Transcripts For CNBC Squawk Box 20130124

And stuff. I think the first one they have is a screen one. I think eventually theyll bring out one that has a qwerty keyboard, as well. Netflix, we use this. You can get old episodes of law through your playstation. You can have it put right into your television. See, Video Streaming Service posting a profit of 15 krevents a share. My blackberry makes a sound every time i get a message. Are you kidding . Every time it buzzes, its either itunes or netflix ive bought something. Now, who is doing that . I would assume the kids are doing that. Like every minute. Its like, oh. You know that sounds will annoy you. Thats okay. Can you does it bother you . No. I feel good. I feel like im im going to send you emails. I feel like im involved. Did you see what facebook causes in people . What . Loneliness, envy, jealousy, depression. Here they are sitting in their dpred depressing basement and theyre seeing these people doing these the lives theyre lead sg like, my life is horrible. Did you see that . Facebook makes you depressed. It doesnt surprise me. Especially when people are checking in on people that theyre not friends with any more. Right. Its like, look at what im doing. Everybody else is living this great lye, but theyre not, either. Theyre on facebook. Pretending. Yeah. Probably pretend vacations, pretend girlfriends. Revenue Beat Estimates that came in at 945 million. The company added 2. 1 million subscribers for a total of 27. 2 million. Ceo Reed Hastings spoke with our Julia Boorstin exclusively about future growth. Now, if you look over the last year, from the beginning of the year to the end of the year, nearly 10 million subscribers. What we want to do is keep making the survey better and better. Some quarters we come in above forecasts and some quarters below. Its more of a forecasting issue than a business issue. And, really, whats happening is internet tv, this click and watch, the control you have, being able to watch on an ipad, all of those things are very powerful and more and more people are doing that. And netflix shares jumped more than 30 on the news. Stocks still well below its alltime high back in mid 2011. Do you know, querty, did they make that up . I thought it was qwerty. Yeah. Why is it called that . I dont know. Honestly . Oh, no. Its the first line of the keyboard. Yeah. I didnt know that. I was trying to trick you. I didnt, either. The control room told me. Oh who . Dave evans. Snake. You saved your rear. Yain that, either. And i looked down and i go, holy holy cow, i didnt know thats what it was, either. Holy qwerty. Yesterday stocks were up once go. The dow is up nine sessions out of ten in a row. As many foourchs futures and nasdaq futures are indicated slightly lower, but the s p 500 was up yesterday for the sixth strayed day. It was not, by the way, had a sevenday winning streak back to october 2006. If things were to turn around today, we could break that session. Well see what happens. We have a lot of earnings coming out before the bell. Obviously, technology has been deriving things over the next couple of days. It had its best day in a year and ibm made up for all of the dows gain by 60 . Also, take a look at ohio prices to 9550. And the tenyear yield at this point has jobless claims. Economists are looking for an upset aftervery low numbers the last time around. You can see right now that the dollar is mixed this morning. Its down against the euro, which is at 113358. And gold prices are down, 1,678. 20 an ounce. Michael corbett says the bank has the right status to generate future growth. Speaking at the World Economic forum in davos, he tells cnbc that several years worth of revamping efforts are beginning to pay off. Over the last year, weve simplified the company a lot the. Weve become smaller, weve become simpler. Corbat took over in october after the resignation of chief vickram pandit. Very sharp in the stripes. Yeah. The gegco, do we have a shot at him . No. That looks pretty good. Theres product in there. What do you think, its water . There is product. And, you know davos, they tend to walk out with wet hair and it turns to ice. But people dont look that good in davos, normally. Thats true. He looks like a banker there. I think he has a lot of potential as far as his looks go. In the World Economic forum in davos is in full swing. Lets get to andrew buzzing in the mountains of switzerland. Youre a big applephile, too. Youre hoping people look good in davos . Whats going on here . I was going to we have a very, very we have a beautiful, gorgeous guest to my left right now. Guest. Jen bistamoyo is here. She is davos woman and here we are is that is not right. And you had bed head yesterday, appeared rue. Did you ever look over here, it was like a big lump. He goes in there and is does a lot of stuff. You didnt tell him that . Well, i didnt want to tell him on the air. Imng to embarrass you on the air. Tell me on a commercial break. I didnt notice, andrew, or i would tell you. Guys, thank you thank you, becky. You guys were talking about blackberry so. To drop some names last night, we have different with orstin hines. I should tell you, jamie dimon and lloyd flankfine were there. What was the thing they wanted to see . They wanted to play with the blackberry. Guess who else was at the table . And this was, i thought, pretty cool even though im not the biggest sports fan in the world. Derek jeter. Our producer, she got a picture with him. And i think that made her whole trip, right . Shes right there and shes very happy and shes smiling. Shes kind of embarrassed. Anyway, David Cameron arriving here this morning. Yesterday we talked about what he was proposing in the uk in items of potentially getting out of the eurozone. Today, he took a different tactic. We talked about not raising tax rates, but as corporations around the world both affecting issues in the uk and elsewhere are becoming a real issue. I want you to take a look at this piece. Individuals and bess must pay their fair var. And businesses who think they can carry on, they can keep selling to the uk, and selling uk tax arrangements are for you to wake up and sell the company. That comment, by the way, about coffee is actually about starbucks which has created some problems because theyve been avoiding taxes in the uk. But take a look at this quote right here. David cameron not making friends. Labor mp Dennis Skinner says it was gruesome for the Prime Minister to be heading out of austerityriddled britain to wine and dine at davos with 50 top bankser who helped create the economic crash several hundred tax avoiding milliona e millionaires. A lot of people talk today about a report. There was a report earlier this morning that mr. Oh lund discovered averting. In total, the report was said to be untrue. We have a lot more to come, by the way, including a huge interview with ray dalio that were going to do at 7 30. So stay tuned for that. But in the meantime, the beautiful guest i was talking about, were going to get to her right now. She is, i think, davos woman. Youve been here for 12 years . Something like that. How many years have you been here . Something like that, actually. I cant believe it. But yeah, off and on. Joe, we were talking about apple. But one of the things and you wrote the book on china. One of the big issues that came up in the Earnings Report is margin compression in part because their costs are going up. Yeah. How much is that going to continue . How much is that going to be a problem . And what other companies is it going to affect . I would answer this in a couple of ways. First of all, we tend to get focused on wages and wage pressures. Its important to be focused on that, but i think what that is comes down to what . What i would suggest is that first of all, need to not just focus on wages, per se, thats important, but think about the broad r concept and see what the implications might be. But the other quick thing i would say is 90 of the population lives in the emerging woorld. We have no idea whats going to happen yet and to other places where actually there could be significant cost businesses. When you think about labor, is this going to hit the other atlanticmakers soon. Its robotics. Feeding gene into the sorry. Will electronics wps be affected like this . Yes. But i think other companies around the world are looking at this very seriously. You mentioned energy. People have talked about energy and shale and fracking before, but not like this year. You were there about a year in advance. Your sense of how quickly this will happen . I will tell you, its not built into the market at all. I think its right not to be built into the market. One of the things that i wrote about in my book last year that i think it will kind of be overoptimistic about what the implications of the revolutions could be. Could the United States be Energy Independent . That would be fantastic. But there are so many effects that people dont factor in. Are you a believer, by the way, that oil could go down to 30 or 40 a barrel . No. No. Somebody last night was making that observation. I do not believe that that is the case. In the past, ive woshgdz closely in oil and gas and i think those people are missing the structural implications. Were living in vary unique position. This is vary unique time in the history of the world in terms of population. The population pressure themselves i think will raise the floor on the oil prices. Your sense on the mood of an economy. Steams you come there and you obviously things dont always always come through. Northbound suggested its because the adjectives are fun. Do you buy that . No. I would say the last couple of years, people were pretty negative. I have to say, though ive only been here a day, people are pretty positive this time. A bit more optimistic about what might be happening. I wouldnt say its time to pop champagne, but people have been more positive this year. Thank you for being here. Joe, becky, back to you guys. Well see new a little bit. We have a fun segment for you at 6 30. You do. I looked through some of the stuff, andrew. Youre a regular skier. Its a little embarrassing, but well show it to you. Dont give it away. But your heel there it is. Your heel is not tethers to the ski, right . Thats what makes it right . This is a different type of skiing that i had never done before. Oh, god. Good. Now youve got the piece. Youll see it. There might be a fall or two involved. Thats how your hair got messed up yesterday. Coming, whats a fair price for apple now that its below 500 a share . I can tell you right now, 467. 80. Do you hear cameron . I love that fair share stuff. Im going to listen to a politician about whats fair. And the newsmaker of the morning, a squawk box exclusive with ray dalio. Bridgewaters biggest hedge fund. Dont miss it at 7 30 eastern. [ male announcer ] it was designed to escape the ordinary. It feels like it can escape gravity. The 2013 cclass coupe. Starting at 37,800. Welcome back, everybody. Take a look. U. S. Equity futures are indicated higher this morning, up by just over 10 points. The dow and the s p 500 have been on a huge winning streak. Down has been up for nine out of the last ten sessions. And the s p has been up seven sessions in a row. Well see how today plays out. Right annoy, the s p futures and the nasdaq futures are indicated slightly lower. Lets take a look at shares of nokia, the hand setmaker beating expectations, announcing plans to scrap its dividends. That stock at this point looks like its up about 4 cents. Apple shares taking a hit. Brian white joins us now with reaction. And, you know, brian, we can parse through these metrics and we can find out exactly what a percentage shortfall in these things. But it all comes down, you need to be a psychiatrist. At 700 versus 400. Its the same company, basically had the same prospects, same innovation, same products, same market share and same potential for Global Growth that it always had. It all has to do with investor sentiment. And at this point, you can see it right there on the chart. That tells you where it should be trading. I dont see how we can say it shouldnt be there or whether it should be there. Thats where it is, right . Its been a slippery slope. They ran into a lot of yield issues in december quarter that held back the demand for ipad mini, for iphone 5. The quarter was minus our sales, a tad lower than the street. Eps was better. Its the outlook that people are concerned with. They did change their outlook commentary in that theyre not going to be ultra conservative. Theyre going to give something realistic in a range. And one of the things we did earlier in the week is twaek or model for an iphone in june as opposed to what we taught an ipad in march versus an october launch. That brought our number down to right in their revenue range and our eps in the street. So we think they expected an iphone 5 in their future. On the way up, 200, 300, 400, 500, 600. All it was was you could have parsed the metric then and said this wasnt as good as we thought it was. But people didnt own the stock yet. People that wanted to get excited about the apple story didnt own it yet. When it comes to 700, everyone who felt bullish, everyone finally owned it and who do you sell it to at a higher price . Its simple psychology of greed and fear and everything, right . You bring up a great point. And this is what i give up, brian. I look at the numbers and i say theres no reason for me to do this. I need to take a psychology course. These guys have the best portfolio. And that hasnt changed. Theres very exciting things on the horizon, apple tv, china mobile. What they need to do is tap into this cash balance in a major way. Yeah. So a dividend thats higher than we previously previously had. And a 10 billion buyback over ten years, why not do 5 million back at 10 . Tlooefb doing that are to a while, too. People always put them down for it, but you cant deny it as 204 or whenever it is. Exactly. And thats what apple needs to do. At 137 in cash, they can do it been thats something to look forward to, as well. The minute they do that, though, people will say, you see, its over, right . Well, you know, i think they announced the dividends early last year and they need to hike it. You cant sit around with 137 billion. What would happen with the stock, do you think, if they did that. Not a sustained dividend. 3 billion in just over three years is kind of consulting. Over 600, they all have trouble. It doesnt matter who it is at 600 million. And i dont know how many of your peers said at 700, you know, they kept talking about the multiple, cheap, cheap, still cheap, 500, still cheap. Cheap is stock in the tech universe, cheap, cheap, cheap, cheap. 467 today. Still cheap. Cheaper. I mean, its trading at six sometimes cash, right . So it definitely is cheap. Gotta be a buy. I think one of the problems is just expanding the investor base. Who is in it . And thats cash, distribute i ing. I started at 300. Some of the big he market caps yeah. By far. Its 300 for a gadgetmaker. And then i get converted, everybody against converted finally, but then its like greenspan with the rationale exuberance. Its 5,000 on the dow and it went to 14,000. So urch right. I wish, you know, with ibm. I look up and then i call you brian. In china, thats what they call me. When we come back, the head of pimco is leaving. And when in davos, in this case. Andrew tries his hand at crosscountry skiing. Oh, my god. That is him. Yeah. I agree fully. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick. Andrew ross sorkin is reporting live from davos, switzerland. He borrowed sabers hat. I didnt know what happened to that, but hes going to be wearing it when he does his package that were going to take a listen to here in a couple of minutes. At what time . Its like in three minutes. Okay. In the headlines this morning, apple shares taking a hit. Yeah, thats one way you can phrase it, i guess. After the Company Issued a disappointing revenue forecast as well as iphone sales that fell below estimates, apple shares hit a high of 705 back in september. But has now seen about a third of that saved off and almost a 50point loser today. For china Manufacturing Activity rose this month to the fastest pace in tw years, monthly hsbc, they use a purchasing managers index. And it registered its fifth straight monthly rise and thats an indication that china may be coming out of an economic a deceleration, obviously, and theyre still growing more quickly than most other companies. Were about two hours away from the labor departments weekly report on jobless claims. The economists expected to jump and give back those big gains they saw last week. It was a fiveyear low last week. You remember the market rallied. It was 360,000. At that point, we had to get a housing start number and we were up sharply that day. Thats helped the rally. It has. I think its nine out of ten days that weve seen so far with the dow. Take a look at the futures this morning. So far, dow futures have been indicated a little higher, right now, up by just over 6. 5 points. S p futures are down. Nasdaq futures are weaker, as well. Theyre down by about 32 points. This is coming after a very long winning streak. We are speccing more news this morning, expecting some 3m and dow components. If you take a look at what happened in europe, all of this good news, the dow was unby 67 points yesterday. At this point, its three points away from its alltime high. Yesterday you saw a lot of movement. Right now, europe is trading slightly higher. The cac was up by about 4 points and in germany, the dax is lower by about 11 points. In asia, you did see higher closes. It was up by 1. 25 . The shanghai and the hang seng were slightly lower. Other markets in area slightly lower. Lets take a look at oil price these morning. Up by 32 cents, 95. 55 for wti. The tenyear is yielding at 1. 812 . Those jobless claims, that will be a big factor for whats happening in the market today. The dollar is mixed. Down against the euro, 1. 3326. Higher against the yen. Gold price these morning have been down slightly, down by about 9. 1,677. 70 an ounce. And we have some other news. We have been focusing on this morning, pimcos Neel Kashkari who has been on, a frequent squawk guest, he is leaving the firm. He says hes considering returning to government service, potentially running for Public Office in california as a republican. Cash kashkari has been a frequent guest. He oversaw the t. A. R. P. Program during the financial crisis before going to pimco in 2009. In a statement, kashkari says he has the obligation and the desire to serve his community through public service. I knew he would need to do this. He is out there, hes a republican, and he is right in the middle, the vortex of these caviar communists. Growth. One even became a guru. Macaulay. With the beard and hes up there goes ohm, ohm. Hes in the lotus position. There arent any mountains in southern california. I dont know where he went dodd that. Elerian. Elerian writes for the huffington post. Elerian is a huge caviar communist. Neel is a moderate republican. Yeah. But moderate republican in the land of pimco, he has a rash all over his body. It was only a matter of time. This is that time. The funds he set up said it was designed for really big downturns. You can imagine a lot of people were concerned about that. But they had run below what other performances had been, but thats because he sat up these funds, he said, to really weather the storm. Im with you, neel. I dont know how you lasted that long. Good luck. Theres a guy that might replace him. To andrew, how do you like that round . Im in the land of the caviar communists right now. You are. And liberals. We have caviar last night. Im not surprised. Did you, really . They have all these rich guys and theyre about cameron and its great. I warned you about the stockholm syndrome. Youre already susceptible to that complete ideology. Completely. Its all around me. You might reject it. This might be just what the doctor ordered. Out might end up rejecting it now that youre in the middle of all of it and you mitt come back a changed guy. Could be. When donald trump is your boss, you may have to change that a little bit. I saw that. I saw he may want to buy the new york times. He wants to buy it and close it down, which im all for. Go ahead, andrew. In the meantime, davos is not noenl for the World Economic forum, but for skiing. Not just downhill skiing, but crosscountry skiing. I am not a crosscountry skier, but i tried it for the first time. I took a lesson with a pro. And i thought i was getting good at it, so i decided, maybe against my better judgment, to take him on. A brief warning for viewers. I was so freezing out, i was wearing a hat. And what happened in davos should probably stay in davos, but nonetheless, for yao viewing pleasure, here it is. Were here in davos for our first stop. What do we need to do . We have to get decked out in the right gear. Hi. How are you doing . Im fine, thank you. Im going skiing, crosscountry skiing for the first time ever. Wa do i need to wear . Okay. So were all suited up and ready to go. Im andrew. Hi. Im yen. Thank you for doing this. This is the line, right here. Three, two, one. Im catching up. Okay. So you beat me. Thank you for that. Well, there it is. The whole production crew was laughing at me here, so i dont know whats going on back in new york, but that fall was that was a pretty bad tall. Anyway, thats whats going on here. Quick joe, im surprised there has not been some kind of commentary at this point. I had actual questions because ive never done it. With regular skis on, there are times where you need to do that sort of hockey i hate that. And it looks harder. Do the triangle. It looks harder to do with your heels not attached. Because you dont really have the edge. Exactly. But it was it was quite a sight. There was another fall that no one you know, guys that know what theyre doing going down like a tough slope and cost lots of nose dives. They know there are guys that can do it down a steep, blue slope. Cool to watch guys that know what theyre doing. I assume that you guys are just going to loop this for im not going to listen. This is going to go on for a year. No, i think were going to run it again. Braver than i am. Etty well. Were trying. A number of executives, by the way, you should know. I wasnt the only one out there. There are a number of executives who every morning go out and do crosscountry skiing before they go to the meetings. But they probably dont want me to name them because theyre probably supposed to be working. Anyway, we have ray dalio coming up in a little bit. Thank you, andrew. When we come whack, our next guest says that equities are historically steep. We will Welcome Solar managements executive head of equities right after this. This is america. We dont let frequent heartburn come between us and what we love. So if youre one of them people who gets heartburn and then treats day after day. Block the acid with prilosec otc and dont get heartburn in the first place [ male announcer ] one pill each morning. 24 hours. Zero heartburn. And dont get heartburn in the first place announcer at scottrade, our cexactly how they want. T with scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. Welcome back, everybody. The United States and european economies have been on the comeback trail. Investors are showing more signs of confidence as the dow gets closer to an alltime high. Joining us now is virginie mano. She has over 17 billion under assets and management. Its very nice to see you. Thank you. You say even though weve seen some gains, things are price i relatively cheaply when you look around at other Asset Classes . Yes, exactly. If you look at historical valuation, i think were at the beginning only of a reallocation of bonds into equities. This is only the beginning. I think in particular growth stocks, people have head away from risks in general. We are not overweight europe where we were very underweight, you know, a year ago. And i think the key is to understand that market move on the delta, the secondary services. We are going from pmis of 43 to 44 to 45. So were not at 51 like china is, for example. But still theres a healing in europe thats happening. Its going to be slow, though, and painful. But its happening. If you are overweight europe now, are there other areas that youre feeling less confident about or you think wont be the big growth . No. Im actually underweight the u. S. Not that i dont like the u. S. I like some of the areas that are doing very well. Housing i like. I like some of the consumer, like financials, but overall, given the size of the u. S. In the benchmark which is, you know, 57 , theres so many opportunities around the world. Europe, but also merging markets and asia that i think, you know, i want to spend some of that money to truly build a Global Portfolio of good, blue chips, high quality, High Conviction growth names. In europe, are there sectors or sights that you like in particular . I like industrials. Some financials, but i remain very cautious in my selection of financials in the sense that i dont want other leverage, i want, you know, good quality company. Some of them might have exposure, but im quite keen to stay with the core area because i think, you know, buying stock the way we do it on the street in a fiveyear basis, it is the ability in greece and italy and spain is still very, very unclear. Financials, some people are worried about the amount of regulation thats coming down. Are there particular stocks on the financials that you think are better served than others . Yeah, i think depending if you look at scandinavian banks, for example, like bnp or even if you look at the bnp in france, i think, you know, they are coming from so far particular by the bnp, that a lot of that is discounted. If i turn to emerging markets, i like indonesia a lot, i like thailand a lot. Even mexico. So there you can find some very interesting financials with strong growth support, mostly based around middle class growth and demand. Virginie, thank you very much for coming in. Thank you. Its been a pleasure speaking with you. Coming up, squawk box takes flight with the ceo of northwest airlines. Find out if the lowcast carrier still has love in the skies. Coming up, Hedge Fund Titan ray dalio, Andrew Liveris. A newspacked show, still ahead from 7 00 to 9 00. Announcer tomorrow, another squawk newsmaker. Live from the World Economic forum in davos, Goldman Sachs Ceo Lloyd Blankfein will be our special guest. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The allnew cadillac ats 2013 north american car of the year. For a limited time, take advantage of this exceptional offer on the allnew cadillac ats. [ male announcer ] how do you turn an entrepreneurs dream. Into a scooter that talks to the cloud . Or turn 30million artifacts. Into a hightech masterpiece . Whatever your business challenge, dell has the technology and services to help you solve it. There are the futures, not much happening. Well see. Whether the s p and the dow can trade higher when its got a drag like the nasdaq from apple today. And well finally get an answer on whether apple, which has been the favorite bull market stock for the past two years, at least, and well see whether, you know, with that story changing, whether that affects the dynamics of the overall stock market, because, you know, a lot of the good feelings, and the profits made in the stock market that gets maybe Retail Investors excited its come from apple. Although apple has split itself from the major markets have kind of split off from apple. Its gone down from 700 to below 500 and the market keeps getting new highs as thats been happening. It doesnt have the same impact that it used to have. Anybody thats bought between 465 on the way up and then from 700 on the way down is not like wow, im glad im playing the stock market. People are feeling pretty good if they bought netflix before yesterday. And comcast. Southwest airlines rolled out Quarterly Results this morning. It was, i think, nine cents a share, which was two cents ahead of expectations. Its an interesting story with what southwest has been up against and that is a rejuvenated sector across the board, with a lot of the former competitors getting together, getting to the, and lining up, and having a lot of success. Delta has been united, couldntent inal. Who knows what happens with american. Its a different world for southwest. In terms of charging for baggage. Now theyre charging for other weird stuff. Gary kelly is chairman and ceo of southwest airlines. Gary, i know we had some camera problems so were going to do this on the phone right now. We have a great picture of you which doesnt really do you justice the way that you look live. I cant see it anyway. So so pretty good quarter. But do you feel like this is an overall question, do you feel like its kind of a different world now that some of your competitors actually are giving you a run for your money . Well, i definitely think its more competitive. I dont think theres any question about that. This is our 42nd year. It has always been a very, very competitive industry. But, through bankruptcy, every single legacy carrier has gone through bankruptcy. And theyve gotten their costs down significantly. And it is primarily their labor cost. So that makes them more cost competitive, and then the other thing thats happened over the last ten years is you do have a lot of lowcost carriers entering the market. So its a competitive industry. Everybodys dealing with higher fuel prices, which puts upward pressure on fares, so, right now the industrys not growing. The capacity in 2012 is actually down, again, and thats what i would expect the industry to do. At least domestically here again in 2013. You look at how much money delta makes on the baggage gary, over 600 million. And even on your air tran flights that you took over, you charge for baggage. You do get a lot of advertising mileage out of not charging for bags, but eventually are you going to have to capitulate and start doing that . Now you can pay 40 and get on a southwest flight, you know, maybe 45 minutes early for 40. Seems like it might be easier than, you know, just to start charging for baggage. Well, our focus right now, and especially since 2006, has been on evolving the southwest product, and giving our customers more choice. Were also very aggressively optimizing our route network. And that focus has served us well. And i think thats what well want to continue to do over the next several years. I would never say never. Again the customers will tell us whether they would refer to have extra fees, or whether they would prefer to have everything bundled in. Were going to once told me he would never raise fees. He would never charge for baggage. But gary youre saying that never say never . Well, yeah, you always have to say never say never. But we have no plans to charge for bags here in 2013. Were going to get the camera fixed and have a longer interview next time. All right. Well be right back. At optionsxpress were all about options trading. We create easy to use, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius strategies, chains, positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Open an account today and get a free3month e ibd™ subscription when you call 18882800149 now. Optionsxpress by charles schwab. You name it. Ive hooked it. But theres one. One thats always eluded me. Thought i had it in the blizzard of 93. Ha never even came close. Sometimes, i actually think its mocking me. [ engine revs ] what . quattro missing the mark. Could apples disappointing results rattle investors today . Get the latest information before todays opening trade. The markets in focus. Trading at a recordsetting pace this month, where stocks are heading and what it means for your money. Whats squawking in davos . More ahead live from the World Economic forum. The second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernen. Andrew is in davos where hes covering the World Economic forum. Well catch up with him in just a moment but weve been watching the futures which are mixed this morning. Dow futures are higher, up just about by six points while the s p futures are down 2 1 2. Nasdaq down by about 34. A lot of that is because of what weve seen in apple. In our headlines this morning the dow creeping back towards record territory. Its close yesterday was the highest since october 21st of 2007. That happens to be the same month that the dow hit its record high. Of course, yesterdays gain was driven almost entirely by ibm. Without big blue it would have registered just a onepoint gain versus the 67point gain that it came in with at the end of the day thanks to ibm. Citigroups ceo tells cnbc that he is confident the bank is headed in the right direction after several years of scaling back and becoming more efficient. I think from a go forward perspective were very focused on execution, driving the consistency and quality of earnings Going Forward and i think were starting to show that. But as a team weve got to execute. Corbett spoke to cnbc at the World Economic forum in davos. Of course he took over for Vikram Pandit back in october. Mitsubishi is recalling nearly 15,000 electric vehicles in japan and in europe for a potential problem involving brakes. Its one of the biggest recalls ever, involving electric cars. And apple says that its going to get real when it comes to giving the street guidance. After the bell apple reported stronger profits. A miss on revenue, and iphone sales which also missed expectations. Jon fortt has more on apples new guidance. Good morning, john. Very buzzedabout earnings call. Perhaps the most buzzedabout moment, apples ceo announced the company will change the way it gives guidance. For those of us who cover the company awhile, the guidance has been sort of a joke. Kind of the earnings equivalent of a friend who says ill be at the restaurant at 7 00 so you know that really means 7 30. Apple will now say well be at the restaurant between 7 00 and 7 30. For awhile apples lack of accuracy was sort of a thrill for investors. Apple with lowball guidance, analysts would put their estimates a little above that guidance and apples results would below past both. In recent quarters the wheels have come off that cycle. Lately apples been giving a number and coming pretty close to it. Last quarter tim cook guided to 52 billion in revenue and apple delivered 54. 5. Under the new system apple might have guided to between 52 and 54 billion and delivered a very modest beat. Its interesting, ive been going over some custom charts i made over the past few hours because thats what we cnbc reporters do and the growth trajectory on iphone and ipad continues unabated. Also apples Gross Margins just contract on a toyear cycle when apple redesigns the iphone its highest margin product. Just happens that way. The 38. 6 margin this Holiday Quarter compares to a 38. 4 margin two years ago, when the iphone four came out. Seems to me apples main problem here might be a failure to manage expectations. Apple new pretty well in july and september that the end of the year would turn out this way. But they could have prepared the street better. Seems thats what theyre setting up to do, guys. Jon, why dont you stick around and stay for this conversation. We also want to bring in an apple analyst. Joining us right now is daniel ernst, principle at Hudson Square research. You heard what john just said about things. Whats your reaction to the numbers last night, and the guidance . You know, lets take kind of a step back. Yesterday, apple reported operating or cash from operations grew 23 billion. Yet after market the stocks down 50 billion. So they added more cash, or you know, it just expectations relatio reality, i think, are a little bit out of whack. And certainly is a valuation. But its still a great company. People still line up for their products. Iphone sales up almost 30 year over year. Ipad sales up 48 year over year. So you know, the company is still growing. But i think the problem is, outside of expectations is the reality is, apple is slowing. Theyre still growing but not the same rate that they had been before. So we have this company that investors and the market got used to a hypergrowth apple. Last year, apple grew revenues 45 year over year, and earnings grew 60 . This year, if were right, revenues will grow at 23 and earnings just 11 . So its still good growth for a company doing, you know, on an annualized basis, 200 billion in revenues to have a 30 operating margin. Its still a great company. Its still growing. Its still gaining relative share. But i think theres this sort of back to earth, you know, were exiting the stratosphere and coming back to more normalized, i can think of as the new normal for apple, is that theyre growing at a good rate. Just not a fantastic rate. So whats a fair valuation, whats a hair price if thats the situation, if were coming out of hyperdrive . Thats right. I mean, it feels like just yesterday we were talking about this with google. But i think the difference with google is that theyve never had that period of hyperactive growth. Right . Theyre going from 33 annual growth on the top line to 24 . So its a not as a dramatic change. And google has never traded at a hypermultiple. If apple were to trade on par with s p, roughly 14 times earnings, the stock would be around 700. The stocks below 500 today. They have 130 billion of cash, or 148 billion cash and 38 per share of cash in the balance sheet. Take that out, the trading closer to six times earnings. Do you think the stock is going to go back to that, daniel . Or is this a situation like joe has been talking about earlier where theres no one left to jump in and no more investors to get into it . Yeah. You know, i think you know, as one of your other speakers said earlier on a different company, you know, never say never. So i think that you constantly reevaluating. I think, you know, the smart call, and its a call that i didnt make, is to look at what was a very obvious change in the growth trajectory of apple, even six months ago. We could see it what do you tell people to do today, if they dont own the stock or if they do own the stock or do you tell them to stay in or to jump in . I think that those who have the capability to add more to a position. You know the day after earnings is never a great day. You kind of want to see and settle out. People who are not in the stock or had been before, i think its a good opportunity. Apple is not a broken company. Apple is not a melting ice cube. Apple still is growing. So the problem with a lot of sort of value trap stories in tech is that the earnings keep going down every year. Apples earnings are still going up. Just that theyre not going up at the same rate. I think its a fantastic opportunity. Ive been saying that since it, you know, fell into the range so ive been wrong there. But i think you always have to reevaluate, and take a step forward. But i think apple is still growing, theyre still theres no lines anymore if samsung is making fun of. Thats going to be a problem for me. Right now theres still lines and theyre still growing and margins are still high. Just not as much as they used to be. Jon . You know, i think its interesting that became was up so much yesterday powering the dow. This apple story is kind of like between the facebook ipo and ibm. Ibm does so well at managing expectations. Theyre an extreme case of managing both expectations, and their earnings. Facebook totally whipped it on their ipo by not correcting managing expectations. It seems like apple is sort of in that facebook wheelhouse trying to get more like ibm. Right now, theyre in the midst of a cycle where they redesigning a bunch of products. Margins are down. But in terms of the number of iphones that theyre shipping, very high. I mean, thats something that investors certainly need to think about. All right, john, thank you very much. Daniel, thank you. We appreciate it. My pleasure. The World Economic forum is just heating up. Lets get back to andrew. He has more from davos right now. Hey, andrew. Hey, becky. Weve actually changed positions. Were a little more behind the scenes here on the promenade right next to the congress center. This is where all the action is kopp happening. And a bit of news this morning, literally just an hour ago mario monti speaking about austerity and his worries that some of the policies taking shape in europe may actually slow growth. Take a listen. We all have an interest in saving, in containing public spending. But i think its against commonsense economics and history not to see the potential for economies of scale. Of your budget slightly less restrained than we are forced and willing to restrain our national budgets. A little more behind the scenes. Right here is where a security entrance is. Youre probably not allowed to talk on tv, is that right . I thought id try. The other bit of news this morning, David Cameron, we talked about, taking a real slot at starbucks this morning and tax avoidance, going after companies broadly but specifically without referencing starbucks, making a mention about what theyve done to avoid taxes in the uk. Take a listen to this. Individuals and businesses must pay their fair share. And businesses who think they can carry on, dodging that fair share, whether they can keep on selling to the uk, and setting up ever more complex tax arrangements abroad to squeeze their tax bills right down need to wake up and smell the coffee. Because the public to buy from them have had enough. Okay. Were running right now, through what is this heated bubble. We have a big show for you. Coming up at 7 30 we have an exclusive interview with ray dalio, founder of the Largest Hedge Fund in the world, bridgewater. Then at 8 00, we have a whole other bunch of guests. Stay tuned where you are and well see you in just about 20 minutes. We are looking forward to that. Big conversation coming up in just 20 minutes. We will see you very shortly. I still chafe listening to some brit tell americans they need to pay taxes, no taxation without representation. I mean we had a big remember what happened last time . 1776 was the last time we went around with this . Didnt work so well this time. I dont feel like paying any taxes to great britain. They spend it worse than we spend it. What for the wedding we got to the royals . God bless howard schultz, finally. You know. I hear ya. But hes pretty sanctimonious about a lot of liberal issues over here but wont pay taxes in britain. Thats cute. If you have any comments or questions about anything you see here on squawk, go ahead and email us at squawk cnbc. Com. Or follow us on twitter. The dow is up more than 5 in january alone. That is on pace for its best january since 1997. 9 s p within striking disance of 1500. The dow is just 3 blow its alltime high. Were going to talk Broader Markets right after this. Whats being said behind the scenes here at daf owes . Weve got the dish after the break live from the World Economic forum. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The allnew cadillac ats 2013 north american car of the year. For a limited time, take advantage of this exceptional offer on the allnew cadillac ats. The s p 500 is within striking distance of the 1500 level. The dow jones is closing at its best level in five years. This morning the futures are up a little bit. About 10 points. Our guest host is Scott Sperling, copresident of thl partners. Used to hand for thomas h. Living. Sure does. And from new york tom greenhouse. Cnbc contributor. I want to start with you, scott. I wouldnt necessarily expect you to be a market timer or individual stock picker. But doing what you do you need to have a valuation of the equity markets to decide on your strategy for what you do. Fairly valued, overvalued, undervalued . I think at this point its somewhere in the fairly valued range. I wouldnt say that its dramatically undervalued. As we look at whats happened over the course of the last really 18 months what weve seen is a series of cycles in the credit markets that have been moving towards relatively robust situations. That tends to affect what we do almost more than the equity market valuation. So we tend to focus on that a little bit more. On the other hand, the equity markets, as we say, looking at individual companies you can see a wide variation in the underlying value, and where those market values are relative to our assessment of the Intrinsic Value of that but overall the businesses are doing pretty well. I would say theyre doing pretty well. I think the expectation is for continued sluggish growth. And given that, the businesses that we look at, the businesses that we own, are generally taking a relatively cautious position in terms of investment, and expansion of employment over the course of the next 12 months, is the expectation. If you look at the Broader Market, i think thats basically what the Broader Market is doing as well. So if we have any ability, and im not sure we do, but if we have any ability in washington to alleviate some of the continued uncertainties, and as we not check off the uncertainties we were supposed to have made certain like tax policy, hopefully theyre not going to continue to bring it back and say, well, were not done yet. Because sluggish thats what really holds things back. Nobody likes the word sluggish. Over Time Companies have learned to deal with sluggish growth and do it pretty well. Makes you think if we could have regular growth i think one of the things that were seeing in these Earnings Reports, and the reduction in expectations for the year that have occurred in analysts reports over the last six months or so, is that the revenue side of the business is the one everyone is struggling with. American companies in particular have done a spectacular job at managing their cost base. And at trying to figure out how to do more with less. So theyve been able to use operating leverage to drive their earnings, and earnings growth. At this point, what we really need to focus on is revenue expansion. And that means making some investments, whether its in marketing, whether its in plant, whether its in people, thats something that you need a little bit more certainty on in order to do more aggressively. And thats what i think will take the market to the next level, if we get it. Okay, dan greenhouse. The market from time to time does get narrow and yesterday, as we pointed out, it was all ibm that give us a positive day. Is that something that concerns you as the leadership narrows and does apple do we need to worry about that casting a pall on the overall feeling about equities or is it all systems go, still . Yeah, i mean thats obviously something to be concerned with. I mean one day of ibm being the primary driver isnt something that im going to freak out about. But i think beckys point earlier this morning was important. Were worried about apples effect on the stock market yet apples fallen from 7 plus hundred dollars to less than 500. Dan, just to be fair, i stole that from your notes. This was your point that i took off of this. Oh, well. Thats why he thinks its so profou profound. Becky, thats a wonderful, insightful piece of information. I stole it from you. Hes really impressed with your logic. I loved the point. Thats why i made it. I was stealing that from you. I should give you credit for it. Becky, youre my best friend on the network. Thank you very much. Well see whether its right. Whether i said it or not the point is valid. The market continues to make highs and apples fallen and weve gone from fourplus percent of the s p to 3. 6 of the s p. Thats apples weighting. The rest of the market has done okay. Obviously thats represented by the indices themselves. But why has would you say that what youve seen with the other earnings that have been coming in so far, does that validate where the stock prices are . I would agree with a lot of what scott had to say about the market being not over or undervalued but roughly fairly valued. A position that, where an argument you could have made for the last several quarters. Were you bullish at all . I dont remember you being overly bullish over the last six months or a year. Were you . Well, bullish is a word i use hesitantly. Arguing for higher prices. Right. Because you havent been. You do use it hesitantly. Weve argued prices should be higher. Where ive been wrong is in subscribing to the new normal argument most the crisis. We had argued for equity appreciation somewhere below historical averages of lets say 5 to 6 or so and actually the annualized appreciation has been a little north of 8 . So weve had a pretty good expansion here, while the economy is mired in the new normal, the stock market is most certainly not. I dont know, weve got a claims number coming at exactly 7 30 which means we have to do stuff right now. So thanks, dan. Scott, youll be with us for the rest of the show. When we come back, Bridgewater Associates founder and cio ray dalio speaks exclusive to squawk box from davos. Were going to find out where the worlds Largest Hedge Fund is putting its money to work. At 1 45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. Surgery was successful, but he will be in a cast until it is fully healed, possibly several months. So, if the duck isnt able to work, how will he pay for his Living Expenses . Aflac. Like his rent and car payments . Aflac. What about gas and groceries . Aflac. Cell phone . Aflac, but i doubt hell be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a getwell card at getwellduck. Com. [ male announcer ] to hold a patent that has changed the modern world. Would define you as an innovator. To hold more than one patent of this caliber. Would define you as a true leader. To hold over 80,000. Well, that would make you. The creators of the 2013 mercedesbenz eclass. Quite possibly the most advanced luxury sedan ever. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. Watch shares of netflix at the open this morning. They posted a profit of 13 cents air share. Way better than what analysts were looking for. They were expecting a loss. Revenue also Beat Estimates coming in at 940 million. Netflix also added 2. 1 million more u. S. Subscribers for a total of 27. 2 million. Reed hastings spoke with Julia Boorstin specifically about future growth. Were continuing to gain momentum, to gain members and to gain content. But ultimately what i think will happen is hulu will do its own exclusives, amazon will do its own original exclusives, and that we three will be like different channels, like abc, cbs, and nbc, or like showtime and hbo. And there will be a lot of room for us all to succeed, each doing our own content. Netflix shares jumping more than 30 on the news and at a 52week high. The stock is below its alltime hit back in 2001. Julia boorstin is going to join us a little later in the show. Shell have more of our interview with Reed Hastings of netfl netflix. If you take a look at the futures you will see a little bit of a mixed picture. Dow futures up just about 11 points. S p down by two and the nasdaq down by over 30. Still to come, he runs the nations Largest Hedge Fund. Find out where ray dalio is putting money to work for his clients. Dalio in davos. And only on squawk box. Welcome back to squawk box, everyone. Weve been talking about apple shares this morning. Why dont we take a look after that Earnings Report forecast that clearly disappointed the street. Apple stock has tumbled by more than a third from that 705 dollar high that it achieved back in september. Its earnings per share did beat the street. Revenue came in just slightly below what was expected. But it was the guidance that really spooked people on wall street for a long time now. Apple has given this very conservative guidance. Now they say theyre going to try and be more realistic, giving you a range of where they really think things are going to be. You can see in the premarket that stock is down by 46. A drop of 9 . We are also just an hour away from the latest figures on initial jobless claims. Last week see you asay fiveyear low of 335,000 claims. Economists are expecting a jump to 360,000 this time around. Also out this morning the index of leading Economic Indicators that comes out at 10 00 eastern time and it is expected to show a rise 0. 4 for december. Joe . Business leaders. Hedge fund titans. Politicians. Expert crosscountry skiers that are also anchors are gathered at the World Economic forum in davos to discuss issues affecting the global economy. From trade to investment ideas. And thats where we find our andrew ross sorkin. I gave you a little plug there, andrew. Thank you, joe. I appreciate that. Youre welcome. We hoped youd be wearing that hat for the dalio interview. Just to throw us off. But i see youre not. Ill break out the hat in the next hour. In the meantime, we do have a big interview. Ray dalio is here. Founder of bridgewater, 130 billion you manage. You were saying before you started with 5 million . Yeah. 5 million and a two bedroom apartment. Well the world bank gave me 5 million in 1985. Thats when i started. Did you ever think 5 million was going to turn into 100 billion . I never thought much about it. Just like playing the game. The other thing we were talking about before we came on was apple and i was talking about the apple stock and how you think about it. You said i dont really think about apple as a company. You think about it in a very different way in the sort of economic machine theory. How do you look at Something Like that . Well, i think everything i think if everything is working like a machine, that the economy works like a machine. The markets work like a machine. There are cause effect relationships. I think we dont talk enough about how the machine works. So when were talking about in interviews like this you know i think okay, what are we going to do, talk about whats the next hot tip . Right. Whats it going to do for an individual . Right you take that and walk away and invest on it . Supposing i change my mind tomorrow. Right. The economic machine or the markets basically are operating in a consistent way. And the outcomes that we have are just a function of understanding that. So i hope that well talk about how does the economic machine work. Right. Where are we in the economy . How does the markets work . Right. How do you develop a strategy. These are the important things. And then i could tell you what i think in that context. So, in that context, lets talk about it, then. How do you think about when you talk about the economic machine, what is that, exactly . Okay. So everything is a transaction, right . Every good service or financial asset, somebodys buying. Right. And they buy with money, or they buy with credit. And so you go in to a store and you buy a suit, you buy it with money or you buy with credit. Credit is promised to deliver money. You and i can make up credit. If i say, listen, you can have the suit and you just pay me back later, that will calculate as gnp or a sale but yet theres no payment made. Right. So as a result, credit grows a lot faster than money. And credit grows faster than income. And when credit grows faster than income, when debt grows faster than income, that cant go on for long. Right. At some point, you cant service, because its promised to deliver money. When that money cant you cant come out, you have a deleveraging. Right. So what happened in 2007 was they ran a bubble. We had credit growing much faster than money. Than money or income. Right. And we had that bubble. And so now were going through an adjustment. And let me explain that adjustment, if i may. Please. Okay. So, in a deleveraging, and deleveragings have happened throughout time, right . It just didnt happen in our lifetime before. But it happened in japan. It happened in the 30s. Happened in latin america. They happen all the time. How do they work . Too much debt relative to income. So there are four things you can do. All of them are the same. You can either transfer wealth from the haves and the havenots so germany can help spain. You can do that. Or you can write down debts. Because if theres too much debt you have to reduce it. So you can write it down. But the problem with writing it down is one mans debt is another mans assets. So you write down assets. And it feeds on itself and it has a problem. It causes pain. The other way you the third way you can deal with it, is that you can spend less. So ill borrow less. Austerity. And we go through austerity. And the fourth way you can deal with it is you can print money. So Central Banks can come and they can give money to spaniards who may not be able to pay the dealt, and that helps them do that. So there are always those four ways that happen. In all deleveraging they all happen. So what weve gone through, the bubble was obvious, because it couldnt extend you cant raise debt relative to income and the leveraging couldnt continue. And the deleveraging that was taking place had to happen in those four ways. It has largely happened. Its happened already. Its happened already. You think its done . No, let me explain what it is. Okay. Okay. That, the capacity of lenders to lend, to meet the borrowing requirements, has largely been adjusted. So, spain is borrowing, has fallen. Right. Italys borrowing has fallen. Those borrowings have collapsed. Mmhmm. With that, is, of course, the collapse of their economies. Thats what the depression is. You have to spend less, because you have less ability to borrow. Right. So that causes a collapse in those economies. It was still, even with that, not enough money to service the debt. So, i use spain as an example because its representative. If you take spain, but the ecb came in, and put in 450 billion of money. They put in about 350 to the spanish banks. Was that the right thing to do . That was the right thing to do. The policy so far. There was a gap. An unreconcilable gap. An unbridgeable funding gap. Right. Okay. That so now what we have is a situation where the bow rowing needs and the debt rollover needs and the borrowing are approximately in line, and a cushion has been created, the ecb took over filled the gap where normally the premarket does and it fills it. And that has now moved it along to a different condition. Were going to have a depression were having a depression. In europe. Spain, we call this the lost decade it doesnt mean you can go back and spend like you did before when you get past it. It means that the level of spending is down to the level of income. And how long you say last decade. You talk about the economic machine, and history. But part of the challenge for any investor trying to understand what to do is the timing element, right . We all know what the history may repeat itself. The question is when its going to repeat itself. We dont always know that piece of it. So the way i look at it is first of all, theres economics of the cause effect, and so, this will be a long problem that now ill talk the economics and ill talk about the markets. Independently. Okay. But theyre connected. The economics means there will be a long period of adjustment and what will happen most importantly is productivity, does europe work hard, do the things that are necessary to raise its Living Standards because it cant be on money, and there will be a social challenge, social, political challenge of ten years or so, maybe its 15 years. Japan has made it go on for longer. Right. The fundamental thing that they need to do most is to make sure that the nominal Interest Rate is at or below the nominal growth rate. And i wont get technical. But otherwise, what youre going to have is the debt compounding at a rate which is faster than the economy is growing. So, anyway, that picture there was a tremendous change, but it will be a terrible economy. Right. Because the balance is, the preventing of chaos, we came very close to having chaos. Right at the edge of it. Because there was not a backstop. We got past that point. So now as we move forward, we can that can be managed, and its going to be very difficult and very painful, as far as the markets go, now, the question in the markets is, how do events transpire relative to whats discounted. Right . Right. So, everybody this is the thing, too many investors are reactive decisionmakers. If something has gone up, they say, oh, thats a good investment. They dont say thats more expensive. And so its the most common mistake in investing. You have to look ahead and say, what is the transaction . What will be determining the buyer and seller . Currently what we have is a lot of money is in cash, and cash is a bad thing. And its not natural that its cash because the Central Banks printed a lot of money so they put a lot of cash. Thats what japan is doing, too, because it needs to do that. So it produces a lot of cash within the system. And in addition, because you have the risks, people want to be safe. Right. So they put their money in cash. And theres a lot of cash sounds like youre saying thats a mistake, though. Well, its a natural consequence, and what will happen is the next big moves in the markets, and the next big moves in the economy, will be based on how the cash moves. Because thats a bad investment. It has a negative real return. Right. It has a return thats substantially lower than the negative than the economys growth rate. And at the same time, were in a situation where risks are being reduced. So the fear, the desire, to hold that cash is reduced. You can go out on the risk spectrum, because theyre reduced for the reasons were talking about. And at the same time, if youre an investor, you can start to move out of the cash, because youre missing out on returns because its lousy. As that happens, i think 2013 is likely to be a transition year. Okay . Where that cash, large amounts of cash existed that way. That will start to change. Change in what way . It will also move move where . Okay, it will move to stuff. It will move to all sorts of stuff. It will move to goods, services and financial assets. So, that will include most goods, services and financial assets. People will spend more with the cash. They will and that will help the economy. It will move into equities. It will move into gold. It will move into it will move. Right. Into out along that curve. As that happens, what happens is, it makes the Federal Reserves concerns change. Because by putting the cash in theyve lessened the risks. As the risks have lessened and that Movement Starts to move then the tilt starts to change. Thats probably something that wont happen immediately. This is like a classic transition year, i think. And then as you get later into the year, i think that were going to see more of that. Okay. I apologize for interrupting. Joe kernen is back in the studio. He has a question. Economic lesson. I get it. No, i get it. And ray basically im looking at some of his notes that we have, as the transition year goes on towards the end. A 4r09 of this cash and a lot of money that shouldnt be in the bond market anymore starts moving out in equities, gold, khadties and that makes a lot of sense. Ray, of the four things i think that the central bankers around the world really did a lot of heavy lifting, and i would have thought that gold would have continued to move. And i was wondering how you explain that. I guess it moved from 200 to 1800. So, it moved in anticipation of what we finally saw. But i would imagine you think that it still got more room to grow or how do you explain it for the last year and a half thats really been, you know, acquiescent . So i just want to emphasize that the way that i look at any market is to look at the buyers and the sellers. And to understand, you know, sort of whos buying and whos selling and what are the motivations behind that. And so in each one of those cases, and i think if i was to get in to that a little bit much i would actually be dealing with sort of some confidential information. I think the important thing here to understand is that gold just generally is something that large large buyers, those with lots of portfolios would like to accumulate over a very long time, very slowly. Whoops. Its okay. Keep going. Well talk. And and built that build diverse indication because were in a new era in terms of which is the currency. What are we were in a new world. What is money . And so theres a need to diversify that. However, gold is a very small market by comparison to that. And its not a big, effective, you cant diversify it. So i think the behavior of gold makes, you know, complete sense, as does the behavior of equities and so on. I dont want to get too much into any one asset class, or what i think about them. I think the important thing here, if im an investor, lets go back to the investor, is the most important thing is that you can have is a good, Strategic Asset allocation mix. In other words youre not going to win by sort of trying to get what the next tip is and whats going to be good and whats going to be bad. Thats youre definitely going to lose. So what the most investor needs to do is to have a balanced structured portfolio. A portfolio that does well in different environments. So much of the driver of many asset class returns is based on how events actually transpire relative to expectations. So theres a certain discounted growth rate in equities. Theres a certain discounted growth rate, certain assets. You can look at whats priced in. And then what happens is, you need to have environments a quarter of your portfolio, in assets that do well, when growth is faster than expected. Or, a quarter when its slower than expected. A quarter when inflation is higher than expected and a quarter when inflation is lower than expected. So you need to create a good structured portfolio, then you can make your bets. But this is a whole conversation on how to invest. Heres a question just about bets. You know, youre making the argument, and explaining the need to have a diversified portfolio. But most people have diversified portfolio follow the market. Meaning, whatever the s p 500 is ultimately youre going to be up or down, somewhere around there. You, and some of your peers consistently outperform the market. And you do that, i assume, by making bets. We break it into two parts. We have two basic portfolios. There is the Strategic Asset allocation mix. Which we call all weather and that just hassing to to do with bets. It has to do with how to make all the assets the same risk parity. Call risk parity. The problem is, when people try to diversify, and they own equities and equities has a volatility. Right. Thats large. Or they own assets that do well when the economy does well and doly when the economy does badly they have a concentration of their risk in some assets. Right. They need to have. They need to change the portfolio. They need to by longer Duration Bonds or bring up so that bonds and commodities and pieces have comparable impacts so that whatever happens in the economy will then have a balancing effect. Because the one thing you can be most confident is that Asset Classes on average will outperform cash. Okay. So if you have thats a Strategic Asset allocation. Up 4u78. Thats what the allweather piece is. Then theres the bets. The bets are zero sum. Right . In order for you to beat me in the game, youre going to have its like poker. Its a zpoer sum game. I have we have 1500 people that work at bridgewater. We spend hundreds of millions of dollars on research and so on. Weve been doing this for 37 years. And we dont know that were going to win. In other words we work that. We have to have diversified bets. We have a lot of diversified bets and so on. So its very important for most people to know when not to make a bet. Because if youre going to come to the poker table, youre going to have to beat me and youre going to have to beat those who take money so the nature of investing is that a very small percentage of the people take money, essentially, in that poker game, away from other people. Right. Who dont know when prices go up, whether that means its a good investment or if its a more expensive investment. Were going to slip in a quick break. Im going to send it back to joe and well come back and continue the conversation. Thanks, andrew. Well be right back with more from ray dalio. And in the next hour we have dow chemical chairman and ceo Andrew Liveris and Peter Loescher is going to join us from davos to talk about global economy, Business Innovation and everything siemens does. Make sure you logon to facebook after the show. Andrew will be hosting Office Hours Starting around 9 00 a. P. Check out happenle ahead of the market open. The Company Reported results late yesterday that were disappointing for a lot of different reasons. The stocks down almost 50 points. 45 now. We will talk expectations and stocks to watch when we return. Were back live here in davos, switzerland at the World Economic forum and were speaking exclusively with ray dalio, founder of bridgewater associated and were thrilled to have you. You rarely do this so were happy to have the education. One of the questions that came up in my mind while you were speaking in the last segment was politics. And a lot of the conversation we have here at the World Economic forum is about politics. How is an investor do you put that in to your economic machine, if you will, you know, when it comes to this debt ceiling issue, or it comes to whos going to be elected, or Health Care Issues or what have you. How is that how do you put that in to your investing hat . Well, everything is a transaction, and it wont have an effect on prices, in any event, unless it has an effect on a transaction. So what i do is i know who the buyers and the sellers are. And then by thinking that through, i think how will it have an effect on transactions. Far more important than, over the long term, the leader of a country will have some effect on the whole Overall Health of the economy. But even they cant even res. Theyre, you know, its a very difficult challenge. The whole political system. You could be president of the United States and it doesnt mean you can change policy. Then, if policy changes, it has to basically change the things that produce have an effect on productivity. Its something thats peripheral largely. Like, for example, a bigger issue is how does Financial Transactions work such as if you lower Interest Rate, and you have nothing on a money market fund. Right. And you cant do that which is what we got now. Which is what you got now. What happens . How is there then the trans where does the money go . How does somebody earn a return . How do Financial Intermediaries earn returns and so on as it affects transactions. Those things are far more important really in terms of an effect in longerterm there are certain basic things that determine the health of an economy, and policy can have an effect. There are also certain points in time that its very critical. Mario draghi and the ecb and how it handled Monetary Policy at a particular moment in time was critically important. So to try to stay on top of that and not only partially anticipate it, but to know when a change occurs, how to properly excerpt it and what does that mean in terms of the knockon effect because everything is cause effect relationships and causes happen before effects. And if you understand the cause effect relationship, thats what its all about. Scott sperling who runs t. H. Lee is back in the studio. Hi, ray, how are you . Youve done this spectacular job at being able to call macro trends very well, and sometimes very aggressively. One of the things that is weve noted over the last, particularly few months, is the use of judicious amounts of leverage on bond portfolios to try to emulate equitylike returns. I think risk parity is what they call it. And youve done a great job with that sort of thing. Ist is that a mechanic or is that an indication of direction of attractiveness, relative attractiveness, of fixed income to the equity market . A mechanical thing. The problem of lets say a stock and a bond portfolio, if you put 50 of your money in stocks and 50 of your money in bonds, the problem is, you have about 80 of your risk in stocks, and about 20 of your risks in bonds. And so you dont have diversification. But if you just imagine that you had a Long Duration bond portfolio or a bond portfolio had about the same volatility of stocks and you went through the financial crisis, most of the decline in your portfolio would have been protected. Because the stocks would have gone up in value by an amount that would have had an impact that would have offset the other. So in structuring a very good plel yo, you have to have comparable basically comparable amounts of risk in that. Equities is misleading. When you think you take a treasury bond and you leverage it two to one, realize that the average company in the s p 500 is leveraged two to one. In other words theres as much debt as there is equity in the company. If there was a law that said that companies could not leverage, then the return of equities and the return and the volatility of equities would be quite like that of bonds. So it tends to be that the one thing were most confident about is that Asset Classes over a period of time will outperform cash. That has to be, otherwise we dont have capitalism. And it also has to be compensation. So, its to get that balance that you need to do that. Ray, were going to have to go. But just final question. Given the mood here in the World Economic forum, your sense, looking out over the next two years, jamie diamond was on yesterday, said he is very bullish. Virtually everybody ive talked to seems very bullish. I know you talk about a transition and it sounds like thats what youre suggesting but to the extent the audience is trying to understand your sense of where things are going, where are we right now . So, i think it depends where when you enter the question, where are we right now depends where is. If youre in europe, it means one thing. If youre in the United States, it means something else. If youre in china, it means something else. And it sounds to me like we dont have enough time to cover those. I would say if i was to make a big generalization, europe will be in their economy will be terrible. And we will have a gradual restructuring and that will go on for awhile and it will be bad. In the United States, i think youre going to have this shifting to taking on the more risk. In japan, we are reliquefying the printing of money to get out of that problem and its going to be more liquidity brought in. And in china, its bouncing back and they have to deal with the fact that debt maybe is growing faster than income. Right. And thats an issue. So we are in a different kind of world. We will not so im going on too long. Thats the best i can do in a time. A minute you just told us a lot. So thank you for that and thank you for this interview. We appreciate it very much. Have a fun time at the World Economic forum. Back to joe and becky back in the studio. Andrew, thank you. Thank you, ray dalio. That was great. Still taking notes writing everything down. When we come back we do have some breaking news. Jobless claims numbers that could move the markets. Hey, becky, joe, when we return, weve got andrew liverus the ceo of dow chemical, friend of squawk coming right here live from dafous, switzerland. At optionsxpress were all about options trading. We create easytouse, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius we knew you needed a platform that could really help you elevate your trading. So we built it. Chances of making this . Its a lot easier to find out if a trade is potentially profitable. Just use our trade probability calculator and there it is. For all the reasons you trade options from income to Risk Management to diversification youll have the tools to get it done. Strategies. Chains. Positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Around here, options are everything. Yes mom, ill place a long call to you tomorrow. I promise. Open an account today and get a free 13month eibd™ subscription when you call 18882800154 now. Optionsxpress by charles schwab. The squawk box ceo call, live from the World Economic forum in davos. This hour, dow chemical chairman and ceo Andrew Liveris and peter loscher, president and ceo of siemens. Plus breaking economic news. The closely watched weekly jobless claim is set to hit the tape. More squawk from davos when i finish grooming this mountain. Lets hit it. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernen along with becky quick. Andrew ross sorkin is at the World Economic forum in a place with a lot of snow, davos, switzerland. First with Andrew Liveris, who is the chairman and ceo of dow chemical obviously. Then with peter loscher, ceo of siemens. Our guest host has been Scott Sperling, copresident of thl partners. Well have more from him still ahead. Becky has headlines first. Earnings numbers, apple coming out with some disappointing Quarterly Results. Investors are punishing the stock today. Take a look at some of the numbers from the company it earned 13 81 and that beat the streets aexpectation. 13. 47 is what they were expecting. Revenue came in slightly loiter than the 54. 73 billion. Street expected. But listen to this, apple sold 47. 8 million iphones for the quarter. That was a record. Some on the street wanted to see a number that was a little closer to 50 million or even higher. Ipad sales were 22. 9 million. And thats up from just 15. 4 million a year ago. And another key statistic, apple has 137 billion in cash. It was the guidance that the Company Offered that concerned the street. They say now that theyll be giving more realistic numbers and keep things in a range rather than conservative guidance to this point. Earlier today we spoke to Analyst Daniel ernst from Hudson Square research. Its still a great company. Still growing, still gaining relative share. But i think theres this sort of back to earth, you know, were exiting the stratosphere and coming back to a more normalized, what i can think of as the new normal for apple is that theyre growing at a good rate. Just not a fantastic rate. As we mentioned, the stock is taking a hit. In fact, its down at this point by 8. 8 . Thats 45 drop to 468. 75. Also in earnings news, this morning weve had dow component 3m coming out with earnings of 1. 14 a share. That was in line with what the street was expecting. Revenue 7. 4 billion was higher than exated. 3m is a new alltime high for that stock. It was sitting yesterday at 99 and change at an alltime high during the course of the day. This is a new alltime high today. Sit a group chief executive says that the bank has the right strategy to generate future growth. Speaking at the World Economic forum in davos, he tells cnbc that several years of revamping efforts are beginning to pay off. Weve, over the last three or four years simplified the company a lot. Weve become smaller. Weve become simpler. Were really focused around our core lines of business. He took over as ceo in october after the abrupt resignation of former chief Vikram Pandit. Lets take a look at the Broader Markets. U. S. Equity futures are looking slightly higher, up just over 8. 5 points. S p futures down by just over 2 points. And the nasdaq is a little weaker down by 32 points. Remember it has been a strong streak of winning days for the dow. Nine out of the last ten sessions its been up. S p has been up for the last six sessions in a row. If you watch what happened overseas in asia, the nikkei was higher. It was up by about 1. 25 . The shanghai and the hang seng composites were slightly lower. And in europe this morning, you can see some very similar trading as to whats happening here. Mixed numbers. Ftse up slightly. With german dax down slightly. And france basically flatlined. Lets get back to andrew in davos with other special guest. Andrew . Hey, thanks, joe. We have Andrew Liveris, friend of squawk right here. Ceo of dow chemical, and this year, the cochair of the World Economic forum. Thank you, andrew. Nice to be with you. Its very good to be with you. Give us a sense, if you will, and we never know whether its a good indicator or a contra indicator what the mood is here but you are talking to virtually everybody around town. How do you think it feels right now . I really am actually very happy that were physically in the center of europe, because what youre getting is a lot of europe positive sentiment from the europeans. Which, frankly, inbound i would not have expected. Now, its a relative positive so i dont want you jumping through to the bull case but people are feeling much better about our european bottom, and the potential signs of a europe thats above zero percent growth which is phenomenal. Are you seeing that in your business . Not yet, no. So you think this is just a little it may be buzz. But you ask me what am i seeing at the meeting. Look, the emerging world is still very strong. The africans are here in force. Russia is feeling very bullish. China is not here a lot but theres good chinese noise and were seeing good chinese stuff in our business. But, no, the european noise is positive. What do you make, i dont know if youve been following whats going on in the uk, David Cameron speaking this morning. Does that have any impact on your business . It does in a way. Because u. S. eu trade is the one trade agreement that the u. S. Has not done. That the europeans desperately need to get done. Right. So the uk being part of that yes or no i would venture to say our government is going to have a lot to stay about the uk staying part of the eu i think as has been indicated. Did you catch any of the comments about tax avoidance, sort of global tax avoidance issue . No, i did not. Ill stay quiet on that one. The other big topic here, energy. Yes. And in particular, the u. S. Energy situation, shale, fracking, et cetera, you bullish, you bearish, where do you think we really are . I mean people have prognosticated for now awhile that we were going to get there but doesnt seem like were there. Andrew, i think it is the bull case for the world. So to answer your question, im billish. And i think its a game changer. And i think it is probably the story of Global Economic recovery if handled right. And frankly, the beneficiaries of that will be the u. S. Consumer. U. S. Jobs. I mean just in the downstream value added industries which im a part of 96 billion of investment already announced. 5 million new jobs over the next five years. Huge value adder to a lowcost energy base. I dont know if you saw the president s inauguration speech. I caught part of it. Do you feel that this administration, and forget about the administration, that washington writ large is going to be supportive and actually put in place policy thats going to allow this to happen on the energy front . I think you know me well enough as does everyone in squawk that ive been on the podium on Energy Policy for seven or eight years or my ceo. I havent seen it yet. President , when married with Climate Change which i think is a very big topic, energy and Climate Change together. I think it would be the topic that if i was president , id go after which is a win win. Less Carbon Intensity and more jobs seems to go well politically. Debt ceiling and the issues that were confronting ahead of us . We just got through our last fiscal cliff. One dark cloud that sits above the u. S. Economy. And its easy within our is it a real cloud, though . Some of the comments you hear from ceos now said were just going to have to get used to all of these cliffs, and were going to have to just keep going and make just forget about whats going on in washington. Is that thats the reality case which i live in. I live in that world, reality. And the reality is were moving on anyway. But, of course, uncertainty in the consumer is what drives us all. And the Consumer Needs to see some degree of political certainty, and lets hope that this is not a kick the can down the road, but a real deal will emerge. We have to solve this and tax reform, the two big policy items above and beyond energy. You think thats going to happen . Let me put it this way, im bullish but theres a better case of that happening in the second term than in the first term. Okay. Final question, it has nothing to do with anything, except apparently the woman that i thought looked like Angela Merkel on the airplane over here works for you . Yes. Carol williams. Who is she . Evp of operations. Its been an inside dow joke a long time. Im so glad you got to experience. Does everybody think that she looks like her . Yes, sir. Do people walk up to her . Yes, spirp here. Youre not alone. Thank you. I feel i feel a lot better. Andrew liveris, everybody. Joe and becky, back to you guys. Yeah, okay. We need a picture. You could get andrew you know what . Well get you a picture. Well get you a picture. So i mean yeah. Awesome. People think that were making this up. She really does look like her. Its a lookalike. A doppelganger. A doppelganger. Coming up weve got a guy that looks just like Scott Sperling that were going to talk to. You really are him. Or are you imaginary . Im virtual. The squawk ceo call will continue with the ceo of siemens joining us to talk about the Electrical Engineering giants later quarter and opportunity for growth in europe. And at the bottom of the hour, a rare look inside the s. E. C. s enforcement committee. [ male announcer ] when you wear dentures you may not know that your mouth is under attack, from food particles and bacteria. Try fixodent. It helps create a food seal defense for a clean mouth and kills bacteria for fresh breath. Fixodent, and forget it. [ dog barks ] [ male announcer ] something powerful is coming. See it on february 3rd. For the new mattress models but sleep trains huge year end clearance is ending soon. For a short time, save hundreds on tempurpedic mattresses. Get the most highlyrecommended bed in america at closeout prices. Plus, get interestfree financing and free sameday delivery. Why wait for the new models . Sleep trains year end clearance is ending soon. Superior service, best selection, lowest price, guaranteed. Sleep train your ticket to a better nights sleep welcome back to squawk box. Futures right now indicated up about 10 points. We are also watching the shares of netflix today. It wont make up for whats happening with apple, obviously. But the Video Streaming Service posted a profit of 13 cents a share. Analysts were looking for a loss of 13 cents a share. Either the company did really well or analysts are clueless about this stock. Revenue also Beat Estimates coming in at 945 million. Netflix also added 2. 1 million u. S. Subscribers. And now there are 27. 2 million, which is thats always been the big issue. Get enough subscribers in there. If you start thinking about the portion of the u. S. Population. Netflix shares jumping more than 40 and back to a 52week high or at a 52week high. I dont know what that means, back to a 52week high. Wouldnt be a new high if it was back to that level, right . Unless it had been sitting around there. That doesnt make makes no sense. Unless you want to speak english. But the stock is still well below its alltime high. That was hit back in 2011, and Julia Boorstin will bring us more of her exclusive interview with netflix ceo Reed Hastings later this hour. Right now lets get more from our guest host Scott Sperling of thl partners. Weve been talking about some of the things you heard here this morning. What you talked to ray dalio about. What kind of strikes you as the big things youve taken away from some of these things today. Number one, i think that there have been a lot of uncertainties that have been redressed. And i think people are feeling bitter about that. Europe isnt going to collapse. It has its more than its fair share of problems. Im not sure theyre solving some of the longerterm ones. At least the imminent threat of a collapse is no longer there. Which is hard to understand. When you look at growth rates across the eurozone you have to be concerned about that. At least its not going to be a crisis a la 2008. They cant service their debt or pay it off. They can keep on flinting money and hope at some point in the future it gets better. That is better for people than what they thought might have happened. So thats a plus. But the printing money itself. Is longterm worrisome. If you believe that the Central Banks, Federal Reserve and european Central Banks can get that money back at the appropriate point out hurting the economy then youre not so worried. I think most people are skeptical that it will be quite as easy as that. So thats an issue. N the United States, we have lots of great things going on. Not the least of which is the ability to have a return to lower cost manufacturing, because of low energy prices. Right. And that is a fundamental change that nobody anticipated 36 months ago. And it is enormously positive for us. And i think when you combine that with the entrepreneurial spirit that you see continue to permeate the entire economy, you have to be optimistic. On the other hand, washington continues to do everything that it can to recreate uncertainties, even ones that we thought were put aside, and not to solve some of the longerterm problems or necessarily do much on the nearterm problems, so you have to be worried about that. You dont think for everyone in that, too, because you sound like youre saying, i mean, its the white house and congress. Its the white house and congress. This is both . Theres no one person to blame. Would you Like Congress to go along with everything obama wants to do . Do you think that would help us . You know, i think many of us share the president s objectives to help people. We go about it very different ways. Exactly. So you dont want to be counterproductive. 2 growth doesnt help anyone. Right. And we cant solve the longer terl problems without significant economic growth. Every 100 basis points. Every 1 change in gdp over ten years is 3 trillion to 4 trillion impact on our deficit. Were not talking about any action that has a 3 trillion to 4 trillion over the next ten years. Right. So you have to have that in ort to solve these problems. I think speeches dont help people. Its like, i think about food stamps. And we want to provide the basic level of what people need. Right. But growing the number of people that need government assistance is the wrong way to do it. Its not sustainable. And there are people that want to work. People that want to take care of themselves and just being a government that is empathetic to the needs of all these people were creating that need us, its not people people want jobs. They want to work. People want jobs. Americans want to work. Just focusing on helping the people that dont have jobs doesnt help. Thats exactly right. And im afraid of a couple of things. Number one, weve been desensitized. Weve run trillion dollar annual deficits. We used to go crazy if it was 100 billion or 150 billion deficit. So we need to get back to a point where we are outraged by that mismatch between what we spend and what we take in. We should be outraged by when you say shouldish growth, that thats okay. Because thats not okay. That holds down growth. That holds down the ability to help these people, get them jobs and solve these problems. The people whove been hurt the worst in the last four years are the ones who most need the jobs. They talk about helping the most. So you have to be concerned about that. Again on the optimistic side, we have an engine here that nobody else in the world, i believe, has. Happens in spite of all this. You think fracking happened because of the government . Right. You think that the move to natural gas happened we were playing around with wind mills and solar. Which would actually disadvantage us relative to the rest of the world and not solve the problems. We do need longterm other forms of energy. And we should invest in basic research to try to make those types of technologies more cost competitive. What we probably shouldnt do is spend tens of billions of dollars building plans for things that are inherently inefficient, or cost disadvantage. Right. Darp sachlt a great example of a Government Program that has worked spectacularly well. Their budget is in the low billions of dollars and they do fundamental research that can then be exploited by the private sector. And thats probably a better model. Exactly. Were going to continue this conversation with Scott Sperling. Hes our guest host today. In the meantime the squawk ceo call on davos continues. Lets get back to andrew. He has another special guest. Andrew . Thank you, becky. Im here with peter loscher, ceo of siemens. Most valuable company in germany. The second most valuable is s. A. P. . Thats correct. It goes back and forth . Absolutely. Lets talk about the economy but lets also talk about whats going on here. In particular, David Camerons comments about whats happening in the uk, and what that might ultimately mean to the eurozone. There, ultimately, your business. How are you thinking about this right now . Andrew, i think its important to understand, when you make longterm industrial infrastructure, investments, that you need longterm stable Macro Economic environments. And the key question that i would ask myself is should i be worried about it. And should you, are you . And this is where we need to get the answer, a minimum what it will do i think it will Impact Investment sentiment. And the rest we will see. But thats real . Youre not going to change anything as a result of this . Im just asking the question. Youre the uk is a very important market for us. We are one of the biggest industrial employers in the uk already. But it is key thing in terms of a new Industrial Investment decisions. That you need longterm stable environments. Because when we look into plants or other investments we look out 10, 15 years. Sounds like youre saying it was a mistake to make this speech. Im not saying anything. Youre asking me how do i believe investment positions could be affected. The other topic weve been talking about has been energy and Energy Policy in the United States. And it was making me think given the possibility of fracking and shale and Everything Else going on, does that give you any sense that you would make additional investments in the United States . Andrew, already done. I think what weve seen in the United States is a great example that the Energy Direction of the United States is really competitiveness agenda. We see reindustrialization initiatives already happening. Chemicals are coming back to the u. S. We will see further industrial buildout coming back to the United States. For us in twofolds its a great Growth Business opportunities, for big and most modern gas turbine plant which we put into charlotte, north carolina. So we are ready there to participate in the energy agenda, of course, and i think it will be a broader Business Opportunities for Industrial Automation for our industrial businesses, so im a Firm Believer that this is really a competitiveness agenda, and siemens is extremely well positions with more than 60,000 people already in the United States, to really benefit from it. Real quick, Angela Merkel is going to be speaking in about i think in an hour if not less than now. I was at a dinner last night and the comment was made by a ceo that Angela Merkel has been more important in terms of keeping this the problems in europe from turning into a full blown crisis than any mario draghi. Do you buy that . You talk to her all the time. I think shes an extremely important political figure. Shes playing a very, very Important Role in this context. And both elements are very important. The decisions in july, for example, was a very important politicalization. Obviously Angela Merkel is really, as an absolutely pro european political leader she plays a key political role. But mario at the same time has made an extremely important decision last august, stabilizing the financial markets. So for me both of them are very important key figures in europe. Okay. Peter were going to leave it there. Thank you for joining us this morning. Thank you very much. Great to be here. Have a great davos. Andrew, thank you. Well see you in just a little bit. When we come back, netflix ceo Reed Hastings on the online streaming business. And well get weekly jobless claims at 8 30 a. M. Eastern. Economists expect claims to jump by 35,000 from last weeks fiveyear low to a total of 360,000. 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President obama is reportedly set to nominate Mary Jo White as the head of 9 s. E. C. That nomination will come at an afternoon event at the white house at 2 30 eastern time. White served nearly a decade as the u. S. Attorney for the Southern District of new york. And youve heard of people who sink a lot of money into their homes. And people who hide money away in their mattresses. Well listen to this. This couple is using money as a building material. Ryan lang and emily bedding covered the floor of their bedroom with nearly 60,000 pennies. They stuck the pennies to the floor with special glue and covered them with a clear coat. The couple said the project cost about 1,000. When we come back we are just minutes away from the closely watched weekly jobless claims numbers. As you head to a break, take a look at the u. S. Equity futures. Weve heard from three on the dow component that came in right in line with expectations. Dow up to about 12 points above fair value. S p futures down by two points. Nasdaq down by about 33. Oming. I have obligations. Cute obligations, but obligations. I need to rethink the core of my portfolio. What i really need is sleep. Introducing the ishares core, Building Blocks for the heart of your portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Welcome back to squawk box. Were just seconds away from weekly jobless claims. U. S. Equity futures are up about 14 points right now. And jim euro, this is a man that has a sixletter last name and only one consonant. Its 82 vowels. That is so weird. Standing by us at cme in chicago. Steve liesman is going to be in davos, joining us, where hes been he had to go to switzerland to figure out the blackberry 10. Jim youryouve got the numbers for us . No, i dont have the numbers. Ill give you the market reaction. Honestly . All right were going to put them up at the bottom of the screen. Thats going well, so we dont have we dont have rick santelliish i thought rick was going to give the numbers. Rick santelli would normally give the numbers. Wow. 330. 330 is initial jobless claims. Thats huge. Yeah, thats a good number. Okay and this is interesting, in that over the last thats amazing. Weve had several different numbers that werent that good. So this is a big thing. But, the question we have to ask your offs is, the chairman said he wants to see substantial gains in the labor market before theyre going to take the foot off the pedal. So this isnt enough to bring us there yet. But this is not a bad numbers. Now you take into affect in asia we have stock market tailwinds, the fact theyre devaluing the yen and china is providing stimulus, and at a decent pmi so this is not bad. The chart is not giving us any reason to sell the stock market yet, either, except for the fact that it might be a little long in the tooth. Liesman, i know youre in another country, but, it was supposed to go back up. Yeah. They were predicting 360, joe. I know. What could cause this . People either getting jobs and or not being fired. That would result in the decline in jobless claims. And maybe what we know is that business seemed to respond to all the uncertainties surrounding the debt ceiling. By cutting back on capital investment, and not firing people. There was a lot of anecdotal evidence over that, that they were waiting this out. That maybe they thought this time around it was more bluff and bluster than reality that wed hit the debt ceiling. And that seems to have paid off. People dont employers dont like to fire employees. Not only because of, you know, being gentle human beings but because its costly for them to do that. They tried to hold on. What we seemed to be seeing here right now is i held my exuberance last week because i thought it was a oneoff seasonal adjustment thing and you do have to be careful in the month of january, as people come off the rolls because of the seasonal hiring. And theres still some reason for skepticism. But staying down at this level for a second week, joe, weve always said 350 was the bottom of the range, and were putting in a new bottom down there this 330 that youve got to think about. Probably payrolls up near 200,000 or above and maybe a faster decline in unemployment than has been factored into the market right now. Steve, one question for you. You still think were miles away from the substantial gains that the fed is looking for to Start Talking about removing stimulus, dont you . I dont think its miles, i really dont. My predictions for 2013 has us nudging just below 7 on the Unemployment Rate this year with a big asterisk as to how we get there . Do we get there because of climate Participation Rate . So i think its possible that we hit that 7 threshold, which all i have right now is what jim from st. Louis told me which is that would be a place where the Federal Reserve would probably stop qe. I think theres a qe examination coming at the fed, a qe examination coming in the markets probably around june when were getting ready to maybe take a vacation or two. And try to figure out is the fed going to continue buying assets this year. We have the fed survey in the field to try to figure out what the expectation is for the year. The prior survey had shown a trillion dollars which is basically 85 billion a month. And im interested after these numbers as to whether or not that continues. The more important question is whether iuorio is something i can use in scrabble. If you can fit it in you can win. I think. No, you cant use names. If i can use a euro, man. I know, its bizarre. I dont know who came up with it, man. So your exuberance last week was irrational steve, thats basically what youre saying. Youre willing to go with a twoweek number to start changing your mind on what the jobless market looks like . I think its time to think about there being a real job i dont know what the unauthored number was. Joe i got to tell you that here in davos aim starting to hear some decent things. The first thing i have to say is people are talking about an end to the financial panic largely brought on as a result of the ecb acting more like the Federal Reserve and creating essentially an infinite backstop to the currency. Doesnt mean the crisis is over. Doesnt mean problems are over. But im hearing a lot of things like maybe europe has to deal with a bad economic problem, depression is what dalio said, others call it a recession. Not having to deal with financial panic is a major step forward. Im hearing a lot of what dalio also told us about the possibility of risk in the United States, that cash is going to find a home here. Im hearing fairly optimistic things here about the outlook especial his for the United States. A chinese official said everybodys waiting for the soft landing. We had the soft landing. Were on the way back up now and i talked to a couple other folks who agreed with that conclusion. Maybe some things coming together on the positive side. Your accommodations pretty sport an over there, too, steve . Yeah, joe, i dont want to talk about my accommodations. I know. But theres alcohol, which sort of thats really all, you know, as far as having a good time, right, youre okay there . Well, yeah, of course it makes it hard to find the accommodations that are kind of in a remote place. But i have to tell you, that ive stayed in my day in enough interest hotels in russia and my accommodations kind of rival that. Right. And over we know why vodka is the biggest, you know, the biggest consumption item in russia. Anyway, iuorio. Im ready for an upgrade when i come back. Maybe the tv set. Youre messing with the antenna. I dont know. Thanks iuorio and liesman. Netflix shares flying 35 higher in the after hours on better than expected results. Julia boorstin joins us now with her exclusive interview with netflix ceo Reed Hastings. He told me the quarter blowout was driven by the explosion of internet connected devices and investment in content. And despite unprecedented competition, he says the company has never been better positioned to thrive. Were continuing to gain momentum, to gain members and to gain content. But ultimately, what i think will happen, is hulu will do its own exclusives. Amazon will do its own original exclusives, and that we three will be like different channels, like abc, cbs, and nbc, or like showtime and hbo. And there will be a lot of room for us all to succeed, each doing our own content. How has the growth of these deep pocketed rivals changed your strategy . You know whats amazing . Were out spending those deep pocketing rifles in this area. So were spending more on content than anybody else is for the internet. And thats why we won the disney deal. When will the streaming content be as good as the the dvd content . How do you address that frustration . We have to get back to our 60 million or 90 million subscribers to be able to afford that content and outbid everybody else. Its coming. We just have to grow and grow. Weve got way more content than anybody else does. But its not enough, and we know that. And we want to see everything on streaming, too. Hastings says that despite the companys ongoing investments in content exclusive content original content he has no plans to raise prices. Coming up on squawk on the street hastings discusses the qwikster debacle and why hes doubling down on original content. Becky . All right, julia. Thank you very much. Its been an interesting interview. Were going to get some parting shots now from our guest host Scott Sperling of thl partners. And i dont know how much of this we want to weve had a lot of conversations off camera and i feel like were really getting along well. You sound so surprised. I do. I do. Well we in the past weve but weve we dont need to talk about this. I dont think what, what we were basically talking about was a strong private sector. Is lifts all boats. And it and its ive seen people call it a National Tragedy that, that, if we grow at 2 a year, that that people that are in the country that deserve jobs and want to work and deserve moving up into the middle class, that its a National Tragedy. Theyre the ones who get and weve seen this year in and year out theyre the ones who get hurt the worst. The people who we most wanted help are the ones on the margin in terms of the job market, the first ones who get cut and the last ones who are going to get hired unless we have stronger growth. American industry is poised for dramatic growth. We can have a 3 to 4 gdp increase, real gdp increase. This year . I believe sometime in the next well, we could do it this year. Good. If we could just get washington, and im using washington very broadly and all sides out of the way and let the markets work. And thats not to say that we dont and we havent put in place reasonable regulation. We always need that. Right. We always need safety net. Nobodys talking about getting rid of safety nets for people because thats what we need. But we need to get them jobs. And the best way to get them jobs is to have growth. And the best way to get growth is to exploit the resources that we have in a very effective way, in a way that protects people from any potential abuse. I think the oil and gas industry has proven they can do that. I think its better deploying the resources we have at government but in a way that doesnt try to substitute for what people in this country have always wanted which is jobs and the ability to care for themselves. In general if you had a pool of capital and you only had so much you wouldnt necessarily want to grow the Public Sector and have it using that capital the way it sees fit. Because the efficiency of the private sector is much greater. Right. At performing those tasks. So we dont want to grow government we dont want to go up to 25 we want to come back down and match our revenues up with a lower level i grew up as a kennedy democrat. Right. A john kennedy and Bobby Kennedy. Who cut taxes. Who cut taxes, who wanted to help people but recognized that there were limits as to what you could do. The bedside project back in the 1960s was great, that Bobby Kennedy and jacobafter jit, this is really old history but i want to it because its an example of the ideology of helping was there and it was great but it wasnt effective, didnt work and what has really worked in this country and what ive learned over the course of the last 35 years is allowing the private sector to do its job. And the government should do what it can to help people, but if you have too much imbalance, if you have too much government, then the private sector doesnt work effectively. Do you attribute this sluggish growth to the new normal that came after the financial crisis, because of all the overleverage, and the Reinhart Rogoff . Weve had lots of new normals over at least my is it selfinflicted is my point. I think its more selfinflicted. Now. Ill tell you why. I still remember in the late 1970s, early 1980s, stagflation. We were never going to get rid of stagflation. We were doomed to have 10 plus inflation and 10 plus percent inemployment. I want to reelected jimmy carter. And i want to see what the counterfactual is. Because people dont attribute the 80s and 90s to the reagan revolution anymore. And i think if we had reelected jimmy carter, we wouldnt necessarily have grown at four, five, six percent we wouldnt have we would have 700,000 people. We would have continued to grow at what he, you know, called not just stagflation but a malaise. A malaise. So, i think we would have had continued malaise. Did we do it again . Are we going to find out this time . Look, our hope is that the parties can work together, and move things lower in a way that really helps the people again that we all want to help and allows the opportunity, and the idea of america, that people, you know, like me, i think, like you, who started with very little, to be able to work hard. And accumulate enough to be able to give back to the country. Either that and thats what we need. Thats what america has been about. And thats what has separated us in some ways. Either that or were going to be really Spring Loaded in 2016. Either were going to get some of it nearterm, which i hope, or wow are we going to be ready. Thats right. Really. Thank you. So we agree on that. We do agree. Like kennedy democrats. Anyway thank you Scott Sperling. Would reagan republicans and kennedy democrats are apparently not that different. As it turns out, theyre not very different. S we look back. And quite frankly i dont think clinton democrats, of which i was one are all that youre leaving out one specific democrat that is maybe a little different. Anyway, coming up the s. E. C. s Enforcement Division is charged with investigating possible violations of security laws, but is the unit equipped to process the massive amount of digital data that pours in every day, Gary Kaminsky is going to give us a rare look inside the s. E. C. I mean he was in the business a long time. If i were him i wouldnt even show my face at the s. E. C. Anyway, and dont thats going to be funnier in a minute. Wait and see. And dont miss squawk box tomorrow. Were going to talk to that man right there, Goldman Sachs chairman and Ceo Lloyd Blankfein. Or, as all the senators called him when he testified blankenfein, theyd never heard of him before. Thats at 8 00 a. M. Eastern. But we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. [ engine revving ] [ male announcer ] every car we build must make adrenaline pump and pulses quicken. To help you not just to stay alive. But feel alive. The new c class is no exception. Its a mercedesbenz through and through. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. Welcome back. Theres an incredible amount of information that continuously flows into the s. E. C. They tell us that six terra bytes of digital data which apparently is a lot, emails and documents, come into the agency every month. Gary kaminsky got rare access inside the s. E. C. s division of enforcement. Thats the unit that digs through all of that intelligence, looking for fraud. Not looking for frauds. You might have had a problem. Oh, yes. But well get to that in a minute. If the s. E. C. Actually printed out all the documents coming in they say its enough paper to fill 250,000 boxes. Thats enough to fill the Capitol Rotunda after just a few months. They tell us in one year the agency receives about 30,000 tips and complaints. We asked bruce carpati if all the tips get taken seriously. You know, bruce, a lot of people will say i contacted the s. E. C. I tried to alert them. I thought something was happening. I didnt hear back. Nothing was ever done. At the s. E. C. We have a very dedicated wrkforce whose number one priority is investor protection. When i get a call, when others get a call, we take those tips seriously. Now in terms of the methods we use, you may not hear from us, because were actively investigating those matters. So the fact that somebody goes on the website, sends in a tip, thinks that that tip is not being investigated, you want them to know thats not the case. Right. Our investigations are nonpublic. Theyre confidential investigations. The fact is, is when were alerted to those we get together and say, how can we get at this misconduct . How can we use technology . It really seems to be trying to turn a corner. Theyre hiring new people, specialized skills, bringing in new technology. They also gave us rare access into the forensic lab. If you find your hard drive in the hands of the s. E. C. , joe, if you find your hard drive in the hands of the s. E. C. , because look out theyre going to get data and things that youre not going to be believe. You happened to be making a joke earlier. As you know. If i were you i wouldnt even show my face over there. 30 years at neuberger berman. Speaking of showing faces i emailed you a picture when i walk into s. E. C. You go down to d. C. , you walk into the building, securities and exchange commission. It is a serious place and theyve done an amazing job, youre going to see saddadam st. What happened when i walked into the building . You told me about the very first mug shot. Mug shot that you saw. Wasnt a mug shot. It was a live tv screen. It was a live tv screen. Folks i walked into the s. E. C. , washington, d. C. , into the building and there is mr. Joe kernen, cnbc, big tv monitor, right by the security guards, and that beautiful face. Really . Right there. First person, that i like. So, but they know me then. Yes, they definitely know you. I im on their radar screen. I asked the people do you guys watch cnbc . Do you actually listen to the network . You hear stories, you think, and the answer you think, the answer is yes. I imagine they are watching right now. So if theres anything you want to come clean about or say anything, as i said, these guys a long time ago. Those were the days the cold calling days. Yeah and we got commissions for trading stock it wasnt like a rap fee where you just sat there and made money. This is joe kernen. Let me tell you about a great bond offer we got there give me 10 of your confidence, let me earn the rest. You got to talk to your wife . You a man or a mouse . Squeak up. See, i got all of them. Dale carnegie. I dont want to talk about this. Big news this morning, Mary Jo White is probably going to be, 2 30 today, expected to be nominated as new s. E. C. Given the culture there now, she comes from a criminal background. The s. E. C. Made a point to us many times, they are a Civil Enforcement comes from enforcing criminals. Doesnt come from a criminal background. U. S. Attorney, Southern District, from the criminal side, u. S. Attorney, Southern District, i think that this is a very positive development for the many positive things we saw down there in terms of what they are going to do white collar cry. Check it out at 11 00, show you inside the crime lab exactly how they are tracking down insider trading. It is amazing. Gary, thank you. We will watch you on squawk on the street. Next, jim cramers take on apple, netflix and other stocks on the move today. Stick around. [ male announcer ] this is joe woods first day of work. And his new boss told him two things cook what you love, and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. Welcome back, everybody, get down to the new york stock exchange. Jim crime hears been standing by it has been a long winning streak for the major of a rams, but apple is certainly throwing things into a little bit of question today. What do you make of these numbers and what happens to the company from here . First, there is some nice symmetry here, jobless claims, fiveyear low, market, fiveyear high. So i think that we are maybe more tune eight tuned to those not attuned enough to the employment claims. Apple is the case of people trying to figure out what you figure for the longterm growth now that the companys growth is indeed slowing. They are trying to wait, refer to intestimonys growth, ciscos growth, googles growth. This should be ten times earnings now, the omg factor is not there you get an old growth stock out of a new growth story until the last threequarters. Spoken with several analysts today who say this is a cheap stock by all these metrics that they look at. Talk to another that say what they need to do is start paying out a bigger dividend, boost the dividend, buy back more shares, not just 10 billion but buy back 100 billion in sharessome that the type of plan becky, thats what intel did, got a 4 yield, microsofts done that. Didnt matter in the end. What people look at is the growth rate. We love to see something be done with their cash. I would much rather see some growth vehicle bought than any of those things because those are all one time and didnt work for microsoft and intel. They are not going to work for apple. Amazing. It was cheap at 700. And by most measures, cheap at 600. Then absolutely meaningless, depending on what is going to happen any given day. Its weird. The analysts have come in sad to watch analysts that come in, been saying it was cheap the entire way. Isnt it kind of sad . Yeah. I just think its sad, it is look, got pay effect here. These are people who loved it on the way up. Saw a guy. Apple didnt deliver a sensational quarter. Said on the quarter it was sensational, grating after a while to hear how great the quarter was, knowing that the stock was sinking as they talk. Not the nation book cohort, nothing in the netflix cohort around putting it in the context of intel. Stock of the day is coming up next. Aww man. [ male announcer ] returns are easy with free pickup from the u. S. Postal service. Well even drop off boxes if you need them. Visit usps. Com pay, print, and have it picked up for free. Any time of year. Nice sweater. Thank you. Hey, buddy . Oh, hey, flo. You want to see something cool . Snapshot, from progressive. My Insurance Company told me not to talk to people like you. You always do what they tell you . No. Try it, and see what your good driving can save you. You dont even have to switch. Unless youre scared. Im not scared, its. You know we can still see you. No, you cant. Pretty sure we can. Try snapshot today no pressure. We just. Have a couple of seconds. What do you have tomorrow . Great conversations today . Lloyd flank fine and sean parker and im going to be on Facebook Office hours, so squawk box on the street begins right now and we will see you tomorrow. You are the apple of my eye one thing investors not saying this morning after the disappointing quarter. Welcome to squawk on the street, im Carl Quintanilla with melissa lee, dajim cramer. Our road map begins with a question, will apple gap down 10 this morning. No doubt you heard of last nights revenue miss, iphone miss. We will cover the quarter from top to bottom. Doesnt include apple, which is one reason it is outpacing the s p 500, sits 3 from a record high. What is the outlook for the Broader Market on this . The best january looks like about 17 years. Netflix is almost the inverse of apple, a surprise profit, betterthanexpected outlook, a stream of upgrades and one very happy carl icahn. And rolls on tonight with microsoft and starbucks, preview the numbers as we travel to crane mer rick ka. Down sharply to the lowest level in years. Apple issuing Current Quarter guidance below census. Many firms cutting apple. Here is what crime her to say about the Company Last Week on his show, mad money. Of course, things can turn around in on a dime, my trust holds on apple can still dazzle. Until then, the threats to the Apple Ecosystem are too great. The price of the goods too high, the ardor of the customer may be gown. All in all, a tough own, a tough hold, alas, a shame. Jim, you sort of said it and added last night, dont let this stock become the eclipse that blinds you to Everything Else going on. You cant. The companys Conference Call was radically opposite of what everyone was thinking. And the company just kept going back to that mantra, listen, we have the best product. We dont really need to defend ourselves. And i think that what was happening was the analysts were viciously, viciously trying to figure out you can as the call was going on, what do you pay for a company with waning growth . What do you pay for a company