Transcripts For CNBC Squawk Box 20140507

190 plus countries where buyers are located. There is still no word on what the ticker will be or which exchange is getting the listing. The underwriters include swecre suisse, jpmorgan, deutsche bank, goldman sachs, Morgan Stanley and citigroup. As you heard at the top of the show, the Major Driving force behind the earnings for disney was the blockbuster hit frozen. Studio income quadrupled to 74 million. Bob iger says the company is increasing the presence of the characters at their theme park. Iger by the way will be appearing on squawk on the street later on this morning, 10 00 eastern time. Disney shares marching higher once again. Well speak with an analyst about those results and if disney is a good buy for your money in just a few moments. Are you a frozen family . Huge. Elsa, hans, kristoff. He likes the snowman. Olof. We should get a video of olof. We were at the pa, in february. It is amazing. If you ever went to epcot, the norway thing, they have all these characters there. Its been so popular that the theme parks themselves are paying for it, keeping the characters around. When i go to orlando i prefer to go to universal. Thats where im headed in june. Youll love harry potter. I have to say, though, its the rides at universal are spectacular. They have the new harry potter stuff coming out in june. I hadnt been on a roller coaster in 21 years when i went to universal last year. True story. I cant believe the technology improvements. I had a blast. I was at one point i yelled out yay, apparently, actually said yay whenever i do something, my kid goes, daddy, yay. Thanks. Thats nice. We have a couple stocks to watch this morning. Maybe some people will say yay about some things. Whole foods taking a hit, Second Quarter earnings per share of 38 cents on 3. 32 billion in revenue. Both items missing expectations that company also cut its 2014 samestore earnings forecast. I want you to check out shares of gruppou groupon. They tally a First Quarter earnings per share loss of 1 cent. How could you lose 1 cent on 7 757. 6 million in revenue . Also, video gamemaker Activision Blizzard and Electronic Arts both moving higher. Activision reported profits of 19 cents on 772 million in revenue. Both numbers blowing away estimates while Electronic Arts reports a profit of 48 cents on revenue of 914 million, which also topped expectations. Is that a large part of the new xboxes and the new play stations that have come out . Is that whats driving this video game activity . There was a lot of pentup demand, people were holding back on buying games. Before the new consoles came out. Are you a video game guy . Im not, not anymore. Im wondering if the games for the consoles are 49 bucks, 59 bucks. You can get ea apps for the ipad or android for 10 bucks. You wonder if the volume, throwaway games, play them for two months. Activision, Electronic Arts, they make money on the ipad. Thats not the big part of it. I did read it could be a function of the legalization of pot in colorado that are you serious . Somebody said that. It was kind of funny. Youre stretching that. Those benefit the slower moving games, i would imagine, those real highspeed, sort of the driving games not so much. Hey, dude, were going 5 miles an hour, slow down. Lets take a look at the broader markets this morning. Yesterday we did see some weakness in the markets. People have been talking about how tuesday, the last seven tuesdays in a row it had been a winning streak for the s p 500. That was not the case yesterday. The dow down by 129 points. Well get a double dose of fed speak this week. Fed chair janet yellen will be testifying today and tomorrow. Before the Senate Budget committee, shell be doing that. Ahead of all that, after the declines yesterday, things are indicated a little bit higher for the dow and the s p. Dow futures up by 20 points above fair value, s p up by 1. 5. Nasdaq indicated lower again, down by just over 4 points. Take a look at the u. S. Treasury. This is a big deal. The tenyear is yielding below 2. 6 once again, right now, its at 2. 582 , this is about the lowest level weve seen in three months. A lot of concerns about what is doing this, why the tenyear is at those levels at this point. That has been driving just about every other market over the last couple of sessions. Youll see right now the dollar indicated slightly higher against the euro, which is trading at 139. 21. Yesterday the dollar index ended at sessions the session at the lowest level since october of 2012. Take a look at oil prices this morning. Youll see theyre slightly higher. Wti up by 92 cents to just over 100 a barrel. At 100. 42. Gold prices are indicated theyre trading up by 2. 60. 1,311. 10 an ounce. Time now. Ross westgate standing by in london. How are things looking today . You can see decliners outpacing advancers on the Dow Jones Stock 600. The ftse was down 23 points about a third of 1 . The xetra dax, the cac current in france and germany, fairly flat. The ftse mib is currently down nearly a percent. Fiat down heavily. Yesterday, Sergio Marchionne laid out his fiveyear plan, concentrating on alpfa romeo an fiat. The firms ceo, patrick kron saying we are open to some kind of deal with ge. But hes not that interested in the firms rail signaling activity, speaking exclusively to cnbc, he also said that ges other freight business was too niche and u. S. Focus to bring any synergies. Kron said ge hasnt brought in the last few days anything new to the table. I have the offer which is on the table. The board is studying it. It has established a committee of independent directors. Again, if there are new elements in these proposals, should it be an alternative offer or precisions or improvements of existing ones . The board will consider. Its a short while ago, siemens up 1. 6 . The ceo saying they may not be interested in making an offer for some of alstoms Energy Business either. Now, weve been hearing from bank stocks as well today. Hsbc, saw its First Quarter profit drop by 20 . Revenue down at its Investment Banking unit, the stock off about a percent this morning. Said it continued to experience muted customer activity in the month of april. But it has cut operating costs by around 2 in the quarter. Its going to continue to close businesses. And socgen down 1. 45 today. The french bank, its booked a more than 500 Million Dollar write. The ukraine situation having an impact on socgens earnings. Ross westgate, thank you. Disney reporting after the bell, easily beating Second Quarter earnings expectations. Johning us right now is david bank, managing director at Rbc Capital Markets and david, weve been talking about frozen this morning. Obviously those numbers were a blowout. What can you tell us about the rest of the quarter . I think the quarter itself, the studio was the blow away. Results at espn were solid. Results at the parks were solid. Results were solid across the board. What really stood out, you know, what we say to investors is, what you want to avoid in media is content risk. Right . Right. You dont want to take the risk, buy something, they have to do good con ten. What was staggering actually less and less as time goes on. These businesses are cable companies. Theyre cable channel companies, driven by affiliate fees. The studio is the one part of the content risk. What stood out was just the pipeline for the next several years. You know, youve got star wars coming. Youve got the next avengers, age of altron, captain america all of a sudden is a franchise. The quarter itself was outstanding in almost every respect. It was the outlook for that pipeline that was crazy good. Two things that ive read in just sort of the synopsis of their quarter that concerns investors. Number one, valuation, stocks 22. 5 times trailing earnings. Its averaged over ten years. Also, you mentioned espn. Good results but theyll probably have to pay up continually for sports rights. Can you address those concerns . The first is on paying up for the sports rights, again, what are you worried about . Youd be worried about a mismatch between what you have to pay and what youre going to earn. This is a business with a tremendous amount of visibility where youve locked in those affiliate fees. You know where youre going to get paid for the next five to ten years. You know what youre going to spend . And you know what youre going to spend. We have decent visibility into the operating leverage and the business that as the mlb steps up, as the nfl steps up, so do the affiliate fees. The question is more on the advertising side to a lesser extent but theres good visibility. I think on the valuation question, given its historical valuation its high right now. I will say that right now were probably at the point in the capex cycle for this company where we tend to look at earnings but on a Free Cash Flow basis, their Free Cash Flow growth should accelerate because theyre just sat the point where theyre starting to spend less money on a lot of these projects that are starting to pay off. I think your point is a good one. The valuation is whats your target for the stock . Were 90 bucks, 91 bucks, i think this morning. This is so much excitement about frozen. Its going to broadway. Nine of the ten best selling items at the Disney Stores last quarter related to this princess musical. Its still the bestselling album in the u. S. This is all great news but were talking about in terms of chasing content. Does that concern you at all . It would if we were chasing frozen. I think youd be dead on on a bare thesis. Star wars hasnt even i mean, star wars. Thats just in the back pocket, star wars. That could be one of the biggest pieces of the disney franchise. Right. So i think i think the multiple being stretched, right, is probably the biggest concern but the reality is, diversified global general Portfolio Managers will pay that multiple for the certainty to play in this space. You think its a gain of 12 over the next 12 months . Thats right. When you think about this frozen franchise, do you think the numbers could double and triple over the next several years . Because most of these kids, yesterday, im with five 3 1 2yearolds and everybody turns themselves into elsa, kristoff and hans. Everywhere be its an all day, every day thing. Any one movie wouldnt get me that excited, even if it were a fantastic franchise. The reality is, frozen skews more female. On the marvel side they skew more male. I look at the earnings power of the studio overall. Recent bottom, this was a studio that could earn 600 million in ebit, maybe four years ago. That number could be 1. 2 billion, a swing of double the earnings power because of all these different pieces of the portfolio. Frozen is an incredible franchise that came out of nowhere. Whats most interesting to me is the Disney Studio hadnt been lighting it up. It was a pixar movie, a marvel movie. Now, you know, wow, theyre making good movies at disney again. I think that frozen goes a long way to saying the disney label itself is pretty powerful. I think there could be a frozen 2. Kristoff never really gets married at the end to spoiler. To elsa, right . That is true. I think theres an opportunity. A week and a half ago i interviewed bob iger in l. A. Did you talk about that potential . Hes not going to say, you know what, brian, you asked me so im not going to tell you. He talked about the viability of the franchise. He said its one of the top franchises. Not elsa. I think its anna. I have not seen the movie. You can spin something out of the frozen universe in all seriousness. There are ways to they highlighted the maker studios acquisition. Which not really making any money right now. That could be a billion dollar acquisition in an entirely new space for disney. You know what we never talk about, ever, is the online presence. Every other company, what are they doing online . I asked iger about that. He hadnt seen the article. It apparently came out an hour before my producer yelled in my ear, buzz feed, 1 billion. We didnt get anywhere on that. Do you think that was true and if was, do we care . They bought maker. It was a billion dollar acquisition for a Youtube Channel universe. And when i asked on the call last night, you do everything so well. Youre arguably the best content creator on the planet, what do you need to buy anything for . They said what this there are two compliments, the first is shortform video. The world is moving toward short form on tablets. Most interesting to me was the data and the algorithms. Disney, theyre thinking about the algorithms and viewership on youtube. That was forwardthinking of management. Very quickly, theyre wrapping us up on this, is this your favorite stock in the area or is there another one you like better . Truthfully, i think we like another one better. Cbs, our top bet. Thank you, david. They should merge, a new show how i met my maker. You should be the head of a studio. Yeah, right. Thank you. Target, the interim ceo says hes not interested in taking the top job. That story coming up in the executive edge. I am the interim ceo and im not doing anything more. Thats a tease. Tesla will be another stock to watch. That company will roll out Quarterly Results after the bell. Well want to see what mr. Musk says about his numbers. Squawk box back in just a moment. Before we couldnt really allow the consumer to customize their preferred chocolate. We needed the scalable Cloud Solution allowing them to see all 800 products and select what they are looking for. Now there is endless opportunity to indulge. Topping todays executive edge, target interim ceo John Mulligan says he is not interested in becoming the companys permanent chief executive. He made those comments in an interview with reuters the day after the board announced the departure of gregg steinhafel. Mulligan also said that investigators have determined that the data theft was limited to what Company Officials had already disclosed. Some 40 million payment card numbers and other data from about 70 million customers. The company had previously warned the probe might reveal the breach was more extensive than understood at the time. What do you think is going on here . He knows hes not the guy and hes just saying im not the guy. That would be my guess. The board has been fairly clear, youre our cfo, we need you to step in and take this over for a time but they have actively hired a head hunting consulting team. Now why do you think they wouldnt have tried to keep him around longer while they were trying to find another ceo . That im not sure about. Normally if you know theres going to be a move, you come up with a plan rather than come up with an interim situation. Remember the ceo of jcpenney, who was supposed to be the interim ceo michael hunt. He was supposed to be interim, he turned into the permane permanent. This is a different time for target to be looking outside and trying to find somebody to bring in. Right. The company has a lot on its hands. The data breach pushed customer traffic down by 5. 5 last year. The big deal is the move into canada. They overpaid for it. Its been a tricky transition. Over a billion dollars. If youre a shareholder, should you be furious with the board because of the prices at the company, the larger issue, i think a board has one responsibility in life, actually have a successor ready to go. If you dont have a successor, you kind of failed at your job. Youve been doing this a long time. Does something smell funny here . You dont just can a ceo like that without a full successorship and plan. This is a multibillion dollar corporation. They probably said, listen, man, you screwed up with the data breach, fix it. Six months later all of a sudden without warning, hes out. Youre speculating that theres Something Else ill say this. Whenever a ceo is blamed for a companys problems and that ceo is canned or steps down, the stock tends to react positively, right . Okay. Hes gone or shes gone. But the stock tonights to drop. Because there wasnt a backup plan. Its really weird to see somebody stepping aside when you dont have a plan for what youre doing next. I tell you, this guy mulligan, he needs to take one. You have to change your comment. No Third Base Coach is like, actually i dont want to manage. Im just happy waving runners home from the corner hoop here. If somebody says do you want the top job . He says, yes, i do. If you dont get it, you dont get it. If its not on offer, you cant walk around saying you never want it. I think beckys right, that he was told that. You also have to put your hand up, by the way, any other retailers looking for a ceo . Ill take the other side of that argument. You could scare somebody off. If i was a ceo somewhere else or thought id be hired for this job and i knew there was an interim guy desperate for the job and he had an inside track because he knew all these people and i didnt you potentially want him staying around. That would throw me for a loop. Im not sure i would put my hand up so quick. Weve all been there. You have the best looking girl in the school. Somebody says why dont you ask her out. You know shes going to say no. You dont say i dont want to go out with her because youre too embarrassed to ask her and get rejected. I guess thats what youre saying. Im not sure target is the best looking girl at the school. I think being the ceo of any corporation that size wouldnt be too bad of a gig. Ill run a company into the ground for a lot less than that. What i do think its odd that theyll have steinhafel step down without having a backup plan in place. It doesnt quite pass the full smell test. This is a situation where this is different for target. Theyve not looked outside ever before. You have the music on this show when they want you to shut up. You need the big hook like they used to have in vaudeville. When we come back, well put the markets front and center. Getting to know alibaba. If you havent heard about the chinese ecommerce giant yet you will soon. A live report from beijing in the next half hour. And tapping into the cloud. Ceo of Endurance International on the crusade to help small and mediumsized businesses succeed. Right now, though, as we head to a break, take a look at yesterdays winners and losers. Oh, boy, im rich im wealthy. Im independent. Im socially secure. Im rich true businessgrade internet comes with secure wifi for your business. It also comes with public wifi for your customers. Not so with internet from the phone company. I would email the phone company to inquire as to why they have shortchanged these customers. But that would require wifi. Switch to comcast Business Internet and get two Wifi Networks included. Comcast business built for business. When folks think about wthey think salmon and energy. But the energy bp produces up here creates Something Else as well jobs all over america. Engineering and innovation jobs. Advanced Safety Systems technology. Shipping and manufacturing. Across the united states, bp supports more than a quarter million jobs. When we set up operation in one part of the country, people in other parts go to work. Thats not a coincidence. Its one more part of our commitment to america. Honestly, the offseason isnt ive got a lot to do. Thats why i got my surface. Its great for watching game film and drawing up plays. Its got onenote, so i can stay on top of my todo list, which has been absolutely absurd since the big game. With skype, its just really easy to stay in touch with the kids i work with. Alright, russell you are good to go alright, fellas. Alright, russ. Back to work on car insurance. Everybody knows that. Well, did you know that game show hosts should only host game shows . Samantha, do you take kevin as your lawfully wedded husband. Or would you rather have a new caaaaaar say hello to the seasons hottest convertible. Ohhh. And say goodbye to samantha. [ male announcer ] geico. 15 minutes could save you 15 or more. Good morning. Welcome back to squawk box, right here on cnbc. Im Andrew Ross Sorkin along with becky quick this morning. Brian sullivan is here. Joe has the day off. But he will be back tomorrow. We have headlines this morning. The big one being that alibaba has filed for what could be the Largest Technology ipo in history. The chinese ecommerce site could potentially raise more than 16 billion which would top the amount that facebook raised back in 2012. Yahoo will be getting a huge chunk of the proceeds. It currently owns a 22. 6 stake in alibaba. We have much more on that filing in just a couple minutes. Its going to be the story, i think, for the next, i dont know, you may get sick of the story by the time its over. Catching up with some of this mornings earnings report, humana reported 2. 35 per share, beating estimates of 1. 94. It raised its forecast for membership growth in its medicare and individual commercial insurance lines. Also, a multibillion Dollar Energy industry deal announced just this morning as well. Canadian natural gas producer encana is buying assets in the the eagle shale basin. This may be his last appearance on cnbc after his esteemed career. We loved having you on for so many years. Fred, good to see you. I hope this is not the last time but if it is, youve had a hell of a career. Weve been a squawk box faithful watcher and participate and the for a long time. From the west coast. From the west coast. I was recently in china. I had a lot of comments from a lot of orientals that were watching you at 9 00 at night, including my wife and myself. Knowing you were coming on, fred, weve interviewed over the years as well. We could treat you well, we could pound you into the ground. I decided to go with the previous one. You are going out on an optimistic tone, youre still bullish on stocks, think they could run higher for the next couple of years. Why . We have the economy at this point, picking up speed and momentum. The fed is our friend. I go back an say we have eight huge economic drivers that dont get a lot of attention. Lets just start with water, food, cybertechnology, energy technology. Massive things going on in the midwest that has really lifted the country at this point and spilling out into a lot of jobs. We have Health Care Technologies that are huge, infrastructure. Our dna in this country is what were seeing coming through on the ipos and the mergers. Little companies will be big companies. I think we can get excited about that. That has a long way to go if we have the right climate. Particularly a favorable regulatory climate. So jeremy, do you share that optimistic view . Because theres so many people out there, both pundits, bloggers, a few high profile ones. You probably know who they are, who have doubted this market for so many years and theyve been wrong. One correction. Its not affinity advisers. Theres been a change. I made up affinity. Im going to start changing my company names. My apologies. No problem. Theyve been trying to Parallel Park in tight space of expectations. Geopolitical risk, there could be a mistake made by the fed. We have large global macro risks overhanging the market. It is a yin and yang right now. Im not sure it drives stocks forward, absent much better cyclical data. So many very smart people have been so wrong about calling for the fedled implosion. Well, i think that is a parlor game, right . I think it continues for a very long time. But when you do have a change in leadership at the fed, when you do have a rates environment that is something completely out of a science experiment, we could see some volatility Going Forward and certainly just after chair yellens last snafu which was the sixmonth comment, we have seen the front end of the rates curve, certainly hiccup, if not burp. I think that continues to be a risk. Fred, do you worry about that . There is some time to go before we get through this, the market could get thrown off guard. What do you think . I think there are a few storm clouds on the horizon, fed action and expectations are one of them. Were keeping our eye on whats going on in eastern europe. The russian incursion to crimea, whether theyre going to move into odessa, into those eastern cities in a more visible way is going to be on the minds of investors. Every market has its storm clouds, at the same time, its longterm fundamentals that drive expectations and at this point in time, as we look at a whole variety of indicators, yes, there are two or three that are bothering us. Merger activity skyrocketed at this point. That says we have a market thats bubbling up with expectations. If you have a bad ipo somewhere along the way or a merger thats a big surprise, that maybe doesnt work out quite so well, that can dampen the enthusiasm. It really is the fed that drives things. Well be watching to see what dr. Yellen has to say in her testimony today and tomorrow to congress. All right, jeremy, ill end on a negative note, per your note at blackheath companies, try to get the name right, historical tenyear average on earnings, Companies Beat on the revenue side. Its hard to mess with the top line unless youre stuffing the channel. Weve seen 52 of Companies Beat on revenue, 6 less than the tenyear average. Worrisome . It is worrisome. This earnings season is all about guidance Going Forward. I think were seeing that weaker than wed like. Im not sure that translates into a weaker stock market over the course of the year because, remember, the one thing the consensus is sure on is well have better u. S. Growth in h2. We like it. Jeremy, thank you. Fred, thank you. We hope to see you again. Congratulations on what has been a spectacular career. Thank you very much. Bring us some voodoo doughnuts from portland. Well think about that. The cough syrup. When we come back, alibaba 101. The chinese ecommerce site filing to go public on wall street. Whats made alibaba so successful . We head to beijing for some answers. Squawk box will be right back. Were moving our company to new york state. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Welcome back to squawk box, everybody. Weve been watching the u. S. Equity futures this morning. After a down day yesterday for the mark hes youll see that at least for the s p 500 and the dow, the futures are indicated slightly higher. Dow futures up by 21 points above fair value. Nasdaq down by close to 4 points. Chinese ecommerce giant alibaba filing for what could be one of the largest ipos in history. Eunice yoon joins from us beijing with more on this big story. Eunice, hello, great to see you. Hey, its great to see you, too. Yes, its a huge, huge company. Alibaba is like amazon, ebay, paypal, groupon all wrapped into one. It has massive reach, 248 billion, its like a quarter trillion dollars worth of goods that moves across its site. One of sites thats most popular is a shopping site called taobao. Joe lee is a selfdescribed addict of chinas Online Shopping site taobao. Reporter joe lee is a selfdescribed addict of chinas Online Shopping site tao bow. Hes purchasing furniture, his guitar and today, food for his cats. I can use it to access shopping anytime i want from laptop mobile. Reporter taobao is a National Obsession in china. In a country where consumers still mainly save, when they do shop, many logon and browse here. On taobao, which means search for treasures, you can buy an outfit, try it on and hand it right back to the delivery man to have it returned. You can also buy something worth pennies and have it delivered right to your door. Millions of these packages are shipped out across the country. Its nothing impossible on taobao. So its easy to find some stuff, pretty hard to get from your local supermarket or local shoppers. Reporter today lees cat food is coming from a warehouse across town in beijing. This retailer, one of taobaos 7 million used to have a proper pet food store but switched to sales online. We have more customers with our online shop. Theyre all over china, not just limited to beijing, he says. Its good for business. Lee got his cat food in less than a day. After paying through alipay, alibabas version of ebays paypal. The Payment System is one of chinas most trusted, though buyers and sellers say they hope alibaba builds faith in its sites even further by cracking down on the sale of fakes. Even so, lee is using taobao for all his needs, well, almost. Never buy on taobao, relationship. And alibaba is hugely profitable. The company, unlike amazon, doesnt have to worry about stocking inventory. It makes most of its money off of transactions. It has very little expenses. But its also a secretive company. Thats the problem investors have had, people are wary about it because the structure hasnt allowed them to feel more comfortable that theyre getting enough information flow from the managers. Eunice, it seems like that would change with an ipo in the u. S. There would be disclosure theyd have to step up to, right . Well, yes, they would but one of the things that was interesting about this whole ipo, a lot of people thought alibaba was going to list in hong kong but they started to face some regulatory issues there where the regulators wouldnt allow them to keep the Partnership Structure that they were hoping to have, where you would see the founders of the company retain full control. Now theyre going to new york. Any have this f1 listing and people are saying now maybe theyll be able to retain the structure that they want. That raises a lot of questions for investors. Will investors and shareholders get the innunes thfluence they want with this company as they see the company grow and grow. Eunice, by the way, do you use any of these sites yourself . Yes. All of our everybody in this office uses taobao. In fact, when i was telling that story about the dresses, the reason why i know that, one of the producers had i walked in and i saw a producer trying on multiple dresses. I said what are you doing . She said im just trying on all these dresses and then afterwards if i dont like them, im going to return them on taobao. Its amazing the kind of service you get for taobao. You would be able to do so many things here with the site that you wouldnt be able to do in the united states. All right. Eunice, thank you very much. Eunice yoon in beijing. Well be talking with her again soon. Great to see you. Theres a lot of debate about alibaba. We should have that debate on the set in the next hour. In the meantime, forbes calls him one of the most powerful ceos under 40 years old. Hes from Endurance International. He sees a vast market of Small Businesses in need of online help. Well talk to him when we return. I always say be the man with the plan but with less energy, moodiness, and a low sex drive, i had to do something. I saw my doctor. A blood test showed it was low testosterone, not age. We talked about axiron the only underarm low t treatment that can restore t levels to normal in about two weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer, worsening prostate symptoms, decreased sperm count, ankle, feet or body swelling, enlarged or painful breasts, problems breathing while sleeping and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about axiron. Tigers, both of you. Tigers . Dont be modest. I see how youve been investing. Setting long term goals. Diversifying. Dip you got our attention. We did . Of course. Youre type e well, i have been researching retirement strategies. Well thats what type e s do. Welcome home. Taking control of your retirement . E trade gives you the tools and resources to get it right. Are you type e . Welcome back to squawk box. Worldwide spending on cloudbase services could see 100 billion by 2017. Theyre growing five times the rate of the industry overall. Your next guest is looking to harness some of that growth by offering it to small and midsize businesses. Hes the founder and ceo of Endurance International. We found out during the commercial break you are from your own similar hometown in virginia. Winchester, virginia, which is just shocking because nobody is from is from winchester, virginia except for us, patsy kline and the company treks. The only publicly traded company there. Lets talk about in terms of what you are doing for the viewers that dont foe what you particularly, we talk about the cloud, but there is sort of many flavors of whats going on, what exactly is it that you do . What we provide, first of all, medium size businesses a solution set that lets them get online, websites, email, domanes, Marketing Tools to get started on the web once they start engaging with us over 250i8, they buy more products, service itself, more solutions to help them grow their businesses on. So probably go daddy would be our biggest competitor. Theyre a private company and web. Com is a Public Company good out there as well. Is it your own cloud or are you living off amazons . We built this. I started this 17 years ago, there was no real cloud back then i guess. So we built it from the ground up. We leveraged external technologies, for the most part, its a proprietary bill. To theic tent you are in the business sector, where do you see the right now . We see a lot of adoption and move from internal services to outsource i. T. Service itself and a lot more Small Businesses say, well, if i have to go higher than and it it person, keep a staff inhouse, its not worth it. There is so much stuff just off the shelf. We see a lot moving towards the cloud. A lot of them looking out as Technology Solutions saying this is ubiquetous and take the headache away. What do you think of Security Issues as well . At the end of the day, this is not the definition of what the cloud has morphed into is more recent. But people have been using outsourced i. T. Services and Contact Services for a long period of time. If its well architected, it will put it together the right way, i dont think they have to worry about that. We dont get that quite as much in the u. S. European customers in asia, thats a lot of questions people ask, how do you think about security . In the u. S. Nobody cares . They care about it. Theyre more used to it. Theyre accustomed its okay to go get some tech following and Data Services from a third party and as long as its a reputable company. Does your stuff ever get hacked . We have not to date. Have you been attacked . Every day. Every day you are attacked . Every day. How many people do you have . Probably at this point about 25, 30, 35 people across enterprise, but, you know, denial of service attacks trying to get into, get credit card number, people kind of get whatever data youve got out there. It happens pretty frequently where people are attempting that. See if i was a Security Systems guy, we keep getting attacked, boss, you need to keep me on another couple years. Is that devious . Yes. Move on. So shocked from winchester, great to see a local guy made good. This is fantastic. One thing about cloud is pricing. What we heard is its becoming not i im not going to say come commoditized. Margins are coming down. The race to zero theyre calling it now is over time. Theyre offering free like lots of free storage online. I think typical revenue is about 14 bucks a month. 14. 18. At the end of the day, some portions of the solutions stuff is commoditized. The price of the server goes down, people charge less and less to customers. But the supports a peck i think we find is a huge element for Small Businesses where they say, hey, look, i dont know what a lot of this stuff s. Its kind of ease to use. Do they call you up and say i have problems . We have 24 7, 2500 agents across the u. S. Picking up the phone. We fend about a million calls a month. If im a Small Business and i use google apps for example to run my business, google business. They charge 4 in the month . They start a little in subscription. There are Pieces Available for free. Then if you want to pick up the phone and call goggle. Its a hard proposition. If you want to call somebody in an ad advisor capacity, we probably spend tens of millions of dollars for google. It took us a long time to find a rep that would work with us. Your Small Business spending 4 bucks. Thats what you offer differently is the 24 hour hours . Its ease of use of Solutions Much more catered towards marketing and helping businesses grow its a little different. Thank you for coming in. Fantastic. Great to see you. When we come back, we will talk deal making, the economy and a much different read on the nations employment picture. Plus, much more on the ali baba ipo filing that has wall street buzzing. And aol Quarterly Results. Tim armstrong will talk to us ab the quarterly numbers. Squawk box will be right back. What is this place . Where are we . This is where we bring together reliably fast internet and the best in entertainment. We call it the x1 entertainment operating system. It looks like the future we must have encountered a temporal vortex. Further analytics are necessary. Beam us up. Thats my phone. Hey. [ female announcer ] the x1 entertainment operating system. Only from xfinity. Tv and internet together like never before. Ali baba is going public. Filing the paper to bring the ipo to the marks. Should investors believe the hype . Aolent to turn in its Quarterly Report card. Tim armstrong will talk to us first on cnbc. Disneys profits are fueled by frozen. Let it go let it go i am one with the wind and sky medium tech analyst rich greenfield will give us his review. Second hour of squawk box begins right now. [ music playing ] whistle when you work. All right. We all whistle to work here. Good morning, everybody, welcome back to squawk box here on cn cnbc our guest host is jay jordan, chairman of the Jordan Company we have a lot to talk about with him. Its great to have you here today. Thank you, becky. Its good to be back. A quick look at the futures. The dow futures and s p futures are indicated slightly higher dow is up 30 points, s p close to three points. Nasdaq is down fractionally. The ten year note will be the key, though. Watch tack yield yesterday, bouncing around 2. 6 . That was driving all the markets, it is a lower yield. We do have the fed talking. That will give people things to talk about too. Disney shares could give the dow a boost by the animated hit frozen. Disney earned 1. 11 per share. Revenue beat analysts forecasts. Well have much more on disney later in the hour. That stock is up by about 1 . Shares of the top two video makers. Electronic arts Beat Estimates with their latest earnings, helped not by the success of their games, but by better tan expected sales of the videogame consols. Not such a bullish morning for whole foods. It posted second fiscal profit of 38 cents per share. Whole foods cutting its full year forecast. Whole foods is having a tougher time against grow competition. That stock is down by more than 16 this morning. The big story of the morning the day, of the next month or two. Chinese ecommerce giant Ali Baba Jones us now with more to help drill down some details. Andrew, i think it will be the biggest story. When they filed this prospectus last night, it showed how many corners the Chinese Commerce touches. It touches the sale or purchase of 238 billion if goods, processed 519 in payments. Amazon and pay pal combined. Ali baba cob takens, microblogging, money market funds. Ref few grew 62 at the end of 2013 and the 15yearold marketplace says the fair value of its shares could reach 50 this month. That would give the company a valuation of 116 billion at a premium for rapid growth rate. Analysts believe its worth 152 billion. Yahoo stands the gain the most, even though its the sec largest shareholder because it is contracttually required to telesell at least a third of its current stake, purchased a billion dollar stake in 2005 for 40 of the company. Its been selling that down slightly over the past couple years. But it could see a windfall of over 13 billion according to people im talking to. Details about the actual offering were scant. Dithey did 2409 list a ticker. It did name six underwriters with Credit Suisse and morroccan stanley an citigroup working on this deal. It has been a long time coming. It wont pay a big fee because of how competitive the process list selects them. It notably is the prestige of working on a deal leak this, notably the largest on a keenese company if not the largest tech ipo in the u. S. Markets ever. So heres my one question for you. Go imp the profits that this company has and the profit mar jen on a relative basis to amazon which has as we all know a profit margin of next to nothing, why is this thing not going to be worth, you know, three times that . Well, i think the question, andrew is, with the margins, depending on what estimate 1445 and 60 , thats huge especially whencoming to amazon, people will scratch their heads and say why isnt ali baba worth more, they will say how profit it is given how thin the margins are, how long they have gotten away with that. When you look at actually how much in transactions ali baba is processing, its at least two times of what amazon is doing and it owns all these other businesses. So i think people will be questioning amazons valuation more than ali babas at this point. Its interesting, this issue about taxes and the fact that they dont pay that much at the moment. Its technically based in the Cayman Islands. They dont pay a huge number in china. What is that about and what could that look like . I dont know what that is about. People have been asking, why is this company that owns 80 of the ecommerce market based in the Cayman Islands . One is we have been talking a lot about potentially how much visits ali baba does if counterfeit goods. They take pains in the prospectus to talk about efforts under way to stem some of that activity. They say they have a name and shame policy, where if you are caught selling counterfeit goorksdz theyll call you out for it. They try to crack down on this. People are a little bit skeptical about how successful some of those efforts could be. There are some issues about what it means to be a Company Based if cone. They have 16 risk factors that they risk, where they talk about doing bes in chosen, if they weaken the currency. If they raise tacks, do all these types of economic policy, then that could hurt ali babas business. A lot of stuff to chew through here. Thanks. Lets bring in our guest host today jay jordan, the chairman and managing partner at private equity firm Jordan Company. When you hear water happening with this in particular, ipo, what do you think about it . The marks are so ro bust, even in the private sector, liquidity globally. Its a little scary to me. I tend to be a bit of a bear right now, thing are going too well. You at the Banking Sector if financing the private equity firms are doing the same thing they did in the mid2000s. This is coming to light, were starting to see that again. Im thinking, dont these folks ever learn . You can make an architect for a bubble building in the markets again, it wont be as difficult the markets are leveraged. You may be right. Meaning, where are we in the game, right . Thats always the problem. Too bad they settle to the firp, which went through a chapter and verse of what i thought was going to happen. Unfortunately, it was like a year or 14 months early. But it happened. I dont know, i had this uneasy feeling. You have a memo right now . In my head, i am. I havent articulated as well as i probably should have. But the things are very, very good and across the globe, even though china has its issues and the emerging mark itself are having some trouble because of what the fed is doing, the liquidity is still there. You look at corporeal liquidity, a trillionandahalf dollars of cash. You will see a lot of corporate americaners. I think the public corporate mergers are up about 20 year over year in the First Quarter, of 13 and First Quarter of 14. So our activity is quite robust. Were seeing a lot of the transactions. Prices are still pretty high, but there is plenty of liquidity in the Banking Sectors. Thats what i was going to ask, you are still doing deals, even though you worry prices are getting high. We dont tend to use a lot of leverage, we over equitize leverage. Some are up six an seven times, thats scary. I was going to say your initial comment was things are too good, im getting nervous. Thats always the case. When do you become positive when things are so negative . You are truly a countercyclical human being . Emotionally i am. I went through five cycles, 74 and 75, which is rough. We have the cycles. So you tend to anticipate these things. Ever since we went off the gold medal standard in the early 70s, weve had a cycle of some magnitude about every six to seven, eight years. So what has it been since 2008, 29, we are closing in on the fifth, sixth year. Jay, you want Company Valuations to be down, right . You will get a Better Bargain longer term, if your friend, a nephew, a Family Member came and said, hey, should i buy u. S. Stocks . What would you say . You buy companies. I went flat about six months ago on u. S. Stocks. I was nervous globally. What do you mean flat . Sold all them, my portfolio stocks. Yes, we are in the private sector. I dont call that flat. I call that effectively negative. Okay. Negative. I missed a big upturn. I reinvested in the businesses. Our corporate sector, if you look back at the sfie crises since world war ii globally, its the safest sector in an allocation model to put your money, not necessarily in stocks, but in private companies, stocks you have the market rick. You have not a lot of market risc. Will is a huge market risk. Private equity took a beating within they had to deal with the last crisis with the last crash. You couldnt roll them back out to the public. If are you worried they are getting potentially into tubl bubble territory. Does that mean you are trying to cash out with the companies you had . Now irrespective of my views, now is the great time to sell, regardless of what i think and one of the problems is its all about leverage. Its not about businesses. Its about leverage because you have good or even sometimes great businesses that have terrible crall structures. Thats what happened in 2008 everybody was overleveraged. We dont play that game necessarily. We are more value add. We arent over leveraged. Thats why we were able get to the next cycle without serious hiccups. I can feel it coming on. I think it will happen overnight. We all remember in 87 an even. Water the trigger if. Nobody know, really. I think a lot has to do with the financial oppression we are operating under now, where the interferes manipulates the price of anything on currencys. Right now, its Interest Rates. When voelker did it in 1981, he did it it for good reason. He drove asset prices down and Interest Rates up. Two things happened when you have a financial oppression. There is huge misallocation of capital and a huge mispricing of assets. So when voelker did it to break the back of inflation, he drove asset prices down when he pulled it off. We had a 30 year bull market in bonds. Bernanything in has driven up asset prices an driven down Interest Rates. So i dont know whats financial to happen when ahave to unwind this fed balance sheet. Nobody has the experience of a 3. 5 trillion balance sheet. I dont think anybody knows. You see it start to happen in the emerging markets. They even talk about tapering, money flows out, their gdp gets hit. Their currencys gets hit. Their trade deficits. So. And they complain rather loudly. Jay, we will continue this conversation. Jay will be with us the rest of the morning. We will get much more including his view of the job market. Aol rolling out more. We will talk about whats ahead for armstrong an later, median tech analyst rich green feel will give us his breakdown for disney, squawk box is the happiest place on earth appetizing were coming back with the rest of this very happy how far in just a moment. What is this place . Where are we . This is where we bring together reliably fast internet and the best in entertainment. We call it the x1 entertainment operating system. It looks like the future we must have encountered a temporal vortex. Further analytics are necessary. Beam us up. Thats my phone. Hey. [ female announcer ] the x1 entertainment operating system. Only from xfinity. Tv and internet together like never before. Right. Welcome back. Here on the east coast, lets check shares of mongolese international, beating estimates by 4 vents, quarterly profits or 39 cents per share. It announced it will combine its Coffee Business with master blernsd. They get a 49 interest in the new company. They announced a 3. 5 restructureing program it says will save about 1 billion annually by 2018. Aol out with First Quarter earnings. They earned 48 cents per share, 11 cents below estimates. Revenue came in above street consensus. A number of onetime factors were significant. Joining us from new york is Tim Armstrong the chairman and ceo of aol. Tim, its good to see you. Lets talk about these numbers, run them down for us. The expectation was a little higher. So what happened . Expectations aside. We had a bunch of onetime charges that happened in the quarter, but the bigger trend line, andrew, thats important is fifth consecutive growth quarter for revenue for profits and consumer, its the seventh quarter in a row. Its the 11th quarter in a row of advertising growth. It grew at 16 . So for our longterm strategy, we are on track and continueing executing the charges we took this quarter related to businesses we were writing off that we had invested in overall, we are happy with the quarter, aol has consistently grown. We are continuing to consistently grow. I think we are on track for 2014. Over your left shoulder, the right side of the screen for those of us watching, there is a company you bought for nearly 100 million what is that about . We are in the process of just like the car industry moving from horses to automobiles, were moving from nonmechanized worlds to a mechanized worlds in advertising. The first phase of the internet has been about recognizeing marking basically on the last click basis the last add you saw is what gets distributed to the value t. Advertiseing, the future of the internet will be something call exposure to conversion, which is taking into account all the advertising you saw leading up to conversion. We think convertrol has the best company recognize how you put exposures out in the world. How that leads to conversion. I would mark told as a real big day for the future of measuring advertising to the about the content, the internet is at a point it will turn into measurement everywhere. Aol is lead tack charge. One big competitor is yahoo. Given the steak it has in ali baba, how closely are you watching that . I mean, marissa will be our tech krunp. In new york city, we have a couple thousand people coming. So i think the world that we live in and that yahoo lives in, goggle lives in, amazon lives in, it is becoming more and more important. Ily the ali baba ppo puts a spotlight, a lot of things as easy as ecommerce is to do online, a lot of our other industries will get converted to an ecommerce type policity model. I think clearly, we are one of the leaders in the because it shows the potential of how big these marks are. By the way, tim, brian sullivan, that intervow will be 2 30 eastern time. Will you hear from michaelerington an melissa myers. How has that deal worked out for you . Do they ultimately pay off . I think we have been very fortunate to really get a tremendous Game Changing talent with our acquisitions. As you notice, most of the talent has stayed with us. Ent entrepreneurs we bought into this company we have empowered, our corporate entity has to be the real dirt that flowers grow out of. We have a number of flowers growing, tech clun crunch is an asset. Crunch base has been an incredible asset if you are into the private marketplace, probably the most important asset in that marketplace, you covered tech funds yesterday. You see whats happening. Its not just business, its also the cultural hub. Tim, i want to get you on two issues, online video. You hear about yahoo trying to step it up, bogey samberg, spending a Million Dollars an episode. Do you think that that model can work given the advertising climate . And is it something you think you will be getting into . We are top three both in video views and ads overall. We were tear earliest investor in video in the syndicated market. Our video strategy. You are not spending on original programing yet . We have 16 shows. We launched four renewables. We sold out more shows in our up front. Before the up front started tan we sold all of last 84. So we are investoring content. We have scripps, discovery, we have adapt tv which is the best product in the video marketplace on the consumer side, its gone from four to five hours, headed to six video. We have our announcement with nielsen measuring online video and tv video the same. So the wall just came down between tv and internet video. Were in a very strong position and we were early in this market three years ago as investors is there weigh in on this, Net Neutrality and in particular the time cable transaction. Are you a supporter, somebody like reed hasteings who may come out at some point. And say are you not happy about this . Where are you . We are longterm bullish on both the investments going into content, which are sizable investments going into drift bulgs, really the u. S. Governments role of what theyve proven overtime to keep access opened for people. So we believe that ob access and high band width pipes with lots of grey content, there is an ecosystem there. Its not about one set of assets or companies on that neutrality or not. All the investments have to be taken into account. So if it were up to us, we love Net Neutrality. With rea big video investor, is remember. Are you a band of consolidation or not . Im a finance of making sure the right companies have models that are profitable and allow distribution to grow. This country has a lot of room to grow in terms of the infrastructure to speed up the networks. So i would say thats up for the government to decide. But worry big fans of Net Neutrality. Struggling to pin you down, we appreciate it. We hope to see you again very soon. Topping, andrew. Coming up, former state Department Official will give us his threat assessment over the ukraine. Will it be another bullish summer for the markets . Jeremy siegel gives us his forecast at 8 00 a. M. Eastern time. I have a feeling i know what he might say. Stick around. When we return, should investors believe the hype surrounding ali baba . An ipo watcher will give us early review. Vice chairman takes on the crisis in ukraine, sanctions and using financial weapons against pos cow. Squawk box will be right back. Honestly, the offseason isnt really off for me. Ive got a lot to do. Thats why i got my surface. Its great for watching game film and drawing up plays. Its got onenote, so i can stay on top of my todo list, which has been absolutely absurd since the big game. With skype, its just really easy to stay in touch with the kids i work with. Alright, russell you are good to go alright, fellas. Alright, russ. Back to work what is this place . Where are we . This is where we bring together reliably fast internet and the best in entertainment. We call it the x1 entertainment operating system. It looks like the future we must have encountered a temporal vortex. Further analytics are necessary. Beam us up. Thats my phone. Hey. [ female announcer ] the x1 entertainment operating system. Only from xfinity. Tv and internet together like never before. Welcome back, everybody, good morning. Mortgage applications rising 5. 3 last week. That rebounded from december of 2000. They say applications for new home purchases an refis rose. Groupon posted a First Quarter loss, two penneys smaller than analysts expected. The company also boosted, yes, groupon boosted its fouryear outlook. Meantime, trip adviser reported a First Quarter profit of 54 cents per share. One penney below forecast. They were 9 above the year earlier. It generated more referrals to booking sites. Always use trip adviser. I love trip adviser. Do you use it . You do . I wont go to a hotel without going to trip adviser bmpl if i dont comment myself. Its family taking photos. You got kid, can you take a photo an post it. Rather than the professional photos of the lobby and how spotless it looks, you get there. There is a lizard walking across the floor. I like lizards. Theyre delicious. Tensions remain high in ukraine between proactivists in the military, joining us is bob hor s. A. Vath and with all those titles the interview is all over him we have for the time him bob, welcome, everybody that i spoke with on air an off the record on background at the milkin conference an recently believe to a person that violence will escalate in ukraine either between the west and russia or between russia and ukraine, specifically because putin and this is their opinion, putin knows president obamas powerless because he can not risk the democrats losing the midterms by starting at conflict or the 2016 president ial election. Would you agree with some of that, none of that, all of that . I would put nit a different context. That is the situation when you crane, itself, seals to be spinning out of control. I think youve got partisans on both sides, loyalists to the kiev government, prorussian forces in the east and the south. Theyre now in a situation where there is more and more violence killings, this burnling of people in the trade unions building a couple days ago. All these things are getting worse. It may well be beyond the control of either side to stop a brewing civil war or at least a lot of violence within that country. Listen, obviously, i was if sochi for the olympics, guys. That was before this really heated up. But there was something that struck me as odd. I couldnt figure out how to read it. It was raining one day and as i was leaving my home lobby, the woman i was working at the desk, i saw her every day. I said, good morning, how are you doing . I said Something Like bad weather. She looks around me, maybe mr. Putin can make it stop raining. I thought it was sarcasm. I am looking back, how do they feel about him . He is very popular. One has to remember most russians consider ukraine if not a part of russia a very, very close traditional friend of russia and for a period of time a part of the soviet union. Kiev was really the first roos. There is very close connections, they feel it almost a part of tear country. So for thechg, this is popular, particularly crimea and other parts of the you crane where other russians live. Ferdz, you dont think its enough . I dont think he necessarily feels he has to send troops in there. I think what is happening, russian partisans in ukraine, not just in odessa now, we are seeing it in the northeastern cities are beginning to take over and the problem is the Ukrainian Forces are not Strong Enough to evict them. There is very little prospect, if any, that nato troops will move in there regardless of. We will put this in an american context. S very hard to image american troops or nato troops moving into ukraine anyway, the russians have preponderance of force there. Not just the russian army, also prorussians in parts of you crane. Already some geopolitical situations. Violence may have gotten too far out of control. Russia doesnt want the strategying border of the west to be on the eastern border of ukraine 300 miles from moscow. The west certainly doesnt want the strategyic border of russias influence to be on the polishukraine border. So somewhere in the middle there has to be some arrangement worked out involving the american russians in you kra into try to figure some solution out. It may be no one can control it now. Its very, very dangerous and could get a lot worse. The economy is deteriorateing as this occurs. It will have an impact on the might havery pro li proliferrie ukraine. I dont know where it ranks in terms of the top ten. Its right there. Obviously, we have a destabilizeing influence on the Capital Markets and the investment markets and particularly our business, the oil business. The Banking Systems would not shut down but certainly take the russian bank is dependent on the interaction with the market as you know. Russia is the sixth Biggest Country in the world, its big largely because the Energy Sector is important. Its very significant. We have a lot of experience in russia. We built the largest Cable Tv Network in russia federation. We dan in 1977 and sold out in 2006 to control the kane. So we understand a little about what goes on in russia and its very, very corrupt. Can you truly play out what you think is the real downside to the market . Rate now, everyone says the market is jittery, weve gone sideways, what have you. But its unclear to me, is there a lot more to go . What happens in the truly worst Case Scenario . And therefore from your perspective, you are a bear on everything right now. Itrying to understand where this goes. It damages the russian economy. And handicap that for a second. Its hard to handicap. Its growing. The ukrainians cant control the violence. Im not sure the russians can control their pro russian forces. In the end they probably can. The problem is russia is fairly dependent, they have a lot of reserves. But they could bore rea lot of money. There is another way of thinking i heard specifically from guggenheim partners, if the conflict heats up, the u. S. Though we may not be involved, could be forced to remilitarize adding to gdp and boosting our equity marks because we have forced to reinrest in this new slash old greater let . I think first of all it will take a long time for the u. S. To up its defense budget. Its a multithought. I think nato, the u. S. Being the largest supporter of the nato in terms of troops and in terms of money, is probably going to have to make a stronger show of force all along that area, in the battleics and elsewhere and certainly in poland and demonstrate to all these countries that American Forces are there to back them up. If there is a threat to nato countries. The danger with the nato countries is that the russians i dont think will move in. The danger is prorussian forces in some of these cases could cause a lot of instability. I think nato demonstrateing its resolve is going to be extremely important. Andrew, you asked early on, what can trip the seven, this is one on the list that can trip an immediate problem. This could. This is certainly, we have to demonstrate through trade negotiation, support for nato, a whole lot more support for uniform t. Europeans think the tapering has not just been at the fed, theically the there has been a tapering on the american focus for quite some time. They want that to continue. They, themself, particularly in the energy area the european, themself, some have opted out of nuclear, others have opted out of frackings, they, themselves, have to make important changes, particularly because the lever the russians have over them is energy. The other thing we have to do, we shouldnt go around villifying putin. This is a much more strategic issue, which will ultimately require some degree of cooperation with him. Bob. Thank you. We present it very much. Coming up, a magical report on the mouse house. Find out if disney can deep investors and visitors coming through the gates. Squawk box will be right back. They say disney is the happiest place on earth. At least for shear olders this morning. They are trying to drive him draez. I love this song. T this is the greatest. You destroy me with this music. Come on. We can do its a small world. Look at olav. Obesity epidemic. All my favorites t. Theme park company that is dis fitheyre earning 15 cents above estimates. Thanks to the animated frozen. You can tell im a fan at this table. Becky is, too, brian clearly not. With us to break down the numbers is rich greenfield, we will make him sing let it go before this segment is over. It is awfully cold in here i must say. You and olav can hang out together then. Help us to understand thats going on here, specifically this issue. The valuation of this company now has gone through the roof and i just wander whether they can keep it up, given how successful frozen has been, but whether that looks like a one off. I think you really have to look at the earnings power of disney, this is a stock that we looked at this stock a year ago and got excited by the content cycle. We thought as you move into fiscal september 2015 to the they had the ability to earn up warfronts of 5,000. We said given that power of all the content, it could get closer to 5. I think ba you are seeing is disney is at the point they are on the upswing of content. Thats whats driving this stock. When you look back across the media universe, the real power of content has been a key driver of success. I this i what is unique about frozen, i think what you had playing, the sopping, is a really important indicator. If you think back over animated movies, mot just from disney, also from dreamworks, also from fox, also from nbc universal, what was the last time everybody was Walking Around sinking the songs, wearing the outfits . There is something about this much larger than a single movie. I think that answers your question of, is this a one up . No, this is an entire franchise for disney thats going to last for a long time but also manifest itself in many other business lines. This is not just having a one off hit in the Film Entertainment line which people dont pay for. What kind of target do you put on this company . It was at 64ish dollars, its closing in on 85. I think a year has passed. The earnings trajectory is getting better. Hey, i hear what you are saying. I am sure the movie is great. Its one movie. This is a 45 billion revenue xaevenl its trading out more than 22 times earnings, about five points hire than the ten point average. How much does this matter to a stock that has already had a heck of a run . Well the life blood of this company is its an mated franchise. Thats what it pipes through the tv networks. Think about the disney can em and em its global foot present. Think of the stores, nine of the top ten items sold at the disney store was frozen merchandise, try to have your kids, try to find for one of your kids a frozen do. Its essentially tough to find. For disney, when they get an animated blockbuster, you think back years ago to lion king, little mermaid. They havent had it in a time. The question becomes, how much replicatable is this. The business is espn. Cable is 3. 16 billion almost twice as much as the studio. Why are we talking so much about frozen . I think you are looking alt this happening for the first first time in a long time, to marvel lukas and marvel, the ability to have content to fuel all of the nonespn parts. Espn is a solid business investors feel comfortable at. We feel comfortable about the Growth Profile and lack of exposure. People are kiping content, including why we are watching right now. The reality is espn has Something Different if live sports content you have to see live. That makes it unique t. Question is the rest of disney doesnt have the content to drive the theme parks, the disney can el to drive all of the other assets. Thats why this is such an important data point is they havent had something this big if a very long time. Looking fore, they have finding dori, the avengeers sequel and star wars. A year ago, we werent forecasting frozen to be anything. Now you have added if frozen, thats where the big opportunity is. Why have you not rayed your target then . Hay, rich, quickly, on espn. We know what the driver is. Have you fox sports1, cbs made more of a national push. Is there any sign these other networks are eat nook espns model . There are 65 billion of advertiseing spent on sight, sound, motion advertising on Television Sports is probably 15, maybe 20 billion of that 65 billion. Maybe not even. I think the reality is the crest of what are you doing at nbc. What fox is theing is fox sports1 makes tons of sense. The real risk is to the broadcast networks. Thats how the ad dollars shift away from places where consumers are not watching advertising to sports which is, you know, you need to watch live. You want to watch live. We know you are going to watch the advertiseing. I think the reality is, these are great tupts for everyone thats doing these sports networks. The funny thing is, the real risk investors need to be thinking about is the general entertainment networks, how does abc get hurt by this . We got to let it go here. Mr. Greenfield, we appreciature time this morning. We just wanted to play the song. Thank you. Can you make sure to stay tuned. Anything elsa to talk about . Ha ha. Squawkon the street, mr. Faber has an exclusive interview coming up on squawk on the street street later today. We are coming right back, tow, if just a moment. Let it go. [ music playing ]. You on your toes. You wouldnt have it any other way. But your erectile dysfunction. Welcome back. Ali baba, we are still in the commercial break, not really, which is going to be seeing the largest chinese firm list in new york t. Question now, though is how much will the ecommerce giant start trading . Here to talk about it is kathleen smith, principal at renaissance capital. You looked through the prospectus last night. We didnt get a real sense of water going on, remarkable Profitable Company afternoon interesting point earlier, i said does this mean amazon is worthlet less or more . She thinks that amazon is going to move down as a result of all of this, given the margin that ali baba has. What do you make of that . Well, im not sure i would look at it that way. Its not profit margin here. I think you have to look at the two earnings. Ali babas earnings are about 3. 5 billion. Amazons earnings are less than a billion. So were talking about a Larger Company when it comes to earnings. I think ultimately for investors, earnings matter. Whether amazon is a its crazy, you have to put in a crazy multiple on ali baba if you were to put it on a relative basis to amazon. On earnings, we would think that ali babas earnings could be capitalized Something Like in 2015, we looked at it and said if the company is growing maybe 35 to 40 it could be a 15 billion in revenue company. If their net margin for ali baba is about 40 , we could have 6 billion in earnings. If you capitalize that, it may be 25 tiles, with i is far less than any high growth face book for example is at 35 times. You get 150 billion in market value for ali baba. That makes some sense to us. Given the earnings, not the margin per se but the earnings. Let me ask you a different question. I may get in trouble for this. Should there be a cone discount on the company, meaning, do you believe the numbers the company is based in the Cayman Islands, there has been questions for years about Chinese Companies and the accounting. I may get in trouble for this question, is there any sense when i look at a prospectus like this, do you look at it any differently than a prospectus for an American Company even though they are listed here . There is some china discount because we have the issue of the government that is going to get and is already worried about ali pay the payment mechanism for ali baba. The fact when you have such a large factor in ecommerce it is the Worlds Largest Ecommerce Company and the dominant Chinese Commerce growing very rapidly, that means a lot of currency can move in and out of goods and services, but the government is looking at and needs to have involvement with it. Do you understand the packs purposes . Nobody seems to know or understand. Well, the taksim politics they are referring to is the variable. The vie is a way to have to offshore theenty to get around some of the governments control of the internet transactions. So those are not positive things. Those deserve some discounts, but i think in the case of ali baba, investors will probably go with some strong discount some of that. Do you care about the governance very . Its not a dual class structure, but its close in that theyve created this other mechanism which effectively gives them control forever. We care about the government structure. Face book had the same issues, goggle has the same issues, so, yes, would we like one vote per each sare . We certainly would. So there is, there are issues when it comes to that. Again, i think because of the size and profitability and growth of this company, it will be a juggernaut that will be in almost every investment portfolio. Thank you for coming out. Coming up, just how much should investors be focusing on janet yellin today . We will be talking about it. Also, we will be covering all of that an more as squawk market master Jeremy Siegel will join us at the top of the hour, later, portfolio member john rodgers, squawk box comes back with the big hour at 12k3w4r506r789s. Ali baba willing to go public. Will investors buy whatter that selling. Yellin on the hill, what investors should be focused on when she speaks later this morning. Can Western Union wire to your portfolio . We have the final hour of squawk box begins right now. Let it go let it go let it go let it go god, i wake up early to come in on this show. We tease you. This is what i get. Its bad enough growing up with the ear, dumbo thing, disney haunts me. We these you because we love you. I love you guys, too. Now i have to see the movie. Never tell us something you hate when you dont want, it gives us way too much of and in. What a nice attitude. Dont believe the hype, perk. Thats as quebec as a dark side. Dont tell me, that itself the other thing. You are lucky we are not playing its a small world, that will get stuck in your head for much longer. Welcome back, first in Business World wide, im becky quick with Andrew Ross Sorkin and brian sullivan. In studio with us, jay jordan the chairman of the Jordan Company. We have been watching the futures the morning. They have been under pressure, the nasdaq futures were under pressure. Itative turned around relate now they look look theyve opened up. S p is up over five points. If nasdaq up over by 7. 5. Ali baba is now filing, famous im going to call it in the initial public offering. Yahoo, of course, will be receiving a huge chunk of the proceeds. That is sort of the derivative talk to watch in all of this check out the two leading video games as well both beating stills on the strength of their own games and the fact that new consols like sonyplace play station 4 and xbox 1, are propeling sales higher. Mongolese, international, one of the stocks to watch this morning, they are a winner. Three pieces of fuse involving the food company. Heres water going on. First it boat the street estimates with its latest earnings. It is combineing its Coffee Business with d. E. Master blender, the deal will give it about 5 billion and 49 stake and announced a restructuring it says will save at least 1. 5 billion annually by 2018. Noen i dont know if we have nelson peltz to thank for. D. E. Masters, when we first did the story, i had no idea who they were. Do they eggberts, the dutch company, coffee branderson. Thats why theyve shortened it to d. E. His pronunciation is no better than mine. That is a mouthful. Thats dutch. In a little while, janet yellin will testifying before congress. Her testimony will likely set the tone for the trading session. It was a sea of red yesterday joining us is Jeremy Siegel professor at the university of p. And a squawk market master and guest host jay jordan who has taken the bearish side on postthings. Jeremy, maybe you could convince the gentleman to my right, how are you feeling ab things right now, jeremy . Well, i think two major things that have changed this year is the longterm Interest Rate picture. Everyone expected the tenure to be 3. 5 by now on the way to 4. Its closer to 2. 5, i, myself, i to the Interest Rates keep going up. Now i think we will have low Interest Rates on that long term for quite a while. No matter what town allen says this morning. Think of what stocks should be valued at. If the long term ten year is 2. 75 . I am sticking withpy forecast of 18,000 for the dow and 2 foul. For zap p s p by 84 end. Jay is making faces. Go ahead. Not faces. Im smiling. Jeremy, given your view, what do you think of the bond mark, are you a buyer of bonds or would you recommend given the potential risk of Interest Rate volatility . What is your view on volatility . Im not positive on bond at all. My feeling is im beginning to think the longterm rate. The biggest surprised bill groves in his monthly newsletter, he was the biggest bear in the stockmarket for five, ten years, finally says, you know what, i think stocks are fairly valued. Theyre not in a bubble anymore. Interest rates are basically not going to go up that much. I think that, wow, thats a turn around. Here was the man that wrote dow 5,000, death of the cult of equities two years ago. I used to be battling him on cnbc and other networks. I was pretty surprised. I think he has come around to saying, you know, when stocks have a 2, 2. 5 dividendyearold, where do you want to be in the market . Why do you think the yield is so low, ho . What is that a rereflection of. The growth will be slow. Cbo says 2 over the next ten years, inflation is going to be low and the age aging of the investor class. More and more people as they get towards retirement dont want to stomach the volatility of stocks. Theyve going into bonds. Pension funds are rerisking their portfolio. Good or bad. They say the rules are i should go for the bonds. There is a huge demands for bonds, lets face it, the deficit, the government the cbo came out and said its less than the historical average right now. There archbishopt that many bonds pumped into the market. Professor that, is an excellent point. Scotia bank came out and talked about pension short faums and the gps in pensions and the lack of availability of bonds. We often assume bonds will be bought because of ukraine, because of some fear it sounds like you agree with that view that bond buying and stock buying can occur at the same time because you good a different reason, which is to fill a pension if lew of cash. Absolutely. The pensioncist is huge, its reflected by more and more choices of the baby boomers, which still control most of the wealth getting to 65 and saying, yeah, stocks may be a better deal, but i got to be conservative that push on to bonds i think will keep a lid on tear rates and then i think youve got another perspective of what you should envest in. This gentleman at our table here basically sold all of his stocks six months ago. You said enough. All two of them. You said you were getting flat. You felt this whole thing was going to go sideways if not down. Two different things. I want to ask jeremy a question. When you talk about Pension Funds buying bonds, what maturity schedule would you recommend . Because, obviously, we know pensions have a real problem. They have an early return of 8 in the bond market. Theyre never going to get if bonds. I pine, you know, the truth of the matter is that yeah, bill groves is right, any pension fund is 8 . Its twoandahalf, 3. 5 . You feed falling Interest Rates. I dont think thats happening the short faum rules have been made so strict that they cant stand another stockmarket decline. Thats the reason why theyre pushing the bonds. I get criticized for it a lot. But the, i think the feds should go negative on Interest Rates and drive gdp up. Earnings are not tracking with the stockmarket. I think its way ahead of earnings growth. You put more liquidity in the market. If the fed was charging all banking system. They got 3. 5 trillion of reserves. That would stimulate the economy. Obviously, it will have inflationary effects. But inflation is not that bad for the economy. If you want to book gdp. Thats not a crazy proposal. I, myself, we are talking here on the interest on reserves, which we all foe the fed set at 25 basis. 25 basis points is higher than the one84 treasury. Will is no incentive for those banks to lend it out. Right. In this environment. The ecb is talking about, perhaps, a negative deposit rate to get the bmpgs to lend. I think at least we should move it down to zero again. But dont forget the lobby of the banks, they have 13 is temperature of excess reserves. The banks are not anxious to give up that revenue over there. Thats the struggle with the fed policy. To be fair, with all due respect, we cant have a conversation without understanding variables. You are a rich guy already. If you are 35 years old, listening and watching, the time frame may be different tan yours, if you look out 30 years. They may not have the access. Gdp growth creates jobs, it stimulates the whole economy. Lets not isolate it obvious sort of a class difference. Its not class. Its time frame. I believe the dow will be higher in 30 years, otherwise you will be living if caves and lighting fires with sticks. Professor, ill defend the gross here for a bit. Youve got to have an expengation of the future value of cash returns in order to make any kind of asum shut up of stocks or bonds, right . If bill believes that cash will return, effectively 2 , which is less tan most people, he is making an architect about future evaluations for all other asset class. Right. Well. Thats exactly right. And stocks look a lot better if those cash flows are going to be discounted at 2 than at 4 , which i think the fed still wrongfully has as their quote, there has been a lot of discussion on that. I agree, thats way too high and actually there is a lot of fed member itself beginning to question whether theyre ever going to a 4 feds fund rate. If you think about that, 2 , dont you want to be with dividends, yieldling, stocks yielding 2. 5 to 13. Thats my point . Thank you for sticking around. We appreciate it. A nice little debate i like that. When we come back, we ask the question, who is jack ma. He take a look at the selfmade millionaire and his prize possession aly baba. For your big story today, janet yellin will be testifying in congress. Steve leisman what can we expect . There is an awful lot to listen for here. Let me give you some of the things ill be watching for. The first thing anybody cares about is rate hike guidance krks we get any more information on whether or not its a Second Quarter, third quarter, First Quarter, 2015 jump off point, she has explaining to do when it comes to recent economic weakness that, gdp number in the First Quarter, now, by the way, tracking negative 0. 3 in our cnbc rapid update. We will be listening to labor slack in the unemployment rate. We den know how janet yet e yellin will dance the politic. We know bernanke would go so far and back off. This will be as care janet yellins first chance to answer questions on minimum wage, deficits, security. All the things that Congress Wants to talk about. She is getting good at saying nothing, basically. We will see. Thats a matter of personal choice. Greenspan went a little further. I want to show you the feds economic project, thats the outlook for this year. It will be hard to get there with this 0. 1 . The meeting of fed members, you see its 6. 2. Where are we now . 6. 3 i. I think these job footballs are a little deceptive. We had the same participation then unemployment would be 12 . in 2012 the reelection, if it was the same job Participation Rate on unemployment would be 10 . So were looifg live income an illusion i think. There is a big debate. It has to do with this guy on the show allen kruger who says the people a part of that unemployment odd number are not coming back into the work farce. Theyre not exerting downward pressure pressure on wages. Essentially, yellin has sort of dismissed this argument. She believes there is a vast pool as you say of labor lack out there. Some of the economists disagree. With real rub is going to happen, the rubberits the road when it comes to wages. May i ask you a question . Any time. When i got into the business in the early 70s, tear ret cal unemployment was 14 purns employed. Thats the way it was, you had 3w450e78 wouldnt and those who couldnt. Today that number may be 6, 6. 5 . Thats another big debate. We have a great guest. I have one more thing to talk about with this guy coming up. I have a feeling you might. Stick around for that one more thing. Let us go on the Rate Decision an janet yellin. Joining us, from isi group, a remember for thor fed pencer, listening patiently for this debate, do you think janet yellin will give us any real guidance today on what shes planning . I think its going to be steady as she goes relative to the Economic Club speech she gave a few weeks ago. The basic message the fed thinks its making progress towards full employment and will hit that goal and stable prices sometime around the end of 2016. Number two, the fedex pecks a low for long and gradual enclose in the funds rate part will be the appropriate part, but, number three, shes cautioning us that the world is an uncertain police and the marks shouldnt assume thats a xhechlt. Its just a forecast of where the feds thinks rates should go. Heres the problem to his point he made, define right of employment. If 10 million drop out of the work force, number employment will be a lot easier to hit. So thats absolutely right. What janet has been clear about is she believes there are important additional labor slack. The fix that cropped out. Also, folks who are working part team but would like full time jobs. However, union et has alsoing a podged a lot art uncertainty as to how effective these sources are in restraining wages and prices, so well have to learn some as we go. We dont know. Christian i want to show you, i dont know if you can see a pick. But there is one guy i think when it comes to these current low rates who is smiling right now. Not so. Not sullivan. Its ben bernanke. I think he is smiling right now. I think there is something we have not talked about. There he is. He is smiling. He just woke up. He is smiling because he had an argument for a long time. It wasnt the amount of quantitative easing, it was the total amount of duration as in years they took off the market. We have talked about every reason six days to sunday why Interest Rates are low. Not this stock vs. Flow argument. Christian, does it team to you, this stock argument t. Total amount the fed purchased is at least one explanation for why yields remain low while quantitative easing declines. Absolutely, steve. Are you on the nail there. We had a hunch all alorng i did. Ben was right it was the stock that mattered not the flow. That explains why the longend yields havent moved higher. But, of course, that doesnt exhussein whats going on the shortened of the curve, where the market is prioritizing rate expectations. There the fed is saying, on a base case, its a gradual increase. But be careful. This is an uncertain world. We dont know all we want to know. I want to follow this up. This is sort of what jay water talking about as well. If that is true. If the stock is exerting an influence and the fed is not going to sell these asset itself, theyre going to run off, it means we will be exerting a downward pressure not just months. Not to the end of qe but well beyond. A question ha is rerecorrodeing. Its the amount of duration or Interest Rate risk. As the portfolio ages, that downpaerd pressure on the term pret premium diminishes. Larger rates should drift higher. That was a good conversation. Appreciate it. Pork, predicament. Why you could be paying more this summer. Who is jacquie ma . We will take a look at the man behind ali been ba when stock returns. All right. Pink floyd, a virus is sweeching across farms. The u. S. Could cut pork production 7 this year. The forecast is much steeper tan what the government was expecting for the production. The virus has killed about 7 million baby pigs since it was detected in the u. S. Its appeared if canada, parts of asia as well. The Research Estimates a 6 to 7 reduction the year. The fda says they could reduce the outlook by 5 . Its probably why the chinese bought Smithfield Foods last year. Joe was saying its gone up. It sounds like its more wage relates to that. You have corn prices up as well which then raises the price of feed. So you got the perfect storm if you will. I want to know about this virus. Its not good. I dont want to calm at this time equivalent of foot and mouth disease. Hoof and mouth. Yeah, in is why people. You know what, quick aside, coffee prices, pork, bove, wheat, corn, sugar, all soaring this year. Yelpch today, i get the inflation argument, you look at things we dont purchase, will is no inflation. The cost of food, every day i go to the store is a higher bill. To me thats inflation. Oil prices have stayed stubbornly up. Flat panel tvs have come down, everything is fine. When we come back, productivity and cost data, the numbers after the break and stock picks from john rodgers. Wreak. Welcome back, everybody, lets go to rick saven tele. He has the preliminary numberings. Fauven productivity down. Last month has had a. 5 improvement. If we look at labor costs. They were up 4. 2 . Wow. Thats probably close to double the expectations. Our last look originally started down 1 tenth moves to four tenths. To summarize, we had decisions that mitigate. Productivity has been averaging a little over 1 . Its not nearly enough. Its a very key issue. But most of the postmortem work being done as japan tries to do everything and the kitchen sink stimulus. Many believe the missing pieces of tear deck indicates lost amounts to a cumulative loss of productivity. Hopefully, which wont end up in the same boat. Yields are bouncing around. We still havent had that close, all tow the february 3rd, 257. We traded below it today t. Curb remains flat and relative to foreign rates, we are still probably too high. Back to you. Hey, rick, why down weve seen the ten year flirting with the threeyear lows once again this week . I think since everybody and their brother thats an apologista for the fed, weaken economy down the road. Door number three is what im picking. I think it is a variety of issues. Its what i call a turn style, you can make a case on the spreads of the europe pine rates, you high our, you sell their, theirs have compressed with the front running going into what they perceive to be qe or general Interest Rate management. I think the slowing economy is a big deal. I think the flattening yield curve is a huge deal i think the shortened is giving us more information. I do think the stock of treasuries and the percentage of 20 years an older, the season 30 years, the purchase contributes to it. That argument falls flat when you consider one rates moved up a year ago, now theyre moving down, if that interim period, you look at the amount of purchases, it seems as though, you know, some of that dynamic was already in place. Why didnt it hold true last may . Let me ask you this, you have been doing this a long time, watching that market a long time, where would you guess the ten year yield ends the year . Much closer to 2 tan 3 . Wow water that sound i hear . Thats Real Estate Agents dancing, singing. I think a lot depends on the general asset classes. Ive never, never called for selling of equities since the bottom of march of 09. I think they are on thinner and thinner ice every quarter. That issue and the flashing red, i think its a matter of time. Ly tell you this, if we dont get under 2. 5 in the next several week, then i think probably i would change my call to be right if between 2 and 3 . Rick, thank you, talk to you again soon. Ali baba filing for a u. S. Ipo. We have jane wells with a closer look at the chinese entrepreneur behind the internet giant. Lucky, just lucky. Reporter jack ma may be lucky. She also relentless, 15 years ago, he launched an online b 2 b website ali baba, no one would help him. I was rejected when i talk about it, they look at me strange. What, alibaba, what are you talking about . I went bab to china, with nothing, no money, nobody invested in me, but i full o confidence. I sold of american dreams. Reporter the hard work paying off. It did, it has turned into the largest platform, beyond btob online payments and more, making this 49yearold former teach worry taught himself english worth nearly 9 billion. Today we have lots of money and we are careful for every penny we spent. Reporter ma is a different sort of chinese businessman, hes funny. Here he is in stamford in 2011. Are you going to boy yahoo . A good question. Yes, we are very interested if that. He has a knack foranalogy justs. This talk is just like a peace talk on the united nations. Its very complicated. I i call myself like a blind man riding on the back of blind tigers. Reporter he insists on telling everyone about failure. Like most company, we paid hundreds of thousands of mistakes. We made so many mistakes. We were so stupid at that time. Jack ma believes you dont learn from other peoples successes but from the stupid things they do. As the company he founded prepares to go public. He says his business philosophy is customers first, employees second, shareholders third. He remains a dreamer who defies critics pence and outside china. We find the best managers of finance, tech following and parking. You put them together. My job is every day tell them the dream. Reporter for cnbc business fuse, im jane wells. Joining us now to talk more about the ipo is daniel easternst. I imagine you went through a lengthy per spectus. If you were look at the red flags if they were any for you what would they be . Let me take a step back. We were bearish on internet fames and we have a sell on 26th and holds on facebook and google largely because valuations were in support of real earnings growth. If you look at alibaba, they had a slowing in the middle of last year, sales growth accelerated in the inteb december quarter. They have 44 net income margins. So its a really well run company. If you look at china, its highly fragmented. A lot of the infrastructure that amazon and ebay can use here to serve customers they dont have. So they have to put all that towing. So its a real problemsolving company. So this is a real company t. Valuation is somewhat reasonable. I think on the internal numbers, about 34 times trailing earnings, the growing earnings 100 . Its 34 times earnings. Earnings were roughly flat. Amazon 87 times earnings. So this is a real company. Its a great business. Its well run. But, certainly, there are risks. Competition is growing as people come online. As an infrastructure comes there. Other competitors can now use. So i think that for the first time they actually might start having real competition and the other fundamental issue that i think the u. S. Investors have to look at is we dont have beat on the street there. We dont know whats going on, on a daytoday basis. Amazons back box. But at least we have some sense of their business. Wherewithal alibaba, its hard to say matter going to happen in the business. I think thats a really big risk. What does this say, though, largely about internet valuations. You said in the 7 00 hour, i said, given amazons razor thin margins and these guys with the huge margins, you said, actually maybe the opposite way around, this could put pressure on Companies Like amazons valuation, people will look at an alibaba, which actually has real profits. I think thats exactly right. I think people look and say, hey, we can go up to this. I think i ache that, you know, your former take, which is reality valuations got out of whack, relative to growth rates. We had a 100 rise in internet stocks last year and a rise in earnings. Somewhere in there is an air pocket we are beginning to feel now. At some point, things come home to roost. Face book is not exactly cheap. They trade 25 times ebita. Its twitter is resetting it. I think thats what i like about alibaba, its valuations and growth rates are supportive. Lets talk about yahoo. Given they own 22 of the company. What does this say about yahoo Going Forward . At this point is the honeymoon over. Do we have to base them on what they are actually doing or . Yeah. Thats probably the number one question most u. S. Investors are looking at relative to the alibaba ipo, take a moment there. Its 22 yahoo preipo, 35 i think, 33 from a soft bank in japan. So youve got half the Company Owned by investor was arent involved in the daytoday business. At some point are exiting. I think we will see large share sales into the ipo. So its never grit to have big exits in an ipo. Thats another big risk for alibaba. As for yahoo, certainly, once we kind of set what this number is, then it becomes, lets not look so much about the valuation of yahoo. But what is yahoo . Where is yahoo going . Yahoo has had a couple different business models, growth is kind of mediocre in their core business. Theyre investing a lot in proprietary content, which means their costs will go up. So now we actually go back to, forgetting the valuation of yahoo, we look at, what is yahoo doing . We have to figure that out, dan we have to leave it there. We appreciate it. We will tell uma r tell you, marissa myers, you will hear from her indirectly. Two quick points, who will be the buyers . Are there enough stock buyers to absorb another ipo . We have a move moving futures higher than they were. According to numerous reports. Vladmir putin spokesman saying he is willing to be more opened to doi log to resolve the ukraine crisis, according to at least one dproup in the region. So some soft or softening comments coming out of the putins people about resolving the crisis through dialogue, whether or not you believe it or its accurate. It is moving futures . Futures are moving higher, they are now higher than they were prior to that, so perhaps a little bit of a bid. Its if same old same old with him. Right . He steps back a while, says he will talk. We dont reach an accord, or we do and its broken. We just want to hear from putin. Hear something, right . You have done business, jay, if russia . Hear him. Would you believe him . As somebody who has done a lot of business if russia . Not necessarily. Hoo es the vice chairman or vice mayor when we get in at saint petersburg, so we didnt know him that well. I dont know, i dont trust russia, itself. Coming up next, why ceo john rogers thinks Western Union will transfer profits to your portfolio. We will get his picks when we return. All right. Our platinum portfolio is expanding with the addition of yet another all star investor. Joining us john rodgers, chairman of aerial investments which has 9 billion under management. He runs the funds up 12 of the year. 15 in three years. They consider themselves longterm investors with a time horizon of three to five years. In fact, some of the Stock Holdings have been there 28 years. John rodgers, you got to sell those radio and Railroad Stocks my friend. Before we get to some of your pick, becky was telling me you were out with the annual meeting for warren buffet. Was there anything that took away that surprised you or made you want to boy or sell an investment you currently have or dont have . It was pretty much the incorporation of his core values we under stootd in so deeply. So there wasnt any changes in our philosophy based upon this weekend. So no change there. Lets get to some changes you do have t. Most or one of the most recent stocks you have bought, john. We have been adding to some of our favorite fames have gotten cheap. Our gameing stocks have been crushed all year. We think theyre bargain prices, International Game tech following selling at 11 times earnings, we think is our best bargain into todays market. We seen a proliferation of markets, casinos if you that you and hawaii have casinos. Is that your thesis or a core business . We think slot machines are here to stay. It is a core business. You are right, casinos everywhere, it is also a global business. You will see more and more in asia, more and more in latin america as governments are finding ways to generate revenue instead of having to raise taxes. Your other pick, Western Union is interesting we seen a proliferation of possibly payments, its a little off the radar, everybody says cash is dead. Wouldnt that mean Western Union will suffer . Is there we dont think so. Especially in the Global Money Transfer business. You are moving money around the world. A place where cash is very important. Even though there are these new technologies, we think the families that use Western Union depend on it leak cash. I want to go a little Bruce Springsteen on you if i can, janice capital had glory days of its own, its one of the high flying funds that benefitted from the internet boom. It fell to earth. Its come back a little bit. Why are you so bullish on janet that has a name that has negative connotations visavis the internet stocks. We think its a relative price. When you look at t. Rowe price, they sell at higher multiples than janice. Janice are more diversified than ever. Their fixed physical business is doing really well. The intech business is strong. We like the diversification. Theyre making progress with tear moves to sell their products in all different types and ways around the world. Okay. And because janet yellin will speak today, john, i have been of the camp that we know Interest Rates will go up at some point, so you have to invest for it. I am not caught up as much as the wind. I know some people are. As a fund manager, do you care when rates go up . Well, were in it for the long run, you know, so we dont care too much. We are looking at whats happening into the long run, three, five, ten84 horizons. So we think janet yellin will make the right decisions for our country and the economy. John rodgers, boom, boom, boom, we appreciate it. Have a great day, take care. Thank you. Still to come this morning, we have jim cramer live from the new york stock exchange. We are going to talk to him in just a moment. In the meantime, check out the futures. They have improved on this news that putin is opened to conversation. You can see right now the dow futures are up 73 points, s p futures up just over 6. The nasdaq is up by ten. Skwaux squawk box will be right back. With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. At your ford dealer think . They think about tires. And what theyve been through lately. Polar vortexes, road construction, and gaping potholes. So with all that behind you, you might want to make sure youre safe and in control. Ford technicians are ready to find the right tires for your vehicle. Get up to 120 in mailin rebates on four select tires when you use the Ford Service Credit card at the big tire event. See what the ford experts think about your tires. At your ford dealer. Lets get down to the new york stock exchange. Jim cramer joins us right now. Weve been watching the ten yi and the yield on that, now back above 2. 6 . Does it concern you to see it even below that this week . I think this is what its all about. We keep talking about bubbles. The bubble is in the bond market. Anybody seems to be able to get money in the bond market that allows deals to occur. I know the bubble in the nasdaq is rapidly deflated. Not the bubble in bonds. Theres just a shortage of high quality bonds, people reaching for yield everywhere. If anything that is what im most worried about, not the stock market. Jim, paits brian. Good morning. With alibaba youve bon bob pisani pounding the table about liquidity do you think there is enough buyers out there to absorb what is going to be one of the biggest ipos in years . Absolutely not. We had a downgrade of ebay. You have to tell ebay if you want alibaba. The in et tricks are not metrics are not that good. At amazon, the gross margins. Google, because they have a great search engine, you have to sell all the ecommerce plays. Thats whats going to happen. This is look, im not going to call it a disaster, thats too bombastic. Theres there isnt money for 20 billion deal. There isnt. Isnt there an argument, youre making the argument the other companies effectively are overvalued. There is a company that has real profits and margins. Hes saying the money has to come from somewhere into i know. The point is everyone will see the other things because theyll look at this and say the metrics are better. Its difficult to own ebay and alibaba. I dont like alibaba, the company. I think it was inflated by this november singles day. I think that a chinese ipo is not what i want. I think we have to remember the communist party, it isnt talked about very much, controls commerce in china. I dont want to every time a pmi comes in and its bad people will sell alibaba. This is no the a company im saying is a blue chip. So i think that everybody loses on the alibaba deal. Everybody. With the possible exception of yahoo . The numbers are real . Do i think theyre funny. I dont think theyre phony. I think theyre pumped. They were pumped when twitter came out. Now what does that mean . Bumped meaning its the best time in the world to sell alibaba. Because it may not get better than this. Got it. Jim, its great to see you. See you again in a few minutes. Were going to wrap up with a couple big weeks for deals and our guest host jay jordan of the Jordan Company will tell us if the deal train will just continue to roll right ou. 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Is that part of the reason youre worried about the market. Very robust activity. Means theres a lot of liquidity in the markets or the banks are doing some of the things they did back in the mid2000s which is not healthy. Some of the things like . Lending, pick toggles and the coveted light loans and coverage ratios are very, very poor. Everybody forgets about what happened back then and now well, i want to get to you on the stanford thing. I would argue to some degree on the private equity stuff most of those deals did not fail oddly enough. The pick toggles let them survive in a way. Well, youre partially right. What it allowed them to do is restructure. You have Good Companies with bad capital structure. Money was lost but the companies didnt fail. Right. I want to get your views on a different topic. Its a controversial one. Youre on the board of notre dame, also on the invest ment committee. I chair the investment. You chair the investment committee. Stanford announced they would take 18 billion in coal related stocks and other types of assets, and theyre saying theyre not going to do it anymore. What does that mean to your whole world, the whole endowment world and more importantly to coal and other types of energy . We at notre dame try to be socially responsible. We have policies in place to reflect that. I dont we have not as yet deal with this coal issue. Ill be having lunch today with our cio in town and this is a good topic of conversation. Stanford, what they say and i trust what they say, but its hard to disengage if youre like in a hedge fund and a commitment to have a hedge fund that may have certain stocks in coal how do you disengage from that . Where the intent might be there is a little more complicated . How do you do it . There are certain sin companies, if you will, you guys cant touch . We do it going in. Its not in midstream. We let every money manager know here are the nonos for us. Its clear we dont participate in those. Now youre starting a process at stanford where theyre already in these funds so how do they backtrack . I dont know. I trust that theyll do it and it seems to be it will probably be very controversial in terms of coal and what it means to this country and what the jobs mean. Jay, thank you so much for being here today. Its been a pleasure having you. Brian, thank you for joining us this morning. Make sure you tune in at 2 00 for street signs. Im not saying thank you back. Tortured me with that frozen song. Youre dead to me. Good wednesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber at the new york stock exchange. What a morning we have in store for you today, the ceo of disney and whole foods talking about their quarters, janet yellen on capitol hill, the alibaba ipo filing, futures improving on the positive side. Tenyear yields 2. 61. Yellens testimony begins in about an hours time