Transcripts For CNBC Squawk Box 20130208

In california this morning. Were thrilled to see them. Theyre going to be talking to a number of people in the world of business and politics. Well talk a little golf, see how joe is doing out there. Joining me in pseudo, our own Steve Liesman and book brusca. Then in the next hour, Jeremy Siegel is going to join us on set to make his bullish case for the numbers and then, nemo, the powerful storm taking aim at the east coast. Forecaster res warning it could be among the worst ever, more than two feet of snow possible in boston. Many cities are telling residents, dont travel if you dont have to. Airlines are now warning the blizzard could cripple travel and hundreds of flights have already been canceled. Were going to check in one on friends at the Weather Channel. Just a couple of minutes for their latest forecast. Also in the news, the Justice Department in multiple states reportedly discussing suing moodys for defrauding investors. Any move likely to make a similar rival against Standard Poors is testing likely so this likely to be more than two years out. The goal is to get more battle on potentially hazard just flights, so these flights will only happens. Now lets head across the country to joe and becky and see what they have coming up this morning. Joe, how was your week on the course . Yeah, i had only one day in the tournament and it was one of those days that im used to out here. It was beautiful weather. It was beautiful weather and i hit a lot of different kinds of shots. When a professional golfer says that, they mean they intentionally hit a a lot of different kinds of shots. When an amateur does, were just dealing with the situation. It was really fast. Im playing with ratiff gussen, who is not only a great guy, but his tempo is still the way it was when he won those u. S. Opens. I make him with my tempo, i say, just turn around, hell quit the game if he watches me too closely. Anyway, i know we want to get to our newsmaker this morning. Carol bartz will be here, perhaps best known for speaking her mind. And this is true. In some colorful tones once in a while. So well look forward to talking with her about everything from yahoo to apple to some of the big issues coming out of washington. And were going to hear from at ts ceo Randall Stephenson. And Telecom Industry veteran dave doorman, now the nonexecutive chairman of cvs caremark. Plus, joining us live this hour, shawn carolyn. He was one of the First Investor s for siri. I got up at 2 40 because i thought i had to be here at 4 00. Because you cant do math and you didnt do the time change correctly. Exactly. I did shower a little last night after the round. Thank goodness. I made et here. And running through the rain to get over here without an umbrella. By the time i left, it was like, im not going back. You got a little hair wash on the way coming over. By the way, we also caught up with a true American Icon yesterday afternoon. Clint eastwood. The legendary actor and director is politically active. We talked to him about everything from simpson and bull to try to talk about whats happening in washington and his speech at the Republican National convention and the now famous chair. He talks about how he came up with the idea to use the chair. I decided to use a different route because i figure theyve heard that from about ten other people in front of me. So i tried something new. It probably seemed odd at the time. But, you know, im an odd person. He talked to us a lot more about that, guys. We will bring you more of that Clint Eastwood interview throughout the morning. Joe, i should mention, he told me off camera afterwards the inspiration with behind how he came up with the chair gave us a little bit of a hint. Im not going to till now, but i want people to listen for a bit. Youll be surprised when you hear it because i was surprised. Hes a machinery man. 83, i think. 82. 82. Ive seen him of the years and he hasnt changed. Thats what i was thinking, too. Well check in wie both in just a minute. Joe, i think you do, you look very rested. I wish i could tell you i was paring it up, but i was not want 8 35, 8 45 in bed, but, you know, do the math. I think i needed to get up at 1 38. I got up at 12 40. You may have picked the right time, both of you, to get out there because i dont know if your flights are going to make it home by monday the way the weather is. Anyway, we have a couple other headlines to get to. Apple responded to hoarding sex sess cash. Iron horn calling into squawk yesterday. We think if they distributed preferred stock with a 4 yield, there would be a stable demand. Shareholders that want to own apple for the upside within the operations would continue to simply own the common and they would be able to take a lot of money off the table by selling the preferred to the institutions that want it. Apple is you no saying its in discussions about how to return money to its investors. Well see what happens to that lawsuit. In other tech news, dells largest independent shareholder has reportedly told the computermaker a thishour buyout bid is now undervaluing the company. Shareholder southeastern management believes dell is worth 20 million per share. Amr critters reportedly plan to meet with the banks on monday. Now mr. Liesman with more stocks. A few stock toes watch after the bell. Movers following quarterly reports. Lingedin getting more earnings the. This marks the seventh consecutive quarter. Activision blizzard posting betterthanexpected earnings and revenues. It offers a cautious forecast for the full year. Shares of coin star taking a hit. The operator of red box video Current Quarter results significantly below analyst estimates. It blames a slower movie release schedule. The company sights a fall of demand for its products in europe and africa, andrew. Before we get back to pebble beach, lets see how the markets are setting up today. Not a lot of movement so far. Dow luxurious like it would open off about three points. Nasdaq would open up two points. Wti crude, up marginally. Lets take a quick look at the ten year, as well. See there were now at 97. 1563 with a yield of 1. 946 . Quickly over to the dollar, i dont know, its more of issue, but lets take a look at whats going on in Global Markets news. And were going the talk to kelly in a second. Weaker on the euro that we talked about ideas at davos, that the ecb may have to do more like the Federal Reserve. That is possible. Miss evans. Steve, andrew, hello. Theres plenty to talk about, but i want to shake things up for viewers. There hasnt been a ton of move responding to the eu budget meeting which is reportedly winding up right now. There has been a lot of auction. Adding 20 candidate as i can see here. The stoxx 600 is adding about 0. 5 all told. Take a look at this, bwin. Com, theres talks about new Jersey Governor Chris Christie opening up Online Gaming. It leaves the possibility out there for Atlantic City casinos to offer games like poker online. So bwin has a join venture with boyd gaming which is licensed in new jersey. And the view among analysts is that other states, potentially federal legislation could follow suit. This is a small step in the direction of perhaps allowing more and more of the u. S. Market to gamble online, like you can already with this one. Up 19 . Watch shares generally speaking in the gaming session today because you can expect there will probably be some similar moves. Just the final word, we saw the yen strengthening avenue the yen appeared to talk down some of its easing moves. The yen was still 1 stronger. The nikkei ended the day 12day winning streak with one of its longest. Back over to you. Thank you, kelly evans. We will see you a monday. Yesterday, we talked to former treasury secretary robert rubin about creating confidence in the markets and the economy. Business really needs to better understand the very different set of issues and dynamics that washington faces. And conversely, washington needs found business better. An that would be very helpful in policy formulation and also in creating confidence. Our guest host for the hour, the one, the only, bob bruska. Thank you for being here. Thank you. Bob rubin was a little more cautious than the markets seemed to be suggest background the economy right mow. It seems appropriate to me. I think theres been a lot of happy talk about the economy. There was a feeling at the end of the last year, i think a lot of people in the election process thought the economy was doing better and gathering steam. And it seems to be steam. Its just kind of going away. There doesnt seem to be anything coming in behind it. The jobless claims numbers were very low for a couple of weeks and now theyre back up to where they were. The job numbers look better to peop people, but they basically benefited from the numbers in the works. We like to look at hours worked. So if you look at the growth rate in numbers, its declining. Steve, the juxtaposition between john taylor and evans oh, you wanted to im thinking about rubin. Why would i want to kill myself . Rubin and taylor, both of them were pessimistic. But i was going to say, evans was right. Much more optimistic. Two different takes on fed policy and its efficacy, whether or not its working. Taylor went even further. Taylor said that balsey is dragging down the yes and in the part that was online, i did ask evans specifically about taylors comments. He said he has Great Respect forte lore, just doesnt understand where hes coming from. Evans says that he sees qe leading to better auto loans, better housing and ultimately he thinks whats happening in the market right now is a recognition from investors of what the fed wants investors to understand, which is that they are in it for the long haul. On the other people of news, and i wanted to relate this back, were talking about apple and David Einhorn and cash. Its a larger story. Obviously, David Einhorn discovers that apple has cash two minutes before my interview with evan. No, really. Ive been screaming about the cash for a long time. Eveng its high time. But evans is applying no pressure. Im not sure thats him job. But theyve created this environment for this to happen. What do you mean . Thats a risk decision that companies are making for some reason theyve decided they need to operate with massive and huge cash balances, okay . And for whatever reason, there have been an absence of investors like iron horn who said, give me back the cash. Find a way to redistribute it. I dont know, bob, in terms of Macroeconomic Development i think some of the Corporate Cash comes from firms that have made money and they dont feel like taking risk in this environment. Apple is the Technology Company and i can understand apples view that they have freedom of cash on the Balance Sheet. Some of this is complicated. Some of the cash is overseas, they bring it home, thee incur some tax liability. Cash on your Balance Sheet is freedom. Its freedom from bankers. Were going to slip in a quick break. Bob, youre going to be with us for the rest of the hour. And im going to send it back to pebble beach and the one and only becky quick. When we come back, were talking about putting money to work behind the next big thing. Since were here on the west coast, we figured we had to technology technology. Were going to talk to an investor in siri intelligent and ask him if he thinks aapple has a cash problem. Plus, a live report on the weather in the northeast as they phase for blizzard conditions. Im glad we got cdw and cisco to design our data center. Yeah, the cisco ucsc series server, with the intel xeon processors, help us scale smoothly, like a perfect golf swing. How was it before . Clunky and full of unnecessary impediments. Like charles swing. I heard that. Welcome back to squawk this morning. Hewlett packard reportedly placing limits on the employment of students and factory workers f cross china. Is says the move reflects a significant shift in how Electronics Companies view problematic labor practices in china. Apple, of course, has come under scrutiny for its practices there. Lets get to joe back from pebble beach. Joe. Hey, andrew. You cant be on the coast, obviously, especially in this area without talking about innovation and advancements in technology. Shawn carolan is a managing director at menlow adventures. Andrew is going to want to stay involved here because he knows this disrupter. Ow viewers might know. But you can tell me basically that the things that youre investing in, whatever you want to say they do, ill just go, ow. If you tell me you have contact lenses that you can do mental telepathy and are you investing in anything like that . No. So siri, how did i cant even imagine that a company would come up with that, but you decided that was something that made sense to invest in. You absolutely. Its one of those things that its so ubl that at some Point Technology will get to a point where you can talk to a phone, it can do amaiding things for you. The question is when. Then when you find one that you think is going work, well make the cut. How many things do you guys look at. How many finally end up into money . So we have seven partners. Each of us looks at between 50 and 100 companies a week. A week . You look at websites. Theres inperson meetings, but youre constantly absorbing one of the next new things and in any given year, the Firm Investor in about 15 new investments. We do seed to growth stage investing. Who is fielding these calls that come in. The average age of the person calling . Ive talked to as young as a 13yearold. Theyve got good ideas. I think the youngest person weve probably done is in his teens. But they come from all walks of life. And the best companies, you have to go out and find yourself because theyre not calling anybody. Is anyone working on a rain cessation technology . Have you seen i have not pictured that yet. Are you listening to whats happening out there . Yeah. Sorry about that. The hardest thing you guys have to do is seeing these new, Amazing Things and knowing when is the right time. People have talked about a phone you could communicate with forever. Ive heard people talking about the printser where you can print out 3d versions of things you might need. Ive heard people talking about that for a decade and it sounds like its coming closer to a possibly now. How do you know when is the right time . Its a really good question. In fact, thats one of the hardest things. Very personal experience, cinema now was a company we invested on for movies over the internet. It was very obvious it was coming. Unfortunately, they were a little too early. Is that really something people are thinking about . We were too early, so they lost and net flex won. And a Company Called roku, which is a little box for 50 bucks. Last year, they streamed a million hours. The nice part of our venture is you can be wrong about half the time and lose all the money and the winners you make ten times your money. Is that wa youre looking for when you go in . The good ones should be ten times. Sometimes it can be more than that, sometimes less. On average, you have that spread and you end up three times your funds. Do you ever consider macro things . Does it matter to you whats happening in europe . It always matters. If you say when do we return money to our investors, its when theres it will come in the form of an ipo or an acquisition and thats heavily affected by the public market. Absolutely. Andrew doesnt have a car. So uber isnt that your thing, andrew . I used uber last night to get home. Couldnt get a cab, used uber. Its impossible not to love. I mean, someone came to me with that idea, id it sounds simple, but undoable. Thats a big trend of ours in investing. The platforms are there. Theres a billion people on social networks, 150 million tablets. The substrate is there to do Amazing Things. I think of almost the perfection of an end user experience. Uber, you push a button and the car shows up. Roku, 600 channels on demand. Im actually incubating a company. Our interest started a company that was looking at the email overload problem. We looked around for five years for a company to invest in. Never found it and came up with a solution ourselves and ive been running that. What do you mean the email overload problem . From how many i get in my inbox . Yeah. Theres more people on email than there are on facebook and you get 150 emails a day and most people cant keep up with it. They spend 25 hours a week feeling like theyre treading water. And it was an enormous problem and we finally thought of something that was going to work and we started it. Filter out the stuff i dont want to see, you know you mean . I cant talk too much about it. Were in stealth mode right now and it will be launched next quarter. But it works with you. Think of your brain and your ip box and together you can do Amazing Things. So you need qualified investors . Is that how it works . Can i give you money if im like a. 0001 percenter . We have some individuals and limited partners that invest in the fund. Can you gauge how people feel about risk at this point based on the kind of calls youre getting for people wanting to come in . Are we seeing people move down the curve at this point . Id say the general trend into flow of capital and adventure has been down some. There was a bubble and a good return. The top funds are still getting money. You know, we raised a new fund last year and i think the theres enough money to fund the Great Companies right now. I dont see anybody who has a really good idea thats getting traction and they dont get money. And its a healthy thing for the industry overall. And what was your degree in . Ive got a bachelors and masters in Electrical Engineering with a Computer Science minor. Ee and Computer Science and from stanford mba. That moved me out here in 2000. Did you ever have a date . Did you i had to work really hard to convince my wife to marry me. Ee and then an mba and all this from stanford . Actually, illinois. University of illinois champagne was my ee degree. I have to look at that again. Anyway, thank you. I got up good to be here. Lets continue this conversation. Thanks for having me. Thanks for coming clean on your educational background. I appreciate that. I thought appeared rue would want to ask something. Andrew, you werent excited . All right. Joe, thanks. Sign me up for some shares in that handle. I want that, too. I happen. I am desperate for it rye it now. Were googling for it rye now. Joe is going to invest in it, make a ton of money and leave us behind. A powerful winter storm is on its way from the east coast. Jen carfagno did i say that right . Carfagno. Joins us from the Weather Channel. By the way, im going throw in a few bucks, too, for that new product. We need that when we have a storm like this. The scale only goes up to ten. We dont see Something Like this every day even every year. Were talking about an historic storm. Boston, 10 out of 10. Blizzard continues expected. Portland, same issue, as well. We have blizzard warnings for 23 Million People overall, 54 Million People under some type of winter storm warning or adviso advisory. And its two storms coming together. The radar, too, shows you where things are. We have that snow coming around now through michigan and moving into parts of new york state. This storm, this is the one thats bringing all the punch and the moisture and weve got rain now starting to move into places like philadelphia, some rain being reported. New york city, nothing yet but its on its way and thats why were timing it out here. New york city is a tough forecast today. Its going to start with snow mixing into rain and changing over to rain and back to snow and them comes the big snowstorm accumulations. Were looking at 12 to 18 inches here. Southern new york, boston, 18 to 24 inches with the wind blowing around, that snow drifting. The snowfall travel extremely difficult if not impossible. Folks are being asked to stay off the roads starting now. Back to you guys. Thank you. Well have to see if becky and joe can make it back on monday. Coming up, Randall Stephenson speaks out on smartphones and tablets and much more. To grow, we have to boost our social media visibility. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. We dont let frequent heartburn come between us and what we love. So if youre one of them people who gets heartburn and then treats day after day. Block the acid with prilosec otc and dont get heartburn in the first place [ male announcer ] one pill each morning. 24 hours. Zero heartburn. Welcome back to squawk box. Charter communications is set to buy optimist west for 1. 63 billion deal. The fed is still trying to determine which of its Computer Systems has been hacked. Meanwhile, overall circulation has been largely unchanged in the second half of this year this according to industry numbers that have just come out. Back to you, becky quick, in pebble beach. How is it out there . Is the weather good out there . No. Its raining on us right thou. It was beautiful yesterday. Its raining right now. Well see what happens. Andrew, you said us magazine. It said u. S. Magazine, but you said us magazine. You went back and predepended thank you. Hes paying attention. You cant get me its 3 30 in the morning, i know. You think thats too early for him, andrew, he cant give grief at that hour . I want to see you guys in us magazine next week out on the golf course. Is there any video of joe on the on the course . Is there . I dont think there is. Joe, we have a point, lets see you in the bill murray video. Youve got two more days to play at least. Last year there was video. We never have video of you fishing, do we, liesman . Yes, you do. And by the way, im more than happy to provide it. But we want to look at that great shot you had. Actually, casting is something you dont want to do as a golfer and i do do it. The big slice. You know who i am, joe. When you go out there to play foss courses, i am the guy who is illegally fishing on the golf courses. Ive been thrown off of golf courses around the country. That snuck off. Guys wbts a few hours before anyone will be teeing off here at pebble beach this morning, but we did get the chance to catch up yesterday and sit down with the at t chairman ceo Randall Stephenson. We talked about the growing demand for smartphones and getting them into the hands of consumers. Also, reports suggest apple market share will peak in 2013. We have obviously built a very strong franchise of apple smartphones and, in fact, Fourth Quarter, we had another iphone records sales record in the Fourth Quarter. We also had a record selling android devices. In fact, you put it altogether, a key metric for us is when you look at customers who buy services under contract, almost 90 of our sales in the Fourth Quarter were smartphone sales to those customers that buy under contract. So you look at that and you say, well, about 68 , 69 of our customers actually had those. 90 of our sales are in that category. So it tells you theres still a lot of headwind left of people who are going to continue to penetrate this market with smartphone sales. From our standpoint, thats a good thing. People when they get a smartphone tend to consume more data. They tend to have higher demand in terms of rate plans and revenue per customer goes up as people move into those. And thats just smartphones. You know, were not even into the world of tablets. And so we are quickly approaching a place where tablet sales are going to exceed pc sales. When it comes to smartphones, you did have a Record Number of smartphones that were sold but the margins were pressured a little because you got subsidizes. I know tmobile is getting to the point where theyre going to not do as many subsidies as they have had in the pacht. The industry is constantly looking at this. In fact, we have looked and have numbers run and plans on the shelves to do something similar to what theyve announced. Really, when you say theres no subsidies, its just changing the Business Model. Theyre financing the hand set, per se. Its a rethinking of what the Business Model looks like. When you pay it out over several quarters or something. Which some would say thats implicitly what the Business Model is. The carriers are financing what it has been for the consumer. That has been strong for the consumer. An iphone costs much more than the 200. How about 600 or 700 when thats whats been reported. Weve not given a number. In the ballpark . Yeah. Youre in the ballpark. The customer is paying 200 for something that has much more value than that. Thats done a terrific job of dproeg the industry and its great for apple. Actually, its great for everybody in the ecosystem. Its more than hand set manufacturers. There are a lot of People Manufacturing equipment that support all the underlying data. A little later, well be speaking more with Randall Stephenson. What he thinks about Economic Activity particularly when it comes to small businesses. Shawn carolan is spending the hour with us. About half your time, you say, youre focusing on mobile and the things happening there . Yeah. Smartphones . Randall talked about it. Its an incredible platform. The iphone is only five years old. To say that theyre going to peak market share next year, who knows . They keep coming out with new hits and its an incredible asset that they have. I think theres so many new, exciting ideas there that theres a lot of head room. Ten years, well still be dealing with these smartphones. People use them constantly. Theres lots of innovation there. We start looking at the smartphones and the tablets that are starting to merge in some ways. I have an ipad mini. The tablets are getting smaller. Is that a good thing . Does it matter . I think its great. You think of all the factors right now, you have a phone in your pocket, with and a tablet in your bag. The mini goes back and forth. Im imaging within the next five years, people have multiple in your house. You walk into the kitchen, there will be a tablet there. Youre in your bathroom, theyre reminding you to take your vitamin. It really isnt possible to do all these things in the air. Does it help being an ee . Do i have any idea how this is happening . Believe it or not, i worked at motorola over ten years ago and it was the first wireless lan before wifi was called. And that was a long time ago. Its come so far. I think its still going to, like, the Amazing Things are coming. So reality around us has nothing to do with what were able to perceive. Pick up a kul of things. Theres a lot happen. Whoa, look out. Dont do that. This is what its going to be able to do for us. I wish i could spill it on you next time. Shawn, thank you for rolling with us. Go ahead. There are things everywhere. But not spiders on my back. Stop making me think that. Guys, we will send it over to you. Couple up, is there a doctor in the house . The ceo of cigna joins us. The industry and reform coming out of washington, stay tuned. What are you doing . Work . Work. Cdw configured these Lenovo Thinkpad ultrabooks with intel core i7 processors. So, we can work anywhere. Anywhere . Sure on the beach, in the woods, at the lake. What about on the green . Lets not get ahead of ourselves. Oh [ cows moo ] [ sizzling ] more rain. [ thunder rumbles ] [ male announcer ] when the world moves. Futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with papermoney to testdrive the market. All on thinkorswim. From td ameritrade. Welcome back to sidewalk this morning. David cordani, cignas ceo, thank you for joining us. Good morning. Its good to be here this morning. You had a pretty successful earnings announcement. Revenue increased 33 , profits for the year, 1. 73 billion. So i have a philosophical question for you that we were talking about around the at a table before we got to you, which is this. Part of me wants you to make a lot of money. I want the as a business, as someone who believes in capital, i want you to do very, very well. And part of me says, 1. 73 billion went to the wrong guy since youre the middleman. What do you say to that . If you think about our business, our business is framed as a Health Service company. So were providing, in the majority of cases, Health Services for employers to lower health risks, to improve health outcomes, and then to ensure that individuals with chronic illness or acute illness are getting the best possible care. In the context of about 30 billion revenue, thats about a 6 return on our overall business. So were bringing a lot of value to the market, helping to improve health, improve worker productivity and is take costs out of the system by increasing quality. So we think its a very fair return. David, obama care is coming. How is that going to affect your company . We see obama care as driving change in the marketplace and change is good because maybe to your core question, the status quo is not acceptable. We need to take costs out of the system and increase quality. For us, focus more on services. The change in the marketplace is a positive. One of the biggest changes we see happening in the United States is the opportunity to partner with physicians, to collaborate with physicians, to drive increases in health quality. Today we have over 50 collaboratives already up and running in the United States where physicians are more paid based on the quality of outcomes haves the quality of services. As a result, people are Getting Better quality of outcomes, Better Services and costs are coming out of the system. David, give us a your outlook for the year ahead and a little bit beyond that. To what extent, when washington is its in the middle right now of the process of trying to find cost savings. Do you expect some of those cost savings to come at the expense of profits at your company . Steve, were a global company, first off. And to the core of your question, those type of changes and disruptions are happening all over the world, whether its in Southeast Asia or in europe. The sustainability of costs are putting pressure on every government, every employer, every individual. So from our point of view, as long as were dealing with change, well be able to both grow the top line of the company as we have over the last number of years and continue to deliver a good return. But its only if youre able to engage that individual and engage the physician. Pay based on quality and then lower health rickes and improve returns. I believe if youre going the maintain the status quo as an insurer, youre going to come under meaningful pressure. Were not an insurer. Were a Health Service company so we see Growth Opportunities and very good returns in the future. David, were going to leave it there. The music is playing us out. Hope to see you again very soon. Interesting conversation. Coming up, outspoken leader carol bartz. Plus, Jeremy Siegel. But first, john fortt with an exciting new technology. We all now drunk driving is dangerous. Texting and driving, just as dangerous. Ill tell but a company thats using technology in a couple of way toes drive that point home. Get ready for a lot more of that newplane smell. Were building the youngest, most modern fleet among the largest us airlines to ensure that you are more comfortable and connected than ever. We are becoming a new american. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] 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 all stations come over to mithis is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. And welcome back. We were reporting from the site of at ts pro am, pebble beach, the crosby. So much history to the tournament out here. Jon fortt joins hop, skip and a jump from where you are to get down here. You know this whole area. Yeah, yeah. Its a long jump. I mean like an hour and a half drive. But not too bad. So its only an hour and a half. Have you spent much time in this area . No. This is above my pay grade down here in pebble beach. Have you ever seen a coastline that is i mean if you havent been here, it is magnificent. Its gorgeous. But in california, i mean, you go down to southern california, theres more gorgeous coastline. Weve got i like point lobos. Its an embarrassment of riches. It is. Youve got a report for us. I do. We at least want you to do that for us. Put me to work a little bit. Before the sun comes up. And you got the sweater on. Which also looks good on you. I didnt expect that from you. Youre not a big sweater fan. Its not the sweater when shactman wears it i think it looks good. That looks good. Depends. I was a little selfconscious putting the sweater on because i didnt know what you would think. Ive been wearing a sweater all right. Actually, nexting and driving really serious problem. Just as bad, maybe worse, than drunk driving. At t is trying to take this on. Ran stevenson, ceo, very serious about this. Turns out that one of the things that at t is doing came from an idea from someone in billing, in detroit. But take a look at exactly how big this problem is and what theyre trying to do about it. The numbers are eyepopping. Studies show drivers are more than eight times more likely to have an accident while texting. In 2011, distracted drivers were involved in 1. 3 million accidents, injuring 387,000 people and killing more than 3300. But now, help is coming from an unlikely source. Wireless companies. Our objective is get the word out, change behavior, and save lives. Reporter at t is spending tens of millions on its it can wait campaign, which features an online pledge. I sent one, stupid meaningless text and killed a man. Reporter jar be Public Service announcements and even a driving simulator. Did you know texting takes your eyes off the road for an average of five seconds. Reporter but the Company Hopes its latest tool will be the most effective. An app that blocks your phone from sending or receiving texts while youre driving. Heres how it works. Once your phone detects that youre moving at 25 Miles Per Hour the app automatically turns into drive mode. Anyone texting or emailing you gets an auto reply telling them that youre driving and will get back to them soon. The app also limits your ability to make phone calls while driving, allowing you to send or receive calls from just five numbers and routing everyone else directly to voicemail. And while most of us probably associate distracted driving with teenagers, at ts quick to point out this is one app everyone can use. Our message is that everybody, no one would think about drinking and driving. If youre an adult, youre a teenager, same message goes for texting and driving. And that app is actually the brainchild of a woman in billing in detroit for at t. A friend of hers had a Family Member killed in a texting and driving situation. She came up with this idea. And it got pushed through the company. So jon, i love the idea. And i think its great. A couple questions about how it works. First of all if im riding in a car am i allowed to text or does it think that im the driver no matter what . This app is not perfect. Its based on guessing how fast youre moving and it doesnt know if youre driving or not. Even if youre walking and youre between two cell towers and you switch between two towers it might think youre moving really fast and shut you down. Walking you could get in an accident. That lady fell in the water. So im okay. I think we should lower it to like two miles an hour. Maybe those people need to have their phone shut down. This is a Great Campaign for at t. Because if you show people, like that young man that said that one text and showed the bicycle, that he hit. I mean, you dont think that. You dont think that. The other thing, i cant imagine, do people text on an iphone . Yes. How can you possibly i cant sober, not moving i cant send a legible message that its so small. I cant imagine trying to text with an iphone. Yeah, its weird. I have a tablet i guess for texting on touchscreens but its kind of like a range of comfort levels. Do you think that people would chafe in terms of personal freedom if it became law to have Something Like if they get that application down to where you could actually use it where you cant i want it for my kids. Would that pass muster in terms of . People probably would. But you mention the thing with kids. Its something i was talking to at t about yesterday. I said, can you tell if your kid shut this app off if you got it on their phones . Thats something i think they might be looking into. There must be a way to do it. Where its just, youre unable while youre driving to text, right . Its not that much different than drunk driving, really. What do you think . I think that, to your point, on android you can actually do that. Inside the operating system you can lock it up. On ios you cant. You dont have control. But its not just the texting. I mean music, people are watching videos, its scary, i drive down the highways in california, and you see not that youre doing it. Every other car somebodys looking down. Its a real issue. It really is. Jon, thank you very much for coming out and playing with us this morning. Yes. Sean, thank you for joining us. You were up all night. You kind of wandered by on your way. Always up. All right. Back to ec, englewood cliffs, bracing for some snow. Thanks, guys. We have about a minute or so, we have bob, get your thoughts on the Federal Reserve this year. Do they do a full trillion, 85 billion a month . I think theres a good chance that they will. They seem to be on that path. And im not that constructive on the economy. I dont think the economy is getting that much better that fast so i think that given their parameters i think that theyre going to keep plugging away at the markets, and i kind of share some of the concerns that john taylor has about it. About what . The program itself is whats responsible for dragging down the economy. Well thats a little bit of an extreme view. I dont think its help. I do think at some point there are some negative spinoffs from that. Is it hurtful right now . Well, you know, you have some of the fed members, you have some of the fed members talking about bubbled markets. Right. Were going to come back and talk about that in the second half. Weve got corporate leader carol bartz in pebble beach. Plus making the walk right now, we have him her,er ismy siegel. How . Cdw and hp networking implemented a Virtual Application Network that reduces the time to deploy cloud applications from months to minutes. With fewer bottlenecks like this. Finally. Charles client golf. Aim for the lake. Really . Is moving backward. [ engine turns over, tires squeal ] and youll find advanced Safety Technology like an available headsup display on the 2013 lexus gs. Theres no going back. This is a special presentation of squawk box. One of the most powerful women in business, carol bartz. I think youre going to see a pushback towards a lot of enterprise apps. The ceo of Telecom Giant at t. Randall stephenson. If things have to change, lets get them changed and lets get it put in place, lets get stability for the business environment. Whartons Jeremy Siegel on the 2013 stock surge. I really think so. And i think 16,000 to 17,000 is a very strong possibility. And a true American Icon, Clint Eastwood. Lets get going. Lets get to work. The second hour of squawk box begins right now. Good morning and welcome to squawk box here on cnbc im andrew ross sorkin, cnbcs World Headquarters. Joe kernen and becky quick reporting from pebble beach, california today. Weve got a huge show and were going to have more from them in just a minute. First a number of stories that were following this morning, including nemo, the powerful winter storm taking aim at the east coast. Forecasters are now warning it could be among the worst ever. More than two feet of snow possible in boston. A foot or so is expected here in new york. Many cities are telling residents dont travel if you dont have to. Residents have been making preparations up and down the coast. Plenty of flights grounded. About 2600 flights have been canceled in anticipation of the massive winter storm. Were going to have more details from the Weather Channel in just a few minutes. Weve got some headlines from steve. Thank you, andrew. Boeing has got an faa permission to resume test flights of its 787 jets. Boeing wants to test the jets batteries under flight conditions to determine the source of the problems which caused the 787 to be grounded for the past three weeks. Mcgrawhills Credit Rating has been cut by fitch. It now rates mcgrawhill at about about abobbbplus from th. That follows the suit against the companys Standard Poors unit. Now to becky in pebble beach. Hey, steve, thank you very much. We are at the at t pro am at pebble beach. Weve got business leaders, golfers, celebrities. Theyre mixing it up on and off the course. Yesterday we had the opportunity to sit down with Award Winning actor and director Clint Eastwood. Heres his message for washington. Its the same message that i put out with the empty chair. Lets get going. Lets get to work. Mr. Obama won, and lets get out there. Lets get out there. Theres no budget coming in. Whos doing these . I mean you got a big staff. A lot of people. Isnt anybody helping . Isnt anybody jumping in there . People going places. All expensive rides. Lets get in there and get it done. Well have more from Clint Eastwood a little later in the program. Well also get his thoughts about washington and the reaction to the now famous chair speech at the republican convention. In fact, we also found out what was the inspiration behind that whole bit with the chair. Well talk about that a little bit later. We also caught up with at t chairman and ceo Randall Stephenson and heres his take on the state of the economy right now. We also saw for the first time in awhile, business spending and investment picking up. We had some segments of the Business Market that were actually positive for the first time in quite some time. So those were all good indications that maybe, you know, were maybe starting to see a little bit of activity. But its still kind of sluggish, if you will, and business, general Economic Activity is a bit slow. And so, were hoping 2013 could produce a little tailwind for the economy as opposed to headwind. Hmm. One big problem, as Randall Stephenson pointed out, is that they are not seeing a lot of new business starts. Ear going to talk more about that. And in a few minutes we are coming up with our guest carol bartz. Shell be joining us. But before we get to all of that lets get back to andrew and steve at cnbc headquarters. Thank you, becky. Im looking forward to that interview with carol. I think shes probably got a lot of interesting views about whats going on in the valley and specifically yahoo theres so much going on. She always has an interesting way of putting things, too. Weigh cant wait to hear more about it. Thats a very interesting way of putting it. We will get the sevensecond delay button going. Our guest host this morning is one of the worlds bestknown bulls. Jeremy siegel is here sitting in becky quicks chair. Yes, i am. How you doing . Im doing great. I think i want to be in pebble beach today. We all want to be in pebble beach today. The last time you were here you said 15,000 on the dow was definite. This was not there was no equivocating here. Well, almost. 70 that the end of this year i made the prediction, january, actually, 2012. So thats when i said i think the markets going to be between 15,000 and 17,000 by the end of this year and im sticking with that. So we had ron baron on after you, hes also in your camp, the 15,000 by the end of the year, but said look i expect it to be 20,000 in ten years. I expect it to be 30,000. You know, he believes that we are now back to some form of a formal 7 a year kind of thing. Yes. I agree. Is that receipt . Yeah. And the question is why now . Okay. And just give us a little historical i want a History Lesson from you this morning. Because weve just lived through what almost could be called not a full lost decade, but almost. Maybe we call it a lost decade. So why did we lose that decade, were there other lost decades along the way, and then what happened afterwards . Okay. Longterm on stocks, return is 7 a year after inflation. Thats the real. People ask me, they said, well, you know, last 12 years, 2000 to 2012, its a long time, and we had virtually zero returns. Mmhmm. The lost decade as you said. But you have to remember, we started that period, 2000, with the price earnings ratio of 30 on the s p 500. That is twice the long run average. And thats the key why we did so badly. 1982 to 2000 bull market was the greatest in history. The question is, why do you believe that parts repeatable . If you take that piece of it out of the last 100 years. Right. It doesnt hold up. Well, we had because that period of time we had, you know, 25 returns every year. Where are we today . Were at 14. Price earnings ratio. Were slightly below the long run average. And thats why i think we can have those average returns going forward. Wouldnt you have to have average growth to have average returns . And since it seems to be consensus that growth is going to be lower than it has been in the past, wouldnt you expect p es to be lower than they have been . No. Ill tell you why we wont have p es lower, because the Interest Rates are lower. The alternatives are lower. You dont have the competition. So i its a good point, jeremy. I want to push on that because i was talking to evans yesterday and he says the key to fed policy working is the belief among investors that the fed is going to be low for awhile. Right. Irrespective of what happens in the economy. Except for maybe inflation. Do you think investors really believe that . That strikes me as the thing that people are not willing to sort of walk across on that plank. Right. From one side to the other. And thats really what holds back price earnings. Ive been one thats saying i think Interest Rates are going to go up faster than people think. I dont think its going to be the middle of 200015. I think its going to so you dont believe them. Hold on, because theres a contradiction here, professor, if i might. Just youre saying that p es can remain bigger because Interest Rates will be lower. And you just said you dont believe Interest Rates will be lower for longer. So square the circle for me. Ill square the circle. Its going to be were going to have Interest Rates go up but theres record low levels now. Somewhere between dont forget we were at 1. 8 . What kind of rate do you think well get to by 2015 . You talking about the long bond . Yeah, id say 4 , 3. 5 . So this market has to fight the rise of the tenyear from 2 to 4, and it goes up all along the way . Yeah. Because you know what . Well only get to the tenyear being three or four if our economy starts moving again and corporate profits get moving. I almost feel like you are in the john taylor camp. No. But he doesnt like fed policy. He thinks its really inflationary. Im saying, Interest Rates are going to go up because the economy is going to do better. Yeah, were going to have a little bit more inflation. But you know, 2 inflation, even 3 inflation, is a sweet spot for stocks. The real assets you gave us a number for what the real alltime high is in constant dollars. Right. So give us that number and tell us where we are relative to that. I think that the s p is 1500 right now . Yeah. If correct for inflation in 2000, the s p was over 2,000. I think about 2100 in inflation adjusted dollars . We are still way below the record. Professor thank you very much. I appreciate it. Interesting to thing about. Higher interest, whether or not stocks go up in that environment. Back re going to send you now to a place where the weather should be much better. Us want to be there i think. Mr. Kernen. Oh, thanks, andrew. Coming up our newsmaker of the hour, famed corporate leader carol bartz is going to speak out on yahoo apple and much more. Plus the northeast bracing for a major winter storm. 2600 flights already grounded. Forecasters warning that this storm could be among the worst ever. Although it is winter. A live report from laguardia when we return. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. This is the pursuit of perfection. Welcome back to squawk this friday. Take a look at how the futures are setting up ahead of the market. Dow looks like it would open up about 4, nasdaq up about 2, and the s p up about a point. Also in the headlines, the northeast bracing for a winter storm called nemo. And it looks like a bad one. 2600 flights already canceled. The Airline Stocks arent moving just yet. But were going to continue to watch them this morning. And other industries likely to be impacted by the storm. In the meantime lets get out to mr. Kernen in pebble beach where the weather is hopefully better. Call me joe, andrew. Call you joe . Okay. I call becky quick, miss quick. Miss quick. You got a lot of i want you to call me joe. Shake it up a little. Our guest host for this morning i want you to play here, andrew, because you know yahoo as well as anyone. One of Silicon Valleys most recognized and outspoken executives, carol bartz, former president and ceo of yahoo also the former chairman, president and ceo of Engineering Design Software Company auto desk. Carol, its good to see you. Thank you. I dont want to weve already alluded to some colorful language, which wed like to thats thats one of the funnest things was that a conference . You mean blue, yellow, orange . Fuchsia . Trying to think if i could get you oh, blue. Shouldnt have put that one in. Maybe in passing well get find a way for that. But in terms are you surprised that yahoo is it really getting traction . Is it a sentiment change . What do you think of whats happening there now . Listen, im still a shareholder so i by the way, i love yahoo i love the people. I love the brand. The products. So it has to get traction. Its just serving almost 800 Million People so to say it doesnt have traction, when we get all excited about some site that has a million new users is like, really . So i think yahoo is going to be around for a long time. And i think marisa and the gang, all those great people behind, are working hard to make sure thats going to happen. And some of the initiatives are actually making a difference. This wouldnt have happened just if Marissa Mayer hadnt gone there, you think the stock would have responded or the business would have responded . What has been the main thing that shes done thats helped, do you think . Well, theres kind of two things in motion now. Theres the alibaba assets, and the cash from that. That was before marissa. And, good for yahoo theyre enjoying their buybacks. And that infusion. But shes working hard on those products. She, all the people, are working hard on those products. When i was there we worked hard on the behindthescenes. We had to get the engine going before we could get the beautiful outside and the dash and all those things. Thats a way of putting it. How that would you laid the groundwork for some of that . Well, there was a lot of technology debt, we like to call it, in our world, which is we didnt pay our debt, just like your house fell apart because you forgot about maintenance. So there was a lot of things happening in Technology Inside yahoo that had to be upgraded. And the whole team worked very hard on that when i was there so you can now start making changes on the top that the users see and that the users think are important. And bring it into more modern world. And of course, now, we also have the big mobile push for everyone. Thats a whole other topic. One of the things you talked about was that you had told and explained to the board that there was not going to be Revenue Growth until 2012. Well, there wasnt. Thats exactly what happened. We saw Revenue Growth in the last quarter. Is that growth that would have come anyway . You know, ive been gone a year and a half. So its no longer relevant to say this would have happened anyway. But, thank you for remembering that, becky. We were very clear. No Revenue Growth until 12. I would have thought actually maybe a little more. But you know, when youre sitting in that seat its one thing. When youre a pundit crawling out from under a rock its another thing. So theres way too many of those. Trust me once youve been there theres a lot of rocks out there and they just call out and zing in some advice. And call back. So im not here to give advice to yahoo im here to just cheer them on. One of those, the biggest questions, though, is just how do you find new users who keep coming in. That was one of the problems, not only with yahoo but plenty of the Older Technology things that are out there. I say it because i still have a yahoo account from the very first one i ever signed up for. Aside from my nbc account i have my yahoo account. The problem is getting people like me to come back in and using all the different sites. Metrics showed even the most recent ones out, the traffic continued to decline there. How does yahoo how do other places that have been around for a long time, try and keep those people in and coming back through . Its interesting, becky. Its not so much that people dont come back. Theyre coming back through a mobile device and that is tracked differently. And it doesnt have the screen space to do effective monetizization. Thats a problem for everybody. A terrible problem for everybody. Dell. Everybodys going through this. This whole change to a different screen, is just shaking every metric and turning it on its head. Mostly revenue. Which is the worst metric of call. To have a problem with. So its not so much that people dont come to yahoo for their mail or come to yahoo for finance reports. Theyre coming in through a small screen, and therefore you cant monetize and count them the same way. I think google has tried to counter this saying it doesnt matter how youre trying to reach people if youre an advertiser youre going to pay one set fee and theyre going to reach everybody whether theyre coming in from a laptop or via mobile . Thats just this week, as you know. I applaud them for that. They have, of course, the muscle power to pull that sort of thing off. But, its its not quite as simple as that. Because, you run the possibility that the whole thing degrades a bit. The advertisers you mean the rate the advertisers will pay . Exactly. Exactly. So, so when you try to pull something up by pulling something down and the thing youre pulling down is 90 or plus of the revenue, thats a problem. I remember Business Model with mobile health yahoo becomes anything more than you work on your content and try to make it a place where you still get eyeballs but then you cant really monetize it. It seems to be almost i look at the way Tim Armstrong has set up aol to be a profitable, much smaller entity, buyback shares, do things like that, to get the stock up, sell some of the intellectual property. But it, i dont see how hoo in the future where we talk about some of the leaders like facebook, and google and others. Is it going to be there . Is it a 100 stock again some day . Well, thats your business, not my business. I dont think it is. Well, then why did you ask me . I dont know. Andrew is andrew playing in this, andrew . You know what i mean, andrew . Doesnt 20 seem like a pretty good price . I think its going to be a tough sledding, as they say here in the northwest. Or in the northeast. Youre in the northwest. Where am i . How do you monetize . What do you do . Get your geography right. What do you do, andrew . I dont know what you do. The one question i had for carol is, you know, google world, can anybody else win . Meaning, maybe facebook but does it just mean that i cant imagine all of the data, even apple by the way, im not sure can ultimately compete with how google has been able to organize the worlds information. You know, its easy when theres a very, very Strong Company at a time to say no one can ever beat them. But history has shown it just happens time after time after time. Is anybody going to grab googles lead quickly, or are they going to have a demise sometime soon . Of course not. But theres things that every company doesnt do as well and theres new technologies that come along. And im such a believer in what Silicon Valley does and the possibility of a new thats ever ever believe that google is dominant, you know, for centuries is ridiculous. A lot of times the new doesnt come from the old, it comes from the new. Almost always. Almost always. So i dont know. Anyway, thank you, carol. Well have more throughout the show. Quick reminder, cnbc cnbc cnbc cnbc and yahoo used to have a business alliance. We still do. Yeah, we still do. To share and coproduce editorial content of which its great stuff. We were just is that a show recently . He looked very thoughtful about what i was saying. Thinking about it. Trying to get a reaction shot. Of how you actually looked. And i thought it was a really compelling, really compelling look. Yeah. Thanks, joe. I work on that. For hours at a time. I do work on that. We have to go, joe. Im getting yelled at and i dont have the status you have to ignore the people yelling at you. We have been tracking nemo, a powerful winter storm headed to the east coast. Nbcs erica hill joins us from laguardia. Erica, good morning. Good morning. Where it is definitely a little busy at laguardia. That, of course, is because of the canceled flights. More than 2400. If you look at some of the airlines, the major cancellations coming from united, delta and american. Just behind us a number of people waiting to get on those american flights. Theyve canceled 300 flights today. Another 150 tomorrow. And in speaking with some of the folks behind the security where the line was going around the corner, they said it is definitely a much busier morning here today than an average friday. More people trying to check in early. I can tell you that was the case last night at logan when i was flying back to laguardia. A lot of people talking about the fact that they werg to get on an earlier flight, basically get out of dodge while they could. And that may have been a smart idea because, as we know, once these cancellations start, then you lead to the backlog. And not just at the major airports here in the northeast. Of course the three major airports in new york and boston really going to be affected. But the backup that that will then send across the country. Because planes may not make it to where they need to go, to then get to other destinations and the crews can also not always get to the airport where they need to be to get that flight off the ground. So those are some of the things that we are looking on today. If you do have a flight today, best advice, check with your airline. The good news here is that most airlines are waiving those change or cancellation fees for you to rebook your ticket. So that is the upside. Definitely contact the airline. And you may want to use twitter as a resource. You tend to get a pretty speedy response if you tweet them one of your issues. So with that we hand it back to you and wish you good luck with your travels. Erica, real quick. Flights today obviously canceled, tomorrow. What about sunday and monday . Right now i dont have firm numbers on sunday and monday. But thats one of the things were looking into so i will check on that for you. Thank you. By the way, this is your first, i think, appearance here on squawk. Ive been a huge fan of yours for many, many years. You going to send her a tshirt . Thank you very much. She needs a hat and a coat and all sorts of things. I look forward to it. Then theres the hazing. Send it all my way. Well see you, erica. New Jersey Governor Chris Christie could be one step closer to making Online Gambling legal in his state. Were going to have the stock impact. Thats coming up next. 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 ] concept. Calvin klein underwear. 360 seamless technology. 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. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] we replaced people with a machine. R, what . Customers didnt like it. So why do banks do it . Hello . Hello . if your bank doesnt let you talk to a real person 24 7, you need an ally. Hello . Ally bank. Your money needs an ally. Steve didnt get that one right. Were approaching 7 30 on the east coast. Welcome back to squawk at the top of the headlines. In the headlines the winter storm thats hitting the northeast today. New englands going to be bearing the brunt of it so get ready. Two feet or more of snow but there will be plenty of white stuff to go around, also in new york, new jersey, and connecticut. Lets take a live picture of times square right now. Doesnt look so bad just yet. The first flakes have already fallen but the storm expected to pick up steam tonight. Though the storm has yet to fully hit, travel plans already are being disrupted. So far airlines have canceled about 2600 flights. A number that will undoubtedly grow throughout the day. Also in the news the faa has been granting has granted boeing permission to resume flight tests of its 787 jet. Its been grounded for the past three weeks since battery problems came to right. Boeing wants to test the batteries under flight conditions to further assess the situation. Online gambling may soon be legal in new jersey. Governor Chris Christie has issued a proposal to an amendment that to existing legislation which lawmakers indicate theyll approve under the proposals. Atlantic city casinos would run Online Gaming and pay a 10 tax on winnings. Higher than the 8 casinos pay on traditional revenue. I thought it should have been higher. Christie also wants the law to expire in ten years so give lawmakers oppo reassess it. News helping casino stocks this week on indications that the bill could finally become law. Steve . More now from Jeremy Siegel. Lets talk high finance theory here, which the academic world has advice for investors. And its simple advice, complicated to execute, is the best portfolio, the pair time portfolio, the u taupe onportfolio is one that owns the world. Right. And the conclusion of most academics is that most people are short the world. Yes. So lets talk about your portfolio and how you own the world. Do you own it in terms of gdp, do you own it in terms of growth . How should people go about owning the world, and why should they . Why should they own the world is easy. Right now over half the worlds gdp is produced outside the developed countries. Outside of japan. Outside of europe and the United States. So, you know, and it was only one quarter 30 years ago, in 20 years its going to be two thirds, and then in 30 and 40 its going to be three quarters. So the world is changing dramatically. Youve got to own the world. Not only is that where the growth is but thats where the capital is going to be. And thats going to be where the capital is going to flow. The reason ive heard, by the way, is the world, no matter what, grows. It grows 3 , 4 , 5 . You can have a recession in america. You can have a recession in japan. But the world is always going to grow and you want to really tap into that growth. And one thing ive heard a lot of financial academics or experts say is people are short global real estate. Its a hard asset to own but in terms of global gdp, and total assets, they ought to own more real estate outside of their own country. Right. Well its just like 30 years ago, people were short real estate outside of their own home they couldnt even invest in commercial real estate until we had reits. And then reits came on and now were Getting International receipts. I think that is an important asset class absolutely. The main lesson is diverse indication. Where you diversify and how, thats always i have onethird, onethird in developed countries outside the United States, called efa and onethird in emerging markets diversified across all of them. Onethird, onethird, onethird. An easy formula. Are you diversified . I have were not allowed to really invest. I do some mutual funds. Right. But i dont really you have no idea, do you . Im looking at you. Ive always tried to not. I try to Pay Attention twice a year i meet with a guy. Im i always thought that as a reporter i shouldnt Pay Attention to it you can do asset allocation. Theres a guy who does it. Im not supposed to know what they do. Really . I prefer not to know. Im going to get back out to pebble beach and becky. I keep calling everybody by their last name. I was going to say becky quick. You just thank you, andrew. You just noticed that . Still to come this morning on squawk, we have more of our conversation with Clint Eastwood. Why the legendary actor says that d. C. Is broken, and well get his solution for fixing the problem. Welcome back to squawk box. Lets get a check on the markets with our trading block on Oil Matt Smith commodity analyst at Schneider Electric and on the markets j. J. Kinahan chief derivative strategist at t. J. Ameritrade. How does the snow effect this . Are people going to leave early . Is there a big impact on commodities . I think absolutely that talking to a lot of my friends in the new york area, many of them are just going to work from home today. I think youre going to see desks with just kind of essential people, so to speak. And when you see that you often see that we have more dramatic moves if we start one way or the other. Whats interesting to me right here is if you look at the spx, s p 500 were trading just under 1510. And 1510 has been a tough area for us to get through. You saw we failed there when we got there yesterday. Sold off kind of hard although we did rally back in the afternoon. It will be interesting to see if we get there today and if we have a similar so youre saying its a low volume high volatility day. Any action either way tends to create big swings . Absolutely. Think of it as the action around the holidays time. Okay. Hey, matt, i thought commodities are supposed to go up, or at least certainly natural gas on the eve of a big noreaster. Seems to have gone the other way on us. Well, the Bigger Picture for natural gas is that were well supplied. Were at a nearrecord production levels and so although we are seeing a bit of a last hurrah for winter here the reality is the market is well supplied. Whats the story behind oil . I had people telling me that its the Federal Reserve being active again in buying assets, creating that commodity inflation. Whats your story for why oil seems to be spiking here . Sure. Theres all manner of reasons. Were actually quite a ju jumpcheck here for the crude level pushing around the highs for late last year. The same for wti. What were seeing is this rising tide raising and thats taking crude with it. Were see equities pushing to highs and the euro rally as well. Even though we some bad Economic Data coming through, that then promotes this weak dollar policy, Interest Rates not to be raised, sooner. And that just really lends further to support crude. Jeremy . I think that the bounceback in china is one of the stories thats propping up oil. Thats what evans told me. Absolutely. Lets leave it there for now. Thanks for joining us this morning. Got a big show today. We have to move on but thanks for your thoughts. All right. See you, steve. Coming up weve got more of beckys interview with Clint Eastwood. His take on americas leadership and the low pace of politics in washington. And then in the next hour, this is going to be big, too, were going to talk technology, health care, and einhorns suit against apple with david dorman. Hes the former ceo of at t, and current nonexecutive chairman of cbs caremark. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Voted best Investment Services company. Welcome back to a special edition of squawk box. We are live from penal beach this morning. Clint eastwood has been very outspoken when it comes to politics and the government. We got a chance to catch up with him and asked him if he thinks washington is broken. Yeah, i am surprised. I know its always very easy to get mired down in political quagmire but it seems that right now, were in a spot where just nothings getting done. Theres just a lot of people standing looking at one another, and maybe it just appears that way to us who are outside of the beltway. But, right now its very disappointing. I just wish, you know, the elections over, everybodys we should be moving ahead. The leaders arent stepping up. Do you think thats a reflection of poor leadership . Do you think its a reflection of people in america, look, its a difficult problem and they dont want to hear the bad news or face the hard choices either . Where do you think it kind of comes from . Well, its probably all of the above but mostly i think that people have to hear whats in order to pressure the people in washington to move a little quicker. I think they have to hear from the public out there and maybe the public is a little lackadaisical as far as you know, most, the average layman out there sitting, going, well, nothing i can do about it. So ill just wait it out. But meanwhile, dont want to wait too long. Clint eastwood said that that was part of the reason that he gave that chair speech at the rns convention at the Republican National Convention Last summer. Well have a lot more from mr. Eastwood including the inspiration about how he came up with the empty chair speech. Its an interesting story. Lets get back to our guest host carol bartz who is the farmer president and ceo of yahoo also the former president , chairman and ceo of Engineering Design software at autodesk. And carol, weve been watching everything thats been happening in washington, and im sure you have, too. Clint eastwood talked about his frustration. How about you . Where do you think things are headed right now . Im so frustrated i cant watch anymore. Quagmire is exactly the right word. Its its sad. If corporations ran their Companies Like washingtons running, nothing would happen. Because nothing is happening. So the republicans, i cant even go there, the disarray thats lapping. We need better. We need people to answer their vow. What do you mean the republicans . What about the democrats . What about the white house . Oh, terrible. But, they won, so theyre in there, they have the leadership, they have the power, theyre not doing anything, and the republicans arent forcing them or helping them do anything. I mean everybody won. Nobody won. Right. Everybodys losing but people that are in elected office, theres a reason that they were put there, too, some people would say, you know, to put the brakes on what each side wants to put the brakes on what the other side wants to do. Thats why we have the government to make sure that and the country is divided 50 50 on theres people that won, all private sector and just simplifying it. People that are private sector fans. People that are government fans and its a tugofwar. Right. Between the two. And boths sides were elected. I kind of understand it and i understand its a quagmire. But i certainly wouldnt want either side to just roll over for the other side. Oh, you cant. I mean people ask me all the time, is my next life politics. Anybody that knows me knows that that would be virtually impossible. I think that would be fun. For about a day. And then id be run out of town on a rail. Because the problem is, you have to say and do things and promise things to people you have no intention of ever doing. Thats right. And i just dont know how that happens, how anybody as a person can do that. I guess the bigger question is how do you break out of that cycle . With some of the problems that were facing right now with the deficit issues, with the entitlement issues that are coming up, how do we get politicians to Start Talking about some of those tough realities . I dont know. The ones that do get slaughtered. I dont know how we do it. I wish i were that smart. Do you think its Holding Back Business at this point . Or does business operate kind of outside the sphere of whats happening in washington. Oh, you cant operate outside the sphere. The last few years, where anybody in a corporation was considered evil, and i really felt that way. I know my colleagues felt that way, you have to operate in spite of washington. And because, first of all, you have a responsibility, shareholders employees customers, whatever, but youre a business. And youre there to run a business, and to make good products and get profit, and la, la, la, everybodys happy. So you have to do it even with the weight of washington strapped to your back every day. You said that you felt the last two years that businesses and your colleagues and other people four years. You really feel like its been a demonization . Absolutely. Or no . I think its numbness. It doesnt seem to be getting worse. Its not better. But you just continue on. Before i think all of us felt that we could, with rational talk change the mind and change the tone, like dont fly vegas and dont do this and everybodys bad so it cost people to do stunts like drive from detroit to washington in a two cylinder car. Who cares . Thats not the point. But now its four years later and you just have to move on. There are a lot of ceos who seem to go to the white house often, or at least be there for the meetings and things that show up. You think anything gets done from those meetings . First of all, after having said all this, you still have to go. First of all, its the white house. Its the president. Its like, wow. I dont care, i came from a town of 1,000 people. If i could see the president , man, the whole town knows. And, but, do things get done . Hmm, slowly. I dont think they get done because of a particular meeting. I think they get done because of the raindrop of and the relationship. And the relationship. You know, besides, america is about hope. You also have to hope. Private sector growth is i mean, that solves everything, and i hope hoping, i keep hoping that thats going to come home, just really be driven home where everything that we talk about is viewed in the from the prism of private sector growth. Because our were everybody its a tragedy to grow at 1 to . Hopefully that were coming out of that and hopefully unemployment comes down and we get down under 7 again because otherwise were taking away the future from next generations. Its very frustrating. Very frustrating. But its, you know, i hope that this second term that thats going to be the mantra that we want private sector growth. Thats what were looking for. Weve done you know hes done a lot with hes done a lot with health care, done a lot with, you know, transforming certain parts but now its got to be private sector. I dont even care im even starting to agree about some of the deficit and when we do it, its got to be down the road. Nearterm its got to be private sector growth. You cant fix overnight something thats taking this long to crumble. More from carol bartz throughout the show. Thats right. In fact when we come back from pebble beach were going to continue to monitor winter storm nemo. Its expected to drop record levels of snow on the east coast. Plus, lifestyles of the rich and famous from pebble beach. Our robert frank will join us with a special report on real estate. Thanks, becky. Pebble beach is one of the richest zip codes in the country. Well show you some of the areas biggest mansions on the beach and on the greens and tell you what they cost. Im glad we got cdw and cisco to design our data center. Yeah, the cisco ucsc series server, with the intel xeon processors, help us scale smoothly, like a perfect golf swing. How was it before . Clunky and full of unnecessary impediments. Like charles swing. I heard that. I dont have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps. Com you can print real u. S. Postage for all your letters and packages. I have exactly the amount of postage i need, the instant i need it. Can you print only stamps . No. First class. Priority mail. Certified. International. And the mail man picks it up. I dont leave the shop anymore. [ male announcer ] get a 4 week trial plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. Is moving backward. [ engine turns over, tires squeal ] and youll find advanced Safety Technology like an available headsup display on the 2013 lexus gs. Theres no going back. Pebble beach is one of the countrys most highend golf resorts. And even though real estate is that a premium, sales are on the rise here. Cnbcs robert frank joins us with some of the show stoppers of pebble beach real estate. This is this thing. Including, 28 million mediterranean mansion on the ocean. What, is that half price, robert . No. Its full price. But youre not going to believe who the owner is. Well tell you in a second. And real estate in pebble beach has never been cheap but it took a big hit in the housing crisis and dotcom bust. Now its on its way back. Pebble beach may be a great place to visit, but its expensive to live there. The average home price is now 1. 6 million. And as the tech boom spills south from the bay area, the Real Estate Market in pebble beach is also heating up. Sales were up 18 in the Fourth Quarter alone, and realtors say the big problem now is that there just arent enough homes for sale. Our market is definitely driven by the bay area, a big part of our buyers, 65 of our buyers, come from the bay area. The economy is strong, but specifically Silicon Valley. Theres a lot of activity there. Unemployment is down. Its almost nonexistent. And just in general theres a lot of demand. And limited supply. We did a little mansion shopping of our own in pebble beach and found some stunning views, and breathtaking prices. This home on the ocean is on the fabled 17mile drive, its 2. 6 acres, 10,000 square feet, six bedrooms and floor to ceiling windows, looking out over the ocean. Price tag, 27. 9 million. For golf lovers, heres a better option. Right on the 14th hole of pebble beach. Its five bedrooms, and 7,000 square feet, and one acre. The seller is none other than bill gross, the pimco founder. These views have no doubt inspired some great investment ideas over the years. But it will cost you, 24 million. Chances are this will be a Vacation Home since there are very few offices or industries in pebble beach. No one gets transferred to pebble beach. Joe, maybe you could get the transfer to pebble beach. Maybe this would be a first. Youd be the first transfer to pebble beach and bill gross could give you a deal on that 24 million house. Hes a friend of cnbcs. Yeah, i get transferred at least for the week. Youve shown us apartments in new york that cost 100 million. Yeah. So that mansion yeah, but where would you rather be, joe . Its a value out there. I know, 24 million with a view of the ocean, and you know, living near monterey or four times as much for, you know, for being locked on the upper east side. As long as you dont have to pay the california taxes its a great place to visit. Thats a good point. Thanks, robert. Coming up, another big hour live from pebble beach. More from legendary actor and director Clint Eastwood. Including what his inspiration was behind that famous empty chair speech at last years Republican National convention. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] this stunning closing hole has welcome back to a special edition of squawk box live from pebble beach. This hour more from at ts Randall Stephenson. Former yahoo ceo carol bartz and Clint Eastwood. The one thing about getting into the senior status of life, like i am, you dont really care. You just say what you say, and you can get away with it. Plus david dorman, nonexecutive chairman of cvs caremark. And squawk market master Jeremy Siegel. A special hour of squawk box starts right now. Welcome back to special edition of squawk box here on cnbc, first in business worldwide. Im joe kernen. Along with becky quick, were coming to you live from pebble beach, california. Andrew ross sorkin and Steve Liesman, back at the headquarters, World Headquarters of cnbc back in foefrt lee with squawk market master Jeremy Siegel. It said holding down the fort. Used to be fort lee. Sort of close. With us on the set. Im living in the past. That happens as you age. Carol bartz, former ceo of yahoo i got distracted. I was thinking about something else. I know exactly what you did. You were reading one point weve got carol bartz here today. Weve heard from many of the other stars of the business and entertainment world including at t chairman and ceo Randall Stephenson calling on the government to cut out the uncertainty. When i have conversations with our policymakers in washington, my challenge is always, look, if things have to change, lets get them changed and get it put in place and get stability for the business environment. And so right now, its just very volatile. Its very uncertain. And i believe thats a lot of whats causing the first couple of quarters of this year to look rather stagnant in terms of growth. Plus legendary actor and director Clint Eastwood opens up about that now famous empty chair speech at the Republican National convention. I just decided to go a little different route because i figured theyve already heard that from about ten other people in front of me. So i just try something a anew. Probably seemed odd at the time. But you know, im an odd person. Well also tell you what was the inspiration behind that empty chair idea. He gave that away to us and well tell you a little later this morning. Plus we have david dorman, the former ceo of at t and the current nonexecutive chairman of vcs caremark. Because stay tuned because you never know who might walk out to set on pebble beach. We always have a few surprise guests who pop up. Right now back to andrew and steve at cnbc headquarters for your morning headlines. Thank you, becky. The buzz story of the morning, nemo. The powerful winter storm taking aim at the east coast. As you can see from these live pictures of times square, snow already falling in new york city. Forecasters warn it could be among the worst ever. More than two feet of snow possible in boston. A foot or so is expected in new york. Many cities are telling residents dont travel if you dont have topso far, and this has already changed this morning. Airlines have canceled about 3800 flights. A number that will undoubtedly grow throughout the day. When we started at 6 00 this morning we were talking about 2600 flights that had been canceled. Were going to be checking in with mike seidel from the Weather Channel in just a couple of minutes. Hes in massachusetts where the storm will likely be the strongest. In our business headlines this morning, Justice Department and multiple states are reportedly discussing suing moodys or defrauding investors. But any move is likely to wait until a similar lawsuit against rival Standard Poors is tested in the courts. By the way, that could take years. Separately moodys reported Fourth Quarter profit of 70 cents per share, one cent above estimates. Also giving the upbeat forecast for 2013. And mcgrawhills Credit Rating has been cut by the Rating Agency fitch. This is sort of funny, right . You have one cutting the other guy. Now rates mcgrawhill at triplebplus from the prior aminus that follows 5 billion government suit against the subpoena Standard Poors unit over financial crisis era ratings. Also worth noting that they are supposedly spinning off s p. So what does that mean . And finally the faa is clearing boeing to restart test flights of its grounded 787 dreamliner. The goal is to get more data on potentially faulty batteries. Federal officials are also demanding a closer look at how the batteries were approved. This may delay resuming delivery of boeings newest aircraft. Take a look at the stock there. You can see whats going on. I dont know how you play that anymore. And finally mcdonalds reporting january samestore sales following 1. 9 . That is worse than expected. The only bright spot, u. S. Sales, which can beat analyst expectation. Steve . If boeings earnings are as volatile as that chart shows the stock price to be, you got a thought on that . I mean its a funny company, right . I mean you would think their order stream, i mean thats ridiculous, right . Look at that. That was before the batteries. Yeah, right. The dreamliner is a big part of boeing. Im wondering how many of those peaks and valleys are related to news on the dreamliner. Being on time, being late. I think a lot, absolutely. Lets go beyond boeing and take a broader check of markets right now. Just, i mean, just call it flat. Nasdaq up a little bit. Dow jones down a little bit. S p down a little bit, as well. Is that all were looking at right now . I think so. But were going to continue the conversation about the markets. Bulls trying to end the week on a positive note. You think it will stay positive . Well see whether it stays positive after yesterdays decline in equities. Request us, constance hunter, head of economics at International Solutions network. And Jeremy Siegel, and good morning to you. Thank you for being here. You were bullish, too. We have too many bulls at the table. What is going on here . I havent been bullish for awhile. This is a bit of a shift for me. Then youre late. I dont think so. Look at the lipper data, people are just going back to stocks. Theyre just beginning to go back. I dont think im late at all. And were not going to go straight up, i mean, we have all this noise coming out of europe, thats making people worried, deja vu all over again. Is it like last year, where europe overtakes the news in the u. S. But look at the mortgage data that came out earlier this week. Year over year, new purchase applications are up 18 . Thats a real number. I mean, you know, the bears would come back and say its institutions buying homes. No its not. Look at the margin compression youve seen in some of the earnings. Margins so high right now. Margins are ridiculously high. Im talking about the economy talking about the real economy not this economy we talk about here on the set. I know what youre talking about. I have a metric i just want to throw it out to our esteemed guests here and this is dangerous. I was thinking about this. Could be totally wrong. Everybody says everybodys bullish, right . Yep. How can everybody be bullish, if rates are still negative. Constance, tell me if i got this rate. If rates are still negative it means you mean real rates. Real rates. People are so risk averse that theyre willing to buy a tenyear treasury and receive a negative return. And in that environment, i have no problem thinking that in general the world is bearish because theyre going to accept a real negative real rate. Is that a good metric to follow . Look, the fed isnt influencing the rate influenced the rate. Okay. But even still, when you take that into account, youre right. There are still people willing to hold 9 tenyear treasury, and my prediction, actually, is that we get a backup in rates this year. Is it huge . It goes positive, or well i guess it depends on what happens to inflation. It could go slightly positive. Right . For good 2. 5 let me mention something. When the market was at its peak in 2000, that real rate was over 4 . Can we put up a chart of the ten year . Its 2 . Inflation is 2 . Call it that. Right. So i am willing to give the government forget what the fed is doing. People are still making private sector decisions. This, andrew, is the metric of whether or not people are bullish or bearish out there. Exactly. There is still a ton of money. Yes. Thats willing to hold or gift the government money for the protection of giving the government money. Steve, what about the 3 trillion in funds earning zero . And that money. Theyre still ship andrew. We had David Einhorn yesterday, and were talking about cash on the Balance Sheet. David woke up to the idea he talked about his depression era grandmother who holds onto the cash, right . Right. So my question is, how long do we hold onto the cash . Even with the metrics youre talking about, it is very possible that people are going to remember this past experience for a very long time. Hmm, i mean when you see corporates holding onto cash im talking about people in the market. Zblfshs not bullish. Youve just made my argument for me. Thats really the question. Investors are screaming for cash. They need income. Theyre not getting it from the money funds, not from the bonds. Lets encourage and get it from the stocks. Lets get some dividends out there. Okay, give me a number. Hes giving me 15,000. We had ron baron on. He gave us 15,000, then he had 20,000. Then maybe even 30,000. About the dow . Not this year. Are we in a time warp . Ron had a general point that stocks are going to go up. Thats been the general trend. On a 7 annualized do you believe that that is annualized 7 . If you merge it for last year, what were we up last year 12. 5 . Maybe 5 this year to right. Ive managed my metric and this is the key to whether or not people get bearish. Ive decided i need 5 to send my kids to school so thats my metric now. Thats part of the bullishness and bearishness, people coming in willing to take a lesser return before inflation. I youre the one who knows about academic inflation. Youre probably responsible for that. Given what youre pulling down professor. But thats the key. You have to have a certain amount of money minus inflation in order to bring am i going to make 5 . 5 before inflation and stocks i think is like a slam dunk for then i could send my kids to school. Were going to thank you for coming. Thank you. Appreciate it. Good to see you. Got to see you more often. Right now lets get back to pebble beach where becky is. Andrew, thank you very much. One of the big great things about being here at pebble beach are the people that you get to talk to and that you get to catch up with all over the place. Political leaders, talk to business leaders, and yesterday we caught up with a true American Icon. Clint eastwood. The legendary actor and director is, of course, also active political politically. Hes also a strong supporter of the work that was done by alan simpson and Erskine Bowles and he says that he is frustrated that washington hasnt done anything with their plan. They were just dismissed and that was the end of it and thats kind of its almost like they dont give a damn. And so if they dont give a damn why do they expect anybody else to. And obviously the you know, people get complacent, and then things really go bad. That was an example, though, of a democrat and a republican working to the, simpson is a republican, bowles is a democrat. Do you think theres room for that in washington today . Well, there is with those two guys. They are probably smarter than most. Yeah, theres room for it. Has to be room for it. Youve got republicans, the majority in the house, the house of congress and senate, majority is democrats, and youve got the presidency. Somebodys got to give somewhere along the line. And if they dont give, then it will just be more of the same. Then well slip back into recession again which would be very worrisome this time. You can watch more of our conversation with Clint Eastwood online at squawk. Cnbc. Com and well have more later in the Program Including what inspired him to make that chair speech at the Republican National convention. When we come back this morning on squawk, David Einhorn appeared on the program yesterday. Calling for apple to lose its depressionera mentality. Well talk more about that in just a moment. Plus we will talk about apples strategy with a veteran executive, david dorman is the former chairman and ceo of at t. He is currently the cvs chair mark nonexecutive chairman. And former yahoo ceo carol bartz. Cial advisor should focus on your longterm goals, not their shortterm agenda. [ woman ] if you have the nerve to believe that cookie cutters should be for cookies, not your investment strategy. If you believe in the sheer brilliance of a simple explanation. [ male announcer ] join the nearly 7 million investors who think like you do face time and think time make a difference. Join us. [ male announcer ] at edward jones, its how we make sense of investing. Welcome back to squawk box, everyone. Hedge fund manager David Einhorn calling out apple for not using its cash reserves more effectively. People whove gone through traumas, they sometimes and apples gone through a couple traumas in its history, they sometimes feel like they can just never have enough cash. Thats the rationale behind the lawsuit that einhorn filed yesterday. He wants to try and prevent apple from making its harder to issue preferred stock. Joining us to talk about this and a lot more is david dorman. He is the nonexecutive chairman of cvs caremark, the lead independent director of Motorola Solutions and former chairman and ceo of at t. Its always great to talk to you here. Thank you for joining us. Good to be here. You know an awful lot about whats happening behind the scenes, just in terms of how technology works, especially with all the phone services that are coming out with smartphones right now. You hear about whats been happening with apple. And i just wonder if you could share your thoughts about how the companys been doing, and where you think its kind of headed from here . Apples had an incredible run. People forget, motorola and the razr told 250 million copies with sort of the standard for everyone and no one remembers that and motorolas market share shrunk below 10 . And now obviously its owned by google. Apple is facing sort of the ballistic apogee. This thing has grown and accelerated quarter after quarter and youve now reached a point where the market share could have peaked. My guess with samsung and android, and the other manufacturers gaining traction, its going to be hard for apple to repeat what theyve done in the past. Youre not suggesting that were watching the beginning of the end of the iphone, though, are you . I dont think it ends. I think this thing still has legs. Its got a very long tail on it at the very least. Apple has an ecosystem that they built around the iphone, the ipad, the ipad mini. But think about it. Theyre doing what theyre doing with very few products. This is not a company with 200 products. This is a company with three or four critical products and continuing to innovate the pace that they have is very hard to do. What about international . Theres so much more room. Thats true. Every ten points from 700 weve heard about number the valuation is still not expensive and number two the Market Penetration is still low everywhere. And as weve come down all the way from 700 somethings happening. And i havent heard anyone say that there could be market pen because its almost Single Digits half the time. Just in the teens. Look at china, where there are some estimates, 500 or 600 million users of phones already. China is going to have strong, indigenous suppliers. Yes, apple will be in the market. But i dont think its a case anymore where people are saying the only choice i have if i want to be cool is apple. I think thats probably the fundamental. In the u. S. , certainly you can look at it and say android has gotten, you know, a good foothold. Youve got plenty of people making it. Im just suggesting its really hard to carry on what theyve carried on. The amount of value alcohol has collapsed into themselves from the entire mobile market, carriers, and providers alike, is pretty amazing. You might think if steve jobs were still around maybe youd think, there will be the next thing that youre able sure force of personality, you have to there are so many talented people there. I remember the razr. I didnt think anyone would ever migrate and within five years people said motorola makes phones . Exactly. And you know, you have this is a very short cycle business where fashion is important, cool is important, and you can sort of see now that people who have the iphone are not as enamored of it as they were five years ago. Theyre willing to try new things. And at least look. I have to tell you, i wouldnt want to take them headon. I think that they still are formidable in so many ways. But theyre looking a little more vulnerable than they were, you know, certainly two years ago. A big part of getting iphones out there in peoples hands, not just iphones but all smartphones, has been this idea that the carrierses like at t will end up subsidizing a big part, big portion of the cost of the phone. Now, there is talk that tmobile might start trying to morph away from some of those subsidies or at least do something where they finance the phone over several quarters for you. Are we going to get to the point where the consumer really has to put up a lot more money or a much larger percentage of the cost for these phones . I think as competition makes the difference greater, between what you would have to pay for an iphone and what you pay for say a samsung phone, the carriers have it in their interest to have other strong suppliers. To the extent that apple can dictate the terms to an at t and verizon differently than the other guys, theyre not going to like that. So at t and verizon are going to, you know, launch the blackberry 10. Theyre going to put the samsung new products out there, and google phones and lg phones. Because its in their interest to have apple have strong competition. Its a great point. Were wrapping it up. I was going to ask you about lipitor and how your health is no, no. Weve been talking about lipitor. But its because your cvs executive chairman and you had to watch, you know, that path. And then i was going to ask you, just looking at the, were going to implement obama care over the next couple of years. Right. That must be daunting even for cvs, isnt it . You know, its one of those things where it should provide opportunity adding 40 million or so new people to health care coverage, undoubtedly theyll go see the doctor. Doctors will prescribe medicines for them. But theres a profound fact here that so many of the people that are being added are younger, and so youre in a situation with its not really clear and how it will be implemented in the states, what the exchanges will do. What employers will do. Good uncertainty or bad uncertainty . Well, i dont know. Uncertainty to me is always bad. Always bad. Its only good what is good uncertainty. If you have no hope and uncertainty means that you may have hope. If youre terminal if nur not necessarily terminal uncertainty there is probably good. Anyway, i guess. Uncertainty is bad. David dorman, thank you. You bet. Good luck on today. You two will be swimming. More from Clint Eastwood, including where he got that idea for the now famous empty chair speech. At the im going to say it, says it, the rnc convention. Convention, convention. Convention. 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. [ male announcer ] youre not the type of person who sets goals and only hopes to achieve them. So youll be happy to know that when it comes to your investment goals, Northern Trust uses awardwinning expertise to lead you through an interactive investment process. Adding precision to your portfolio construction by directly matching your assets and your risk preferences against your unique life goals. We call it goals driven investing. Your life has a sense of purpose. Shouldnt your investments . Expertise matters. Find it at Northern Trust. Welcome back to squawk box this morning. Lets get an update on this winter storm nemo. Threatening blizzard conditions in the northeast and the Weather Channels mike seidel joins us now from, where is he . In massachusetts. Good to see you. How you doing out there . Mike, can you hear us . Im not sure that mike can hear us. Mike, you there . No snowe just yet for mike. But were going to try to get back to him at some point, figure out do we have him now. Mike, can you hear us . Nope. We will try this again. Were going to take a break and then well talk to mike and figure out whats going on with the weather. In the meantime, breaking Economic Data. Just a few minutes away from International Trade data for december. As we head to a break, take a look at u. S. Equity futures at this hour. See how the market is setting up. Dow looks like it will open up a little off but Everything Else relatively marginal for now. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. 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Were going to get trade data in just a minute. First the Weather Channels mike seidel joins us with an update of whats going on. Good to see you finally, mike. Hey, good morning, andrew. Out here at revere beach, just north of logan, the north shore of boston, where the snow is going to be here in here in a matter of few minutes. Were looking at a blizzard warning for parts of seven states. The entire state of connecticut, and coastal areas of massachusetts, a coastal flood warning. High tide in about an hour comes up to about here. Were concerned about the high tide tonight and 10 00 a. M. Tomorrow morning. Thats going to take the atlantic up to the sea wall. Property here on revere beach will be fine. But when you think about 50, 60, maybe 70mileperhour wind gusts weve got to be concerned about power outages. Already many airports have canceled flights. 2800 systemwide. 500 flights, andrew, have been canceled so far at logan. Travel will be next to impossible beginning midafternoon. The city is effectively going to shut down. Thank you so very much. Steve. Just seconds away from the data. In fact its out now. Rick santelli at the cme in chicago. Rick the numbers. Hello cow. 38. 5 billion is the trade balance. Thats a deficit. But its under 40 billion. That is really shocking. The last time we were under 40 billion was november of 2010. So this is really a pretty big deal. Were expecting, you know, 8 billion wider deficit, and 46. And last month, had the most subtle revisions, well just call it a push. So you know, im going to have to ponder this. We know that theres a lot of Foreign Exchange going on in the world. Most of it right now isnt free market driven, its central bank printing driven. Thinking this through, of course, is going to have big possibilities for strategic trades down the road. Especially if the offshoot of whats going on potentially between europe, japan, maybe to a lesser extent china, is going to boost the value of the dollar. Is that something thats going to help or hurt . How important is this number . All that, of course, will be defined by the market at some point. Yields are a bit lower today. As a matter of fact on thecoms, one week ago today, friday, pretty much the high close going back to april for most maturities. For the ten year 202 closing yield. Were 18 basis points higher on the year. Back to you. Hey, rick, this is a big deal for that Fourth Quarter gdp growth. Absolutely. Heres the deal. About a billion compared to what was originally estimated is worth 0. 1 gdp point so we might have just added 0. 7, 0. 8 gdp points to the Fourth Quarter. I dont know where all the adjustments had us the last i saw we were still at a negative 0. 1. But, professor siegel did point out theres been a conundrum which is we had this relatively strong payroll growth in the Fourth Quarter but not necessarily the gdp growth to go along with it. I think its still going to end up being a weak quarter. But not as weak as presented. Lets bring in joel naroff. Maybe rick will stick with us. We have our guest host Jeremy Siegel to sort of unpack this puzzle thats out there. Joel, good morning. Good morning, steve. So tell me what this does to the gdp forecast for the Fourth Quarter . Well, you know, i think we can, you know, pretty easily say that there was not a decline in growth in the Fourth Quarter. And i agree, when you look at the economic, you know, elements of the Fourth Quarter numbers, strong investment in equipment, and software, decent consumer spending, really good durables, excellent housing, the economy was really good. If you look at why we didnt get the positive number, or now what well even look at a weaker number, it was some temporary factors. I think when we get the revisions it will be up and also sets the stage for even a better First Quarter growth number. Joel, tell us now what you think the Fourth Quarter really did in terms of growth, and how to think about what the right growth rate is to think about. Im guessing youre not saying this is the gang buster economy. But its also not one thats declining. No, no, not by any means. I first of all, i had a number closer to 2. 5 going in to the report, so i was about as far off as you could possibly be. But when you look at things such as what are businesses doing, what are louseholds doing, whos the Housing Market . Whats the vehicle sector doing, that growth was roughly in the 2. 5 range. Yeah. E where we got the negatives was from the government, from defense, and you know, largely from inventories. Thats going to turn around. I think the inventory decline was just an insurance policy. Okay. Thats all. Rick, can you tell us if the bond market cares about this . Reassessing the Fourth Quarter, you could argue, its a rear view mirror issue. Yeah, you know, it may as well be. Because, actually, we decreased a basis point yield. Weve rallied a bit in treasuries. And the preopening equities havent budged at all. So, my guess is, theres a couple ways to look at it. You know, 157,000 was a loss of momentum. A lot of the positive growths could be attributed to the adjustment process in jobs. And housing, you know, im sorry, i think we for sure hit the Inflection Point in the rear view mirror. But i dont think i could ever use the word excellent. So i think its a semantics issue. You know, its relative growth. Its change of rate. You know, all that is improving. But were nowhere near the type of growth space we need to be, and i think that the market is very sensitive to that, at least on the fixed income side. The equities side is a different story. Let me get to professor siegel very quickly, is this solving a puzzle for you . It helps. When we got that minus 2 productivity growth, oh, my god. And, again, this helps us, i think, with some inventory changes. Were actually probably up to plus one or very close. A full one percent . Theres a still a puzzle but it alleviates about half of the puzzle. Professor siegel thanks very much. Joel, im glad you were here to help me do the math in realtime and rick, thanks a lot. Okay, guys. Coming up millions saw Clint Eastwoods conversation with an empty chair as a standin for president obama at the rnc Convention Last year. Still ahead were going to get the inspiration behind the empty chair idea. Plus, stocks to watch ahead of the opening bell. Were going to check in with jim cramer at the new york stock exchange. Welcome back to a special edition of squawk box where we are live from pebble beach. Yesterday we got the opportunity to catch up with Clint Eastwood and ask him about that famous empty chair speech at the Republican National Convention Last year. Obviously it caught a lot of peoples attention, and hes still hearing from people when he walks down the street. Heres what mr. Eastwood had to say about that. I just decided to go a little different route because i figured theyve already heard that from about ten other people in front of me. So i just try something little anew. And it probably seemed odd at the time. But, you know, im an odd person. What reaction did you get from people . When you came back home . When you talked to people on the streets and things . On party lines, the party lines either loved it or hated it. But so then after awhile peen people that hated sa oh, what t heck seemed like it was a fun thing to do. Its funny, when we sat here last year we talked about the ad that you had done for the super bowl for chrysler. Right. And the outrage that came to that. There were a lot of people on the right saying this was an endorsement of president obama. Yeah. And then you had the outrage that came after the rnc where people were saying this was an outrage, too. Are you surprised by the feedback that you got just whether from the media or other places . It wasnt a bouquet for it was just a bouquet for working people, and it was encouraging or if theres a momentum going, which everybody thought there might be at that particular time at least in the auto industry, then lets keep it going. So thats all it was intended to do. And, the commercial did. I notice this year, chryslers doing very well, as well as gm and ford. But, you know, i dont know how long if it slows back down again maybe really hard to get the engine have you been surprised that these messages created such outrage . I mean, have you been surprised by the reactions . No, im not surprised at anything. You know the one thing about getting in to senior status of life, like i am, you, you dont, you dont really care. You just say what you say, and you can get away with it. Thats right. He said its okay with him. I asked him if he would shy away from making messages like this in the future from saying anything. He said absolutely not. It just makes him feel like its more important to really Start Talking about some of these things. In fact, off camera, he actually told me what gave him the inspiration with that empty chair speech. He said that he had been standing at his Hotel Getting ready for the Republican National convention and he heard this song i am, i said by neil diamond. These are the lyrics. And no one heard at all not even the chair so thats where he heard this. He was standing right there waiting as they went on beforehand and he saw a chair sitting there and he was sitting there thinking about the empty chair theme. One of the guys backstage said do you want me to take that chair out for you do you want to sit down . And he said no, just take it out. Take it out and put it there and it was kind of happened at that moment just kind of inspiration while he was listening to the song. Thats funny. Does anyone know this . No. Ive never heard it, either. He just kind of told me as he was walking away, just what made you come up with that . He said oh, it was this song. And i knew i mean i have talked to him a few times, i dont know him well, but i knew that he at this point in his life, hes clintz eastwood and hes going to say whatever he wants to. And i dont think it bothered him one bit. You saw the twitter sphere light up and it was on party lines. He went from and people that you know its sad people on the left that used to think of him as iconic suddenly thought of him as senile i think. Yeah, he said he has a very thick skin and hes used to it because in his business you hear critiques and criticisms of everything you ever put out. In his business . Yeah, right. There are a lot of people who probably have thick skins around here. But he said you hear from these people and you let it run right off your back. People who think your films are terrible are stupid or you know are not quite as in tune with things. People who think youre great you think theyre wonderful and you get through with it that way. Our guest host this morning is iconic. Iconic woman herself. Carol bartz. Well, thank you. Whos joining us here to talk about everything that shes been doing in Silicon Valley. Carol its interesting. We were talking earlier, you said that youve been mentoring a lot of people, that you might with a lot of people right now. Tell me a little bit about what youre doing. Well, i mean, i certainly cant compare myself to eastwood. But as you get older you have had some experiences. So, and im usually pretty willing to share an opinion. So i get asked to join a lot of people for coffee and give some advice and counsel and that sort of thing and thats really been fun. Because, you know, when youre when its an employee, you have an obligation to the company to try and save them or this or that. But when youre a neutral party, and they say should i do this, should i go here. What about this boss . Its much more fun to have a conversation. And when youre having conversations like that you probably have a better chance of seeing whats really happening in Silicon Valley. What are the new things and new trends. What do you think are some of the leading things really just coming around at this point . Well, its everything mobile. I mean, and that goes without saying. And the whole appification of the world. And by the way the lowcost entry. You know, back when i was like employee 100 at sun, you know, you had to use your cash to buy computers and hopefully make it and you know, wed all go to the loading dock and ship them off, and now with Cloud Computing i mean, a couple bucks and you can get in. And so you can try anything. And which is of course what the valley has always been about. But its more now. It is just more, more, more of everything. How do investors kind of look and see whats coming with that thing and figure out how to position themselves . Well, investors get overly excited about things. We were talking about the appification before. Its not how much they came down. Its how much they ran up because this euphoria. I think apples a fantastic company and apple has long legs and theyre going to innovate in a lot of areas. But its so much fun now to pick on them because they went from 600 billion market. Yeah. And its a lot of large numbers at some point and nothing grows to the sky. Absolutely. And 600 billion as a market cap discounted a lot of great things happening forever. Yes. Even though we heard the valuation was cheap and Everything Else, discounted, and i saw it with cisco. Seen it with everybody. A few Companies Hit 600 billion, 700 billion and theyre all 200 billion now. Its interesting. There used to be a rule of them that you couldnt get past the 1 billion mark. We never did. Trillion sorry. Billion but as a company or 100 million. You dont remember that. Well i dont remember a lot. You know. Im kind of like clint, but you werent even you were oh, yeah, yeah. Carol, thank you. Were going to have much more with carol through the show. Steve well send it back over to you. Thanks very much, becky. Real quick, Ian Shepherdson writing in saying that it does, indeed add 0. 7 to the Fourth Quarter gdp. Were going to keep reporting these as we get estimates from different economists as to what the big trade surprise means. Much more from former yahoo ceo carol bartz plus stocks to watch ahead of the opening bell. Well check in with jim cramer at the new york stock exchange. Right after the break. A final g. This is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. 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See why millions of people have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp. Dont wait. Call now. Folks we have been tracking powerful noreaster nemo. This storm is headed right for the east coast. Nbcs erica hill joins us from a place thats impacted in a big way. Laguardia airport. Good morning, erica. Yeah, hey, good morning again to you. Major impact here, of course, because these three new york airports right in the thick of it, along with boston. Of all the cancellations were seeing, which is just over 2700 right now, today, 1740 of those in the new york area. That accounts for about twothirds of the canceled flights. Heres the good news. I was just speaking to some folks at the gates behind me. While it was pretty busy earlier the lines were wrapping around everybody had been very patient and very calm. Which is exactly what you want to hear as much as it may be annoying to hear over and over again, you need to pack your patient when you do come to the airport. People seem to be doing that. A lot of people tried to get out to get on an earlier flight i today. We do know flights have been canceled tomorrow as well. What were hearing is probably between 2 00 and 5 00 p. M. , a lot of airports in this area, in new york will be closing, and then resuming operations hopefully around noon, maybe a little later afternoon on saturday. One of the people i spoke with, said she actually heard it may be 1 00 at laguardia. Theyre expecting things to get busy here around 10 30. When we last spoke on squawk box, there were flights for sunday and monday. Right now i have not seen any cancellations for sunday and monday. Saturday tends to be a light travel day so maybe they can pick up some of the slack, get things back on track before travel starts sunday and monday. Erica, thank you very much. Lets get down to the new york stock exchange. Jim and david join us now. Hey, guys. How are you . Good. We can go a couple different directions. We can talk weather. But perhaps i still want to get we had a little bit of your views yesterday on apple, jim, on squawk. Later you talked a little more about it. Given what david eihorn said, any thoughts . What if they actually need the money to build out, or to make partnerships with some of the piggest companies that have tv businesses. I mentioned to david, what happens if they go to verizon and say, listen, just like you have with vodafone, we will buy 50 of fios, david. I want to explore this idea a lot more on our show. But jim, what could they need the money for . Jim . 137 billion, how Many Companies could they buy in the s p outright with 137 billion . If they really needed it, they could borrow it. You could buy cbs, murdochs, disney and comcast at one time talked about merging. You could buy comcast. It was way too low on price. But if you were to do a 100 premium to where disney is right now, you would need every penny. Maybe were not thinking big enough. Maybe they arent thinking big enough. Thats what i think. I think theyre sitting on it and they dont know what to do with it. I think its a use it or lose it thing. I think einhorn, there are two sides to every story, how in bad faith was apple with einhorn is very much a question. I dont think there was nearly as much bad faith as einhorn made it out to be. Financial engineering, its antithetical. I think that matters. Jim, david, were going to see you in just a few minutes. Were going to go back wait a second. Yes, please. I think were going to get 14 inches. 14 inches . Thats the prediction from cramer. 14 inches. Where is that . Where is that measurement taking place . This is the adirondacks. Im going to take 12 inches. And were playing price is right rules. Ill take the spread. Ill do a ladder thing. Come on, guys. Weve got to get back out to pebble beach where i dont think theres any snow, happily. No snow. But plenty of precipitation here, though, andrew. Probably 14 inches of rain. The over under when it comes to rain, its been pouring. The tent looks like it might collapse over here soon. Maybe it will do it live on camera when we come back. Well be back after a very short break. Monday on squawk box, taking the pulse of the bull rally, our guest host will be paul mcculley. Squawk starts monday at 6 00 a. M. Eastern. Ility. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. 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. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] welcome back to squawk box. Lets get final thoughts from our guest host, carol bartz. I wonder long term about how you monetize mobile and everything seems to be moving that way. The tiny screen ive seen in the past other disruptive technologies, we traded analog dollars for digital nickels. Its great for the consumer. Its great for productivity and for people, but it seems like its going to be challenging for all the companies involved. I dont know what the Business Model is. Its challenging for dell, for hp, anybody associated with the hardware side. Anybody associated, microsoft, with facebook. Is social media going to be is there something after this . Or is it going to be variations of social media were talking five years from now . Or what else would it be . Well, social media is a funny term. It covers a wide it just means people interact more. It was search for a while, the internet revolved around that, and content. Suddenly that was replaced with this weird first it was mail. Its communications collaboration. You collaborate business, collaborate with your friends. But it is really both of t