Take your pick, mr. President. Thank you four a great two hours. Squawk on the street begins right now. Congratulations to the alabama crimson tide, winners of the bcs College Football championship for a second straight year. A third time in the last four years. What a run. It good morning, welcome to squawk on the street. Im melissa lee, live from the new york Stock Exchange. Lets see how were setting up on this tuesday morning. The futures look like were tulg back here. T take a look at the picture. Interesting Economic Data points out over there. Eurozone hitting a record high. But a measure of consumer and Business Sentiment actually rose for the second straight month in the month of december. A road map this morning starts in china, where young brand said samestore sales are set to disappoint. Is this a sign that a reacceleration of a timeless economy may not materialize after all. The ceo of sears is stepping down citing Family Health matters. Does the fund manager have enough Retail Operations experience to man the helm. Targets has online Price Matching. Is this a new chapter in a bruising retail price war, and of course, what happens to margins now . The Airlines Getting love today. Deutsche upped southwest from a buy to hold. Others get a downgrade. What is separating the winners from the losers. Lets get straight to young brands. Those shares are down sharply premarket. The parent of kfc and taco bell warning earnings for 2012 below wall street forecasts. Sales in china falling more than expected in the Fourth Quarter, down 6 . Yum citing a Chinese Government review of the countrys poultry decline. The last two weeks in december, exactly when that government report came out and raised those questions. Thats where they saw the most impact. I think they have a small position. Thinking about 63, 64 might be a good level. The stock is already down 10 . This was new news. The company was not prepared for a longer problem here. They said it was short term. Theyre no longer saying that. It could be a six to ninemonth head wind. That said, wellrun company. Kfc has done quite well there. Unwilling to panic just because i think they could already have addressed the situation. At the same time, you never want to see a government report saying, be careful, stay away from kfc. Its still been a place where people have felt that theyve got the ag seal of approval from the United States. But that seems to be, you kn know they had already told everybody in china that they had ceased getting shipments from this particular farm where these chicken samples came from back in the summertime. When mcdonalds addressed the issue, because they were also the subject of this report, they ceased getting shipments from that particular supplier the day before they came out with the statement. But for some reason, yum is feeling a huge impact here. 44 of the 2011 sales came from china. So this is a huge part of revenues. In china, people go to u. S. Chains because they view food safety at u. S. Chains as better than local brands. They have two suppliers lined up. Thats one of the reasons why i would think that you could, i dont want to say take a shot, but they come back time and time again. You bet against novak. Howard schulz at the 48, 49 level for starbucks. At the same time, yes, its absolutely true. This is a china play. So you want china to be hitting on all cylinders and not falling double digits. Amazing this morning how quickly you see a yum, say, tweet or headline, and how quickly the conversation turns to a nike or other companies who are heavily relying on that country. Is the situation comparable or not . The last nike quarter looked a little better. North america has been very strong. Nike has a new shoe coming out. I think youre absolutely right to worry about anything china. But i think that nike is a twoquarter phenomenon. Yum is this quarter, and maybe next quarter or the quarter after. China is the big conundrum. Because you have to think, well, wait a second, are they picking on American Companies . Are they picking on us . To what extent does that add the unpredictability of the Chinese Consumer increasing their spending, the idea that that could be fine, but we have to keep in mind that the government might do things that are unpredictable and not necessarily good for those companies that are outside of china operating . I think we got into a groove which said that anything chinas good. Oh, wow, someone expanding in china, bf corp expanding in china. Now youre saying, it comes with political risk. Im kind of struck by the fact that theres been a spate of bad news about our companies in china. I want to put two and two together and say, wait a second, dont be as enthused about a Chinese Initiative in that not everything in china is working out. Iron ore, almost return to the material stock. They need the materials. Yes. They need thats a very good way to put it. Not Colonel Sanders necessarily. General cho is finally more powerful than colonel. I know you like general cho. Deep fried. Deep fried. Extra crispy. Always. Youve always stood for higher cholesterol. You know that. The chinese mandate that you have lipitor with your you need the lipitor. Now its generic. Meantime, Sears Holdings announcing chief executive is stepping down on february 2nd. Family Health Matters are being cited as the reason. Eddie lampert will have the role of ceo. The news coming as the parent of sears and kmart reports a 1. 8 drop in samestore sales ending december 29th. All of a sudden the discussion is about lampert himself. We know hes been on the board a lot in the company. Is that the same as Running Stores across the country . Hes been saying, look, i learned a lot about Morgan Stanley. I come back to, was he really running the company the whole time . There was a big a strategy developing by ambroseio. Obviously theres a Founding Member who is sick. This is not a kinnard. However, i was gratified to see those sales. Theyre not down as much as i thought. A rising tide rises all boats, as i told joe. Whirlpool, one of the best performing stocks in the s p 500, if housing continues, lampert will finally be able to explain why he did this to begin with, other than real estate. Because remember, the real estate shut down the sales. Remember, they got the better of home depot in a previous transaction. So real estate went from positive to negative. And then housing went from a positive to negative. Housing comes back. Gary bolter, my favorite analyst is saying, its still overvalued. He still thinks its overvalued. At the end of the day, samestore sales are still coming down. Is it a financial story, or is it a i mean, do you look at it purely on the basis of what they can generate in terms of cash flow . He manages for that, the big knock against them is that they cut costs dramatically, underinvested in the stores themselves. They started to look rather shabby. I dont know. Sears is just one big conundrum in terms of an investment based on what youre viewing it as a retailer. Is it best buy with clothing . I dont know. Best buy with clothing . Is that a good thing or a bad thing . Is Eddie Lampert going to say im going to reinvent the retailer. The numbers arent that bad. Theyre much better than best buy. They were quite good. Thats where ambroseio was putting a lot of effort into it. There is some traction. Do you just manage the cash flow and try to continue to shrink the cap in some way . Theres always been ulterior motives attributed to mr. Lampert, isnt there . Not necessarily in the interests of i was with someone the other day saying, Minnesota Vikings were a real estate play. Thats kind of over. The idea that theres great real estate value there. Although what happens if the possibility that rents go up dramatically in some of the Shopping Centers theyre in, maybe it turns out to be not that big. Although jcpenney, price war, target, price war. Maybe the takeaway is retail is too hard right now, including sears, jcpenney, including target and walmart. The online component of your sales is increasingly what upgrades, downgrades, all about how ecommerce initiatives they dont expect will pay off as well. Home depots ecommerce initiatives have been amazing. Theres so many things going on home depot, one more thing frank blake has done. Lets not forget, housing can do so look at pier 1, how well these have done. Anything that spruces up a house, thats already bottomed in price, including a kenmore washer and dryer. Not bad. No, not bad. Sears is its own animal in so many ways, including the idea its a control position of a hedge fund that really should be treated more like a private Equity Investment in some way. Although hes already been paid on the appreciation every year that took place for sears for quite some time. As opposed to private equity where its only on the exit. Its very interesting. I just dont know that youve got the hedge fund manager, with the upcoming herbalife meeting. Its funny, if lampert were short sears, would he be telling you, hes not a promotional guy, hes a very quiet guy. I met him when he was 14 at goldman sachs. Eddies done a remarkable job as a money manager. Lets not forget that. No, absolutely, auto zone and a number of the other positions have been very strong. I think the fact that sears is still alive and kicking is rather remarkable. Even though its bleeding slowly. Does anyone here shop at sears . No, but i dont necessarily have the barometer i dont shop at all. We live in manhattan and its a different lets me give you a costco story. One of the single best things, target and sears, i had a bad experience from costco nearby. I got a call from costco on my cell phone saying, listen, i want to know the circumstances of why costco did not treat you well. There are retailers in this country, how great is costco. Youre going up against costco if youre sears. Who can compete with costco. Speaking of competing lets talk about target and what theyre announcing this morning. Theyre announcing that year round it plans to match prices online of other online companies. Its really upping the ante when it comes to the lowest prices out there. They want shoppers to feel confident that when they go to target, theyre going to get the lowest prices. Period. Thats a huge it wins me over. I happen to like shopping at target very much. I like to shop at amazon. I like to shop in general, david. Weve talked about that. I am aware of that, yes. Now, this is a genuine price war. A very good investor, if youre listening to our dialogue about amazon yesterday, emailed me and said, are you guys crazy . Amazon, look at the pe, look at the valuation. That actually works in their favor in a price war. Because they almost have an unlimited way to unlimited buyer power. Remember, this is a company that hasnt been constrained by earnings. So i dont want to be in a price war with them. I dont want to own target. You dont . Amazon will win. Everybody loses. They said they would be willing to reduce cash flow, which tells the investor that, yeah, they will match those prices and maybe even go lower. They dont care about margins. What a terrible enemy to have. Yeah. Someone who doesnt care about gross margins. Remember u. S. Surgical . I certainly do. Suddenly Johnson Johnson said were going to go into this business and cut the margins to were going to come in well under u. S. Surgical. Because its still higher than our businesss gross margins. People understand at home when you have a competitor that doesnt care at what price they sell stuff, and youre in the business of trying to meet wall streets estimates, holy cow. Were going to be talking eli lily later today. If that ever changes, that dynamic that bezo seems to demand that respect from his investor base, they know that potentially they can turn on the margin switch. If that dynamic ever changes, this may change. But if it doesnt, hes empowered to conceivably compete in a way that one of the criticisms of the upgrade at Morgan Stanley yesterday is youre going into an earning season that amazon shows a weakness because theyre willing to take a few bullets for a longterm gain. Amazon, we remember that as being one of the great football price targets during the 1999 period. But people stay home, they shop amazon, people like the ease of amazon. Yes. It is a delightful site. They use this terrific software. The tipco software which says, listen, i saw you liked that book on general krueger, how about that book on general eisenhower. Amazing how they know that. Hey, im going to school against amazon and google. Thats smart right there. Thats a suma stock. Record high on amazon yesterday. Thats the way you do it, right . That, and a better seed. Well get to that a little bit later. What a moment. As jim said a moment ago, we are going to talk with the chairman and ceo of eli lily later on. Set to lose patent protection later this year with cymbalta. And live from ces from las vegas, how the wireless chipmaker is with everything from the cloud to cars. Were back in a couple of minutes. [ male announcer ] some day, your life will flash before your eyes. Make it worth watching. The new 2013 lexus ls. An entirely new pursuit. You know my heart burns for you. Im up next, but now im singing the heartburn blues. Hold on, prilosec isnt for fast relief. Cue up alkaseltzer. It stops heartburn fast. Oh what a relief it is Deutsche Bank out with a couple of calls on the airlines, upgrading southwest from a buy to a hold. Deutsche bank says it feels southwest fresh off a 52week high is poised to ben git from the acquisition of air tran but sees jetblues earnings lagging those of its peers. A fire broke out yesterday on an empty 787 dreamliner jet at bostons Logan Airport. So the latest in a couple of problems with the new 787. Jim, you had just mentioned southwest yesterday, saying you never talk about airlines. But you had to mention southwest. Sometime, the chart is the best of the airlines that ive seen in a long time. The air tran acquisition, very good. Theres so many notes out today, that energy is going down in price. Thats always been the variable that no one can control. I think weve all flown planes and would be shocked that, hey, this is an extremely full flight, will you please put your luggage where you cant find it. I do believe southwest, after what i thought was paying too much for air tran, was able to rationalize this. I like the Deutsche Bank upgrade. Then it came out. Thank you. You know, yesterdays phil lebeau report, you watch the stock shrink as you see the smoke coming. Boeing is one of the bestrun companies in the world, would i fly this thing. But the technology of a new plane obviously challenged. Interesting. Weve had gordon bethune, he calls it a teething problem. Which i guess happens with every new model. Just rarely on such a public scale, right . This is an operation now. You need some gripe water. It still works. I dont know if you ever used that. Thats a way to be able to when the kids dont feel well, teething problem. But i will point out, it may be a teething problem, but theres not been a cancellation of orders so to speak. But there was another united air, going to airbus, ive been saying the way to play the aerospace plays, is to go with the united technology. If one wins, and the other loses, its just safer. A couple of points off a 52week high here. Do you switch over to others . I agree. There was a little note underneath us, like right there, oh, like a jimmy kimmel thing. It was the most exciting thing to happen in the game last night. Were just way too concerned with the notion that phil lebeau was going to come on and Say Something negative, because he covers a thing in a way that i feel like, wow, the dreamliner is not ready yet. As we go to break, we did want to let you know that a restaurant pioneer has passed away. Mcdonalds honorary chairman and former ceo ted turner died yesterday at the age of 80. He was known for shaping the restaurant into what it is today, for the domestic and International Expansion plans. In 1958 he wrote the companys First Operations and training manual, which is still the blueprint for Restaurant Operations today. Did they talk about him when you did your hes legend obviously in and out of the mcdonalds circles. Served in the role until 1987. Remained chairman until 1990. He is survived by three daughters and eight grandchildren. Wow. I dont spend money on gasoline. I am probably going to the gas station about once a month. Last time i was at a gas station was about. I would say. Two months ago. I very rarely put gas in my chevy volt. I go to the gas station such a small amount that i forget how to put gas in my car. [ male announcer ] and its not just these owners giving the volt high praise. Volt received the j. D. Power and associates appeal award two years in a row. This is 100,000. We asked total strangers to watch it for us. Thank you so much. I appreciate it. Ill be right back. They didnt take a dime. How much in fees does your bank take to watch your money . If your bank takes more money than a stranger, you need an ally. Ally bank. Your money needs an ally. Lets get cramers mad das dash. We already do have earnings season under way with monsanto. Let me tell you something, this is the real kickoff, monsanto. Latin american sales incredibly strong. This is a Biotech Company not unlike theyve got new drugs, new seeds, they are doing everything right. Latin america, also the United States, monsanto is just a feelgood story. Nothing to do with washington. Youve liked it for a while. Yes, i have. Signer semiville. T. J. Rogers, a terrific manager. But hes not in apple. Being apple is no longer something that you want. I think thats im being facetious there. Samsung reported good numbers. But this is a play on everybody else but apple. They do