Transcripts For CNBC Squawk Box 20140124 : vimarsana.com

Starbucks is boosting its forecast despite Slower Growth. Samestore sales cooled more than expected at Online Shopping kept consumers at home. And a boeing executive says the reliability of the 787 dreamliner is slowly improving, but it is still not at satisfactory levels. Boeings Vice President to services adds that the firm is working to improve the performance. The dream liners reliability rate is now at about 98 . And that means two out of every 100 flights is being delayed. Thats been happening with the markets, too. Over here, the market stays open until about 10 00, so we were able to have a couple of cocktails based on what was happening yesterday. It was down over 200 for a while, closed down sharply. I dont know what the malaise is at this point. Lets look at the futures this morning which are extending the action we saw yesterday. Down another 85 points. The revenue shortfall didnt help. China growth story. Car bombing in cairo. That was this morning. But yesterdays activity was china and then u. S. Home sales lets introduce our guest this morning, nicholas pedin. We call him the homeless billionaire. You dont want us to say that . Youre okay with that . Youre here in the mountains, youre beautiful. Two questions, one is i want to talk about the fact that youre starting something called the world post with air anna handcuffington. But the other thing i want to talk about is the optimism despite what were seeing in the market in the last day and a half. I think sometimes what happens in davos is sometimes the great contra indicator. Your sense generally on where things are as an investor. Well, i think youre right. Does this thing work . It does. Okay. I think youre right. Davos, like any gathering in the world, tends to be fairley shortterm oriented. And the markets have been very nice, so people tend to be on the optimistic side. The real issue are the longterm challenges. Frankly, i think the most interesting one was what eric schmidt posed yesterday was man versus machine. What is a future going to look like . How are people going to occupy their time . How theyre going to find uses with their brain power and their bodies longterm . So i think so we have all the time. Eric schmidt is going to be on the show later. You seem to think that innovation is grinding to a halt. No, im arguing the opposite, that it is going to be so tremendous that it is going to make it harder for us to have jobs. If were all in a grid, its not going to i dont want to work that hard, anyway, because youll be flying around like on avatar. Why not . Ill go with this. Its a bridge between and the question is how do we, you know, make that transition. It will be very exciting. But i do think its exciting. Youre here in part launching with Arianna Huffington something called the world post which some people call the one percenters of diop line insurances, if you will. I dont know if you agree with that assessment. But im curious, why hook up with her . And also, the Huffington Post we often think is a left leaning publication that hates the 1 . So how do you square that . The world post is a 50 50 current venture between the Huffington Post and my institute. So the idea is to create something thats new, that gives a voeld voice to the world. Thats why its called the world post. Its different ideals, different courses of culture, not just the west, but also the east. Young, not so young, privileged, less privileged. So the whole idea is to have a global conversation around topics that are not just, you know, business and politics, but also cultural and things that arianna cares about like mindful nest which i think is more important about in our lives. By doing it this way, Huffington Post says the institute has access to wonderful thinkers and wonderful writers that from every part of the social, you happen, strata. So youre right. Well attack and defend the elite both. That will give a voice to the elites and also the nonelites. And thats part of the idea of the world post on. If we were to go to worldpost. Com right now, is that the the address . Theworldpost. Theworldpost. Com, whats the issue . We started a lot on this issue of technology. We had a big emphasis on china, which we think in all the Global Factor is becoming more and more important. And we have sources within china that both address western thinking about what china is. So the idea is to engage not just, as you say, the 1 on the west, the same in another part of the world standing edition people who are at the other side of the 11 . Okay. Theworldpost. Com is the address . Were going to send everybody there. Please, please. Thank you for coming in this morning. Thank you. Obviously, there are a lot of big names and a lot of guests here. But one of the biggest names is investor george soros. We spent some time yesterday listening to him. We caught up with him and talked about the crisis in syria. Its really the fact that you have a humanitarian catastrophe of the first developing and its liable to get worse if there isnt b a greater International Public awareness and engagement to deal with it. Because the regime has deliberately targeted excess humanitarian aid and medical supply supplies as a weapon of war. The policy of the staff or surrender. So its a its a tool of war. And the conflict has to do a political settlement. There is no a settlement would take years of fighting. So if during this time there is no arrangement to provide humanitarian aid across better lives or as part of a generalized ceasefire, the population currently already this winter more people are going to die because of deprivation from food or medical supplies than from actual fighting. And that is going to amount with the passage of time. So the sooner people become aware and put pressure on the governments not to parade this, the sooner this can end. Is it acceptable to have a solution that keeps the assad regime in control . Well, whether its the asass regime or some other representation of the and other minority regimes, there has to be a policy arrangement which allows people of different religions and ethnic affiliations to live in syria. Because its a very mixed country. So that has to be the basis of a settlement. Am i correct in thinking that you dont care who is running the place as long as people arent being slaughtered . Well, i do care and i think that in many ways assad himself and the regime has committed such violences against humanitarian law that they cant really remain in power. But there has to be a representation of that faction in the arrangement. And whether it is, you know, loose confederation, these are details that have to be negotiated and it will take time. Its not something where you have a conference and this that is the end. Its only the beginning. And part of what strikes me with this conflict is its hard to figure out who the good guys are because so many of the fighters who are there today arent factions that we trust, either. You dont trust assad. How do you find a solution . Who do you figure out who to agree with . Its an extremely complicated situation. And that is why its important to make the humanitarian aspect, really, the syrian population where they are now about i dont know how many million, 4 million refugees abroad and 2 million or so internally displaced people and according to the u. N. , there are 2 Million People whom the Food Supplies dont reach. So those are people who are literally starving as we talk. So they have to be taken care of. Its a huge problem for the neighbors of syria. Ive heard jordan speak about this. But the five neighboring countries are taking in Something Like 97 of the refugee population that is leaving, creates all kinds of chaos for the entire region. Yes. If you were to advise john kerry, what would you tell him to do, negotiate with assad or to try and freeze him out with some sort of sanctions or to try and use military force to do that . Look, i think that there is, in my mind, there is a basis of closer understanding between russia and the ooudz. United states. Because the United States is reviewing and russia is pushing in. And what needs to be understood is actually putin is acting out of weakness because he was quite popular and then the switchover between him and medvedev really turned the russian population against him. And that is when he felt threatened. And he then became more repressive at home and more aggressive abroad. So its a very high Risk Strategy that hes undertaken. If he stayed off with the chemical weapons, but he cant really convert it into a real change in russias standing in the World Without dealing with the humanitarian issue. And that has to be he has to be reminded of anytime you meet him. You have to remind him. That is some pointed criticism from soros for president putin of russia, which is interesting with the sochi olympics coming up just around the corner. Last night, there was a dinner that was focused around this. Joe and i were both there. Kofi annen said when leaders fail to act, people can force them to act. Well see if that happens in this situation. Vote right now on cnbc. Com for the top contenders list. There is almost a frustration. You could even hear that the chemical accord, while it got rid of the specter of additional chemicals, it almost enabled assad to get away with all this other stuff. And, you know, these guys universally work with frustration that theres not going to be a winner or loser anytime soon, it will likely be a political resolve. But the humanitarian crisis, theyre using starvation, theyre using all these individualhideous things just as bad as chemical weapons. Instead of it being a war that affected people in a humanitarian negative way, now theyre using the humanitarian crisis to extend the war and through the war. So i mean, that was the main theft of the whole thing is we just got them to stop these innocent people from dying and now 5,000 years these factions have been jkkying for some but it wasnt very i tournd to leave and john kerry came in with a big entourage. And there are nice hotel necessary davos. There are some nice hotels. While becky and joe were hanging out with george soros, i caught up with billionaire Richard Branson who is in davos to present his plan b idea where Companies Need to have a larger responsibility beyond profit. I asked him about getting companies to play along with that proposition when shareholders and investors are not always on the same page. Listen to this piece. I think shareholders and investors are getting on the same page. If you say, hey, what about pt members . Paul norman from unileaver, he has 100 got it. Hes turned the whole unilever into a force for good and started embracing it and is proud of the company that hes creating. Hes getting out, getting his suppliers to become forces for good and getting their buying right and, you know, where theyre buying from and not cutting down the rainforests. And the shareholders seem to be doing okay out of it. So i think it does not necessarily have to be contradictory for businesses to get out there and try to better the world. And for shareholders to come along with it. How much do you worry about the activist investor who is looking at every quarterly number . And if youre a ceo and you are not making your independent number because youre going to spend more this quarter to do some of the longer term things youre thinking about, all of a sudden your job is in peril. I think the whole beating quarterly reporting is long. Paulman has made his statement and in fact maybe even moved unilever to that reporting. So, you know, think longer term. Make investments for the longterm. And not have to worry every minute of the day for the next quarter. Tomorrow or i should say on friday, youre beginning the virgin ka seeno business in new jersey. How does that conport with your idea about whats good for the world . Because some people would argue that gambling is not the greatest thing to be doing. Well, we gave the virgin brand name to a Wonderful Company called gamesis. They are very, very responsible in this area and have built up a great reputation towards poker and other some games like that online. You know, if youre the sort of person who is apt to gamble too much, you can just say, i dont want to gamble more than such and such in a day. Thats fine. Theres a lot of protect ek like that. Obviously, its for addouts, as well. Weve debated it and i think all in all and i play poker, i love it. And its a fun thing to do. And to have a flutter with other people playing, i personally think its okay. Okay. Bitcoin, the last time i talked to you, you were accepting bitcoin. We just spoke with jamie dimon in davos and he was not a fan of bitcoins, thinks it could be used for ill litis purposes, thinks it may ultimately get regulated, nor by the way do the chinese regulators who seem to be coming down on it. Im not a great advocate of bitcoin. All im saying is we have a Spaceship Company and if people who have made lots of money out of bitcoin. And there are a lot of people in a large amount of bitcoins. Well accept their money and send them into space. And weve had, you know, six or seven Space Tickets sold already. Well, youre an investor in bitcoins. I put some money in bitcoins. I like to learn about things. Whether bitcoin is the one, i think there will be a global currency which will take on jamie dimon and the other banks, the other currencies, that will be the future. I suspect if its not bitcoin, somebody like will be the people that will come up with that currency. So i think the idea is very exciting. I think having a global currency and you dont have to spend all the money changing your currencies is admirable. And i think bitcoin, the leverage behinditcoin was brilliant. It was a brilliant first step. Cnbc is turning 25 years old this year. As part of that, were creating cnbc 25, the most important people in business and in the economic world over the past 25 years. It could be people like steve jobs, jeff bezos, people like you, people like ben bernanke. If you were to nom name somebody who you think over the past 25 years has been the most instrumental over the world of business, transformative in terms of how we live, who would you put at the top of that list . I personally think larry paige from google would be the one i would put at the top of that list. And obviously survei who has worked so well with him. Theyve created a formidable company. Theyre still young. Theyre going to transform the world in many other ways in their lifetime. So happens to be great friends, as well. And we spend a lot of time together. But i just think hes just just incredible. Ive got to tell you, i think between larry page and steve jobs, i think they are at the top of the list. Probably bezos, too. If i were survei, i would be like, am i chopped liver . He put they will together. He said larry first. Well, larry is the ceo of the company. Anyway, Richard Branson, a huge contender. Why do they not ever do interviews, sergei and larry . They dont have to. Larry has a tough time because of his voice. He has a vocal problem so its harder for him. How about eric . Coming up, among eric smith and others, our lineup, working on reshaping the globe. Ubs, standard of care again, House Majority leader eric cantor i saw yesterday. Lloyd blank fine and googles eric schmidd. First, though, after the break, ausdy is everywhere here. The uxly automaticmaker, will it keep rolling into the future and where does it head next . The latest, talking squawk blog is out. Really nothing went on this week. Theres you and goldy. Me and and mindfulness is on the cover of time magazine. Mindfulness is. Do you meditate . Every night for seven or eight hours, if i can. This week, it has links to every single interview we did in davos from jamie dimon to google, again, you can see my beer package. The best of it we didnt show you yet. Its on the webb. Announcer before you hit the road, here is your travels check. 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Hotel received trip individualers best bargain award . The Desert Riviera Hotel in palm springs, california. Welcome back, everybody. Bono is teaming up with bank of america in the battle against aids, specifically in the fight to end hiv transmission between mother and children in africa. His band u2 plans to make a big splash at the super bowl. U2 has given a sneak peek from the album. You can download this free and the bank will match or give 1. My dad used to say, when are you going to get a real job . And i said i have a real job. He said no, i mean with a bank. I said dad, im working with a bank. Its all part of bonos red chari charity, something that was launched here at davos six or seven years ago. At this point with the commitment from bank of america, that is now something that has raised 250,000 over that time peri. We also had the chaness to talk to Brian Moynihan and get his thoughts on the economy. Its not going to grow as fast as everyone wants. Theyve raised that in 2 1 2 to 3 in the last few months. Spending is there. Customer activity is there. Thats good. Other places will be slower. Overall, we have the world growing about 3. 5 to 3. 6 next year. But its just not as fast as people like. But the reality is, not only do we have to restore confidence to help create jobs and thats what were focused on. Well have much more coming up at 7 30 eastern time. He is so cool. I told you my experience, he was so nice to me and he was going to kul me to have lunch. Ive been waiting by the phone for three years. It makes you feel like youre not friends with bono. Unfortunately, ive learned that the hard way. I know you have. Its on your face. I mean, i see the tracks. And audi reported record sales in 2013. The companys chairman and ceo, Rupert Sadler can i say it its sadler. Were close to germany, obviously. A lot of german cars, better than what i see driving around in Southern Europe and such. Many, many, many audis. In the United States, it is a luxury brand. Audi is number two in the premium segment. We are number one in china, number one in europe, and we are aiming for the next success in United States. What are you in the United States, three . Three. Bmw, their position as leader has gotten not as ahead recently, has it not . And mercedes is closing the gam gap, as well . We still have that towards bmw. Where does lexus come in, by the way . On a global scale, not when you think about why someone would buy a luxury car, i think of, obviously, there has to be the feeling of, wow, i feel good driving this. But also, it has to be quality and reliability. It has to be and audi, over the years, ive seen what youve been able to do. And its a really phenomenal car. It is a loaner. And that is is it the most important thing is quality . It is a major part of on our strategy. We are aiming for being number one. So we are investing heavily into new products, into technology innovation. And what we would like to have is that the customer stays good and this is really quality. The architecture of the interior, the Exterior Design and, of course, a lot of progressiveness which is linked to the brands. Good to be able to go through snow, too, which audis are easily. And a lot of suvs and station wagons around here. Almost the car of choice i would say in davos. We are linked to the Economic Forum in more than 25 years. Youve been putting on the because of the weather conditions here. But we like to be here in davos because we hear a lot about the economy and we would be partners. Mexico close to the United States. We spoke this morning with the president of mexico and one of the things he was talking about is how companies were coming and locating mexico. You have opened a new plant there in the last year. We took the position to go to mexico with a factory. So this will be in the puebla province. It will open up end of 2015. So we will employ there 3,800 people. We are investing about 11 is billion euros. So, listen, at least in fact last few days, curriculum because it has to be effective. The high end, the super car, how much is that . Do you sell any of them . Is it a sports car . Here, t quite a cool concept. The sports quatro concept. 700 horsepower. Systems. We are working on that to bring it to the markets. But the other one that you already have on the market is pretty awesome. How much is that one . The r8 . All right. Weve got to go. I wish we had more time. Thank you for joining us this morning. If we need a car, we can i compliment you. Up nn next, Jpmorgans Jamie Dimon told us the stars are aligning for the global economy. Does the Swiss Banking giant ubs feel the same . We will find out right after this. Welcome back to squawk box. Equity futures have been getting weaker in the last half hour after that tough session yesterday. We will take a quick look, now down triple digits. Over 200 for a while in yesterdays session. Whether this is the beginning of a long awaited 5 to 10 or whatever. Its unclear at this point. Well see how the rest of the earnings season plays out. We havent been watching quite as close. We had the other. We have bigger issues to discuss. When you have auto new Federal Reserve chairman coming in next week. And that happened. Within six months on either side of that, apparently you have a 10 correction. There havent been that many of them. It has gone on for at least 50 or 60 years. The emerging markets, a big question mark out this week. Yesterday as we were listening to soros talk about syria, the peso suffered its deepest daily decline since the countrys 2002 financial crisis. This morning, argentinas government has authorized citizens fwie dollars and lowered its surcharge on any dollar purchases because its been trying to stemdy cline. We didnt see soros making trades any sooner, did we . No. He did not cause this at this point . Not that we know of. Maybe he didnt want to talk about the economy or the markets. In the meantime, hitting a record low against the dollar, even after the countrys central bank spent at least 2 billion trying to profit up yesterday. Michelle Caruso Cabrera will have more on that in the next hour. It is argue last day in davos and we are delighted to be joined by switzerlands top banker. Sergio amadi, thank you so much for being here today. Great to be here. Should we be concerned by what weve seen in the currency markets at this point . This was something that was spreading throughout a lot of currencies. Well, there are many threads out there, in my point of view. I dont see any of them on, you know, singularly to be big enough to threaten stability in the world or the economic outlook. A convergence of a few of them at the same time could be quite disturbing. So we need to what are the top two or three that youre thinking about . Well, you know, eurozone, i think there is a hard level of complacency in my point of view about the sustainability of this growth. China, i think they are going through a big secular change in the way they want to look at their growth from quantity to quality. And that will be a challenge. The u. S. , i think next month, youre going to see debates on a gain on the funding of that. Geopolitical tensions. Each of them, japan, each of them is not big enough. But a couple of them together are steady. You think thats what the market has been seeing the last few days, just some jitters will each of those things and worry about what comes next . Yes. I think there is this notion that there is a lot of cash in the system and, therefore, you know, for the last 20 years, when there is a lot of cash out there, there is a reason why its out there part and people are concerned. Do you think qe3 has way over here even further away from the United States . Have there been investments made that didnt make xhmt economic sense based on the availability of money . Is there a day of reckoning to come from that . No, no. Our clients, look at our clients for the last nine quarters, the record level of cash. And as long as they dont see structural changes coming through and more stability, they want good cash at work. So those cash balances are twice as high as you would have in a normalized environment where people are conservatives. So that is real, the real issue is to stabilize the system. The discussion, the tapering discussions are also somehow disturbing because, you know, if you have the Stock Exchange going out as a function of bad Economic Data and the other way around, it tells you some things at this point. I mean, thats right. A Federal Reserve question for you. They are now putting in new rules that are going to regulate foreign banks in a much more meaningful way than before. How much of an impact is this going to have on you . Well, i think that is well into spirit. We have been debating those things for two years. Its impacting the Capital Allocation is not going to change our business model. One other quick question for you. Switzerland, historically known for secrecy, bitcoin known for secrecy. Weve been asking every banking leader, whats your take on the future of bitcoin and electronic Virtual Currencies . It is premature to say. I know something in our industry that can be and will be i dont know if bitcoin is the one, but something will happen. So i we shouldnt be too complacent about anything. All right. We want to thank you very much for your time. Appreciate you stopping by today and we hope to see you again soon. Thank you. Still, weve got a lot more to come from davos, including a conversation from House Majority leader eric cantor. Were coming right back to davos in just a moment. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. I takbecause you cant beatrning for my frzero heartburn. N. Woo hoo [ male announcer ] prilosec otc is the number one doctor recommended frequent heartburn medicine for 8 straight years. One pill each morning. 24 hours. Zero heartburn. The theme for davos 2014 is reshaping the world. The forum has provided an opportunity for the public and private sectors to collaborate on policies as environment and growth and innovation. Joining us now is House Majority leader eric cantor. Eric, you know, do we really have to talk about Global Politics . We need to talk about all politics are local. Can we start in the United States . Yeah. What are we going to do in the next two or three years . Here in davos, you have an opportunity to talk to some really smart people. You know, about how we can go about not only continuing with american leadership, but how do we create jobs . Im going to be meeting this afternoon with some Health Care Innovators that weve been about in congress, gabrielle la Miller Research act putting money into cures to trying and bring down Health Care Costs and save lives. Were having a lot of discussion about competitiveness, how to really increase upper mobility and that is, i think, joe, when you ask what were going to be about in congress over the next couple of months, were going to be about an america that works. How do we get people back to work . How do we get our Energy Sector going . How do we begin to start to control our Health Care Costs and do something about our education . That was my point. Youre over here and, you know, we talk about the Employment Situation and subsaharan africa. Then we talk about spain at 35 . Take a country. Theyre all different than the United States. So yesterday we decided to bring in mayors from localities around the world. But we need to talk about just the United States at this point because were not where we need to be, were not even close. 6. 7 does not describe the Employment Situation in the United States. You know, what is so unnerving is some in washington want to accept this new normal of a lack of participation in the labor force which i think contributes to the lack of decline in unemployment rates. But we all know that there are chronically unemployment who have frankly given up. There are so many jobs and and in your opinion, we have to figure out how to train these people. Larry summers thinks at this point you do eventually something with entitlements. But right now, we need to do infrastructure. Interest rates are low. Jfk, right . Now with rates where they are, is that st way to first of all, lets look back to our best asset, which are our people. The American People are the best assets. And what were trying to do is focus on getting back to work. Were having a big discussion over these entitlement programs and nonhealth care entitlement programs, unemployment being one of them. Are we going to accept the new normal and continue to expand these programs or are we going to say, hey, if youre going to get a benefit, you ought to be willing to at least go out and look for work or participate in a skilled Training Program so you can get back so on one is not related to the other, though. The whole Infrastructure Spending is not related to the unemployment. Well, i think joe asked, becky, is that the way to go about it. Is it . One would say, look, the stimulus back in 09 was an attempt to the infrastructure. A good portion of that money went into maintaining Government Programs rather than hard assets of infrastructure. And i think all of us would be supportive of a smart Infrastructure Program so you can dont allow for the waste to go by the wayside. Immigration by staipartisan, you do that in 2014 . I think the intent to launch the system is bipartisan, yes. There are some bipartisan aspects. Yes, we have to get strong in terms of enforcement of law at the border as well as on the interior. I, as you know, have been very strong in advocating for a kids act. What do you do about the kids who have been brought here unbeknownst to them in many instances. Youve got to give them a place in our country. You have to give them citizenship. So i think mindset lets do what we can and move the ball forward. I have an Infrastructure Project for you. You care about energy and natural gas. Would you get behind an Infrastructure Program to build out natural gas filling stations for cars and big trucks all across the country . That could change the energy game in a big way. I think we have always talked i dont know what that entails, honestly. I dont know what the costs are and what the returns are. Right . But what we want to do is create an environment where you have both federal regulatory policy and state policy conducive to more exploration and production. Right now the federal government is standing in the way. All the activity or most of it is occurring on private land. Lets at least get there, before we start to explore, maybe we should, im not saying that the government should be necessarily in that business. Theres all kinds of technologies. If theyre ready to do it, it will happen. Its the chicken, egg. You have to get people out of the way so private sector can do it . We have jack lew with us yesterday talking about the debt ceiling and the letter he sent to Congress Earlier this week. He says we could run out of money by the end of february if we dont lift the debt ceiling. Do you think congress will pass a bill that raises the debt ceiling before the end of february . I think what we have seen during october with the treasury secretarys pronouncement that that was the day and beyond which we would go into an unknown territory of risk, if the secretary then says date certain we are in an unknown territory of risk where default could become a reality, yes, i think we will act. I think that we cannot accept, though, continuing the problem and hopefully the administration will join us in some progrowth measures, whether it be things like keystone pipeline, whether it be fixing the Regulatory Framework on natural gas. What can we do to help create jobs . Not just continue the status quo. Are you going to help create jobs for republicans in congress in 2014 as leader . Whats your plan to push back against that . Theres more class warfare coming, income inequality. Youll hear that. I think they see that for a lot of reasons. I think well have a very good november 14th for the republican party. I think well pick up seats in the house, strengthen our majority. Senate . I think weve got a great shot at the senate as well. Im focused on the house to make sure we continue what were doing there. Can we mention Chris Christie . Do you have a view about what this all means to your parties is a potential candidate . Listen, we have a deep niche, Chris Christie and many others. Is he no longer on the bench . I dont count him out. I think that hes got a new session in front of him and up in trenton, new jersey. Huge Approval Rating still. Right. Hes proven to be an effective governor. I think theres a lot of room for, i this i, robust competition on our side. I think the country is going to be poised for something new, because theyve seen a barack obama, whether it is health care, Energy Sector, education, joblessness. America is, frankly, not working the way it should. Eric, thank you. Well call you leader. Right. Thank you very much. We appreciate it. Lets take a quick look at futures on our way out. Weve been watching markets closely. There are strong red arrows. The dow futures down by about 80 points, s p off by 10. This is coming after a day when the market was down by more than 200 points at times. Squawk box will be right back. You got the bargain kind . You would need like a bunch of those to clean this mess. [ counselor ] youre probably right. Hi. Cascade kitchen counselor. 1 pac of cascade complete cleans tough food better than 6 pacs of the bargain brand combined. Cascade. Beyond clean and shine. Every time. You are gonna need a wingman. And with my cash back, you are money. Forget him. My Airline Miles will take your game worldwide. What im really looking for is i got two words for you rewards. Theres got to be better cards than this. [ male announcer ] theres a better way with creditcards. Com. Compare hundreds of cards from all the major banks to find the one thats right for you. Its simple. Search, compare, and apply at creditcards. Com. First rounds on me. Search, compare, and apply at creditcards. Com. Fifteen minutes could save you fifteen percent or more on car insurance. Everybody knows that parker. Well, did you know auctioneers make bad Grocery Store clerks . Thatll be 23. 50. Now. 75, 23. 75, hold em. Hey now do i hear 23. 75 . 24 hey 24 dollar, 24 and a quarter, quarter, now half, 24 and a half and. 75 25 now a quarter, hey 26 and a quarter, do you wanna pay now, you wanna do it, 25 and a quarter sold to the man in the khaki jacket geico. Fifteen minutes could save you. Well, you know. Coming up, we reach rock star status. Bono is in davos and hes teaming up with the bank of america in the fight against aids. Hes promising a big splash during the super bowl. That interview is still to come. Plus, more cnbc first 25 contenders. Goldman sachs Lloyd Blankfein and Googles Eric Schmidt on the next frontier of technology. More on squawk, right after this. [ male announcer ] this is the story of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. And the little room above the strip mall off roble avenue. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment this is a special presentation of squawk box, live from the World Economic for numb davos. This hour, Hedge Fund Titan David Harding gives us his investing strategy, plus, the ceo of european banking power house soc gen. And one of the biggest rock stars on the planet, bono, unveils a new deal with bank of america in the campaign to fight aids. The second hour of squawk box, live from davos, switzerland, begins right now. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernen and andrew ross sorkin. This is our last day of coverage here. Two more big hours just ahead. In the meantime, weve been watching the futures and things are looking concerning. The dow futures are down by 7. S p futures are off by just over 9 points. There was a lot of concern about china and what was happening in the Housing Market in the United States. And probably the bombing in egypt not helping things, either. In the meantime, lets take a look at the tenyear note. It is yielding 2. 734 . In our headlines, following wall streets thursday slide we are seeing selling pressure and some emerging markets this morning. Slow Slower Growth prospects in china. A selloff in emerging market currencies, particularly the turkish lira which hit a record low against the dollar and the argentine peso off by about 15 yesterday. This morning, argentinas government government has authorized citizens to buy dollars and lowered the surcharge on any dollar purchases. The country has been trying to stem a severe decline in its international reserves. One stock bucking the trend is microsoft. It reported better than expected profits. It also had upbeat results for its Office Software suite. We are keeping an eye on shares of starbucks this morning. They Beat Estimates and reported a 5 increase in samestore sales. However, it also predicted Current Quarter profits slightly below street consensus. And Procter Gambles quarterly results, 1. 21 a share, a penny better than expected. Revenue basically in line. Those numbers just coming in from dow component proctor. Among the topics being discussed in davos this week, the geopolitical concerns. We caught up with investor george soros and talked about the crisis in syria. Its really the fact that you have a human catastrophe of the first magnitude developing, and its deniable to get worse if there isnt a greater International Public awareness and engagement to deal with it. Because the assad regime has deliberately target ed access t humanitarian aid and medical supplies as a weapon of war. The policy of starve or surrender. So its a tool of war. And the conflict has to have a political settlement. There is no a military settlement would take years of fighting. If during this time there is no arrangement to provide humanitarian aid across battle lines or as part of a generalized ceasefire, the population currently, already this winter, more people are going to die because of deprivation from food and medical supplies than from actual fighting. And that is going to with the passage of time. The sooner people become aware and put pressure on the governments not to tolerate this, the sooner this can end. The heads of seven aid groups jointly appeal for humanitarian relief in davos this week. Again, this is a complicated problem. Kofi annan and others were there last night to talk about this. No easy way out. Theyre all pointing at putin at this point as kind of the problem behind this. Are any of them going to the olympics . Those guys . I doubt it. Its untrackable. No one is optimistic. It has to be a political settlement but assad and now apparently every jihadist on the planet is now in syria. Where do they go after the thrill settlement . You can hear the frustration in kofi annans voifce. The head of amnesty was there. Women and children are dying every day. Its an impossible time to live through with all this. Our next guest runs one of europes largest hedge funds. Hes a rock star in europe. You have your sunglasses on. Its not exactly bono sunglasses i call them bono sunglasses. Not getting a laugh out of that. Theres been a remarkable amount of optimism here broadly speaking about the economy in the United States, less so about europe. Im just curious where were going to talk about commodities, because thats your business in many respects. When you look at europe broadly, what are you thinking . Im not really an expert on economics or anything like that. The hedge fund i run uses mathematics and Scientific Research and patents. I live in london. London is prosperous. I read the newspapers. I dont know any more than you do, really. What do the mathematicals suggest . Weve been long on all the stock markets for the last year but for no better reason really than theyre trending upwards. Thats the main reason. Its not particularly because were optimistic. We bring complete objectivity, for better or worse, we bring complete objectivity in the investing process. We dont invest on what we want to happen. Some people criticize that. Our job is to work for our investors and make money for them. Is there a reason youre short grains, corn and wheat . Are they trending lower. I wouldnt say its purely technical. I would say its purely objective. We research explanatory variables. The most successful explanatory variable we used seems to be something about human nature. People seem to behave socially in markets. We reach the usda crop statistics, the fundamentals of markets, supply and demand. When we find anything that we find statistical evidence that we can bet on, you can bet your Bottom Dollar well bet on it. If theres evidence. I dont know why we long the beans and short the oil. We use multiple trading systems. How much is mathematics for you . Its mathematics set in a framework of applying mathematics to the analysis of very, very noisy data. Market data is very, very noisy data. A large part of it is random. You know the theory, its all random. Thats the theory. But it isnt all random. Its mostly random. Were looking for a needle in a hay stack. You wouldnt think that means we could make money. You wouldnt think the tiny amounts of noise they found could change the outlook of the universe but it does. Youre long the euro. What series of statistics would lead you to that position . How long term are some of these positions . Are you changing in and out . Were a big enough ship so we cant be bhipi iwhipping in and the markets. The euro well be long on against the yen, the euro yen has been a longterm trend. It will be the australian dollar. The euro is strong against the australian dollar. You were short gold. Weve been short gold for a long, long time, a year or two, not since the very top, obviously. Its been going down. We cant afford to right every rally. We have a long short position which has been fine. Bonds . A little bit longer bonds. Thats probably not on the trend. Long bonds . David, what do you pick up here at davos . Theres so much macro stuff here. Does that help you provide the framework . It does, really. Im not here for that reason. The parties. The science. To be honest its a privilege to be able to come at all. Im a first timer. Im here to listen and star spot. Star spot. Nice way of saying it. We have that in common. Star spotting, we all do. Thank you for being here. Appreciate it. Still to come this morning, the state of european banking with the ceo of socgen. We dont have bono. We have bono. We couldnt have bono. He tragically passed away. Bono will be with us on his latest deal with bank of america to fight aids. Later in the 8 00 a. M. Hour, Goldman Sachs chairman and ceo Lloyd Blankfein. Thats going to be awesome. And eric schmidt. Im so psyched for this hour. You heard your friend talk about that. Its friday, which means the latest talking squawk blog is out. This week, it has every interview weve done in davos from matt damon, goldie hawn to bono. See them all again. Go to squawk. Cnbc. Com. Hewlett packard, and disney both started in garages. Mattel started in a garage. The ramones started in a garage. My point . You never know what kind of greatness can come out of an american garage. Introducing the 2014 motor trend car of the year. The all new cadillac cts. Aint garages great . Welcome back it squawk box, im sara eisen, reporting from squawk box headquarters. S p 500 indicated to open down ten points and the dow 78 points. Nasdaq lower as well. A sharp selloff in emerging markets accelerating today, global stocks on track for their worst week this year. Among the reasons, worries over an economic slowdown in china, theres that, Monetary Policy and domestic issues. Emerging market currencies are getting battered. The turkish lira also getting hit, its at a record low against the u. S. Dollar even after the countrys central bank spent 2illirying to prop it up yesterday. Also watching two earnings reports, Procter Gamble earning 1. 21 a share ex items. Revenues basically in line. Also watching honeywell earnings, beating the street by 3 cents. Revenues also topping estimates. Plenty earnings and emerging market currencies on the move. Back to you, becky, in davos. Thank you very much, sara. When we come back, another titan of banking, the chairman and ceo of Societe Generale will be talking to us to tell us if the world is over for the european economy. Squawk box, live from davos, well be right back. Time now for todays aflac trivia question. Where can you find the cheapest beer in the world . The answer when cnbc squawk box continues. Yeah, hes clean, boss. Now listen to me, duck. I have an associate that met with, uh, an unfortunate accident. While hes been incapacitated, somebodys been paying him cash. Now, is this your doing . Aflac . Now, if i met with some such accident, would aflac pay me . Nice. This is your stop. [ male announcer ] find out what aflac can do for you and your family. Aflac . [ male announcer ]. At aflac. Com. Over the pizza place on Chestnut Street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i95. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment this magic moment sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Now the answer to todays aflac trivia question. Where can you find the cheapest beer in the world . The answer, vietnam. The average price for a pint is 76 cents. Aflac. Is the worst over for the banks, specifically european banks . Well talk about that question more right now with our next guest, Frederic Oudea is the chairman as well as the ceo of Societe Generale. I like that. Notice ceo and chairman, theyre in europe, together. Both titles. Thats good. Lets start with this. In a vacuum, we think argentine peso. Lets not worry, turkish lira, ruble. Lets think of the past, currencies we havent heard of. Its like a thread on a piece of clothing, you start pulling and the next thing you know youre naked. Any potential of a currency crisis starting right now that were sort of being lulled in and not paying attention to . I think there are different elements beyond i would say this issue of tampering in the crises of several country which is are mainly related to political situations. The situation can vary from one country to another. That is good then, that its not a macro issue, it wont be dominos. Lets keep in mind the fed might progressively reduce. Im reasonably optimistic still on that front. I think the rest of the world is less enamored of tapering than we are. A lot of people in the United States want tapering. The rest of the world says keep it coming to some extent. At least as a banker i would prefer to see normalization of the liquidity situation in had the Interest Rate. So much liquidity is not supposed to stay. I think its good to have seen the fed announcing without too the volatility on the markets. Now its a question of implementing. We have to impact effective young investors. The way to ask this question, ive been thinking about this. Even over here, athletes or artists or musicians, if theyre really good, the market will dictate a price, in millions of whatever were talking about, right . Why is the best banker in the world, genius, is he really only worth a million whatever it is, a Million Euros . Arent you losing people that might really be you can tell me for sure you couldnt find someone that could help shareholder val yaw thats worth than a million . Do regulators think this way . Regulators and governments. Perhaps in europe we have a slightly different way of looking at things. I think its fine to reward effectively talents. And if they are really genius to bring added value to the clients, why not. What happened in the financial crisis showed sometimes short on profit can create disaster. Not always, though. Its not always that youre risking the banks money to make your own. I agree. As a ceo and chairman, i want to also have a culture of people with motivation regarding their compensation but beyond that, who have an interest in their job, who are keen to help their clients. To have something which is acceptable to society which can mean still good packages. We deferred payments to ensure the risk that is taken today, i think it makes sense. Let me say that on that front, of course, the question mark is to have a level playing field. Of course the talents we want to recruit in europe, japan and the u. S. , we have to compete with u. S. Banks, et cetera. What will be needed are the same rules. What do those rules like then . If you were to have a global fundamentally, theres been an introduction of europe and regulation, which is more difficult for us. Precisely u. S. Banks and asian banks will not have the same legislation. Beyond this, the structure of compensation has changed dramatically compared with before the crisis. As you know, now people are paid but there are different payments. A lot is paid in shares so people are exposed. Youve dealt with compensation before getting a European Banking Union to deal with the unified economy . You deal with compensation first, not with the unified Banking System . Thats insane. May i say for the public opinion, the government, the leaders, it was something probably more symbolic, important. Exactly. As you say, 2014 which is important. 2014 is a very important year because we are moving towards precisely the Banking Union which is positive. Which i think is needed to avoid the fragmentation of the euro market. I think it will further build confidence in the Banking System. What do you think of the strength in the european Banking System . When you look at european banks relative to u. S. Banks, it is almost a slam dunk to say you are not in the same shape at all. I cant agree at all. I cant comment. We would have a ratio basel free, fully loaded in the technical words of 10 . As far as i know, jpmorgan is at 9. 7. In terms of liquidity, i cant comment but you will see the quality of the liquidity we have. There have been a huge amount of deposits flowing to us. We have the capacity issue, et cetera. What is at stake more, the difference, depends actually on the banks is based more on profitability, on capital. Some u. S. Banks have more to do on that. Now the challenge for big banks at Societe Generale, its not the balance sheet, is to be able to reach an acceptable profitability. Thats what well be doing the next few years. We have an economy that might be a bit more sluggish than the u. S. , which will be a challenge. I have a question. Girlfriend number one or two. Hes talking about may i say that also in france we dont enter into the personal lives of politicians and other people. We dont either. We dont either, not while were here. We just did but we dont either. I like number two. Thats just me. Shove you off your chair. Thank you for being here. We appreciate it. Coming up next, we have bono. Well be talking about the rock star joining forces with the bank of america to combat aids. We have that interview right after the break. Check out the futures which have been under bigtime pressure all morning. Welcome back to squawk box. Were coming to you live from davos, switzerland. The snow is coming down. It is not a green screen, people. With some earnings reports just crossing the tape, lets tell you whats going on. Dow component Procter Gamble reported 1. 21 per share. Thats ahead of estimates. They expect to see strong Earnings Growth in the second half of the fiscal year. Black decker beat systems by 2 cents. Revenue also ahead of consensus. The toolmaker is being helped by the Housing Market rebound. Zero reporting First Quarter profit of 29 cents per share. Thats matching treatment estimates. Leave knew was weaker than expected. Xerox announcing an 8. 7 increase in the Quarterly Dividend to 6. 25 per share. Becky . Bono and bank of america are teaming up. Theyve been working hard on a preventible disease. I caught up with Brian Moynihan to talk about this. We met up six years ago here in davos. Its not just a talking shop. Really stuff comes out of davos. Now with this bank of america commitment, 250 million for red. Six years. Yes, six or seven years. Whats extraordinary is not just the money, its the heat. You have to keep public pressure to get the politics right. The real big money is in government budgets. And america is being extremely generous but americans dont know this, the 7 Million People theyre paying for to stay alive, hiv sufferers. What im excited about, the bank and brians leadership is, they have like 6,000 outlets. They have like 250,000 employees who are now working for those women who dont want their kids to get the virus. Its the reach of the bank as well as the money thats exciting to us. A few years ago, i had the pleasure of hosting at a Central Enterprise center in georgetown had bono come and speak to them. He made one of the best cases why americans should be proud for helping in this fight, how it goes through george w. Bush and clinton and all the years. What became apparent we can enable our client base, teammates and provide a capability to help give another push to the effort. And around all the things were doing with the ability to download the song. Its a nice package to say lets enable americans to do one more push through the capabilities we have in our company. Bono, you know how to milwaukee a splash. The way youre going about this is, youre going to do i believe an ad at the super bowl that talks about u2 has given a song from the album, a song called invisible for 24 hours you can download this free and the bank will match give a dollar for every time people download it. Its kind of a big deal. My dad used to say to me, when are you going to get a real job . And i would say im with the band. What do you mean . Hed say, like with a bank. Thats a real job. I speak to the band. What are we doing . Were working with a bank . Larry said youre robbing a bank. It was like, the band understand, theyre supporters of red. I think theyre in 11 million themselves the last tour. And they see bank of america is a game changer. We couldnt have dreamed when we started red that wed have this kind of leadership. And its a global company. And this is a global problem. Guess what, by 2015, if we keep the pressure on, those women wont have to pass that virus on. We can get them the medication. Well have the first aidsfree generation by 2015. In about four or five countries, it could be 12 countries. With this kind of push, like i say, its political. If its in the shopping mall, people are caring about it, if their kids are caring about it. Its in the districts people are caring about it. Things change. Its very good. People listening to this across the continent of africa know that america stood by them in this fight against this horrible pandemic. I think that thats a good thing for the u. S. This is a completely preventible disease in terms of the mothertochild transmission, if its caught in time, if its identified, treated with the proper drugs. Yes. 700 babies are born every day with this hiv virus. And then you have to pay for the rest of their life to keep them well. Or they dont have to be. Thats exciting. Its like 40 cents a day. This is a doable thing. Its not like were here in davos, arent we great . Its not one day. Its coming up. One of things you seemed attracted to is that you felt your consumers and employees liked this was finite. Bank of america says that this Campaign Marks a major milestone in the banks efforts to move towards an active philanthropy instead of just writing checks to charitable donations. His employees say he lis the ems like this because you can see success. Think about what it takes as a chronic disease. If it is passed to a child. Youre talking about 40 cents on the one hand, and then life long. All these banks getting involved and doing something, in just a different way. Well go to break. Somehow its snowing but its sunny. It got a little warmer. Welcome. Peeking through somewhere. Kind of makes for a surreal look. Can you see did z it show up on the camera. It was on the interview with bono and brian. I love it when its sunny. What is the idea that its snowing and freezing . Whose idea was that . Welcome to davos. Thank you. In the next hour, find out what bono had to say about the new host of nbcs tonight show, minimum ji fajimmy fallo. An emerging markets meltdown under way . Were posing the question. Turkey, venezuela all under pressure. Plus, is puerto rico the next greece . Michelle carusocabrera is in san juan where it is 77 degrees this morning. Shell bring us that story, next. [ tires screech ] [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to your authorized mercedesbenz dealer for 1. 99 financing during our certified preowned sales event through february 28th. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back, everybody. Emerging markets are a major point of concern for investors right now. Earlier today i caught up with the president of mexico, among the topics we discussed were mexicos macro environment. Translator we have to recognize that mexico has a climate of Macro Economic stability and that it has debt levels, visavis its gdp which are moderate, about 39 . Its fnlt institutions have a capitalization level of 16. 1 . This generates a very stable Macro Economic environment. Adding to the impact of the structural reforms. This generates, for mexico, a climate of attention and attraction for productive investments. Last year, the Third Quarter of 2013, the amount of direct Foreign Investment in mexico was 28 billion. Price as much as what we had in 2012. Mexico has been a huge draw for foreign investors. Its been something theyve been talking about. In fact, today, the president there making the announcement that cisco and nestle will be making investments in the country of mexico as well. Were concerned about what you might think about the peso. The peso is 35 owned by foreign ownership. That makes it much more much more affected potentially by any of these moves in the global foreign markets. President pena neota. Puerto rico is under pressure from the ratings agencies to borrow before the end of the month to prove they can. Or else face a downgrade. Our chief International Correspondent Michelle Carusocabrera joins us from san juan, puerto rico, the polar opposite from where we are here in davos. 74 degrees, rising to 88. It seems incongruous to want puerto rico who owes 70 billion to borrow more. They are under pressure to do so. That 70 billion owned by a lot of investors in the mainland by their Municipal Bond fund. The reason theyre being pressured, theyre concerned about a potential shortterm liquidity event. Puerto rico has been using shortterm cash operations. Thats been drying up a lot of the cash flow that they have. Think of it like this. When you refinance from a 15year mortgage to a 30year mortgage, yes, you ultimately pay more for the house and the Interest Rate is higher, however, your monthly cash Flow Payments are much better. The ratings agencies are concerned theres too much current cash flow going to debt service. They want more longterm permanent financing. Theyd like to see that. Moodys in floor said theyd like to see that in the month of january. The question is can puerto rico do it . Have they convinced the markets theyve done enough to be able to borrow . In this environment it will get much tougher. We have one week left in the month of january. Lets see what we can do. Thats the shortterm problem. The longative term problem, i mentioned at the top, they have 70 billion in debt, plus unfunded liabilities. What have they done in the meantime . Theyve raised taxes on everything under the sun, Corporate Taxes, individual taxes, they raised utility rates. Pension reform, which is controversial. Teachers have been protesting it and its in court right now. Things like raising the retirement age from what could have been as low as 47 to 55. Additionally, new teachers would would have retire at 62, they have to increase the amount they contribute and the amount theyll get when they retire is less. Is all of that enough to let puerto rico to borrow. Can they do enough to pay back the debt, make their economy grow . Theres a lot of debate in the market. 70 of all Municipal Bond funds in the United States hold puerto rico debt because it is exempt from federal, state and local taxes no matter where you live. Back to you. By the way, later on, we have the treasury secretary and the chairman of the Government Development fund. Okay. I was talking to somebody the other day who said one of the longer term problems for puerto rico, the idea that it is a lot easier for people to leave puerto rico and move to mainland United States and that that is going to put pressure as you lose potentially more of the population there. You have a terrible brain drain going on here. The economy is bad. Because anybody in puerto rico can move to the United States, they do. Theyve had a decrease in the population over the last five years. The population here gets older and older. Its graying. And keep in mind, between the people who work for the government and the people who are on welfare, 50 of those people, thats 50 of the population. Youve got 50 working to support the other 50 . Wow. Okay. Bad numbers. Michelle carusocabrera. Stay warm. Not so hard for you. Chilly economically but warm nonetheless. Coming up, Silver Lake Partners cofounder glenn hutchins. Hell talk to us about the buzz here in davos. Then in the next hour, two cnbc top 25 contenders will help us finish out our week here in the swiss alps. Goldman sachs ceo Lloyd Blankfein and then googles executive chairman eric schmidt. That is coming up. Right here on squawk. Back in a moment. [ male announcer ] this is the story of the little room over the pizza place on Chestnut Street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i95. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment welcome back to squawk box, live from davos, switzerland. For a look at global tech investing trends and Key Takeaways from the big summit here in davos, were joined by glenn hutchins, cofounder of Silver Lake Partners. We are also sponsoring africanamerican research at harvard. We wanted to talk about the buzz here in davos. Wanted to ask you, is Justin Bieber in the buzz. Who . Justin bieber. Next subject. One lesson in the past three days, since this is our final day here at davos, what would it be. The davos consensus is always wrong. It tells you how people will behave in the coming year but it doesnt tell you the outcome. We are therefore, headed . Right now everybody is optimistic about growth in the global economy. I think were sitting on all cylinders. When you say well behave that way, does that Mean Companies will start spending more. The economists and the Public Servants are optimistic. The Business Leaders are essentially saying ill invest and spend op ex when i see it. The smaller ticket to purchase, the less optimistic the ceos are. What do you mean by that . Its a consumer market. Today, given the way the policy has shaped up, if your assets are in the markets, your financial assets, youre feeling very good. If your wealth is in your home, youre okay. If youre reliant upon a wage youre still in recession. As we have come out of this recession and longterm unemployment ben bits have come off, those entering the force have entered at a wage less than what they left. Im skeptical about the sustained path of recovery above 3 because we need to have the consumer come out, which is 70 of our economy to accomplish that. Im not saying its no the going to happen but its why im skeptical. You made an argument for a different policy on employment. Unemployment insurance. My observe is based upon this set of circumstances you just described, plus the fact were experiencing longterm unemployment, which are people unemployed for more than a half a year, at the highest levels youve ever seen. Short term and medium term unemployment are historically average levels. Our unemployment is centered on people unemployed for a long period of time. Thats more an Unemployment Insurance. Youre talking about retraining. Well, Unemployment Insurance is largely not been reformed since 1935. I think theres an opportunity to reform the policies that are go at Unemployment Insurance, disability insurance, the earned income tax credit. The same way we reformed welfare. If youre unemployed, youre required to look for a job but not be retrained. If youve been unemployed for a year or more, looking for a job isnt going to help you. You need training. There are all sorts of things the world has done that are responsive to the modern marketplace. That wasnt the case in 1935 when we created Unemployment Insurance. Thats one idea. Do you have something going on. Youve been shaking your head, man. Im waiting. When i shake it, yes, you get nervous. I do, i do. If joe and i are in agreement with each other, theres a problem. Its either that youve come around or davos a stockholm syndrome. Yes, the one thing ill say is that from the top down, we can come up with some things that might work not only here but also in the United States. Although not everything. We just had the socgen ceo on. He almost seemed to imply we need to get all the worlds banks on board, even in terms of compensation. Right. What is it, a Million Euros is the maximum over here. Thats in france. In france. Thats what im talking about. That will never happen. I dont think you would suggest that that he actually said it needs to be the right number for society. And just hearing that, you know, to me, that rings of hypocrisy and absurdity to me. Youre outside of my field. Im not a banker. Talking about compensation and whether there should be a cap on talent, even in france on how much a banker can earn. I would like to be able to hire the very best people for my shareholders to run the bank. Look, im a capitalist. You say that but the way you say it, you cop to it . Im proud of it. Are you . Say it loud and say it proud. I tried to call him democrat during the panel. He said, no, no, no, im a capitalist. I think there should be a free market and compensation like in everything else. We need to have a social compact where people look at the amount of money people makes and say thats fair. Fair means that you are whatever you earn and whatever if in life youre doing it a certain way like in college. If you earn an a, you earn an a. You dont all of a sudden give everyone a b just was its fair. I think youre right. You say i can get there too if i work as hard and do the same things you have done, too. Its about opportunity. We need to have a philosophy i can get there, my children can get there, too. I like when you say im a democrat, no, im a capitalist, implying you cant be a democrat as capitalist. You should not introduce me as a democrat. Ipractice capitalism. So much of the conversation here in davos uses the phrase about inequality. Right. The phrase is not inequality of opportunity. Its one word, inequality. Its not about bringing up the bottom, its also about bringing down the top. I dont agree with that. Whats happened with Interest Rates at the zero bound, risk capital has been forced into risk assets and people that own those risk assets have done well. That hasnt done anything for the people who have to work for a living and live on a daily wage. There has been a growing gap. As a result of the way weve come out of this recession, the peopleefited from it thinks its been good. Housing has been in the middle. Housing is what we need to do is put a set of policies in place and practices at businesses. We had dinner one night and there was a ceo talking about how hes taking some of the education responsibilities that we think about should reside in universities and putting them inside his company. Thats really exciting and interesting, right . Is that a trend that corporations will take over . That can be a trend. We need to create the conditions under which people can go to school, get an education, have an opportunity to get a job, work hard, have an opportunity to fail but also have an opportunity to get ahead. Thats my point. Its been fantastic to spend so much time with you this week. Were done . Were done. Plenty of squawk box still to come, including a look back at the week it was. The futures have been down most of the session, down about 78 points. Squawk box will be right back. Coming up on squawk box, two of the most recognizable games at the World Economic for numb davos. 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Go national. Go like a pro. Welcome back to squawk box, the parade of power players from davos tunes again this hour. Lloyd blankfein is here. Well talk to the ceo and chairman of Goldman Sachs. And Googles Eric Schmidt will join us. Well ask him what the internet join the is developing and how the tech world is changing. Third hour of squawk box begins right now. Quid pro quo, clarice. Welcome back to squawk box on cnbc, first in Business Worldwide, im joe kernen along with becky quick and andrew ross sorkin. Thats my pet name for blankfein, clarice. Im not sure why. Our top story this morning, the Global Markets, u. S. Equity futures are headed lower after yesterday, as well, were seeing selling pressure in emerging markets this morning. Slower Growth Prospects in china and various local political issues are among the key factors. Unsettling stuff in the currency markets. We heard it was specific to areas and due to political unrest, not a macro issue. Well talk to lloyd about that. Argentinas government has authorized citizens to buy dollars and lowered its surcharge on any dollar purchases. That country has been trying to stem a severe deklain. The peso suffered its steepest daily decline since 2002. Remember it was the thai bott. The stock market and markets around the world, especially emerging markets dont like this kind of action. It can rattle some nerves. One thing seems specific to turkey. Theres elections coming. The argentina situation seems specific to argentina. You have the futures down with this bombing in cairo. When they start like this, you have global funds that are so liquid and moves so quickly. Like in the case of the peso. Thats when you get nervous about some of the trends and whether it is the unraveling. Were in a new year, the tapering will continue. Theres a lot of places around the world that benefited from that liquidity. I think money went to places where it wouldnt normally go. Well see what happens with it. We are hear in davos and in davos, you spetend to come acro some strange bed fellows, rockers and bankers sitting down with each other. Yesterday, i got to sit down with bono and Brian Moynihan. Bank of america has paid out over 50 billion for settlements to this point. There is an outstanding one from the fhfa. Recent recently it was suggested that bank of america may have to pay 5 billion to 8 billion. I asked moynihan if that sounded like a number in the right ballpark. We settled a lot of cases. I wouldnt agree thats in the right ballpark. Every case is different. Today is a day to celebrate about what were trying to do as a major force and doing good things in the world. A lot of the litigation is behind us. The work is getting done. Important for america, delinquencies and mortgages are down and the home markets are healing. Thats whats important. We can talk about litigation. Im having a heart attack here. Hes trying to get his cut out of that. We need to talk. Bono was kind of playing off the idea that bank of america pledged 10 billion to red to go ahead to try and fight the transmission of hiv from mother to child in africa. Thats a goal they think they can actually beat in some countries by the year 2015. When bono heard 50 billion, he heard, wow, what would that end up doing . It will be well spent by the people who have collected it. He says sarcastically. It would be better to go to bono, it would. Bank of america shares are trading near a threeyear high. Joining us now, Lloyd Blankfein, chairman and ceo of Goldman Sachs. Its good to have you here. Last year, you sat here, we wet all together. They were back in new york. You said that you thought that the market and the economy was going to, quote, break to the high side. That was your phrase. Yes. Would that apply to this year and especially in light of the tapering and the things weve seen in the last 24 hours. Id say im still opt miftic b but i cant say its going to break to the high side. Break to the high side in the United States or across the board . Conditions are well, weve narrowed the point where weve recognized that conditions are going better. In the United States theres a big tail wind. Im sure previous guests have gone over all these things, the deleveraging thats occurred, the Interest Rate environment, housing situation, energy, all favor the United States. Of course as weve been saying for a long time, the u. S. Is probably half a cycle head of europe anyway. Europe is doing better. Even a euro, two years ago, european risk was almost exestential. The market offered 40 at 385. 40 billion euros at 385 for spain. No one would have contemplated that a year ago. A lot of work has been done. Everyone is focused on the amount of work that needs to be done. Sentiment tends to lag a bit. If a year ago we could have sewn up where we are today, we would have done it in a heartbeat. Thats amazing. At the same time, people are still dragging. I think were in the kind of muddle through phase, the most likely outcome is that wed muddle through. Were muddling through. We wont exceed on the high side of expectations buzz theyre kind of in line with reality. You are a risk manager more than anything else. What is the one or two things that you think are the big risks for the firm, the economy . I was worried about this before. Having lived through the situation recently with target and you see the vulnerability of firms to technology glitches, whether done with a criminal or accidental is huge because of the leverage involved. Somebody makes a mistake in one place and the leverage that comes out of spinning out wrong information or misappropriating peoples information, millions, hundreds of millions, of accounts sold or transacted. Thats a very big exposure. I worry about everything. I worry about things that nominally were in control of because you have to surveil people and test. People can make mistakes. When it comes to things that feel out of your control, it is a very big concern. Did anyone call you in the last 24 hours and say this is happening to the ruble in russia . This is happening in argentina . Have you said do this, do that, lets offload risk here. I know you have a high opinion. Nobody called me. Have you changed anything . Youre a trader at heart. Youre a risk manager. Is there risk brewing that you hadnt counted on . These are high yielding markets, high yielding currencies. You dont get a high yield unless theres high risk associated with it. These things can all go well in the long run. But it doesnt mean theyre going to go every minute till we get to the long run. These things are going to be more volatile. Is it because of argentina . Turkey, thats because of turkey. I heard your introduction. Id say when its one country specific, its like credit. If its name specific and were at that part of the world, how is this country doing, that country doing it . But at the point, at some point it becomes kind of a macro event. Its not yet. All these countries that are very far apart on the globe are close together on investors minds. Yes. You went back to the asian crisis. All the dynamics werent the same. When it got right down to it, it became the same currency. They were just trading the macro circumstance of emerging markets. Is that the case here . I think so. You mentioned traveling with liquidity, raising rates, developed world rates go up, start competing for opportunities with emerging markets. The pressures that these countries have and possibly in funding themselves at levels. It feeds into each other. In the long run, somebody said take a position on the emerging markets and you cant change your mind for fill in the blank, one year, five years . Id be long, not short. Doesnt mean im going to feel good about the next. In the long run you have to bet on growth. You see, you know, growth education, mobility in these countries, basically the flattening of the world has given tremendous opportunity in these countries. What you just said is really important. I want to make sure i understand it. Basically what you said is this could be related, its the same thing, investors who are looking at emerging markets from the same story. It could feel bad for the short term but under the oneyear or fiveyear id say this how i used to say it. When you think of emerging markets, in good times, merging markets feel like a credit business. What is the credit worry, the balance of payments there . It feels like in name specific, micro, like a credit business, name by name. At a point in time when things get bad and tips over into that category, forget the names. Its a macro market, emerging markets. Given the runup we had in our markets last year and not so bad this year, it wouldnt take much nervousness to get us to maybe take a pause. Sure. You notice thats whats happening yesterday and today . Its a pause. Youre watching the pot and waiting for it to boil or hoping for it to boil. Right. When it goes down, relative to where it was when we first started talking about it, its going to drop from way up here to here. Right. Look how high up the markets are. Within what percent are the market highs are we right now, even after going a little bit of a pullback. We could pull back more and it wouldnt derail the track were on. Your analysts say we should have a correction in 2014 of 5 to 10 . Is that right . It sounds about right. I havent followed it that closely. Theres a natural people get enthusiastic, people believe, people get in. There have been people who have made 30 because theyve been over a year and people who got in the market 15 minutes ago and havent made any money. When it starts to go south, they think oh, my goodness, im not playing with the houses money, im playing with my money, get me out of here. Some people call that technicals or some people would try to graph that. Thats the psychology behind those charts. How far do you think we are from the retailer coming back. The Retail Investment is back. The institutions are the sum of Retail Investment. People are looking would a Retail Investor somebody look at his 401 k plan or the money he has in fidelity in a managed account . So in a way, Retail Investors are not only participating but theyre feeling the wealth effect or theyre feeling the pain of it going down. Whether or not theyre calling up a broker and buying stock directly. I would say compared to my prior experiences, i would have said by now, you would have expected more of a shift from the fixed income markets to the equity markets on retail. You know something, the Market Structure evolves. Theres a lot of people put their money in institutional hands. Its not just the active managers. Its the etf market. Can i ask you about china . That seemed to be what kicked off some of this concern yesterday, the Slower Growth numbers in china, slower than expected. Is that something that you put a lot of credence in . Or are there other things youre thinking of instead . It might. By the way, its not like look through it. We could be nervous about it. We did put out a statement to the effect, were committed to emerging markets, were committed to china. We said wed have less of an allocation now during this kind of tumultuous or uncertain period than we did before. And probably would again. But they have a big experiment going. Its not really an experiment. Its a commitment. Theyre committed to deregulation. But the execution issues are tremendous. You know, one of the things about china, they dont have the capital markets. In this country, you make an investment, it works out, you know, if it doesnt work out, the investment fails. Why does it fail . People dont use it, they dont have the revenue to pay back the debt. They cant service the debt, bankruptcy, failure, somebody else gets the asset. In china, how do you write off mistakes . Thats one of the issues. If you cant write off mistakes you cant easily reevaluate capital. When you have the markets and companies that are public and you dont have so how do you have Institutional Investors . Without Institutional Investors, who takes the companies public, who buys them . They have to do all this at once. Its very difficult. There are people who think in the emerging marketettes because of qe 3, qe 2, whatever, in the action of pulling back, we saw what happens, how quickly it reacts. Has there too much overbuilding, have there been investments made that arent going to work out . Were going to taper more most likely unless the tenyear goes to 2. Sure, there will be mistakes made. As a theme, im not sure, maybe. Maybe. Qe 3 has not undoubtedly. In other words, every time a lot of capital flown in. And was spent quickly. Look, in a way what china did was a substitute for what we did when we were trying to stimulate the economy. The government spent money and said spend it fast. China didnt do it through the mechanism of its state. To some extent it did. Basically i wasnt there at the table and i wouldnt speak chinese if i were there. The common understanding is that the official sector told the banks, extend a lot of credit and told municipalities, build a lot of projects. Guess what . A lot of the money we spent quickly, built things in the wrong place, they were built inefficiently. So, too, with china. One of the things thats easier in our markets, because of the structure we have, its easier to see the mistakes, write them off and rekrim natucriminate. You can have a mall with no one in it and it can Still Service its debt. Those mechanisms arent in place and thats one of the projects china has to accomplish, develop its capital markets. Can i ask you about mexico. Spoke with the president today, enrique pena neota. They are working hard. Investors are working hard. But growth last year was only 1. 2 . Whats your take on this . I was in mexico city, its striking, the level of the caliber, the dialogue with the business people, the level of investment, the commitment. Frankly, the participation beyond the borders of mexico, it feels to me, ive been going to mexico for a long time. It feels like a different energized place. I think in a lot of ways, one of the big opportunities that i think in the United States, is to recognize north american opportunity. The blessing of energy and to have some sort of integrated policy and really push that really hard among canada, the United States and mexico. One of the subthemes that you have in davos is the anxiety that european manufacturers and industrialists have because the cost of energy is so much higher in europe than in the United States. They feel theyre on the wrong side of a competitive disadvantage. In the United States we dont feel that good about it. Its not really in the front of mind what an advantage we have and i think we have an opportunity to take advantage of it and were frankly missing the opportunity to be an uplift in morale to our country. Thats a powerful think of all the way our lives have been organized, the geopolitics of the last 40 years. Because the United States was permanently an Energy Deficit and we had to go out and get and transport our energy. Send our money over there. From the hardest, toughest places in the world. Right. Everything was you can explain a lot of life in the last 40 years and sacrifice made by this country by that fact. What happens when north america is energy sufficient . And what happens not just in the United States but what happens, you know, you have to have recognition that middle eastern oil to a greater extent is being shipped to china. Not to the United States. Right. I have a couple quick banking questions. We only have a little bit of time. We saw jamie dimon. Potentially 50 billions of more settlements. Youve gone through your own settlements with the government. What do you make of whats going on. Im a little bit close to the coal face here. Frankly, look, i dont love spending my life dealing with legacy issues but its part of what we its part of our responsibility. We have to deal with it. We have to sort out the past and more importantly, learn from the past. What do you make of the fact that the government has gone more after the corporations than individuals . I would argue individuals ultimately make the decisions, good or otherwise . They do. But at the end of the day, listen, having been a focus of this myself, i assure you that people people examined these issues very, very, very enthusiastically. And you know, you still have to have a bad intent. Again, taking away as a commentator on these things, there are people who made mistakes. Everyone made a lot of mistakes. The whole world was overleverage. At the end of the day, a mistake is not necessarily a crime. They still have to have criminal activity to have a crime. Do you think this investigation into china, which ultimately may include Goldman Sachs is real . Is that a big issue. I think its a big issue because isnt this something thats happened everywhere. The issue is not that one cant hire people connected to people who are important in the prior generation but it cant be your motive and you cant give undue benefit. It cant be a bribe. Have you seen stuff that looks like a bribe . Not firsthand. Have you had chinese ceos or other ceos that said hire my kid and if you hire the kid, you get the job. I say yes to the first part but no to the second part. Not china specifically. Ive had people say my kid is in such and such a school, he really would like a job at Goldman Sachs. I didnt necessarily take it that way but ive got to tell you, these issues have been around a long time. We have a lot of processes to vet these things. If yew precluded yourself from hiring any kid that was affiliated to somebody whose parent was an important official or an important industrialist or executive, you wouldnt have very many people left. Who do you think the kids are that are multicultural and filling Harvard Business school . Are you going to ask him who he picked . Our cnbc 25, were 25 years old, who is the most important person in the Business World in the last 25 years. A lot of people. You have to give me time for that. Youll come back. gselevator is a twitter handle who parentally works at Goldman Sachs. Do you know who this person is. If hes still writing i obviously dont know who it is. Does jake know who it is . Do you know who it is . Hold on. Hes smiling. He knows who gselevator is. I see that smile. Im wondering if its him. Does the nsa snow w snow wo he is . Does snowden snow who he is . Of course. Go ahead. Im glad to see hes doing well, hes on a school trip far from home, doing well. Hes fitting right in, amazingly enough. I havent been totally consumed yet but i have a banker from france tell me we have to have the same rules and laws about compensation, the socgen guy. He was fighti inin inin inin about a hot dog. They didnt know what he wanted. Google chairman eric schmidt wit be speaking to squawk right after this. Change in aftermarket trading. All the tech stocks with a market cap. Of at least 50 billion. Are up on the day. 12 lowvolume stocks. Breaking into 52week highs. Six upcoming earnings plays. That recently gapped up. [ male announcer ] now the world is your trading floor. Get realtime market scanning wherever you are with the mobile trader app. From td ameritrade. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. And the little room above the strip mall off roble avenue. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment welcome back to squawk box, im sara eisen. More from davos in just a moment. First, Procter Gamble, earnings Beat Estimates by a penny. The Consumer Products giant says it expect todays see strong Earnings Growth the second half of the fiscal year. Shares of fellow dow component microsoft getting a boost in early trade pg morning. The company posting better than expected earnings and revenues after the close yesterday. A solid Holiday Season for its new xbox game consol and surface tablets also helped. No word though from the company on the ceo search. U. S. Equity features pointing to a lower start on wall street following a global selloff. Emerging markets currencies getting hammered right now, the dow down 53. Up next, Googles Eric Schmidt joins joe, becky and andrew for a special extended interview. That will be love from davos when squawk returns. You in m. Tdd 18886282419 you read this. Watch that. 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Becky and i took a swing at the bavarian version, its kind of like shuffleboard. He doesnt speak english, dave. You knew this, right . Yeah. Its like bowling. Yes, yes, thats good. Harder. That a girl. Anybody speak german here . Do you have a question. You do . Do you speak english . You hear that . Whoa. You okay . Yeah. Thats what i get. It was a different one. It was lighter. Yay they have different the bottoms may or may not they interchange them. They go slower or faster. The first one i threw went all the way through and almost went through the wall and back. I couldnt get it anywhere near who was better at this. He was, from the very getgo. Is this boccie ball . What is this. Our coaches, our trainers were talking the entire time in german, just going off. Were looking like, you know we dont understand. We had no idea. Later i found out we had a guy that spoke german the entire time was looking at us. He spoke german and english. He didnt tell us anything that we needed to do. The one gentleman that really knew who he was doing, i dont think we showed him that he could take a big windup and slide forward with his feet, which i tried to do. It was the time i fell. When it would hit, when we would do it, you would hear it hit. When he would do it, it was totally seamless. Those things are heavy. Theres no sweeping . No. This is the bavarian version. They do this in the olympics . No, they do the other version. Most of the time they look like theyre i never understood that. Its compelling to watch. We loved having that on cnbc. Its like huge boccie ball. We get huge ratings. Are we really not as interesting as curling. No, were not. When we come back, eric schmidt is. Hes googles executive chairman. He joins us, hes making his way through the tight security here in davos which we all have to deal with. Yes, we do. Were waiting to go go through the airport 20 times a day. Theyre so nice. Theyre not like our tsa. On the interview interview with bono and his thoughts on jimmy fallon. Squawk box will be right back. vo you are a business pro. Seeker of the sublime. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. And only national is ranked highest in car rental Customer Satisfaction by j. D. Power. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. [ male announcer ] a car that is able to see, to calculate, to think and can respond to what it encounters. Even if that means completely stopping itself. Its the stuff of science fiction. Minus the fiction. The 2014 eclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Welcome back to squawk box, the futures right now, take a quick look, theyve been down between 60 and 80 for most of the session. Now a little bit better, down about 54. That comes after a down session yesterday. We just talked a lot with when you talk to blankfein about markets or the world or risk, you get a pretty good risk manager. Hes a trader. The traders took over. It was interesting to hear. That was against what we were saying, that it was just argentina, specific to the political situation or just turkey. He says when it starts happening like this, theres more to it. That was concerning. That part what he said was concerning, this may all be connected. But he said if he was looking at this over the next five years, long years, he would not be short those markets anyway. Potentially see interesting things but he would have said that about the asia crisis. Five years stay in. It was hell if you stayed in for six months. Good point. After the olympics on nbc, jimmy fallon will be making his debut as host of tthe tonight show. His first musical guest will be u2. I asked bono about this honor. Jimmy fallon, what an extraordinary man, talent. Hes the joy and exuberance of young america. And everybody watches him because of that. You cant fake that. Thats who he is, off and on, as a real person and were going to go on and, you know, ruin that for him. Just some irish melancholy. People will be at home crying into their beer. Do you have a favorite u2 album or song. You dont have to. Really you dont. I probably go back to the roots in the lerlearly songs. Me, too. I wont pick out one. That may offend. Youre absolutely right. You can expect new music from u2. Theyre coming out with a new album. Part of that will likely come up on jimmy fallon. And his first guest will be will smith. A look back at the week that was in davos, highlights just ahead. And dont forget, its friday. Which means the latest talking squawk blog is out. This week it has links to every interview we did here in davos, from jamie dimon to goldie hawn to matt damon. See them all again. Go to squawk. Cnbc. Com. I think you can see my favorite, my brewery package. Its 15 minutes long, but you only saw 2 minutes. Go watch the whole thing. Its riveting. You got the bargain kind . You would need like a bunch of those to clean this mess. [ counselor ] youre probably right. Hi. Cascade kitchen counselor. 1 pac of cascade complete cleans tough food better than 6 pacs of the bargain brand combined. Cascade. Beyond clean and shine. Every time. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. It has been quite a week in davos, from beer to bavarian curling to the brightest minds in tv as far as anchors go. Oh, no. And also to the brightest minds weve tackled it all. Heres a look back at the week that was. The biggest mistake of investing is that people think a good investment is that which did well recently. Past performance. Not that its a more expensive investment. You have to understand how to look at future returns. Theres always going to be an absolute winner. The Airline Trade works in my view until the customer kind of starts to push back. If you came through the crisis as we all did, whether on your side of the table or mine, were all pretty scarred from it. Are you a bad ass . All those moves. If you touched me on the shoulder i would cry like a baby. I would literally cry. The trajectory of growth is rising. That should reflect in more income and more income means the system is growing. The truth is the economy grows fast, the longrun budget will be fine. If the economy does not grow fast, we can do one measure or another and were still going to have rapid debt accumulation. We need to redefine work because work is not necessarily has to take place now with technology in an office, especially in western countries. We need to leverage technology, leverage social media. People can work at home and add value. The way the world will emerge is in 2020, 75 Million People will be buying Health Care Insurance as a consumer from exchanges. Okay. And some portion of that will be public exchanges, probably 20 million, 25 million. I think the effort for Corporate Tax reform will help make our companies far more globally competitive. Theyre making the argument, have made the argument successfully to the administration and now theyve got to help make it with us on the hill. The world looks improved from last year. U. S. Looks like its got forward momentum. The emerging markets have probably hit bottom. And europe ought to be creeping up a little from a low base. Did i get it all in . You got it all in. That was great. Thank you. And she did get it all in. We got it all in. Were going to wrap it up, topping it off with eric schmidt of goog, executive chairman right after the break when we come back from davos, switzerland, in just a moment. Why wouldnt you make that call . See, the only thing i can think of is that you cant get any. Bars. Ah, thats better. Its a beautiful view. I wonder if i can see mt. Rushmore from here. Geico. Fifteen minutes could save you fifteen percent or more on car insurance. [ male announcer ] a car that is able to see, to calculate, to think and can respond to what it encounters. Even if that means completely stopping itself. Its the stuff of science fiction. Minus the fiction. The 2014 eclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Over the pizza place on Chestnut Street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i95. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment welcome back, everybody. Our next guest recently revealed that his biggest mistake was not anticipating the rise of the social networking phenomenon. Joining us right now is eric schmidt, executive chairman of google. Eric, thank you so much for being here. Thanks for having me. A quick question on that last point. That revelation struck me. What would you have done differently if you had seen that rising . During that time we did android and chrome and amazing search and great monetization. We did it well. You cant get it all right. The new stuff is doing very well. Off camera were we talking been talking with lloyd we had blankfein from Goldman Sachs. He was looking at whats happening in terms of things improving, things getting better. Over the last couple of years, davos has been incredibly european centric. Is greece going to leave, how are we going to deal with the banking . Lets get rid of the countries we dont like, that kind of stuff. Its all over now. Europe is now stable. Theres a bit of optimism among our historically negative european friends. Thats a good deal, right . As a result everyone is now talking about syria. Yes. We spent some time talking about syria too, with george soros. A big issue. The interesting thing, that means that europe, the systems are working, the funds are coming out, the investments are happening. My question is how is the growth going to occur in europe . You have declining population. You dont have a bias for innovation. You dont have the entrepreneurship, you dont have the venture industry you have in the United States. Its important they build that. Theyre going to need those entrepreneurs and fastgrowing companies. What do they need to do . There are structural impediments to that here. Theres a long list, allowing the compensation schemes that america pioneered, not criminalizing failure. Thats a problem, you go to jail if your company fails. Its also cultural. If you want to grow youve got to create gazelles, these fastgrowing companies. People have studied this. The Big Companies and little companies dont grow. The fastgrowing new companies of any kind people want to export to us the euro centric ideas. The u. S. Is doing really well in this department. I didnt like it. I was ready to at how were doing things over here and you just said it very clearly. They need the entrepreneurial spirit. The problem in the european structure because theres no Single Person in charge of europe, by their design, 27 countries, all that kind of stuff, its very slow moving and when its very slow moving it favors the incumbents. If youre a challenger its hard to get permission to enter a new market. Its hard to get the space to innovate. They have to fix it. Look around. Look around. When you go back, youre going to love it and see it and feel it. One of the topics youve talked a lot about here in davos is the nsa and edward snowden. First, identify dont think we actually had an opportunity to talk to you about edward snowden. Do you look at him as a hero or a villain in all of this . When i look at what happened here, the great thing that happened here is a debate has been started and you have to give him credit for that. You cant have the security agencies in a democracy doing stuff that nobody is really watching. And the debate is a good one. We can decide whether you want the government doing that kind of stuff or not, but if you dont know about it, right, how can you have the debate did you know about it . We did not. Its important to know when the british arm actually went and broke the connections between google servers we were upset about it and weve changed that so they cant do it anymore. When you think about the opportunity for additional business in other countries, is this going to have a real Economic Impact . Of course, it is. Every single one of these European Companies that is saying you cannot trust these American Companies because the nsa is in bed with in them which in googles case is absolutely fault, the estimates are its costing hundreds of millions of dollars of american revenue because of this. It was a bad policy. The head of Human Rights Watch is going around davos and saying what it is doing is a violation of human rights, simply taking all this information. I look at it and say this is what google and facebook does every day. Its very, very different when you are talking about countries. Countries are different from companies. They are monopolies and have use of force. They can keep secrets and enforce them, companies cant do that. When the president said all this information should not be stored by the government but should be stored by somebody else. Who should it be stored by . What should happen . Im a member of the group having this conversation and theres not a consensus yet on what that should be. You can imagine various people have proposed having a third party of some kind or having it held in the places it originates. All the systems have various problems. If youre going to collect that kind of data, you need to make sure that it does not get abused. And remember, that large Data Collections can now be leaked by new people. Do you think the government should be collecting that data . As a general matter the government should only collect data that it really needs, and if it is going to collect that data, it should keep it reasonably segregated. Theres a tendency for the data be misused for other reasons and we worry about that. Get me excited about five years, ten years. And i love social media. But wouldnt it be great to use all this, the machine knowledge, the machine power, wouldnt it be good to use for health carkc for biotechnology . Its coming. In the foreseeable future, five years, its an eternity for us, we have breakthroughs in artificial intell jenls. Finally. Weve been working on it for decades and the reason it occurred the algorithms were always there but the computers were fast enough that we needed all this competition. Do you believe there will come a time where machine knowledge or Computing Power is so great in terms of total Human Knowledge that there is a singularity that we dont know what computers will actually do at that point, that we cant predict it. Its important that the computers remain under the control of a human with a finger. Ive been telling you that. Ultimately the humans have a button right in front of them. Hes a big kurzweil fan. It seems like they could get around us. Its very important to have an off button and you can always unplug the power, trust me. Ive seen it done. Let me answer the question seriously. Whats really going to happen that we have all these great things about ai, the most important thing is a set of assistants are going to emerge that you will use to make your life more productive. Your audience members will have tools and suggest things, have you thought about this, have they thought about that. They will make humans smarter and thats the great revolution for ai in front of us. What about the robots, though . Robots are coming as well but not the ones you see in the movies but more automative things that make repetitive human tasks not needed. Today the new cars are made by robotic assemblies that do a fine job and theres a human driving the rob bought and thats important. Ive made the argument and youve made the similar argument and joe disagrees and i dont know where becky is on this issue, were coming to the second machine age, a book that just came out, where were going to have so much innovation that its actually going to really hurt employment in a meaningful way. Theres a lot of evidence he would say thats a malthusian argument. You have two problems going on the rise of unequality because of the concentration of wealth and the globalization and its well established and you have a race for automation and jobs. Its important that the humans, win, by the way, its important that the jobs win. And i worry that the systems of humanity, the educational systems and the Government Systems are not changing fast enough to provide the employment opportunities, the Educational Opportunities for the people to run these. There are job shortages in america for people of these skills to run the machines. Do big businesses take up some of that responsibility . We had a conversation earlier about that. I think we do to some degree. If you look at the german model which has served them well in the past generation of technology, corporations had a responsibility for training, literally starting from high school, right. And it was seen as a social good, so youll probably see a lot more of that. But are problems in the developed world in terms of jobs and lifestyle, they are the envy of the rest of the world that isnt here yet, okay . So to say that, you know, that america, the way americans havent progressed with our middleclass, if we if we can use technology and innovation and efficiency and increases in productivity to bring the rest of the world, the other threequarters of the world up to our standard of living, why doesnt that the great celebration of davos and all around the world should be the 2 billion people have come from abject poverty to essentially lower middleclass. Those people now have reasonably safe water. They have some level of access to education and they have reasonable personal security especially in the case of women. This is a huge achievement, right . Its largely due to globalization. Another billion are going to enter in the next five to ten years and every one of them will be on a mobile phone. Think about the connectivity. Think about what that mobile phone means for them, shocking what it can do for them. I think back on the disruption of the initial Industrial Age to the wouk irki class. That seems much more disruptive, this seems more positive outcomes for what we can do than the negative. Its important to understand that the disruption is in the normal course of affairs. What happens is the rate of innovation disrupts existing political systems and companies and the disruption should be welcomed because its how progress occurs. All all Economic Growth in the globe has occurred salt of basic technological progress. Right. In health, in information, in connectivity and communication. So we should not worry that were going to run out maybe we should be aware of it. Its important that we talk about it. Right. So everybody expects it. But the fact of the matter is the economic engine of america depends on this innovation. That this innovation is core to the way America Works and americas leadership is because we have the top 18 of the top universities in the world, tom 20, 18 are in america. The american model of innovation is the envy of everyone here. Right . We need to emphasize that. We need to put more emphasis on it and basically support it in every way we can. Meaning what, whats one step that the administration might be able to do to support it . In general more support for research, more support for innovation zones, places where people can try new things. What happens is the regulators this is true in every country. They take the incumbents and they make things exactly predictable for the incumbents and the challenger comes in and says where am i going to work and how am i going to experiment . Look at uber in france, they dont want to annoy the taxi drivers. You can imagine the french citizens saying 15 minutes, 14 minutes, 13 minutes. Its crazy. Its time for Net Neutrality to go away, wasnt it . Net neutrality is a good concept, but the correct answer is competition. As long as the Communications Industry is highly competitive were going to be final. And the kids in the garage could start up a company and compete if there was not Net Neutrality . No, the problem Net Neutrality is not the issue in that issue. The problem with the way we do spectrum, spectrum is essentially owned by three or four companies we need to change it to allow new entrants to do sharing and we can solve all the bandwidth problems really quickly. Real quick, cnbc is turning 25 this year. Congratulations. We are picking the top 25 Business Leaders that have changed the world of business and economy over the fast 25 years. Steve jobs. Yeah, lets get your picks. Richard branson said it would be larry page and sergei bridy bri. Who are the people that transformed the world that you see it . I start with tim bernerslee who is the inventor of the web and i start with bob khan or jointly the inventors of the internet. Had those three people independently done what they did, we wouldnt have the connectivity we would not have had the Communications Revolution and the knowledge revolution we have today. Okay, eric, thank you for being here. Come and see us again. Come and see us again. When its warmer. Its been a great week but that wraps it up for us from davos this morning. That does it for us. Well see you back in the United States on monday. Right now its time for squawk on the street. Kudos to squawk box for a great week from davos, guys, nice work. Nice friday morning, welcome to squawk on the street. Were at the new york Stock Exchange. If the market did not have your attention before, it does now, an emerging market selloff, currency interventions the worst day for the dow in three months and futures do suggest some more weakness at the top. The tenyear yield is poised for its biggest onemonth decline since may of 2012, down some 30 basis points