Transcripts For CNBC Squawk Box 20130207 : vimarsana.com

After the bell, earnings beat the street. Analysts say rosy quarterly figures masked troubles at three of news corp. s properties, most notably fox. The nations retailers will report Monthly Sales today, costco post ago 4 rise in comps. And there were two after the bell winners in the space. Shares of zumis rising after the Action Sports retailers raised its forty quarter guidance on sales. Im putting the gavel down and sending it to you, mandy. You have the gavel this morning . The gavel is at the desk. He has to like that. Whenever he goes, he takes the gavel. Why dont we take on the markets this morning for you and get you up to date on what is happening out there. Of course, were looking at an implied open that is marginally positive today. As for oil prices which had been moving higher, ever creeping towards that 100 mark for crude, were currency just below 97 right now. The tenyear, theyre sitting just below 2 at 1. 993 . Now we move on to the dollar. Dollar yen at 9. That is the one to watch, k, lots of comments out from various forex corners. I think the finance minister in japan this morning was saying, oh, the markets decide where the yen goes. Of course, that is absolutely youre in the part of the world. Youre from that part of the world wherefore yex matters. It really does matter. People think about that routinely. I think were so ego sent rick, we dont think about anything for the most part. Im always saying there are people watching who think about it. The dollar is king, i think. I started to say that. Lets do a currency segment where people go, oh, the dollar and the euro. Yes. Anyway, were going to be watching what happens later on. Ecb meeting, draghi, were expecting hopefully strong words out with regard to how strong the euro has been recently and how weak the yen has been. Youre up to date, gold sitting at 11677. Markets physicianed fractionally lower yesterday at one point falling deep into the red. Phil orlando, from federated investors and ben white, chief economic correspondent at politico. Also here with us is david joy. Its great to have all you guys here. Phil, why has the rally stalled . Well, weve gotten out of the gate in terrific shape here. The stock market, the s p is up about 6 the first six weeks or so of the year. Weve got a very constructive full year forecast of 1660 on the s p, which would be a record high. But we didnt think we were going to go straight there. The reality is that weve had a terrific run. The markets are a little bit tired. Youve got some washingtonrelated news coming up over the next month or so. We would expect that this would be a perfect opportunity for, you know, a 3 to 5 pause. And i think were starting to see that reflected up to 5 is almost the whole thing. Well, look, a week from now, president obama is going to do his state of the union address, okay . Typically the market doesnt respond well when the president talks. Then were going to start to get into some of the nittygritty, some of the spending issues. That would be a perfect opportunity for the market to give half of that back. So weve had a 6 rally. Why not, you know, reclaim three of that percent over the course of the next few weeks. Do you feel like were acting a bit bullish with regard to the markets . I get the feeling its more buying from kaufton as opposed to selling at this point, right . I think thats right. First of all, youve approached a couple of psychological hurdles on the dow and the s p. Weve seen what earnings season is going to give us. Were approaching the sequester cuts on march 1st and there is an increasing belief that theyre going to be triggered. And so when you add on to that the fact that payroll taxes went up and the economy is going to be pretty sluggish here in the first half of the year. So i agree with phil that were probably going to give back a little bit of this rally that weve enjoyed. Maybe about half of it sounds right to me. Are we underestimating the impact of the sequester on the markets . Its not that far away. Yeah, i think we are. We have a poll that says market insiders, Hedge Fund Managers see a 5 drop on the dow. Thats 86 billion that hits. Hits a lot of furloughs across the government, transportation, Security Officials at airports not being on the job. Weve got 1 Economic Growth, you add 86 billion in spending cuts on top of that, it will be pain across the board. The question is, do people freak out to come to a deal . I think i got an early version of Morning Money this morning and you let with that story. The disconnect, though, that i cant get is are hedge funds hoeding tight . Meaning have they come out of the markets in the last couple of weeks as the run happens . Is that what the suggestion was . That sort of suggestion, yeah, thinking markets are going to tank and the opportunity to make an arbitrage there. I dont know the extent to which thats across the board hedge funds. There is question whether smart money thinks the sequester is going to hit and done money. That suggests that the smart money has missed a bit of this front. Thats true. The smart money hasnt been that smart, right . If you look at the performance last year, the socalled smartest money turned out not to be the best performing money. I think the assumption is that washington gets to a deal like it did the last time on the fiscal cliff. And you say they dont. If you asked me yesterday i would say no. Today, its hard to know exactly. The prolific deal at the last minute, the market goes through this whole tumultuous period where theres a lot of fear, theyre not going to get the deal done. The question is, are the consequences big enough this time to bring the two parties together, democrats to spending cuts. The last time with the fiscal cliff, it was armageddon if they didnt get a deal. Complete economic meltdown. We wont nail you down on that prediction. Youre here as a guest host. I would say at this point, 60 , the ee zester goes into effect. We do not need silver statistics. Panettas speech yesterday where he said were moving aircraft carriers out of the gulf, that scared people. Theres a lot of republicans who have big military backgrounds in their district. The Armed Services Committee Chairman said ill be willing to accept tax increases if we can get this thing done. Its moving on the republican side, then . Its not all bluster. They want real spending cuts. They dont feel that theyve gotten them. They think this is one way to get them without having a huge impact on the economy. So the risks are higher than on the fiscal cliff. If you dont get a deal done, the dow would fold more than 5 . Right . I think we got an early look at that very point when we saw the flash for the Fourth Quarter gdp. There were two big drivers in there. The inventory to stocking and the defense cuts. So if that part of the sequester, remember defense is half of the sequester goes through, we could be looking at much slower gdp growth. Now, our forecast for this year is 1. 5 positive. Thats maybe about half a percent lower than consensus, but whether were right or the consensus are right, both numbers are terrible. Were not at trim line 3 growth. So i think that the politicians are start to go freak about what the implications are for smarter growth, based upon the full complimentation of this sequester. And, like, we will be thrilled to have 4 or more growth. Now its like 2 point something, thats okay. But certainly for less. There are two key drivers here. There was an Economic Impact from sandy, we felt, in the Fourth Quarter and the fist quarter. That will become a tailwind in the Second Quarter as we start to rebuild. The other issue is with washington. At what point do we get through all the nonsense . Our view is that something happens positive. Were opt misters and that gdp growth begin toes ramp over the back half of the year. Per se, we dont know that. Theres a giant cloud of uncertainty as to what actually comes through washington. David, if we get a 5 or so fullback or anything close to that, would you be a buyer on that . Id be absolutely a buyer. Im a buyer now, really, for the longer term. I think whatever fall out there will be from a sequester trigger will be temporary. And is, in fact, i think in the longer term, it will be viewed as a positive because this is the only way were going to get spending cuts in washington, so be it. Its not the way anyone would prefer it to happen, but i think theres a positive spin on this because it would improve the Balance Sheet. But yes, i like equities. I think theyre reasonably valued. I think Earnings Growth is going to continue, especially in the second half of the year. The fed is still printing money as fast as they can. So i think equities have a lot going for them. You have a yearend target on the s p of 550, 1600, right . Yes. In january, i was feeling as though that was a little bit light. I still think its reasonable, but, you know, that suggests that stocks are going to rise commensurate with an average year of Earnings Growth and is thats pretty good. I think certainly stocks look a heck of a lot better than bonds at this point. David, thanks so much. Phil and ben will be sticking around for the rest of the hour, so well have much more of their thoughts coming up the. I think im with david. I think this pullback we think could happen, people are seeing through it and that may mean you never get there. Anyway, well talk more about that. Coming up, squawk takes flight. Well talk about boeings efforts to get the dreamliner back in the air. Plus, we have a possible deal we know amr and usair. Were going to talk to mike floyd next. Hell always ready to speak his mind. But first, take a look at yesterdays winners and losers. Oh, boy, im rich. Im independent. Im secure. Im rich. You stink and i dont like you. Our first full Team Gathering i wanted to call on a few people. Ashley, ashley marshall. Here. Since were often all on the move, ashley suggested we use fedex office to hold packages for us. Great job. [ applause ] thank you. And on a protocol note, id like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh im sorry guys. Ah sometimes the caps lock gets stuck on my keyboard. Hey do you wanna get a drink later . [ male announcer ] hold packages at any fedex office location. Welcome back, everybody. Good morning. Welcome to sidewalk. As we can see here, and i feel like the weather girl, but u. S. Equity futures are feeling slightly higher today. We have a couple of Quarterly Results hitting the tape in the last few minutes. Cigna reporting earnings and revenues ahead of estimates. Earnings topping estimates by a nickel. Were going to continue to follow both of those stories for you this morning. Scotty, back over to you. Some mandy, thanks so much. Now over to the weather channel. Eric fisher joining us to talk about this major winter storm heading our way. Good morning. This could be one for the record becomes here over the next couple of days. It starts in the midwest. Not to ignore whats going on here across michigan, wisconsin. Chicago, sleeting rain, sleet this morning, a bust of snow this evening. Biggest snow totals, eastern michigan. The bulls eye is right around sagin saginaw. So difficult travel there. The cold air and this slipper moving through the states. Then weve got the rain across the south. Thats ingredient number two. Area of low pressure there that keeps a wet day for new orleans over towards atlanta. And then that turns the corner and it comes up the coastline. As we head towards tomorrow, those two systems meet up and become one much stronger form for us in the northeast. Heavy snow will blanket the region and we are talking about big snow totals. It is february. It snows in the northeast, but this could be an exceptional event. Winter storm watches, that whole area in blue. Winter storm warnings, right here in orange, you have a blizzard watch. Providence, cape cod, strong winds, maybe over 60 miles per hour. Low visibility and a whole lot of snow. How much snowfall . Well, this whole area in purple is a foot or more. Rhode island, connecticut, maine, youre all into there. Locally, we could see over two feet. This would be your sweet spot here in new hampshire, around boston, in the suburbs and down towards northern rhode island. New york city, in is a tricky forecast for you. Youre right on the line. We know its going to snow. The question is, how much is it going to snow. Weve got you in the 6 to 12 inch range right now. That would be the biggest storm of the year so far. Northern new jersey, some big snow totals and in lesser amounts if you move south and west. Dont think youre going to have to go very far to get into the north or east to get into the bigger snow totals. Poughkeepsie, eastern long island, things will be significantly worse than we see in the city itself. Timing there is late tomorrow and into tomorrow night. You see amounts tapering off as you head farther south and west. The idea here is that a lot of people see a foot of snow. Some people say two feet of snow. Maybe in a few spots in and around boston we could see three feet of snowfall out of this one. Your top five snowstorms, the biggest, president s day in 2003. Some model res saying we may beat that total in boston. Not written in stone, but these are ones that everybody remembers. We stop that, that indeed will be something to talk about. Travel tomorrow and into today, thats not going to happen. Rearrange your plans. Some snow good. Three feet . No good. Right . Yeah. Unless you operate a ski place or you want to go skiing. My regular flight to teeter teeterbor on is out of the question. Private jets have a little more leeway in getting out. Eric is going to get me a specialized Weather Forecast for teeterboro. In the meantime, airline webs two developing stories in the aviation industry. Boeing may have another battery plan for its troubled dreamliner. Also, we have a new mega deal coming closer to us. Joining us from denver to talk about this, you guys have snow out there, michael boyd. Skiing is good right now in colorado, correct . Its great. Before we get into the important flight stuff. Great skiing. Come on out. Lets talk boeing first. You see now there is a plan for a new battery strategy. What do you think it means . Well, i think theyre probably going to find a new battery. Who knows, they might have hired the energizer battery. But theyre going to find something to replace the current system, give the faa something to talk about so they get the air mines in the sky again. What does that mean in terms of flying . It could be a week, it could be two weeks. This is something isolated to one area. Its easier to find rather than if you have a structural problem that could take a year to fix. It could happen quickly. Hold on. If theyre replacing the batteries or changing the structure or how theyre going to replace the batteries, its only going to take two weeks to get them in the air after they say theyve been testing them for three years and millions of miles . It could be. If they find a fix, the result of that fix will probably happen very quickly. I understand that boeing had asked the faa to be able to do some test flights. In other words, to get off the ground and to be able to see whether or not the air conditioned change anything with regard to the cause of the problems. I understand that they are allowed to do one flight, but one flight only and under very strict conditions. Is that right . Thats what i understand. Because the faa wants to be very careful we dont have an airplane suddenly fall out of the sky for the safety of everybody. Do you think its a good idea that they get up there . Do what it takes, right, to find the problem. Were dealing with professionals. The people at boeing have any idea that that airplane could have a major problem in flight that could cause a safety issue with the plane to go down, there wouldnt suggest it. Michael, lets talk deals for a second. We thought Something Like this usair amr deal would happen. Do regulators allow it to happen . They better. Theyve allowed every other merger since roughly 1980. This one here, theres no real down sooitd to the consumer. I have a knee jerk thing about combining airlines, but the reality of it is, this does work. It will be good for the consumer. Theres not a lot of overlap. America will get new management and new blood. Going forward, i think it would be a positive thing for everybody involved. Doesnt it mean higher prices for you and me . No, it really doesnt. The only merger in the last ten years thats caused any reduction in real reduction in pass is the southwest air tran merger where some communities got hammered. But if you look back at the other mergers weve had, it has not them themselves driven fares up. Airlines are trying to price this to make their payroll. I was reading one of the notes that you had written. Theres a suggestion that the biggest problem this poses is ultimately a competitive one, not in the u. S. , but that it doesnt advance the game for americans internationally. Americans are a member of the one World Alliance. The free alliances, one World Sky Team and star. The one World Alliance has no real world access to china. You need a china partner to connect all these markets to china to the u. S. And latin america. And this merger wont fix that problem. Theyre going to figure other ways of doing it. Right now, their competitors have an advantage of slowing that traffic and is its going to be huge. I understand theres been some disagreement from both sides as to what the potential benefits would be of this merger with regard to the cost savings and the additional revenues. Do you have an estimate on how many it would save . You know, all of these mergers have said theyre going to save the world, let alone money. In this case, i think youll see a couple of headquarters, but ov overall, its end to. End. The real issue is the revenue stream and the increases in Revenue Streams by putting these airlines together. American express membership miles, they work on us airways, dont work on american. What will happen . I dont know. They better be or ill be ticked. Its a generous people. Theres a lot of people in the audience who want to know the same thing. Thats frankly all i care about. Michael, great to see you. Im sure well be speaking to you as we see what happens with the transition and with boeing. Coming up, its suggested that jpmorgan could have known about some loans with instruments. All the details, next. And merit on, do not miss our newsmaker of the morning, former treasury secretary robert rubin in studio for a squawk interview. A squawk exclusive at 8 00 eastern. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] this is america. We dont let frequent heartburn come between us and what we love. So if youre one of them people who gets heartburn and then treats day after day. Block the acid with prilosec otc and dont get heartburn in the first place [ male announcer ] one pill each morning. 24 hours. Zero heartburn. Welcome back to squawk box here on cnbc. Im Andrew Ross Sorkin along with mandy drury today and scott wapner. Becky quick and joe kernen are off. Theyre going to join us live tomorrow for a special broadcast from pebble beach. They have some pretty cool guests themselves tomorrow. You dont want to miss that. Did you draw the short straw or the long straw by not going . Thats good. I dont play golf. So i dont think becky plays golf, either, so well see. Were all rooting for joe, who is playing. We hope he makes the cut. Okay. Were rooting for joe. We all have to root for joe. I dont know if becky carries the bag or if she drives the cart. I dont know how it works. Shes not going to like that comment, but we do love both of them, of course. Our guest host this hour, chief equity strategy phil orlando and ben white of Morning Money fame. Lets talk about the headlines this morning. A story in the New York Times today looks at documents filed in federal court this week that relate to jpmorgan. The document suggests when an outside analysis uncovered serious flaws with thousands of home loans, the bank didnt disclose the full extent of problem, apparently overextended borrowers. Rather, jpmorgan adjusted the critical reviews as a result. This is what the lawsuit is saying. The mortgages appeared healthier making the bundled complex securities more appealing to investors and internal emails and employee introduce were filed as part of this lawsuit by one of the investors. Let me go to ben white. Ooefb following wall street for a long time. Is this important, not important . Are they idiots . Were they duped or are these sophisticated folks who are now just trying to theyre sophisticated folks but if theyre not getting a full picture of what is in these securities. I think its important because its a precedent setting lawsuit. A lot of the other banks are watching it closely and its jpmorgan who for the most part has come out of the crisis looking fairly good. If its true that theyve massaged these mortgages to look better than they were, its problem for them. Do you buy this or is it monday morning quarterbacking inspect and i say that with the suggestion that i read through this s p complaint. I dont know if you saw that. I did. And shockingly, theyre suing on behalf of the federally deposited institutions like citigroup and bank of america and guess who was underwriting these bonds that theyre suing over . Citigroup and bank of america. The technical reason why theyre doing ta that so they can get around the freedom of speech article. But it also made me think there might be an element of monday morning quarterbacking. I think theres a legitimate concern. Separate yourself from the jpmorgan situation and take a step back. This aplayal situation has been a morass throughout the industry. The banks are legitimately doing a better job of trying to loan more money, the appraisal process has been a disaster. The fact that investors didnt know at that time how bad it was is significant. I think the process right now is terrible, as well. Its gone the other way. There are people who, you know, might otherwise normally qualify for a loan or a rephi, just cant get it because the appraisals are coming in so conservati conservative. And theres a question of whether the banks are saving themselves from banking bad loans, to slowball the estimates. In the meantime, why dont we take a look at my favorite subject. For ex, the japanese yen is taking a nose dive hoping the Auto Industry will become more competitive. But it is not all good news. Joining us now is camilla sutton. I guess its good news if youre a japanese exporter, terrible news if youre on the other side of that trade. Others are getting annoyed with how weak the japanese yen is being made right new. Absolutely. Weve had a few changes in terms of yen. Weve had a 22 move in the last four months. Its been dramatic. In terms of what that means for trade, its tremendous. So if youre an exporter sitting in japan, you have a very good chance. But the problem with yen is its been so strong for so long, weve seen a whole host of Companies Moving a lot of their exports move offshore to counter balance the strong yen. Now that weve had four months of a weak yen, were seeing a lot of the corporates coming out, even sony coming out and telling us theyre able to keep their guidance strong because theyre expecting about 180 million of gains because of the fx. The flip side, though, is that if youre sitting in the rest of asia and youre trying to compete in japan in terms of autos or electronics, its a very difficult ball game. I think the implication is that we have Monetary Policy expected to be so loose in japan, the retaliation of some of the other Central Banks either through currency intervention or through very, very loose policy is real. So in currency markets, we have very exciting times in terms of what policy is doing to currency and how quickly some of these currencies are moving. So lets bring this back in terms of dollars and cents or yen if you like. Where do you think the dollar yen or euro yen is going to go . Weve seen a 20 move upwards in euro yen. Do you think that draghi later on today is going to have some strong words about that . Draghi is a key piece today. When we look at what draghi has said up to now which is that he doesnt comment on the currency, i think were going to see to hear a bit more of that, though a slightly more cautious tone than weve heard. Right now, euro is strong against everybody. Euro is strong against everybody. But when it comes to yen, i think that the trend is just too hard to fight right now. So we really have to wait until we start to see the trend top out before its time to pick a top in dollar yen. The truth of the matter is, the fundamentals have dramatically changed and we have a deterioration in many of the things like the trade balance. All of that combines where yen should be weaker. Is there such thing in currency markets as the trade getting too crowded, camilla, or does that not factor in anything . The dollar yen trade is starting to feel easy. That makes everybody cautious that were getting towards the end. Its been very, very painful if youre trying to pick the stop. I think we have to wait to see signs at the top before you move towards it. Typically what we see is its been about a 20 , 25 move where weve seen these big shifts. Were getting close to that type frame. I think its just a little bit too early, still. I noticed the boj governor is leaving earlier than he normally would have left. In other words, before the end of his term. Do you think the government in japan, the new government under abe pushed him out to get someone more aggressive . Hes leaving three weeks early, timing it with the leaving of his deputy governors. I think whats important is the government appoints the next head and were likely to see somebody dovish. Most likely were likely to see someone who supports the bond buying from japan from the bank of japan and that would be very negative for the yen. And i think thats what markets are pricing in right now. When we look at the list of candidates and we look at who the top spots seem to be, the government is likely to appoint two governors who are very dovish and likely to follow the new politics in japan. That is likely to put pressure on the yen. The big meeting will be i think its april 3rd, right at the beginning of april there where well have the first meeting where well have the boj and the new governor in place. Thats where the real excitement will be. Before we let you go, camilla, give us news that we can use in terms of the fray here. What should people be doing if they want to make money in forex right now . I think the big risk is probably g20. Thats february 14th, 15th, and were like leg to see some terminology. Its not a disorderly move, but its lickly to see some terminology heat up. Then i think what we have is the green light for dollar yen to continue to move higher. So i think between todays draghi comments and next weeks g20, thats when the real ideas come through. For now, i would continue trading through these trends. Over with rsi being overbought at 77 for dollar yen, we have some upside here. Thank you very much for joining us, camilla sutton. The trade that traders talk about a lot as a result of this weak yen is toyota. Toyota is the way to go if youre looking tore trade currencies, you dont want to do necessarily the dollar yen trade. To go to toyota, right . Their pricing becomes more competitive here in the united states. You have to believe that a General Motors or a ford is certainly watching this situation closely and how it is going to relate to its own pricing competition here in the states. It was only a couple of weeks ago, right, that the detroit three actually actively came out and asked the Obama Administration to get tough on japan because, obviously, keeping the japanese yen so weak is giving them an unfair advantage. So if youre long nikkei or long basically exporting stocks in japan like toyota, you have to be short the yen, you have to be negative the yen. Coming up, all aboard the market train. Were talking dow transports and why bulls are very excited to be riding the rally. Dow transports trekking up to an alltime high. But do the fundamentals . [ male announcer ] concept. Calvin klein underwear. 360 seamless technology. [ male announcer ] concept. Calvin klein underwear. If your a man with low testosterone, you should know that axiron is here. The only underarm treatment for low t. 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See your doctor, and for a 30day free trial, go to axiron. Com. Is moving backward. [ engine turns over, tires squeal ] and youll find advanced Safety Technology like an available headsup display on the 2013 lexus gs. Theres no going back. Dow transports trekking up to an alltime high. To some extent, does the bull rally . Don, welcome. Its good to talk to you. Good to be here. Dow fears what happens with the transports. Theyre giddy. Theyre saying it validates the move that wove seen overall in the market. The question is, is it going to last . I like to look at the underlying goods flow. The stocks themselves are not omniscient. Youre getting a very different story when you look at the underlying goods flow. In what way . What is the most telling sign that you see . Truck tonnage is the leading indicator. Historically when you go back and look at it, its predicted eight of the last six recessions, its predicted. I like to separate it between good guys and bad guys. The good guys are simple. We have ecommerce. Were up 14 . You saw domestic air freight up 3 . We expect good results out of fedex when they come out in february. We saw good results out of u. P. S. Which just released a few weeks ago. Thats good news. The other good news is fracking. We have cheap natural gas, were pulling enough oil out of theda. Up more than 50 since the trough 37 bur thats pretty much where the good news ends. Truck tonnage is down 5 in december. We know the results for january were also negative. Were seeing fall falloff in ov overall rail carloadings of 4 . Coal is down another 15 . Metal, metal ore is down 4 . Ag is down 4 . But the markets been able to look past that for some time, right . This didnt just happen overnight. Its not like the Fourth Quarter wasnt gang busters for all of those internal metrics that you say but the market has totally looked past it. Well, this is true. This is true. But as yogi berra said, i dont want to make the wrong mistake. What has happened again and again and again is the truck tonnage leads the way. And truck tonnage has not only been decelerating throughout the year but its continued to decelerate. And so as you see weak truck to beage. You see week consumer spending. We see taxes go up, we see weak, planned business spending. You have to be a little bit more cautious than the market seems to want to be right now. Business investment is up, and i saw, i think dana telsey was on a program preceding this one on cnbc saying that actual january trends in retail look pretty good. I mean the airlines have done well, also. I hear you loud and clear. But then why are why is truck to beage down . If retail is doing so well, where are those goods coming from . When you look at the volumes of containers coming into our ports, you look at the volumes being moved by truck, its negative and that means theres less product somewhere being moved, being sold. So if we went to the declining trucking tonnage as the leading indicator that is not boding well, what are the implications for an investor in this space . Don . Well, it implies that most of these companies are a little bit ahead of themselves. That most of these stocks are fairly or fully valued. We recommend things Like Union Pacific because were moving all of those chemicals. Moving all of the byproducts coming out of the those chemical refineries in the gulf. Theyre also moving all of the intermodal traffic. Weve seen decemberal prices stay stubbornly high so more intermodal traffic as people continue to shift things off of the road onto the rail. Don, there were a number of union related problems with ports on the east coast and west coast during the Fourth Quarter. Could that have any impact on some of these declining volumes that youre talking about . It certainly could have. We saw interruptions with the labor issues. We saw interruptions as a result of sandy and weve seen that reflected in pricing. People, that were able to stay open for business despite the weather, it would be able to exact a larger price for their services. But that said, the overall macro trend for global trucking, from trucking across the united states, is negative, and if thats negative, that couldnt be negative just because of a port eruption, Clerical Workers threatening to strike or a storm. Don, thanks so much. Have a good morning. Well talk to you soon. Thank you. All right, don brown. Were going to take a quick break. First lets take a peek inside the squawk green room. Weve got the professor in the house, stanfords john taylor. Why he says the economy is stuck in neutral. Then in the next hour, earnings and outlook from the whoa of media giant iac interactive. Plus weve got a big newsmaker this morning, former treasury secretary Robert Reuben live in the squawk studio. Hes not been here in years. All coming at 8 00 eastern. You dont want to miss it. Tomorrow, a special edition of squawk box. Live from pebble beach. Former yahoo ceo carol bartz will be our guest host. Well talk to at t chairman and ceo randall stephenson. Plus, the legendary clint eastwood. People have to get creative when the pressure is on. It all starts tomorrow at 6 00 a. M. Eastern. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. [ male announcer ] fast, reliable deliveries worldwide. All stations come over to mithis is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. Weve just commenting on how fast the hour has gone. You know it goes fast when youre having fun. This hours guest host, we have phil orlando and ben white. You put out a note about the january effect and it was the best january weve had in many, many years so far in february, though, its been somewhat of a damp squid. Where do we go from here . I think youve got countervailing points here. 5 up in the month of january. We looked, there were 19 instances where january was up 4 or more in every instance, the market inished a full year positive up on average of about 22 . The longterm signal is good. Weve got a 1660 full year target but we dont think were going straight there. Looking out over on the horizon, state of the union next week, weve got continuing resolution on march 27th, the sequester on march 1st. Theres the potential for an air pocket. We would use any weakness as an opportunity 1660, thats 15 , 20 return . Exactly. We think youve got a 15 , 20 return. We think you hit a record high on the s p by the end of the year. I got to go to ben real quick. There is a market for this, tim geithner is writing a book. You are mr. Washington. How much is the tim geithner book go for . Well, we were talking about that a little bit off camera, i think youre probably right. Somewhere in the Million Dollar range for the advance, and then, you know, who knows on multiple is this the black buster book . We wrote a story yesterday saying hes going to settle scores, talk to his critics about t. A. R. P. And the criticism that he bailed out wall street. The executives there. The opportunity for him to do that. I dont think hes going to do it. Hes more of a professorial type, arguments for why, what they did, the t. A. R. P. Bailout was the only option. Will it sell . I think it will sell. Thats the dichotomy, hell zaz it up a little bit. Hell have to address people like sheila bare. Thats why it could be interesting. Those people have taken a lot of shots at him. While he was in office he had to back off and say he did this for this reason and that reason. He could say, what do you want me to do . Let the bachs fail . Let the economy go down . We did a twitter poll yesterday on cnbc joking around a little bit as to what the title of his book should be. I think some of the the world according to t. A. R. P. Treasury island, money booboo. I like world according to t. A. R. P. That was my idea. Theres plenty of ideas for the book. I think it will be an interesting read. Hes got my number. Hes not exactly a ghost writer. He said im not a guy to sit down at a desk and do a lot of writing. You have to write to write a book. Hes not the best storyteller. Hes not. When you do interviews with him he doesnt like to talk about himself. So i think it could be tough. Hes going to have to jazz it up a little bit. People want to know what happened. Bob barnett is doing the work . He does everybody big in washington. I say between 900 and 1. 2 million. Im going to go 1 mine 5. Price is right rules . Exactly, right. So 1. 3, then. Gone over a bit. The show case showdown. Love it. All right, guys. And the judge can judge what happens. Gentlemen, thank you very much for being with us this hour. Still to come were building up to the newsmakers of the morning. Former treasury secretary robert rubin, a cnbc exclusive at 8 00 eastern. Plus chicago fed president Charlie Evans talking about the Central Banks next move. But first well welcome a visitor from the west coast, stanford profirst irjohn taylor. Find out why he argues easing is hurting the economy. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] its a power money hour. Former treasury insider and squawk market master john taylor. Plus carlyles Oliver Sarkozy. And searching for profits. Iac interactives ceo on his companys earnings and outlook. Plus the tools of the trade. What you need to know before another busy trading day ahead. Second hour of squawk box starts right now. Mandy drury and scott wapner sitting in for joe kernen. And becky quick. But, of course shes only gone one day. Joe has been gone all week. Theyre out in california. Theyre going to be bringing us a special broadcast tomorrow from pebble beach, and you dont want to miss that. Lets take a quick look at the futures. Dow looks like it would open up about 4. 5 points higher. S p 500, virtually unch and the nasdaq off a point. This comes as we have a little bit of a breaking news crossing the wires. The bank of england announcing a decision on Interest Rates. Leaving the key rate unchanged at half a percent, which was expected. Also we have a number of corporate stories on our radar this morning, including this one. Two in the aviation industry. American airlines parent amr and us airways said to be hashing out the last major details of a merger agreement. Also boeing reportedly working on battery design changes that would minimize fire risk on its grounded 787 dreamliner. We talked to Industry Expert mike boyd earlier on squawk about that battery issue. Probably find a new battery. Who knows they might have hired the energizer bunny, we dont know. Theyre going to find something to replace the current system. This is something isolated to one area. So its easier to find, i would say. Rather than if you have a structural problem thats going to take a year to fix. It could happen very quickly. Weve got a virtual whos who of power players on wall street on the show today. Among them here it is exclusive newsmaker of the morning, treasury secretary robert rubin. Hes going to join us on set for an extended exclusive conversation at 8 00 eastern. He has not been with squawk for many, many years. So this will be a Good Opportunity to what did you do to him . Why did he disappear for is amany years . What did you say to him . I didnt say anything. There were some other things that interceded. Then chicago fed president Charlie Evans is going to sit down with Steve Liesman at around 8 30 eastern. But dont worry, you dont have to wait until then to hear some interesting voices on the central bank, because on set were happy to say, stanford professor and former treasury official himself john taylor is here here discuss. Lets go to scott. Hes got the morning headlines. Thank you. What might be considered a surprising partnership, yahoo and google have signed a nonexclusive marketing agreement. Retailers in the northeast stocking up on storm goods ahead of an anticipated weekend storm. Home depot, target, lowes among the companies telling cnbc theyre taking steps to deal with anticipated increased demand for certain goods that people anticipate theyll be stranded at home because of weather, and its supposed to be bad in the northeast. Standard poors has hired a top white collar defense attorney to help fit a 5 billion government lawsuit over ratings. San francisco based john keeker has represented Lance Armstrong to enrons andrew fastow. Back to the big developments from the aviation sector this morning. Boeings plan to fix the 787 battery problems and a merger to create the Worlds Largest airline. Phil lebeau has details on both stories. Which one would you like to start with. Lets start with the american usair because i think a lot of people are going to look at this and say, what . Weve been hearing about this for some time. When is it finally going to be finished. I talked to one person this morning familiar with whats going on, involved in the discussions between american and usair, and they tell me that they are close to having this thing wrapped up. But close means it could happen in the next week to two weeks. Thereve been some reports out of dallas that well have an announcement early next week. Ive been told that might be a bit optimistic. I think were still probably at least another week out. This still needs to be approved by the amr board because this would happen as they exit bankruptcy, they have not finalized all of the details in terms of management, as well as some of the other things. But we do know that in terms of management, doug parker, who is the usair ceo, he would be the ceo, and effectively run the new airlines. The new american usair. What happens to tom horton, who is the current ceo of american . That still needs to be finalized. There is some discussion about him taking a position as an honorary executive chairman, or perhaps executive board chairman, with a little bit more power. Although i was told this morning its unlikely that hes going to have a whole lot of say in terms of how the airline is run once the merger takes place. If they are finally brought together, and again we expect this to happen within the next couple of weeks, it would create the Largest Airline in the world. Larger than even united continental. The unions have already approved the terms here, so what were looking at right now is the final financial details and some of the management details being worked out by the creditors, as well as in Bankruptcy Court. Take a look at shares of lcc. Remember american, because its in bankruptcy, that stock is not really worth checking. But if you look at us airways over the last year, in anticipation of this merger, its been moving higher. So thats the story with usair and american. Now lets shift to the other story, which involves boeing. And a couple of developments there. We talked about for some time that boeing has a has p e tegsed to the faa to resume test flights as soon as possible. Well we also know that they have asked the faa for a fairy flight of one of their 787 dreamliners to go from texas up to washington state. It is likely that that is going to be granted by the faa. Meanwhile, the wall street journal reporting that boeing is proposing changes to the 787 batteries. Those changes have not been finalized. But essentially it would make the batteries in essence safer when theyre put back in the 50 planes already out on the ground. The ntsb out yesterday criticizing the faa certification of the 787. There is a press conference later this morning in washington. Well hear more about the ntsbs thoughts on whats been happening with this 787. But listen to the chairman of the ntsb yesterday. Its clear were a long ways from this being resolved. Were working with boeing and the faa. They have some parallel activities going on. So i will tell you, we are going to have some information tomorrow but i think we are probably weeks away from being able to tell people, heres what exactly happened and what needs what needs to change. After Debbie Hersman made that comment around 10 30 yesterday morning, shares of boeing dipped down and then they came back. And thats been the story ever since the grounding took place on january 17th. They have continually moved higher. Now there are a couple of dips in there. The bottom line is this. They are working on a solution when it comes to the lithiumion batteries. In terms of changing the structure of those batteries. Now whether or not those changes will be enough for the authorities to say, you know what, we think that this works, lets start some test flights, perhaps in a couple of weeks, were at least several weeks out before they can say, okay, this is definitively what we have and what were going to do to solve it. And the Biggest Issue is, if you dont have the root cause, are the authorities going to say, we approve the changes in terms of the battery structure . But clearly its a moving story along with the amr usair story. Guys . Well, question on the amr story. What is the timing . Why is this happening now . And you know, it struck me as you were doing your report, we were showing broll of these new american airplanes, right . So they are spending a fortune to redo their planes, a whole new logo system. I dont know if the ultimate combined airline would be called american it would. I hope for the 5789 of spending. But why now given that theyve had this opportunity now for at least six to eight months . Youve got the creditors. They have got a deadline coming up on february 15th. And by the way, thats not a hard and fast deadline. In other words, if they dont have a deal worked out, its done. They can get that extended in Bankruptcy Court. And so thats what theyre pushing for. They would like to have that done. The creditors believe that theyre fairly close in terms of all of the financial details. Getting this all worked out. So, thats whats driving this right now. And the other thing, andrew, they want to get this done, in bankruptcy, and come out of bankruptcy, as a merged airline, as opposed to what was originally being considered by the american board, which was lets do this on our own, and then well become we can talk about a merger with usair. Usair has been pushing all along with the unions, by the way, to get this done in Bankruptcy Court so thats whats driving it right now. Okay. Thank you for that, phil. Thank you very much. I imagine we will see you were seeing you almost every morning. Happily. Unhappily for boeing, probably. Getting our moneys worth out of phil these days. That is true. Lets talk to our squawk market master. John taylor, professor of economics at stanford, university. Also former treasury undersecretary for international affairs, and we havent seen you in awhile so thank you for joining us. Good to be back. Thank you. Market. A little toppy . I gather from some of the thoughts ive ive read that youve had. Not so much the market thats toppy, seems the economy and the market is broader set of issues related to the whole world economy, i think the u. S. Show shows its going to be a pickup. Over 1. 5 , which is what we had in 2012. So i think there will be a pickup. I really worry it will be just 2 , 2. 5 growth for the year and that wont be really good. You recently wrote an oped saying you believe the fed was a drag on the competent. Yes, i still do. Why . They have rolled out every possible intervention you can imagine. Its confusing to the markets. And the low Interest Rates actually discourage lending. To some up all the things, i know theyre trying to have those low rates to stimulate demand. When i look at them all it seems to me, after all the economy has gotten weaker and weaker as theyve rolled out so its counterfactual but assuming they didnt do those things where do you think we would be . And is there some policy on the other side that you actually think would happen . Absolutely. I think if they hadnt done all these things. By the way, all these things, i think during the crisis, during the panic, september, october, 2008 was great, then they continued with these emergency policies long after the emergency went away. And i think that has been counterproductive. I would have basically done the liquidity operations in 08. Have them wind down, then try to get back to normal Monetary Policy. Where we are right now, what would you advocate in terms of where they should start what im hoping is there will be a bit of a pickup this year and that will give them the excuse, if you like, to stop all these extra asset purchasing, to 85 billion a month, if you like that would be the first step, and then gradually, as i hope the economy recovers, it will be the opportunity to move off some of these and that will reinforce the recovery. You said in the oped, these are your words, zero rate policy creates incentives for risk averse investors to take on questionable investments. Are you suggesting by saying that that investing in the stock market is questionable . I think, actually, the stock market is good to be invested in. I think theres a lot of opportunities, not just in america. 50 of the profits coming from abroad. I think emerging markets are still quite promising. Some risk there. But no, im concerned about really searching for yield, and sort of risky credit, if you like. Going to operations which a lot 6 people shouldnt be taking those risks. Pension funds shouldnt be taking those risks, but theyre kind of forced to because the yields are minuscule. Were going to hear from Charlie Evans later this morning with Steve Liesman. Hes one of the more dovish members. Hes going to come out and say more needs to be done, not less. Why is he wrong . Just as i said, i think its counterproductive. I think has try shows that Monetary Policy works well, works best, when we dont have all these interventions. Just its completely unprecedented. Weve never seen anything like this. Of course he wants to get Unemployment Rate down. Central bankers always want to. I believe its counterproductive. What do you think the if 6. 5 is the current sort of target Unemployment Rate for the fed, where do you think we would be if they arent doing some of these things right now . It would be lower than it is now. And i would lower than it is now a by tick or lower than it is now by a full point . If they started way back when, like i would like them to have done back in 03, 04, 05, where they cut those rates so low, we wouldnt have nearly what would you do right now . As i said, i take the opportunity of a little bit of a pickup this year, hold off on extensive asset purchasing if you like to stop that, and then move gradually. Has to be gradual. How gradual . Because it seems like anything would shock the markets that would go in the opposite direction of where the feds been going. Of course, because its a surprise. Its a surprise compared to where they are now. Thats why i say all the time, the Monetary Policy you have to be gradual if you like and i think if they did that, the markets would like it. How realistic do you think 6. 5 unemployment really is, though . When you consider that, you know, weve made a lot of gains in terms of technological advances, companies have learned during the lean times to do to make do with fewer employees, become more productive, et cetera. I mean, isnt there kind of a structural embedded unemployment right now . I dont think its nearly the concern. We could get unemployment much lower than it is now. Much lower than 6. 5 . I think there basically is no reason why we couldnt have an Unemployment Rate of 5 . Whats tragic is we still have this high unemployment. Whats even worse is people arent talking about it very much. They think about the policy, they dont talk about unemployment being 7. Has washington given up . It sounds like they have. The fed hasnt given up unemployment. Unfortunately, its not talked about enough. I think its a real concern. Okay. Well well talk more. Great. Okay. Coming up, a call on commodities. Were going to be talking metals, oil, and were also going to ask what recent moves mean for the broader markets. But first, as we head to break, do check out sprint, the company posting a smaller than expected loss just a few minutes ago. Revenues topping the street. And also limited are reporting better than expected monthly samestore sales. Do stay tuned. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. This is the pursuit of perfection. Open up about 15. 5 points, dow jones almost unch. European stocks in early trading, lets see whats going on. Ftse down marginally. Cac up marginally. And the dax up marginally. The word of the morning. Its all marginal at this point. Weve been tracking khadty prices. Gold is rising slightly ahead of todays ecb meeting that could set the tone for the euro. Platinum and palladium prices holding steady. And oil is edging up to close in on that 100 mark. Lets get to our trading block now. Talking oil is carl larry from atlas commodities. Hes also president of oil outlooks and opinions and with us on set to talk precious metals, sean, editor of the wealth report. Sean, Credit Suisse was out with a note saying the era of gold is coming to an end. Are they right or wrong . I dont believe that. Theyre wrong. Basically, when trends would come to an end, if you were having a gold bubble pop, you wouldnt have Gold Consolidating for a year, year and a half in the 1500, to 1800 range. Its actually building a healthy base to launch higher in my opinion. I think that well see gold, you know, in the coming 6 to 9 months hit 1900, possibly 2,000 an ounce. What takes it there . Their premise being sort of the ultimate fear is off the table and that in their minds gold is overvalued where it is now. Are you banking, so to speak, everything on the fed . I think a lot of it is going to be the decline of the color. The color peaked out about june, july, broken one year uptrend line about august, and has been heading down overall since. Consolidating lately but the next leg got us lower. I saw an incredible headline this morning that said vehicle sales in china january rose 46 from a year earlier. I know plot numb is already in short supply. Platinum demand is going to go through the roof, this kind of trend continues in the worlds Fastest Growing car market. I think platinum, palladium head higher. Obviously more autos come online with into china and into india. You know, americans have been holding off in their car purchases for years now. Now theyre saying, okay, probably the worst is over. Im turning in this old car, im getting my new car so i think theres some renewed demand there showing up in gms and fords figures, toyotas figures. All this is putting more demand on platinum and palladium. I see this demand rising and platinum and palladium heading back to their old highs. Carl the biggest variable for the oil market, china data coming in the very near future. Ecb meeting today. What do you see . Well, i still see what you were talking about earlier, Economic Growth in the u. S. The last time we were at 100 was 2008. So i mean were still a long way away from that. Demand here is really what drives us. I think yesterday was a perfect example. We saw inventories rise in crude oil in the u. S. And yet we bounced right back up. So i think were going to be watching those ecb numbers and the china numbers but also keeping an eye on how the u. S. Does. If we go to 100 oil is the Global Economy Strong Enough to deal with that . Sure. I mean when you look over the pond, over the uk, and see brent prices, you know, trading at 115, 120, nobodys blinking right now. And i think 100 here in america is just a number. Weve been there before, well be there again. Again i think theres a lot higher left here especially with growth coming back in. At 2. 5 gdp were looking at maybe 110, 120 without even thinking. Is it possible that money has come out of gold and gone into places like palladium . Thats where the rise in palladium has come from as gold has suffered the other metals, industrial and otherwise have gone up . I think palladium and platinum both definitely took a back seat as golds had its tear, silver had a big tear. As you had those two pull back, i believe a lot of money did roll over from those from gold and silver into platinum, palladium. Also you had the South African mine strikes which really put deficits there relative to the demand thats there. That put platinum and both palladium as well. Sean, thanks. Carl, thank you, as well. Okay. Coming up, folks. Details on some looming job cuts on wall street. And were also building up to the newsmakers of the morning. Former treasury secretary robert rubin, in studio. Thats a cnbc exclusive, folks, at 8 00 eastern. Plus, chicago fed president Charlie Evans talking about the Central Banks next move. Do stay tuned. Tomorrow, a special edition of squawk box. Live from pebble beach. Former yahoo ceo carol bartz will be our guest host. Well talk to at t chairman and ceo randall stevenson. Plus, the legendary clint eastwood. People have to get creative when the pressure is on. It all starts tomorrow at 6 00 a. M. Eastern. Welcome back to squawk. Barclays capital saying it plans to lay off 275 employees at three offices in new york. Its blaming economic factors for the layoffs. The layoffs are going to take place during a 14day period beginning may 5th. How do we know this . The Investment Bank disclosed the plans through the department of labor. The federal workers adjustments and retraining notification act, which i didnt know too much about, requires employers of companies with 100 workers or more to provide notice 60 days in advance of a plant closing or mass layoffs. I would have thought that this would have constituted that. But, who knew. Who knew . All right coming up. Earnings central. Iac interactive ceo greg blatt joins us with his outlook. Interview you dont want to miss. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] welcome back everybody, to squawk box. In the headlines this morning, it is the busiest dave an otherwise light week for economic reports. Were an hour away from the labor departments look at initial jobless claims, as well as Fourth Quarter productivity figures. Claims are expected to drop by 8,000 to 360,000. Productivity is seen showing an annual rate drop of 1. 6 . We are just a few minutes away from the european Central Banks latest rate decision. That bank is expected to keep its key Interest Rate unchanged. But it will be followed by ecb chief Mario Draghis News Conference at 8 30 eastern and that, folks, could be very interesting viewing. In the meantime limited and costco among the retailers that have beaten expectations with their january sales this morning. Limited saw a 9 jump in sales at stores open at least a year. That is more than double street estimates. Costco saw a 4 increase, plenty above consensus. Over to you, andrew. Thanks so much. Iac reporting after the bell. The companys Fourth Quarter earnings fell 16 , as some losses operating losses continued in the media division. Were going to talk about all this and a lot more. Joining us from new york and a first on squawk interview is greg blatt. Iac chief executive. Good to see you, greg. Good to be here. Lets talk about these earnings and then i want to get into some of the other issues around google and some of the other things talked about on the call with barry diller yesterday. Lets go through the earnings. What does it say about the business the profits have fallen . Well, i guess i dont really think about it that way. Our operating profits were up dramatically over 36 year over year. The sort of reported earnings had a tax issue from last year. We let out some transaction related reserves that brought the tax rate down so i think when you look at the net income number thats not reflective of sort of the business going forward. Where we posted, i think, the 11th or 12th straight quarter of plus 30 Earnings Growth. And clearly did beat expectations. You guys talked on this call yesterday about your relationship with google and about this issue of how they changed some of their policies and im hoping that you can just share with the audience whats going on. Because it was pretty interesting. Sure. I mean, we have a great relationship with google. They supply our sponsored listings for our search business which is effectively the advertisements that we serve in our various properties. From time to time, they adjust certain policies, about the way those advertisements are used. We had a big one over the course of the last weeks where sort of we and google worked together to come up with a change to the set of policies. Its probably the biggest one that weve had in a long time, and our business comes out strong. It has some impact in the nearterm but i think overall leaves us in a great competitive position. We said were expecting strong double digit growth in that business this year. So we actually feel great. I mean when you have a relati relationship like that thats big over time issues can arise and you sort of then have periods of realignment which we have and we come out very strong. So we feel really good about it. Lets turn this around for a second. Were you in compliance with the new policy . And more importantly, are you frustrated as a partner of google . And by the way, youre not the only partner of google, that the policy and the goalpost, if you will, can change overnight . I think weve certainly been in compliance with all the policies thatve been in effect. When the prior policies were in effect we were in compliance with them and theres been no question about that. They have instrumented some changes to some of the policies and we will comply with those policies. I do and specifically just explain frustrating. But really with respect to the last set of policies we worked with google hand in hand for the last several months to come up with them. I dont think theyre exactly what we would have crafted if we were working alone, we werent and overall we support googles efforts and intent at sort of making sure that the business is good for advertisers and good for consumers and we think thats best longterm. You guys had a tool bar. Other partners have had tool bars that you can download, put on your browser, but there have been questions, google was changing in terms of some of the policy was whether people understood exactly where they were going or what kind of search result they were getting as a result of it, correct . Yeah, i think broadly speaking thats right. But i think, you know, we have been changing disclosure screens over time. Consumer habits on the internet change. People get used to Different Things. And they end up not liking certain things. And from time to time you have to adapt what youre doing. I think the changes in general were fine with. We think that, again, we think anything thats good for the consumer is good for our business longterm. And we feel good about where weve ended up. Greg, can you describe the level of worry internally regarding facebooks graph search . Because certainly the day that that was announced your stock was lower. And i think you could make the argument fairly that brands such as ask. Com or urban spoon could be impatted by that new service from facebook. Look, i think any Time Facebook makes a big announcement thats news in our space. I think our stock may have been down that day. Unfortunately i think our stock was down several days around there. So i dont think, i certainly didnt draw any direct correlation there. The market did. I certainly think any area where knowing what your friends really want, recommendations, et cetera, is an area that can really be impacted by that. I think urban spoon is that kind of an area. But urban spoon is something that, you know, its a great app for restaurant recommendations. Its growing fast. I think that, you know, whenever you have these sort of announcements i think you have to take into account sort of the incredible growth in this kind of activity generally, which is still much earlier than later. I think facebook will grab an increasing percentage of that stuff, in the real recommendation space. Especially where your friends really matter. But i dont look at that as really impacting urban spoon that much. And ask, i mean ask is really a reference business. So, ask is generally used, we are trying to find out information that tends to be factual, and i think that, i think that the facebook serve product is going to be a little different emphasis than that. Why did you recently shut down hatch labs your incubator for mobile apps . Well, look, i think we tried different ways to start new businesses from time to time. We came to believe that a captive incubator can work at a very large scale where youre putting in lots and lots of money to sort of come up with enough bets that when the winners come through they pay for the losers. I think when we were sort of half in, i think, and we had some good products come out of it, i think we came to a point where we really either had to step up investment meaningfully or sort of approach Startup Investing in a different way and i think thats where we ended up. Whats going to happen to those assets . I understand youve been exploring several options. Some of them, the ones that were still in play are being invested in, we took one of them, tinder, which is a dating app and theres another that is an advertising play, still using the funding that we gave it. The existing businesses that were up and running are still very much in play. Give us an update in terms of growth opportunity, match, we have valentines day coming up. Hope you get some business. But also we expect to. By the way, do you actually get a lot of business around valentines day . Do people use match for that . Its a big peak season for that. December, january, february big season. Separately, an update on about. Com which you bought from the New York Times last year. About has been great. We bought about under a thesis that our knowhow from ask would translate well. The business had been in decline. In q4 alone our First Quarter of owning it rereversed eight or nine straight quarters of declines and had 35 growth in that asset. Were expecting big growth this year. It really fits in with ask nicely and ask sort of brings it benefits and it brings ask benefits. A real mutual synergies, we feel great about it. Quick final question. You own the daily beast and newsweek. Its no longer doing a print edition. What do the prospects look for that as a digital business. Do you see that being profitable . I think the next twelve months probably not. I think what we said is that we brought back the investment meaningfully. I think this year well still be an investment year and were certainly looking forward to 14, and with the expectation and hope that well be turning the corner around. 2014. And it can become profitable . This has always been the big question, whether you can turnt a print business with a legacy into a digital business, and whether the digital dollars or rather the analog dollars become digital coins or not . Were going to try and answer that question for you. Okay. Greg, thanks for joining us this morning. Really appreciate it. Thank you, guys. What happens in america . Do you give each other a gift . Or is it just from the guy . Or just from the girl . On valentines day . What do you do in america for valentines day . Hallmark card . Isnt this a hallmark holiday . Dinner if youre married . Ill let you know the day after. What kind of like feedback you got from your wife when you didnt give her anything . Cards. Theres usually a card trade and maybe a dinner. If youre married. And then maybe if youre single youre trying to work on more than that on cnbc. You should get some big heart shaped balloons. Theres an idea. Okay. She can wear that dress. If you have questions or comments exactly. I need to help myself. About anything you see on squawk box, connect with us online and on mobile. Follow us on twitt twitter squawkcnbc. Like us on facebook and visit our show page squawk. Cnbc. Com. Up next, Carlyle Group managing director Oliver Sarkozy is making his way to the set. Well ask him about european risk, opportunities in equities, and the return of the retail investor. At 1 45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. Surgery was successful, but he will be in a cast until it is fully healed, possibly several months. So, if the duck isnt able to work, how will he pay for his Living Expenses . Aflac. Like his rent and car payments . Aflac. What about gas and groceries . Aflac. Cell phone . Aflac, but i doubt hell be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a getwell card at getwellduck. Com. Good morning. Lets take a look at what the futures look like at this hour. The implied open is the s p and dow would open higher. Nasdaq just a touch lower this morning. Well see if we cant push back towards 14,000. We hit that and the rally stalled out a little bit. A little bit. Our next guest might be able to talk a little bit about the market. The Carlyle Group wrapped up its acquisition of tcw group on wednesday. The deal is just one in a recent buying spree for the company and all of our sarkozys team led this acquisition. There he is. As well as the latest deal to buy Investment Bank duff and phelps at the end of december. Oliver joins us now. Hes head of Global Financial Services Group at carlisle. Good morning to you. So, youre buying up banks when nobody was touching banks for a long time. What got to you . Well, neither of these two things are banks. Thats true. But Financial Services was sort of a dangerous place to play. To play. And with that comes a lot of opportunity and we think weve seized a couple interesting ones in tcw. Would you play europe right now . Europe is going to be full of opportunities. Structural changes that are taking place there clearly for folks like us is land of opportunity. But with that will also come some issues. Youve got a Banking System that needs to dramatically delever. We estimate about 30 trillion dollars of assets needs to move off the books of those banks. And as that happens there will be opportunities for investors. Opportunity is a great word, right . But its very broad and encompasses a lot of things. Narrow it down for us in terms of there could be opportunities in europe. Where geographically . Which sector specifically . It really depends on what your investment parameters are. What is clear is that the cost of capital for europian firms is going to increase. And with that will come some disruptions, as you move lending off of the books of the Banking System onto the broader market. As expected the ecb has left rates unchanged. Get your reaction to that. Is that the right he got the phone call in advance. He said unchanged. It was on the bottom of the screen. Is that the right move, though . Yeah, i think so. I mean, look, europe needs stimulus, and in order to make that happen, you need to have a flexible Monetary Policy. Doesnt europe need a weaker your row . Europe needs a weaker euro in my view. Politicians up in arms about the fact that the euro is being so strong recently . Were just doing a segment on currencies earlier on today. I think its up 7 . I dont know. So its up about 20 against the yen, for example . I dont know how much its up against the dollar over the last three months. But its strong. And you can question why that is, but certainly as an export economy, germany would benefit from a weaker historical factors that make them cautious about policy that would cause that to happen. So this is going to be one of the major debates, i think, going forward. Is draghi afraid to cut rates now because hes holding it back in his pollster in case he really needs it if the situation worsens beyond what he expects . I think theres a bit of that. I think the central bank in europe is generally been more conservative. In implementing policy. And so taking a more cautious approach doesnt surprise me. But certainly theyll have dry powder that we dont. I dont know if you heard you guys are in a different place than this, though. A little bit . No, im not sure i disagree at all with what he had to say. The yes about the euro and the yen, a lot of that comes from the fed. Basically these easy policies make it more difficult for these other Central Banks. So its actually, i am always concerned that this currency war people keep talking about is actually do you think the europe is doing ecb . They are doing a good job. One factor theyve committed this sovereign debt purchase. Thats made a big difference in europe. So i think youve got a lot on his mind i want to back up to what you were saying about a currency war coming. Already were in the middle of a currency war of words. But what exactly do you mean by a currency war. How would that manifest itself . Usually happens when central bank is very easy, and other Central Bank Sees their currencies too high so theyll be easing, too. We actually have seen it for a few years. A lot of Central Banks hold their rates lower, whether its mexico, scandinavian countries, because of the fed and ecb rates lower. So thats kind of what causes this currency war. How does that end up . Kind of like a mexico standoff . Its about when people have a more global view of policy. Take this into account. Ive been urging for years that youve got to take into account the fact that theres spill overs in Monetary Policy. Its good for countries to take that into account. When people are trying to fight fires, if you like and youve got economies that are desperately trying to boost themselves like japan and i guess the u. S. , you could also add has been manipulating its currency to the downside as well. People realize it becomes counterproductive and they make the adjustments. We had a long period of time where Central Banks didnt do that. 80s and 90s. Oliver, youre a buyout guy. We just had a big deal in the buyout space. Not a financial deal, but dell. Right. I actually think it was a financial deal. Microsoft turned itself into a bank by lending some of the money. How big a deal do you think could be done in the private equity space right now . Well, that one certainly caught me by surprise. It was larger than i would have extented. Having said that the debt markets right now in large part because of some of the issues weve been discussing are incredibly accommodative. And with that comes greater buying power than one would have imagined so its really a question of how stable and predictable the cash flow stream is. You got something in the happener . We are always busy. I good year for m a . I think so. Certainly for m a in the buyout world. Whether the corporate world follows suit depends on a bunch of different factors. For People Like Us the debt markets will likely keep us busy. Just quickly i understand youre more positive on the liquidity market than you have been in some time. Even as multiyear highs, nearing record highs in the u. S. Or are you talking globally . Here in the u. S. You have a disconnect between what the bond markets are telling you and what the equity markets are telling you. If the bond markets are right, equities have a long way to run. Oliver, thank you for being here. Nice to see you. Coming up weve got more happy valentines day. Treat your lady right. Coming up, weve got more with our stanford economics Professor John taylor. Coming up at the top of the hour, a squawk box exclusive interview with robert rubin. Former treasury secretary of the united states. Well talk about the path from debt disaster to economic prosperity. Keep watching squawk box on cnbc. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and youll find advanced Safety Technology like an available headsup display on the 2013 lexus gs. Theres no going back. Time now to get some final thoughts from our guest host john taylor. You make the case that the fed, by its easy money actions, is hurting the economy. There are those who would say, show me the evidence. Where is the evidence of that . Right . Housing has started to come back. Would it have come back without the actions of the fed . And then other areas of the economy that have at least shown some signs of life. Think about it this way. Two years ago the fed was forecasting growth and 2012 was going to be 4 . Turned out to be 1. 5 . They rolled out all these policies. So things have gotten much worse than they thought. What are the reasons . Europe. I dont think so. Policies is a mess in many respects. Fiscal policiepolicies. We dont have a budget. You wrap all those things together you see a drag on the economy. Monetary policy is part of that. If washington had not screwed up the fiscal cliff, i mean that was an embarrassment, okay . You had ceos who were holding back in the way they were investing, the way they were spending, the way they were hiring. Absolutely. Wouldnt that have helped the economy be better than it was otherwise . Absolutely. All this policy uncertainty. Theyre sitting on huge amounts of cash, banks are sitting on huge amounts of cash. Policy uncertainty has been a really a problem for the last two or three years, at least. And will continue. The cliff is just an example of that. We have some big battles to come on that front. Absolutely. One coming up in just a few weeks in the budget. How does it transpire . What im hoping is that they have this sequester, which is just adross the board. If they translate that into decisions that could be made across the board. But we do have to get spending under control. Still rising very rapidly. Thats really what the problem is in terms of the deficit. We have this debt thats still exploding, part of the policy uncertainty. The more we can i think my point also is, wouldnt we be seeing more signs that whatever the fed has done, may have been working better had washington not shot us all in the foot . I think its i think its the whole policy package to the. The fed has been very interventionist if you like. Theyre trying to do a good job, i think its not helping. But also weve had the stimulus packages, a whole wide range of things like this which has been a drag. We have to leave it there. Thank you so much for joining us this morning. Its been a pleasure. A lot of fun. Thank you. Come back. Next time youll have kernen he wont give you a hard time. Not as bad as you. Coming up, two very big interviews that you can only see right here on squawk. Former treasury secretary robert rubin. Hes in the green room now. Hes going to join us on the squawk set. Well talk about the economy, big banks and americas debt crisis. And later chicago fed president Charles Evans is going to join us live from chicago. Weve got a very special hour of squawk box starting in just two minutes. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] this hour on squawk box, an exclusive interview with former treasury secretary robert rubin. Well ask him how to restore the american economy, and avoid a catastrophic debt crisis. Plus, chicago fed president Charlie Evans, on the path to higher employment, and stronger Economic Growth. A very special hour of squawk box begins, right now. Welcome back to squawk box. A very special hour of squawk here on krcht nbc. Im Andrew Ross Sorkin along with mandy drury and scott wopner. Joe and becky have the day off. Theyll be joining us tomorrow from pebble beach. With me on set, robert rube rn, former treasury secretary of the united states. Plus were going to be talking to chicago fed president Charlie Evans later in the hour. First mandy and scott will get you caught up on the morning headlines. Hello, everybody. Among the stories we are following this morning the bank of england leaving its key Interest Rate unchanged at half a percent. The European Central bank also leaving its key rate unchanged. Both decisions were as expected. Back here in the united states, we are less than half an hour away from breaking Economic Data. Economists expect weekly jobless claims to drop to 360,000 from 368,000 the previous week. Well also get productivity numbers, economists expect a decrease of 1. 6 for the Fourth Quarter. All right, mandy. Boeing reportedly working on battery design changes that would minimize fire risks on the grounded 787 dreamliner. The wall street journal says the company could have the passenger jet flying again as soon as march. American airlines parent amr and us airways are said to be hashing out the last major details of a merger agreement. The deal would create the Worlds Largest airline by traffic. The allstock deal would be executed as a reorganization plan that takes american out of chapter 11 bankruptcy protection. And a filing offering more details on the dell buyout. Founder michael dell and his Investment Firm handing over 750 million in cash towards the 24. 4 billion deal. The company also says it is targeting the repatriation of 7. 4 billion of cash now parked abroad to help finance the transaction. Mandy . Okay, scottie. Lets take a look at what the markets are up to right now u. S. Equity futures pretty flat right now. Earlier on they were a little more positive. The implied open is looking flat and mixed. As for whats happening overseas in asia, hang seng slightly lower along with the shanghai composite. The japanese nikkei also lower. I should add the nikkei 225 really had quite the comeback recently. And even shanghai this december has had a comeback of its own. In europe, the ftse is slightly lower. The cac quarante and the germany dax also moving slightly higher. Andrew now with our big interview of the morning. Andrew . Thank you, mandy. We have an extremely rare and exclusive interview with one of the most influential figures from washington to wall street over the past 20 years, joining us now on the set, robert rubin, the former u. S. Treasury secretary and cochairman of the council on Foreign Relations. Hes also a speaker, or was a speaker at the cnbc institution Institutional Investor delivering alpha conference as well as an adviser to centerview partners. We just had blair effron on the show yesterday. I know that. Good to see you. I wanted to put this up. This is whats on the cover of usa today. Pentagon warns of huge cuts. When you think about whats going on in washington, right now, and you think about the sequester that may or may not happen, and you think about your history in washington, do you think that we will have the sequester . Andrew, i dont know. I think its a very complicated situation. I think we had a great opportunity and i actually thought there was some reasonable chance it might happen, which was to have a grand bargain that could have addressed what is really unsustainable and deeply dangerous longterm fiscal situation and i think if we had done that, not only would be useful for the long run but i think could have generated confidence in the shorter run and promote jobs now. Now instead of that we have a happen has 5rd process. A sequester were facing. Its a terrible piece of legislation. It arbitrarily cuts defense and nondefense without thoughtfully doing so. Instead of being phased in so wed have more room for recovery, it hits abruptly. And its far, far from clear that if its put in place its going to stick. So in all respects its a terrible piece of legislation. Will it take place . The Politics Around this are so complicated and both parties would want it not to happen, they want it not to happen for different reasons. I will say, as you know, the sequester is an authorization measure. So on march 1st, if it still is player it authorizes the reduction of spending but it doesnt actually implement it. The implementation would be at the time of the continuing resolution, which is march 27th. You talked about a grand bargain. And the fact that we didnt have one. And that youre worried. Who do you blame for the fact that we havent got a grand bargain . When president obama came out with his proposed plan, which was a plan in response to the fiscal cliff, it was in my judgment a very sound plan, financed by revenues and spending and going to be phased and had Public Investment. I think it was a very good plan. Clearly, the republicans in the house werent going to accept the totality of that plan. And what he said is you will remember when he announced it, this is what i believe in, but im prepared to compromise. And the Congress Never engaged with him in the process of compromise. Our democracy cannot work without the willingness to compromise. So i would say it was the house not engaging. Do you think washingtons a different place than when you were there . It is very different, andrew. I had dinner about two or three months ago with Walter Mondale who i really do know very well and he described what washington was like when he was a senator and he said we had partisanship, all of the kinds of stress that you have today. But, he said, at the end of the day, most of the members of the senate were committed to governing so they could work together. He said a lot of things were accomplished on a bipartisan basis. By the time we got there, it had already deteriorated substantially. Our first deficit Reduction Program was adopted entirely with democratic votes but whats interesting was after that, there were a fair number of important measures that had bipartisan support. Today, theres virtually no bipartisan activity unless its in response to a crisis or very special circumstances. People often talk about president ial leadership and compare president obama and they compare president clinton. And the suggestion is that president obama has not been able to lead the same way, not been able to cross the aisle. Do you think thats right . I think that president clinton was effective in crossing the aisle. And i think president obama would have been every bit as effective, but i think he faced a very different political situation. By the time you got from the 90s when we were there to the present time the polarization had hardened very substantially and i think had president obama faced the same political situation that president clinton had it would have been very difficult, just as it was very difficult for president clinton, but i think obama in a different style, in his own way, would have been equally effective working with the opposition. We have lots of ceos who came on the set before the election who said that president obama was not probusiness. He was not progrowth. He was not youve heard it. Youve heard it a lot. Do you believe that . Having lived in washington. Whats your take on that issue . My take is as follows. If you take a yellow pad, andrew, and you write down what president obama has done, he dealt effectively with the crisis, the financial crisis that was the worst weve had in 80 years. He then moved forward in a number of steps tried to put out or did put out budgets that made sense but congress wouldnt engage. Now you come down to the present moment where as i said a moment ago he put out what i think was an effective and serious debt Reduction Program. When it comes to entitlements there is an argument to be made that it didnt go far enough. Just to finish that thought and ill get back to you thought. I think that his policies and id include the Health Care Program in this by the way, thats obviously controversial and remains to be seen. My instinct is to see if the cost measure works. I would say his policies have been centrist and effective. If you look at the economic teams he put in place, both in the first term and the second term, they were fundamentally pragmatic centrist people. If you look forward from here, i think the key is to stay on the track that hes been on and then for congress to engage. What do you say to all of your friends in the Business Community who i imagine youre having this conversation with them all the time and theyre saying, i hate this guy . Its an interest being phenomenon. What i say to them is part of what i just said to you plus one other thing. I say take a yellow pat. Think of where we were. We were on the ink of an abyss. They put in place under tim the guy nears leadership, a response to the financial crisis and you will remember this, andrew, they got tremendous pressure from the left and the right to abandon that program. Tim and the president stayed with it. And it turned out to be very successful. So i think that he is and then he had a stimulus, you can argue about its content, but were in a political world. But i think the fact of having a stimulus was right and i think the amount was about right. Where are we in the economy i think the reason for the phenomenon you just mentioned is there is a real, almost ships passing in the night. And this has been true ever since ive been involved with these kind of things, business really needs to better understand the very different set of issues and dynamics that washington faces and conversely washington needs to understand business better. And i think that would be very helpful in both policy formulation, and also in creating confidence. Where are we on the economy right now . Youre looking at a market that has gone up pretty considerably and i know you as a professional warrior of some sort so im just sort of wondering whether youre worrying about where we are both in the markets and from an economic perspective. Leave the markets aside for a moment. Because i believe markets are psychological phenomena in the short run. I believe in the long run they reflect fundamentals. They can easily move substantially away in either direction. From the fundamentals. Some of the fundamentals where the economy is, i think we face enormously strong head winds. There have been some positives. Housing is better. But if you really dive into it, even though its better, its a very small percentage of the economy. Because it is coming off such a low base. So the bottom line of what i think, i think if we look at all the various sources of demand, what you see in all of them are very strong headwinds, and particularly the fiscal drag were going to have, so i think the recovery is going to remain slow and gradual slower than we think right now . Depends who thinks. Slower than who thinks. I think its slower than a lot of the more affirmative analysts have thought. Want to put a number on it . Yeah. Im not an analyst arriving at a number. But if you want a number that kind of reflents the idea that im describing, i would say probably somewhere in the number people have, which is a 2 kind of number, with some but thats sort of in there with everybody else. Thats not there are its in there with a lot of other people. I guess i would think that theres at least some chance it could be lower. Some chance could be higher. There are a fair numb bev of analysts who think it will start off on a relatively slow pace. Then it will pick up, theyre quite a bit higher by the time you get to the end of the year. That may be. But to me it still seems with all the head winds were going to have its going to remain in the slow recovery. Are you worried about europe, still . I think that europe is very different than most people think it is. I think theres a complacency about europe that is probably a product largely of, youll remember this. The announcements mario draghi made. I think hes an outstanding leader. In fairness, hes a very good friend. I think hes an outstanding leader. He made an announcement on a thursday, that he was going to do what was need and the markets reacted positively. He subsequently wisely said the ecb was only going to act if conditionality was met so the politicians would do what they need to do. I think theres been a very substantial complacency in europe and i think the risks are considerably higher than people think. And ill just add one more point. A lot of europeans will say a lots been accomplished over the past year. What i think is that the european leaders have been behind the curve from the very beginning and if you look at the facts now, in the troubled countries, the Banking Systems, nobody knows what the numbers are. Growth is still negative and the output gaps are greater and the debttogdp ratios are greater. I think europe is far more troubled. More tail risk . I was just in davos. They said tail risk is off the table. Mario draghi said its over, dont worry about it. There is a complacency i think mario draghi who i think is outstanding has a role to play. But i was not at davos, but people tell me that there was this sort of attitude youve just described and ive heard people there describe it as complacency. I would describe it as complacency and i think its a function of a misreading of what the ecbs action could actually mean. Okay. Were going to slip in a quick break. We have a lot to talk about. What to talk about jack lew, wall street, banks, regulation a whole lot more. Were going to come back and get more from former treasury secretary bob reuben. Still to come we have cnbcs exclusive interview with chicago fed president Charlie Evans at 8 40 a. M. Eastern. Stick around. Were coming right back. [ male announcer ] at northern trust, we understand that if you pick three people, odds are theyll approach everything in their own unique way including investing. So we help clients identify and prioritize their life goals. Taking that input and directly matching assets and risk preferences against them. The result . A fully customized plan. We call it goals driven investing. You have unique goals. How about a portfolio specifically designed to achieve them . Expertise matters. Find it at northern trust. Welcome back to squawk box. Want you to watch shares of target today. The retailer says january samestore sales rose 3. 1 . The street was only looking for an increase of 1. 7 . Right now lets get back to andrew and mr. Rube rn. Rubin. Our special guest has been former treasury secretary bob rubin. Last summer his former boss made some big news talking about breaking up the banks. Take a listen. I think what we should probably do is go and split up Investment Banking from banking. Have banks be deposit takers. Have banks make commercial loans and real estate loans. And have banks do something thats not going to risk the taxpayer dollars thats not going to be too big to fail. Bob, i want to get your reaction to that. I dont think anyones had an opportunity to ask you publicly about sandys comments. Obviously some people have argued that you pushed in your role when you were treasury secretary for less regulation that allowed the creation of some of these big banks. Well two parts to that, andrew. One is that with respect to the deal itself, in a series of interpretations that began in the late 80s, it had been basically eviscerated in terms of the big banks. By the time you got to the time glass steagall there was nothing left in terms of its restrictions. Thats been widely reported including in one of your columns. I did write about that. You did. But on the larger picture the larger picture is the really interesting question. I think the following and ive given a lot of thought to this and lived with this issue for a long time, way before ive ever got to washington, too big to fail is an enormously important question. Came up in 1990 when a group of banks were in difficulty. I think its an enormously important question. I think the problem is, that if you look at what sandy had to say and i have a lot of respect for sandy, but i think that if you followed sandys path and you broke up the banks in some fashion or other, as hes describing, the risk isnt going to go away. The Systemic Risk, the too big to fail risk will move from one place to another place. For example, if you could curtail what the banks can do in terms of trading, it isnt that the trading is going to go away. You have a large Global Economy that needs those activities but theyll go to other platforms. I think the real question is, are there ways to deal with the risk . And theres doddfrank on the totality, theres basel iii. Its interesting, basel iii which are higher capital requ e requirements, regulators are backing off because theyre afraid theyre going to restrict lending. Tim geithner probably had the best answer at all when he said the answer to Systemic Risk which is what youre talking about, too big to fail, is capital, capital, capital. The problem is, as basel iii people are finding right now, when you increase your capital requi requirements beyond a certain point you limit lending. So when you watch that and saw sandy say that why do you think hes said that . John reed has said that and paul volcker and many people who you spend time with. Are you asking me why what do you think is well, paul volcker actually said something slightly different as you know. He has advocated the volcker rule, and i dont know the volcker rule, what it means, because nobodys defined it yet. And the reason, as you know, is that it is a very it is a line that will only be ultimately arbitrary. So, its an issue that a lot of people engage with. Ill stick with what i said a moment ago. The focus is right. Right. The focus of too big to fail is right. We had fannie mae and freddie mac. The question of how to address it i think is massively more complicated than these kinds of relatively in my opinion, limited proposals. Right. Ill just say once again, i think its really important, if youre going to get into this question of too big to fail, you have to try to figure out, if i take the risk away from here, where is that risk going to go and how do i deal with that . And i dont think anybodys come up with a good answer to that. Let me ask you this, because you havent been on squawk in many, many years, probably since you were treasury secretary i think, and there are members of the audience we had sent some tweets out earlier and they said you got to ask him about his role in citigroup. I know youve answered some of these questions before. Let me ask, do you feel any responsibility for what happened to citi . I think with respect to citi and more broadly, i think this is a question of the financial crisis, not just with me but very large numbers of people, id studied and dealt with dealt with on a very practical way, andrew, tail risk. Tail risk which is the low probability of an enormous effect. Really my entire professional life. I was worried about excesses before the crisis began. But what i didnt see and virtually nobody saw, regulators, analysts with all due respect to journalists, was the possibility of a serious crisis. Turned out to be the worst crisis in about 80 years. I wish i had seen it. I regret not having seen it. And i would suspect or would guess that there are very large numbers, vast numbers of other people who have the same view. That is to say, who also regret not having seen it. Having said that i think system reacted in the right way, which is to say, even though virtually nobody saw this, now that its happened weve got to try to figure out how to minimize the probability of it happening again. I want to talk briefly about jack lew, who is going to be up for his confirmation hearing next wednesday. You know jack lew. You helped him get a job or recommended him at citigroup. What do you know about him . What do you like about him . What dont you like about him . I knew jack when he was back at the head of omb. I think he was a very good choice. Jack is a very it was interesting when he was at omb. Jack is a very openminded person. Hes smart. He listens. Engages does he know enough about the markets . You knew about the markets. Hank paulson knew about the markets. If we have another crisis is he the right guy . I think the answer is yes. But let me expand on that if i may. Treasury is a very, very broad has a very broad agenda, if you will. A very broad range of engagements. And i found when i got there that the range of issues that treasury is involved with is much, much more than i realized. No secretary is going to be fully conversed in all the issues you have to deal with. Where the key lies, i think, is being openminded, engaging with people who are expert in the areas that you have to deal with, and then being able to listen to, and parse through what youre being told to make a good judgment. Thats what the director of omb does as well. I got to know jack very well in that role. And i think that he was very effective in doing everything ive just said and i think he has very good judgment. The other quality he has which is very important at treasury, as well, is he dealt very well with other cabinet members, and with the hill. And thats an important and thats a very important part of the treasury job, and hell now have to expand that and will expand, i have no doubt, effectively to deal with finance ministers around the world. Score for me, if you will, tim geithner, who you just brought on board i think. I imagine you had a real in it back to cfr, to the council on Foreign Relations and i know youre a long time friend of his and you know each other very well and you talk to him frequently. There has been criticism that he ultimately throughout his tenure was too close to the banks. Do you think thats a fair criticism . I think, andrew, i think tim was the hero of the response to the financial crisis. We had a financial crisis that really took us to the abyss. What tim did was to develop this idea of stress tests and getting out of capital into the banks. As you will well remember, i think ive said this before, as you well remember, he was attacked from the left and from the right. They both wanted to go in different directions. Tim had the courage to stay with a program that was very uncertain at the time. President obama had the courage to back him. And it turned out to be successful. In comparison, if i may say so, with what the europeans have done with their banks, where nobody knows what the numbers are, they apply a stress test that was meaningless and here we are some number of years later, they were still, and rightly so, enormous questions about many of the european banks. I think tim has done an excellent job. Do you push for enough regulation . People look at compensation on wall street and say its still too much. Well i dont think that compensation was the purview of tim. You could argue about compensation one way or another and argue what role it played. Thats an issue that the policy community is going to have to deal with going forward. But, it wasnt central to what he had to do. Do you think compensation played a role . Obviously the other critique on you has been that you were paid a huge amount of money, 100 million plus. No ones ever asked me and i was wondering if i could, did you get to keep all that money . A lot of it was in stock. The part that was stock, stock went way down. Did you get to sell any beforehand . I never sold. I could have but i didnt. The only stock i sold was the stock to pay my taxes that were due on the receipt of stock. Compensation broadly, i think the key i may be wrong about this. But i dont think compensation was nearly as central to the crisis as a lot of people think. I think what probably did play a role in the crisis was the fant that these companies were public. I think because they were public there was tremendous pressure on all concerned, true throughout the industry, every one of them, to provide quarterly earnings. Its interesting, andrew. That problem of the quarterly focus goes way beyond this crisis and way beyond the financial industry. I think it really distorts Company Management throughout our economy, because instead of focusing on longterm strategy is very often is on trying to produce the next quarteraries earnings. Im told were going to have to go. This has been fantastic. I have one final question for you. Hillary clinton, you think shes going to run 2016 . I have no idea if hillary is going to run or not. If she did i think shed be an outstanding candidate and president. But i have no idea. If she doesnt, is joe biden your guy . I dont have a guy. I think that there were actually i do think there are a number of very good people. The party will be very well served would be very well served by any one of a goodly number of people. And i think much more importantly, there are massively important issues about the role of government, the Public Investment that we need to have, fiscal restraint. Reform and education and energy and so much else. Who the next president is is very important. I think there are a number of very good democrats to carry that. Carry the torch . Okay. Bob rubin, thank you for being here this morning. Youre more than welcome. Come on back. Weve got to do this more frequently. Okay. Ive got to try. Coming up we have breaking Economic Data around the corner. Closely watched weekly jobless claims and Fourth Quarter productivity numbers at 8 30 eastern. [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] get ready for a lot more of that newplane smell. Were building the youngest, most modern fleet among the largest us airlines to ensure that you are more comfortable and connected than ever. We are becoming a new american. Welcome back to squawk box. We have data coming out, Fourth Quarter preliminary nonfarm productivity and unit labor costs. Productivity deteriorated. Down 2 . Were expecting about down 1. 5 . Our last look, though, was ramped up a bit from 2. 9 to 3. 2. And you know, labor costs usually rise when productivity goes down. It didnt disappoint in that regard. 4. 5. 4. 5 increase. Were looking for about 30 less than that. And last month, we did see a drop just like the revision positive in productivity from down 1. 9 to down 2. 3. Jobless claims. Revised 371, moves down 5,000 to 366,000. So originally released to 368. That 3406ed up to 371 and then we subtract 5,000 arrive at this weeks 366,000. We had an upward revision to continuing claims which is on a different time line. Last week it was just shy of 3. 215 million ramped up a bit to 3. 224. Lets not get lost in the inush yeah. Hovering below 400,000. Were not below 350 although some record areas were. We continue to monitor how all of that feeds into improving but not gaining momentum jobs. The ecb is talking a bit. The Euro Currency rebounded. Of course we want to continue to tune in to this press conference. No rates were changed. Nothing hugely significant. The dollar did lose a little bit of ground against the pound, as well. Remember the mnc, thats the policy Committee Bank of england met this morning. All right, rick, thanks so much. Rick santelli with those numbers this morning. You want to check out shares of apple. David einhorns Green Light Capital is sending out a letter suggesting that shareholders oppose one of the major votes thats going to come up during this proxy season at apple later this year. More details on what this all means. Hes suggesting they vote against a proposal in the proxy which would eliminate preferred stock. This would actually keep them from being able to issue that stock without shareholder approval and i believe, if weve done all our homework were going to have David Einhorn on the telephone in just a little bit to talk all about this. This comes on the heels of yesterday. There was some speculative talk swirling around, right, that apple would buy back its stock and raise its dividends. And that stock, of course, has fallen that stock has obviously fallen and David Einhorn has been a big proponent of that stock. I imagine hes been in it for a long time now. Theyre still long. Still long. Well ask him by the way, whether he took any profits throughout because hes been in this for quite awhile. It was one of their biggest holdings. He is a big shareholder in apple, has a lot vested in all of this. Incredible chart. Clearly in september it peaked out about 700 a share. Look how far it has fallen and seen almost a complete freefall i guess you could say a straight trudge downward to 460 a share. Do you have a gut feeling, andrew, as to why he would urge such a thing . Why he does it now . I dont know. I imagine he has to do it now because this is coming up in april . Shareholder meeting is coming up soon. Whats interesting, also, is that apple and tim cooks going to speak next week in san francisco. Right. At the Goldman Sachs tech conference. Unless hes worried that theyre going to start issues thats something that they could do. We will try to talk to david probably in just about 15 minutes. Were working on that. Okay. Coming up, another squawk newsmaker. Chicago fed president Charlie Evans will join us next to talk jobs, the economy, and the feds next moves. Tomorrow a special edition of squawk box. Live from pebble beach. Former yahoo ceo carol bartz will be our guest host. Well talk to at t chairman and ceo randall stevenson. Plus, the legendary clint eastwood. People have to get creative when the pressure is on. It all starts tomorrow at 6 00 a. M. Eastern. May not be with fidelity, but we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box, everybody. Lets go straight to chicago where Steve Liesman, i believe, steve, you are joined by a very special guest. Yes, mandy, thanks very much. Im here with chicago fed president Charlie Evans. Charlie, thanks for joining us. Thanks for being here. So you sort of started a revolution in central banking about a year or so ago when you started talking about economic targets. The Federal Reserve is using it. Theyre talking about using it in england. They started to use it more in japan. Are you satisfied with the way the Federal Reserve has implemented so far . I think we have pretty appropriate policies in place right now. I think that moving into economic conditionality, clear conditionality, as to how long our policies will be in place. The one thing we really want to make sure everybody understands is Monetary Policy will continue to be accommodative until things improve substantially, and we get out of this slow growth economy. So im extremely pleased with where we are. When you say clear, there are some who say its anything but. Its clear when it comes to raising Interest Rates. But some argue that its not clear when it comes to quantitative easing. Youre using this phrase substantial improvement in the labor market. Is that clear to you . Its qualitative. I tend to favor quantitative markets. I think thats sufficient. Were out for a run, were not going to run a marathon. Its about a half marathon. And were going to see how it feels when were done. So were going to keep policy low until the Unemployment Rate is 6. 5 . If we still feel good, you know, with the run, we might go a little bit longer. Wed like to get off to a good start. Were loading with carbs, taking the energy bars, were going to get this off so the first couple of miles is at a good pace that continues like that. So the quantitative easing is to get it started. Were going to do that until were clear that the Labor Market Outlook has improved. Might be happier, might be a whole year, could be longer. Im hospital mystic that momentum is going to pick up this year. Lets talk about what substantial improvement looks like. The last time we met back in october you talked about job growth of 200,000 per month over a sixmonth period. Is that your metric for substantial improvement . I think thats a good bench mark. I think thats completely achievable. The last three months have averaged 200,000 on payrolls. We need month after month of 200,000. Id say, for six months, that would be good. But we also need growth above potential that reinforces that labor market improvement. And we need to really see the Unemployment Rate turn in its direction. It picked up a little bit to 7. 9 . We ought to see it moving down. This is really the key, the Unemployment Rate. Theres Different Things that are effecting the Unemployment Rate. You have the participation rate. The percentage of those in the workforce who are actually population and part of the workforce, that seems to be going down. Part of that is because of aging. Part of it how do you think about the Unemployment Rate . Could you imagine 200 or 300,000 jobs a month but increasing Unemployment Rate and would that cause you to dial back on stimulus . I think the Unemployment Rate came down a little more quickly in the last year than we had thought. I think once we start getting growth above trend, clearly above trend, quarter after quarter, the Unemployment Rate is going to move down, people will be coming back into the labor force but theyll be finding jobs and things will be picking up. So once we get momentum, and we achieve escape velocity either later this year or 2014, i think unemployment will move down with momentum. Do you have a time period where you think we get to, say 7 unemployment . Well, ive got an outlook, and you know, that outlook has the Unemployment Rate in the range that you talk about by the end of 2014. In the 7 vicinity. I kind of currently think that 6. 5 unemployment isnt going to be achieved until about the middle of 2015. But if things pick up more quickly, you know, that data will appear sooner. We have to talk about the difference between when the fed starts raising Interest Rates, and when it stops quantitative easing. The st. Louis fed president says its about 7 . Do you have a point in your mind when the Unemployment Rate should trigger the end of quantitative easing . These are hard questions. Thats why we ask them. Thank you. And we have chosen to take a qualitative viewpoint on this. Ive said 200,000 on payroll. Thats what im looking at. Id love to see 7 unemployment sooner, rather than later. And moving down. To 7 . I tend to think it might be possible to turn off the quantitative easing. We build moment up and then were just going to keep going. Its selfsustaining. We wouldnt have to continue to carve up along the run and so thats why we might be able to stop before 7 . But im openminded, and i think that these policies have done a lot of good, auto sales are up. Housing is turning the quarter. I think our policies are improving things. How much running out of time. How much fiscal restraint do you expect to see . Go well, thats marked down our forecast. Im looking for 2. 5 growth this year. Thats against 1 drag under the current law for fiscal policy, if we had more of a drag this year, thats more of a headwind that might mean that we have to do a little bit more. But i think weve got the appropriate policies in place to respond flexibly to what were facing. Youre going to sit right there. Were going to go back to the squawk box show. Theres a lot of news happening this morning between bob rubin and some other special guests there. And charlie is going to answer some more questions. Were going to bring you those other questions, those other answers in the 10 00 hour, then again in the 1 00 hour. And all of it, of course, online. Back to you guys in new york. All right, steve, great stuff. Thank you so much. So many newsmakers this morning. And coming up, more on the apple news we just told you about a few minutes ago. Were actually going to speak to David Einhorn next. You certainly do not want to miss that. Also dont miss a special edition of squawk tomorrow morning, when becky and joe are out in beautiful pebble beach with some very special guests. Including at t chairman and ceo randall stephenson. Former yahoo ceo carol bartz and clint eastwood, as well. Thats going to be a very special show. Welcome back to squawk. Want to show you the futures. Mixed picture right now of the implied open, slightly lower for the dow. A little bit higher for the s p, and the nasdaq. Number of economic stats hitting the tape this morning. Fourth quarter productivity falling 2 . Labor costs rising 4. 5 . The Fourth Quarter productivity drop is the largest since the First Quarter of 2011. Weekly jobless claims falling 5,000 to 366,000. And out of europe this morning, the ecb and boe both leaving Interest Rates as expected unchanged. Okay. We have a very special interview. Joining us now on the squawk newsline is David Einhorn who just made some news about 15 minutes ago regarding apple. David, good to have you on the show. Good morning, andrew. If you could, because its complicated and technical and i should also tell you that apple stock is moving on this press release and letter that youve sent out urging shareholders to vote against the companys proposal to eliminate preferred shares. Why dont you give a little bit of history to explain what this means, why apple was trying to do this, and what you think could happen. Excellent. Let me tell you what i think is going on here. Apple is a phenomenal company, filled with talented people creating iconic products, that consumers around the world love. Apple has a problem, we think, which is it has a cash problem. It has sort of a mentality of a depression. In other words people who have gone through trauma and able has gone through a couple traumas in its history, they sometimes feel like they could never have enough cash. I remember my grandma roz, she was a depression era woman from her chilood, and she wouldnt even leave me a message on my answering machine so i could call her back because she didnt want to get charged for the phone call. And thats kind of the way peoples attitudes sometimes are once theyve been through this. So weve been thinking about tplt the companye a very large cash forward. They want to have it in case bad things happen. They want to have it so that they can be strategic. They want to have it so that they can do acquisitions if they want to do it. And this has been building up to a large number, over quite some time. And what we thought about was we came up with what we think is a solution, where apple can maintain its cash, and its strategic flexibility, and its comfort money, and its war chest, and at the same time, shareholders can receive the value that is embedded within the Balance Sheet. And the way that this would happen would be, if apple distributed, not sold, but distributed to existing shareholders high yielding preferred stock. And they could do this in some size. Apple is a phenomenal credit david, you went to them, from my understanding of this, you went to apple and suggested this, not only did they say no, they now appear to be trying to eliminate this possibility by taking it off the ballot for this proxy season. Right. So lets talk about both halves of it. We think that apples a terrific credit. And people who would own this preferred would be happy to have it at about a 4 yield plus or minus. Something in that ball park. When we went to apple, we suggested this idea, they went to their advisers, and their advisers came back and said geez, it will probably be about an 8 yield which makes the idea not all that attractive. Thats something that we agree to disagree about. Longterm microsoft yond bonds yield under 4 . We think apple is an even better credit than that. Here were looking at just start with 50 billion, which would be 2 billion of dividends. Which, you know, apple has 140 billion of cash on the Balance Sheet so they could pay 70 years of dividends right out of the Balance Sheet. Why not buybacks, david . Oh, this is better. This is way better because this doesnt actually require them to use any of the cash right away. Theyd be able away. They have been able to maintain their cash in all of their strategic ideas and at the same time, shareholders would be rewarded with something that gives them credit for apples phenomenal Balance Sheet and franchise value. Why not hike the dividend, as was the speculation just yesterday, david . Its really, again, the same issue. The dividend gets capitalized in with the earnings in a common equity security and the common equity security is a secure that has the volatility related to the earnings. In todays environment, theres a tremendous demand for highquality, cash flow incomes for individuals, for institutions, for pensions, for insurance companies. So we think that if they distributed preferred stock with say a 4 yield there would be enormous demand. Share holders that want that stable income could keep it and shareholders that want to own apple for the upside within the operations would continue to simply own the common and they would get a be able to take a lot of money off the table by selling the preferred to institutions that want it. You are long apple, right . Is this all you think they need to do to get this stock moving again. This is a stock that has had quite a fall since its peak back in september . Very simply put, we think for every 50 billion of prefer they had issue, it would unlock about 32 a share in apple. If apple used about half of their earnings toward this program, we think they would be able to issue approximately 500 billion, which would unlock about 320 per share and that assumes that the pe multiple doesnt expand. David, just to nail it down what is your position on apple right now so the viewers understand . We are long. Youre long . You have been long a long time now . We have owned apple since 2010. Have you sold in between, taken any profits . Theres been a little bit of trading but we own we own more apple today than we ever have before. David, let me switch attention quickly to another stock that you have a relationship or had a relationship with, that being herbalife, which you said at one point you were short and that you are no longer. Is that the current position . I am very focused on apple today. I know you are, but carl icahn and bill eichmann were focused on herbal life. They were focused on that on the network. We will concentrate today on helping apple shareholders unlock the value in their Balance Sheet. Okay. So lets get to that because what we really need to do is we need to have shareholders speak up for themselves. At the end of the day, david, youre doing this because your ainto the at all happy with the fact that they have got a third of the market cap sitting in cash and you want them to do something about it . No, no, no, im happy for them to have a third of the market cap in cash this is a clever idea that enables them to keep the cash for all the reasons they want to keep it and yet unlock the value for shareholders. Its win win situation. They keep the cash, we get the value. David, take us behind the scenes though. You were talking to apple privately. Why this seems to me to be pay back for that . Seems like they are taking this off the table purposely what happens, they did some sort of a Corporate Governance review and they came up with some ideas as to how to improve their Corporate Governance and they say that absolutely nothing to do with our preferred idea so they put three ideas together that they thought were, like, for the Corporate Governance percentage i know cal pers working with this for them. They put it on a proxy to eliminate the ability to have preferred stock. We think that unfortunately that kind of ran into our idea. So, what we are saying right now today what shareholders need do is they need to if they support this, they need to vote against apples proposal number two that takes away the companys ability to issue this sort of high yield preferred from their charter. Okay. If they do so get a good Critical Mass to do so, to send that kind of a message to apples board, they have told me that they are going to reevaluate this idea and i think if there is a lot of interest in shareholder support, i think we have an outstanding opportunity to create a win win situation where apple gets to keep its Balance Sheet and its cash and all of its strategic flexibility and shareholders will get the value that is embedded within that. David, let me ask you an operational question about apple. This is a little bit about the finances of apple. When you think about apple and innovation and the future of this company and where the stock could go based on what the company is doing based on what they are doing with their cash or Balance Sheet, do you have hope . Do you have anxiety . What are you thinking . Apple is fantastic. Made over 20 billion in cash last quarter, more money than amazon has made in its entire life. Apples got 30plus percent margins, amazon less than a percent. Im not short amazon, im just making a comparison. Both the Companies Traded the same price the sales multiple. Its utterly misvalued by the market because theres just too much theres just too much noise at the moment. But i think thatted business is doing very well, im very optimistic about their nearterm prospects. I think that theres a lot of confusion relating to the guidance in this coming quarter and i think the company, the stock is going to do very well and i think it is going to do exceptionally well if they Pay Attention to what we are saying today. Arent you worried at all about margins compressing there . It is part of a fundamental shift, isnt it as well, david . I know theres a lot of noise around apple, but the stock has gone from 705 to where it currently sits at 460 and moving as we are having this conversation but there seems to be a bit of a fundamental shift in the apple story. I would think that more than any bad news has been priced into the decline. You know, you have a company right here, i have just explained to you how essentially they could, at some point, distribute 500 per share in preferred and still have a company that lots of earnings, 140 a share of cash on its Balance Sheet. I think there is a tremendous upside to this story. When it was marching toward its record highs last year, it was kind of a stock that could do no wrong and started to hear price targets like 1,000. Do you think that is still feasible . I think if the Company Continues to execute and the Company Unlocks the value within its Balance Sheet, either in the way im describing or in a similar fashion, it still seems very much on the table to me. You have more than 1 million shares, correct . Yes, maam 1. 3, is that right . That is what we had, i think, at the record date. Do you have complete confidence, as we have this conversation today in tim cook . I think my interactions with tim cook have been universally positive. Fwhaunchts doesnt im not sure if that really answers the question. Are you confident that he has the ability to keep apple on the sort of trajectory that you and other shareholders would demand . Look, i dont think apples going to grow 80 a year anymore but i think if valuation, it doesnt need to. I think that from everything ive seen, i think tim is doing an excellent job. Ive enjoyed my conversations with him. I think he has the right idea for apple and i think apple is going to succeed under his leadership. Let me rephrase what scott just asked you. Do you think the company is worse off without steve jobs . Well, of course you cant replace steve jobs but i think in some places, the company, you know, obviously will miss him but theres other places were theres opportunity, like what were talking about today. I think some of the depression mentality we were talking about with apple, i think that same came from steve jobs. And i think with his passing there is san opportunity for a toll, you know, shed some of that thinking and to move in a more forwardlooking attitude toward its Capital Allocation in a way that could be very rewarding to shareholders. David, i know you wanted to focus on apple and i feel like weve actually spent a good deal of time doing that. If you would indulge us just for a moment, theres a lot of questions that im sure viewers have about your take on where Green Mountain stands. I know odd short on that. You mentioned amazon earlier. Could you just give us a little bit of where you stand on those two issues . I love your thoughts on herbalife, i know you want to be hire on apple, but i do think that the audience deserves a chance to hear where you are. To be clear we dont have any position in amazon at all. I was just bring up as an analogy to apple because of the valuation disparity relative to the margins, so on and so forth. So, we are not really involved there. Odd short position at one time though, no . No. No. I dont think so. Certainly not in the last five or ten years. Green mountain . Green mountain. Yeah, we are still short Green Mountain. We think yesterday, they managed to sort of stuff the chan well brewe brewers. We think it is a very low quality earnings results. We think the kcups came in below forecast. We think the Sales Forecast had to be reduced. It seems to us like a classic channel stuff. When you have high levels of brewers and low levels of kcups it tells you that people are using the brewers less, in other words, fewer kcups per brewer that kind of tells me that our longterm thinking that our story has peaked i think is intact. David, try one last time with herbalife with bill ackman or dan lobe now . No position with herbalife. Want to make a friend today . Youre friends with both, i think . My friend today are the thousands of apple shareholders who im hoping will join in voting against the proposal to eliminate the prefer sod that we can unlock the value. David, we got to run. Thank you for calling in. We do appreciate it. Thanks to scott and mandy. Make sure you join us tomorrow. Squawk on the street begins right now. Thanks so much. Thank you. What a half hour of television morning. Welcome to squawk on the street. David einhorn wanting to vote against the issue of preferred stock. Saying apples plan would restrict the ability of board to unlock value on apples Balance Sheet, comparing the company to an old grandmother who is literally hoarding cash. Take a listen. Apple has a problem, we think, which is it has a cash problem. It has a mentality of a depression. In other words, people who have gone through traumas, and apple has gone through a couple tram nas its history, they can sometimes feel like they can never have enough cash. That, guys, we have watched the stock move in the past half hour. Jim, early thought you what the she can talking about . Look, yeah, this is a way to bring out some value. I want them to grow. I want them do an acquisition and grow. I think that i dont want a preferred because that does i know he said this doesnt necessarily preclude that. It doesnt necessarily change their capital position. I think its an interesting way to approach it. I think whats far more important was deet press mentality issues, they just seem to think that its good enough to have cash when they reported, david, remember, you felt there was a level of arrogance to the idea that they dont even address the cash. I do when you talk to shareholders, they will tell you in three years time this could be a company, if you make the assumption s on how much cash they are generating that could have 275 billion in cash. Thats right you 275 billion. Their cash needs are nowhere near that, more like 33 billion over that time period. Not is a say they arent moving too to that idea. Einhorn may be in a position to credit for t in 06, they pressured microsoft to return capital they did. Although they have a huge cash short yet again. I dont quite follow. I understand what preferred is. It is convoluted. The heart of having this much a cash on the Balance Sheet, 145 per share in cash, break down what it means turk the shareholder. The fact in einhorns letter, he said that apples management was willing to evaluate green lights proposal that signals the company may be hearing shareholders cries to do something with that tremendous amount of cash and that of itself is a positive sign for shareholders, they might consider doing something with cash that is a change that is a change worth noting. They did offer. I think that if they increased the dividend, the stock would go up. Buy back stock if they buy back stock aggressively, not just a little bit this stock would go upship. An interesting method of returning capital, doesnt necessarily, you say, impact the cash position. Regard it is a convoluted way. Simple