Transcripts For CNBC Squawk Box 20180123

Its the biggest gainer of the major averages look at treasury yields, this is where the action has been. Yesterday the twoyear sitting at the highest level since 202000 the tenyear at the highest level since 2014 the yield on the tenyear is 2. 632 couple big stories were watching, the u. S. Government is officially reopen for business after President Trump signed a bill to end the shutdown hundreds of thousands of federal employees will return to work. The bill funds the government but only for 17 days its the product of an agreement in the senate to reopen government and tackle immigration within three weeks well watch that its a busy day for ponentse the opening bell Johnson Johnson, Procter Gamble, travelers and verizon. We will hear from capital instruments and united netflix shares are popping the streaming company adding more global subscribers than expected in the latest quarter heres what Reed Hastings had to say about what is driving growth the real driver is to make the big titles bigger. So what happens is so many people are talking about bright or Stranger Things, or the crown, that pulls in people who have not yet joined, all their friends talking about the shows. Thats the dominant accelerator. Earnings and revenue were in line the companys upbeat guidance pushing netflix shares to an alltime high giving it a market cap of 1 100 billion for the first time this is the kind of day davos was made for yes yes. The snow stop. Sun came out its beautiful you hear the church bells ringing . Its not cold last year it was freezing this is our first of four days here. Thats okay but this is pristine not the slightest bit look at him. He looks like hes leaving this to go to a runway. Walk up and down looking good without a jacket all right. I was going talk about something. Ge reporting on a wednesday we need someone to find out the last time it was that they they always report on friday yeah. New company, new leadership reporting on a wednesday. We have a lot of important guests do we have to work in these earnings theres a lot of news duty calls. Are there are no computers h. Including this. As a proponent of renewables, you have to tell me whether you like this or not President Trump is slapping tariffs on imported solar panels and large washing machines the u. S. Will impose duties as much as 30 on solar equipment made abroad. Currently about 80 of the parts in the industry are made overseas solar stocks this morning are up a bit. Renewable people here have been against tariffs, even though they are definitely being taken advantage of from dumping from abroad they think it will hurt the overall adoption if you look at the issues, just the jobs created in the United States, based on solar products, 15 of it comes from manufacturing. 25 comes from research and development. And from the sales jobs. 53 of it is installation. More expensive solar panels, it will mean fewer installations. So the green lobby is not the solar lobby is not on board because it means theyll have less adoption rates thats what i meant, the greenies i wondered how you felt about it it seems like were getting dumped on. Its unfair. This is one area where you would look for if you would try to make things well see washing machines, i dont know tariffs on large residential washing machines will range from 20 to 50 the u. S. International trade Commission Found both imported products are substantial causes of serious issue to domestic manufacturers. U. S. Officials said more trade enforcement action will follow thats right there is a lot of news this morning. We do have news andrews column it is some breaking news that just broke overnight elon musk is the subject of the column telling me hes agreed to stay on as ceo of tesla for the next decade. There was speculation that he would be stepping down he said once completion of the model 3 was up and running, that he might not stay at company at least as the ceo. But tesla announcing a radical new Compensation Plan. It could be the most radical Compensation Plan in history his compensation will be tied to the performance. The executive will receive no guaranteed compensation of any kind at all. He only gets equity that vests over time but only if he reaches the hurdle rates which are, dare i say, crazy right now the company is worth 59 billion they run at 50 billion increments youre just talking market capitalization not based on revenue or production theres two metrics at each step so the first step is he has to get the company to 1 100 billion and reach these operational and adjusted ebita and revenue number if he doesnt get either, he gets nothing thats a weird way to break it down. If he gets to 150 and hits the operational number the market can be irrational. Cant control that at each 50 billion number h collects 1 of the company if somehow magically he would get the company to 6 650 billion which is what the plan calls for, if you can believe this, he would contact the equivalent of 55 billion in compensation. Otherwise he gets nothing. What if you get it to 6 650 billion and it collapses to 500 billion . Is it just hitting that market milestone that matters heres where it gets more interesting. The shares vest but then he has to hold the shares for five years. At each break point. You still get it, right market capitalization is the weirdest thing no. Its impossible to game, even if you were to get the company the market cap to 100 billion, you have to hit the operational numbers. On top of it. You have to get both. Then you have to hold the shares for five years so if youre trying to do something temporary you cant, because five years later your shares would be worthless. Would affect decisions on i buybacks, issuing stocks the last Compensation Plan they had in place started in 2012, it was similar to this it had a market cap component and all sorts of i never heard of another company doing this. He literally gets nothing if he gets to 99 billion he gets nothing if he gets to 1 149 billion, he gets nothing it is truly eat what you kill skin of the game operations, it would be that. Yes, production if you can make sure youre producing enough models by a certain time its not eat what you kill but you have to capture both. Otherwise what do you do he is taking a chance huge chance who was it that said if you value the company x subsidies some think the company is worthless. People talk about what an executive Compensation Plan should be, you want people to have skin in the game, this is about as much skin in the game as it comes. Heads you win, tails you dont lose all right well talk more about this over the next several days. Right now down to business with our first guest who has a big stake in all the final issues weve been talking about this past year. Those include tax reform, the u. S. Market rally and future of banks in the digital age joining us is bank of america chairman and ceo, Brian Moynihan bank of america the best performing bank stock in 2017. We appreciate you being here today. My pleasure to be here on a Beautiful Day. We got lucky today. You came out with earnings the numbers were better than expected but one slightly weak number was the trading number your trading revenue down 34 in fixed income for the Current Quarter we have not seen more volatility, but whats happening with trading . Theres seasonality to trading that goes on as you open a new year, people get back to work you see it so its been a bit stronger. If you look at it the way we run the trading business, over the last six years revenues ranged from 12. 9 to 13. 6 billion in revenue. Its much more stable. It comes from our ability to issue clients andinvestor clients. So were not running it to swing from the fences. We just talked about treasury rates, how theyve been creeping up a bit the twoyear, the fiveyear, the tenyear things picking up. What does that mean for bank of america . Weve been waiting for higher rates for a long time. If the rate structure represents stronger growth in the economy, and next year the economy picks up a half percent to three quarters of a percent, thats a great thing if the rates are rising in response to that if theyre rising because theres inflation or other things, thats not so good but we all benefit technically if theres a rise in the curve from year end, 60 of it is the short end. We go by the general economy, and its in pretty good shape in the United States, and we anticipate it to grow 2. 7 the imf just raised their Global Growth forecast, 3. 9 an increase of 0. 2 , that was based on the u. S. Tax law changes. We know what it means for bank of america, but what does it mean for the companies you do business with . I think the key for tax reform in the u. S. From a corporate perspective and a global perspective was a lower Corporate Tax rate and territorial system so you remove some incentives to try to move money to figure out where the natural watermark would be for activities. So companies are going to benefit by that. Theyll have more money to invest the second thing is they will be less about trying to figure out the knew wants in nuances in tax. We have a talent of work force, we have Tremendous Energy resources, we have a rule of law around working and employment flexibility and a Regulatory Environment swinging back in i dont think people have seen ive been pleased to see so far is not only u. S. Reaction, which you might expect, but outside the u. S. , the u. S. Becomes a more attractive place to manufacture and drive to i think that will help the u. S. Economy. When the u. S. Economy goes because of size and the consumer side of it, that lifts boats what do you think about the Small Businesses youve seen its early days, but have you seen increased demand for loans or Capital Expenditure weve been doing sort of successive record quarters of origination, small mid size businesses its been very strong. I think Small Businesses tend have looked the last several years on policy of being a bit working against them we decide that policy involved but implementation of Affordable Care act causes them to slow down and rethink the Business Models what has happened with the regulatory move and the tax reform is you have taken away uncertainty. Theyll be more aggressive you have to be careful of overstating it if they tell you theyll do it, lets say its 5 , 10 more aggressive in terms of investment, thats a big difference when you take across our 200,000 our 200,000 mid size business customers. Think of each of them being slightly more aggressive and how that flywheel keeps turning. What do you make of the companies that announcing after the tax reform plan to give onetime bonuses what do you think thats about we did it as part of a shared success with our teammates when we think about driving responsible growth at bank of america, we think of being sustainable. When the Company Receives a benefit like that, we thought it was important to show the teammates we had success with. Its part of what weve done in terms of healthcarebenefits an changed and lowered costs for lower paid people. We have done a lot of work around it. It was a good sign that, hey, we received a benefit, you should share in it. Well continue to use the tax savings to invest in the company and continue to drive things but was it driven from an Economic Perspective it was driven by you received a benefit and i thought it was important to share the teammates. If you got the emails that i got from teammates who were excited to get it, it was a tremendous thing lets talk more about the consumer i know the consumer was strong heard what you said about the Holiday Shopping season. The strength that was there. I read a report that suggested that consumer bad debt was up by 20 in the credi four major banks should we be worried about it . Spending, if you think from 15 to 16 and 16 to 17, the spending on debit, credit cards, cash, everything was up 6 16 to 17 think of that difference being across 2 2. 6 trillion of spending so consumers are out spending. You hear about retail sales. Theres a lot of spendingon experiences, eating, travel and stuff thats picked up so the spending is good. On the credit card pick up, were at a low base. We always have a bit of a pick up in the Fourth Quarter we went from 2. 6 to 2. 8. We used to underwrite 5. 5 in good times of losses now were experiencing half that so the conservatives in us and our colleagues in the industry will hold this in check. So i think the increase off a debt count balance level is expected well see that turn back down as we get through seasonality and as you continue to grow receivables, youll see that in good shape Consumer Credit is in good shape. You have closed a lot of branches mine got closed. Thats okay. A Technology Giant like you yes yes. I never use cash what do i use . Bitcoin venmo yes through my paypal or something. Thats a change in strategy, isnt it bank of america, there should be one on every corner, like starbucks. As much as at the peak we had 6100 branchs we sold about 500, 700 to Smaller Banks to get the consolidation benefits we closed some it was all based on Customer Behavior and flows in that time, last year we rehabbed 300, 400 branches, built some new well go into cities like minneapolis and denver we have gone from 150th market position to 8th in those cities already. So were bringing our as far ass and capabilities to seven or eight large cities automobile be building branches. With a change in behavior, if i were a retailer you would tell me what are you doing in terms of retail sales. Its incredibly important to do everything for customers we have a Million People kocomet branches every day all served by one teller . 60,000 teammates. Still yeah. Thank you, brian. Its great having you here. Appreciate your time thank you enjoy your davos. When we come back, up next ubers ceo will join us on set to talk about the challenging and changing culture at the ridesharing company. We will talk to him. Then blackstone chairman and ceo Steve Schwarzman is here ronoh really . Gs going on at schwab. Thank you clients . Well jd power did just rank them highest in Investor Satisfaction with full Service Brokerage firms. Again. And online equity trades are only 4. 95. I mean you cant have low cost and be full service. Its impossible. Its like having your cake and eating it too. Ask your broker if they offer awardwinning full service and low costs. How am i going to explain this . If you dont like their answer, ask again at schwab. Schwab, a modern approach to wealth management. Welcome back to squawk box. Were live in davos. 2017 was a bump year for uber, but they came in with a new ceo, an investment from softbank and what could be the hottest ipo. Dara khosrowshahi is here on set. Were thrilled to have him here. Thank you for having me thank you lets talk about the softbank deal yes weve been talking about that on our air the past month. Its finally done. How does that change the company . We are thrilled to have soft bank as an investor. Theyre one of the biggest capital players in the world and through their historical investments, they know the ridesharing industry they understand transportation in a way that few investors do were thrilled to have them behind us, investing in uber, not our competitor it came with certain governance change, is that we needed to make, such as getting rid of high vote shares, getting rid of one share one vote for everybody at uber. So everyone has an equal voice we think those government reforms are incredibly important as we drive the company forward. Whats the relationship like with travis . Its fine but strained. There was a lot that happened in the past it wasnt right. The moral compass of the company wasnt where it needed to be, but at the end the eo of the Company Needs to take responsibility a lot of the press coverage is difficult for him. Thats understandable. Travis has been there for advice when i needed it as a board member it is a difficult time for him and as a company we have to look past that. My job is to move the company forward, move the culture of the company forward. How often do you talk to him on a weekly basis . Not on a weekly basis its on a monthly basis. We have our normal board calls and we touch base once in a while. Right now my focus is getting a Management Team together we brought barney harfen from from orbitz. Tony west from pepsico and really getting a Team Together who i think can at uber, who i think can open up the next chapter of the company and take us where we need to go. The next place you may be going is an ipo. Yes, we hope. Do you think its going to be easier or harder to make some of these changes that i know you want to make people talk about how they need to be a private company to do this ive been ceo of a Public Company for 13 years at expedia. I think thats an excuse sometimes its harder as a Public Company to make the longterm bets that you want to make if youre clear about where youre going, youre clear that you wont be subject to shortterm thinking, then theres a certain class of investor who wont be interested you need to be clear an then deliver. So the Public Markets hold ceos and teams accountable. And i think with uber, this is a company thats absolutely been held accountable to some extent i think uber suffers from the negatives of a Public Company because the world is fascinated with everything we do we dont get the benefits of being public i think lets step up to the plate. This a big Scale Company its an important brand. We are going to step up and well be a Public Company that our employees can be proud of. What is the latest with the regulators in london were continuing to have dialogue im cautiously optimistic. I think the difference here is that were being open and honest there were things in the past that we did that werent right all of londons questions and issues, they make sense. We asked them to be patient with us in some area. Theyve been clear about what they need. I believe we can deliver i think london with uber in it is a better city i know uber with london as a large market is a better company. Dara, one issue for regulators and other people watching the company has been every time we think were getting through and it looks like a clean slate another scandal comes up whether its taking control of passwords, being able to change things, so if something came n headquarters could step in are there any other issues out there . I hope were done i honestly can say i hope were done the employees at our company are open and have taken responsibility for the past. Some have left we are looking forward and well do the right thing if there has been behavior in the past, i believe its been out there. Weve done investigations. Were looking through everything sometimes when we found things that were unpleasant, even though we knew it would hurt, we disclosed it so i believe that the mistakes of the past are out there. The only thing we can do is be transparent. Tony west said sunlight is the best disinfectant. Right now we have to bring these issues to light, be transparent, admit mistakes and then change thats why we brought in new cultural values, new norms one value that i get repeated to me over and over again not by me but by employees is do the right thing period if we do that well be fine. You came in when you were nine i think. Yo do you think its time now with what youve seen over there . Do you think theres something that has been lit and that this is not going to end quickly or theres still more i think that its going to take time, but i think a fuse has been lit in iran and iran wants to be part of the world community. Theres an incredible Education System there women in iran are strong theyre educated and the identity of iran as a country, i believe, is greater than the identity of iran as a nation it was a secular country. It was. How do you go back i think that that identity of iranians being proud of their heritage, of the persian culture and the empire, that and the Education System the fact that women are so strong in that culture, it will live on. Werent there chants, bring back the shah . I wont go there. Before he was in place iran had a prime minister, but unfortunately the u. S. And Great Britain because they didnt like what he was doing removed him. I think theres a reason why iran historically is angry with the west we have to put that behind us. There is hope. Final question for me driverless cars. You made some news the other day saying you thought it might take longer than we anticipated there was also an accident overnight, a tesla car on auto pilot. I didnt see that what is your sense . You hear from elon musk . You hear from google youre now in the hot seat what do you see . I think its going to take a long time to get to full, full autonomy in software its difficult to write software that solves every single problem out there there are edge problems in software that create problems. The key with autonomous is that there will be a period where you will have certain routes that can be served autonomously, and certain route theres a only a person can serve i think we as uber having autonomous and the network under one roof to get from here to there, but the there will take fully autonomous, and that will take ten plus years. Dara, thank you for coming in appreciate it. Love having you. Maybe you can do something with my uber rating you should tip more tip more . Are you tipping im an aggressive tipper. Really . Hold on i think the highest tip i do, too my rating is Getting Better do they rate you after the tip . I dont know. I think they can rate you before or after somehow my rating is Getting Better i dont know why everybody, tip aggressively thank you not going to happen not after they got rid of salt in new york. Coming up, Steve Schwarzman will join us after the break then ciscos Chuck Robbins will be with us when sundown pales the sky i want to hide a while behind your smile ah, but i may as well try and catch the wind our mission is to make offshore wind one of the principle new sources of energy. Not every bank is willing to get involved in a first of its kind project. Citi saw the promise of clean energy. Were polluting the air less. Businesses and homes can rely on a steady source of power. This will be the first of many offshore wind farms in the u. S. For standing in your heart is where i want to be and long to be ah, but i may as well try and catch the wind where can investors seek pin an uncertain world . Pgim sees alpha in real assets. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over one hundred fifty billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Good morning welcome back to squawk box. Were live from the World Economic forum in davos, switzerland. Lets look at u. S. Equity futures. We saw the major averages closing at record highs yesterday. This morning things have turned around the dow futures were up by 66 last time we checked they have turned down 25 points. So youre talking about a swing of close to triple digits in the last half hour s p futures are under pressure the nasdaq is up by 9 points now. Government shutdown is over and joining us now is Steve Schwarzman, chairman and ceo of cofounder of blackstone you must be watching events globally but also in the United States, steve, just in wonderment and i guess a degree of satisfaction. You were an early supporter of President Trump. Do you tie some of the gdp, the confidence were seeing in Business Leaders, the stock market, any of that get traced back to trump and his policy i think it does you started seeing this right after the election and the markets started going up on anticipation of sort of tax reform, tack cuts. Changes in regulation. We talked before it last time i was here, those things happened or are happening so i think theyll have a substantial impact on the econom economy. Being an individual that will do better with noncore layingret equity markets, is it bitter sweet to see etfs doing better than what you can do in private equity its actually fascinating like most cyclical things, its probably relatively limited. Its nice to see its good for pension funds, good for all of our portfolio companies. They become worth more all the time so its not like we dont benefit from this. But its good for the basic investor geopolitical risk was the one thing that you said could be the problem down the road. I think youre i dont know how many times you were quoted you wont buy many Office Buildings in seoul they have a joint Olympics Team now. Do you feel better about real estate in south korea . You might in terms of skating rinks. Right but things have the geopolitical risk is less than three months ago feels less than three months ago but that doesnt stop the development of nuclear technology, ballistic missiles, and things that we stopped thinking about on a shortterm basis. I look at some of the geopolitical risks rather than the economic ricks economically the world is expanding almost every place things look good and will continue to stay good absent sort of any of these unpredictable black swans. The president will be here on friday theres been lots of speculation about what he will say what do you think he should say to this group in particular . Can he pursue an America First agenda here . Does he have to pivot and go in another direction . Modi was speaking this morning thats a good question. Ive been told its a good speech thats been worked on a long time. So whatever is said is considered i would suspect, and i dont know it all, that it would be some kind of mix of, you know, pursuing National Interests is not a bad thing because look whats happening to countries that do that there will be some other stuff that wont be quite as harsh as some of the other rhetoric that gets reported on almost a daily basis. We did talk about the trade actions that took place this week the administration raising tariffs on solar panels and washing machines is that a precursor of things to come its hard to know theres friction and frustration given that the chinese trade surplus went up again. I think the administration is looking around things to do. Ultimately that has to be addressed by both countries if a comprehensive way. Individual things are, you know, indicative, but wont change the overall balance. Do you have 90, 100 billion lying around now is it hard to deploy because of the market maybe people need you now to find your value, that way the price is not fully reflected thats the basic thing. You have some ideas its nice to have that around you never know when you might need it. Prices are high for sure growth is up you have to be careful but we always try and only buy things where we can make them better didnt tax reform open up a whole new mix of companies that might not fully recognize the possibilities now that tax reform where it has the ability to have 100 writeoffs of capital equipment, they make those types of companies much, much more attractive i am low on time. Talk about mega funds. Were one of the early mega funs. Masa son talks about wanting to create 1 100 billion funds regularly. Does that make sense to you . Is size a friend or an enemy of the investor masa is an unusual guy. I know him quite well. He supported our Scholars Program in a generous way. Ive been with him in saudi arabia i spent a lot of time with masa. He has a peculiar kind of niche at the moment. Because tech is where theres enormous expansion if youre going to finance the expansion of an industry that often doesnt earn anything, you will need large amounts of money to the extent youre a believer that those types of investments will turn out to be involved with companies that make money its tech at a time where only certain Tech Companies really make money to expand them, need a lot of money. To keep them alive, need a lot of money so i understand how hes in a particular place steve, thank you. Well run into each other again. Well see you here. Yes i still havent talked to him about boitcoin coming up, Chuck Robbins wi tk llalto us about taxes. Were live from davos in a moment at cognizant, were helping todays leading Life Sciences companies go beyond developing prescriptions to offering subscriptions with personalized, realtime advice for lifelong, healthy living. Honey . You almost done . Nope. Get ready, because were helping leading companies see it and see it throughwith digital. Todays Senior Living communities have never been better, with amazing amenities like movie theaters, exercise rooms and swimming pools, public cafes, bars and bistros even pet care services. And theres never been an easier way to get great advice. A place for mom is a free service that pairs you with a local advisor to help you sort through your options and find a perfect place. A place for mom. You know your family we know Senior Living. Together well make the right choice. Johnson johnson is the first of four dow components to report earnings this morning the Company Earned 1. 74 for the latest quarter 2 cents above estimates. Revenue was about forecast the results were boosted by Strong Performance in the pharmaceutical business. Later this morning well get the numbers from travelers, verizon and Procter Gamble the internet runs on cisco hardware, but the company is reaching for the skies with Cloud Computing and networking joining us is cisco ceo Chuck Robbins. Good to have you on set. Good to be here seen some price upgrades, the move to more of an not an Annuity Business but sk subscription business is in full swing. Its been going on for a while but finally bearing fruit. Is that accurate when i became ceo 2 1 2 years ago, seems like yesterday, we embarked on a transition in business primarily because our customers were asking us to change the way we deliver Technology Customers wanted to consume more technology as a service which leads to more subscription and more occurring revenue which is positive for a longer term Business Model so weve been working on that. The strategy is working. The results have begun to show that were making a great deal of progress. Certainly as we can see from that chart after a long period, trying to get back to those glory days of 1999, it was between 25 and 30 it seemed like for years and years, now here we are breaking out. I think 60 is the high 42 is a far cry from where it was stuck. You still are a hardware company, right theres nothing wrong with that. If the guts of the internet the internet wont run without it 80 of our engineers are software engineers, they always have been. The notion that were becoming a Software Company is not the truth. The reality is that were taking some Software Assets and were adding new Software Assets and giving customers the ability to consume those assets however they like. At the heart we build High Performance hardware because without it the internet wouldnt run. I think anybody that provides jobs and creates wealth and, you know, satisfies their customers, i think theyre socigood shape youre involved with bigger issues when you can move beyond hardware, you can do security, you can do internet for everyone, where it isnt right now. Theres some initiatives youve embarked on. If you think about it, look back three, four years ago in davos, its funny because we were talking about the internet of things, the internet of everything, the fourth industrial revolution, now were talking about all the positive and now the potential risks associated with the transitions were going through. Technology will be at the heart of it. The network is at the heart of it as is security, which are key areas we play in well continue to Bring Technology and to deliver solutions. With security as an example, we see 20 billion threats every day. While were trying to provide security, we live in a world where traffic is increasingly encrypted. So theres got to be innovation at the center of that, where we brought us some technology recently that can determine when theres threats inside encrypted traffic without decrypting it. Theres a lot of work going on when you move to the other issue, we have a great deal of responsibility and we have responsibility around helping ensure this Technology Creates opportunity for everybody. That includes access for everyone it is also at the heart of that lots of partnerships, deep partnersh partnerships Public Private partnerships. We need people to gain the skills they need to participate in the economy later this afternoon you will hear over the last two years weve been working on a Skills Initiative here at the World Economic forum where were going to try to he heducate several Million Students the reality is we see several Competitive Companies coming together rising above the competition in order to actually try to solve some of these problems on a global basis are you seeding soft of the Cloud Business to amazon because theyve got it you can do other things or are you still going to compete actually, when you look at the cloud providers, when our customers today think about the world theyre trying to operate in, they have public cloud offers from amazon, microsoft, google, alibaba, tencent, all of those. They have private data centers they havent gone away the Infrastructure Market for private data centers hasnt gone away they have sas offers what the network is going to do is provide policy and security across that entire architecture. Real quick, repatriation. Yes. Whats it going to do what are you going to do with the money . We talked about it. Its in line with what we talked about before, continue our Previous Capital investments, look at some new investments obviously weve always been very keen on m a. We can see a big headline big headline i mean, are you thinking of we said our m a strategy over the past few years hasnt been impacted by the cash being over seas we continue to look for assets that line up with our strategy. Fair enough thanks, guys. When we come back, a big lineup continuing this morning including hilton ceo christopher narcetta and a lot more names. Stay tuned you are tcwahing squawk box on cnbc live from davos, switzerla switzerland. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. Like you do sometimes, grandpa . And puffed. Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. If you cant afford your medication, astrazeneca may be able to help. Welcome back, everybody. One quick stock to watch this morning, the u. K. s antitrust regulator says twenty First Century foxs deal to buy sky is not in the Public Interest it could complicate disneys separate deal to buy most of foxs assets, including sky. Still to come, hilton ceo will join us here in davos along with Carlisle Group david reu n reubenstein. Squawk box will be back in davos. What did you have in mind . I dont know. 4. 95 per trade . Uhhh and i was wondering if your brokerage offers some sort of guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 4. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Squawking in davos business and political leaders gathering at the World Economic forums annual meeting to talk politics, economics and social issues and squawk box is there. In this hour, Canyon Partners joshua freedman. Hilton worldwide ceo christopher nocetta. Carlisle groups david reubenstein and bill browder joe, becky, and andrew talk politics, tax reform, the Government Shutdown and the issues facing the World Economy with some of the brightest investors and Business Leaders in the world as the second hour of squawk box live from davos begins right now good morning, everybody. Welcome back to squawk box here on cnbc im becky quick along with joe kernen and Andrew Ross Sorkin. We are live from the World Economic Forum Taking Place in davos, switzerland beautiful morning. Lots of sun, lots of snow, lots of security. Were keeping track of whats been happening with the markets, too. Lets take a look at the u. S. Equity markets we were looking at the dow futures up by 66 points. It gave back all of that and half an hour ago we were down by 22 and theyre up 30 this is all happening a day after the dow and other averages set new highs once again this morning it looks like the stau s p 500 is down. Premium revenue exceeding forecasts and setting a record for the full year. Stock right now is unchanged but well keep track of it as we get closer to the opening. Also, Johnson Johnson out with earnings in the last half hour it, too, beating expectations earning 1. 72 compared to forecasts of or 1. 74 on an adjusted bases compared to expectations of 1. 72. Johnson johnson helped by the pharmaceutical business among other factors. And a major deal in the spirits industry this morning. Ba card did i is buying patron spirits for 5. 1 billion that deal will make ba card did i the second biggest Spirits Company in the United States market wonder how much our friend is going to make on that. Patron is gone. Yeah, john paul remember that . 5. 1 billion do you know how much he owned . I dont remember. I dont. Hes already done so well on the hair products. I know. I know it. All right that covers about everything, doesnt it tequila and hair products. For me. All the most important things. Yeah, exactly netflix shares, add this in, netflix shares moving higher this morning the streaming company adding more global subscribers than expected in the latest quarter heres what ceo Reed Hastings had to say about whats driving netflix growth. The real driver is to make the big titles bigger. So what happens is so many people are talking about bright or Stranger Things two or the crown that thats what pulls in people who havent yet joined, is all their friends are talking about the shows. Thats the dominant accelerator. Its all about subscriber growth really. Because earnings and revenue were in line the companys up beat guidance pushed netflix shares to an all time high. Up almost 21 points. Almost 10 and the company now with a market cap of more than 100 billion, first time i think its done that. A little bit of news this morning. Topic of a column that i wrote, but elon musk telling me that he has now officially agreed to stay on as the ceo of tesla. Hes going to do that for the next decade. Theres been a lot of speculation that he might step down, take on a chairman role or Something Else as part of tesla announcing a new Compensation Plan that could be considered the most radical in corporate history, musk compensation will be tied with the company performance. He will receive no guaranteed compensation, no salary, no cash bonuses or equity that vests based only on time instead, hes going to be based on tesla reaching certain operational milestones and market caps. He effectively collects 1 of the company for every 50 billion of market cap he creates. If he doesnt create that new market cap and at the same time reach the operational adjusted ebida numbers, he gets nothing if he gets 99 billion, 149 billion, you get nothing at each increment. In each case he has to hold the stock after it would vest for another five years so it makes it very difficult to game it in terms of trying to profit. Claw backs, too if he gets a 151, back down to 85, does he keep the no, no, no, no, no. Lets say do that lets say he gets he hits lets say he gets the company to 100 billion its at 60 today lets say he hilgts the operational numbers. Right lets say that is some kind of illusion. It would vest at 100 but then he has to hold the stock for five years. 1 of the company whatever its worth. But then youre saying its an illusion. Lets then assume the stock falls precipitously and gets to zero if it falls to 50 billion he has 1 of 50 billion its a bizarre thing especially when you look at what the markets have been doing, market capitalization the companies that have performed well have out performed their peers. Stocks were up by 40 , 42 since the election for the dow its a weird thats why people dont gauge their compensation based off the market. First of all, he gets nothing. Then he has to go up it literally has to go up 100 for at each instance just on the market, forget the operational numbers. Market capitalization is not a reflection of what the executive does. Cisco in 99 got 1 when it was at 500 billion. It hasnt been above 200 billion for the last 18 years, whatever it is. Got to 500 billion. Youre still paying 1 of 200 billion. 1 of 500, so you get 1 of the 500 billion. Then you go down and its its hard to believe you can get the stock to that number revenue numbers you have to do both. Not necessarily ge was trading at 50 times earnings back in 1999. All of a in this market. Come up to shareholder vote if you were a shareholder, you would vote down. Bad deal for you too radical. I understand tied to operations i would think tesla shareholders would like to see production numbers hit. Subsidies from all the states and government, too. That will never happen. No, no. You have to pretend youre a shareholder of the company i would not like toplace anybody on market cap. Flip it around. The alternative is he might say, then im not going to do this. Im not interested its not interesting to me he has 13 billion of stock then you have to say how much of the companys value today is actually elon musk. If thats the case, hes not going to be there for forever. If the key man issue is something, you want to make sure that its a Company Worth more might be a question of whether youre the key man during this remarkable growth. Hes a complete visionary im not trying to take anything away i think theres a reason no other ceo compensation is based on market capitalization its irrational number you can get rewarded for things you didnt do. You can get punished for things you didnt do, too its a bizarre way of tying it. If you tied both together, if theyre paired together. Its not like if you hit the market if you hit the market cap and not the operation numbers, you i know. Ebida but then also production numbers i would think would be a valid thing. Theyve had trouble hitting the production numbers. Whats the multiple to ebida right now . Infinitinfinity. Exactly so its easy to hit your ebida numbers when youre getting a multiple number like that. Yes, i never thought the market cap makes sense. Right im not contending it makes sense. You can say that about anything. By the way, this was a company in 2012 when they set the first Compensation Plan in practice, the company was worth 3. 2 billion and nobody would have if i told you it was going to go up 17 times you would have laughed at me. Right so, okay. Separately, champion of risk maybe you have a view on this id be curious our next guest is no stranger to disruption or its benefits josh freedman, cofounder and coceo of Canyon Partners. Great to see you were in davos or what were we calling it, davos in the desert . Yes by the way, so youre a shareholder in lots of things. Ceo comes to you and says this is how youre going to pay me, im only going to get paid this way. There is a reason why private equity people are paid on realized not market to market as a shareholder do you really care about ebida or do you care about the stock price . Market cap might not capture either one because if a whole lot of additional shares are given in merger shares, it might not have to do with share price. These are imperfect. Fair enough when we did see you at davos in the desert, we talked about what could happen if there was tax reform i think you said that you expected there would be some form of tax reform i dont necessarily think you thought it would happen this quickly nor at this rate how does this change the dynamic for you now . Well, its pretty clear that deregulation together with a lower tax regime for corporations together with accelerating depreciation has a very positive effect on not just the profitability of companies but also on psychology youre seeing Consumer Confidence at levels that it probably hasnt hit in 17 years, 18 years corporate confidence is high spending is high and earnings are anticipated to be high and, of course, the stock market has absolutely rocketed. Therefore, you were doing what we tend not to be people who are trying to seek beta and be long stock market risks particularly i would say that the stock market has certainly outrun our expectations in the short run. The concern i say we have at this point is that you could be a little bit set up for maybe a 1994 type scenario where corporate earnings are up 20 plus but the stock markets maybe already had its run and therefore is uneventful or flat. Especially if you consider Interest Rates as well, which are starting to creep up those two have an effect on multiples. Do you think the market is fairly priced at this point . Is it richly priced . Is it under priced and i ask this because weve had guys like sam zell who have told us theres irrational exuberance done that for a while. What do you think im not trying to avoid your question, but we dont really get paid to make that judgment were really trying to find things that are out of the general flow of mutual funds, out of the general flow of etfs, things that are event driven than market driven. Is it tough to find things that you think are reasonable deals . Because the amount of liquidity has boosted prices across the board . Its been tough for a while now, but actually the increase in the stock market has helped in some respects andrew mentioned risk arbitrage, for example. Because of the slow pace of antitrust approvals together with a lot of fixed priced deals that have been announced but not approved yet, when the stock market moves up so much the floor value of those stocks if a deal doesnt happen goes up quite a lot, therefore, your risk is actually quite a bit lower. In fact, maybe youre better off without the deal onthe table. Whats your biggest deal youre playing right now at t time warner. Its a jump ball whether or not it gets antitrust deal. Its a jump ball . In our mind its a jump ball. Which way are you betting neither way you may have some initial underwinding but we think if you look at the disney price that they paid for fox, the fox price, rather, disney is paying, you would translate that into a significant premium to the price thats being paid for time warner so maybe in the long run were a lot better off if it doesnt get approved but i think either way is a good outcome. You were cautious on retail last i saw you, but we had this sort of remarkable sort of retail season. Did that change your view at all . Look, retail is something people like to do, but its still a hard call. And a lot of uncontrollable factors. Youve seen whats happening in the world of malls sometimes very good retailer is a casualty because an anchor drops out in a mall in which it has a presence, so were still cautious about retail, and youve had Record Number of bankruptcies last year in retail its an area that continues to warrant lots of caution. Thanks for coming in. Thank you very much. Thanks, josh. Earnings, meanwhile, coming, crossing the dow components, Procter Gamble and verizon Procter Gamble earned 1. 19 a share in the fiscal Second Quarter beating estimates by 5 cents. Its on track, in its words, to achieve its fiscal year goals. It did say that growth profit margin fell by 60 basis points during the quarter and verizon earned 86 cents a share for the Fourth Quarter falling two cents short of estimates. Revenue did beat street forecasts. Verizon also saw the new tax law, set the new tax law will improve its cash flow 3. 5 to 4 billion. They got that little kid that didnt have teeth in the first season. Oh, yeah, from Stranger Things. He does the phi owfios stuff hes a gamer. I thought you were going to talk about the hbo Silicon Valley guy who does their commercials. I dont like those at all i dont like the guy yeah bring back the other guy the other guy got another job for sprint. Hes like mr. Phone salesman or something. Great deal. Good gig if you get it, right . All right when we come back to davos, he runs the second Largest Hotel chain in the world Christopher Nassetta is our guest after this break then later david reubenstein will join us and wliilam browder will join us to talk about russia and investing stay tuned you are watching squawk box right here on cnbc when you look at the mercedesbenz glc. With its hightech cameras and radar, contemporary cockpit, 360 Degree Network of driverassist technologies and sporty performance whats most impressive about the glc . All depends on your point of view. Lease the glc300 for 449 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Your but as you get older,hing. It naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Time to focus on the travel industry joining us is ceo Christopher Nassetta youre opening a hotel every four seconds were opening more than one a day. One a day. 400 last year not quite every four seconds. If i do my job, it will be. Still sounds like very rapid. Yeah. We had a great year last year. Not only did we open a hotel a day plus, we signed more deals than we ever have in our history. We signed, you know, a thousand hotels last year in our pipeline we now have more rooms under construction than any other Hotel Company in the world we launched some terrific innovations with a new brand tapestry by hilton gamechanging technology with our connected room and probably the thing im most proud of, which gives us a lot of momentum coming into this year particularly here in davos, we were voted for the second year in a row top ten great places to work in the world which is a great reflection of our taking care of our people so our people take care of our guests. You do get free wifi if youre a member . You do, indeed. If youre a member. You do, indeed. Do you have your Hilton Honors card . I do. I think i have one. Andrew, if you dont 71 Million People, right . Christopher, what i like to read, you know what, uconn vinced me. You really dont compete with airbnb you do but its different. We talk about it all the time, airbnb all the time. I fundamentally believe were in different businesses the simplest way to talk about it is were in the business of hospitali hospitality, taking products, wrapping it into authentic heart felt service, connecting it with technology and delivering aho lis stick approach for an experience for customer airbnb is much more about the business of lodging which is a good business. Our average market share for 1400 brands is 115 . Were the premium player because we consistently give high quality product, high quality service, amenities, technology, the things that people need. Its not that they dont do t theyre offering a different service. The competition from them because they were able to get so big so quickly without owning any real estate is part of the reason why you operate the way you do. We are a very capital light business it affords us the opportunity to open a hotel a day or more around the world because were using Third Party Capital and all of these things. When you open a new hotel, how much is acquiring old hotels and rebranding. 1 3 of it, given the strength of our system. About 1 3 plus or minus every year is taking either independent hotels or hotels that are part of weaker brands and converting them into the hilton system. Whats going on with the price of these rooms theyve gone up a lot. Prices are going up. Big time. I wouldnt say big time i would say whats interesting is our growth is circa 10 same store growth was in the 2s. The bulk of that was in rates. When you say big time rate growth, rates probably grew 2 sort of in line. Do you see an industry shift in terms of cancellation policies i definitely see thats a huge thing. Were trying to lead it, and not in a way that is taking choice away from customers, in a way thats giving more choice to customers. The issue explain to people whats going on. Ill explain real simply. In a world of all new technologies that everybody can use in all of the new apps, all of the other intermediaries selling our products, youve seen an escalation in cancellation rates what that means is we dont know on any given night whos really going to show up so effectively it has to get built into our pricing. Effectively it costs consumers more to tie up inventory cancellation rates have gone up to 50 . What was the standard maybe 10 to 15 so its going up at an astro no, maam mick rate. Used to be free to cancel. Now it is free to cancel within 48 hours. What were doing is were going to launch in march or april various new ways of pricing products that will give complete choice and control to the customers. If you want still to have total freedom to cancel up to that 48 hours become like a refundable fare on an airline . In a similar way. Give us five days notice on cancellation, well sell it and well give you a discount. By the way, when you test it with consumers, almost every consumer that we talked to actually knows within five days when they want to cancel or not. Never had to do it. Think about it. Right. In a typical world we didnt care much, but in a world where you have 50 of your inventory being tied up and canceled, its very challenging to be able to sort of manage inventory and make sure you have inventory. Are you going to give people credits the way the airlines do . We will effectively sell if youre willing to give us a little bit more notice, youre going to buy at a lower rate you are going to get a discount so you will get credit. Around the globe the economy has been strong. Very quickly, whats happened in terms of travelers in the United States down by 1. 7 million. Travelers in the u. S. , that was down 4 or 5 probably cost the u. S. Economy about 2. 7 billion 20 or 30,000 jobs. So, you know, theres a host of issues contributing to that. Some of that with the travel bands are a component. The overall strength over the last three or four years, the dollar has not been helpful. One of the things were working on is to work with the administration to make sure that people that want to come to the United States, the vast majority of them dont want to do any harm feel like theyre welcome in the United States and that is something i think from a marketing point of view we can do a better job. Were losing market share and theres no reason to theres thousands of jobs available. Weve got to go safe to say i mean, tax reform helps hilton but it also helps the businesses that send their employees on whatever theyre doing and they stay at hilton. It helps everybody. I think thats why you see in part you see the economy sort of buoyed a bit i was here last year, i know were out of time, i sat at this very desk. I was told by the interviewer that i was amongst the very few that were optimistic that the economy would be a little bit better it was a little bit better last year, and i would say i have that same kind of optimism not that were going to have a roirg economy in 2018, but so many things are going to boost economic growth. Coming up when we return, a lot more live from davos trust in the valley being tested by mark banteof. Sales rce foceo sounding off his comments coming up next. siren wailing barry murrey when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. We call that the golden hour. Evaluating patients remotely is where i think we have a potential to make a difference. barry murrey we would save a lot of lives if we could bring the doctor to the patient. Verizon is racing to build the first and most powerful 5g network that will enable things like precision robotic surgery from thousands of miles away. As we get faster wireless connections, itll be possible to be able to operate on a patient in a way that was just not possible before. When i move my hand, the robot on the other side will mimic the movement, with almost no delay. Who knew a scalpel could work thousands of miles away . Coming up, david reubenstein of the Carlisle Group. U. S. Equity futures. It did gain after the deal was announced maybe not surprisingly after someone said one side caved. Not going to say that, but some would say that we took legendary and made it liberating. We took safe and made it daring. We took intelligent, and made it utterly irresistible. We took the most advanced eclass ever and made the most exciting eclass ever. The 2018 eclass coupe and sedan. Lease the e300 sedan for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Good morning welcome back to squawk box right here on cnbc among the stories front and center this morning, want to check out the stocks of four dow components that have reported. Johnson johnson, travelers and Procter Gamble to beat earnings estimates verizon, slightly short. David favor will have an exclusive interview with Lowell Mcadam socalled initial coin offerings dont appear to be the safest investments. Thats from ernst and young. I think i probably could have told you that. More than 10 of funds raised that way are lost and stolen from hacker attacks. Theyve lost roughly 400 million. J. P. Morgan chase saying it will increase wages, hire more workers and open more branches 22,000 employees will get wage hikes of an average of 10 Ceo Jamie Dimon will join us on squawk right here in davos tomorrow morning at 7 30 a. M. Eastern time also want to tell you about a panel that i hosted this morning. Sales force founder mark benioff slamming the leadership styles of Silicon Valley bosses he said trust must come before growth as a Company Priority what is the most important thing to you and your company . Is it trust or is it growth . If growth, i think it was you that said the very powerful thing. You said convenience trumps trust, which doesnt have anything to do with our speaker on friday. It was this thing, but this idea of anything trumps trust, were in trouble sales force boss cited the example of uber as a company he claimed under ceo travis cali knack forgot to value trust. David reubenstein warned of black swan events disrupting the market and threatening Global Growth david joins us now he is the cofounder and co executive chairman of the Carlisle Group my pleasure to be here. This is the first time were talking to you since you stepped away from coceo youre cochairman what does that mean . It doesnt seem like youre slowing down. I dont have to do the earnings call. The other coceo and i were 68 years old. We thought before there was a 7 attached to step back and let the younger people be the coceos. Bill conway and i are the largest investors in the firm. Were going to do what we can to help the firm but we have two good coceos now youre still involved in the business not day to day as much. Im pretty involved if you owned as much of the firm as i own, you would want to be involved i do this because i love it. Its not work. I love what im doing. When you create a firm from whole cloth 30 years ago and its grown to be a large firm, you have pride in it you want to see it succeed wanted to talk to you about the tax reform package and what that means to the world of private equity one issue has been the carried interest issue. Weve never talked about that before. But theres another issue in terms of how debt is being treated. Yes. And i want to know sort of how you think thats going to change your business maybe you should explain to the viewer. Historically you could deduct the interest that you borrow, interest you pay on debt that you borrow now in the new law you can deduct up to 100 you can deduct up to 30 of ebida for the first four years and after 30 years 30 of ebit if you have good companies, it probably shouldnt be that big of a problem we think its not something we would have been in favor of but we dont think it will ruin the private equity industry. Will it make it less likely that theyll take on turn around projects well, it will make it more complicated to do some of that but, remember, most private equity deals today dont have the kind of debt they had 30 years ago when you had 90 debt. Now you have 45, 50 debt compared to the 90 of the 70s and 80s its not a problem i wouldnt have recommended this to congress. Congress didnt ask me. In terms of what it would mean for how long you hold companies, the average holding time is seven years. If you only get the initial benefits for the first four years it will Mean Companies try to turn it around more quickly they tend to hold on for four to six years, Something Like that the law could change in four years. It will change whether the congress concludes that they should keep the standard of 30 of ebita we need to find good deals at prices that are affordable prices are high. In the intro we talked about how you talked about a black swan event would be something that would impact prices thats because you think prices are at the right level in terms of what we see with the economy, different tax changes that come through . Prices are high relative to what we prefer investors are willing to accept lower rates of return. The average ebita was 9. 7 times. Today its 10. 5 to 11 its higher. They wanted a net internal rates return of 20 . Today theyre happy with 15 net. You can pay a little bit more and still please your investors. Thats because investors are doing next to nothing in the treasury markets. Thats correct. We are seeing prices start to pick back up were looking at the two year now trading at the highest level since 2008. Yes. The ten year since 2014 does that change when you look at investor surveys, consistently they think private equity will out perform every asset class over the next five years the rate of return might be slightly lower than it was 20 years ago or 10 years ago, theres a big gap between that and public equities. David, lets talk about infrastructure carlyle was one of the first funds to go into infrastructure. We know there are big plans coming from this administration. Weve seen the plan leaked out a little bit today its going to be a bit of a heavy lift to get both sides of the aisle to pass something. Couple points everyone loves infrastructure. It used to be called pork barrel people love infrastructure its a Wonderful World the truth is infrastructure is terrible when you go to new york city you see the great new skyscrapers, billionaire apartments, but the roads to them are crumbling. You drive to these places and bump up and down why we havent fixed the infrastructure, i dont really know you should know that 90 of infrastructure is really state and local. The federal government if it does something will be helpful but state and local governments and authorities are going to have more impact they are doing things to make it easier to have Public Private partnerships. Wanted to ask you about your side inthustle as an interviewer i did. You are yo core coming to. He said he didnt know it was a globalist affair was he being serious both your question and the answer. When you interview people sometimes you want to get a rise out of them and sometimes you ask a question which is tongue in cheek maybe you guys dont do that, but i do that from time to time. I obviously was saying that this was a global elite kind of place, though i dont really think it is. I didnt think that the Trump Administration would come en masse here, but obviously they are. I think theyre coming here because they have a message that they want to give, which is theyre not as bad from the point of view of global elites as people think they might be. Thats too bad. If President Trump came here i suspect the message will be reasonably well received you cant expect everybody here to love everything he says i think he has a message that will be reasonably well received. What is your forecast for gdp growth over the next three or four years average i think on average in the United States. I think wed be lucky and happy to get close to 3 somewhere between 2. 5 and 2. 7 would be very good i know the administration has 3 projections. Most economists dont think i dont know whether that means anything. What other no, what most economists think. Most economists are not always right. Why bring them up well, i thought it might be nice for your audience i think they know that. They know that only too well atlanta feds at 3. 4 for this quarter. That would be three straight i think its unlikely were going to have 3 growth in an economy of our size for a two, three, four year period of time. If so, it would be hard for me to believe that. You dont have that many people in the work force. You have an aging population to think that an economy of 20 trillion can grow at 3 is hard to believe. Well remember. Go ahead. No, im done. I hope im wrong. I hope we do grow at a higher rate, but i dont think we will. One of the things you do in an interview is to try to get a rise out of people that gives me license. I didnt hear that. About carried interest if you didnt hear. Carried interest, look, it stayed in. A lot of people thought it should have gone out you do this because you love it, not because of the money what would happen if they would get rid of the carried interest . I dont think the world would fall apart as we know it western civilization wouldnt be destroyed, but i think the private equity industry, which benefits from it for sure, and the Venture Capital industry which benefits has done very well for the United States it would keep some people from being in the industry, perhaps, you dont know most of the carried interest is paid for by the Real Estate Industry private equity and Venture Capital are really small they changed the law you have to hold onto the assets for three years. Right like you said at the beginning, you hold them for four to six on average. Some are held less and some are held more. Yes, carried interest doesnt raise that much money. I know. It doesnt raise a lot of money. Because we do well and because we dont raise a lot of money we should ignore it, right . There are issues that i would deal with. If i were writing the tax code, i would change many things carried interest isnt a big issue. Would you change it though . Well, if i were in your grand scheme. I wouldnt change it because i think we dominate the world in private equity, we dominate the world in Venture Capital and why take a chance that we might not dominate the world. Do you think its fair . I actually do think its fair because i think people are taking risks why did they decide to do this because you are taking a risk. Theres no guarantee youll benefit. Youre taking risks when you do this. Elon musk is taking risk in this new crazy Compensation Plan thats the way it goes thats because we decided youre in one when he sells his shares in tesla he will be set taking capital gain. On the ones he got initially, invested in. No, no, not on the ones that have been compensated on any share that hes been given as compensation yes. Restricted shares. Yes restricted shares. Those shares when they vest the shares that he bought when he initially started the company will pay capital gains. Yes. He took a risk just like private equity people, were taking a risk. Thank you. I dont think im convincing this audience of three. Youve got one. Youve got one. When i hear things arent fair, its like, okay, now youre paying 50 taxes and kormss are paying 21 . Does that sound fair to you . Its not about fairness. Nothing to do with fairness. Do you think the whole progressive i think the tax code progressive tax system. Okay. Weve got to go. Eye of the beholder. Thank you, david. Great to see you. Top 10 pay 80 of the taxes . No, but if youre talking about a progressive system, it ld remain progressive across the board. I dont know. Its definitely, but theres no business track record. Well, have you seen her work . No. Is it good . Good . At cognizant, were helping todays leading banks make better lending decisions with new sources of data so, multiply that by her followers, speaking engagements, work experience. Credit history. That more accurately assess a business chances of success. This is a good investment. Shes a good investment. Get ready, because were helping leading companies see it and see it throughwith digital. Welcome back to squawk box. Futures have turned negative not a lot at this point, but after a pretty solid session positive up about 2. 5 points the nasdaq has gone up over 20 points few stocks on the move this morning to tell you about. Adobe systems raising its profit forecast for the Current Quarter thanks to substantial decline in tax rate Software Company announcing that chief Financial Officer mark garrett will retire as soon as a replacement is found shares of t. D. Ameritrade, discount brokerage reporting quarterly profits 2 cents above estimates. When we come back, Hermitage Capital founder and ceo and author of red notice bill browder will join us well get his thoughts on u. S. russia relations. Squawk box will be right back. Despite trends and Global Growth, russia seems to be falling under the kremlin. Bill browder is the ceo of Hermitage Capital management hes the author of red notice. Thank you for being here. Great to be here. We talk to you a lot. A lot of times in between. We know about your issues with russia that go back to 2009 and beyond give us an update. Its been a very dramatic year it was discovered that the famous russian lawyer working for putin approached donald trump jr. , Paul Manafort and Jared Kushner asking for the mag nin ski act which is what i had been fighting for to post sanctions on russian officials she wanted that repealed that set off a whole political firestorm like ive never seen before since that happened in terms of my own campaign we have gotten now five countries to impose magnisky sanctions on russia that includes United States, canada, lit through wayne na, estonia. Putin is pretty mad at me. He probably was before. Gains from this. President trump was one who backed this up i think back in april. He gave some Additional Support to your rulings on these things. So where do you think we stand just in terms of u. S. russia relations at this point . Its a bit schizophrenic. If you read trumps twitter feed, he says nice things about putin, however, if you look at the Trump Administration in terms of their actual policy implementation, they are as tough or tougher than obama and russia theyve been implementing magnisky sanctions and other sanctions. Things are moving forward. I watch it like a hawk so far if anything, things have gotten worse, not better for putin. Do you have a take though, given your own experience, do you have a take on the whole mueller investigation, the whole investigation and what happened . Im not going to be an armchair Law Enforcement officer. Mueller has got some 20 of the best u. S. Attorneys working for him. He probably has 200 fbi agents underneath him hell come to his investigation, either there will be collusion, there wont be collusion i dont know more than the guys that can do wire taps, surveillance, subpoenas, other things he knows a thousand times more than ill ever know. You dont like investing in russia, that goes without saying you dont like bitcoin either. What are your concerns about bitcoin . I have an interesting perspective on bitcoin ive effectively devoted myself to imposing sanctions on russian crooks and crooks from around the world through this magnitsky sanctions program. Bitcoin and other cryptocurrencies are a way for bad dictators or criminals to bypass sanctions and so from my perspective, and i think from the perspective of politicians around the world, theyre not going to allow that to happen. They will eventually regulate all cryptocurrencies you cant take more than 10,000 out of a bank without reporting it to the u. S. Government, theyre not going to allow people to take 1 million of bitcoin and move it from russia to switzerland thats just not going to happen. Eventually it will be regulated. As it gets regulated one of the prime aspects of bitcoin will disappear, libertarian freedom. Weve seen south korea step in and look at potentially regulating why do you think other governments have been so slow . Just because governments tend to be slow at doing everything what weve seen over the last ten years is technologies get ahead of regulation. True with facebook, twitter with information, true with bitcoin in terms of Money Laundering they will get to it. When they get to it it will be extremely tough and devastating and hurt the share price. Whats the rationale for it if the libertarian freedom part is taken out what good is it . People are talking about ease of transaction, lowering transaction expenses, stuff like that. Id be worried if thats thats the selling point. It doesnt become it becomes a temporary currency you go into something, then out of something, but use it sort of as part can you still only get other you know, other cryptocurrency you cant really exchange it for dollars . You could no, you would be able to. Its hard with fees and everything else. Its still early well see. My view is that theres no longterm value for these cryptocurrencies because of government regulation. Bill thats different than worth a Million Dollars in bitcoin. It is, indeed. Worth zero or a million. Its binary if you dont like russia, you dont like bitcoin, what are some of the areas where you do think there is a good place for investment as an investor over a 0yea career running the Hermitage Fund i invested exclusively in emerging markets and now i exclusively invest in developed markets, namely the United States and the western europe. I think the markets are pretty frothy a lot of good news is priced in. I wouldnt be sort of going crazy adding on to positions right now, but i like countries with a rule of law, with Property Rights and good economic fundamentals. Thats where we are with western europe, the United States. Do you feel like you got burned going into the emerging markets thinking it was a good place to be and all of a sudden rule of law is the thing that matters most Property Rights and rule of law are absolutely essential if you dont have that, they can take everything away which is what weve seen happen over and over and over again in russia and other countries. Bill, we want to thank you very much. Always good to see you. Good to see you yeah, millennials are listening. 45 would rather live in a socialist system i dont andrew, weve got to work on that weve got to get the word out. Will you help me that i can help you. They listen to you. I dont know about that. They do thanks, bill. Coming up, another big hour from the World Economic forum in davos. Ray daleo will be here paypal Ceo Dan Schulman. Ebay devin wenne and vtb bank, andre costin futures up this hour, please there they are down 3, 3. 5 on the dow actually, 9. 5 on the dow glare on that. Up 18 on the nasdaq. Down fractionally on the s p squawk box returns after a break. You always pay your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Snoitsds good morning welcome back to squawk box here on cnbc live from the world we are here, the World Economic forum in davos i forgot for a second. Look at that shot. It is beautiful. Its a Beautiful Day its arm im joe kernen, becky quick and Andrew Ross Sorkin i have a vest that has a battery in it that im afraid that im going to get electrocuted. I dont have it on. I have long underwear on and im regretting it. Anything going on with you, sorkin good. Good. Youre layered up im layered up. Its good. I do like it. You are a davos man you come here and the energy you have like youre up early, bouncing around. I like it here. Youre in your element, dude. Its all good. It is. Right now lets check out the futures. Take a quick look. They were mixed with the dow just barely positive negative down about 10 but the nasdaq is up netflix having a big, big day. Now 100 million market cap for 100 billion. 100 billion yeah, yeah, yeah why have billions when you can have millions . Right treasury yields, 262 on the ten year check out the two year though, weird Dynamics Global play here with germany still down half a percent for ten years . Uhhuh. There are some tough corporate stories, becky. There are lets tell you a few of them this morning big news is earnings from ford Johnson Johnson posting better than expected profits and revenue. The company benefitting from Strong Demand in its pharmaceutical business. Check that out, it looks like the dow component is up close to 1 this morning. Procter gamble beating the street on the top and bottom lines. Profits down from a year earlier primarily because of the sale of the companys Beauty Brands and a onetime charge that was related to tax reform. You can see that stock is down by 1. 25 then theres travelers latest numbers topping forecasts as well the insurance companys performance comes despite the widespread wildfires in california travelers up 2 . Mixed quarter for verizon. Earnings falling 2 cents short revenue beat the street forecast verizon said it would see positive cash flow from tax reform of 3. 5 to 4 billion. Stock is up by close to 1 joe mentioned netflix. Take a look at shares of netflix this morning the company posting Strong Subscriber numbers and upbeat guidance as he mentioned, that stock over 100 billion for the First Time Ever thats a gain, wow, of 23. 5 points i realized why theres all of these earnings usually were here a week earlier. Davos a week later earnings while were here. J. P. Morgan chase says it will increase wages, hire more workers and open new branches. This is part of a 20 billion investment resulting in an overhaul 22,000 employees will get wage hikes of an average of 10 Ceo Jamie Dimon is going to join us right here on squawk box tomorrow morning thats going to happen at 7 30 eastern time i think thats good, andrew. Yeah. Joining us no. Theyre getting a raise. Dont gloss over that. I just okay. All right. Told the audience the news. I know. I know i want you to be a little bit more upbeat. Little more happy. Thats what you wanted income and equality. Im ecstatic. Thats a strong okay in other corporate news, dont you want to read this . I could, but you could read it, too. Your thing. Elon musk has agreed to stay on as ceo at tesla. His compensation will be tied to the companys performance. Will receive no guaranteed compensation of any kind instead, hes going to be paid on tesla reaching certain operational milestones and market capitalization which brings up all kinds of discussions that weve been having all morning long. The issue stock, the market cap goes up. You buy it back. The market cap goes down all kinds of and market cap is a its in the eye of the behold beholder companies can trade 100 times earnings like coke or ge in 1999 and then they trade ten times but i will say it again he has to in 50 billion increments. I know. He gets nothing if he gets 49 billion in market cap. I know. Plus he has to hit the operational we talk about how markets can be irrational. You cannot get rewarded for good performance no claw backs you have to own it for five years. Doesnt matter. You still get 1 even if it loses half of its value you still own 1 of the company at that point. This is not a claw back. You have to think about how would you if youre the compensation percent of tesla, how do you compensate him . Youre never going to be able to pay this is part of the game. Youre convinced that he is the steve jobs of the Auto Industry obviously because have you ever heard the term the future performance past performance is no guarantee he gets ten years because hes elon musk. What if he sucks five years now . Ten years getting paid nothing. I understand. Fire him tomorrow. Its a tenyear employment contract. They can fire him tomorrow. If he doesnt hit his numbers. Hes agreed to that. You think this is skin in the game this is the ultimate skin i dont think theres i think this is the best deal that shareholders could ever have ive never heard of an executive Compensation Plan like this. Most of the time were sitting here talking about how people are getting paid when the stock is going down and theyre getting this and getting that. This guy gets zero this guy can create 99 billion and get nothing. I love when commodity closed down when they lose money because they dont get the 10 , whatever it is anymore can he leave in two years . He can leave. He can leave . Sure. Then youre not even locking him in but you cant lock anybody how else would you lock him in i dont know. It seems gimmicky. Joe and i are reacting to this knee jerk you had more time to think about it i heard it on air. We have ray dahlia here i dont think he may not know about this im actually curious we want to talk about stocks and the markets with you do you have a view about this . This guy is going to get nothing but he only gets money he only gets paid if he raises the companys market value by 50 billion increments and at the same time has revenue and adjusted ebita numbers if he doesnt hit either, he gets nada. So i dont know the particulars of the deal, but if its just as youre telling me, i think its fabulous. Also, the man is the man is tesla. I mean, its his dream hes built the dream so when we start to think about whos going to be the other person is it a dream is there anything illusory about the dream . Because there are people that say without all the subsidies its worth zero. The market its at infinity times ebita. If the company is worth zero then he gets zero. I understand that there are so Many Companies that are like that. The request he is what the future holds. No. I dont know. We dont know what the future holds. Its your choice you dont have to invest in it right. Short it, do whatever you want to do the question is, what is his incentives so all the critiquing about that, you know, dont do it. We dont do either. Okay. But im just saying i think it ties them together its his its the dream, you either buy into the dream and you have the right ray, the idea of sayings that your compensation is tied to market capitalization, thats out of your control. They can be entirely thats his risk as much as anybody else isnt it partners with the i would think hitting your operating numbers and if you want to tie it to Stock Performance is different than tying it to market capitalization. That is market capitalization. No, it isnt. Everything cant be precise you can tie it to earnings, market capitalization makes a big difference theyre partners if youre a shareholder, youre a market cap person. That ties it to that whether you do that. Is it. I think its a secondary decision. Would it incentive advise you to do things for short term rather than long term . I dont think thats him. I mean, the character. You have to decide thats been the case with this company all along its all about elon musk. Shareholders get to vote. I would also say, as i said before, even once the shares the best, he then has to hold the shares for five years and then have it go to zero later. Buy into it or dont buy into it. Its not necessarily a binary question of 100 billion or zbleer we should properly introduce him. Yes. Ray dalio is the founder of bridgewater, chairman, chief Investment Officer were always happy to see you, always get your ideas about where you think the market is and how the machine, weve always talked about the machine and your principles work right now. So where are you so i think we, lets particularly talk about the u. S. , but i think its generally true of the world, we are in this goldilocks period right now in which we have had a beautiful leveraging the inflation isnt a problem. Growth is good everything is pretty good with a big jolt of stimulation coming from changes in tax laws and such that is going to at the part of the cycle where the at the later part of the cycle if you look at the operating rates, you look at the gdp gap and measures, were going to have a jolt of stimulation into that and there as a lot of carbosh h sidelines. Banks have a lot of cash corporations have a lot of cash. I think were going to be inundated with cash. I think thats going to produce a lot of stimulation and i think perhaps a market blowoff in other words, were in a situation where if youre homing ca holding cash, youre going to feel pretty stupid. With that, everybody is going to become more deployed classically, this is late cycle behavior as you get that movement, then the interesting question is how does the Federal Reserve react i think its difficult to get Monetary Policy precise. Thats why we have recessions. You can never get it right i think its particularly difficult to get it right now because of the fact that with Interest Rates so low, all assets trade at the present value of the future cash Interest Rates affect all assets because the duration of bonds and debt has lengthened, it just takes a little change in Interest Rates to have a bear market so the things that we look at are in terms of tightening and Monetary Policy, will it be tighter than is discounted in the curve, right we have a very small amount of tightening, which is built into the curve. If it is greater and Interest Rates rise greater, that can affect all asset prices. But youre not necessarily talking about four moves instead of three, youre talking about something a little greater than a quarter percentage point off, right . Its all a matter of degree, right . Right we are entering that part of the cycle, right that last part of the cycle. That last part of the cycle i think can last a year, but i would say when we come back here next year probably when were dealing with t the issue of the preciseness and Monetary Policy, the delicacy is going to be a particular issue so i think that i think youre going to get a reaction i think that the fed should think about how much of it is this jolt to stimulation and they should let it go. That the notion of inflation worry, what is the problem with inflation . Theyre struggling to get it to 2 all the Central Banks are struggling to get it to 2 were not going to probably even hit a core inflation rate of 2 . There are other things happening in the economy so let it go. Enjoy it but probably were entering the last segment. This is the last if this is the last leg, not only does the fed have to get it right, you as the investor have to know when to be in and then clearly when to be out. Thats my game. Right. Right. Ive got to know weve all got to know. Ray, we need to recalibrate what is a high Interest Rate and what is a low Interest Rate . Because even historically im conditioned to think that, i dont know, im used to 6 and 7 this time 5 could be high and that could be enough to dislocate i think to calibrate it you have to ask what does it mean for asset prices first and then what does it mean for Economic Activity if you look at asset prices, if theyre all calculated as present value of future cash flows, so if the bond market goes down, put that in perspective. If theres 140 basis point rise in bond yields right. You will have the greatest bear market in bonds ever. The biggest bear market and when you do even though were still at a relatively low level historically right right. You cant have a significant rise in Interest Rates without knocking over the whole asset markets. All markets, private equity, real estate, everything in terms of market is trading at cap rates or yields that are very low. If all of a sudden you raise the discount rate on that, theyre all going to go down, right . So you have a sensitivity from asset prices the average increase in the tightening cycle has been about 500 basis points i dont think you can have 100 or 125 basis points from here without knocking it over. Just to put a fine point on it joe mentioned 5 youre talking 4 potentially . Yeah. I dont think you can get yeah so for asset prices, and then if you look at the nature of there has been a leveraging up on many parts of the company corporations, the return on equity was high relative to the return on cash so the typical companys leveraged 2 to 2. 5 times what they did before did they get that right . Thats the key thing youre going to have a sensitivity to that. You still have a fair amount of debt so theres a lot of sensitivity, much more sensitivity to Interest Rate changes than there has ever been. So the fed really does need to tread lightly is the fed in control . Is the market going to decide where Interest Rates are the fed because thats the fed is going to determine what the level of real Interest Rates are. They can. Right the only thing that the only thing that can matter look, theres been 15 trillion of pushing of buying Central Banks by we do have an issue that were now entering the reverse of that cycle, right right. So as were looking at that, there is a supply and demand issue because as they let the Balance Sheets run off and we have a larger deficit, then we have to sell more bonds, okay . That selling of bonds is a factor and that has then, of course, it has its effects on the markets, it has its effects on the economy. So the markets do play a role, but the fed could decide how much theyre going to accommodate that or how much theyre going to let it go that will be the feds balancing act. By the second half of this year i think when we meet again were going to be talking about that you know, did they get it exactly right and how difficult it will be to get it exactly right. Let me ask you about what you called two different economies or two different markets that were living in in terms of the United States, which as youve talked about sort of inequality in the country are you surprised by and were talking about the jamie dimon news this morning, jpmorgan, you know, offering 10 increasing salaries by 10 . You have all these bonuses that came out right after the tax reform plan. Are you and do you think thats going to seep meaningfully into the real economy . I dont think its going to i dont think its going to move the needle, okay what i did is broke the economy up into two parts. I think when we look at averages theyre misleading the top 1 10 is equal to the bottom 90 if you look at income you cant look at averages and be represented. I broke it into two parts, the upper 40 and the bottom 60 i picked the bottom 60 because thats the majority of the people if you look at that, thats majority it has no its had no Income Growth its been the group that has suffered the most in terms of income change has been the middle class so less Income Growth it has the only rising death rates in the world and it has open eig opiates, suicides. I go through the calculations and see what Companies Say they are going to do. There probably will be a one time, maybe 10 pass through of that of that benefit in terms of trickling down to workers so i think that there should be metrics. In other words, they really take the economics of the income because what im worried about is what would the next downturn be like . Im not worried about an immediate downturn, but i would say if we were to look two years forward, probably before the next president ial election there is a good turn you will have a down turn. If you have a down turn for that segment i wonder how we will be with each other in that element of cohesiveness. Basically the formula for having social and political problems is having a lot of difference between rich and poor people who are their budgets are tied together so they have to decide on those things and you have an economic downturn because there will be a lot of arguing are you concerned about what that will be like if you have a down turn . I think we may. So i think getting along so well now so i dont think when we look at when you look at if you look at how it passes through, lets say revenue growth, we boosted tax after tax earnings because of the changes. Its great for shareholders, and then if you look at the percentage of profit, revenue that goes to profit and the percentage of revenue that goes to the worker, theres been it was typically property has been about 7 of revenue and its gone to about 14 of revenue and the amount thats going to the worker has gone less thats capitalism and, okay, because we invent better technologies and do such things which are wonderful for productivity in its various ways, but there is a question of how thats working for the majority of people that is thats our so i dont worry about Debt Service Payments i dont worry about inflation. I think were in good shape. You know, just let that lets just let it go a little bit, but i do worry about a downturn with that set of conditions. The age old question is does it make more sense to try to divide a stagnant pie more evenly or hope that the bigger pie divides itself more . I think you and i would agree that that group you cant give away money. If you just give away money, thats not good for right its not going to make people productive and thats not good for their state of mind and not good for the productivity but to find ways to make those people productive right. I think there should be a national initiative, a commission that basically uses metrics of that particular group and say how do we do that probably in private public partnerships, so shareholders say i can buy into that particular program right. Thats going to be able to have an effect. Skills. You have to have usefulness for that population. It all comes down to work and the dignity of work and the skill set you need to be productive in the dignity of work right. It all comes down to that. Thats why were in davos. We have to run. You did mention the idea of a recession before the next election do you think thats going to change the course . I think it would make greater polarity i think the left will be more left and the right will be more right and i think this isnt just an american phenomenon. If macron doesnt do well in france well have a choice between two extremes. The left cant get anymore left theres no room left of left where they are right now its impossible. And i have to ask you before you go last time we saw you you said you thought bitcoin was a bubble it hadnt gotten to 19,000 it has come off. New view well, it was a bubble its a bubble. Still a bubble . You know what bubbles are they have their own dynamic. A perfectly good market can be in a bubble. Dotcom bubble. They had a bubble and then they had a bust i dont trade dot. I dont know how to value it i believe in the blockchain technology, i think its great that notion of how to trade it and value it is not my expertise, so ill keep my mouth shut that was a bubble. It looked like a bubble. Thank you good to see you. Still to come this hour, paypal Ceo Dan Schulman and devin wenig. Live from the economic world foruinavm dos nobodys putting their money into equities. Theyre not investing in commodities or fixed income. What people are really putting their money into is what they hope to get out of life. But helping them get there requires a real refusal to settle for average. Because when you approach investing with a tireless desire to beat the status quo, Something Wonderful can happen. Those people might just get what they wanted out of life. Or maybe even more. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. We usso why do we pay to havers a phone connectede days. When were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And ask how to get a 150 prepaid card when you buy a new lg x charge. Its a new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com coming up live from davos, Campbell Soup stock down nearly 20 percent the companys ceo talks about diversifying the companys naands to include more scks and fresh foods. Stay tuned youre watching squawk box right here on cnbc what we do every night is like something out of a strange dream. Except that the next morning. It all makes sense. Fedex powers Global Commerce with vast, farreaching networks. Deep knowledge of industries. And, yes. Maybe a little magic. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley coming up, this mornings top corporate stories plus the ceos of paypal and ebay. As we head to break take a look, please, if you will at u. S. Equity futures theyve been all over the map this morning theyre mixed. The dows down, thnaaqs upe sd i well, its earnings season once again. Yeah. Lot of Tech Companies are reporting today. And, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from td ameritrade. I thyou never got the brakes looked at . L. Oh yeah. No. At cognizant, were helping todays leading manufacturers make things that think and do automatically. Imagine that, a world of new Digital Products and services all working together for you. Can i borrow the car when its back . Get ready, because were helping leading companies see it and see it throughwith digital. Good morning welcome back to squawk box on cnbc were live from davos, switzerland. Got a lot of stories to tell you about. Among those front and center, kimberlyclark cutting 5,000 jobs about 13 of its global work force. Kimberlyclark trying to deal with sluggish sales and heavy price competition in the country. Separately they reported 1. 57 per share. Upbeat forecast. The stock is up close to 2 in the premarket the Company Behind the dating site bumble said to be up for sale theyre telling cnbc that badu which owns bumble is seeking a sale that could value it at 1. 5 billion. Badu is said to hire jpmorgan to advise it. Women have the power to initiate conversations with potential matches. I dont know anything about it. Puerto rico is going to privatize a utility company. The utility has yet to fully recover from the devastation resulting from Hurricane Maria late in september. Here in davos this morning i had the chance to sit down with campbells soup Ceo Denise Morrison i asked her about the companys Stock Performance over the last year down close to 25 i think about it for the long term and, you know, ive been ceo since 2011 the stock was 31. Its 47, 48 right now, but im really focused on what are the drivers of shareholder value that will ultimately improve the Stock Performance from being a company that was the majority of sales and earnings from soup, were now much more diversified. With this latest announcement, about half of our company will be from snacking and soup will still be very important, and we have over 1 billion in fresh food. So i have my eye not only on satisfying existing baby boomer consumers but also with a lens towards a focus on the next generation of consumers and weve got to do both today. Whats the impact of the tax reform bill, do you think, going to be on campbells . We are going to have a positive benefit from tax reform obviously being predominantly a United States company, we bear a high rate today, and we expect that that rate will be much more favorable going forward. And, you know, we have most of our most of our cash in the United States so its mostly going to be the tax rate that benefits us. And we intend to invest in our business and pay down our debt. Do you ever think you need to be really big and not independent . Well be a 10 billion company, but most important is to bring, again, the entrepreneurial spirit of a Small Company in the categories that we compete in but enough scale that youre meaningful to retailers. Okay. You can see a lot more of that interview on cnbc. Com. You dont want to miss the facetoface conversation between Denise Morrison and k kimbell musk that will be available on the Cnbc Facebook page our next guest is a leader of the cashless payment revolution joining us right now is paypal Ceo Dan Schulman dan, thank you for being here today. Great to see you. Thanks for having me, becky. I know youre in a quiet period you cant give us specific numbers in transactions over the holiday period can you tell us broadly how you think the consumer is doing based on the numbers youre seeing at paypal i think the holiday period was a strong period in general across the world, and i think what was really interesting in the holiday period was the advent of mobile payments. You saw for the first time mobile payments actually more than half of all of ecommerce payments. Wow for the First Time Ever ecommerce was over 50 of the sales in the holiday period. So last year you saw that just on black friday weekend. This time you saw it over the whole holiday period. Its not 50 of all retail sales numbers. Of retail sales. Not including cars and other things, talking about retail sales. At stores. At stores exactly thats a massive move towards online sales were obviously a beneficiary of that tail wind that goes on. There are a lot of competitors who are kind of springing up, too. Youve branched out and are doing things like venmo. They have zell, they and other banks are behind their transactions are oaring, too. I think they were up 91 in the Fourth Quarter where do you think the future is headed how do you deal with all these new competitors that are later to the game than you were . I think there are two trends that are going on right now. One is the digitization of money. Were all seeing that happen as people are moving more and more towards online, less checks are being cashed, that kind of thing. And the explosion of mobile. Those two tail winds are fueling digital payments, whether they be online or mobile. And when you think about things like p to p, p to p is person to person. Peer to peer. Like a venmo. Or zell as you were mentioning before. Thats a 35 billion industry right now. In the next three to five years thats supposed to go to almost 300 million. 35 billion thats in revenue . In revenue. To the business yes. How are you collecting money on venmo right now venmo is peer to peer. No money . Just starting to monetize it now by allowing venmo users to start to basically click on any button where paypal is accepted and then make a purchase that way. So just like paypal started off as peer to peer, thats exact same metaphor for venmo. We started monetizing paypal through merchants. Were doing exactly the same thing about venmo. We asked every guest about cryptocurrency and bitcoin you may have more authority than others do you own some bit cohn i do. Did you get it early . Pretty early on. But you dont like bitcoin. Even though you think the digitalization and fin tech is going to mean that people have been banked, so to speak yeah. You dont think bitcoin is the way its going to happen i think whats happening with cryptocurrencies and blockchain is a grand experiment thats happening right now. If its successful, it could be one of the greatest shifts in how you think about the transfer of value and distributed trust, and thats what blockchain is about. But the cryptocurrencies on top of that right now, whether it be a bitcoin, aethereum, ripple, any of those, right now theyre quite volatile they go up and down, sometimes 10 in a day if youre a retailer and your margin is 2 to 5 and you accept bitcoin and it goes down 10 that day, youve lost money on every transaction that youve made and so for something to be a legitimate currency, it needs stability on it. Really today bitcoin and these others are more like commodities. Its more like trading in gold but the underlying blockchain protocol actually has the chance to fundamentally change the way we think about trust type of applications, contracts, payments, that kind of thing and i think that could be one of the biggest breakthroughs that weve seen but, again, its an experiment i give that maybe a 50 shot of happening, maybe a 20 shot that the whole thing collapses. But if it does succeed, it could bring massive change. Dan, i want to thank you very much for being with us and make sure you stop by next time youre in new york, right. Thank you so much, becky. Appreciate it. Coming up when we return, ebay ceo, devin wengin is going to join us among the special guests, jpmorgan and Goldman Sachs ceos all up on squawk tomorrow. Back in just a moment. Weve been preparing for this day. Over the years, paul and i have met regularly with our ameriprise advisor. We plan for everything from retirement to college savings. Giving us the ability to add on for an important member of our family. Welcome home mom. With the right financial advisor, life can be brilliant. nadia white the moment a fish is pulled out from the water, its a race against time. And keeping it in the right conditions is the best way to get that fish to your plate safely. dane chauvel sometimes the product arrives, and the cold chain has been interrupted, and we need to be able to identify where in the cold chain that occurred. tom villa we took our world class network, and we developed devices to track environmental conditions. This device allows people to understand whats happening with the location, but also if its too hot, if its too cold, if its been dropped. Its completely unique. dennis woloshuck if you have a sensor that can keep track of your product, it keeps everybody kind of honest that way. Who knew a tiny sensor could help keep the food chain safe . Welcome back to squawk box. Our next guest is devin wenigen. I read a lot of stuff about ebay trying to prepare because im kind of illiterate in terms of these type of things becky or andrew is going to take over i had no idea that pop culture can make your area. Its always been a marketplace of everything in the world. Things break out, sell, they end up on ebay its a minority but still is the case. If its a quiet quarter in terms of pop culture, you may be explaining that to shareholders versus if something happens . Were pretty big and diversified. Big example is we own stubhub and the super bowl matchup matters. We were kind of rooting for the vikings because it would have been a home game for them but it is what it is. Well get through it. This is better, isnt it, overall . Exciting. I think its good in taking ebay though from where it is now to where youd like to be, whats most important . What are your key initiatives right now . I think there are a couple of dichblg tall and omni channel marketplaces that make up the future of retail, and were going to be one of them. So you heard dan said that over 50 this holiday was e. Commerce thats going to grow to probably 60 or 70 . The markets globalizing its going mobile. E. R. Approaching 100 billion now of sales with 180 million customers. For me, its about a sharp relevant Customer Experience and a brand that stands for more than unique items because that is what we sell but still many people think that were limited to, say, collectibles, pop culture. How about speed of delivery because clearly the major distinction in this whole game, at least that amazon has created, is that they can get you the product, in some cases an hour, at least overnight. They clearly have built a pretty remarkable marketplace some of your own customers and clients are on their marketplace as well. Sure. I think speed matters, but its not the only thing that matters. We do a lot to facilitate the speed of delivery. In the u. S. Average package is delivered in two days for ebay people also care about costs and value and more often than not youll find a better deal on ebay than any other marketplace. Its a combination of cost, speed, convenience and its those its that mix that we think gives us a great competitive advantage. Within the context of the world of search, people find a lot of products on ebay through search you are beholden, to some degree, to google. How do you think about that in the context of regulating google and regulating amazon and just the larger conversation thats been taking place . At least you hear in washington Silicon Valley. First of all, less and less is dependent on third parties. More an overwhelming majority come directly to ebay not through channels like google the answer isnt strong regulation through things like search i think that would be a mistake. Building a better product is always the answer for companies in Silicon Valley and, sure, we have a complicated relationship with google, but id rather build a great product and have customers fight to get to ebay than have the government intervene and solve that problem for me. The Government Intervention may be coming whether you want it or not. Certainly washington has turned its sights towards Silicon Valley you may not be the primary target of this, but that is had a in any way changed the feel in Silicon Valley, the mood sure it has, and i spend a lot of my time on government and regulatory issues, probably more than i ever thought i would when i took over as ceo there are things around the world, not just in the u. S. , that are going to impact tech disproportionately trade, taxes, privacy. All of them matter theres certainly increased scrutiny i dont think all regulation is bad. I think these companies are really important in the economy and its time that they grow up and they play a responsible role in society. Are you going to bring your money back yeah. What are you going to do with it well, well talk about that in a week when we have earnings. How much you got over there not over 9 billion. How much of that is yours specifically, devin . Most of it. Before we let you go, we like to say election. How do you think about voice controlled assistants and the fact that people are shopping this way and where do you fit into that ecosystem given that clearly alexa gets you to amazon, google home is not yet tied in with everybody else yet. Are you going to break off and start partnering with someone in this game . Which we already have you can shop ebay on google. I do think the way humans interface with technology is moving fast. Moving from text to images to voice. That will be in messaging platforms, it will be all over your digital life. Were spending a lot of time and effort on that, and i dont think the world will be in an alexa or google home that will be one way people shop there will be many others. Devin, thank you. Thank you. Great to see you. You come on, the sun comes back out. Always. Unbelievable. Stay here dont leave. When we come back this morning, one of russias most influential bankers will join us live on the set. Stay tuned, youre watching squawk box live from the World Economic forum in davos, switzerland. Thats what happens. So afterwards i couldnt stop fletcher cox and send four, you can drop back. I dont know if that works against the pats because they know how to read these kinds of things okay, now i see near tendency and theyre done it took a lot of people by surprise they did not have the horses at all. Jes jesus, not at all. You must be washingtonilkingd like that during the game. The revf loves the patriots a couple of times i just thought god, that sure helps how about some results today verizon is much better than exacted and Kimberley Clark with the reinstruction much better than expected. All i can tell you, joe, the people that dont like this market dont like to look at the market if they did, theyll be saying maybe i have this wrong. If verizon now is a based Straight Point jim, weigh in on the elon musk conversation plan, we had a debate going the last couple of hours. I didnt like it, i loved it. If he makes that much money for people, i would double what he gets i wish that everyone could take that i thought that was a great piece. Holy cow, what it presents you was here is a man of conviction and i have been neutral on the stocks, who knows. That was a fabulous vehicle, it told me a blueprint of what to do with ceos, it is a mustplay. Andrew. He keeps ongoing like this, jim. I was looking while you were talking. Just gloating a little because he got you on the side the discussion is brilliant okay. It is not nice to gloat you are in the meantime, our last news maker of the morning that we had so many joining us this morning. The president and chairman of vt bank we are thrilled to have you here i want to talk a little russia politics the last time we saw you, you said i am sick and tired how u. S. Views russia. I am curious if you think that has changed at all this morning, i talked to one of the wellknown journalists asked him, whats a result of this the discussion of mr. Trump could fire the fbi boss. Okay, but it had nothing to do with russia and there were other things like Money Laundering business, again, it had nothing to do with russia. I cannot understand what is it about russia again, it is some battle in america and the russia card was used yes, i am psyched and tired. This year did not help very much how is the u. S. Viewed in russia well, we dont understand whats happening we thought that you elected the president and started to fight against him, it is ridiculous. We found it is a little bit dangerous because as more arms are coming to europe and whats going to happen . It is dangerous. I am not talking about the nuclear war. When is too much military or weapons when close to each other. I think it leads to less safe of a world. Do you think there is any tu opportunity to improve the relationship i dont see how, america is putting on a new sanctions and what should report of a new sanction, more corporations, i doubt. Last time we talked to you about prioritizing the bank. Where are you on that process . American investors and european investors can buy our stocks where do you think . We dont have much sanctions. Next week we promise there will be some news and we can make a judgment at the moment the olympics thats coming up thats another sore subject, i guess, right i dont know. It is another very serious story. We have what we have russians are a big fan of Winter Olympics and particularly we have what we have. Overall, it must be welcome to russia and the Financial Sector the situation that we have, probably if mr. Kim jongun behaves better than mr. Putin. Thats sarcastic, i like this guy. What happened do you have an answer . What the hell did happen there is a large part of the country that liked him he comes here and maybe he will Say Something and you will like what would you like him to say . I dont know. Last year everybody was frighten because mr. Trump was seen as an antiglobal and hes a guy against free trade, i dont know what hes going to say here. I was in vietnam when he was speaking one day after he visited china and i saw nice things in the chinese and in vietnam, he spoke of a different tone of china. I dont know we are all waiting for that time now to slip in a quick eak and an early look of tomorrow of an early line up of davos when we return, back in a davos when we return, back in a moment it is. The new ibm cloud private. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. Your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Yes or no . Gin. Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. The original place to invest online. Since 1980, the government have shuts down on two occasions. Welcome back, twitter says that the cfo is leaving the company to accept the ceo position at another company. Cfo noto could take the top position at another company. Make sure you will join us tomorrow we have a huge show on tap we have jaime diamond. Big news 22,000 employees are getting a 10 raise. Michael corbeck from city group is kicking off things for us and secretary wilbur ross make sure you join us tomorrow right here in the snow of davos squawk on the street begins right now. Good tuesday morning, welcome to squawk on the street. The government shut down end, we watched davos and trade. Europe is green. 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