago. there were items where they earned pennies. it was like $200 or $300. you wonder, how can you possibly justify that kind of price? this company is supposed to earn $10 or $20 in a couple of years, right? >> that's exactly right. we're looking for earnings of close to 350 this year, going to 6 plus next year, $9, $10 the year after that. the story is international. they deliver very strong domestic results. the bigger beat in the quarter, both in terms of subscriber growth and profitability is on the international front. the company is still getting started on that front. that's 20%, 25% of the business. over time, that will probably be the majority of the business. you have several launches this year. that will dove tail with more launches than that. >> what do this he have that's proprietary? isn't everyone going to be streaming content eventually? >> there's no question there's increase in competition. one of the challenges is to find ways to differentiate itself. of course that's what it's trying to do with its original programming. house of cards, orange the new black launched a season here. they have a whole host of new programs coming. that's what really establishes longer term differentiation for them. >> well, now they'll be dependent on content. we know you've seen the network wars over the years. or even movie studios. you can have flops. it's expensive. i don't know if i'd bid it up based on that. >> i think that's one of the reasons they're raising prices a bit. >> they tried that one other time. he had to come out and apologize and everything else. it's a hard business. >> yes. well, i think they've learned lessons from that. they're looking at a very modest price increase, really initially only for new subscribers. i think that's the right play here. it's still a great value, even if it's $8, $9, particularly with the rising con tonight the they'll deliver. >> if you want to be a new customer, sign up right now? >> that's exactly right. that will probably help q2. it does give you extra incentive. they made it pretty clear over time, even those that are grandfathered will start to pay a higher fee. $1 to $2 is a raez anable number, we think. >> the dvds aren't out yet, it's not on demand, it's on netflix. >> i used to be a subscriber. >> it's on our playstation. it's confusing. this new world is confusing to me. why is it on my playstation, will? >> they want to make it as widely available as possible. playstation, chromecast, apple tv. simplicity. >> that's me. that's why it's on -- because i have to switch the button to the playstation. this world is daunting, this new world. will, thank you. appreciate it. >> good morning. thanks have having me. when we come back, ford's succession play, the automaker expected to announce ceo alan mulally will be stepping down. we'll see if mark fields has the right stuff to keep the company moving forward. and sir andrew witty, glaxo smithkline ceo will be our special guest. he'll talk about some of the big deals with novartis. more "squawk box" right after this. st dcircumstances. experience builds character. experience builds confidence. and experience... has built this. the 2014 glk. the engineering, and the experience, of mercedes-benz. see your authorized dealer for exceptional offers through mercedes-benz financial services. welcome back, everybody. the futures at this point barely budge. if you're looking at the dow futures, up by 3.25 points. nasdaq up by 7.25 points. s&p up by less than a point. down right now. take a look at what's been happening with the ten-year note. we've been watching this yield very closely. this morning, the yield is trading at 2.71%. automaker ford is apparently planning for the exit of ceo alan mulally. various reports say mulally will step down before the end of the year with a more specific announcement coming in a few weeks. the reports say mulally would be replaced by current chief operating officer mark fields. fields was named to that position in december of 2012 and has been widely seens aa potential successor to mulally. ford wouldn't confirm the reports saying only that it does have succession plans in place for all of its key leadership positions but does not discuss them. alan mulally became ford ceo in 2006. ford was one of big three that did not have to go asking for dollars in washington. ford stock has nearly doubled as a result. >> go out on top, right? well positioned. 68 years old. didn't go to microsoft but doesn't need to go anywhere. >> after boeing, and then turning around -- there were so many doubters when he came into ford. just because you know how to run an assembly line doesn't mean you know how to run a car company. >> he works hard. he travels all over the place. i think he plays golf. might be nice to be on a a couple boards, he'd be widely sought after. >> i can't imagine mulally retiring officially. >> no, no. i think they had to lock down mark fields, too. he had been offered a star on a primetime soap, the remake of "dynasty." >> he's a good-looking man. >> can someone that pretty be smart. >> we have you. >> what am i thinking? what am i thinking? that's right. but we always kid mark fields about that. >> central casting. good looking man. >> right. >> what does this mean for the future of ford? joining us now is jeff sonnenfeld. he's a senior associate dean at yale school of management and also a cnbc contributor. >> is he good looking enough to be a contribute contributor? >> you would know that as well. we have a picture of you, jeff, that shows the new disappearing you as well. >> i know. thank you. you used to complain i was using a high school picture. >> we have the 120-pound -- i'm going to buy you a cheese burger. >> he looks good. he's kept it off for a long time. >> he's worked hard. >> jeff, what do you think about this transition? is mark fields the man for the job? >> yes, he really is. this is the classic textbook succession. we wish all companies could do it this way. here's a guy step by step has learned all the core functions. he's a core strategist, the ford one plan that, of course, allan mulally has championed. he championed the restructuring plan. the cross functional skill set operational superstar. he's a marketing wizard. financially very strong. all key constituents, from the dealers to investment community, employees. it's an awkward situation to be in to get along so well with his chairman in, bill ford, alan mulally and his predecessor. jack nasser was a very strong leader at one point, would have been a mentor to mark at times. mark never disparages anybody who's rising or falling or trying to build his career. he's become a genuine car guy in a business that too many times, too many of these, quote, unquote, finance guys who are accountant types, he's really proven himself since age 38. he took over, became ceo of mazza. the premiere automotive group that he ran very well which is volvo and jaguar and some of these great car divisions that sadly they had to let go for cash at a different period. north american sales, incredible turnaround. that was north american auto business for them, they were losing record losses. they stepped in there, about $9 billion in profits there alone. >> right. >> he has the track record. >> the one surprise on this, we did expect alan mulally to be staying through the end of the year. he had said that specifically. when push came to shove when there was talk about him leaving for microsoft. why the change potentially at this point? >> we don't know officially this is actually happening. the rumors are that alan, as he has had before, people coming after him. he's become one of the greatest icon of u.s. global industry. what he's done to revive manufacturing. one of our ceo summits, an extremely promising financier said who wouldn't invest in a plan? alan practically fell out of his seat. he has shown how you can be a tough turnaround guy without being abusive. he's been a great mentor to mark along the way. i think he has a lot of opportunities and perhaps something has heated up on a front burner for alan. it clears up ambiguity. on the inside, it's clear how this succession was working and they were quite comfortable with each other. somebody seems to be talking. >> jeff, i realize that i can -- the way my mind works, i can figure these things out. i just thought they don't need that guy from discovery anymore. to do their commercials. the guy from dirty jobs, whatever his name is. his name is mike rowe, february 19th, ford splits with mike rowe. he's gone. he's no longer -- you don't need him anymore. this guy will be -- can't this guy sell the cars now, too? doesn't he look like he could do the commercials as well? >> i guess so. you're attracting to alan mulally to cnbc. i was just wondering if he's goen to turn around bitcoin or something like that? i don't think so. or sotheby's is looking for somebody. i'd love to get him here at yale. i don't think that's in his future. >> i have a hard time thinking he's done. >> he's a very young 68. i'd like to look like him when i'm 38. >> what do you mean a young 68? 68 is young already. >> you could teld me he's 58 and i would believe it. >> exactly. he's not that much older than hillary clinton, a little older than joe biden. >> thank you for calling in. great talking to you. >> they did. they split with him just a couple months ago. they probably knew. when you saw that, you should have known fields was rising. more reaction to the deals of the day from big pharma, glaxo smithkline ceo sir andrew witty coming up and then eli lilly ceo john lechleiter will be with us to talk about his part of this mega deal at 7:15 eastern. and not a number? scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: ranked highest in investor satisfaction with self-directed services by j.d. power and associates. predibut, manufacturings a prettin the united states do. means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources to get the job done. 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[ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ my mom works at ge. at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. life with crohn's disease ois a daily game of "what if's". what if my abdominal pain and cramps end our night before it even starts? what if i eat the wrong thing? what if? what if i suddenly have to go? what if? but what if the most important question is the one you're not asking? what if the underlying cause of your symptoms is damaging inflammation? for help getting the answers you need, talk to your doctor and visit crohnsandcolitisadvocates.com to connect with a patient advocate from abbvie for one-to-one support and education. good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. it's april. it's like, this summer you might not do a lot of stuff. have you noticed news overload? >> a lot of news. a loot of earnings that are coming, too. >> in addition to everything else. american business keeps moving, keeps moving, things keep happening. we have a lot to talk about. in the headlines, novartis, glaxo smithkline and eli lilly are -- i don't know what you'd call this, swapping things, buying things, combining different things that make sense synergistically and saving money. they're all higher in premarket trading. novartis is buying glaxo's oncology unit for $14.5 billion and at the same time selling most of its vaccines business to glaxo for $17.1 billion. it's weird the way this is structured. the investment bankers involved in this are going crazy. i don't know if money eventually changes hands. in a separate deal it will sell its animal health division to eli lilly, this is for $5.4 billion. we are going to talk to the chief of glaxo, sir andrew witty in just a couple minutes to discuss why his company is doing these deals with novartis. at 7:15 eastern we'll talk to eli lilly chief executive john lechleiter who we talk to a lot about, he's lost some patent protection on huge drugs. they've been dealing with trying to replace those revenues. now they'll get into the animal health business in a much bigger way. years ago, mario, super mario. i have three dogs. i don't walk out of the vet -- people love their pets. i don't walk out of the veterinarian office without $500. >> he's smart. you know what he said with the bad winter season, the day before you got a flat tire he had said you want to be investing in auto parts companies. the roads are so bad, people will get so banged up, the tires. >> tires. he does. he looks at the way -- there was a day he brought in presents for all of us. one of them, this was years ago, one of them was a big bag of kitty litter. you think you're funny. this is not a gift that anyone needs. kitty litter. but he was right. that was to make a point. petco, petsmart, a lot of those pet-related companies have done well demographically. >> they care about their pets, they are their children. >> what if you have children, what are they? >> they're your children's children in our house. >> your grand kids. markets closing to the upside on monday, so a correction still come? was that it? have we seen it? joining us now is maryann bartels. what do you think, maryann, was that it? >> we said it was an april fool's joke, right? markets hit all-time highs, then we saw the correction come. one of our major macro themes for 2014 was the return of volatility. we have markets up substantially since the lows of '09, last year many of the indices were up 30%, 40%. markets need to consolidate the gains. they either go down or they trade in a range. we think we've been in a trading range, maybe about a 10% range. we think the correction is over and we continue to encourage our clients to buy the market. >> so what do you think happens this year? are you in the camp that says 3% or better gdp and that's why you think the market continues to grow? >> a lot of it is corporate america sitting on a pile of cash. they've been returning cash to shareholders through dividends and increase dividends. now we're starting to see an m & a cycle start to build. we think capex will be the next step tore investing. what's interesting about this m & a cycle, it's been creative for at choirer. we've seen the acquirer stocks go up. yesterday you have the announcement with pfizer and astrazeneca. you are pfizer stock up. corporate america has learned how to create value by purchasing other companies. i can tell you, becky, i have not seen this in my career before. not at the rate we've been seeing. >> you say flowers to come in may. >> that's correct. >> but there will be growth in the spring? who are you, chauncey gardner? >> you have april showers. >> the roots take hold, growth in the spring. >> yes. i should have brought you flowers, sorry, joe. >> i like to walk. >> things will blossom. we don't think the market has ended. >> all right. >> so you say you haven't seen this in your career. is that in terms of the m & a where the companies have gotten smart about making creative purchases? >> correct. fund managers that invest in m & a, particularly hedge fund land, they own both stocks. i've never seen this before. >> you think the next step is capex, companies will start investing. does that lead to faster job creation, too? >> probably not faster job creation. but one of the things we are seeing in our global fund manager survey is now that companies have returned part of the cash through dividends and share buybacks, shareholders now want to see that money re-invested back into the business. because they really haven't done that. >> that's longer term growth. >> that's longer term growth. part of it is yes, we're seeing return of gdp growth. we think part of that gdp growth comes from capex. >> marryia maryann, thanks for n today. >> thank you for having me. next up, sir andrew witty, glaxo smithkline ceo, will be our special guest. that's right after this break. what's in your ear? 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[ male announcer ] it pays to double check, with state farm. are we still on for mytomorrow? tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. csx. how tomorrow moves. what a day. can't wait til tomorrow. welcome back, everybody. we've been watching u.s. equity futures at this hour. things are barely moving, right around the flat line. yesterday, stocks up, the dow was up 40, the s&p up 7. this was the first five-day winning streak of the year for the s&p 500. we'll continue to see what happens as we get into earnings today. when we return, more deal rumblings in big pharma. this one involves activist investor big ackman. we'll see if he can pull off a deal for allergan. and glaxo smithkline ceo sir andrew witty on the big pharma deals of the morning. 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[ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. swiss drugmaker novartis announcing today it will acquire glaxo smithkline's oncology unit. with us to break down the deals, sir andrew witty, ceo of glaxo smithkline. great to see you, sir andrew. >> thank you. >> looks to me like you're getting into a lucrative business, doubling down on consumer products. i think you feel you've got the right person to run it. was it at traction the attracti business that allowed you to part with oncology or was there a reason oncology been fit into your portfolio as much as it may have in the past? >> first of all, thank you very much for the opportunity. this is a three-way deal. what we're able to do is significantly expand our world-leading vaccine business by acquiring the novartis vaccine business. we're creating the world's biggest over-the-counter medicine business by combining together our two consumer organizations and as you say, we're divesting our marketed oncology assets for $16 billion. we believe that represents great value for our shareholders and allows us to strategically extend within our organization the businesses which have very long annuity or durable sales profile. almost 40% of gsk after this transaction will be made up of consumer and vaccines. >> does novartis have an oncology business that is very complimentary to glaxo smithkline's? what did they think -- were you a leader in oncology or did you feel like you weren't going to be a market leader so you were able to part with that and novartis could better use it? >> we've been a very newcomer to oncology in the last four or five years. we had a productive period in r & d. we've launched new products in the last few years and done very well with it but we're world number 14 in oncology. novartis was world number two. this was an opportunity for us to pull our assets that we think are important medicines for people in the hands of a company with tremendous distribution network. we believed that was the right thing to do. that is what allows this tremendous value to be held for our shareholders. we're the world's biggest vaccine company, novartis is very much smaller, us taking their vaccine products into our portfolio gives us a tremendous opportunity to create value there. this three-way deal represents a great opportunity for both companies. >> people that don't think about vaccines, sir andrew, not everyone gets sick and needs a therapeutic. but in a perfect world, wouldn't every newborn or every person benefit from not down the road having meningitis or a disease? i mean, everyone in the world should get most of these ak seen -- vaccines. that's a positive aspect of the vaccine business, isn't it? >> vaccines are everywhere. just at gsk alone, we manufacture some 800 million doses of vaccines a year, every single day 2 million children in the world receive vaccines from gsk. it's a tremendously large, massive volume operation for the company. we have one of the widest portfolios of vaccines of any company in the world. by bringing into our portfolio these novartis vaccines, both today's and the possible future vaccines they have under development. we really believe we're bringing them into the right family to make the most of them over the next 10, 20, 30 years. the vaccine business is a true annuity business. >> true annuity business. i don't know of anyone that would say that the cost of the vaccine is not worth it compared to what it costs a society to deal with the eventual whatever malady you're trying to prevent. it's a no-brainer. >> exactly. if you think about the vaccine, it's with one course of vaccination you can get a decade, 20 years, in some cases, a lifetime of protection from a whole series of diseases. it's one of the most cost effective health care interventions that's available. >> sir andrew, i remember glaxo ten years ago getting into what i thought was going to be the future. that was a combination of common chemistry and rational drug design. the promise of that, i'm not sure what happened. it's hard to go from the lab bench to the bedside, i think. is there going to be a quantum leap? are we close? >> i think we are going through a very productive period, actually, joe. if you look at gsk today, we have 45 new molecular entities in phase two or phase three advanced development. we've had seven major new medicines approved in the last 12 months. we've approved in the last 12 months. we have seen a tremendous increase in productivity. largely in part pause of some of the investments you described way back at the turn of the century. i would say they didn't up being an answer but became a component in the answer. my belief is the real answer is how we create the circumstances for extraordinarily creative, brilliant scientists to be able to combine some of the advanced technology. but to apply it pore as an art than a science. you have seen a tremendous step forward. it is really down to extraordinarily creative r&b scientists who have the chance to let their vision come to light. >> are the margins slimmer there? why is that a good business for a research based company? >> well, the margins are lower in the consumer. they have much more durability and long life. they are exposed extremely positive demographic dynamics. the vaccine is predicted by the world health organization to grow 9% or 10% a year going forward. very steady group. mid single digits. these businesses are not dependent on the patent protection that you see in the phrma businesses. they are built around brand equity and consumer and around just frankly the difficulty of being able to manufacture a scale for the vaccines. we believe there is much more durability. it has destabilized the value of our sector the last 15 years. it takes a long time to reshape these companies. that's our long-term strategic goal. and today's announcement takes us a big step in that direction. >> all that money to develop it. you get it for a while. then you fall off a patent cliff. no other business is like that. do you have to be -- if i'm a british citizen, can i become a knight? or do i have to be born there? sir nick faldo, sir elton john. if i move there do i become a shot? >> i'm probably not the surety on that. my understanding is if you're a brit and they knight you, you're allowed to change your name, so you get to use your sir. if you are knighted as a nonbritish citizen, you have the honor but you cannot change your name. so it is only, joe. come to london and meet the right people. >> if i can't say sir joe. >> i just wonder, all of this makes sense as you explain it. was it management's idea, investment bankers? >> becky, this really came up in a conversation between joe and myself, so the head of nevartis. we had a historic supply arrangement between the two companies in vaccines. basically one thing led to another. it led to vaccines, consumer, and then to oncology. we really took the decision together, khwhich was the first thing we had to decide. how about trying to do these three things and allow the two big companies to make a significant strategic shift in the direction we both wanted to go. once we had done that, the easy bit of the deal was done. it was down to an extraordinary level of complex negotiation as you can imagine under that surface. but the strategic logic really compelling for both of us. that's where we began, in a vaccine conversation. >> we had joe on in davos. he wanted to do big things with with novartis. we appreciate your time. any time you're ready to talk with us, we would like to have you on the show, sir andrew. we appreciate your time this morning. >> very kind of you, joe. thank you very much. >> we're also going to talk to -- we'll have an sphroexclus interview with sir john. i just knighted sir john lechleiter. being the swiss maker animal health division. >> quarterly results expected from dow component travelers. and media giant comcast coming up at the top of the hour. ♪ "first day of my life" by bright eyes ♪ you're not just looking for a house. you're looking for a place for your life to happen. good morning, everybody. welcome back to "squawk box" on cnbc. andrew is off. we have been watching futures. not a lot of movement. this comes after the first five years of gains. up to five days in a row. the first time that has happened since february. the yield is sitting just at around 2.7%. 2.71% the last tick. we have hraerpbgs that have just been hittings. we have earnings from dow. insurance company coming with $2.95 per share for the quarter for travelers. revenue was slightly below consensus. travelers announcing a 10% increase in its quarterly to 50 cents a share. incredibly strong performer for as many quarters as i can remember. >> beating estimates by 5 cents. revenue slightly above consensus. aerospace raised the lower end of its 2014 earnings. nbc universal parent comcast just out with quarterly numbers. the company earnings of 68 cents per share beat expectations by 4 cents. revenue exceeded consensus. there are a lot of different metrics that people look at for comcast. >> it excludes $17 million in costs related to the time warner cable transaction. amount of that was legal fees. but without that, operating cash flow would have been up 10.4%. >> so the video ads once again grew. that's the second quarter in a row. >> for the cable company. >> comcast. their video ad. and nbc universal and steve burke. 28.8%. 1.1 billion. if you haven't seen it, how the company, nbc primetime is doing that's number one. things that used to be -- some breath at a loss the network at one point. people said if they could just turn around nbc it's -- and it's happening right before our eyes. >> you back it out and it's still up. as you said, the "today" show is up and late night. remember some of the previous attempts to move to the next level? didn't go quite as smoothly. revenue increase 12.6%. some of that with sochi. you can see cable network revenue, it's hard to grow. it was up 1% without sochi. you look at any of the cable entities and that is still doing well but not the kind of growth we saw three or four years ago. even theme parks grew. that had nothing to do with the olympics. does that say joe? novartis announcing a restructuring. it will pay glaxosmithkline $14.5 billion for its cancer business. hopefully you saw the interview with sir andrew of glaxo. you can see why they like vaccines. the interview was five minutes ago. they are also combining consumer units in a joint venture. and it is selling animal health unit to eli lilly. people love their pets and they blow all kinds of money on them. $5.4 billion is what that is for. let's talk big phrma. me go terrell. have you been on "squawk box" before? >> it's my first time. >> oh, my god. for you -- >> i'm in awe. i want to call you sir, i think. >> call me sir joe. you can see how much i want that. >> and if i said to you i know about it, you wouldn't assume i have botox experience. >> definitely latisse. >> have you seen that guys eyelashes? he has beautiful eyes. he is put together everywhere. his hair. look at him. look at those eyes. do you feel when you look at him? david? >> scary. i just think there's a pretty big demand for botox. >> a huge demand. it became a huge market cap company, did it not? >> absolutely. let's get to david in chicago. david, what's the most compelling thing? everybody wins on this? >> very attractive aesthetics business. you don't have to deal with the pricing pressure from government payers or private insurance companies or pbms. and durable products. they have very long life expanse. they are going to see significant synergies there. allergan has a tax rate of 25%. you're going to see a lot of tax savings there. i think allergan shareholders will get a good price if this goes through. >> i think you have to think about how much allergan is going to go for. it reports $45 billion. this is on a market cap of a runup of $42 billion. what kind of premium are they going to be able to get? seeing astrazeneca/pfizer rumors that was a $100 billion deal on an $80 billion market cap. >> it's very attractive. i think they will be able to pay a higher price than anyone else because it has the lowest tax the rate but better synergy opportunities than anyone else. i think they will be able to create the most value of those assets. they will be able to pay more than anybody else. >> why do they have such a low tax rate? >> a lot of profits are showing up there. any u.s. income they do have it's really going to be confirmed by the interest tax shield. >> we don't think of it as lower taxes than here, do we? >> canada has a treaty with bermuda. allergan has been a name we have heard about in the past. it's all about botox too. what is with this society? >> we think allergan is not too keen on the deal. allergan tried to do the fingerprintly deal. now they're going hostile. navartis has a presence in ophthalmology already. they already had the sales force dealing with plastic surgeons. >> it's like elective surgery. >> people are paying out of pocket. >> you're going under the knife. there's nothing wrong with you. except you're ugly. >> it's a needle. >> i know it's a needle. >> david, you have seen the show. you know what you're in for. david, thank you. we appreciate it. meg, blockbuster first appearance. thank you. we will be seeing a lot of you. great beat to be covering it. >> great time to be covering it. we hired you as biotech started plummeting. >> i know. i was hoping it didn't have anything to do with me, a barometer of the industry. >> markets made modest advances in monday's trading. but it is up. it is a heavyweight. we have had a few today. as you know, we're right in the middle of earnings. are we halfway through the s&p? >> no. this is a really busy week. we have today, tomorrow, thursday. and then maybe you get to the point. >> joining us now is julian, executive directsor in u.s. equity and derivative strategies. and founder and senior portfolio group at newberger berman. >> remember when with he did the that shoot? >> you have the accent to be like -- that's the home of golf. >> the home of golf. >> i was expecting a little bit more. but you did chemical. julian, correction is over? >> you may get more side ways chop. you called it in terms of the correction. we have been doing a lot of hand holding in recent weeks. what we think is really happening. the market has absorbed a lot of difficult news. you had a chinese growth square. russian geo-political scare. bad weather in the u.s. we think we are getting towards the end of all of that. obviously earnings season will be impacted by the weather. we think you are in this transition phase. ultimately news like today in the phrma space is one of the reasons we think the market is going to go higher. companies with cash will deploy the cash towards capex and mma. >> it looks like they are buying growth because things aren't that great. they are looking for cost savings, putting things together. redundancies. this is a positive you're saying? >> there is an element for certain. and i think there's always an attempt to cost save. but i think if you listen to what the executives were talking about earlier, there is an aspect of one plus one equals three at some point. >> is that where you start to worry about evaluations? >> i think the news this morning is so much about foot and focus. these are not audacious deals. i think the real opportunity is what happened to it. it is 8%, not cost of money. that's comfortable another $15 of earnings per share for the market over time. does it get invested well? if it approximate does get invested well, that's tremendous. if it gets wasted that's bad for the market. but nothing we have seen so far suggests that. these are rather thoughtful deals that the markets like because they are not that complicated to understand. >> okay. >> this is not animal spirits. >> not even close. that was pretty definitive. you have done cable before. >> it's not only mma but cap ex as well. if you look at consumer confidence, it's held up nicely. ceo confidence, it's rebounding. the fed is the driver of this. >> we had a guest earlier this morning who said, look, this is what you expect. but for the first time in her career, you are seeing deals that actually make sense and the stock goes up because they are created immediately. >> you worry about it getting wasted. in times of this, folks will be thinking strategic. folks will be thinking about complicated earnings. they are looking at their businesses and say how would an inside see these businesses. it looks at a company that spends a tremendous amount of r&d. it is about reducing r&d. >> for now it's been good for shareholders. >> julian, i would think that the activist stuff is animal spirits. a lot of management is entrenched. business as unusual. they're afraid. maybe you need them to come in and shake things up. >> mma has been missing from the bull market. we're up 17%. maybe it is tempered animal spirits. >> they see value. they're trying to shake up a little. juli julian, thank you. >> when we come back, media analyst rich greenfield joins us to break down the numbers from comcast and netflix. an interview with eli lilly chairman and ceo of john lechleiter. single stroke and pause for two minutes. our heroes will now open the marketplace. >> everybody should step to the plate and show the strength of the american economy. >> this city is the welcome back, everybody. a big morning for earnings. we have seen five days in a row for gains for the s&p 500 and for the nasdaq. for the s&p 500, that's the first time it has happened. the markets still trying to figure out which way to go. we have gotten a lot of earnings, many beating expectations. >> he lie lilly stock hitting a 52-week high. john lechleiter, president and ceo of eli lilly. >> hi, joe. >> we just spoke to sir andrew of blackstone. all you guys have had to watch some of your biggest products go off patent. you have been dealing with trying to keep revenues where they are and grow the company. >> with the action of novartis, it grows to be the number two player in terms of global revenues. we have been quite clear all through this period that you refer to where we are losing patents on some of our big pharmaceutical products that we would be very interested and aggressive in terms of expanding our animal health business. we believe there are a lot of synergies between animal health and human health. we believe it represents a great market opportunity for us as people around the world look to put more protein into their diet. safe, nutritious food. and we're all concerned for our pets. we think this deal represents a great opportunity for lilly shareholders to benefit from not only the size of the new company but the complimentarity of our new business. >> you said livestock and food supply. how much of it is sort of -- it probably isn't. when i think about it probably equally. people are just as concerned about their pets as their food probably. one is not less consistent than the other i guess, is it? >> joe, novartis had sales of $1.1 billion. half of that in the food animal segment and half in companion. it is more focused on the food animal side. again, the deal is very complimentary. it helps to build strength in both of these areas. >> so you're getting more into it. >> companion animal is growing a little more quickly. companion animal market is a little more steady. >> is this created right away now? >> i'm sorry, joe? >> is this a creative right of way? >> this will be a creative beginning in 2016. we hope to have a deal closed by early in the first quarter next year. >> john, can i ask you real quickly what you think about the remake of novartis as far as what it means as a competitor. it is buying gloxo's cancer drug. that's an area you have been competing in terms of bringing out a new breast cancer drug. what does it mean to your overall competitiveness with novartis. >> i learned about the other transactions this morning when i woke up and read their press release. we were obviously focused on the animal health part of the transaction. i believe you see companies can gravitating toward what they do well, trying to build up strength and mass in those respective areas. so we have been the global growth leader in animal health the past five years or so. so we have doubled the size of our business since 2007. but when you see an opportunity like novartis that's not going to come along very often. we were quite intent on securing this. >> did it make you say, oh, like maybe i wish i had that cancer unit as well? >> well, we've got a pretty good cancer business of our own. it's been an interesting 12 hours. we learned the fd approved syranza, one of the pipeline products in that deal we announced just over five years ago. this will be indicated for advanced gastric cancer for patients who haven't responded to earlier chemotherapy. so we're excited about that too. >> i'm wondering once this closes, changes around your dividend. you have been clear about wanting to maintain that at a minimum. does the nature of these cash flows mean possibly that dividend can grow now over time? >> no. this does not change our dividend policy. we will maintain our dividend at least at our current level. after we resume growth and work through the impact of these patent expirations we will look and see if we can't increase it. >> so nobody knew what anyone else was doing. >> joe knew. >> right. >> it's just interesting. >> thanks, john. we'll see you later. >> thank, joe. thanks becky. >> comcast, travelers and united technologies. more returns in just a few moments. moments. those little things still get you. cialis tadalafil for daily use helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like 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 free 30-tablet trial. 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. good tuesday morning to you. a lot of activity in the business world today. mergers and acquisitions. we have earnings. when we return, the spotlight will turn to the media sector. comcast reporting just a few moments ago. netflix last night. we have rich greenfield joining us. you know what else i can do on my phone? place trades, get free real time quotes and teleport myself to aruba. i wish. carsthey're why we innovate. they're who we protect. they're why we make life less complicated. it's about people. we are volvo of sweden. welcome back to "squawk box". swiss drug company novartis announcing a series of multibillion dollar deals that would reduce sales but boost products. it is buying glaxosmithkline's cancer business and selling its sack seen business for $5.3 billion. they are also combining their consumer units in a joint venture. separately, the company is selling its animal health division for $5.4 billion. >> we believe it represents a great market opportunity for us as people around the world look to put more protein into their diet. of course we are all concerned for our pets. we think this will benefit from not only the size of the two but the complimentarity of the two businesses. >> he said he found out about the other deals just this morning. >> mark fields successor to alan mullaly. since he took over as ceo, ford stock price doubled because of what he did to prepare that company before the financial crisis in 2008. ford did not have to seek assistance from the government. in the midst of a big earnings, the two dow components. united technology reporting $1.32 profit, 5 cents better than expected. sales grew in all five of its businesses. ruts many proved in underwriting and invested. mcdonald's is expected to report at 8:00 eastern time. >> we have more drug related news this morning. bill ackman is teaming up with valeant to make a run at allegan. it is expected to offer a mix of stock and about $15 in cash for the maker of botox and different eye-related stuff. latisse. restasis, contact lens solutions. all kinds of stuff. sources told cnbc, that the total value slightly more than $45 billion. the persing square began buying allegan in february. its biggest ever investment. it has a 9.7% stake. the word is they would go hostile on this. >> we have had a couple of people raise the question, will they have to cough up more. >> right. to shareholders. you would start down where you are. valeant is -- ackman is start. >> he just started in february? >> he made the agreement in february and started buying in february. >> that's what's interesting. we have an agreement that, yeah, we're going to do this. it's a closer relationship. teaming up with another company knowing you think they are going after -- >> normally you a mass a stake and then search for a buyer. >> i'm not a legal expert. >> it feels we are pushing the boundaries. i'm not sure how the sec would weigh in on any of this. knowing there is going to be a deal. >> you buy and say, look, this is undervalued. >> if you washed at valeant, as an individual -- we have seen that story. remember berkshire? >> you know that valeant is interested in buying. >> but you were talking him into it. the berkshire case. >> it was a violation of berkshire's own. this doesn't look funny to me at all. this looks genius. >> i think it's very smart. i would be surprised if it doesn't raise some questions about how it was done. >> i have already put my money into it. i don't know there's a buyer doing it. when i know this company, i talked you into buying it. and i'm going to buy it just knowing it is going up. >> it would be a fit for another company. >> it's another if you have cut the deal and paperwork that says, i promised we are going to do this. we will hold shares for six months to a year. maybe there's nothing wrong with it. it feels like an activist investor. >> you can see that it got a huge play in the journal. >> maybe they needed mr. ackman to get it done. >> so you are a major owner of the company at that point? i'm talking myself in circles. >> you don't know whether you are going to be successful. if he buys it, he could easily use all of his money. allergan says no. it's not a done deal. i think allergan would be hostile anyway. you don't know the prospects. >> i'm guessing if he had announced his stake without any parp, i think given his representation the market would like that as well. you bought it as it is running out. >> i bought my 10%. then we will announce you and i and a bunch of others are going to buy it. and that runs it up. >> that's legal too though. >> it feels a little different to me. you're right if this was just an announcement without valeant. >> i'm guessing you have good legal counsel as well. >> it feels different to me. >> there's no guarantee a deal would be done. >> comcast out with quarterly numbers early this hour. earning 68 cents a share. it was well above expectation. looming price increase after solid first quarter results. earning 86 cents a share. rich greenfield is the media and technology analyst. great to see you this morning. >> thanks for having me. >> let's go through this morning's numbers first. comcast, what do you think? >> nothing terribly surprising in the comcast results. this was another quarter of results. it continues to lead the industry and blaze a path. you look at their subscriber growth. the second straight quarter they are adding. so you are seeing in inflection point. the cable company has been losing subscribers to satellite, the telephone companies. you finally now seeing the bundle, they are finally adding subscribers again. that is why you are going to see so much opportunity the next couple of years. >> if that's not a surprise, what's the surprise, rich? >> look, at the end of the day, nbc becomes a relatively small part. no offense. >> it's been 10 years. just working for the company and watching it happen -- it's been a while since it has been primetime. >> just keep that in mind. >> absolutely you have to look at that and say things are moving in the right direction. raise a little bit of concern as you look out across the rest of the media. >> that's kind of across the board in cable, isn't it? >> in terms of the largest media, that's a key driver is cable network advertising. >> the stock has been under pressure because of the time warner, that teal and the talks that are out there. what would you do with stock at this point. >> we would continue to be buying it as a cheap way to get a hold of comcast. it goes through. buying time warner in an all stock deal. you are getting it as a discount. we can't figure out why they are not continue to go buy twc at these levels to buy comcast. >> it is up 50% the last year. but you still think it is cheaper. >> reed hastings saying unprecedented fees -- it's never been done before. comcast is already dominant. being able to capture unprecedented fees from providers. limelight, google, all have similar deals with verizon, at&t, level three, sprint. unprecedented. that's not true, is it? >> we co-moderated the call last night. said imagine if brian roberts were sitting up here and look how much comcast has invested to create access for netflix to reach the end consumer. why should comcast have to keep paying? why shouldn't the burden fall on netflix. hastings pushed back hard saying they used to end up getting paid and now they are forced to pay. i think the reality is this is a little bit of a challenging topic both regulatory wise and between these big companies. no one expected netflix traffic to get as big and as fast as it did. they had to provide free access without netflix having any cost in the game. i think it will be a tough one. >> the stock has gotten crushed the last five or six weeks. would you drown grade. >> i think at this level it looked like 3.75 in the after market, premarket. >> it is occurring substantially earlier than we expected. earnings in general were in line. guidance was within a range of in line with expectations. the real surprise in earnings they are raising pricing not just by a dollar but two dollars globally on a market-by-market basis in the second quarter 2014. >> good surprise or bad surprise? >> good news, it is a tremendous amount of incremental cash. they can't afford it. they are basically being forced to the raise price and hindering or altering to the consumer. that will be the target. i think that's why it isn't up more. they have to and need the cash to generate earnings. >> netflix is a content provider, right? that's a business they decided to go into, right? they want to keep any other costs down as much as they can. this is not a big business for comcast. the isp stuff, is it, the interconnection? >> well, it's a small amount of dollars right now. as they look at it, broadband by far is their biggest business. >> it's about keeping costs down at netflix is what it's about. >> comcast is looking for as many ways to drive the margin profile of broadband as possible. they don't care about netflix as margins. >> rich, thank you for joining us. >> thank you for having me. >> i have to go back to school, i think. >> re-learn? >> yeah. don't we? >> yes. >> five straight up days in a row. find out if the run will continue. later, earnings from the biggest burger chain in the nation, mcdonald the's ready to report quarterly results. back in just a bit. ♪ [ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today...and tomorrow. so let's see what we can do about that... remodel. motorcycle. [ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. for $175 dollars a month? so our business can be on at&t's network make a my financial priorities appointment today. 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. new at&t mobile share value plans. our best value plans ever for business. quarterly earnings taking center stage along with big deals in the drug business. big names you should be watching now. do you position yourself for breaks you saw two weeks ago? or do you just stay in the right names? >> i think it's more important that people try not to move with every single move in the marketplace. you just want to own the right names, the right valuations, companies that may have catalysts that the street is not anticipating. positive readvises we watch very, very closely. las vegas is reporting this is a gaming leader. three main geographies. macao, we anticipate upside. singapore. and then las vegas itself. but the company is more of an international company at this point. this is one of those stories where you get the best of both worlds. a very strong grower that can compound earnings growth the next three years. mid-20s. you have a company that's returning cash to shareholders with a dividend of 2.6% and buying back 3% to 5% of shares every year. you get the best of both worlds in a choppy environment. it's a great stock. >> i wish you would have called me during the financial crisis and told me to buy it. do you remember the low? >> oh, my gosh, yes. well, you have to remember the high and the low to get the full picture. >> from $150 a share to $1.38. and now back to 70. >> unbelievable. >> disney? >> we like disney as well. it's growing very nicely. where they are in the product cycle or maturity cycle is they are very well positioned. the theme parks, looking for an upside there. espn continues to grow very nicely. it is a cash of redeployment story as well. they put a lot of money into their theme parks as it wanes as far as an incemental cap ex, they will deploy back to the us. >> right. >> the yield is $1.25%. that's the best of both worlds. >> facebook, their advising model starting to get it together, huh? >> yeah. the advertising model is very strong. 1.1 billion users worldwide can't all be wrong. when they look to where they can advertise best they want to go where the eyeballs are. that is where usage numbers continue to amaze. >> all right. chris, thanks. >> thank you, chris. >> all right. you got it, joe. >> i can't guarantee it. >> when we come back, we have earnings from another dow component. mcdonald's. later, city executives will address shareholders for the first time after they suffered two high-profile black eyes. know what the experts at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. why relocating manufacturingpany to upstate new york? i tell people it's for the climate. the conditions in new york state are great for business. new york is ranked #2 in the nation for new private sector job creation. and now it's even better because they've introduced startup new york - dozens of tax-free zones where businesses pay no taxes for ten years. you'll get a warm welcome in the new new york. see if your business qualifies at startupny.com hi, are we still on for tomorrow? tomorrow. quick look at the weather. nice day, beautiful tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. what a day. can't wait til tomorrow. valeant announcing a bid for allergan. it's offering $48.30 a share in cash. 4.3 for each share. and bill ackman would take only stock as his part of the deal. he would remain a long term shareholder. >> valeant shares up 10%. >> three times 12. >> another stock that we're watching this morning is 13 cents above wall street expectations. the company maintaining up to 284,000 motorcycles it plans to sell in 2014. i think that looks like a new high. i wouldn't be surprised. heats up now. >> what happened? it's hog. it used to be hdi. not quite. it is almost there. just under it. >> all right. when we return, more on the big drug deals of the day. mcdonald's dough component set to report quarterly results. rly. [ male announcer ] the wright brothers started in a garage. mattel started in a garage. disney started in a garage. amazon started in a garage. ♪ the ramones started in a garage. my point? some of the most innovative things in the world come out of american garages. introducing the lighter, faster cadillac cts. 2014 motor trend car of the year. ain't garages great? ♪ "first day of my life" by bright eyes ♪ you're not just looking for a house. you're looking for a place for your life to happen. they sell a lot of hamburgers. that's all i know. welcome to "squawk box". i'm joe kernen along with becky quick. mcdonald the's is reporting. right now they are reporting. it's $1.21 a share. lately things have been not going as swimmingly at dick donald's. >> it's down. it was 3 cents below expectations. >> revenue came in line. >> the company itself said earnings per share declined because of the impact of prior year income tax benefits. >> if people knew what their tax rate would be. you know where you look? the comps. they are probably disappointing. global comps up 5%. >> on a month by month basis. >> they have been having trouble. u.s. comp sales down 1.7%. >> down 1.7%. >> mcdonald's around the balance sheet, leverage and refranchise opportunities. they started to suggest it may be more aggressive with the balance sheet. it is uncredibly conservative with the balance sheet. for the -- >> stocks down more than a dollar right now. >> for the longer term -- >> the mcdonald's commercials. >> they have to deal with market share in the u.s. always interesting from mcdonald's is what they have to say about the rest of the world. they had a very good been in russia. those comps held up well. interesting to see if there's been any russian effect spoebgs the next five months or so. >> they talked about weather being part of the problem. it pressured the traffic. they are pointed to weather for this. they say the u.s. remains focused on improving the restaurant experience through a continued commitment to operation and service excellence. >> europe was up but only 1.4%. >> those were trending higher. those are tougher margins as well. >> all right. we'll keep an eye. right now i have it indicated between 99 and $99.49. >> it will come back to the commentary on the balance sheet. >> it is right near an all-time high. it's not all that bad compared to where we were six months or so. the question is to whether they could keep it going in terms of all the innovation. >> they have reached the point where there are too many items on the menu. franchisees were complaining they couldn't handle that many items on the menu. they are trying to pair back some of the offerings. >> remember a few years back they went to coffees and lattes. they bring back the mcrib. >> in the u.s., no question they have to execute the stores better. and that hasn't happened. and they need to fix that. for growth to return in north america. >> okay. well, again, we will continue to decline the stock. >> valeant farm sue cals offering cash and stocks for allegan. bill ackman on set with us. he bought almost 10%. >> right. >> if he went over 10, he would know we did it. >> yeah. he started accumulating. started accumulating really fast. that's the point from which they are calculating the high premium. it's on top of $116.63. day before he crashed the 5% threshold. i did a quick back of the envelope on what this represents. based on valeant, this represents a 16% premium to where allergan closed. so getting to $165.33 for this offer. getting you to about $49 billion in this deal. so 16% premium is not as high as we have seen in the deals in the past. interesting valeant has gone after big companies. they came in as a white knight. looking at this statement they just put out, they printed a later they sent to david piatt. they had been going after allergan 18 months. >> the way they structured the deal is to convince the allergan shareholders is we will share with you all the costs of the deal. r&d will be quite significant. >> how did that work i wonder? did anyone else know that valeant was buying allergan. they have been publicly and privately saying it's not in the deal. >> just mad he didn't tell us. >> a lower tax rate. it would be in the high single digit tax rate. stocks really, really coming down. looking for $2.7 billion at least in annual costs. cuts are indeed cutting jobs. it will do the same thing here. $300 million that it would retain in late stage r&d? got approval in migraine. this is not the strategy that he has been pursuing. he has been trying to buy stuff himself. he's been vocal in that. >> i think if you get rid of your wrinkles, you're less depressed. >> apparently it's if you can't frown it does kind of stop depression. >> put a smile on your face early this morning. >> they have done studies. >> i'm just looking at other big shareholders. the biggest shareholder is sequoia capital. 3.4% of the company. fidelity is in there. >> it is a canadian company. single digit tax. people hate that. it's a canadian company. >> they have not disliked this the at all. i think strategically from a shareholder perspective you sit there and see what is allergan's return on capital. the skepticism out there in germ. and it has been for a long period. most of the stuff doesn't go through rigorous enough testing. it is very different than just running an r&d company. this is where the discussion is. within the context of what's going on in the u.s. today. if you can't give the customer more value. if you can't improve outcomes you're at the wrong end of this. here is the methodology to meaningful reduce the overall cost structure of the industry. >> do you think that is a playbook that others will pick up too or more of a one off of valeant. >> i don't know if this is a one off. a lot of deal activity. i think some of the other stuff is all around fit and focus. >> just like slashing r&d not necessarily looking for the big science. . >> it's just a balance. it is right inside these companies. they would argue they are completely wrong. over time you will know the answer for the shorter term it's working. if you don't have new products to sell over a longer period of time you have run out of things to do. >> allergan is way up. so is valeant. animal spirits. look at that. pretty amazing. >> as it goes up, the deal goes up. >> that's right. >> coming up, citigroup executives facing shareholders today in st. louis after two high profile black eyes. fraud in mexico and failing the fed stress test. d stress test. a big day for the whole drug group. novartis glaxo and eli lilly. check out the "squawk box" market indicator. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. welcome back to "squawk box", everybody. we have earnings coming in "fast & furious". also big deal news too. if you haven't heard already, novartis announcing a major restructuring including several mega deals. it will play glaxosmithkline's cancer business for $14.5 billion. and they are selling their vaccine business for $5.3 billion. that price tag could rise to above $7 billion. glaxo and novartis. >> this is an opportunity to put our assets we think are important for medicines in the hands of a tremendous distribution. we believe it was the right thing to do. >> in another day, novartis is selling animal health to eli lily. we talked about ceo john lechleiter earlier. >> citigroup executives facing shareholders in st. louis. kayla tausche is there. it's all drug sector today, kayla. you're an expert on all the other companies. >> well, i don't necessarily regret it, joe. there are interesting things in the financials even though they have become more of a utility space. we talk about it all the time. this is one of the core beats within the u.s. economy. citigroup of course one of the core companies. in an hour and a half they will be meeting shareholders since the first scandals erupted in the first quarter. four shareholders today in st. louis. of course they are going to have to approve citigroup's board of directors. a lot of those up for reelection. they are going to have to make a nonbinding vote on michael car bet's compensation last year. that could be the sticking point today. it's of course been a troubling first quarter and troubling second quarter so far. in march they had a high profile stress test. it is also down much more than its piers. financials have not been performing as well as the growth sectors if we look at year to date so far. it's been a tough year for michael. this is his second shareholder meeting. this year of course there are a lot of other issues facing the firm. you can expect they will be vocal. criticizing the firm for holding the event in st. louis. why not hold it in new york? why not webcast it. to be fair, citi announced it would alternate cities other year. it has about 4,000 employees at the citi mortgage. a busy day for us. busy day for citigroup. becky, for now, i'll send it back to you. >> it will always be interesting, kayla. you have the way compensating. >> just humor me, okay? >> look at what's happening in europe, france. you look at what compensation used to be in financials. and now compare media guys to financial guys. they make two or three times what financial guys make. >> right. >> it's like a utility. dodd/frank is not even done. they will make it even more restrictive you would think. so it is interesting. >> right. joe, we talk about these financial companies like utilities. the cruel irony here is michael corbat made $17.6 million. that is a nice paycheck for a year's work. utility executives actually make twice that in a year. >> utility executives. >> 17 times what you're allowed to make in france in the banking business now. they have all the answers over there for how to run an economy. toss back to you. >> kayla, thank you. we will be watching because it is an interesting thing to be seeing. >> it is. with kayla, i always like a little curveball. >> when we come back, we'll talk more about ronald mcdonald. shares initially under pressure. hey, i just checked. looks like they have turned around. the stock has traded higher. eps lower than expected. revenue came in line. investors should be thinking about this and whether or not they should be beefing up. we'll ask an analyst in just a little bit. little bit. know what the experts at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right 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[ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today...and tomorrow. so let's see what we can do about that... remodel. motorcycle. [ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. make it happen with fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. welcome back, everybody. we have been talking about these annual shareholder meetings. coca-cola will be holding its annual shareholder meeting tomorrow. ahead of that, we have heard a lot of noise from david winters. winters actually reaching out to coke's largest shareholder, warren buffett sending the legendary investor a letter to oppose the 2014 equity plan calling it something that shouldn't be happening. he said the implications for investment returns in our country may be devastating if they don't vote against this. this topic will be one we will be covering tomorrow with warren buffett. he will dine with the winner of the glide foundation lunch that is auctioned up every year. this year the winning bid came in of $1 million, $100. tune in to street signs tomorrow. after they finish the lunch, we will talk to warren buffett. the questions we will be asking is how they voted shares of coca-cola and why. he hasn't said anything publicly. >> he hasn't had enough to -- these are nonbinding anyway, the compensation issues, aren't they? >> yeah. if he were to come out and say something against us, that is the point. definitely at least register something. >> do you know this situation? is it not tied to performance to the extent it should be? >> i have no clear reading to the statement and how the compensation plans are designed. it would be irresponsible of me to give an opinion on that. >> qaa minute sky says how to you pronounce sun core. >> sun core. >> you finally visited the company and wore gucci loafers into the sands. >> he may be confusing me with some of his other family members. you worked with him for a long time. >> he was terrific to work with. a few folks on wall street think of it as a "we" equation. he was terrific to me, helpful to my career and supportive of things i was trying to do. >> neuberger -- i mean, the u.s. economy is resilient. it's mazing. >> yes. >> we shouldn't be surprised when it does well, i think, because we have the best system probably on earth. it's taken a while either because of the depth of the financial crisis or because some of it might be self inflicted. do you think we are on our way to what we used to be able to do, 3% year in and year out? >> i think there are many things going on in our economy that's very exciting. the stuff in energy. if it had a dotcom it would be all you're talking about. it makes the company safer of the long term and reduces volatility. i think the economy has remained resilient. it has lost -- >> i saw that article yesterday. >> -- than many would have thought. it doesn't have to be gang buster growth. i would say at the moment, it feels like the banks are lending more. it feels like there is more credit available for everyone. i don't think 3.5% is completely off the table. ultimately it comes down to earnings. earnings have remained incredibly resilient on year to date. around $180 per share for this year. there's a lot of noise out there. but nothing has really moved that number. if that number holds -- for sure there will be volatility. maybe it won't be as easy as last year. i think it is still quite solid. >> is it enough when we have people talking about the middleclass and talking about large segments haven't been part of the recovery, will they become part of the recovery eventually, or are we changing the makeup of this country where a lot of people are just going to be, whether it's food stamps or disability, or out of the workforce or whatever it is, we have become a lot more like aour the last five years. >> i think that's an ideological debate. it believes where you believe over the long term it's good for everyone. if you knock the spirit of the u.s. folks, you knock everything. the willingness to wake up and try to be better and get rewarded is very -- >> basically -- there are people that can do better. >> if they go the wrong direction it is certainly not good for evaluations all around us. there's no suggestion that the scales are tipping. but if they were to and you prevent me from waking up because i don't have a good risk/reward for my effort, that's not good for anyone. >> i have something for you on the coca-cola winners thing. and coming up, mcdonald's. stock has been trading higher. we'll talk to you more when squawk comes right back. es righ. es righ. hi, are we still on for tomorrow? tomorrow. quick look at the weather. nice day, beautiful tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. what a day. can't wait til tomorrow. e financial noise financial noise financial noise financial noise welcome back to "squawk box", everyone. let's take a look at stocks that are moving after earnings reports. comcast earnings 68 cents a share excluding certain items, 4 cents better than the street was expecting. of course they have a lot of different metrics. the nbc universal parent helped by a surge thanks to the winter olympics. jimmy fallon taking over to the host of the "tonight show", adding video subscribers. >> time warner acquiring company, many people waiting to see. >> although most people think it would be tough to make the case, and i think only al franken is -- i don't know what's in it for him. >> reed hastings. >> exactly. >> they are still talking. there would be some investors or ways of making it more palatable. >> and picking up net neutrality. time warner not at this point but comcast is. one of the only internet providers that is. harley davidson shares earned $1.21 for the first quarter, 13 cents above expectations. revenues as well. the company is maintaining its prior full-year forecast up to 284,000 motorcycles sold for 2014. that stock is up 6.6%. xerox beating estimates by 27 cents a share. but it did go below consensus. they are impacted by declining sales, printing, slower growth and services. that is down 5.8%. netflix reporting 86 cents a share. 3 cents better than expectations. video streaming service announcing that it will increase its monthly membership fee by $1 to $2 a month for new subscribers. and profits above straoefp estimates. that stock is up $28. shares of mctkopd's. just out of the top of the hour. earning $1.21 a share. 3 cents below estimates. but if you take a look, the stock is trading higher. right now to give us his action is r.j., senior restaurant and retail analyst at morningstar. r.j., why is the stock trading higher? >> the initial reaction is it was down on the earnings miss. if you look at the numbers a little bit closer, there was a one-time close beyond the operating profit line. if you take that out, the numbers are a little bit better than expected. comps had expected to be positive in april. that's getting people excited. even modestly. it is going to be a transition story. they will need to show traffic. >> charles cantor is here. we were just talking a little bit about it. the stock is yielding 3.25% which came as a surprise to me. >> yeah. >> do you think most of the bad news is out there? >> yeah. it's been priced in the stock. the company set the barlow for 2014 saying competition would still be a factor. margins a little bit pressure said up. value platforms out. back of the kitchen investments. so a lot of negative news then. but to charles's point, it is paying a healthy dividend. i don't think this is a completely broken story at this point. i think they have a lot of things. a brand recognized globally. i think it's a brand you can still get behind. it is trading at one of the wider discounts i have seen. >> you don't usually see the market leader trade at that discount. there is still some value in this name. >> what do you think they need to do in north america to turn it around? >> that is the key question how they turn it around and how they execute. i like what they are doing in terms of the back of the kitchen investment. they are going to make the ability to make more customization of products. but also keep in mind that the fact they need to key service up a bit. the prep tables, they will be able to add new ingredients, new flavors. things you have never before seen at mcdonald's or in america. i think it will help get people more excited about the story here. i think that's the first step. just getting the brand perception a little bit better in north america and help to start to move momentum. it has been the sweet swat for years. >> what is the opportunity there? it gotolks quite excited the last month. >> i think they have an opportunity to add some leverage and potentially return more cash to shareholders that way. at the same time, too, maintaining the investment grade rating. i think makes sure the franchisees get the best rates possible when they are looking for capital as well. i think there is opportunities for other leverages as well. >> do you worry about competition from taco bell? >> there has been a lot of competition the, particularly on the breakfast front. so it is a concern. but i think the company will talk about a number of initiatives it has. i think we will see potentially announcements such as extended hours. new breakfast products. >> what's your favorite name in this entire arena. >> right now i like starbucks. that's probably the most compelling. i like what they are doing in terms of diversifying not only from brand and geographic perspective but also the movement they are doing into the package coffee space and really becoming not only a retail player but retail wholesale hybrid. and its grocery store partners as well. it's a real interesting story. >> r.j., thank you. >> thank you. >> he knows a little. >> initially stock sold off. i will. go ahead. do you think that was a buying opportunity when the stock sold off, ronald? i don't think there was anything wrong. i was going to do it but they didn't trust me to be running it. they said three seconds. anyway, you try something. it doesn't work. you want to tell me about coke. >> yeah. >> here's the thing with coke. i would like to assume the best in muktar and the board and the managers there. i don't think their whole intention is to swim money and line pockets at the expense of performance. >> this is a much bigger share than they have asked. i think this is for four years. >> you're talking hundreds of employees? >> thousands. >> he says this plan has the potential to dilute shareholders 14.4%, transfer of $28 billion worth of equity to 6,400 people. >> i don't know what that means, ferrer. >> is it 60%? >> i think they have come the last maybe four or five -- >> they don't need -- >> they could take longer to use that. >> is it based on performance, hitting certain metrics? >> much larger grant. >> wouldn't the appreciation in the stock allow for them. >> he thinks the company buried it in the proxy. this is not in line with past equity plans. it has been less than 1% a year. >> okay. my question was, the offset, if they need appreciation in coke cadillac stock, revenue, comps, whatever it is they used to measure the performance, if hitting that more than offsets what they are -- >> it's $28 billion, though. >> i don't know whether that's a big number. >> i think the legitimate question is coach hasn't been a terrific stock. >> right. >> and maybe you said this but we haven't spoken about it. he may just feel this is too low a price to give this much equity. >> he says he thinks he is a fantastic manager. he has said that. >> seems an easy target to inflate. >> i will do more research on it. >> we told but a couple of deals in big phrma. california may be in trouble if el nino returns, which some are expecting. expecting. at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. if you don't like the weather phenomenon, just wait a membership. it will change. the price of copper, that's a pretty good tease there. jane wells is preparing to dust off her up principle la and explain. >> yes. >> you tell me. explain the copper part. i don't get that. >> joe, torrential rains in south america could flood these mines. copper may not be as much of a deal as nickel. copper is expected to be in excess this year. so we'll have to the see. but here in california, i'm going to first talk about ag a little bit. they are saying 94%, 94% of the state's $45 billion ag economy is either in severe, extreme or exceptional drought. now, if with he do get an el nino later this year, perhaps starting in the late summer, it will be the first time in five years. the historic dry spell could be eradicated in one season. it could. it has happened before. >> some of the historically strong el ninos, 29-93, 97-98, the hallmark were flooding rains and heavy mountain snowfall across much of california. >> yeah. we also got a lot of flooding and mudslides. the current chance are between 50% and 6%. if it happens, it generally usually means colder, rainier weather in the u.s. drought in australia and asia. if that happens, it could significantly affect coco and coffee. where wheat is lacking say in india, you could see dire poverty situations. it usually creates good weather for corn and soy beans in the u.s. that could mean lower feed prices, which means lower meat prices. other conditions could raise soybean prices. >> you get situations, for instance, where fish swimming patterns change as a result of this. there is less fish meal to feed them so soybean is used to elevate that complex. >> the circle of everything. it also will impact metals. nickel in particular may be one to watch as supplies are already expected to be low. he tracks 13 commodities from cocoa to zinc. that strategy pays off and 71% of the time is right. we don't know if el nine know is going to happen yet. if it does, there is one other positive. see less of this video. there could be fewer hurricanes in north america. guys, back to you. >> el nino. it gets confusing. i took latin instead of spanish. >> el nino is the boy. >> el nino is the little boy. it's spanish. it means wet. la nina is the little sister and means dry. >> that's too complicated, el and la. >> sometimes it's el problema. you have an el with an a. >> the spanish i speak. here's something. let me see if you know this. bienvenidos. i said welcome, parking lot. >> tango buen dia. >> thanks, jane. >> adios. >> thank you. >> when we come back, live from the floor of the new york stock exchange. mcdonald's, comcast, the big drug maker deals and much more after the break. after the break. tomorrow on "squawk box", the ceo of dow come talks earnings. plus, the state of the consumer and quarterly profits from proctor & gamble cfo. right here on "squawk box". profit from it. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence. and experience... has built this. the 2014 glk. the engineering, and the experience, of mercedes-benz. see your authorized dealer for exceptional offers through mercedes-benz financial services. 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[ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. down to the new york stock exchange jim cramer joins us now. everybody likes to talk about netflix, one of the stocks people made so much money on. people on it that could earn, 10, $20 at some point in the future. is it cheap, expensive in do you have it in your charitable trust? >> i don't. the main thing about netflix they seem to like it as much international as domestic except netflix can make more money. a great line in the conference call where he said the total adjustable market worldwide is people who like good programming and obviously that's billions of people. this was a very, very good quarter and there's still a lot of firms that are saying under perform, they have to raise their price targets. a big short position. still have to wonder why didn't apple buy them? why didn't a google buy them? this was a remarkable quarter and they did a terrific job. >> we're doing it right now, talking about coke, i don't know enough details. i like -- when you're talking about 6800 employees or whatever and i'm trying to figure out how you compensate them in the most shareholder friendly way to try to spur performance and hit numbers and hit metrics. i don't know, if you do it with stock or stock options, is it a line the shareholders interest with the company? do you do it? is it tax advantage? what do you make of this, jim? >> you do red shirt stock units. those are tax advantaged. give them to your staff in you would like to. invest over a four-year period, makes a lot of sense. least tax impact. it's very easy to do. i'm surprised people don't do it. >> is coke trying to rape its shareholders here? it's a $28 billion number do you think? >> no. muhtar kent is a good exec and coke is in a tough business. it's not like carbonated soda is doing well. where they are doing well is emerging markets is the place to do it. the idea of attacking coca-cola, i know becky was speaking to warren buffet, is fat tu was. many companies underperforming where the business is quite good and you should go after them. there are sectors very strong and some companies are doing badly in the sector. when you look at coca-cola's performance and the sector you have to say you know what, they're performing as best they can given a fact they sell a product no longer in vogue in the united states. >> you're smart and you went to harvard, see i feel fat tu was after christmas, easter, i mean, i had ham, i had macaroni and cheese, beef -- >> i said i feel fat tu was. but that's a totally different use of -- >> who knows what that means. >> i didn't go to college to get stupid. >> no. >> to quote the godfather. >> yeah. >> charles sent me information too that's very interesting. he says, based on what you've seen, this is another echoing what jim was saying this time around it is not that far out of line with what they said in the past, the impact of the plan appears to be more or less with previous plans. based on the idea that they've set specific annual growth targets that are in line with companies long-term growth plans, the addition of operating income growth as a metric and some other things. anyway we'll talk about this a lot more. >> it's $90 million. your charitable trust has i think that much coke, doesn't it? >> it's not a lot of money. look, activists want to make a name for themselves, makes it easy if they get on cnbc they can raise money easily. >> i wouldn't put david winters in that camp though. >> i don't know what's his game but there are so many companies in the s&p 500 that you could go after. look i thought carl icahn was right to go after e-bae, there's a lot of value there. coca-cola it's not clear what they can do to do a better job. i think they're motivating their employees in a correct fashion and coca-cola is actually a -- they are a paragone of good american business. >> yeah. and winters said the same thing, he does appreciate the management and thinks they're good management. i wouldn't put winters in the same camp with other activists which seem to be a long-term holder. they're yelling at me. >> go after the bad guys. >> you say this, we'll hear more in a few minutes from jim, "squawk on the street" will join you then. we have more from charles cantor. . treat you. care for you. today, you can come to cleveland clinic for anything, everything or just to get that "thing" checked out. big, small, and yes, the best heart care in the nation. it's here everyday, for everyone. that's the power the power, that's the power of today. cleveland clinic. call today, for an appointment today. for $175 dollars a month? 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[ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ welcome back, everybody. charles cantor is our guest host this morning and charles, we've been going back and forth about the coca-cola situation. this comes to a head tomorrow with their annual shareholders' meeting. what do you think? you've gotten stuff on both sides of it. hard to come up with an answer? >> i will side with coke management. i think both an incredible company over decades and ultimately for the stock it will be how they handle today's competitive landscape and if they execute well there and innovate around the core products we won't be worried about their shareholder incentive plans. i really like the fact that they are not issuing options that reprise them everywhere year. that aligns them with us shareholders that stock option plans don't do. i vote with coke here given what i know and if they execute well in the market and manage the competitive landscape the market will be fine. >> we need to economic growth will do a lot for income inquality and i wish we had a full employment and everybody who wanted to work would get a job. so many things i want to do to help this problem not good for anyone but in this politically charged environment right now with income inequality, it's easy for this guy winters to pick a number like $28 billion and say that coke's management -- this is another fat cat corporation lining the pockets of senior management doing to make money for himself. >> for shareholders, for shareholders. >> it's an easy target. you see politicians do these wedge issues all the time to try to win elections and, you know, they make it simplistic. people are paid too much. in france, that resulted in executives making a maximum of a million dollars a year. people look the other way when sandra bullock makes $70 million and a lefty picture makes $180 million, yet a ceo that has hundreds of -- >> south paw. >> what did i say? >> lefty. >> yeah, south paw. >> you have "occupy wall street" and there are countries where you will hear people say, why does anyone need more than $70,000 a year? that's not the way that we built the united states here. you get rewarded for effort and working hard and if you don't work hard and put up the effort you're not supposed to be here. >> i would say this, coke wouldn't come to these decisions lightly. i think on balance they heard the shareholder voice, the performance measures in the system, and hopefully they continue to grow for the neck decade. >> go become one of the 6800. >> join us tomorrow. right now it's time for "squawk on the street." the street." ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david is at the active passive investor summit in new york city and what a morning for it with the flurry of deals we've seen in the past 24 hours. more from david in a minute. futures are flat. the s&p going for its first six-day win streak since september. lot of earnings including mcdonald's, harley, utx and more. ten-year crept up to 2.72 and europe getting back to work today with gains around 1%. road map
melissa: your fault, washington, 70% of americans say the leaders are hurting the nation. you know, 77% of americans saw their taxes go up this month as well, even as calls grow louder for more tax hikes. lori: live tv on your smart phone, and how they plan to be number one. liz claman live in the consumer electronics show in las vegas with the ceo of dish, joe clayton. busy hour. let's get where the markets hour on the floor of the new york stock exchange with nicole watching narcotics as we kick off -- watching the narcotics as we kick off earning season. >> the dough -- dow is to the downside, down 85 points now. boeing down 3%, caterpillar, verizon weighing on the dow jones industrials. awaiting on alcoa to be the first to report the earning season, and, affect, so many names we are watching closely, however, right now, we are certainly right near the lows of the day, and the nasdaq down after a percent like the s&p 500. i want to take a look at the retailer, sears, in particular, which we tack about the sales over the season. holiday season, which was not as bad as some of the analysts expected, and now there's a change at top, the ceo stepping down because the family medical issues, and now the chairman's going to be stepping into that ceo role. analysts, of course, follow the company closely with the stock down 5% right now. back to you. melissa: any cole, thank you. eia cutting oil demand growth forecast today raising the u.s. crude price estimates about a dollar a barrel for this year for the impact on the price of crude today, going to the pits of the cme, phil flynn, there in the pits, what do you think of the estimates? >> you know, i think it's great news. you know, not only is the iea saying that we're going to be producing more oil, overall, despite the u.s. prices higher, overall, our gasoline prices are going to be lower. consider this. the price of crude, over a hundred dollars for what seems like an eternity falls next year to $105 a barrel. in 2014, maybe below a hundred dollars a barrel to 99 a barrel. what that means is that we're going to see prices that average 3 # 63 this year fall to 344 this year and maybe 334 next year and could see gasoline prices in many parts of the country below $# a gallon. -- below $3 a gallon. that shows the production in the u.s.. we are going to producing oil on, you know, on pace to do the highest since the 1980s. that is pretty incredible, and it's changing the global energy stage as we stand here now. >> great news definitely. natural gas having swings today. talk about that. >> i don't know what's swinging more, the natural gas or weather reports. we are going back and forth. what's interesting in this report, natural gas prices, the spot prices, they fell a whopping 31%. that is incredible. the lowest prices for natural gas since 1999. you want an advertisement for shell gas production, that is it, and not only that, that shell gas production is cleaning the environment because we use more natural gas, using less coal, that means less greenhouse e mageses, and they are musing less emissions than they have in many years. great news today. >> wow, thank you so much. great report. >> thank you. >> okay, switching gears here to talk about the housing market. six years after the bubble burst, the consumer protection bureau set to outline a new set of home loan rules, but will the guidelines make the mortgage process transparent or add to confusion? asking someone who has a wealth of experience in the mortgage industry, bill emerson. great to have you with us. >> great to be here, lori. lori: what a year quicken had. $70 billion in loans closed versus the prior here and record of $30 billion. that is tremendous growth. why were conditions and even confidence among home buyers so improved in that time? >> well, i think there's a variety of reasons for that. number one, rates were low. that's helpful. number two, market participants shifted focus on what they wanted to do for mortgage, and then number three, with our platform, centralized nature of the platform with technology and process, award winning client service, folks needed a place to go so they were calling us and trying to find a way for them to help themselves. lori: $70 billion against $30 billion in loans closed the prior year. is it growing faster than the housing market's recovering? >> yes, no two ways about that. it's stabilized. home prices bottomed out. there's a little bit of an increase. some regional players you are seeing multiple offers, but it's not -- there's not a great recovery yet. it's good to see where it's balanced out at, but there's long way to go. lori: quicken loans, the fourth largest va loan provider. you say the refinance program or harp is critical in the mortgage landscape. character how the low equity borrowers are fairing. >> they are still primarily focused on an hfa or va mortgage, and the lending criteria there is tight. it's difficult to qualify for a mortgage today if you're a low equity borrower than in the past. as you indicated, they have the qualified mortgage rule here, hopefully tomorrow, and that's probably going to define the lending landscape here the next few years. >> will it loosen credit or tighten further? that's the question. >> tas the question. lori: what do you think? you're the insider. >> i think it's going to be roughly the same, probably narrow credit a little bit, but roughly the same for what we deal with today, and that's -- given where it was to where it is, it's better news than what we thought. >> what's it mean carding to the cfpb, look to standardize home loans, present exotic loans, the all pay loans, ect., and aim to prevent another subprime crisis. what does that mean? just check the box on the loan you want? >> no. what it means is dodd-frank outlawed the underwriting guidelines that existed that caused problems we had. the rules written now is the ability to pay, and it's going to be -- it's not a check balance. it's what -- there's lending cry criteria that exists based off the new rule, and if we lend within the criteria, it's a qualified mortgage, and you'll be good to go from an ability to repay. if you lend outside of that, you're going to have an increased litigation risk as a lender so folks are going to stay inside the four corners of that new box. lori: what's that mean for you? considering the fact you have the robo signing settlement letting banks move forward. are you looking at a competitive environment in the new year? >> we'll see. i don't know if it's more competitive. the settlement that took place really has more to do with servicing. i think that, you know, we've seen consolidation, and usually competition comes from having more players in the marketplace. i don't know that it's more competitive and help the consumer from that perspective, as we see, but a lot of this depends. there's the americay landscape that gets clearer here in the next few months. lori: don't have time, but interest rates, near the lows? >> great question. i think so, but pick up a little bit. lori: all right, we'll take it. thank you, appreciate you coming in today. >> my pleasure, thanks. melissa: they are called dark pools, institutions that trade large bonds outside public exchanges, and now regulator want to shine a brighter light on them. adam is breaking the story. what do you have now? >> that's right. this is out of the "wall street journal" report in which richard, the chief executive at fenra said in 2013 that they are intending to increase its oversight of dark pools. one of the issues and one of the legitimate uses of the dark pool is you can trade huge volumes of stock and avoid price manipulation, but to the downside, those who operate the dark pools have privileged information, and the question is do they protect the information or use it, one, to their own advantage, could front run, could sell information, that would be another form of front running if they used that to their advantage, and, in fact, a firm in boston was cited by the fcc for operating a dark pool and selling information or giving it to an affiliate athey were fined $800,000. since mob -- since anybody watches what happens in the dark pools, this situation can occur. it's a red flag for a lot of people, and now they are saying they will increase oversight, but no details how they will do that. back to you. melissa: adam, thank you so much. 77% of americans had taxes go up this month, and it could be just the beginning. new calls for higher taxes coming out of washington. lori: plus, fever, muscle aches, and chills just from hearing that; right? flu sufferers can new track down the culprit who got them sick thanks to a new facebook app. melissa: unbelievable. lori: tell you about that one just ahead. ♪ >> announcer: you never know when, but thieves can steal your identity and turn your life upside down. >> hi. >> hi. you know, i can save you 15% today if you open up a charge card account with us. >> you just read my mind. >> announcer: just one little piece of information and they can open bogus accounts, stealing your credit, your money and ruining your reputation. that's why you need lifelock to relentlessly protect what matters most... 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retailers as of late? >> post christmas, and some hit good. one of the things about everyone down in retail is it makes expectations low, and this one particular stock, expectations are very, very low. coach. do you still go to coach at all? melissa: no. lori: you did a segment on coach a year ago, and you said the guy stuff is great. melissa: great point. you're right, yoir right. lori: buy your husband something from coach, and i did, and he liked it. melissa: true in our house. >> funny that men store factories working out well for them. they are branching out to the single stores and opening up all over the place, but this is a stock hit. look at the chart. it's hit, $20 from the 52-week high. risk reward is not bad. i'm in the sure why it's taking off today. some say it's rallying in sympathy with the jew jewelers -- with the jewelers, but i think people are watching for a chance to get in. same sales up 5.5%, and china, up double digits, opened eight stores in china, seven in tiian, 48 in korea, and i like that area of the world: margins steady. from evaluation, it looks good. compare that to cores, peg ratio 105-114. price to sell, three time sales where course trades as six times, trading at -- >> oversold? >> i think it is over sold, worth looking at here for people interested in it, and it breaks out through 60 be a good shot at 65. >> really? >> yeah, could be a good play for a lot of people down here. just be patient. it's not, you know, i still think michael kors took the lead, but they are coming on good. take a look. if you walk by the mall at the madison pen -- pen inn n -- pennacle. it's a purse there. my wife does not -- she does not go in kors anymore. >> she's a louie gal. >> i feel bad for myself. >> no way charles is retiring any time soon. melissa: let's check the markets, nicole's is on the floor of the new york stock exchange. what are you watching? >> improvedded ten points since we last talk on the dow jones industrials. retailers, target, in plaf, because target is a name that did a lot of price matching, introduced price matching back in 2009. they continued to do so. they did so throughout the holiday season, but now here's the news. the news is they continue to do so throughout this entire year. matching the price to some of their key competitors including amazon, walmart, toys "r" us, and even themselves so if there is some sale or a better price of something that you bought at target within seven days, bring your receipt in for the price adjustment. it's aggressive, animal -- analysts say, but if you're a consumer, you say, i'm at target, and i know they are right on with the best prices. back to you. lori: nicole, thank you so much. geithner out, and lew? we have been told for weeks now he may be next in line it take over as treasury secretary, but what's the future have in store for tim geithner? details ahead. melissa: mcdonalds 2*esing chicken wings in the fast food restaurant. stocks down 73 points issue and the dollar is stronger there versus the euro and the pound. we'll be right back. ♪ ♪ melissa: 21 minutes past the hour. the fox news minute, border tensions rising after pakistani soldiers killed to indian soldiers in the disputed kashmir region. they are accused of disresulting a cease fire held for over a dead. both countries claim the area, but the area is divided between them. former representative giffords, and her husband launching gun control initiatives seeking to reduce gun violence and prevent mass shootings. today the the go year anniversary after a gunman killed six and critically injured give fards. opening an investigation into the death of a lottery winner last summer. after new tests determine he died of cyanide poisenning and not natural causes. the family urged medical examiners to re-examine the case. those are the headlines, back now to melissa and lori. melissa: thank you so much. jack lew will likely take over tim geithner as treasury secretary, but what will geithner do as a private cents and what will others in obama's economic circles do in the months ahead? you called the jack thing a long time ago. >> yeah, we were the first to report he was on the short list, at the top with larry fink and i think larry would be a better treasury secretary, and then, i think bloomberg reported another name, that was not in my mind. jack lew, a guy that does a lot of legislative stuff, budget director, he's in there. he's gone. what will geithner do? he's taking geithner's place. this is what geithner is telling friends. he wants a detox. he may take the year off, and his plans, according to friends who geithner spoke with directly, his plans are to write a book. he wants to write a book about the service in government. remember, he was the fed chairman, new york fed president, important job in the financial crisis, went from the fire to the -- frying pan to the fire as treasury secretary in president obama's first year, and he plans to pin this, who is the publisher? i don't know he will not have a problem getting a publisher. if it's written well and goes after people, he's the type of guy that will, and i will buy this book. what are others doing? bill daly, former chief of staff, jack lew took his place, and bill told people on wall street he wants to run for governor, seriously considering it. why is it important to say it to wall street executives? raising money from them, senior people on wall street, talking about that. interesting story. we'll see if he does it. here's the real interesting thing. ben bernanke likely to step down; right? he wanted one more year, finish the term, who is going to replace him? well, there's two names. at least the white house leaked two names at the top of the list, the short list. one is a guy named ferguson, roger ferguson, tia, you know, a former fed governor, and corporate america for a long time, a ceo, and the other guy is the guy you always hear, but i think it's serious this time, larry summers. lori: really? >> how is it leaked out? i want to give people context of the sources. wall street firms have all lobbyists that deal directly with the white house; right? that's now i knew about jack lew at the top of the list. same with these guys. they are lobbyists, talking directly to the white house. this is the short list that's being, you know, compiled right nor, and it looks like it's summers for the fed chairman or this guy, ferguson, and, by the way, it's early. names could change. this is what i have now, but my name list, my lists have been good. melissa: excellent. what else is excellent is the news on her ball life. >> there's a meeting, and herbal life, and calls is a pyramid scheme saying it's a company that should go to zero. upon city, whatever it is, it's bad. thinks it should be zero. the company is fighting back. they hired david boyce, a high profile attorney. they will have a meeting, and where's the investment? they are keeping it secret because of the press. the meetings' at the four seasons hotel at 50 and 57, i drink there regularly. this will be in the morning. by the way, great bar. melissa: that's the place to see to be seen. >> i thought you said cnbc. >> no, see and be seen, the place to go. >> no, that's not a place to go. larry summers didn't like being one the economic advisers so why go to the fed? >> all the power in the world, are you kidding me? what an ego trip. >> you don't really -- the president's right hand man is a woman, vaerie, by the way,. >> fair point. >> if you're an economist, other than treasury secretary, which he was already, that's the ultimate. here's the other thing people forget, a side story. people forget how much prominence he has in economic circles, particularly when there's democrats on board. if ewe look at jack lew, tim geithner, larry summers, and i mean, this is pretty amazing stuff that bob reuben, former treasury secretary for president clinton, not a good board member of citi group, but no name, worked at citi group, ceo, chairman of goldman sachs, has this much stroke in economic circles. interesting how tim geithner in the book describes bob reuben. that will be a big wet kiss. >> good stuff, charlie. thank you so much. >> satellite operator dish launching a new dvr allowing subscribers to watch live tv from wherever their mobile device has connection. >> so happy about this one. we are live at the consumer electronics show with dish ceo joe clayton. ♪ [ woman ] if you have the audacity to believe your financial advisor should focus on your long-term goals, not their short-term agenda. 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[ male announcer ] at edward jones, it's how we make sense of investing. at legalzoom, we've created a better place to handle your legal needs. maybe you have questions about incorporang a business you'd like to start. or questions about protecting your family with a will or living trust. and you'd like to find the right attorney to help guide you along, answer any questions and offer advice. with an "a" rating from the better business bureau legalzoom helps you get personalized and affordable legal protection. in most states, a legal plan attorney is available with every personalized document to answer any questions. get started at legalzoom.com today. and now you're protected. melissa: time for stocks as we do every 15 minutes. let's head to the floor of the new york stock exchange. our own nicole petallides standing by. nicole, the dow down 71. >> we're pulling back across the board, melissa and lori. the dow jones industrials is down half a percent much like the s&p 500. tech-heavy nasdaq is the best of the three, down one-third of 1%. selling is across the board even the russell 2000, some of the small caps, they are lower. i want to look at some airline stocks in particular. there is analyst calls. there is news, the transportation index is lower. however you're seeing names like us airways and southwest airways hitting 52-week highs. southwest airlines deutsche bank raised them to a buy. jetblue, that was cut from a buy. we'll keep up with what happens with american airlines. will they merge? will they stay independent. back to you. melissa: nicole, thanks so much. lori: a year ago satellite tv company dish shook up the consumer electronics show by rolling out the hopper, that automatically skips commericals. users loved the idea. networks understandably hated it. they filed lawsuits to protect revenue. did dish back down? hardly. liz claman with the ceo of dish. >> i have to tell you, remember last year i told you we opened the hopper. dish network they say you can have your tv anywhere. you look on the back, it said dish hopper. basically what it allowed you to do is move your dvr, what whatever you dvr to any tv now they added a word, dish hopper with sling. we're joined first on fox business, joe clayton, ceo of dish. thank you so much. >> always a pleasure to see you. >> there it is, the hopper which we talked about last year. you guys areries are uptores to the nth degree, aren't you? >> yes we are. hopper good in the home with things like prime time anytime. now, with hopper with sling you can take dish anywhere, on the go, in an airplane, in a car. over to your ipads, your tablet, or your pc. so wherever your at you got your content with you. >> joe, the hopper became available, you unveiled it on fox business at cvs but became available in march. what is the adoption rate of customers which you have about 14 million subs? >> we have over 2 million hoppers in the marketplace and growing like a weed. >> okay. let's show the hopper with the sling. as we walk over there the important thing to point out the networks absolutely hated this. lawsuits, including from our company fox but cbs as well. les moonves of cbs famously say how does your chairman expect me to produce csi without commercials? the ad revenue creates quality programing. what is your response to that. >> maybe we ought to listen to what the consume wants when i say. when the economy changes, technology changes, your competition changes, and consumers taste change better change. so, we believe that we are following what the consumer wants, like mobile entertainment. the consumer is not making gradual move to mobile. it is full-blown splint. i learned a lot loaning time ago it is pretty good formula for success. >> is there a chance that you and broadcasters will settle. >> broadcasters are our partners. we want a good relationship. at the same time we want what are best for consumers. i think we'll have meeting of the minds at the appropriate time. >> we'll see about that. let's look at the sling. we have a demo. >> i have my able assistant laura here. >> hi. >> she will show us a little bit dish anywhere works with an ipad. then she is going to show you a little bit about how fast and, user friendly our new program interface is. >> okay. >> is that okay? >> go ahead. >> let's see it. >> show us what we have to do here first. >> explain what she is doing. >> now she is scrolling it, making it easier to find their content. there are over 15,000 different content keepabilities. >> sure. >> we're trying to make it easier and simpler to use. okay. now, here's a whole list of stuff. >> i want to jump back it my ipad or television set on the wall here behind her? >> exactly. basically we download that. from the tv in the home, onto the ipad. and then you could take the content with you. if you're flying from the west coast back to the east coast for some meetings you could have your fox favorite show. "bones" is my favorite. take it with you. >> joe, my question to you is, you know, a guy like les moonves or the fox lawyers do have a point. if you want quality programing so that you get more subscribers. so you don't want to kill that goose that lays the golden egg. >> no, that is absolutely correct, liz. what i think we need to do is use the technology to make the commercials more addressable to a specific segment of the community. a family of four with two young kids will probably want a pampers comercial but not a viagra comercial for example. we believe we can use technology to better segment the market and make it more efficient and economical for the advertisers. >> you have a lot of bandwidth. >> there is hopper. he is everywhere. >> hey, hopper. you have this bandwidth you guys bought, the wireless spectrum. it is worth 12 billion. bought it for 3 billion. why not sell it to verizon or sprint or something? will you do a wireless network. >> once again you follow what the consumer is doing and they're moving to wireless. we want to offer wirelesses voice, video. >> not going to sell it? >> that is not our plan. >> how about a directv merger, will that happen this year? >> there is lot of speculation. you will have to ask the pundits. >> can try. joe clayton, first on fox business. ceo of dish. once again they are continuing to disrupt technology as they do. i'm going to send it back to you guys in the studio in new york. melissa: liz, i want that little hopper right there the little small one next to you. i have to have that guy. >> bring it home for you. melissa: great interview. first on fox. thanks for the interview on verizon last hour as well. thanks. lori: keep it right here. fox business, shibani joshi talks to patrick lo, netgear chairman and ceo. next hour at 2:00 p.m. eastern. liz is back with first on fox business interview, curtis jackson known as --. melissa: 50. lori: 50 cent. melissa: 50 cent, nice. love it. she is killing it out there. aig happy to take the government bailout the company need ad few years ago but now the board may return the favor by suing the government although, you know, this is all fueled by hank greenberg. so it is a very complicated story. lori: remember that whole won't happen until the end of february or march to figure out the debt ceiling problem? well, perhaps. not so much actually. the new warning and the risks of a u.s. default. ♪ . >> good afternoon, i'm sandra smith with your fox business brief. richard chech ham is trying to shine a light on dark pool trading. they are expected to set up dark pool enforcement this year. they are private trading venues that allow buyers and sellers to post orders hidden from the rest of the market. boeing shares are down after another one of its 787 dreamliner planes operated by japan airlines gets grounded before takeoff. the plane returned to the gate at the boston logan airport due to fuel leak. yesterday a different 787 experienced a fire at the same airport. gamestop shares are tumbling after forecasting a bigger drop in same-store sales from 2012. sales were down 4.6% from a year earlier. that's the latest from the fox business, giving you the power to prosper. lori: never know looking at interest rates but there is new urgency on the debt ceiling debate after a just released report warning the u.s. government may default on its debt two weeks earlier than initially expected. the bipartisan policy center think tank is warning that the federal government may default on its debt as early as valentine's day. that is no love letter, february 14th. the government hit the $16.4 trillion debt limit on december 31st. the treasury department is taking extraordinary measures to stave off default. you can bet we're all over this one. melissa: i know. stay tuned. sounds like the ultimate case of ingratitude. aig's board is meeting to consider joining a big lawsuit against the u.s. government which says aig's controversial $182 billion bailout cheated aig investors. of course there is a lot more to this story. here's liz macdonald with emac's bottom line. >> there is news on this right now at this very hour. reuters is reporting that now the white house is out defending the bailout of aig. what is happening aig is confirming to fox business the board will meet tomorrow to decide whether or not to join hank greenberg. he is former chief of aig, whether whether to join hank greenberg's $25 billion lawsuit against the new york federal reserve which basically says that aig is a victim of the government bailout. the lawsuit is contending that in the process aig sold off $66 billion in assets. that basically aig was ruined and destroyed by government oversears run amok. that aig was overcharged punitive interest rates on $85 billion line of credit. we have representative elijah cummings, more breaking news, democrat, ranking member. house government oversight and reform committee. for aig to be considering this and hank greenberg to be doing is like suing the paramedic for giving you cpr because he did not give you a pill loy. hank greenberg says, wait a second, there is more to this story. telling our very own neil cavuto this turned into a back door bailout for wall street. take a listen to what hank greenberg told neil cavuto. >> as far as i'm concerned that bailout should have never taken place. >> really. >> the way it did take place was wrong. aig was used as a bailout, as a back door bailout for many others. >> what he is referring to there is goldman sachs, deutsche bank and societe generale. aig's board, telling fox business it is the board's fiduciary duty to consider hank greenbergs lawsuit. melissa: they have to consider it. doesn't mean think will join in. this is hank greenberg who has been disgruntled for a long time. it is important to separate this out. >> they have to hear him out because it could expose the board to more shareholder lawsuits. there are no merit to the allegations that aig had alternative bankruptcy. melissa: emac, thanks so much for that report. it is quarter to. as we do every 15 minutes let's check the markets. nicole petallides is on the floor of the new york stock exchange checking out yum! brands. >> the parent of kfc and taco bell you see it under some pressure. this is because they're noting sales in china will be less than what we expected. don't forget over in china they had to conduct reviews of powell try and such which were not favorable. of course yum! brands sticks to the fact that their food is safe -- powell tri. their comps and sales numbers would be lower than what analysts were expecting. the stock is lower today $2.88 at 65.01. back to you. melissa: nicole, thanks so much. lori: so using its mighty wings to land in chicago this week. fast-food giant using bone-in chicken wings in the windy city after successful trial run in atlanta. they will have three serving sizes to pick from. three, five or 10 piece. sounds like mcnuggets, right? options start at three bucks and come with a creamy ranch dipping sauce. this new menu item may prove to be expensive venture for mickey d's. prices of chicken wings are rising steadily over the last year. many expect prices to continue rise with demand. any reaction to mcdonald's shares? no one can say for sure. down 60 cents. melissa: shaking your head. those little bones are the worst. so who is in the minority? senate minority leader mitch mcconnell and house minority leader nancy pelosi digging in over another round of tax hikes. the fierce partisan divide impact on your paycheck. that's coming up next. lori: also the flu making its way through schools and offices around the country but who is to blame? we'll tell you that. look at winners and losers from today's trading session. the dow is down 72 points. there are outperformers. celgene, check point, nuance communications among the gainers lori: at one point washington's bickering, that never happens, okay, it does sometimes, causing harm to the american people. now according to the latest "gallup poll" 77% of those surveyed says the way politics work in washington is causing serious harm. 19% said the effects are not serious. although we should note the polling was done in mid-december before a deal was reached to avoid the fiscal cliff. melissa: speaking of washington, the middle class was not supposed to get taxed at all by the fiscal cliff deal, you remember that but the payroll tax kicked in. more taxes may be coming. curtis dubai, heritage foundation. on who may be footing the bill. have higher taxes get that out of the way and sit down to talk about spending cuts. instead it involved into this was only the beginning of tax upgrade, interviewedding vat tax, value-added tax. is that a good idea? >> no, it's a terrible idea. let's not lose focus what is really going on here. president obama said during the campaign and as president, he said to reduce the deficit and debt problem we need to have a balanced approach which means some tax increases and spending cuts. the fiscal cliff deal had tax increases it allowed. there were no spending cuts. now he had the tax increases, congress needs to force him through with the spending cuts part of the balance approach. melissa: doesn't seem that will happen. seems idea of waiting on carbon tax or putting forward a value-added tax. something they do in europe. that would be a whole new revenue stream stream for the government in the u.s. they tax you every step along the way of production. what do you think that would mean for the economy. >> a much slower growing economy. it would greatly grow the size of government. the key to both, value-added tax and carbon tax, they tax the middle class. there is just not enough revenue at the top anymore for president obama to tax to pay for his big government seems. he needs a much broader tax base to get revenue to pay for the programs he wants to grow around expand. that is where the carbon tax and vat tax come in. they allow him to tax middle class without raising income taxes which a way for him to dodge his pledge he would never raise taxes on middle class. melissa: one of the things scary bit, it is a silent tax. at income tax at end of the year you see the final tax was. vat tax you pay it along the way and no place you see how much it is taking a bite out of your income. do you think all this has to do with paying down the debt and getting our problems under control, or, would we not really slow our spending in this really wouldn't help us with the deficit and the debt at the end of the day? >> right. that is, why the vat is the perfect tax for those who want to grow government. very hard for people to know how much they're paying it and raises tremendous amount of revenue. if we instituted the tax it would raise trillions of dollars a year. it is also misplaced right now. we shouldn't worry about a tax at this point. we should worry about getting spending under control. if we get spending under control now we won't have to worry about a vat in the future now is the time to get spending under control. with very three opportunities in the next couple months. debt limit debate, continuing resolution to fund the government for the remainder of this year and debate over the sequestration cuts that come, are coming very soon. we need to focus getting spending under control and those debates and we'll never have to worry about the massive tax increases that would greatly curtail opportunity. melissa: i'm afraid you're only one focused on getting spending under control, curtis. thanks for coming on the show. we appreciate your time. >> thank you. lori: so new facebook app is playing flu detective. the new app is called, help, i have the flu!. not be able to diagnose you but by gathering includes from your facebook friends it may narrow down who infected you. the app searches for key words your friends are using like, flu, sneezing, coughing. melissa: that is ridiculous. lori: and zeroes in on the culprit. also notes places they may have checked in. the flu app allows users to message people and question them and know they passed along their germs to other. >> so you can blame someone. lori: that is so necessarily. you don't feel badly enough when you are the typhoid mary, right. beforeeyou unfriendly any potential con -- contaminatetores but flu can be transmitted up to six feet away. melissa: unbelievable. the whole point, people that get sick, first thing they want to do is blame the person that gave it to them. ridiculous. coming up tonight on mony, star of "national geographic", wild python hunters. lori: love this guy. melissa: he joins me to discuss a python hunting contest in florida. it is drawing hundreds of participants. there is a cash prize. that is why it is on a show called mony. we're speaking to him. 5:00 p.m. eastern here on fox. lori: are you afraid of snakes? melissa: no, i'm thinking of getting in the contest to go down for python hunting. bring my kids. in the everglades. that is a big cash prize. i will ask him if that is a good idea. tune in. lori: 'nough said. regulations is one of the biggest concerns for small business americans. bill dunkelberg breaks it down next with trace and ash. don't miss it. you are a brave woman. melissa: you know. [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all onhinkorswim from td ameritrade. ♪ neural speeds increasing to 4g lte. brain upgrading to a quad-core processor. predictive intelligence with google now complete. introducing droid dna by htc. it's not an upgrade to your phone. it's an upgrade to yourself. tracy: good afternoon, i'm tracy byrnes. ashley: i'm ashley webster. america's job creators are not ready to hire. small business optimism inching higher last month but many say it is still too soon to add to the payrolls. nfib chief economist bill dunkelberg will talk about. tracy: the debt limit debate. will the government hit the $16.4 million mark weeks earlier than expected and will congress sign off on another increase? congressman paul brown and john jarmuth -- i can't remember muth face off. ashley: another dreamliner safety concern. this time a fuel leak, one day after a battery exploded and caught fire on another dreamliner s boeing's jump bow jet safe? certainly hurting the stock. tracy: so scary getting on a plane. ashley: it is a haunted plane. been a problem since inception. tracy: absolutely right about that. time for stocks as we do every 15 minutes. nicole petallides on the floor of the new york stock exchange. hey, nicole. >> tracy, we're selling off on wall street. we've had a down day the dow jones industrials are down 67 points. i have to tell you most of the traders i'm talking to obviously eagerly awaiting alcoa after the bell. the aluminum-maker, the first one to report earnings this earnings season as usual. but the trend most say still seems to feel it is to the upside until we get to the point of the end of the february until we hear more from the government and the debt ceiling. the dow is down half of 1%. s&p much of the same as tech-heavy nasdaq one third of 1%. look at dow losers. you mentioned boeing and the fire. boeing is under serious pressure. it has been the number one loser on the dow jones industrial average. now you have the analysts obviously now looking closely at boeing and downgrading it on the heels of the dreamliner fire over in boston. bb&t says it is too much to ignore. they cut boeing to a hold from a buy. caterpillar is on the move. caterpillar raised its price target to 98 bucks from 90. here are others. verizon under pressure. back to you. tracy: thank you, nicole. ash will be here with the numbers at 4:00. ashley: we'll be here with sandra smith. always first run of the season. alcoa, we'll see what they have to say. earning estimates have been cut from back in october like 9% growth. all the way down to 3%. the bar is so low. tracy: that's a good commodity story too. so it is good you have our girl sandra smith with you. ashley: she will be all over it. all right. american small business confidence, well it rose slightly in december but it is still at the second lowest level in nearly two years. this according to a new survey by the national federation of independent business. its chief economist bill dunkelberg joining us. bill, as always, thank you. so what is the biggest concern of small business owners right now? what does the survey show you as far as the biggest fear for business owners right now? >> well, kind of a triple header. obviously sales are not good. so we have 19% saying that is their top problem. that is down a couple percentage points. 23% said taxes. so there you go. that is the big issue for december right? talking about what tax rates are actually going to be. now we know. doesn't mean we're happy about them. but we know what they are and that's helpful. the other one is the perennial cost of useless regulations and red tape. that drives them nuts. that is 20 you 1:00%. that is the -- 21%. that is the trifecta so to speak. tracy: we're up a little bit from last time we talked. the survey got killed because of the election. everyone was worried. now we're in this election, do you get any sense they will start to maybe, i don't know, see some sort of light at the end of the tunnel or will it just be doom and gloom the next four years? >> it could be that long. let's hope it isn't. i certainly think it is doom and gloom for the next six months. we really went over the cliff. we couldn't really avoid going over the so-called fiscal cliff. it was just a question of how we did it. what taxes, how much spending cuts and of course we did the worst. we kicked all the spending cuts down the road and another can-kicker there. so we don't know what that is going to be. we have health care coming on. we have the debate over the debt ceiling and what that is going to do. there is still a whole lot of trash out there to clean up before we have a clear view of the future. we can decide whether we like it or not. right now we don't like it. 45% of the owners said next, in six months the economy will be worse than it is today. ashley: so with that in mind, bill, i'm assuming small business so critical to employment in this country, they will not be hiring in the short term at least? >> right. they don't expect their sales to grow. so therefore they don't have a good reason to hire employees to take care of customers that they don't have. that is the real issue. they need to see the economy being better. they need to have a sense that we're on the right path. so they can invest money knowing they will get a payoff in the future. of course we already know that payoff will be taxed more highly. that is not real helpful. if you have profits growing, you don't mind paying taxes on them. tracy: one of the things i thought interesting was the quality of labor is a concern to a lot of the respondents. does that mean we don't have enough people trained to do the jobs we need filled? >> we certainly have mismatches and that tends to be a perennial problem for these people. they tell us most of the job openings they have don't have qualified applicants for them. now we did a special study of that. interestingly a big chunk of that has to do with not with bad schooling or, lack of math skills, which are cureable things but are more important things like bad attitude. don't know how to dress. don't have good work skills. don't have good ethic, those kind of things also get you turned down. more and more kids are turning up with drug problems and bad attitudes. so young people could fix those things real easily if they really wanted to get these jobs. ashley: that is really shocking actually. really is. tracy: almost embarrassing. ashley: it is embarrassing. >> but it is true unfortunately. ashley: bill dunkelberg, nfib we're already out of time but thanks so much. brings up a real interesting point. one i hadn't heard that much, lack of a qualified labor force. tracy: high and lazy. not so good. ashley: no. tracy: all right. how are concerns about the future impacting day-to-day operations at america's small businesses? especially after what we just heard from bill dunkelberg? fox business's jeff flock live at one of them right now. a packaging supplier in oak lawn, illinois. hey, jeff. >> i know about, tracy about 500 or so employers, -- employees. small business, we just heard bill confidence, is your ticking up half a percent or what is it, bill? >> our business we've been growing 15% year-over-year coming out of the recession of '08. >> just so we know, you build stuff that conveys product around for various companies, correct? >> exactly. this happens to be a package conveyor line that goes into most distribution and fulfillment centers. >> for big companies like nike, skechers and staples? >> yeah. >> how has their confidence affected your business? >> well you know it is interesting in terms of our growth, historically, that would have been driven by these companies expanding their distribution networks. >> that isn't the case this time. >> exactly. this time around what is going on they have to deal with a new challenge which is, servicing multiple sales channels. and so, you know, from that standpoint what they have got to do is retool or reoutfit the facilities that they have. >> so that has grown your business as opposed to actual growth which would have been an expansion of numbers of locations and that sort of thing. >> exactly. it is dealing with this e-commerce, direct to consumer explosion and retooling these facilities to do more within the network they have. >> real quick before we get away your sense of year going forward? your sense is stuff people built a year ago. >> the lead time is not measured in days and weeks. it is measured in mum pell months. the work we're doing now is intended for end of 2013 and beginning of 2014. the amount of work we're doing would indicate companies are pretty confident about their prospects end of this year heading into next year. >> end of this year going forward. that is informative. kevin ambrose, good boston boy. we appreciate you being here in chicago. they can them out, wynwright. ashley: the irs in the u.s. plans to accept defend 12 tax returns on january the 30th. that is eight days later than first planned because the irs says due to delay of all those last minute tax law changes made in the fiscal cliff bill. normally could get them in by january the 22nd. now an 8-day delay. january 30th. as you were pointing out most people don't get their forms until january 30th. tracy: mostly talking about social security recipients. thankfully only a week. could have been a heck of a lot worse. ashley: price matching, holiday season experiment becoming permanent at one retailer. the question is, will everyone else join in. tracy: plus, first on fox business, netgear ceo, patrick lo talks with our very own shibani joshi at the consumer electronics show in las vegas. earlier she said she has the best job in the world. she really does today. before we head out to break let's look how oil is moving. it is not. $93.18 a barrel. we'll be right back. have given way to sleeping. tossing and turning where sleepless nights yield to restful sleep. and lunesta®(eszopiclone) can help you get there. like it has for so many people before. when taking lunesta, don't drive or operate machinery until you feel fully awake. walking, eating, driving, or engaging in other activities while asleep, without remembering it the next day, have been reported. lunesta should not be taken together with alcohol. abnormal behaviors may include aggressiveness, agitation, hallucinations, or confusion. in depressed patients, worsening of depression, including risk of suicide, may occur. alcohol may increase these risks. allergic reactions such as tongue or throat swelling occur rarely and may be fatal. side effects may include unpleasant taste, headache, dizziness, and morning drowsiness. ask your doctor if lunesta is right for you. then find out how to get lunesta for as low as fifteen dollars at lunesta.com. there's a land of restful sleep. we can help you go there on the wings of lunesta. your financial advisor should focus on your long-term goals, not their short-term agenda. [ male announcer ] join the nearly 7 million investors who think like you do. face time and think time make a difference. at edward jones, it's how we make sense of investing. face time and think time make a difference. music is a universal language. but when i was in an accident... i was worried the health care system spoke a language all its own withnitedhealthcare, i got help that fit my life. information on my phone. connection to doctors who get where i'm from. and tools to estimate what my care may cost. so i never missed a beat. we're more than 78,000 people looking out for more than 70 million americans. that's health in numbers. unitedhealthcare. tracy: the dow is down 6 points but charles payne is here to make some money anyway -- 63. he is looking how to make profits in oil and gas. charles, what is going on with that? >> we have a company called continental resources. i'm one of these guys big on the founder. he started company with shelly dean oil back in the day if you will. let me tell you how determined this guy is. 1983 i drilled 17 dry holes. 10 years in rocky mountains with technology and 10 years later with the bakken shale in north dakota. they're absolutely doing ex ord extraordinarily well. next week the street looking for 4.34. over the next five years wall street thinks they will grow 37% a year. versus three times what the industry is growing at. tracy: wow. >> this is interesting because it is a volatile stock. up big today. i haven't seen that much news on it today. the last four upgrades on it, the average target on this stock is 1100.75. there is huge amount of room to the up side. earnings inconsistent. last four quarters they missed a couple times. that inconsistent. of course the stock is extremely volatile. everything else about this company is something, kind of company i admire. they're doing extremely well. wall street likes them. there are more buys. buys, tons of upgrades. so it is hard to see really, the big problem again is execution. maybe oil prices. but other than that maybe matt damon movie is a hit and stop fracking all together. just kidding. ashley: don't slide that in there. >> i don't think so either. the bottom line if you can stand volatility i think continental resources will be 95 to $100 stock. tracy: we need him to go back to the bourne identity and do things like that. >> although that script got a little crazy. tracy: "goodwill hunting". how about that? >> there you go. ashley: charles, appreciate it. price matching was so popular during the holiday season now one retailer is making it last all year long. target will match prices from top online retailers including amazon.com, wal-mart.com, best buy.com. in addition to matching prices from its rivals target stores will match discount prices from its own website. target unveiling the program after a disappointing holiday season. the retailer was hurt by tougher competition online and became the latest victim of so-called showrooming. you check it out and buy it online. target's ceo previously said the price matches wouldn't hurt profit margins, investors well, perhaps showing some concerns, down slightly today by 36 cents at 60.94. not a huge movement on the stock but it is interesting. people, shoppers today are so savvy on all of these deals. i think, yes we get them all in the holiday season but now that the payroll tax hike kicked in, people are looking for more deals than ever before. tracy: i don't know. ashley: you're a savvy shopper. tracy: well, yeah. ashley: you are. tracy: from the comforts of my own couch i am. all right. it is quarter after the hour. we've got to check on the markets. nicole petallides on the floor of the new york stock exchange. i know you have breaking news on herbalife, nicole. >> that's right. herbalife been in the news since the middle of december. more news coming out and charlie gasparino was the first to report it. let's look how herbalife is faring right now. it is reported that the investor robert chapman, saying and telling fbn, fox business networks, there is quote, big news regarding the company's battle with the short seller bill act man. you remember bill ackman had the whole idea it was somewhat of a ponzi scheme and he wasn't a believer in the company at all. when he talked about it being a pyramid, pyramid, were his exact words at that time, in the middle of december, we'll give you longer charts, that week you see the big dip. herbalife lost 38%. robert chapman, i just checked on bloomberg and poking around, that is how i got the 38% number. that drop woos obviously significant. robert chapman who is 35% long the company. it will be interesting to see what the big news is concerning the company's battle with the short seller bill ackman. so of pershing. william ackman. everybody is familiar with him. we'll see what happens here. right now the stock is gaining up 3 1/4%. ashley: whatever it is. tracy: charlie gasparino has been covering this too. nicole, we'll see you in 15 minutes. >> thanks. tracy: the government is spending more on immigration enforcement but getting less in return. gerri willis has the eye on popping results of a new study. ashley: can netgear deliver on its explosive growth? patrick lo is live with shibani joshi at the consumers electronics show in las vegas. first let's look how the dollar is moving against the foreign currencies on a day with the dow moving lower. the dollar is up against all of the currencies you can see here except for the yen. we'll be right back. can. >> at 22 minutes past the hour i'm arthel neville with your fox news minute. more proof this is a serious flu season. lehigh valley hospital in pennsylvania opened a mobile surge tent outside the e.r. to handle increasing number of patients arriving with flu-like symptoms. they used similar tent during the h1n1 flu during 2009. former representative gabby giffords and her husband are launching a new gun control initiative to limit gun violence and mass shootings. today marks the two year anniversary of a day a gaun man opened fire at a tucson supermarket killing six and critically injuring giffords. chicago police reopened the homicide investigation into the death after $425,000 winner last summer after new tests determined he died of cyanide poisoning and not natural causes. he will relatives of cain urged medical examiners who reexamine the case. those are the headlines. let's get back to tracy. tracy: arthel neville, thank very much. you stay healthy. stocks started the new year off with a bang. the same can not be said of gold. is it possible the metal may have lost its luster? sandra smith with today's trade. it doesn't have a great year last year, sandra. >> not at all, tracy. we're looking at 12 straight years of gains. here is what a lot of folks are looking at. i will pull out the pencil for this one. this is october of last year. this is the rapid decline we've seen in the price of the yellow metal, down $140 since it hit the 52-week high. we're down to $1640 a troy ounce. a lot of gold bugs are asking, is gold cheap, should we buy now or does it have further declines to go? here is a what smith had to say about that at citi futures. inflation expectations continue to be tame that coupled with a fear that quantitative easing may be ending by the end. year are keeping buyers away for now. what do you do withed trade. george giro at rbc says he believes silver will bounce back from its rapid decline. it followed the the price of gold over the past six months. it is a far cry from the $35 a ounce let back last october. he says because of silver's industrial component will bounce back even more than gold. he says that is the way to play it. he says, tracy, ashley, it will be back to the basics. these precious metals will bounce back based on a low interest rate environment, the weak u.s. dollar. he says there will come a time where you want to own at these levels. by the way he is actually pretty bullish on gold the next couple months. he really thinks silver will outperform gold because of that again the industrial component if the economy recovers of silver. tracy: that is why silver always made more sense to me. i don't know what you do with gold. >> wear it around your neck. tracy: that's it. it is a big ol' doorstep stop. ashley: thank you, sandra. consumer electronics show getting underway in las vegas where companies are unveiling what they hope will be the next big thing in tech and netgear is just one of the many companies that are looking to make your home smarter. i need that help. shibani joshi joins us from vegas with a first on fox business interview with netgear's ceo. shibani? >> hi, there, ashley. thanks very much. netgear has turned itself into a multi-billion dollar company selling very practical things i think is a fair term like things like networking equipment and routers but now it is taking more of a personal term, and personal turn trying to get in your home with a brand new series of connected home products. we've got the ceo, patrick lo and chairman of netgear joining us now. thank you for being here, patrick. great to see you. >> nice to be here, thank you. >> so you've been in the home for a long time now but now you're trying to take a more front and center role, connected home to products you're unveiling. tell us about them. >> right. going forward we believe the home should be more connect the much. the ultimate vision for us that every single device in the house powered by electricity should be connected to the internet and linked up to the cloud. you can control it over your mobile devices. there are a whole bunch of device west introduced this year. >> here is one. one much these is a camera. >> right. it is a very tiny little, what we call, wire-free camera. it is for monitoring purposes. great for monitoring your pets, your adolescent kids. >> my baby i told you. >> that's right. and what it does, battery operated. so you can stick it to anywhere you want and you don't have to drill holes. you don't with to find a power supply. it is wireless. very easy to install. what is even better is that you can control it from any of your mobile devices. all the images be it photos, snapshots video are stored in the cloud so you can access at any time. you can decide how sensitive it is. one it is moving will send you alert -- >> i can think of a million uses for this depending upon, you know, what type of person you are and how involved you want it to be in your home. >> right. >> another thing you're doing, connected living room. we're hearing this over and over again. throwing your hat in the ring with this new fox. >> that is true. we call it neotv prime. this is our video streamer. it combines three functions. offer as whole bum of online channels such as hulu, netflix, amazon prime all of this. now it is coming up with google tv browser that you will be able to search for -- >> internet. >> on the internet, exactly. so that is why we enhanced it with a qaertty keyboard in the backpack. >> got it. >> you can store the own content, home videos and music and pictures. it is three in one. >> patrick a lot of things sound very similar to this. what make this is unique and how do you make the leap from something a little bit less, more practical like a router to something like this that is a lot more personal? >> yeah. so, the first and foremost is to really make it easy to use. so, for example, it is just a little bit, you know, improvement over our competitors with the qert at this keyboard. much easier to use. the interface is lot crisper, faster, you don't have the lag. third is a lot of people not only would like to have striming video from the internet, they also want to play their own photos and videos. all combine it to make it more personal, more usable in the house. >> that is a challenge. not just about being smarter. it is about being easy to use. >> right. >> and what you're provide something a product you believe combines the best of both worlds. patrick lo, ceo and chairman of netgear. great to you on begin. >> thank you, shibani. >> there you go, smart and easy to use, something we can all appreciate right? ashley: certainly can. i would like to be smart. and easy too. tracy: don't say it. i'll finish it. smart and difficult to use, how about that? ashley: there you go. tracy: immigration spending surging in the obama white house. gerri willis is on the store next. ashley: plus it's been a week since the fiscal cliff deal and we're so glad we're not talking about it. how long will congress wait to fight the next battle over the debt limit or debt cliff? congressman paul brown and john yarmuth weigh in ahead. the dow is down some 65 points. we'll be right back. >> announcer: you never know when, but thieves can steal your identity and turn your life upside down. >> hi. >> hi. you know, i can save you 15% today if you open up a charge card account with us. >> you just read my mind. >> announcer: just one little piece of information and they can open bogus accounts, stealing your credit, your money and ruining your reputation. that's why you need lifelock to relentlessly protect what matters most... 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>> the first week of the year we see a lot of money coming in but that is typical of the first week of every year. it is back into more realistic mode, i feel better about this year but probably the second half. i think most people expect earnings will be very next. nicole: that is some good insights. it was quick but gave us the poop. back to you. tracy: the gains are from loaded. night to hear that. cu in 15 minutes. ashley: the u.s. supreme court is set to weigh in on statute of limitations shedding light on when exactly the five year limitations with civil cases begin. rich edson at the supreme court with more on the story. peter: rich: the court heard arguments in a case like instant replay. when did:00 start? this deals with statute of limitations and goes back to 1999-2002. that is when the sec says there was wrongdoing on the part of gam belly funds, market timing to the advantage of its customers. the sec says it filed suit in 2008. that is beyond the statute of limitations. the company says the clock ran out and the sec couldn't act. what the companies are saying or the sec is saying is it only discovered this and started investigation in 2003. if the supreme court sides with the sec it would make longer the amount of time the government, not just the sec but other government agencies have to file these civil suits. if not it is limited to five years from when the wrongdoing occurred and one attorney says if the fcc doesn't go its way it could get congress to change the law. >> they believe this case will hamper their efforts to bring cases on a timely basis where penalties are being requested i would expect them to ask congress to amend the statute and make it absolutely clear when they bring fraud charges the five years should be extended until the sec learns or should have learned the action. rich: we won't know the result of the court decides in the next couple months. very skeptical of the sec position where number of justices especially conservatives who view this as an expansion of government power. back to you. ashley: interesting issue. thank you so much. don't like it, congress can change the law. tracy: it could be anything, state and limitations on tax return, could be almost anything goes. why bother with laws. who cares about that? a new study reports the obama administration spend more on immigration enforcement in the last fiscal year than on any other federal criminal law enforcement combined. $18 billion spent, more than the budget of the fbi, the d a, secret service, bureau of alcohol and tobacco, really? is this good money spent? gerri willis is here. ashley: i have a feeling. gerri: not what you expect from the president. he seems to be for immigration reform but he is coming down a hard. the number of people removed from this country nearly doubled from 188,000 in 2000 to 409,000 in 2012. the only number that is down is border apprehensions at a four year low and we are doing a lot of that with groans now. ashley: interesting, and did thousand, how many of those come back? >> great point. i feel strongly about this but have to turn to my cohort who actually is not from this country. ashley: i'm a u.s. citizen now. it was very hard to get in. you had to go through a lot of hoops and interviews. when you go through that and come to this country people come in illegally, a is a slap in the face for those who went through legal channels. i understand the need to come to this country, no doubt about it but so many are doing it illegally. there had to be something, the very word illegal means it is not right, it is against the law, something has to be done. borders are wide open. tracy: my husband came into this country, the forms we filled out, i have never seen him so anxious in my life as when we sat down to do our interview. [talking over each other] gerri: people who've come to work in this country because they share our values and wants to be year. i love the front door. come in the front door. ashley: this is what you're talking about tonight? gerri: no. we are talking about the details of the mortgage settlement with banks. there are some surprises in that. i think people will get big fat checks. they were reviewing each case one by one. now that won't happen. all kinds of interesting details coming up out of that. we will have a big debate between housing advocates and someone who says we have to stop the spending on houses. gerri: don't miss the willis report at 9:00 eastern on fox business. ashley: the debate. boeing's dreamliner nightmare fuelling, discovered after a battery fire. now there's a report of faulty wiring. the stock is tumbling. tracy: are more tax hikes as congress tackles the debt limit? paul brown and john young debate that next but as we do every day at this time let's look at the ten year and 30 year treasuries as we head out to break. 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[ all ] i'm with scottrade. >> the irs will start accepting tax returns for 2012, january 30th, later than planned. the agency says the last minute tax law changes made in the fiscal clip deal is the big reason for the delay. and attempting to shine light on trading, the financial industry regulatory authority aspects to set up dark full enforcement this year, private trading venues that allow buyers and sellers to those orders hidden from arrest of the market. superstorm sandy will likely cost the insurance industry at least $20 billion according to a new report, the complexity of accepting insurance losses from such a large and intense storm over a wide spread region has created uncertainty in estimating ultimate insured losses from sandy. that is the latest from the fox business network giving you the power to prosper. ashley: is congress running out of time to craft the debt ceiling deal? bipartisan policy center released a report will run headlong into the debt ceiling as early as feb. fifteenth unless congress reaches and agreement. joining us from both sides of the aisle republican congressman paul brown of georgia, democratic congressman john young of kentucky. thank you for joining us today. it will be a contentious issue. let me begin, the republicans saying they will agree to raise the debt if there's corresponding spending cuts otherwise they don't want to raise the debt ceiling. those two are really tied together, why would you not agree to that? >> right now is not the time to cut spending dramatically. we are faced with a struggling economy, a struggling recovery and every bit of government spending you can't comes out of the economy. if we hit the debt ceiling february 15th, the same bipartisan policy center report said we would basically take one month time, $165 billion out of the economy. that is 10% of gdp in one month. that would send the economy back into recession, unemployment would skyrocket again, we would be far worse off. we need a balanced approach to deficit reduction. we started on that track and need to continue. ashley: congressman ron, responded you can. >> my good friend is totally wrong. it is not government spending that will stimulate the economy. we need to leave those dollars in the hands of job producers and family businesses, the hands of consumers instead of sending it to the federal government in washington d.c.. we have to cut spending. the american people want us to deal with this issue right now. $16.4 trillion is unsustainable. every man, woman or child, even the newborn babies, $52,000 a person, that is unsustainable. we have to cut spending, make major cuts in spending across all of the whole government expenditures including the non discretionary funds, so-called entitlements. we have to get our financial house in order and this debate is about doing just that. ashley: would you -- are you strongly enough -- to you feel strongly enough about this to lead the u.s. default on its bills because you have a debt ceiling raised but without a corresponding spending cuts? would you not agree with to that and let the country default? >> we don't need to let the country default. we are -- actually we are already bankrupt today. we have to deal with it today. that is what the american people expect. let me give you a couple examples what is going on and what democrats have done. when this recession started, in all of the u.s. department of transportation there was one federal bureaucrat who made above $170,000 a year. just 18 months later, there were 1,690. this is unsustainable. every salary in the department of education is $102,000 a year, about twice what teachers make. ashley: we are almost out of time. i just want you to respond to some of the comments made by representative brown. >> first of all, we have already cut $1 trillion in spending and did that in 2011. we did $600 billion of deficit reduction, we spent two campaign is being blasted by republicans for finding $700 billion savings in medicare. we made significant for the approaches on the spending side to dealing with the deficit. there's still room on taxes. we need to do more on the revenue side. we are dealing 3% of gdp below historic lows, taxing ourselves less than we ever had in the last 60 years and it is just about a balanced approach. we have to deal with spending but also deal with the revenue side. ashley: we are already out of time. we could talk all day, we are already out of time and clearly it is a very big debate. thank you for being here today. we appreciate it. clearly the different philosophies are there to see. do we tax people more to generate revenue or should that money be in the hands of small businesses and people out there who will generate their own jobs, create their own jobs, spend money, keep the economy going. the federal government has gotten bigger and bigger and bigger. tracy: my paycheck last week -- i am not sure they should take any more money out of our checks. quarter till the hour, time for stocks as we do every 15 minutes. nicole petallides on the floor of the stock exchange. jewelers are doing well today. nicole: glad to get off the paychecks, actually crying when they saw their paycheck. let's look at these jeweler's in particular. when we talk about big nets, boosting the jewelry sector overall. boosting its earnings outlook, they are the cfo, ceo talking about chief financial officers, sales are looking good, this bodes well for valentine's day and with all the policy news, look what is going on. big nets up 8.7%, their apparent of kay jewelers, every case begins with k, tiffany is doing well, and zeeland over 3% on a day we have been selling. back to you. tracy: we knew nicole would know the jewelery lingo. ashley: two boeing dreamliner is sidelined for a separate safety issues, now reports of a wiring problem as boeing's jumbo jet, save to fly, that is next. tracy: let's look at today's winners and losers on nasdaq as we head out. dow down 71 points. ashley: shares of boeing stumbling. the stock down as you can see here, down 3-3/4% after a 787 in japan stop the fuel began earlier downgrade from a buy to a hold, all of this after a fire, one of the company's new dreamliner airplanes yesterday. the latest in a string of problems plaguing the jet. dan springer joins us the latest. >> even more bad news for boeing. as we were waiting for an update from the national transportation safety board on where the investigation was going from yesterday's fire different 787 had a fuel leak, same airport, as it was preparing for takeoff short time ago. about 40 gallons of fuel week. the plane is being towed back to the gate for evaluation. the last word, passengers are still on board, flight 007 was headed for tokyo. the fire happened every lithium battery overheated in a rear bunker belly of the dreamliner that had completed a flight from tokyo to boston. all passengers and crew were off of the plane when smoke was discovered by maintenance worker half. the battery that caught fire power as the plane when the engines are off, had this happened in flight it could have been catastrophic and adds to a list of electrical problems experienced by boeing's dreamliner starting with a major fire during a 2010 test flight. in december there were three less serious electoral problems, one of the fertile land in new orleans, qatar airways has a serious problem the ground a plane and the united plane taken out of service to replace the power panel and generator. the concern is the 787 uses a lot more electricity than other planes and the problems keep on occurring. >> these are all electrical issues, but it appears to meet these are different electrical issues. having said that the national transportation safety board will probably take a look at all of these electrical issues and try to determine if there is some sort of pattern or systemic nexus. >> investors are concerned, stock is down 2%, dropped nearly $4 since yesterday's fire and people looking at these problems saying why is boeing continue to have problems with its dreamliner, offers new plane in years. ashley: dan springer, thank you so much. every day we seem to be in these headlines. tracy: scary stuff. how about this? shocking twist, reports that aig, the american international group which received a $182 billion government bailout may not--may turn around and sue the government for cheating its shareholders in that deal. fox news senior judicial analyst judge andrew napolitano. who is right here? judge napolitano: i think aig has a legitimate case the courts will be interested in hearing. here's their case. three people go to the government and a bail us out and the government says to one of them we will get you the money and no one will know about it. the governments as to the other one hears a few hundred billion dollars, 4%, the government says to aig will sell us 80% of your stock. that will dilute the value of the stock and when you want the money, when you want the stock back you got to give as 14% interest. aig said while we and your company the people who want the money that we don't want the world to know about we are giving you the money we are going to funnel through you. so a ig, to funnel money to people from whom you don't ask for any money back, competitors, loan them the same money and charge them 5% in stan charge of 14.5% and stock value went down and assets went down. is that fair? the government can't depreciate the value of a corporation. that is called taking and the government has to treat similarly situated similar race at -- it was not done here. tracy: they have a case. i am sure he will be back to cover it for us. ashley: liz claman taking us through the last hour of trading live from the consumer electronics show in las vegas. she has guests across the board including curtis jackson, $0.50, up fox business exclusive, "countdown to the closing bell" up next. they don't know it 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creating jobs in the small town, we're pleased to have the mayor join us with his story in minutes. melissa: very cool. lori: time for a market check. let's head down to the floor the new york stock exchange, giving back earlier gains. nicole: that is true. we have been pushed around a little bit, even moved into negative territory but the move to the upside and getting some of the moves to the upside with the gains we are seeing, dow jones industrials up 34 points, the bank stocks are looking little better and that is one of the reasons we have had the turnaround. drug stocks doing good. the dollar continues to drop. as the dollar is dropping that gives room for the commodities and equities to move higher. i wanted to take a look at a name that is making news and that is molly corporation. rare earth is something that has the demand they have seen is dwindling particularly in china. and so now you are seeing this stock dropping 22.5%. that is a drop of almost two and a half dollars now sitting at 836. as they evaluate their capital means so far not so good for molly corporation, moll lori and melissa. melissa: the president will be nominating the chief of staff jack lew as next treasury secretary. should we be gearing up for another confirmation battle? rich edson at the white house with the latest on this story. what do you think? rich: we very well could be. he refuses to address entitlements in spending. he is the typical big government liberal and a troubled person to deal with in his capacity as chief of staff for the white house but democrats point out he knows budgets. he has been a budget director for the clinton administration, obama administration and they say that is why they picked him. >> in the past quarter of a century jack lew has been an integral part of some of the most important budgetary financial and fiscal agreements, bipartisan agreement in washington. >> "rolling stone magazine" will have to come to the senate and tell what his thoughts are about the spending and how it plans to address it. rich: it is u up to send them to see this another proxy fight to add to the administration on their views about that deficit and spending. back to you. melissa: i have to wonder how his senate confirmation will go to look at comments, there is just a lot of anger and frustration with jack lew hanging over from the past, statements he has made. can he get past the confirmation? >> the question or will there be enough to vote against him? there will be republicans who vote against him but it is questionable if enough will actually block his nomination. only because you still have first off a few democrats saying they have problems with defense secretary nomination in chuck hagel. he believes too much in the president's economic policies. that is not what they should technically be having with the president. melissa: thank you so much. lori: explosion of online shopping has meant big business for amazon and they are expanding and investing. increasing the fulfillment centers or items are packed and shipped. now 47. new jersey will be the new home of one of these film centers. msn investing $200 million promises 700 new jobs and 22 million in tax revenue over time. we are pleased to welcome the mayor, welcome to you. >> thank you very much for having me. lori: what is the timeframe and when can i get to work? >> this construction project will happen very fast and could start in the next couple of months completed at the end of 2014. lori: why did robinson choose this town? shipping is key, why did they come to you? >> our town is centrally located in the middle of the state. very easy to go north, south, east and west. a good reputation of luring fortune 500 companies to our town. making the process more business oriented as opposed to what people are used to in government. we talk about projects in our town in terms of customers really trying to make it easier for business to do business with government. lori: were budget in 2012, 2013, and with a promising 22 million in tax revenues. i thought wow, and one year they will make the entire budget, but this is overtime so tell me what the tax revenue will mean to your township. >> i wish it was in one year. government is very hard in terms of texas going up every year, this will allow us to stabilize taxes and maybe even bring taxes down. million dollars per year to a town our size is a big deal. to offer jobs is something that is a ver very amazing for the ks coming home from school, guaranteed job for everyone in our town and for them as well. lori: the average salary $55,000 per year, more than the average retail salary job, that could create a nice ripple effect through the economy. >> absolutely. in addition to great salaries they offer lots of stock options and this will be a real opportunity for lots of people who desperately need them. lori: would it be nice if amazon could open a fulfillment center in all of these? you mentioned they won the fulfillment center, but do you have advice for any other townships around the country that are really struggling with their fiscal challenges? >> this is a long process. the credit of bringing it to new jersey goes to governor chris christie, but being able to have a good process and bring people in town and explain why these businesses should be able to be attracted to your town, which are going to be able to do for them really is a sales perspective and they are not used to selling. that is something the mayors have to start doing because they have so many choices. melissa: thank you for joining us, we look forward to hearing how things come along as amazon breaks ground. >> thank you for having me. melissa: good for them. gas prices moving steadily through 2012 but our next guest says you can expect good news at the gas pump this year. joining us on the phone with his outlook. what makes you think prices are going down from here for the next year or so? >> we are going higher from here, but in the first three months of 2012 moved up $0.65, we will not do that. we do it with the wind at our back for this preseason rally but i think it will be much more tamed than previous years, and domestic oil situation and the cheap crude in north america will be a continuing story for 12 months. melissa: we are looking at a chart of natural retail gasoline and it has been on a trend upward. the most anybody paid to visit grandma for thanksgiving. they look at data out of mastercard, gasoline demand is at the lowest level it has been since 2004 when i started getting the data in the hulk and prices be so high with demand at historic low? >> now you have to look at the key price, trading more than the wti price. it is a little bit subdued but the world prices moving higher because growth, it will continue to see that in south america and asia they will use more crude and more diesel. in the u.s. there is no question, it is moving lower. it is not heavy attrition, but we will be using less in 2013 and 2012 and there is a little bit of a sweet spot. the oil shale comes out to market sometimes for lots less than that may boost in the refining and manufacturing. at the end of the year we will pay on average $3.25 to $3.50. melissa: we're still seeing prices that are high, but demand is so low. what happens if people get back in their car and drive more? if you look at all the people who would like to be working more than the people totally discouraged from the workforce, so much higher than the topline of those people had to go back to work or find something to do it seems demand will go back up and prices will explode. >> we have plenty of supply. we will export a little bit less whether it is diesel or gasoline. nobody can take responsibility for it, it is a factor of price and technology, but we are in good shape. we will never see the numbers we saw back in the early part of the century and we paid $1.35, $2. but we will pay considerably less than some of the numbers we have seen in the last few years. melissa: always fantastic, your finger on the pulse of everything happening in the gas market. we appreciate it. >> take care, melissa. lori: and the nominees are. not for treasury secretary, we already know that thanks to charlie gasparino. we have the oscar nods and snubs ahead. melissa: and where are the women? 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[ male announcer ] e pill eachmorning. 24 hours. zero heartbur lori: time to make money with charles payne. sometimes way to make money well is to not spend it. the place i rarely take. we have all been critical on the stock. charles: we had talked about that. melissa: they found the expensive crazy contract. you were just talking about how they had to freshen things up. charles: yeah, there is no killer app, nothing have to go and get this year. i went there over the holiday season and that was just blah. i have to tell you, put down a lot more than this. you look at the chart, you can see where it was up recently. i don't know who is buying it. but somebody must think the turnaround is here. i would rather see more evidence as opposed to a hunch, but hit $58 earlier today. again, japan was weak, they will print a whole lot of money. asia-pacific, found out it is one of these -- lori: nothing like receiving a gift in a late loop box. melissa: there is turnaround value, have you freshen up what is in the box. charles: i wanted to mention that, if anyone followed up and did it, that is what we just d did. had to ring the register is with these details. melissa: you never know. don't be a hog. thank you so much. as with every 15 minutes, let's check the market. on the floor of the new york stock exchange. nicole: looking at general motors and ford. looking at them today, both of them are doing well, ford up almost 2.5%, general motors up 1% and with these moves both of these names are hitting 52-week highs. both of them are back to levels of july 2011. so not bad at all to see these moves. ford is moving higher as they increase their dividends, so obviously that shows them some belief in the companies are sustainable in the business cycles so they see growth there. general motors is hiring people and improving information technology center as part of their plan going forward, and so that is looking good. melissa: thank you so much. lori: president obama's pick for treasury secretary expected in moments, those remarks live. melissa: it is battle of the hedge fund titans. charlie gasparino just back from the company's investor meeting with exclusive new details. and look at how the dollar is faring today as we head out to break. suddenly, she does something unexpected and you see the woman you fell in love with. she's everything to you. but your erectile dysfunction - that 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 four hours. if you have any sudden decrease or loss in hearing or vision, or if u 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. [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪ or turn 30-million artifacts... ♪ into a high-tech masterpiece? ♪ whatever your business challenge, dell has the technology and services to help you solve it. nicole: 21 past the hour, i made an appointment with your fox news minute. jerry sandusky back in court today arguing he needs a trial because his defense team lacked time to prepare for the first one. no ruling from the judges get convicted in june for five counts of child sex abuse. vice president joe biden meeting with the nra, the top gun lobby. vice presidents joe biden met with him yesterday. he will send gun recommendations to the president by tuesday. a shift in ice appears to have freed the dozens of killer whales trapped in the hudson bay ice 100 miles north of montreal. they were taking turns bobbing up for air in a single break the ice for the past couple of days. villagers planning and icebreaking askew when the wind shifted overnight when the ice creating an opening for the whales to swim to safety. those are your news headlines, now back to melissa and lori. melissa: mother nature swooping in and saving the day. what a saga. lori: we need some good news. always fun. herbalife came out swinging today on charges to reassure that the company is not a pyramid scheme. what happened? shares went down. charlie gasparino has the story. charlie: so far the ceo of herbalife, they have not made the sale to investors that taxation is wrong. but we will get to that in a little bit. a couple of interesting headlines the fox business network has been able to uncover. significant eight figure retainer. the famed attorney retained for possible litigation. significant eight figure retainer. melissa: he is so busy with hank greenberg, i'm surprised he has time for this. charlie: now he will be looking herbalife. from what i understand, significant eight figure retainer. he looks like my old boss at "newsweek." i go all over the place. but we should point out he was barred from the herbalife meeting. lori: can they do that? charlie: he is a short seller, not an investor. he should buy one stock and show up and harass the ceos. guess where he is right now. he is issuing statements telling the fox business network and everybody else he's going to issue questions or herbalife on how they misled the public, he will issue questions, further questions about their business model which he obviously thinks is a fraud. bill ackman is telling people he he's bracing for possible legal action from herbalife and that the company, he is actually interfering with their business model. we should point out one major distributor has backed out of herbalife. if they don't have distributors. melissa: multilevel marketing, you need distributors. charlie: he is scheduled to be interviewed with us. we will see, but later on this afternoon. melissa: the basic presentation was about the multilevel marketing or a pyramid scheme. they tried to make their case, you have been discussing this all day and the essential difference, how much revenue for each. charlie: what is a pyramid scheme? this is a legal definition. i have a whole definition, could scheme if you have a company that makes money just by distributing products. if you'r your distributor to pae company a fee, but not by filling the company product. at some point you can sell the products the distributors that we will not do this anymore. melissa: more from recruiting people then selling the product. charlie: but investors put money into the company but eventually you start getting distributors because no product to sell so the company implodes. that is what ackman is saying. herbalife says it does sell stuff however i will tell you one of the problems they had to date was and never saw the real breakdown in sales. they have a lot of distributors, china and everywhere else, but you don't get the impression when you listen to them today that they're actually striking gold, the distributors are actually selling shakes. how do you build a business model of selling protein shakes? and i drink them all the time. lori: charlie, as you know, keep it here on fox business for his interview with herbalife president. thank you again, charlie. melissa: breaking news, live pictures from the white house as we await president obama's nomination, we will bring that to you live next. lori: a look at the winners and losers on the s&p 5000. an overall bullish market, we are back after this. >> announcer: you never know when, but thieves can steal your identity and turn your life upside down. >> hi. >> hi. you know, i can save you 15% today if you open up a charge card account with us. >> you just read my mind. >> announcer: just one little piece of information and they can open bogus accounts, stealing your credit, your money and ruining your reputation. that's why you need lifelock to relentlessly protect what matters most... 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>> the way i view it, simply he reflects the president. i think the president has been a tough negotiator. certainly when you look at the fiscal cliff deal, it does seem that the president won most of that battle. so i would suspect that jack simply reflects the president. and that seems to be the way we're going to go forward, as someone in the financial markets. that is what i have to take it at face value, whether it is good for bad overall for the economy over the long run, it just doesn't seem to be all that important right now. what seems to be important is, the position of jack and the president seems to be, defending the spending numbers, and being very, very cautious about tax cuts. melissa: yeah. senator jeff sessions from alabama is very fixed on a comment that he made, that jack lew made a while ago, i guess february of 2011, about president obama's blueprint for the budget and he said, we are not adding to the debt anymore. and there was almost no, sort of quantitative way to make that be true. although they came back afterwards and tried very hard to justify that statement. senator sessions has said, it was a false statement and that is a tough person to have out there as treasury secretary when he is making these claims mathematically very tough to defend. how do you feel about that? >> what do you think about that? >> well from the private sector point of view, federal government debt is continuing to go up, driven primarily by entitlements over the long run. that is the way we have to treat it. i don't see a case being made based upon the behavior of the last three or four years that federal debt will be slowing down anytime soon. we have large deficits that continue to accumulate driven primarily by entitlement spending that is not going to change. melissa: do you see him doing any trimming at any point down the road? i mean as some people pointed out he did say at some point it would make sense to raise the medicare age. do you think he believes that and would advocate for that at all? >> i think the president and jack lew are probably agree to some modification. as you say, trim, melissa, would probably be the fair term. in terms of deep cuts, fundamental reform, big draw back in terms of entitlement spending i don't think that is going to be on the table. i think we're trimming at the margins. melissa: so what do you think all of this means going forward? what is your outlook for the economy, given all that we have going on, john? >> seems when we look at debt-to-gdp ratios, when we look at long term, it seems the argument is you will try to stablize debt-to-gdp at some very high level. we'll not be cutting that debt-to-gdp level down as some people would like. and i guess the question for us in the private sector is, is debt at a certain level relative to the gdp, is it going to stablize and how much can we depend upon low interest rates for a long period of time to help stablize that ratio? and will the global markets accept that? will the chinese and japanese be willing to accept large fiscal deficits in the united states, continuing to be refinanced over time, at what every the given interest rates in the marketplace are. very, very different story that what we traditionally think about in terms of fiscal policy in the united states. melissa: john, thank you so much. >> thank you. melissa: so we are expecting the president's official nomination of jack lew as treasury secretary shortly. we'll bring you those remarks coming up live. lori: speaking of treasury, let's look at treasury rates. the 10 and 30-year treasury for you. 10-year, 1.88%. and out the curve the 30-year is unchanged yielding 3.06%. [ male announcer ] this is joe woods' first day of work. and his new boss told him twongs -- cook what you love, and save your money. joe doesn't know it yet, but he'll wk his way up from busser to waiter to chef before opening a restaurant specializing in fish and me from the great northwest. he'll start investing early, he'll find some good people to help guide him, nd he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense. from td ameritrade. melissa: here is your fox business brief. the united nations is downplaying fears of a global food crisis as drops drop for a third straight month in december. according to the food and agriculture organization food prices were down 7% last year from the year before. the agency also warning bad weather could spark a repeat of the rioting and unrest that hit parts developing world in 2007 and 2008. shares of supervalu are soaring after striking a deal to sell five grocery store chains to a consortium of investors led by cerberus capital management. the deal is worth $3.3 billion. amazon looking to take a bite out of amazon's itunes. they are launching auto rip, a service that gives customers free mp3s of the cds they purchased through their cloud player library. very cool. that's latest from the fox business network, giving you the power to prosper. lori: and the cabinet turnover continues. we're awaiting the president. you're looking live at the white house where president obama is expected to introduce jack lew, currently his chief of staff and nominated treasury secretary, to succeed timothy geithner here in the second term. similar to chuck hague bell, likely to face a heated battle for confirmation. here's the president. >> good afternoon, everybody. please have a seat. a little more than four years ago i stood with mr. tim geithner and announced him as my first nominee to my cabinet. we were barely two months into the financial crisis. the stock market had cratered. the housing market had cratered as well. bank after bank was on the verge of collapse, and worst of all, more than 800,000 americans would lose their jobs in just that month. and the bottom was not yet in sight. so i couldn't blame tim when he tried to tell me wasn't the right guy for the job. but i knew that tim's extensive experience with economic policy made him imminently qualified. and i also knew that he could hit the ground running. as chairman of the new york federal reserve he had just spent several sleepless and chaotic weeks emersed in the complexities of the crisis and had been working closely with his republican predecessor at treasury to save the financial system. then with the wreckage of our economy still smoldering and unstable i asked him to help put it back together. and thanks in large part to his steady hand our economy has been growing again for the past three years. our businesses have created nearly six million new jobs. the money that we spent to save the financial system has largely been paid back. we put in place rules to prevent that kind of financial meltdown from ever happening again. an auto industry was saved. we made sure taxpayers are not on the hook if the biggest firms fail again. we've taken steps to help underwater homeowners come up for air, and open new markets to sell american goods overseas. and we've begun to reduce our deficit through a balanced mix of spending cuts and reforms to a tax code that, at the time that we both came in was too skewed in favor of the wealthy at the expense of middle class americans. so when the history books are written, tim geithner is going to go down as one of our finest secretaries of the treasury. [applause] don't embarass him. [laughter] on a personal note, tim has been a wonderful friend and dependable advisor throughout these last four years there's an unofficial saying over at treasury, no peacocks, no jerks, no whiners. that would be a good saying for all of washington. no peacocks, no jerks, no whiners. few embody that ideal better than tim geithner. that's why when tim was thinking about leaving a couple years ago i had to personally get on my knees with carol, to help convince him to stay on a little bit longer and i could not be more grateful to carol and the entire geithner family for allowing him to peak the sacrifices that so many of our cabinet members ask of their families in serving the country. the fact is while a lot of work remains, especially to rebuild a strong middle class and offer working folks new pathway to rise into the middle class, our economy is better positioned for tomorrow than most of those other countries hit by the financial crisis. the tough decisions tim made and carried out deserve a lot of credit for that. so i understand that tim is ready for a break. obviously we're sad to see him go but i can not think of a better person who continue tim's work at treasury than jack lew. now, this is bittersweet not only because tim's leaving but also because jack's been my chief of staff for the last year. he was my budget director before that. i trust his judgment. i value his friendship. i know very few people with greater integrity than the man to my left. so i don't want to see him go because it is working out really well for me to have him here in the white house but my loss will be the nation's gain. jack has the distinction of having worked and succeeded in some of the toughest jobs in washington and the private sector. as a congressional staffer in the 1980s he helped negotiate the deal between president reagan and tip o'neill to save social security. under president clinton he presided over three budget surpluses in a row. though for all the talk out there about deficit reduction, making sure our books are balanced, this is the guy who did it, three times. he helped oversee one of our nation's finest universities, and one of our largest investment banks. in my administration he has managed operations for the state department and the budget for the entire executive branch. and over the past year i've sought jack's advice on virtually every decision that i have made from economic policy to foreign policy. one reason jack has been so effective in this town because he is a low-key guy who prefers to surround himself with policy experts rather than television cameras. and over the years he has built a reputation as a master it of policy who can work with members of both parties and forge principled compromises. and maybe most importantly, as the son of a polish immigrant, a man of deep and devout faith, jack knows that every number on a page, every dollar we budget, every decision we make, has to be an expression of who we wish to be as a nays -- nation, our values. the values that say everybody gets a fair shot at opportunity. and says that we expect all of us to fulfill our individual obligations as citizens in return. so jack has my complete trust. i know i'm not alone in that. in the words of one former senator, having lew on your team is equivalent of a coach is having luxury putting somebody at almost any position knowing that he could do well and i could not agree more. i hope the senate will confirm him as quickly as possible. i want to personally thank both of these men and their families, especially carol and ruth, for their extraordinary service to our country. and with that i would like to invite them to say a few words, starting with tim. >> mr. president, it's been a privilege to serve you. i'm honored and grateful that you asked me to do this really. i am, and i'm very proud of what my colleagues at treasury and your economic team was able to help you accomplish these first four years. when you step understood this building as president you were confronted with a world in crisis, the worst crisis in generations and you made the necessary, the hard, the politically perilous choices that saved the american people, saved american industry, saved the global economy, from a failing financial system. and you were successful response to the crisis. of course did not solve all the nation's challenges. it could not have done so. but the actions you took along with those of a forceful and creative federal reserve have made the country stronger and have put us in a much better position to face the many challenges still ahead of us and they are many. i have the greatest respect for jack lew. i know him as a man of exceptional judgment, calm under pressure, with an extraordinary record of accomplishment and experience. over decade spent at the center of american economic policy. he is committed to defending the safety net for the elderly and the poor. he understands what it takes to create the conditions for stronger economic growth and broader economic opportunity. and he understands that to govern responsibly is to govern with a recognition that we have limited fiscal resources. now like jack i have spent my professional life in this world of public policy and public service. and as all of you know our families carry a large share of the burdens we assume in public life. and i feel incredibly fortunate that my wife carol and my family have been willing to allow me to do this. i thank them for their support and their patience and i understand their occasional impatience. i want to express my admiration and my appreciation for the women and the men of the treasury department. those who came to serve you these years of crisis, and the civil servants of the treasury with whom i first started working in 1988. they are exceptionally talented and honorable public servants. i'm very proud of what they have helped you accomplish and i am confident that my successor will find them the extraordinary asset they're to the nation. i also hope that americans will look at the challenges we face today and decide as many of you in this room have, that in spite of the divisive state of our political system today that serving your country is compelling and rewarding work. that was my experience and i am grateful and will always be grateful to you for having given me the opportunity to serve you as the 75th secretary of the treasury. [applause] >> mr. president, it has been my honor to serve as your chief of staff and before that at omb and the state department. it is a privilege to come to work every day as part of a team that is dedicated to build a sound economy and a safer world. tim, you have been a colleague for many years, actually decades and the american people are better off for your outstanding service. you know i thought i knew you pretty well but it was only yesterday that i discovered we both share a common challenge with penmanship. of la of laugh. -- [laughter] tim, i join the president and everyone here wishing you and carol your whole family well. as a kid growing up in queens i had dreams of making a difference in the world. these dreams were nutured in a home where the gifts of american freedom an opportunity were cherished and never taken for granted. the responsibility to engage in issues of public concern were part of daily life. i will always be grateful to my parents for grounding me in the values that have remained central to my personal and professional life. i grew up professionally in the office of speaker o'neill whose compass was always clear and who demanded unvarnished advice how to reach the desired destination. mr. o'neill cared little about your age or rank but only whether or not you did the hard work to form the decisions of the day and you took a big chance giving a lot of responsibility to a very young man and for that i will always be thankful. serving at omb first under president clinton and recently under this admin strags i worked with one of the finest teams in the government. execute responsible fiscal policy and advancing policies to promote economic growth. i'm delighted to see so many of my friends from omb here today. at the state department i worked closely with our great secretary of state and my friend, hillary clinton, to advance our nation's national security agenda including our international economic policies. and as chief of staff i've had the pleasure of working with a tremendously talented while house team which manages policy, politics, communications and complex operations every day with grace, skill and loyalty. if confirmed i look forward to joining the treasury department whose people are legendary for their skill and knowledge. it's a team i have collaborated with closely over many years and have come to respect greatly. finally thankful to ruth, shoshi, and the kids for tolerance to the demands of schedule that tests all family patience. thank you, mr. president for your trust, your confidence and friendship. serving in your administration has allowed me to live out those values my parents instilled in me and i look forward to continuing the challenges ahead. [applause] [applause] >> well these are two outstanding public servants. i think the only point that i want to make, leave you with is the fact that i had never noticed jack's signature, and when this was highlighted yesterday in the press i considered rescinding my offer to appoint him [laughing] jack assures me that he is going to work to make at least one letter legible in order not to debase our currency. should he be confirmed as secretary of the treasury. so, thank you very much everybody. [applause] melissa: all right. so that was president obama, nominating jack lew for treasury secretary. obviously they were making a lot of jokes about his very loopy signature we showed on the bottom of the screen. that actually doesn't seem to contain any letters as far as you can see. he made a joke about it. there you go. there it is. he said he promised he will work on his handwriting so he doesn't go ahead and debase our currency. he made fun of tim geithner's signature which people also said is a little bit sloppy but not compared to that one. lori: just yesterday he learned they're both challenged with their penmanship. raises a interesting and important point. that is the signature will --. melissa: no it is not. he will work on it. not that one. that will not appear. more seriously he heaped a lot of praise on tim geithner saying that he made the perilously hard and political challenges to save the american people. thanking tim geithner there. lori: we also have rich edson i believe on site who will check in a little bit later throughout the afternoon. we can't to keep you aprized of other day's headlines. a rise in jobless claims. that of course raising new questions about when the job market will show real strong improvement. ftn financial economist lindsay piegza breaks it down with tracy byrnes and ashley webster next here on fox business. don't miss it ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission? ♪ whatever your business challenge, dell has the technology and services to help you solve it. ashley: good afternoon, everyone, i'm ashley webster. tracy: and i'm tracy byrnes. we have some breaking news. president obama task jack lew to be the new chief of treasury just in time for a critical battle over the national debt. he has one vocal critic in the senate so will he secure the job? ashley: new evidence american job growth is lackluster at best. you throw in smaller paychecks in 2013. what does it all mean for the economy? ftn financial economist lindsey piegza is here to talk about it. tracy: that is good thing. herbalife defends itself against charges it is a pyramid scheme. who will win this escalating fight? we'll cover that wall-to-wall. that is ahead. ashley: first top of the hour time for stocks. the dow is up 44 points. let's head down to the nicole petallides on the floor of the new york stock exchange as we do every 15 minutes. stocks gaining back some ground. >> absolutely. we're up again for yesterday. we had back and forth action this week. we're not too far off from the unchanged line. the trend remains slightly to the upside. the dow jones industrials are up one-third of 1%. s&p is up half a percent. seconds are not participating as much. up one tent of 1%. financials doing well on the dow jones. vix is taking a breather. i want to talk about some names hitting new highs. so let's look at these names in particularly. ford doubling its quarterly different vend up to 2 1/2%. delta getting positive comments from goldman sachs, to a buy from a sell. this is soaring over last four weeks, no pun intended. your on ban outfitters good sales over the holidays. ubs is doing well on this particular list. when i talk about delta air lines i should note some of the traders focus on the transportation index which is higher today and hitting a 52-week high, for all the dow theorists who follow these things and see the transports hitting a high, that certainly bodes well for this bullish market we've been seeing, back to you. ashley: delta really turned things around. thank you so much. tracy: i think all the airlines suck. ashley: you don't like, i know. don't get me started but delta, if you have to fly, they have done things well. tracy: i guess. nobody gives out headphones anymore. moments ago president obama nominated jack lew and his next treasury. as his next treasury secretary i should say. rich edson live at the white house on this there is lot of pushback on this, isn't there? >> there is starting to be. from the white house per speck tim this transitional pick. president obama highlighting secretary geithner as rescue guy coming to the treasury when the economy is in freefall. at this point it is all about budgets and transition to jack lew. current chief of staff. former budget director for president clinton and president obama and the current chief chief of staff going through this nomination process a trusted presidential advisor. >> over the past year i've sought jack's advice on virtually every decision that i have made from economic policy to foreign policy. one reason jack has been so effective in this town because he is a low-key guy who prefers to surround himself with policy experts rather than television cameras. over the years he built a reputation as master of policy who can work with members of both parties and forge principled compromises. >> now the opposition. republicans first starting out with their reaction. this from senator jeff sessions. he said we need a secretary of treasury that the american people, the congress, the world will know is up to the task of getting america on the path to prosperity, not the path to decline. jack lew is not that man. the original messages that we're now getting from a number of republican senators who will have to consider this nomination, many are saying that they will go through the vetting process. see what jack lew has to say from confirmation hearings as the information comes out. they want a plan to address spending. many are skeptical they're getting it from the treasury nominee or from the administration. back to you. tracy: rich edson, thanks for all that. ashley: jack lew then must face the senate before he takes the helm at treasury department. with the top republican on budget committee already speaking out against lew are we in for a bumpy confirmation process on capitol hill? joining us bob cusack, managing editor of "the hill." it could be interesting, bob. we mentioned senator jeff sessions, top ranking republican on the senate budget committee and he said, quote, in a statement that is now at, out, jack lew must never be treasury secretary. he has critics but do you think he will get through the confirmation process. >> i do. sessions will not vote for lew but lew is definitely qualified for the job. republicans, other comments coming in from senator orrin hatch, the top republican on the finance committee. he says we need it to focus on questions about this administration's policy on spending whether medicare, social security where are the specific cuts? i think republicans will look at this and not go after lou personally but go after the policies;r÷ of the obama administration and look back at lew's comments when he was office of management and budget director. that is what sessions is highlighting. he gave too far rosy a picture where the budget was heading. that is session's concerns. do i think he will ultimately get through? i do. tracy: we don't have a budget, do we, right? we haven't had one for a while. we blow through spending, spending numbers like, god my kids do in the mall. so what are the perks to having this guy on staff other than he is part of the old boys club down in washington? >> i think that is one of the questions that come up. the republican senators are certainly going to ask lew, do you think it is good that the senate pass a budget? senate democrats have not passed a budget for three years. there have been other budget agreements but they have not passed a budget resolution in three years. so they will tweak lew. that is where they will say, listen, we need to have cuts because even democrats say, like chuck schumer said we're on an unsustainable path. whether it is 50 feet or 500 feet. we need to change things. revamp the policies. obviously with this debt deal that just got signed into law, not any significant savings there and we're clearly on a path that we can't continue on. ashley: all right. bob cusack, with "the hill." bob, thank you so much for joining us. our next guest has worked with jack lew and says his bipartisan credentials make him the right man for the job. joining us kenneth baer former omb director and former senior adivsor to jack lew. kenneth you're uniquely qualified to talk about him. you say he is bipartisan but there are reports that republicans have not had kind things to say about him when they dealt with him during the 2011 budget negotiations. they called him condescending, inflexible and a little bit sneaky. are those fair assessments? >> not at all. you know, to me that is a monumental case of sour grapes. jack lew knows his stuff inside and out. that is why he is such a great negotiator. that is why he has been at the center of bipartisan big fiscal bargains going back to 1983 dealing with president reagan and speaker o'neill which saved social security. what they don't like he is such a tough person to negotiate from the other side of the table. sort of like taking batting practice from tom seaver. that would be hard to do. tracy: if you could, tell us the differences between him and tim geithner. a lot of people comparing them saying they're very similar. at the same time a lot of people weren't really happen with tim geithner. >> well, you know, i think one similarity these are two gentlemen who really dedicated that life to public service. secretary geithner had long distinguished career at new york fed and the treasury department. jack lew, twice omb director. deputy secretary of state as well as running the white house as chief of staff. their dedication to public service and sacrifices they have given to put in place economic policies that help all americans is really what they have in common. ashley: also, kenneth, you say he is not a wall street insider. we know he spent a short time with citigroup. >> right. ashley: and also at a senate confirmation hearing in 2010 he told the confirmation hearing that he didn't believe the regulation was a main cause of the financial crisis. so it is all a bit of mixed messages there. what relationship does he have with wall street? >> listen, jack has, really unparalleled experience at senior levels of private sector, public sector an nonprofit sector at new york university. he did work as a management executive at a global financial services company and i think, gives him some insight. i've been with him when he met with wall street executives and other business community leaders and he has a very good rapport with them. i think it will be a really good relationship and outreach to big business as well as small business and all stakeholders. there is very hard to find people in this town who really can say a bad word about jack lew despite grumblings you're getting right now i think is partisan sour grapes if you ask me. ashley: kenneth, thank you so much. with the harvard group and former omb associate director. >> my pleasure. ashley: thank you so much. tracy: we heard he is a good guy. ashley: yeah, you do. tracy: so that helps. coming up, well good day for one apple is up plyer but not so much for apple itself. making money with charles payne is on deck. ashley: more americans sign up for jobless benefits. when will the labor market show real signs of improvement? that is what everyone is asking. ftn economist, lindsey piegza is here. as we do every day at this time see how oil is trading. dow is trying to move higher and so is oil. up a dollar at $94.05 a barrel. we'll be right back tracy: it is time to make some money with charles payne following up on a tech stock, cirrus logic and suspicious. mails which happen to be mine. ashley: they're always suspicious but also this time. [laughter] we'll get to that in a minute. >> i thought about you guys because cirrus came out the gate real strong today. a lot of people are getting geeked up. we did it on your hour not too long ago. it is one i would hold on to. they report earnings later on this month, january 24th. still down 30% from the highs in september. there are all kind of positive scuttlebutt going on with this despite a big move i would hang in there with the stock. i wanted to update that. ashley: so they provide, obviously they're closely tied to apple but they're not a one-trick pony. >> they're not a one-trick pony. their stock traded with apple. it has been as volatile. of course it doesn't have the recuperating abilities we see in apple. now, i did also want to address this, guys. we talk about making money. but sometimes you make money too by not doing some things. tracy byrnes, i got an e-mail this morning, good day. how are you doing. stuck in madrid, spain. i was on a short trip. unfortunately robbed at a park in hotel where i as lodged. all my cash, credit cards, phone, all gone. please my flight leaves soon. ashley: send money immediately. i got that one too. >> really. i was hoping she could speak spanish. tracy: tippoff, i would have asked for small bills to tip at the strip clubs. that you should have known was not from me. >> the scams keep going. that is fun. tracy: awful. my e-mail gets hacked. just everybody in my whole life got it. ashley: are you getting money. >> i wish at this point, people called and said we'll help you. >> that is why i think it is important. people do, you send it out to a million people, somebody will say, golly, i got to help tracy out. tracy: god bless, actually, these kind people because i've gotten a bunch phone calls today. but not only did they send out this e-mail, they went into my account and changed the recovery e-mail that i had in there, to one they had made up on their own. ashley: oh, my goodness. tracy: so i changed everybody i think i will have to get rid of the account. i'm not in madrid. ashley: don't send, money, charles. >> i hope you're never truly stuck in madrid because no one will send you money. tracy: boy that cried wolf. >> see you later. don't get stuck in the madrid. that is the moral of the story. tracy: valuable life lessons you get here 2:00 every day. ashley: quarter past the hour. as we do every 15 minutes let's check the markets. nicole petallides on floor of new york stock exchange. i hope you didn't send money, nicole. we're looking at smartphone makers. >> wait a second. you guys left out one thing. if tracy is going on fabulous trips to madrid or wherever, please notify me, trace so i can come and tag along for the weekend. tracy: the tippoff, if you stole all my money, i'm just staying. i'm not coming back. >> i love the way you think. all right. let's get to apple. when you take a look at apple, we talked so much over the past few days about the new, cheaper, iphone that apple is producing for china. well some analysts particularly over at piper jaffray said cheaper iphones could bring down apple's margin. this could be one of the concerns. the analyst actually cutting his price target on apple. we'll see how they fare with that. appeal -- apple at 516.66 nowhere near the $700 mark they were in september. let's look at nokia. still holding the gains it got earlier today. 17% to the upside the lumia phone doing much better than anticipated. they shipped four million lumia devices in fourth quarter. that lifted total shipments to 6.6 million. that is more than they expected. gaining market share and face intense competition from samsung and others. ashley: thank you, nicole. we'll be back with you in 15 minutes. ashley: i sent some money to a guy in nigeria. waiting to hear back. tracy: i got some of those. herbalife is aggressive fighting charges that it is nothing more than a pyramid scheme. ashley: how the dollar is moving with the dollar moving slightly higher. down against almost all currencies. the yen slightly higher against the dollar. we'll be right back. >> announcer: you never know when, but thieves can steal your identity and turn your life upside down. >> hi. >> hi. you know, i can save you 15% today if you open up a charge card account with us. >> you just read my mind. >> announcer: just one little piece of information and they can open bogus accounts, stealing your credit, your money and ruining your reputation. that's why you need lifelock to relentlessly protect what matters most... 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according to ackman herbalife did not respond to our identification of overstatements and inaccuracies in the company's earnings statements for distributors which among other deceptions, quote, excludes the 93% of distributors that have zero gross earnings. that would at least indicate, if he is accurate, if you don't have any earnings you're a distributor sure does sound like a pyramid scheme but a lot of investors thinking that herbalife is on the up and up and legit. ashley: there is more to this story. i'm sure we'll have more. adam shapiro thank you so much. whatever you to do not miss charlie gasparino's interview with herbalife president des walsh, 4:00 p.m. eastern time right here on fox business. charlie gasparino on the story. he will get to the bottom of it. tracy: he will certainly. latest jobless numbers rising this week. is this proof that the american job growth continues to be lackluster in this country? ashley: what does it mean for the overall economy. joining us is ftn financial economist lindsey piegza. once again thanks for being here. >> thanks for having me. ashley: it was lackluster, really ho hum. is there any positives in the report. >> we saw the jobless claims pulling four-week average up. once we parse out the temporary volatility to hurricane sandy we find ourselves very much unchanged from where we were before the superstorm hit. really no change in the labor market. we're still just kind of bumping along. tracy: we heard that small business confidence is ridiculously low. they're not hiring. where will the job growth come from. >> that is part of the problem. the fed continues to have very accommodative policy in place and continue to pass along the baton to the federal government saying now it is your job to put pro-growth, pro-business policies in place to reinvent the investor class and business class in order to grow that highering. ashley: we heard from a number of companies and we're just into the new year about more staff reductions. that must be a concern. >> it certainly is. we're seeing more and more companies moving full-time employees to part-time employees to rein in the costs. still keep the employees on payrolls but reducing hours. ashley: fran cheese of wendy's in nebraska, we may see more of this, bringing hours down so they don't have to pay for the employee's health care. >> businesses are struggling with the recovery very tepid. three years into the recovery we should talk about four, five, 6% growth. but we're not. we're still very much range-bound at 2%. tracy: a lot of it has to do, most of it has to do with washington and lack of direction. now we're up against this debt ceiling. we don't have a budget. play that out for us. happens to the economy during all that? >> we do we continue to see the overhang of uncertainty and we saw that effect in the quarters leading up to the fiscal cliff negotiations. now what we've done is really kick the can down the road for another three months saying, okay, we can hold on but that does not reinstate confidence for small businesses or reinvent the incentive to get the capital into the market to grow businesses and create jobs. ashley: but on the flipside of that, lindsey, once they do get their act together, and that's a big if, isn't it, once they do it take as way a lot of uncertainty could we see a real hush to hire and expand? >> i don't know if we'll see a rush to hire. in the long term we will as we see a more sustainable recovery. we're seeing budgets becoming more balanced on the state level and talk of that leading to hiring. i'm skeptical we'll see that in the short term as most of those budget surpluses have already been allocated to really cover short falls or cover expect the rise in costs particularly surrounding medicaid. tracy: interesting you're saying states are seeing more revenue. so they're collecting more taxes. >> sure. tracy: will we continue to see that? will we see a little more exodus from the high tax states? >> we could see that again in the long run. in the short run i think people will sit that out. we're starting to see a little better recovery on the state level. revenues are set to increase about 4%. right there we're starting to see budgets come in line but there are still a lot of holes as we saw a lot of programs, specifically pensions underfunded in those years following the great recession. tracy: i would be interested to see the exodus, especially from states like ours, connecticut, new jersey, california. ashley: people moving out. >> certainly small businesses relocating. >> absolutely. lindsey, love having you here. >> thanks so much. ashley: thanks, lindsey. coming up identity theft is swamping the irs not just tracy's e-mail. you won't believe how long victims have to wait until their cases are resolved. complete nightmare for victims. will gerri willis is on the story. she will be here next. tracy: dow is up 35 points. look at some winners on the s&p 500 as we head out to break. best buy up 5% and urban outfitters almost up 5% today. we'll be right back. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan. tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world tdd#: 1-800-345-2550 as if i'm right there. tdd#: 1-800-345-2550 and i'm in total control because i can trade tdd#: 1-800-345-2550 directly online in 12 markets in their local currencies. tdd#: 1-800-345-2550 i use their global research to get an edge. tdd#: 1-800-345-2550 their equity ratings show me how schwab tdd#: 1-800-345-2550 rates specific foreign stocks tdd#: 1-800-345-2550 based on things like fundamentals, momentum and risk. tdd#: 1-800-345-2550 and i also have access to independent tdd#: 1-800-345-2550 firms like ned davis research tdd#: 1-800-345-2550 and economist inteigence unit. tdd#: 1-800-345-2550 plus, i can talk to their global specialists 24/7. tdd#: 1-800-345-2550 and trade in my global account commission-free tdd#: 1-800-345-2550 through march 2013. tdd#: 1-800-345-2550 best part... no jet lag. tdd#: 1-800-345-2550 call 1-866-294-5409 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get started today. ♪ ashley: let's get a check on those markets as we do every 15 minutes. nicole petallides on the floor of the nyse-listed rieti's gains nicole. >> reporter: and standing here you a lot of reading, delving into all the earnings for earning season. based on all this reading and studying that you do, what are your conclusions? our you feeling about the market >> very bullish. short-term bullish for a while. we don't have the market overbought. we won't see that on the s&p and self 1490. the expectations for earnings in the fourth quarter have been ratcheted down so severely after the third quarter earnings. at the rest is for people who are short the market and make it, on the upside because a lot of companies have ratcheted down there will surprise to the upside and the market will take off. tracy: you talk about 1490 on the s&p, sitting now at 1466. the short squeeze is pretty bullish. >> i have to say that, but that's what i see in the numbers. again, 1490 is my mark, and i don't think that will change. we are building momentum with some of the trading, even though it is lackluster. i think we get there easily. >> thank you. we always appreciate your insight. back to you. ashley: thank you. we'll be back to : 15 mets. tracy: scary news for anyone filing a tax return and hoping to get a refund. the taxpayer advocates services reporting that tax-related that in the theft is up over 615%. this is over the past four years. the internal revenue service is warning victim's it could take six months to resolve these cases. >> people still your identity, take out loans, student loans, car loans, you name it, and now the irs is saying that taxpayers are getting arrested for crimes they did not commit. someone else committed in their name. prime time, people are starting to think about filing taxes. yet in the -- the irs saying it will take up to six months to resolve the cases because there are so many people in the pipeline to be 650,000 cases. the problem is up 80% year-over-year because it is easy to do, especially if you are just a w-2 employee. start hanging around mailboxes and steal the w-2 and filed a tax return unbeknownst to them and get the money. a big problem. tracy: getting it back is challenging because people have to go through the paperwork to file. ashley: then the victim trying to prove to you or who you are. meanwhile, it is a complete nightmare. id theft is a huge problem, but when it comes to the irs is even more difficult. gerri: the victim is commonly the elderly. in some cases they have even lost their homes because somebody else and their identity and maintains they are that person the motherhouse is mine, and the elderly person really gets hurt. tracy: gerri willis. tracy: the willis report tonight. were you talking about? gerri: all kinds of things, including executive orders. how does barack obama stack up against other presidents. can he put an executive order limiting guns in place? ashley: a shocking debate. thank you very much. uncle sam is out with new rules designed to stop risky mortgages. will they do the job? liz macdonald is all over the story next. tracy: first, as we do every day at this time of day, let's take a look at the ten and 30-year treasurys as we head to break. ♪ ♪ >> good afternoon. and sandra smith with your fox business brief. president obama officially nominating his chief of staff, jack lew, to be the next treasury secretary. facing some opposition in the senate, including alabama republican jeff sessions and vermont independent senator bernie sanders. burger king largest franchise will pay to one-half million dollars to settle federal claims of sexual harassment in the 14-year lawsuit with the club signed opportunity commission. it settled the case to avoid litigation costs. and 1-and-4 workers plan to change jobs this year. that is according to a survey by career builders. the same survey showed potential employees are making a rages mistakes. 62 percent of employees are appearing this interested. that's the latest from the fox business network, giving you the power prosper. ♪ ashley: the government finally unveiling new rules to stop mortgage abuses that led to the financial collapse in 2008. now, the rules are aimed at protecting mortgage borrowers, but they do much more. the usher in a whole new world of mortgages. what does it mean for you? here is liz macdonald with the bottom line. what does it do? liz: we have to clear up media misconceptions. misreporting already on this story. on the phone with the consumer financial protection bureau. these rules sunset after five years, but let's get to what we're talking about. essentially, banks now legally, by law, must mayor of -- verify your ability to pay your loan. verify your income, assets, credit history, that to much house support, loans, credit cards and also your job status. banks have to verify this. let's cut to the next one. no more toxic loan features, meaning long gone are the days of the no-income, no document, no problem mortgage. what you're seeing is that those loans can still be made available, but they will be under the umbrella term, a qualified mortgage. in the next one, debt payments cannot exceed more than 43 percent of your income. again, this is a new rule. all of your debt to my child support, of the loans, credit cards. and that is really lenient. that is a reasonable standard because last year the debt to income ratio was around 34%. the averages trending around 36%. the government is giving the banks leeway. capping points and fees at 3 percent, and they have the incentive if they follow all the rules, there will be shielded from lawsuits. another misconception. consumers can still sue, they can still sue any bank over a bad loan or mortgage for whatever reason, but this basically says that if you, lender, you will be shielded from lawsuits in court the judge will say, you know what to mike case dismissed. the other important point to make is that these rules do sunset after five years. the government will revisit them. this is like to striving to see how it goes and if it works and if people like it. but subject to amendment after five years and the other misconception, sub prime loans will still be out there, those no-interest, no document loans. basically -- by the way, the cftc told me, they don't want to as over or wreck that for the low income or first-time borrower. they want those people to come into the market. they just cannot be as risky as they were before, so that is the deal in the bottom line. ashley: good stuff. tracy: they were created for a purpose, to help people. that's all i got my first mortgage. liz: and it was for the upper hand, the ridge bracket. they really were. that is why there were no interest. those people could pay them in the early 90's. then in flooded into the low-income bracket. tracy: interesting. ashley: thanks. tracy: well, the academy award nominations are in, and there are some surprises about who was left out. no surprise, dennis kneele is on the story. >> reporter: a dead president, a dead terrorists, and a computer animated tagger let oscar nominations out today along with a major snub that may reflect hollywood liberal bent. an impressive 12 nominations including best picture, best director, and the three bids for actors. "life of pi" came in second, now, the nine best film, commercially a better crop than last year. a silent film won best picture, though few people ever bothered to see it. the best film nominees include the musical box office hit "les miserables" with eight nominations total. "silver lingings playbook." "django unchained" got five nominations, and the air ron hostage thriller "argo" got seven nominations. the osama kill mission thriller "zero dark thirty" getting five oscar nods, but nothing for its director who won the oscar for the her locker a few years ago. hollywood accusing her of endorsing torture as a way of -- playing a role in finding a osama. the dark horse is this little noticed "beast of the southern wild." it got four nominations, including one for the youngest actress ever to get a best actress nomination. she is nine years old. her name is quvenzhane wallis. kind of hard to pick which one you want to read for camino? ashley: but "lincoln", 12 nominations. and "life of pi," which did not get a whole lot of who hawk, but certainly did well in the nomination category. i'm sure will have a special effect. >> that tiger. tracy: i don't get out much. i have not seen one of those. except for bond. i did not enjoy it. ashley: five nominations. tracy: i did not enjoy it. >> thank you very much. it's a guy thing. tracy: there was no girl in a guy thing. how could it be a guy thing? ashley: gadgets. tracy: gadgets, but no girls. i don't know. ashley: it's a quarter till. stocks as we do every 15 minutes. nicole on the floor of the nyse, looking at -- let them roll, casino stocks. >> reporter: still on the same page. i have not seen any of the movies and always enjoy a love story. as tracy said, there was no love story in the bond movie. i send my kids to it. let's take a look of some of the casino stocks. the only one holding up is when resorts because they get an upgrade. the group overall is coming -- coming under pressure, down 2%, mgm down two and a half, sans down 1/4 1%. revenue numbers that have been coming up are a little shy. what we have seen is total revenue in november, numbers are falling 11% to 782 million. stripped over in vegas accounting for more than half of the total, but over there in vegas they have seen the numbers dropping even more so. we did have a couple. gm was downgraded to neutral from buy. and, of course, as i noted. ashley: well, liz claman was just in los vegas. i imagine those numbers a turnaround. thank you very much. tracy: i feel bad that she missed out on a bond movie because of me. i would not steer wrong. ashley: you don't like daniel craig? tracy: coming up, five weeks until we get the debt ceiling. when will washington get serious about fixing the problem? ashley: mcdonald's once again trying. live in chicago with a preview. first, take a look at some of the winners and losers but the dow up 54 points. ♪ ♪ [ male announcer ] this is karen anjeremiah. they don't know it yet, but they' gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. 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[laughter] work with me. thank you. great stuff. welcome back to more serious topics, 35 days from hitting the debt ceiling. the head of the u.s. chamber of commerce says our exploding debt is the biggest threat to our economic future. will congress be able to tackle the government's spending problems? joining me now, former head of the republican party in virginia and former senior adviser to senator harry reid. thank you both for being here. kate, let's begin with you. was reading some of your notes. you're not a happy person with your own party. you say the gop needs to grow a backbone. the president's tactics of class warfare is working in the republicans need to wake up. >> yes, i think that the president has been incredibly successful with really vilifying republicans, pointing them as loving only the mega wealthy, which he classifies as anyone making over $250,000. it is this steady attack and drumbeat that they don't care about the working class and middle america. it is time for republicans to stand up for some fiscal sanity and point out the fact that penney's, senator reid has not bought up budget -- brought to the senate floor a budget in two years which is just irresponsible. instead we have these manufactured crises, and the republicans are told, you are going to be blamed if we fall off the fiscal cliff or if we don't get an increase in the debt ceiling. republicans need to stand at. ashley: why has senator reid not brought a budget to the senate floor, and what about this class warfare issue? is it unfair? >> well, you know, we cannot continue to legislate. ashley: i agree. we cannot legislate by crisis by crisis which is just kicking the can down the road for one month at a time. we need to have adults in the room to hammer out a long-term fiscal plan. i think that is what the president was doing today when he announced, as is the treasury secretary, jack lew. that is really hopefully with him there now at the head of the treasury department and with some, bruises from the last two battles, we will have some sanity returned and we can actually get something done that is more than just one more month of kicking things down the road. ashley: kate, you are not a big fan of jack lew, are you? and no other republicans have called him condescending and flexible, even a little sneaky. >> i think jack lew signals obama's intention to only intensify this class warfare rhetoric. jack lew has been right in line with the president's unwillingness to even discuss spending when it comes to the debt ceiling debate that we are going to be having. he hhs been intransigent, certain republicans down it came to any sort of meaningful spending cuts in the fiscal cliff. ashley: giving her the last word, do you think jack lew is the man? >> i do. negotiating tip o'neill and ron reagan, newt gingrich and bill clinton. this is someone who knows how to bring both sides together and get a deal done. ashley: we have to leave it there. thank you so much, kate obenshain and penny lee. thank you for joining us. >> thank you. ashley: always want to debate. tracy: sure is. ashley: lots to talk about. tracy: for a while now. a valentine's day, which, a lot going on. all right. cheryl take as to the last hour "countdown to tmyhe closing bel" is next. ♪ i honestly loved smoking, and i honestly didn't think i would ever quit. 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so secretary lew would have to make a decision. he could recommend the president continue business as usual-- ignoring the debt limit, borrowing money and paying the bills. as justification, lew could say the president had to choose between conflicting laws congress has passed requiring him to spend money and not spend it at the same time. >> at that point, i assume someone who would claim to be an injured party would bring suit and the federal government, if you can imagine this and the congress would find themselves before the supreme court arguing under what circumstances the debt of the united states should be paid or could be paid. it gets into really nasty stuff. >> reporter: but veterans of washington's budget battles say the rhetoric jack lew will face will be much nastier than the ultimate outcome. >> the debt ceiling is going to be an ugly fight, perhaps as ugly or even uglier than what we went through at the end of last year, but the real fight is not over the debt ceiling, the real fight is over deficit reduction and the debt ceiling is not a lever that will ultimately be pulled. being treasury secretary over the next couple of years is not going to be an easy job, tom. >> tom: what do we know about lew's background, darren, that could inform us how he may treat the negotiations over the debt ceiling? >> he has been described to me as a pragmatic progressive. he has been around for 25 years in washington, and he has been involved in almost all of the major budget battles. so he is widely respected. he really knows his stuff, and he is seen as a calm but fierce negotiator. >> tom: did he play any role back in august of 2011, the last time we had this debt ceiling de back debac. >> absolutely. there were some republicans who felt that lew got the best of them. he came up with the whole scenario of sequester, which at the time was thought as equal playing. but at the time it came into play, it was seen as more beneficial to democrats. >> tom: does that spell out some already ultra hard bargaining, i suppose, on the part of the republicans, if they think lew got the best of them last time around? >> i have to say my experience has been any one individual in this town -- we like to talk about personalities, and we like to focus on them. they're important, but they're not critical to the outcome of these things. basically what is really going on here is there are deep divisions over policy, over what to do, whether to raise taxes or cut spending. one guy into going to change that dynamic. >> tom: real quick, does he get through the senate pretty easily for his confirmation? >> there will be some senators who will raise and be upset and pick a fight. but he was confirmed by the senate, i think, four times. >> tom: they're fot going to do it for the fifth time. he has seen this song and dance before in terms of the senate confirmation. in washington, d.c., our bureau chief, darren gersh. >> thanks. >> susie: what's in your portfolio? still ahead, the importance of how to allocate assets when it comes to your investing strategy. on wall street, stocks broke a two-day losing streak, rising modestly. investors were feeling a bit of optimism about earnings season, after alcoa's positive report last night that we told you about. the dow rose 61 points, the nasdaq added 14, and the s&p gained almost four points. >> tom: a.i.g. will not being suing the u.s. government after all. the insurance company's board of directors decided against joining a controversial shareholder lawsuit against the government. former c.e.o. hank greenberg and his company starr international claim the terms of the government's bailout of a.i.g. were unfair. but even without a.i.g.'s support, the suit will proceed. erika miller reports. >> reporter: maybe it was the outrage by the public and politicians, or perhaps it was simply a business and legal decision. a.i.g.'s board did not explain why it decided not to join a shareholder lawsuit against the government. back in september 2008, the insurer was saved from collapse with a $182 billion loan. that's the largest government rescue of any wall street firm. former c.e.o. hank greenberg filed suit on behalf of shareholders asking for $25 billion in damages. he alleges the terms of the bailout were too harsh, including 14.5% interest on its initial loan. but columbia law professor jack coffee does not think the suit will be successful: >> i think its a longshot suit, he has alleged very specific facts, that the federal government was seeking to take over a.i.g. and run it for the best interest of others and not its shareholders, but it is very, very rare that a federal court will allow a derivative action to proceed against third parties. >> reporter: a.i.g. was legally obligated to consider joining the suit. but today's board meeting comes on the heels of a new high- profile compaign, in which a.i.g. expresses gratitude for the bailout. >> thank you america. thank you america. thank you for the freedom to ensure a brighter future. >> reporter: and that's what the public wanted to hear all along. erika miller, "n.b.r.," new york. >> susie: robert doll, chief equity strategist of nuveen asset management says he's "moderately positive" on the outlook for 2013. he says the u.s. economy will "muddle through," but stocks will hit new all time highs. those are two of his "ten predictions" for 2013. >> so the key, susie, is we're in an environment where stocks continue to climb walls of worry, and the economy continues to muddle through, not similar to last year. last year the economy some days okay, some days not so okay, and the stock market kept climbing that wall of worry. last year stocks were up 16%, s&p 500, and we only need about half that to achieve a new all-time high. i think we'll get there. >> susie: bob, how do markets go higher when the individual investor is out of the picture, so fearful of investing in stocks. do we see the return of the individual this year? >> i wish i could say we're going to see that, susie. but the individuals who own a lot of bonds first need to see bonds going down in price to be willing to sell them to buy stocks. i think we hit a new all-time high without much participation by the individual. it is the corporation itself that has the big burially since the become oof 09. >> susie: you believe the emerging markets are going to do better than the u.s. so should investors focus outside the u.s.? >> i think so, susie. both in terms of where they have there are money and the kinds of u.s. companies. if the economic momentum is shifting from the u.s. to the emerging markets, and we think it is, that's where the best earnings growth will be, and so i want to own the companies that serve there and are located there. >> susie: bob, you're predicting that cyclical do better than defensive companies. how do that work in such a weak economy? >> because investors have gravitated to the defensive companies. they are now expensive. they have shunned the cyclical companies and they are now cheap. as a result, and if -- and it's a big if -- economic growth is acceptable, i think the cyclical stocks will show the earnings and outperform them. >> we know that big corporations are sitting on a pile of cash. tell us why you think they're going to opt to pay more of that in dividends, than investing in their businesses? >> unfortunately, because they are so uncertain. they have tons of cash, good free cash flow in some cases, and they'll sit on some of it, but i think they'll continue from very low payout ratios, to increase their dividends and give it back to the shareholders. >> susie: let's turn to washington. you believe that washington is going to get its act together this year. there are a lot of big battles. and we know that investors stay away during these battles. how do you think it will play out? >> i think there will are some selling squalls in wall street because of it. we went through the fiscal cliff, and we have the debt issue here in a couple of months. it is not going to be a fun period. the optimism that we get something done is cross your fingers, hold your breath. but i believe at the end of the day, they'll coble together something and they'll learn what the word compromise means. i think when you look at bond rating agencies, holders of u.s. debt, particularly outside the u.s., and voters, and they're putting the pressure on, and i think that somebody will cave in and we'll get something done. >> susie: so a lot of factors to consider for every individual. what is your best advice to investors for this year? >> don't think that what happens today is the only thing that is going to happen. in other words, don't be so short-term in your orientation. step back. when we have a selling stall because washington is messing it up, , quote, unquote, step in and buy stocks. i think people are generally under weight in equity. cash is zero, treasuries are two, and cash will give us mid-high single digits. >> the new year is often time a good time to pull out that portfolio and take stock of your financial health. ruben ramirez takes a look at whether some age old rules around asset allocation still hold true for today's portfolios. >> why did we invest so much? >> lord gratham, it was you who insisted we should. if you remember, we advised against it. >> reporter: it may have been a scene out of downton abbey, but for some investors, putting all their eggs in one basket is not uncommon. >> we definitely find that clients need some sort of event to look at their portfolios. whether that's the arrival of a new child, getting married, leaving their job getting closer to retirement or being of retirement age and so the new year is actually a fantastic time of year to tune up ones portfolio. >> reporter: kent sargent is one of marlena's clients, in 2008, he was two years away from retirement. >> i would say there was some anxiety there as you approach that age. am i comfortable? >> reporter: over the past few years, easy monetary policy by the federal reserve has buoyed bonds, stocks, commodities and even real estate, sending all the asset classes higher. but many investors, shaken by the market's downturn, in 2008 and 2009 have been sitting on the sidelines, in cash, missing the upside. >> most people aren't thinking along the lines of when i leave my money in cash its actually an investment decision they think they are out of the market, but they're not out of the market because they're not out of the economy. >> reporter: many investors, follow the rule of diversification by age, for example, a 40-year old should have 40% in bonds and 60% in equities. but sonn points out, following that strategy in this easy money environment, you'd have missed out on the rally. as for sargent, who meets with sonn and her team quarterly, he's cautiously optimistic about 2013. >> you stop you look you evaluate. you decide what options there are and you go with the ones that you feel more comfortable with. >> apple may shoot through the roof but that's not what were aiming for. what we're really aiming for is that you don't go down with a sinking ship. >> reporter: or, as lord grantham discovered, putting every chip on black, could easily leave you deep in the red. ruben ramirez, "n.b.r.," new york. >> susie: something new today for goldman sachs. the firm's asset management unit started disclosing "daily" values for its prime money funds. before today, they were calculated on a "monthly" basis. the move comes as regulators are considering banning the use of a constant $1 share price. j.p. morgan says it will also offer daily values for its money funds, starting next week. >> susie: tom, more green than red here on wall street, a nice break from the losing sessions we've had over the last couple of days. and it's all about earnings. investors are feeling a little more optmistic that the earnings that will be coming up. we have wells fargo on friday and they're feeling that the numbers won't be so bad. >> tom: after all of the big volatility last week, we saw very narrow trading ranges over the past several sessions. not a lot of volatility, digesting the big gains from last week. let's look at tonight's "market focus." the small gains did return to the market after two days. the s&p 500 had another day of a narrow trading range, just 7.5 points. the index finishing higher by 0.3%. 670 million shares traded on the big board. 1.7 billion moved on the nasdaq. the healthcare sector led the gains, up 1.1%. the industrial sector finished higher by 0.9%. yesterday's big loser among industrial stocks was today's winner: boeing. the company was out defending its marquee plane, the dreamliner 787, after three issues in as many days this week. shares rebounded 3.6%. volume doubled. today the chief engineer for the program expressed confidence the 787 is safe. the other big winner in the sector was industrial equipment maker danaher. shares are at an all-time high after the firm raised its financial forecast for the fourth quarter. among the health care stocks rallying was medical device maker stryker. it makes replacement knees and hips. preliminary quarterly results were encouraging after a recent slowdown blamed on weakness in europe. shares moved up to a new 52 week high. u.s. sales had been under pressure as well from insurance companies becoming more conservative in paying for elective replacement surgeries. the fight for clear-wire is on. clear-wire is a wireless broadband technology company. sprint owns half of the company and has offered to buy the rest, but dish network topped sprint's offer, as dish continues moving toward offering its own nationwide mobile phone service. the dish offer would give clearwire shareholders $3.30 per share. that trumps sprint's last offer of $2.97 per share. remember, sprint owns about half of clearwire already, so in order for dish to be successful sprint would have to reject its own offer. clearwire stock meantime closed right between the competing offers. after rising 7.2% today, it finished at $3.13. volume was three times average. meantime, dish network stock rose 2.5%, closing about one dollar below a new 52 week high. but sprint fell 1.5% on heavier volume. its a different kind of fight at nutritional supplement marketing firm herb-a-life. first, dow jones reports the company is the target of a securities and exchange commission inquiry. that comes a day before tomorrow's investor meeting where the company is expected to defend its business model. activist hedge fund investor william ackman has claimed the company is a pyramid scheme. shares were up 7.5% today as another high profile hedge fund manager daniel loeb, has taken more than an 8% stake in the company. a milestone of sorts for facebook. for the first time in six months the stock is over $30 per share. it rallied 5.3% on heavy volume. there was some excitement about the possibility of a new product as company announced a media event next week. four of the five most active traded exchange traded products were higher. the lone loser of the group was the financial sector fund, down 0.2%. and that's tonight's "market focus." >> tom: despite the worries about european government debt, and violence in mexico, exchange traded funds following stocks in those markets did better last year than the s&p 500. we spoke with stuart schweitzer, vice chairman and global markets strategist at j.p. morgan private bank. >> tom: welcome back to n.b.r. and happy new year. >> as you look across the globe and put your client's money to work, what global market do you see as poised for the best stock market. >> we're really optmistic about non-japan asia. china has bottomed, we think, and that should help chinese stocks and stocks in greater china, and i think it should help stocks across asia. it should also help a little bit in the natural resources producing economies, brazil and peru. >> tom: and what about brazil -- >> another one. >> tom: why not japan. >> japan has a positive impetus from a changep change of policy. >> tom: lots of new government spending, trying to pull that economy out from the doldrums it has been in for almost a generation. >> that's what they say, and they've said that before. and the question is not will they do something -- they will. the question is will they keep at it. but will it be a lasting impact. right now the jury is out on that, but japanese stocks have been doing better and understandably so because they have more policy impetus behind them. >> tom: you mentioned latin-america. within latin-america, brazil has been a big engine for a long, long time. and we've seen chile come along recently. argentina, not so much. is there an area that you like specifically? >> i do like brazil because it is an economy that has been actually a little bit down, and i think it's starting to look a little brighter there. but what i really like on a longer term basis is the potential for change in mexico, for structural change in mexico. they've already moved forward on education reform. penn yetta, the new president is a big proponent of energy reform. mexico has a lot of potential it is not tapping at present. >> tom: we mentioned the price performance that the exchange rate had, outperformed the united states, and you think it can still continue to build on those gains. >> i think the u.s. needs to be there for mexico to outperform. as long as the u.s. economy keeps growing, mexico should keep growing. >> tom: so it is really the united states helping to pull mexico up? >> and mexican labor costs, when you adjust for productivity have been held flat over the next decade. china has seen its labor costs escalate, and the two have pretty close to met. so mexico is much more competitive on a cost basis, and it is here. >> tom: just across the border. finally, that brings us to the united states. how does the u.s. look compared to the rest of the world? >> i think we are still looking okay if we can get past this budget. >> tom: you're less excited about america than you are about non-japan asia. >> i'm really excited about non-japan asia because they're coming back from a period of out and out weakness. but i'm really hopeful if we can get a budget deal without too much problem in the next 60 days, we can really publish something. because if we can do enough to stabilize the ratio of u.s. debt to g.d.p., i think markets are going to love it. >> tom: we'll see. we have a long year ahead of us, stew. we appreciate the navigation in the global markets. >> always good to see you, tom. >> tom: there's more with stu schweitzer on the web, you'll find our discussion about global currencies on: www.nbr.com. >> susie: tomorrow on "n.b.r." we focus on fitness, for many it's a top new year's resolution, and it could help power up your portfolio. and we meet the people behind the nation's hottest fitness craze: zumba! >> tom: in the money file tonight, not all college bachelor's degrees are created equal. some come with a much higher cost than others. donna rosato, senior writer at money magazine, tonight on figuring out if that degree will pay for itself after graduation. >> if you're a parent with a child heading off to college soon, you know the tab will be expensive. but just what kind of pay off will you get for your investment? until now its been hard to evaluate whether attending a pricey university helps you land a well-paying job. but a few online data providers are trying to fill that void with data about salary and employment for grads of many popular schools. if you're helping your son or daughter choose a college, here is some new information to factor in. first, get a sense of the big picture in terms of salary at payscale.com, which lists starting and mid-career income for grads of 1,000 schools. you can get more precise average starting salaries and employment rates for schools within universities at nerdwallet.com, though only about 100 colleges have supplied information so far. finally, weigh that salary information against the cost of attending a school using the college net price calculator at cnnmoney.com. if two schools offer the same job prospects but one costs a tonight on quest -- cell biologists have a new tool in their toolbox. see how this powerful x-ray microscope generates amazingly detailed, 3-d images of cells-images which are leading to advances in disease treatment and biofuels research. and -- meet the bay area scientists whose collaboration is pushing the boundaries of "bio-inspired" design and generating some pretty cool creatures. support for quest is provided by -- the s. d. bechtel jr. foundation -- the david b. gold foundation -- the dirk and charlene kabcenell foundation -- the vadasz family foundation -- the wyncote foundation --