Transcripts For CNBC Squawk Box 20130227

Good morning. Todays top stories, a key debt auction in italy amid postelection uncertainty. In the u. S. Quarterly report due from retailers like target, dollar tree, and tjx. Plus, ben bernanke goes back to capitol hill. Yesterday the markets rallied on what the fed chairman had to say with support of easy Monetary Policy. Its wednesday, february 27, 2013. We have one day or two days left in the month. Squawk box begins right now. You called me a dove. Maybe in some respects i am. But on the other hand, my inflation record is the best of any Federal Reserve chairman in the postwar period or at least one of the best. About 2 average inflation. So we have worked on both sides of the mandate. And were trying to achieve a stronger economy for everybody. Good morning, everyone, welcome to squawk box on this next to the last day of february. It is not a leap year this year. You know that, joe. Friday is march 1. Im becky quick along with joe kerner and Andrew Ross Sorkin. Weve been watching the u. S. Equity futures. After tripledigit gains for the market yesterday, you see a little bit of a pullback this morning. Dow futures down by 15 points. S p futures off by 2. 5 points. And the dow recovering more than half of mondays losses with yesterdays big gains. It was about 115point gain yesterday for the dow. Today were assembling a group of some of the most seasons veterans on wall street, offering guidance on where to best position investments from here. Among our guests, jim oshaughnessy, chief quit strategist bob doll, s ps alec young, and former new york fed staffer dino kos. A big part of the market rally store is housing. And some signs of recovering. Real estate firm trulius will join us with the latest numbers. Then well have breaking economic numbers. Weve got january durable good thats are set to hit the tape at 8 30 eastern time. Economists looking for a drop of 5. 3 . Before we get to that, andrew has this mornings top corporate headlines. Good morning, andrew. Hey, becky. Yep, the big headline this morning the faa saying it is not close to approving test flights of boeing dreamliner 787 with a battery fix. Now the Government Agency is now denying news reports that such tests could start as early as next week. Remember, last week we were talking about some of those news reports themselves. In other news on boeing, the companys Engineering Union decided to drop its demands that its labor contract include a pension for new workers. The move could speed up a deal as the two sides resume bargaining today. And shares of airbus parent eads gaining an gaining in early european trading. The company predicting higher profit this year on the heels of expected 2012 earnings and cutting costs. Apple holding its annual Shareholder Meeting in california today. Investors will now not be voting on a proposal from the company to eliminate whats called the blank check preferred stock. You might know what blank check preferred stock is in this context because shareholder David Einhorn had launched the legal action against apple. And a judge blocked the investor blocking the proposal. Also in the news, best buy founder richard schulzys effort to take the Company Private is reportedly in trouble. Happy to say that weve been saying that the whole time. Reuters says his attempt to secure financing has faltered and an alternative strategy to line up minority investors may not happen. So there you have it, joe. Andrew . Yes, sir . How are you . Good to see you. Good to see you. In other corporate news, clearwire reportedly plans to tap financing from sprint nextel. The wall street journal says that the move further complicates dishs efforts to buy clearwire. Dish, you might recall, made an offer of 3. 30 ashire for the wireless a share for the wireless broadband operator. Thought we had this settled. Clearwire had already agreed to sell itself to majority owner sprint for 297 then did 330. Special committee on the clearwire board reviewing the dish offer. This is that favor thing, right . Yep. Yeah. Then you think we put this to bed . You think we put best buy to bed . We werent talking about the difference between 2. 97 and 3. 30. Not somebody needs a you have 10 million in stock, you dont care. I guess, but i dont. I dont care. The pentagon chief for the f35 warplane is slamming his partner lockheed martin. Hes accusing them of trying to squeeze every nickel out of the u. S. Government faults them for seeing the longterm benefits of the project. And tesla ceo eland musk vowing to pay back an Energy Deficit loan in half the time required by the government. The Company Receives a doe loan in 2010 and made the first payment of nearly 13 million in december. By the way, did you see yesterday remember we had there was a big debate about the test drive of the tesla in the new york times. Yeah. Uhhuh. And phil lebeau went well. Then edmonds did one yesterday. How did that go . Not so well. The whole interior screen that sort of is the hub of the whole car, it stopped working. I dont understand this debate anyway. If you want to go a long trip like that, wouldnt you take a different car . Rent a car or yeah. Phil made the point. This is what you do andrew made the point, too. If you feel green and you want to, you know you want to tool around town close to where you work, the car you get in at night. But. Drive around at a 50,000 car for that . If youre going to take a trip like that, you dont want to be in a situation where youre stuck for hours recharging. Take a different car. This will work itself out in ten years. Right. The batteries wont work. You wont have to have the same i cant get over this cannibal story. People dont have it another cannibal story . Barbie doll. Cannibals barbecue plan. Barbecue plan for beauty. You know, you said weve got a bunch of seasoned veterans on the show. I was thinking, which one nothing will take the horse meat. In a rare interviewer with seasoned interview with seasoned veterans. Nothing will take the horse meat story off the front page quicker than the swedish meatballs, 51 at pimlico. Those dont seem as weird. I mean no. Who wants to cook up their girlfriend . There are weird people out there. We were talking about this this morning. If you watch local news, there are awful, terrible, weird stories. Then i happened to notice did you see the headline did you see the apartment on top . Isnt that the one thats high place. My place. Search Andrew Ross Sorkin, new york apartment, you will be able to find all right, all right, all right. All right. Im going to put your address on line start tweeting it. Did you see this . His high School Picture . I want to eat you. Next next to the pope. The whole thing the pope thing weirder and weirder. Another business story is odd, too. New Jersey Governor Chris Christie signed a bill legalizing internet gambling. New jersey becomes the third state in the nation to offer online betting. This bill means that online playing of any game offered by atlantic citys 12 casinos is out there. So bets cant be placed until the state division of gaming enforcement actually sets a start date. Casinos say that it could take stockton 12 months to get ready. With all the stories you heard about atlantic city, they could probably use an advantage, some sort of help to get people back in their dorms. We go back in their doors. From gambling to beer. Classaction lawsuits accusing anheuserbusch of watering down its brands. The suits claim that consumers have been cheated out of the alcohol con stated on levels. This is only 32 some have supposed to have 5 , some are supposed to have 4 . Apparently theres some exemployees who have come forward. Right. Suggest that whistle blowers say they know they were intentionally watering stuff down which is crazy. The beer lovers in the suit are seeking millions in damages for all the alcohol that they missed out on. The lawsuits are based on information again, as andrew said, from former employee at the companys 13 u. S. Breweries. Anheuserbusch calls the claims groundless and said its beers fully comply with labeling laws. Which is interesting. It doesnt say like they said we never watered anything down. How do you measure the value of of less of a hangover . And all bloomberg probablied like this. People get less strong one thing you dont want is to try to get, you know, to get a buzz on all that liquid. Thats beer ive stopped. If you drink three beers, like 36 then the second six pack which goes down pretty smooth, as well. What are 144. Youre going to be basically ill set my my alarm every hour. Every ten minutes. Yeah. By the way, talking about soda bans in new york. If you order pizza you cant get the get the big its true. Call it soda jerks. You tried yesterday . No, over the weekend. We ordered you cant order a big bottle. Thats crazy. Theres four of you at home. In this case, we had eight people. We thought we needed soda. Youre fat thank you. Thank you very much. Let them eat cake. We drank water. Im not happy with that. All right. Why dont we talk about the markets . Lets look again. We showed you that the futures are indicated slightly lower. But many people are saying volatility is back. You saw big, big moves this week. Dow down by over 200 points on monday. Gained back 115 points yesterday. See where oil is trading, up 22 cents, 92. 85 is the low ever level weve seen in 2013. Crude oil settled back below 93 yesterday. If you were watching the tenyear note, bernankes testimony yesterday was a big decider in which direction the note was going to move. Right now the yields at 1. 862 . Hes going to be speaking again today. You can bet that the market is going to be watching closely. The dollar is down against the euro at 130. 91. Down against the yen and pound, as well. Gold prices popped back to a twoweek high yesterday during bernankes testimony. This morning, its down 7. 90. Still above 1,600 at 1,607. I think w made the he made it cool to use. Its legit, i can say it . Say it decider. As i knew that word, i knew you would give me you knew i would. He is the decider. He makes the decisions. Decider. People mis underestimated him. Not anymore. Time for the Global Markets report. I love stand by its not kelly evans today. Its not . It is james bond himself, ross westgate. Mr. Westgate . Mr. Sorkin, good morning to you. We are you see, weighted slightly to the downside. We tried to have a bounce going first thing here. In europe, its petered out slightly despite a relatively well received italian debt auction. More from me and michelle, of course, in rome in a few minutes. About 54, decliners outpacing advancers on the dow jones stocks 600. This is where we stand. Same for the ftse, up 12. Cac coran up 14 points. 4 . Flat on the dakotas dakotas. The ftse mib in italy, it was down just before the italian auction. Its rebounded up 29 points. They raised the maximum target 6. 5 billion. The key thing, i wont say any more because i dont want to steal michelles thunder, the yield was less than many had anticipated on the ten year. 4. 83 . Less than what was priced in the secondary market, which suggests pretty good demand for italian paper. The impact on spain fairly muted. You see actually the ten year back up under 4. 9 . Tenyear spanish yield, 5. 3. They have been higher during the session today. I do want to point out, gilt yields. So weve got stripped of the aaa by moodys on friday. Since that point, gilt yields have fallen. Now that may be nothing do, of course, with whats going on in the u. K. More about general Risk Appetite post the italian elections. Yields now 1. 937 . We dipped below 2 for the first time in a month toward the end of the session yesterday. We have continued to see those yield fall. So yes, weve lost the aaa, but like weve seen elsewhere with countries that have lost their aaa, it hasnt stopped it in a risk phase, still getting safe haven flow. George osborne will be happy with those gilt yields, 1. 435 . Were seeing spreads widen out between the peripheral and the core in europe, as well. Lets share remind you where we stand on the currency markets. Something just to show you on that face. Ear dlar 134. 95. The low yesterday, 113. 17. We are still pinned down. No Real Movement yet or any sign of what may happen with the gridlock or result of that gridlocked italian election. On which note, ill hand it back to you. All right. Well well go south, southeast of where you are. For more on the situation in italy. Did you see my mind working . That was oh, now i feel like the pope . Im blessing you. Yeah. Including the key data auction were going to rome. Thats again where we find why dont you stay over there . You coo k do tha you can d if i did it, it wouldnt go over well. Michelle, why dont you stay . That starts soon, doesnt it . Reporter im very tempted. I could do the pope, theres i could find many, many stories to do in italy, joe. If you take me every morning from italy, i would do it. Where are you now . Im trying to are you youre not near the steps, are you . Reporter no. Were at the ministry of the interior. Okay. This is where they were counting the ballots. We have chosen this location because, you know as the story comes off the front burner, moves to the back burner, we want to save the company money. Weve gone to a slightly cheaper location and set up, et cetera. I hope the bosses are listening. Theres stuff to tell you about. Ross highlighted the italian auction. The you know, months went by where we didnt Pay Attention to what italy had to pay every month when it went to borrow money. Remember, it has to borrow a lot of money. Were back to doing exactly that. Lets show what happened this morning. They borrowed in total 6. 5 billion euros of money. They did five years and ten years. The five years, they sold 2. 5 billion worth at 3. 59 . Compare that to last month, 2. 94 . So definitely higher. But not as bad as some people had expected. When it comes to ten year, very Long Duration paper, they sold four billion worth at 4. 83 . Consider last month that was 4. 17 . If you look at the oneweek chart of the tenyear yield for italy, you have seen their Interest Rates rising. Now, if they had done this auction on monday, might have been a lot uglier. So clearly things have calmed down. Every time you see italian Interest Rates rise, remember, they have to roll over 300 billion euros worth of debt this year. That sucks when your Interest Rates rise, it sucks cash flow out from other places of the government where you would have spent it otherwise. Thats why this is problematic. Now the political update. There is talk potentially of a loose coalition being formed between the following two gentlemen that we are going to show you. The first one is the center left leader, luigi personi. And perhaps him teaming up with the antiestablishment comedian, bepe grillo who well show you. Here they are. Translator its as clear that anyone who cannot guarantee the ability to govern his own country cannot be said to have won the elections. And therefore, we havent won even if we were first. This is the substance. And this is also the reason for our disappointment. Translator they talk about coalitions. Theyre finished. The story is finished. Another story will start. Why do you continue talking about coalitions . Theyre finished. Reporter so clearly bepe grillo, the guy you saw, says hes not interested in the coalition at all. There has been talk that everybody would go into parliament. And his party would help support only the laws that they want to support as opposed to the old style of doing things where once you get a coalition in theory, everybody agrees were going to push certain things forward altogether regardless. So that would mean, you know, things that we know he supports, he definitely wants smaller government. He wants fewer members of parliament. He doesnt want taxpayer to fund any more campaigns. He also wants Free Internet for everybody. Free tablets for all children. Hes against highspeed rail. He would support a referendum on participation in the euro. Its a real hodgepodge of mixes as opposed to luigi bersoni, old school communityist, leftist. You can communist, leftist. You can imagine what his platform would be like. All happening march 15. Back to you. Thanks, michelle. Seriously, though, when does the stuff start with the conclave . When is thats coming up, isnt it . I mean, i want to save us some money. Reporter yeah. Its coming up. Well, yeah the 28th he does the whats the official word . Not resignation, abdication. He steps down. Theyve moved it up, right . I havent paid as much attention to the pope maybe as i should have because ive been trying to understand italian politics. I wonder if we stay there his final audience is today. The vatican very busy again today. I wonder as a Business Network whether we stay there. Probably not to the extent that we did with this. Maybe we dont need i dont want to mess this up for you. Maybe as long as youre there, i was thinking you should stay for that. This again, what markets would we quote after the story . It doesnt really well, except for that you never know what will happen with the next term with the italian parliament. You know, michelle made the point that it stepped off the front page for today. On monday it was ruling the roost and could come back at any point. Someone needs to be there for the return of the lira. Well, thats true. Right. Exactly. True. One way to think about it. If we get a new pope and he is infallible, id like to know whether we end higher or lower if the year. If we would we could see that not available on everything. Only when he says hes speaking with infallibility. You know that. Well get him to speak can you tell us with infallibility where the markets headed compared to guys we talk to by the time were finished with two hours with them, all i know is the market will continue trading. Coming up yeah. Seasoned seasoned veterans. Michelle, thank you. Well check in with you later, too. When we come back, the results of the latest nbc news wall street journal poll. Findings on why americans call the sequester a bad idea. First, a programming note for you. An annual show back by popular fan demand. Ask warren. On monday we will report live from omaha with warren buffett. He is ready to field your questions. Send them to us via email at askwarren cnbc. Com. Or you can tweet with the askwarren. [ 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. Dow futures this hour off 12 points. Nasdaq off about five. The s p 500 off about two. Making headlines this morning, variety is dropping its daily print edition and replacing it with a weekly publication starting next months. Now the trade paper had covered hollywood for more than a century. The publication is going to be having a management new math structure featuring three editors in chief. It will remove the pay wall that was puts up on its web site three years ago. Variety was purchased last year for only 25 million. You would have thought, variety, great brand. Right . Penske media own the popular hollywood web site deadline. Nikki fink recovers as you go into the oscar season. Some covers if you want to buy an ad on the cover valuable. Really expensive. I dont know how you do it on line. Does it translate to the same value . I imagine it does not, but i dont know. The issue is that nikki fink with deadline. Com has become the de facto place for all of the news. He does a thing during the oscars where she says she says, im isnt that correcting the oscars. Then she its a theres advertising in the magazine. There is advertising. Nobody pays for it on occasion. How do you make money . Its worth more than 25 million variety used to make a muj amount of money for two reasons. The agents, payola yeah. Yeah. Paid to buy the paid to buy the magazine. Then on the flip side, advertisers, all the studios, paid these huge fees i was they wanted to sell oscar voters on their films. Thats how literally. Literally. Thats why i was wondering. 25 sounds like not much to you for the brand. But to me, it sounds like i wouldnt pay that for that thing. Its on the way out, isnt it . Now its on the way out. True. Lets get to the National Weather forecast from a very busy individual who in addition to giving us the weather is also i think the executive producer of the today show. Most of nbc news, isnt he . Alec wallace wow. I guess that would be a different alex wallace, and yes she is. I wish. If you need you know, all right. Never mind. Its different. Thanks. You just do the weather then, how about that . Yes. Lets do that. And you know, today were still tracking snow. You see here on the radar around he. Stretching from the midwest through the great lakes and even into the northeast, finding snow. Mainly, though, for us staying away from 95. So west of 95 is where well be dealing with the bulk of our snow issues for today. So here it is for our day. Were going to be watching the snow pile up for us. Not huge amounts, but a couple of inch possible for places like detroit, then well see a little bit more to continue across sections of new england. Even as we get into tomorrow, still dealing with some rain, though, right again across the coastal areas. Lets check how much well find. This goes through friday morning. Additional one to three inches. Most of us will be on that lower end of that scale. Working back toward the north and the east, though, more. Michigan, three to five. Same for us here as we work into southwestern portions of new york state. Even a few pockets as we get into Northern New York state and new england where we may be talking about a foot of snow in some locations. And then in the wake of all of that, weve got cold air coming in for the eastern half of the country. For the end of the week. By tomorrow, temperatures for us in the central plains, 10, 15 degrees below average. We keep that going into friday. Chilly numbers here for us. 44 for you at oklahoma city. Look at memphis, 43. Thats a good 16 degrees below average. Even the Sunshine State last weekend, we were well up interest the 80s. That will not be well up into the 80s. That will not be the case. Saturdays high in tampa, only 63. Guys . Okay. Thank you for that. Well talk about a new nbc poll this morning. Wall street journal poll, as well, its out. Ahead of the sequester looming at the end of this week. Chief washington correspondent john harwood joins us with some of the headlines. A pretty something poll, john. It is, andrew. And what we see is the American People are not happy with any of the players in this. And theyre not happy with the sequester cuts. When we asked do you want the do you think the sequester cuts are a good idea, 52 of the people say no, theyre not. Just 21 say theyre a good idea. When you look at whos behaving better or behaving worse, we ask whos bringing the country together, whos taking a partisan approach. President obama does okay on that score. Hes 48 of the country say hes trying to bring the country together. 43 say hes taking a partisan approach. But republicans get hammered by the public. Only 22 credit republicans with trying to bring the country together. Three times that many just about, 64 , say theyre driving the country apart in a partisan way. And when you look at the issues at stake, each side has some advantages. But from the democratic point of view, looking out for the middle class, 22 advantage for the democrats. On the issue of taxes which is traditionally a republican strength, democrats have a small advantage plus 3 . Republicans on the flip side, who would do better at protecting a Strong Defense . 26 advantage for republicans. Whod do better at reducing the deficit . 6 advantage for republicans. So each side brings strengths to this issue. But president obama clearly has the high ground in terms of the bully pulpit and trying to put pressure on republicans. He hasnt been able to put enough pressure to avoid the sequester. Thats where we are where we are. John, theres what they call the callout in the paper. They say 1 5 of respondents think sequester is a good idea but twice as many favor deep cuts in federal spending. There seems to be a disconnect with whats happening. There is. If you look at the numbers, they dont like the sequester cuts. And thats not surprising. First of all, the word sequester sounds bad. People dont know what it means. And everybody like you and me and and everybody throughout the media has been saying its a bad idea. So its not too surprising that they would say that. When you say what do you replace it with, when you add together the people who would like it keep it and people who want deeper cuts, its a majority. Its 53 . Clearly the strength, the hold card for republicans in this debate is the idea of cutting federal spending in general. That is a very popular idea. The challenge is when you put it to specific programs, those the specific programs tend to be popular. Thats the rub. Thats i dont know if you say anything it a 22 number. You know, thats almost like you can ask a go out it a vegetable patch and get 22 almost, john. You know, thats thats barely you cant draw any conclusions from that. And the one thing that you just finally said which i think comes really late in the report, theres if you say replace, get rid of the sequester and replace it with even deeper cuts, you get a plurality. If you add the people that want the sequester and the ones that want deeper cuts, you actually get a majority. And thats where i think, you know, that if that if the democrats get too sure that the the public wants bigger government, those are the numbers they need to look at. If they think that you can, you know, pigeon hole the republicans and win the house back in a couple of years just based on starting fights with sequester, they might have to consider those numbers. Those are telling numbers, john. Well, no, they are significant. Thats why i mention them. At the very end. Well. Right. Yeah. Okay. The very last thing youre going to mention is that maryland duke game. Probably at the very, very, very end. The one we won or the one we lost . When was the whats the more recent past . You got a big game coming up, too. Is that tonight or tomorrow night . No tomorrow weve got virginia. Tylers team. Do you have miami coming up . Thats going to be a hard game. Then saturday weve got miami. Who crushed us ive made plans. What who crushed us on their floor. Well see whether we can take them on. 6 30 sudden. We cant do anything saturday night. Yeah. John, one quick takeaway. If you topper project out a year for now, say we go after the sequester cliff and nothing happens in the next month, who do you think ultimately gets blamed . Look, when youre the president of the United States, if things go bad, thats going to have an effect on you. But when you narrow it down and realize that we dont have a president ial election next year, we have a congressional election, republicans are on the short side of this. Their image is very bad nationally. When you ask people, groups of americans do you have a favorable image of the republican party, republicans have a net negative image with every group in the country except for white southerners. They theyre very much behind the eight ball. But that doesnt mean that democrats would win the house. As joe indicated, youve got a republican majority. And the democratic minority most of those people are in safe districts. Local, all politics are local, too. Right. So the number of competitive districts may not be enough to flip control in the house even if republicans do get blamed. One postscript on the support for spending cuts that joe and i were talking about a moment ago. One thing we didnt ask in this poll but typically draws 2 3 support is the idea of raising taxes on people t top. So that people at the top. So that we simply dont have numbers on that in this poll. But consistently over time when you say should should you raise taxes on people near the top, you get like 2 3 support. It only affects raising the taxes on somebody else. It affects thats right. But john, i was thinking about number one, if the sequester goes through and, you know, the world doesnt end, weve got weve got our national security, if i understand, well be more prone to a terrorist attack or something. Less safe because of 3 . Weve had Business People, weve had Business People come in and out. And, you know, that are in a position. They said if i had an edict, a mandate, to try and get 3 of my expenses out of my business, i could do it with my eyes closed in one hour. Not one customer or client or employee would even know. Theres so much things you can do around the edges just with pure waste. When you ask the question do you want a hammer cut where you dont have any discrimination of of course theyre going to say we dont want that. We want some way of doing it thats smarter. The way you ask the they dont want to slice the baloney. She should axe individual items. But they should axe individual items. But you cant you could do three, thats nothing. But if you go to newport news, virginia, john, youll find people that are going to be furloughed. Troubles going to be easy to find a yes. Real people are going to be furloughed. Thats the only way a Nutrition Organization can tell the story is by going and a News Organization can tell the story is guy going. Tonight talk to jpmorgan. Theyll tax cut dont talk to jpmorgan. Theyll cut people. Speaking of News Organizations, you may have noticed a significant number have gotten to the end of the line, the nibbling around the edges stuff, and cutting the jobs of real people. Thats what the federal governments go b to do. Right. Okay. We can always work at variety, john, or deadline. Com. Deadline. Com. Thank you very much. Really, i said i have plans at last night, upset night, john. Did you see xu memphis had 18 straight games. I saw minnesota beat indiana. That was something. I love you were supposedly one of your hometown, indiana. Yeah. And florida got beat by tennessee. The only team that looked really good was wisconsin which i think they were going to be moving up. Charles doing his he was doing his brackets. Im obsessed. Coming up, ben bernanke heads back to capitol hill. Well ask if the markets will get another boost from the fed chairman. 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See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. Among top stories, this is the top one, i think. Watching ben bernanke yesterday, he will head back to capitol hill today set it defend the Central Banks policy. Meant to comment on that sound bite of him at the top where he said, i have the best inflation record of any fed chairman in history. Because for now you happen to have the greatest the greatest depression except for the great depression, you presided what happens from your policies down the road that people he said i dont think housings a big deal before we fell off the cliff in 2007. That was a effective inflation Management Strategy that he instituted in 2007 to make sure that he was would be the best record very proud of himself. He said it with a straight face. I was like, youre a usually i lankt i like the bernanke. Bragging about i have the best inflation rate after weve had sub 2 growth for the last, you know, 8 on a relative basis to where we were. I know. But weve had no growth or growth in employment. Of course weve had no inflation. Weve been trying to recover from the worst financial crisis hes looking at it on the he doesnt know. Only the pope can tell us whether well have inflation in the future. The infallible guy. New pope or old pope . Either. It depends when they pass the old pope talking now. Yeah. Its bittersweet. You know whats weird is hes a couple of years older than the last pope who was definitely on his last legs when he finally passed away. All right. Lets go to these guys. Michael tyler, chief economist at eastern bank. He must be the guy on the left. Michael . Good to see you. Good morning. Good to be here. Youre looking good. From the ceo, alan nukman. I can tell that because it says cme behind you. Im pretty fast. Lets start with you. Lets see, michael. Yesterday, was that not significant after last week that bernanke was so sort of i guess he just ruffled all the feathers about whether there was any tight new englaening any ti. Yeah. Hes got a real challenge in front of him. I think hes got three items on his agenda that he needs to take care of. He sees the economy is fragile. He needs to not be too hawkish on cutting the deficit and reducing spending. Hes got to keep shortterm Interest Rates down so people refinancing their mortgages, who are buying business equipment, who are doing other things like that are able to continue to have easy access to money. The third, he needs to start preparing longer term as the private sector gains momentum. He needs to be able to prepare for an exit from his current policy. Did so you think that he did that yesterday . I mean, is he has he gotten the markets to the point where we can take all those minutes and thats already in the past, thats done . Well, i think that investors have recognized that a lot of what you saw in the minutes, for example, smfs discussion that an exit has to come sooner or later. And i think its most likely going to come in the form of a reduction of the longer term asset purchases so youll start seeing it first in longterm Interest Rates beginning to tick up. If the sequester the sequesters going to go through. Say it stays in effect for a while. Do you have a different gdp number based on that . Well, if you just do the arithmetic, 85 billion over seven months is not quite but close to 1 of gdp. So theoretically thats the effect. But a lot of it takes place overseas, especially in the military section. That has very little impact on gdp. The domestic programs that are going to get cut could be significant. It accelerates over time. I think youre going to see at this point i suspect that congress and the president are saying, all right, the sequesters going to happen. Lets not fight it. Let it happen. And then lets use the continuing resolution at the end of march to figure out what we need to tweak in order to make this acceptable to the public. Do you think that at some near term diminishment of gdp, but seeing that we can actually start shrinking government, could that ever turn out as actually being a positive even though near term it might not be seen as a positive . It seems right now that i mean, i see the way we run trilliondollar deficits and cant cut 3 . I think thats even a worse sign than cutting the 3 . I cant disagree you. I think that longer term the government has to reduce especially in the entitlements area, it has to reduce its impact on the economy so that the private sector doesnt get squeezed out. But thats a longer term issue. Doesnt have to be done abruptly. And i think when we were listening to poll results, thats what the public was saying is dont do things abankruptly. Dont do things abruptly. Dont do things arbitrarily. Use intelligence. Thats what we elect you for. Use intelligence to figure out where, when, how much to cut. All right. Alan, with all that in mind, what would you be doing in terms of all the markets that you follow . Well, where ts important in a lot of markets now. If we look at copper, the euro, crude oil. Crude oil at the Halfway Point of theeraly from 87 to 98. Its important here. And you alluded to inflation. I was looking at the crb index. Its down 10 over the last 52 beaks. Commodities in this break has not participated in this reinflation in the equities markets. I think theres good value. B we saw gold have a nice bounce. The key is the dollar. We were talking about all the sequester, the Financial Difficulties in america. The dollar it s at the highest point since september k. That be supported, justified, or does the dollar need to unwind . People keep talking about how were printing money and, you know, that has inflationary concerns down the road. But the fact is the dollar, 15 above the lows that we saw in 2008. So i think thats thats something that needs to be focused on because were getting a disconnect like you alluded to. Okay. Gentlemen, thank you. Michael tyler and alan knuckma. Its not tyler, michael . Its confusing, people with two first names. Confuse people with two first names. Confusing at times. You dont have a son named knuckman, did yoo you, allen . No, but michigan Michigan State thats another i want to see. We havent even had the conference tournaments yet. I dont know why im into it. The stupid brach lets last year, his success with the brackets. A firsttime gambler. Like a firsttime gambler. I am. Andrew . Coming up, crude realities. A top refiner says he might have a solution for higher gasoline prices, next. Plus, were fielding your questions for warren buffett. Email askwarren cnn. Com or tweet us with askwarren. Then hear his answers. This is america. We dont let frequent heartburn come between us and what we love. So if youre one of them people who gets heartburn and then treats day after day. Block the acid with prilosec otc and dont get heartburn in the first place [ male announcer ] one pill each morning. 24 hours. Zero heartburn. A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . Welcome back. Recent discoveries of new oil fields sparking an energy boom in the United States are. Refineries ready for the newfound supply . President of the National Petrochemical and refiners association, charlie, what do you think . Well, we weve had opportunities and now we have challenges. The opportunities are weve, you know, been able to get oil from some fields, i. E. The balkan and others, that historically have been we havent been able to tap. Now that were able to tap them, weve got to find a way to get those crudes to their highest value market. Most of those would be on the east and west coast. We dont have the infrastructure in place to be able to get this kind of crude to, you know, usually by pipeline to the east or the west coast. We have but we are making significant investments in rail. Just last year, 2012, weve increased rail shipments about 230 . An extra 250,000 some cars. Wow. Equivalent of 450,000 barrels of oil. Wow. Yeah. You know, were pretty good going north south as far as transportation i would say. There are a lot of folk the Keystone Pipeline gets all the print as it should. Thats another north south line. Thats another north south line but we need to get the canadian crude to the gulf coast refineries. Thats a longTerm Solution. Thats not something thats going to be happening overnight. Becky, there is no there is no shortTerm Solution. There is no overnight solution. So you know, we have to understand what the market looks like. What the logistics are. The massive amount of investment that the refiners are putting into rail shipments, and, you know, we we need to keep developing our own resources because you all know, you know this as well as developing our own resources. You notice as i do, the last barrel in dictates the price. Obviously, they have to put it into the rails now to get it there, is there now not a market incentive to buy into longer Term Solutions like the pipeline, not a conviction the ball can will be there long enough . Why is there not a solution . All things studied right now, why the free market should be allowed to run its course in the country and allow pipeliners to figure out what the long Term Solution is. You can understand they wont attempt to put billions of dollars into infrastructure when government regulation or access may be limited or prohibited. You need an energy plan . Yeah, we do. We need a solid plan that says actually, we need a plan that focuses on reality, that says were going to be using oil and natural gas a long time in this country, a way to get the economy going and jobs back and if the government can give us assurances rather than picking winners and losers in the market we will continue to have these challenges. You said 250,000 cars coming from the ball can itself . All over the country. What railroads are picking up that . All railroads equally or some particul particularly i think probably spread out pretty evenly. You know the big names and where the ball can fields are. I think its amazing, becky. Can you imagine or think five, six years ago, were in this predicament. I say predicament, its a challenge, we have the opportunity to get these east coast refineries off brent and being able to compete in the marketplace and keep refineries running on the east coast, thats a winwin situation. Charlie, thank you for joining us today. My pleasure. The top market strategists, and signs of a rebound yesterday. Find out what areas are finding home prices popping. And durable goods eastern. [ male announcer ] this is not my home. There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. [ construction sounds ] [ watch ticking ] [ engine revs ] come in. Got the coffee. That was fast. Were outta here. [ engine revs ] i know what youre thinking. 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As stocks snap back, markets gaining nearly 1 after the worst one day drop in 2013. This mornings market panel is ready to show you where the markets are headed next. Hopeful hopefully, these men talk day two of bernanke testimony. Europe, the sequester and your money. Housing on firm footing. Why yesterdays data could mean pockets of strength for home buyers and we drill down what areas of the country are hot. And we have the numbers and instant Market Reaction and what theyre saying about the state of the consumer. The second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawkbox on cnbc. Im becky quick along with joe kernen and Andrew Ross Sorkin. A look at the futures, you will see some red arrows have mitigated. Basically flat lining this morning. Yesterday was a big day for the markets. Flat lining after yesterdays drop of 200 points. A Federal Reserve chairman, ben bernanke goes before the House Services committee for day two of his biannual testimony. Yesterday, he told the senate that the Federal Reserves Monetary Policy is givining support to the economy. We have the tools necessary to tighten Monetary Policy when the time comes to do so. As i noted inflation is currently subdued and Inflation Expectations appear rel anchored. Private forecasts are not projecting development of inflation precious. He acknowledged keeping rates low indefinitely and expressed confidence risks like that pose little threat right now. Numbers expected to be released this morning. Holiday clearance helped boost samestore sales. When you have things on discount you wonder what the margins are and interesting to see what they have to say about higher prices at the pump, delay in tax ectation e expectations and refund checks. And patrick mcceever, senior equianalyst will join us and what the tech giant plans to do with its 100 billion cash load at the Shareholder Meeting today. Apples stock traded higher amid speculation the Company Might announce plans to boost shareholder value. This news just crossing the wire, Weekly Mortgage applications falling 3. 1 even though rates are lower. And the battery fix weve been talking about, the Government Agency denying reports such tests could start as early as next week. Movie studio Dreamworks Animation reporting its First Quarterly loss in six years as it wrote down 169 million of Weak Box Office performance and ri rise of the guardians. I never heard of them and that may be the problem and they plan job cuts and shares were down 3 in aftermarket trading. Proxy advisors iss and glass lewis are urging a proposal to split the chairman and chief executive roles now both held by one man. And theyre urging those to cast it against disney and it could sway those ahead of the meeting scheduled for march 6th. A controversy issue at the media and theme park have those dual roles of iger. The board added the chairman title to igers role at the last one. Look at that chart. Go away. You look at 2005, say the same thing. Im saying im with iger on this. Had enough . If youre a shareholder, youre probably happy. Complainers go away. Do you think iss has been good . Corporate governance. Fphooey how Many Companies have a chairman and ceo. The majority have one separate. Theyre virtually all separate. Have you heard of american exceptionlism . It ever entered your mind . Want go to the uk, go to the uk. What about the uk makes you think we want to emulate what theyre doing. Give me one thing about the uk that makes you envious how things are going over there. Food. Food in the uk . German shepherd pie . How about their dental work . Dental work has got an lot better. I used to live there. It really has. So has the food. Stocks, theyve got a lot of old stuff. The guy that was married to the cute kate whats his name. Thats nice. Downtown abbey. Downtown abbey is produced by us. Not anymore. An nbc production . No. Just distributed here. A bbc production. A bbc production . Am i wrong on that . I would get that one straight if i were you. Stocks ending at their best levels after a one day drop in 2013 and despite italian political gridlock and worries about the sequester, joining us allen young and bob dahl, chief strategist and portfolio mana r manager. Where is it produced . Produced by carnival films and masterpiece and first aired on itv. We have a new arrangement with the producers to produce a separate show for nbc. I know that. I think we have more to do. Anyway, stew hoffman is with us, chief economist of financial services. I want to get to where s p is on a full year s p earnings number. Are we up . The capital iq, we tracked the consensus. Right now, 111 for this year, drifting down because guidance has been lousy. Last year, better than expected earnings. Its a 7 1 2 type number. The problem is it was 12 in october and 10 on january 2nd. The trend is moving down, stocks moving up. The valuation, while people say stocks are cheap at 13 1 2 times, if you look at the peg, not the valuation in a vacuum that matters, the growth, the peg is closer to 2. We dont think that ends the rally but slows it. We have probably seen our best burst for the year and well be higher at the end of the year and valuation p to growth dynamics, we cant keep rocking the way we have. Produced by carnival, a british unit of nbcuniversal. Oops. All right. Bob, how are you feeling about the overall markets . We had a huge gain from the fall. Its not yeartodate we have to focus on, where we came from the fall. We came a long way in a short period of time. I think were taking a rest. Market is tired. Doesnt mean its going down but we have thrown a lot of stuff at it. Higher gasoline prices, payroll tax hikes, taking a rest. Thats okay. Were going higher before the end of the year. Higher before the end of the year. Did you think italy would be a problem . Ever heard of grillo before the end of this week . Funny . Funny looking. Supposedly thats what they say. Not like a gallagher with melons smashing supposedly a cerebral guy. Its about politics now. They have to find a way to make a coalition. Do they stop with their liberal, reforms, contagion . Is europe on the front burner or not . Probably the next few days. It will take italy a while to get back but then it will fade again. The big fancy bandaids is buying time for europe at a minimum. We have bernanke on our side. S stu, what about the sequester, long term is it a negative or positive . Long term negative if you let it happen this big. This big . Fairly sizable. 3 . 100 billion over 10 years 1 a trillion over 10 years. The sequester is sort of a tire with a slow leak. If the fiscal cliff was blowing a tire it would have veered off the road into recession. This is a slow leak, 85 billion, probably only 45 billion in spending cuts this year, but i suspect congress will come back and patch it before we ever see that much of a spending cut. Chairman bernanke said yesterday we need long term fiscal restraint, we just dont need it quite as sever in the next year or two as the economy is trying to Gain Momentum. I think scaling it back is the right thing to do for the next year or two. Seems like, stu, you definitely cant equate a dollar of spending in the private sector with a dollar of spending by the government. The idea that to cut any spending, cut back any spending, whether government or private is by definition bad for the economy, then we should just spend like drunken sailors forever with the government and then well be prosperous forever. It just doesnt seem to make sense, stu. Your own survey of people across the country showed the majority of them arent opposed to spending but dont like it fairly indiscriminate across the board. You mean cutting, not opposed to cutting. Not opposed to cutting but rather see smarter spending cuts. I can see that if youre talking 10, 15, 20 . It seems like for 3 , you could do any corporation could do 3 across the board of all its units, it could find 3 to cut. No . Real fast . Sn maybe they could. Youre right. Its not a corporation, not run by a ceo and a board of direc r directors. It has different priorities. I think it can find 2 or 3 to cut. It doesnt necessarily have to do that in this calendar year. I suspect it wont. Youre a big kick youre kicking the can. I never looked at you as a can kicker. Your thomas more whoever said i want to be chased, i have a couple of girls waiting for me, maybe after theyre gone, the same thing. No . Its spending cuts. Augustine. Sorry, a lot of them. Sorry, stu. I said, i dont think of kicking it the can, i dont think bernanke thought of it as kicking the can, more spending cuts over time, i agree, absolutely right. I just dont think they should be across the board and they should be so indiscriminate. You have to do a better job than that. This was supposed to be the bludgeon that would make them come up with a long term plan. If they still, more than a year and a half later, cant come up with a long term plan, some people say this is the lesser of two evils. You dont agree with that, though . I dont agree its the lesser of two evils and dont think it was intended to get to this point i think the president said that and republicans have said that. You agree with spending rather than sequester kicking in . I think the sequester will and should kick in. I think theyll come back and fix, probably rescind some of the spending cuts as they have a chance to see where it would be mo more targeted rather than across the board indiscriminate. Thats not a bad thing as long as its used to come up with a better plan. If its used to come up with a better plan to use time where spending cuts could be allocated rather than completely across the board, 100 billion 85. 85 in the calendar year, 85 in the fiscal year is about 100 billion for the calendar year. You have the fed, bob, they do 85 billion a month. They do 85 billion a month. Ben keeps saying, please help me, please help me. Do you guys feel do it later . Given all the can kicking weve had the last few years, it rings a Little Hollow to say this is too blunt a sequester, lets draw it back. All weve been doing on spending cuts is drawing back. I dont think investors have any confidence or congress are willing to do spending cuts. Obama seems to be allergic to any cuts. If i really believed we would get long term entitlement, cost cutting down, a lot of people on the right feel like were not going to get cuts from this guy. People on the right that want this are big defense hawks, say ill even take it in the defense if we get something somewhere elsewhere the growth of government slows a little. So much damage was done august 11 they had the deal in hand and was this close and fell apart. I dont think we healed from that. The animosity just is awful. Speaking of that, i mentioned you are a blue shirt guy . I wear blue shirts. Almost everyday and i do, too. The combo with that tie is a pleasing combo. But i ask you what thought process went into the pink shirt. I said my foot marsh. The last shirt in the closet. Who actually is taking responsibility for that. Your valet apparently said it was the second footman, i thought you said. It could have been the third. Val let or valet, i dont know. Who is no longer working on the Upper Eastside or Upper West Side . We will have that conversation this afternoon. You fire them and they always come back somehow because you cant find good help. We have great help in the sorkin family. Who didnt send out that seems like something thats pretty obvious, you send out the shirts when you get low, right . A little mistake was made. I have to talk to that guy. Coming up next, the rise of the shadow Banking System. Why banks arent lending and what one fund is doing to bridge the gap for developers. Check out the futures. Squawk box is coming back right now. A mixed picture there. Welcome back to squawk box this morning. The Housing Market is picking up but some are concerned about bank lending. The president and ceo of kimball capital management. Thank you for being here. Thank you for having me. We have all these bank ceos saying were lending more and out there. Youre saying not so much. Its interesting. A little bit of a fallacy. The banks are very interested in making loans liquid and easily secur secured. Balance sheet loans more flexible money, construction, acquisition, repositioning of properties, the things that the midmarket developer is looking for, thats more difficult. Thats a function of what . Its a function of, i think, three things. Number one, basel 3 penalizes bank for commercial real estate loans and proposing increase of capital set aside 150 opposed to 100, historical. Also, theres a big big consolidation in banks that has happened over the last few years. 88 of all deposits are in the top 10 of banks. These big banks cant service midmarket customers. You jumped into the fold. Theres arguably a shadow Banking System that sort of emerged to make these type of loans . Absolutely. Is that actually its good for you but is it actually good for the country . Would we be better off if the big banks could find a way to make the loans that youre now making . Big banks in my opinion have never been all that good at taking commercial real estate risk. I think that big banks tend to invest when times are good and pull back when they should be investing. I think a lot of shadow banks canned add discipline to the marketplace. Remember, this is not federal fdic insured money, money managed and owned by the people putting it out. I think thats a good thing. In your view, how much of this is cyclical and how much is secular regulatory. Banks, as they get the bad loans off the books, as lending standards continue to ease, will they be back doing these things or is this a big change . Great question. I think part of it is structural and part of it is cyclical. The part thats structural, i think the capital charge which peernllizes them going certain places to the Capital Stack which i think will be the purview of shadow banks for some time to come. Also consolidation. Unless there is a way to promulgate smaller banks, remember, regional banks were the big commercial real estate lenders. Theyre not doing so well and a lot of Community Banks are going away. Unless that changes, this is a long term trend. One last question for you. Commercial real estate, right now, in terms of we have seen the equity market go crazy. Right. We have a view on the bottom market, maybe we dont. Your world . By and large, commercial real estate fundamentals will bump along, except for apartments. Apartments are a home run because since the crisis, there are 5 million more households looking for apartments that were once owners. That is sam zells point. In a good year, in a good year, the economy produces 250,000 net units. How many years does it take to get equilibrium . This is long term in multifamily. Thank you for coming on. Thank you. I appreciate it. Coming up next, gambling and drinking, talking about gambling and drinking. New home sales in january the highest levels since i want to go back to the gambling and drink i drinking and biggest increase in years and is it a sign . Well ask a chief economist in just a bit. Time now for todays aflac trivia question. Which hollywood starlet was the youngest oscar winner in history . The answer when cnbc squawk box continues. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. But at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. Tdd 18003452550 playing this and trading. Tdd 18003452550 so im always looking to take em up a notch or two tdd 18003452550 and schwab really helps me step up my trading. Tdd 18003452550 now i can use their most powerful platform, tdd 18003452550 streetsmart edge, on the web. Tdd 1800345255 so i get their most advanced tools on any computer. Tdd 18003452550 ive also got a dedicated team of schwab trading specialists. Tdd 18003452550 all this with no trade minimums. Tdd 18003452550 and only 8. 95 a trade. Tdd 18003452550 after all, im in this to win, right . Tdd 18003452550 open a schwab account and you can earn up to 600 cash tdd 18003452550 and 150 commissionfree online trades. Tdd 18003452550 call 18779089253. music throughout why turbo . Trust us. Its just better to be in front. The sonata turbo. From hyundai. Now the answer to todays aflac trivia question. Which hollywood starlet was the youngest oscar winner in history . The answer, shirley temple, at 6 years old. Welcome back, everybody. New jersey governor, Chris Christie has signed a bill legalizing internet gambling. It becomes the third state in the nation authorizing online b betting. The bets cant be placed until the state division of gaming enforcement sets a start date. It could take 6 to 12 months to get ready. Joe. From Online Gambling to beer. Class action lawsuits have accused budweiser bush and others of watering down the cheap alcohol content and seeking millions in damages. The lawsuits are based on information from former employees that the 13 u. S. Breweries, anheuserbusch calls the claims groundless. A couple bald spots there. Still to come, housing showing signs of improvement. That was years ago, already losing. What does it say about the state of the economy . We will find out from a chief economist. Stay tuned. [ male announcer ] how do you engineer a true automotive breakthrough . You give it bold new styling, unsurpassed luxury and nearly 1,000 improvements. Introducing the redesigned 2013 glk. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. [ 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. We have target coming out. I see a g. A. P. Number of 1. 37. Thats probably what not what wl use. Seeing all g. A. P. Results on adjusted basis, the Company Earned 1. 65 versus 1. 48 well above. Heres the adjusted number for 2013. 4. 85 to 5. 05 versus 4. 82 estimate. For the First Quarter theyre looking at 1. 10 to 1. 20 versus 1. 05, all above. Expectations in the stock is immediately moving higher up about 95 cents. Fourth Quarter Sales rose 6. 8 to 24. 4 billion, looks like it might be a little bit shy of the 22. 686. They sold their credit card stuff. Can we use sales . 0. 4 for the comps. Samestore sales. Up 0. 4 . Yeah. I wonder what what the analysts were expecting f. That was for the entire quarter. That looks like at first plus, looks like a pretty good number for target, which is also you wouldnt call that low end and high end, like everyone end. Theyve done it where you will see like they do the high low like everybody else. You will see like a hollywood staff in target not embarrassed. You can do it. You can do it. Covers the whole range. You ever been in one . Absolutely. Is there one in this city . One down by union square, i think. If theres not, youre missing out. Ive been up to one theres a one in harlem. Im looking through the release. While they have comments, they dont have anything about what walmart was talking about, seen a slow start to the year or february because of delayed returns of income tax, dont say anything about the payroll tax cut or tax hike going back to normal levels after two years of cuts and dont say anything about how their consumers are struggling something people were wondering. Is the target consumer more upscale . Its the high low where were you 30 seconds ago . Your mind is mush. I just had a huge conversation about that. Not huge. It was short. It was huge. Not huge. We were having a discussion on the side there. They get the low end he was telling me he wouldnt be embarrassed to go into target. If youre missing out Pay Attention. Were having a conversation over here. More than walmart shoppers. I think its 20 to the payroll tax thing isnt going to bite that person so much and gas prices i do the same thing when youre talking, even worse what did you say . Anyway lets not to say they wont Say Something on the call today. Hows the the what . The 0. 4 comp . Earnings were fine. Revenue only 04 on comps. Not terrific. Did you say that also or is that new information . Hes been on it for the whole show. He knew about the target results at 6 00 a. M. 2. 25. Stock up now 2. 25, a new high. What was akmans final determination and investment in target . Is it still going on . No. Its over. Nite didnt work out well. If he had stuck with thats way above. Hed be doing great. A lot was call options that would have expired. They decided to do j. P. C penney instead . That comp number, complaining abou about. 4. Thats down 30. Up. 4 is better than down 30, right . Thats right. Even at this hour. Lets talk more about the Federal Reserve. Steve liesman is on set with us because theyre talking about the easing money policies to the senate yesterday. You know what i have to say before you start anything, i was surprised to hear how warren, Elizabeth Warren was giving him such a hard time on some of these issues. You would think with him having easy money policies she might lay off. Remember, warren, i think its the first time shes been there for a bernanke testimony. This is a bit of grandstanding. Theater. Theater also. We have some of the back and forth. Im calling him a feisty fed chairman yesterday because he is not running again. I thought because shes so feisty. I thought she was so feisty. How about where i have the best inflation record. Ive never seen him do that. He was feisty that way. Did you hear what he said to corker . I heard some of the exchange. None of what you said is accurate 0, not a little bit of what you said is in accuraaccur none of what you said is inaccurate. And there was back and forth on that. He came back later. I thought open hunting season on the fed and fed policy, theyre out of season in the senate right now. I think that white change today in the senate. Lets play the Elizabeth Warren sound rather than the stuff i was going to read here. I make another prediction and prediction is always dangerous, the benefits of being large are going to decline over time which means some banks are going to voluntarily begin to reduce their size because theyre not getting the benefit they used to get. I read you on this and read your predictions on this in your earlier testimony. So far it looks like theyre getting 83 billion for staying big. Thats one study, senator, you dont know whether thats an accurate number. They say there is an 8 83 million subsidy because theyre too big to fail. And you saw the senator from arizona saying i agree with you completely on this and bipartisan banks should not have an 83 billion subsidy. It depends how we count it. Its not a negative. Youre right. Its not a negative. Is the taxpayer giving a subsidy or is there a perception . It hurts small banks and makes them less competitive. If you take the deposits, is there a subsidy on the deposits . No. Isnt that the biggest part . The biggest part of the business. The too big to fail expert. It is bad they get money that cheaply. Doesnt bother me. Bernanke on the other side of Elizabeth Warren. Im on the other side of Elizabeth Warren and im on the same side. Youre on warrens side. I see what she was saying. I dont think these guys should have a it is, by definition, they have much lower rates than they would normally have, because theyre going to be bailed out. Are they . He said they could be taken apart. One of the guys asking the questions was the guy who wrote the liquidation procedure in the doddfrank bill, bob corker. So bob corker hes saying his own bill doesnt work. His own bill doesnt work. Bernanke was saying were writing the rules now. It takes time. Bernanke appears to have done enough to convince markets there will be no early end to the feds open ended policy of purchasing assets and Interest Rates. Lets play more sound. In the current economic environment the benefits of asset purchases and accommodation policy more genry are clear. Monetary policies providing important support to the recovery while keeping inflation close to the 2 objective. Rbs guys called this a strong signal from the chairman. My question to you is no one expect qe to go away tomorrow but 69 months but dont you think this increasing dissidence from the feds and maybe theyre not voting members and maybe the press could do a better job saying who has a vote and who doesnt rather than reporting everyones view equally but appears theyre undermine iing policy of the assets and more people are more worried it will end sooner rather than later. Any thoughts on that . Agree with that. I would say no other policy the current looking aspects of the qe infinity policy or more than any they had. They want to convince markets. Thats whats new here. We will be in the game not for a given quantity of purchases but until we receive an economic target. If that works they try to pull forward a lot of stuff that happens in the future to today. Why do you need the fed if you know this is a policy, why do we need an entire body talking about this if we know it is 6 1 2 and wait for that to happen. Thats not true for qe. 6 1 2 is the Interest Rate target and qe is the the other thing thats interesting to me is they have to the market is overstating what were talking about here. Maximum this year is a trillion. I think the minimum this year is 700 billion. Are you going to sell stocks right now because the fed is not going to do 300 billion on the back end of this, going to do 700, not a trillion. You characterized it right, 69 months, were good. I remember my guy who put this forth very eloquently, hon dsz ig. Remember hes been on here. Yes. The Resolution Authority doesnt cut it and these things have to get smaller to get rid of the advantage the big ones have based on having a lower than market borrowing cost. Absolutely. I think what bernanke kept saying, well, we levied other costs on them. Higher capital fees, right. And warren kept saying i havent seen it if its there. Not 83 billion. Look, i think we need to do a whole segment on this. Im happy to give you the background i have from the Basel Committee folks and reserve and what the actual subsidy is. You know what, lets do that on cnbc. Com. Lets do that online, someone that really wants to see that. Thats an important issue. Online tv. Thats an important issue. Tony just emailed in too big to fail subsidy is actually negative 16 billion. Why . Really . Because they levied too much stuff on. Well go through the math. Still to come on this morning. Lets do a segment on it. Not on dotcom. Housing numbers suggesting buyers are returning to the market. We find out from the chief economi economist. First, check out shares of dollar tree excuse me, yemen. 1en 01 a share, revenue in line with expectations. Onour longte, not their shortterm agenda. [ male announcer ] join the nearly 7 million investors who think like you do. Face time and think time make a difference. At edward jones, its how we make sense of investing. Face time and think time make a difference. How do you keep an older car running like new . You ask a ford customer. When they tell you that you need your oil changed you got to bring it in. If your tires need to be rotated, you have to get that done as well. Jackie, tell me why somebody should bring theyre car here to the ford dealership for service instead of any one of those other places out there. They are going to take care of my car because this is where it came from. Price is right no problem, they make you feel like youre a family. Get a Synthetic Blend Oil change, tire rotation and much more, 29. 95 after 10. 00 rebate. If you take care of your car your car will take care of you. That actually is kind of interesting. Hi, welcome back. Andrew said something sent in shows small banks actually have certain advantages in funding cost, not disadvantages. When i took Elizabeth Warrens 83 billion, thats not necessarily the right number, that they have an advantage. An advantage saying the number is negative. Too big to fail is subsidizing everybody else by the tune of 16 billion. The reason theres smaller funding some of the Funding Sources dont trust fitchs ratings on bigger banks and bigger banks rely on different sources of funding instead of checking accounts, they focus on repo and deposits. We have to apologize to steve. Hes gone. Never mind. We had encouraging data on the real estate markets. Where are we on this cycle . Are the fundamental drivers real or investor driven . Jed is chief economist at tru trulia. Is it real . It is real. Were seeing two different types of housing rebound right now. In places like phoenix and detroit, a lot is investor driven without market fundamentals to support it in places like seattle and denver, were seeing strong job growth and vacancy rates and can support the big price increases in those markets. I was trying to figure out this piece in the wall street journal. Existing homes, they say the inventory has been picked over already. What are they saying . That would imply the inventory is down and make it seem more dear for existing houses to get high prices rather than building new ones. Remember, during the housing bust, we saw a huge inventory. A lot of overbuilding during the bubble and a lot of homes that stayed on the market. If anything, weve gone too far in the other direction. Inventory is at the lowest level in years that helps boost prices but a challenge for buyers looking for inventory especially in california and other parts of the west where inventory is down almost 50 yearoveryear. If there was inventory around, existing housing would be doing pretty well in terms of pricing as well, is that what youre saying . Thats right. Were seeing strong buyer demand and sales increase despite the tight inventory and also seeing a shift in sales from foreclosures and short sales to more conventional home sales. Thats an important sign that the markets recovering. Snow is its easier to get credit for a new home than existing home . The credit still remains tight. The typical credit score of borrowers getting a mortgage remains very high. Well see whether that changes with the new mortgage rules that were designed to outlaw or at least make less common the types of loans that really hurt us during the bubble. Are the Home Builders actually being involved in making its easier to get loans . It says in the journal theyre offering to pay Closing Costs or arranging loans for inhouse mortgage operations, free credit counseling sessions and doing all kinds of stuff to sell new houses. Is there an advantage based on that for being able to get a mortgage . We are seeing some of that from Home Builders for new home sales and reflects the fact the credit remains tight and you need a strong score to get a new mortgage and all happening even though were recovering. This sounds like weve always heard were turning the corner and slow down a little. Nor banks youre looking at a 30 year fixed mortgage rate, do you want to keep more of these on your books if the fed will change it. I can understand why the fed wouldnt want to lock you in at these rates. Jed . Thats right. Were seeing a lot of interest from bankss on the refinancing side and not home purchases because the rates are low and now that theyre starting to rise we will see less refinancing but as the economy recovers more home buyers looking for home purchase mortgages. We will see that shift. Were adding to the population and stopped building as many houses. This is a long term thing. Has it been long enough to where the inventory is more matched up with how many people want houses now . Inventory is still very tight. At the lowest levels in a while. We have seen more new construction than the past couple of years but new construction is bay below the long term normal level. Two things will happen as prices recover. More new construction as builders jump into more markets. As prices rise, more homeowners decide to sell especially those under water until now and move back into positive equity now that prices have gone back up. I want to throw a devils advocate question out there for you. I always get worried when the consensus is so bullish on any one area. How do you reconcile the weak job growth and the fact a lot of money is coming from Institutional Investors with the idea the Housing Market will continue to heal over time . Dont we need better job growth . Job growth is key for housing demand. Thats why there are two different types of recoveries going on now. In some markets a lot of price growth isnt driven by job growth, driveren by investors. The price increases weve seen in places like phoenix and detroit may not last. But in other places like san francisco, like denver, we have seen both strong job growth and strong price growth and where the recovery looks more sustainable. Is jed a nickname or really jed jedadiah. Im really a birth certificate jed. Thats it . Thats it. Got a middle name . Jed david. That could be like an anchor newsman name. Hi, im jed david on closing bell with maria bart roiromo. Something i would aspire to you. See, you actually said the guy. Reward any careful viewer. When we come back, well focus on target. Big bucks reporting a short time ago. Well get wall streets reaction. Squau squawk will be right back. To a new etrade retirement account. None of them charge annual fees and all of them offer low cost investments. Etrade. Less for us. More for you. That your mouth is under attack, from food particles and bacteria. Try fixodent. It helps create a food seal defense for a clean mouth and kills bacteria for fresh breath. Fixodent, and forget it. [ male announcer ] every car we build must make adrenaline pump and pulses quicken. To help you not just to stay alive. But feel alive. The new cclass is no exception. Its a mercedesbenz through and through. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. But at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business welcome back to squawk. Target rolling out results this morning. To newsline to see what we can make of this. Patrick mcceever, the managing director of mkm partners. Good morning. What do we make of these numbers . They seem good on a relative basis considering what we think of walmart. Maybe we shouldnt think of walmart and target in the same sentence. They do have a different consumer demographic. Target is more focused on innovative merchandising and walmart more focused on Everyday Low Price and being the low price leader. Thats like saying target is great and walmart is a dog. They there are some nua e nuances there. Certainly, theyre both mass merchants, no doubt about that. They have a pretty different customer demographic. The numbers are as expected, how i would characterize the Fourth Quarter numbers. Sales are released, a 4. 4 increase in samestore sales. T they had a nice pickup in january and earnings in line as well. Look forward for us a little bit. Payroll taxes, Everything Else going on sequester, anything to do with anything in terms of the consumer. What should we be thinking about in terms of target . The call is at 10 30. They only gave Earnings Guidance in the press release. Frankly, a little bit light where i was thinking it would be. On and adjusted basis talking about 4 growth in eps. Thats a little light on a 52 week versus 53 week basis, some impact there. They had a 53 week in 2012. A little light. They dont make any comments on sales and all ears will be on february. Thank you for this perspective. We have to go. Also, alec young, i want to thank him for being with us the last hour. Great talking with you and see you again soon. When we come back, more on todays testimony from fed chairman ben bernanke and dino is with us from the first coast. And things consolidate after the loss this morning. Dow futures up by 15 points and s p 500 by one point. Squawk will be right back. You know whats impressive . A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . [ construction sounds ] [ watch ticking ] [ engine revs ] come in. Got the coffee. That was fast. Were outta here. [ engine revs ] stocks bounce back. But can bulls pick up momentum ahead of fridays sequester. Market master bob dahl. Do you believe your asset purchases are causing any kind of equity bubble . I dont see much evidence of an equity bubble. Now the house gets a turn. Dino joining us for the next hour. And housing climbs to 4 1 2 year highs and plenty more in the Housing Market. The third hour of squawk box starts right now. Welcome back to squawk box. Im joe kernen with becky quick and Andrew Ross Sorkin. And more from bob, asset manager in a few minutes. First, Andrew Ross Sorkin has more with target. Earnings higher maybe a little less so. It went down in the last three minutes. The analyst said hed like to see comp store guidance. The street has a higher number but wasnt in the release. It was talked about. It wasnt but will be. Target out with the Fourth Quarter numbers at 1. 65. 17 cents higher than expected revenue slightly above expectations. Weekly jobless Mortgage Applications falling 3. 8 even though Mortgage Rates eased slightly. Well be talking with david crowe the chief economist at the National Association of Home Builders. And chief economist ben bernanke will be heading back to the hill today. Yesterday he told senators the fed is giving crucial support to an economy sit rattled with high employment and the house gets their shot at the chairman today at 10 a. M. Thanks have changed a little bit, dow futures up by 13 points. These are not massive moves one direction or the other and after a big up day for the dow yesterday gaining 115 points. If you were watching overseas in asia, you saw she nikkei down by 1 1 4 percent and all the talks focused around italy, you can see the best performer of those three markets in the green and the cac in france up by 8. 5 . Markets rebounding with fed chairman bernanke defending the fed. And joining us is head of regulatory Global Affairs and former new york Bank Executive Vice President and bob dahl, chief executive strategist at investment management. We spoke with steve a little earlier what bernanke was saying. It seems to have undone a lot of what we were expecting when you heard from a lot of rebel rousers. Remember the minutes are not the views of the committee, different views of factions of members. When the chairman goes for Humphrey Hawkins hes speaking with one voice for the committee as a whole. One message. You have seen this two months in a row the markets were focusing on minority views. Nonvoting. Even if there were voters and they had reservations about it, those were the views the markets were focused on and you had selloffs right after the minutes were out. The message from the committee and you saw this a few weeks ago and the chairmans speech yesterday, when theyre speaking on behalf of the committee, they are set, this is the policy stance and a long time before this changes. The question is, is the minority getting to be more vocal and is it getting to be a larger minority . We dont know for sure. We know how the voting is, thats public. We know a little bit about jeremy stein, one of the new governors had an interesting speech voicing concern about new yields. Credit. And there are issues like that not being talked about. I dont see that minority is getting much bigger, but certainly the way bernanke was talking yesterday, theyre set in their ways. I thought the most interesting part of the speech was where he talked about costs an benefits. The benefits are clear, better housing, economy et cetera. Costs, he put the word potential. These are potential costs. He didnt say actual costs. If you talk to Endowment Fund managers and retirees, they will have a different answer. There is an asymmetric view about costs and benefits. Bob, as an investor, you look at all of this . How do you weigh it . The fact the minority is beginning to talk we cant buy these bonds forever means the earnings surface is doing a little better there is some mechanism and we need to focus on that positive as well. Durables doing better. Housing autos, manufacturing pretty good. Consumer spending numbers are acceptable, not great. Im not sure its all bad news. That is a much better positive scenario because youre talking long term benefits that come from this, not just the sugar high. Weve been on a sugar high. The sugar high continues as the chairman clearly said. It needs to transfer at some point to a selfsustained mechanism. Did the market read the minutes incorrectly . Yes. Two weeks in a row they read them incorrectly. Theyre still saying theres an underlying truth there in that perhaps still needs to be accounted for. If you listen to the chairman and vicechairman of the board was saying, theyre dug in. Theyre not ready to concede we are getting that much improvement. They are worried more than others whats going on in the fiscal side. Coming out of the crisis, we had strong Government Spending and strong government exports and weak consumption and housing. Thats flipflopped. Theyre absolutely right we are seeing numbers getting better, fiscal tightening j exports slowing down, europe still a problem and signs of slowing in other parts of the world. We had a reversal. Composition has changed. What are you left with . Fourth quarter growth down to, lets say 1 . Whats the First Quarter look like . One handle as well. This is not an economy overall grow i growing in a healthy way even though sectors are doing better clearly. Were on five cylinders, not eight. You know what we didnt talk about at all yesterday, italy. Do you care . There is another shoe to drop in europe. I dont know italy is the place. Italy has been in slow growth no growth mode for 20 years now. This is one of the interesting things. You think of the lost decade in japan or two lost decades in japan. I saw something written yesterday that said italy has grown less over the last 20 years than japan. Italy in a sense, i dont know thats the biggest flash point in europe. Bigger flash points may be in spain, smaller peripherals, where banks are in deep trouble. If there were to be a credit event, you could have a run on the banks. That would be a big problem. Yes, i probably care about spain and some other countries more. What about you, bob . The forced recapitalization of banks in the u. S. In 09 when a lot of ce os didnt want it to happen ended up being a good thing and has not yet happened in europe. Were still living on razors edge for the Banking System and to some extent sovereign. Low Interest Rates, some Global Growth has bought time but not solved the problem. Along those same lines, if you think about whats happening, the capital issue is crucial. We did recapitalize the banks but not denying the asset problem. Spain, the spanish market is down 30 , right . Probably needs to go down more and the banks havent begun to meaningfully reserve against mortgages. Construction and development, yes, mortgages, no. When you have 26 unemployment and rising still, theres a lot of mpls still in the pipeline and those need to be dealt with. Dino and bob will stay with us the rest of the hour. We have a lot to take about with them. A little worrisome. We need asia to pick up the slack. We cant sell to ourselves the rest of eternity can we here domestically . We could have a long discussion about asia. Theres a lot of controversy about how china is and what is the underlying strength of china. Housing comes back here, better but doing better on a lot of fronts but we need trading partners. We need consumption of emerging markets to pick up. It wont be europe. We need asia and latin america. We need those guys to pick up. These things are all linked. If china doesnt pick up more meaningfully, theres the spillover back to brazil, spi spillover to all, spillover to commodity exporters relying on china. It is you know, its interesting all of them have been revising Global Growth down not up. In italy, i feel bad for the italian people, their wealthy has not increased and losing pace with the rest of the world. It doesnt matter to me italy hasnt grown the last 20 years. It didnt need to grow. A perfect place. Its a good place and political dysfunction is something thats been around 60, 70 years. The pasta is still good. Not quite as rich but looking out at the most beautif beautiful right, your favorite place . Feel rich. Youre living rich. Right. Well talk about feeling rich in just a minute. In the meantime, a 25 year veteran of the fixed income market is warning a fed fuel bond market could burst this year. We wont feel rich if that happens. Mark okada will join us next. Signs in the Housing Market industry but is it sustainable, david crowe, chief economist in the National Association of Home Builders. With fidelitys new options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box. The futures are up and down and well see what happens getting closer to the opening bell. Clearwire has elected to take the 80 million march draw under agreement with next tell and complicates dish networks effort to buy it. Clearwire had already agreed to sell itself to majority owner sprint for 2. 97 a share and clearwire said dish said it would withdraw its proposal if clearwire drew on the funds made available by sprint. Our next guest is an expert with 20 million under management. 19 or 20 . We can round off. Chief Investment Officer for highland capital management. You rang the Stock Exchange closing bell yesterday. Mark joins us on the set. Thanks for being here. Thanks for having me. Have you rang the bell before . The first time in 25 years. I dont know how long that will be there. Did you practice before hand . They give you the whole thing, say you have to push the button at the right moment. If you push it early, you have to hold it for like a minute. You go late, the markets are open. Its scary. A lot of power. You have to hold it for 24 hours. You miss it, youre in trouble. When you read the fed minutes, did you call it right two weeks ago . Yeah. I think theres no way you get out of this early. You cant. If youre going to go down this road and balloon the Balance Sheet up as much as they have. Qe3 is very different than qe1 and 2. They got rates down but spreads stayed high. Mortgages werent moving. You know this. When you get qe3 and cross the line and you start buying mortgages and get into the Capital Markets you compress spreads and push it down. We see it across the board. Aaas are tightening across the board all over the place. Thats the goal, right, with qe3 and why its very different than qe1 or 2. You cant give up, you have to keep going. Did you watch ben bernanke yesterday . A little bit. Did you see how proud he was . A l he was quite proud of the inflation situation. He doesnt usually put himself in a position where he can look i thought it was a little strange. 25 years in business, you learn not to fight the fed, right, the markets . But washington isnt getting the joke. Theyre still fighting the feds. You have this payroll tax hitting right now. Gasoline up, not them, per se, but certainly a lot of things, sequestration were talking about, europe certainly isnt getting the joke, you have the comedy show in italy. You have a lot of things going on really countering what bernanke is trying to do. I can see him getting up there and being a little testy. Qe 4, can you buy s ps . Lets do it. Instead of just mortgages, lets run this baby to 20 grand on the dow. Remember they were buying cp. If you put money in the banks, you can buy anything the banks own. They already said theyre going to cross this line. Is there no qe 4. Qe3 was unlimited. Its infinity anyway. Qe3 infinity, whatever you want to call it. Hes already crossed that line. Youre concerned theres a little bit of credit bubble developing. The ultimate credit is equity. Is there a bit of bubble there, too . Its tough to tell. One thing when you have this much intervention across so many different markets you lose confidence. We dont know where rates should be, spreads too tight. Guys in the business doing triple bonds at 5 , 6 , i dont want to hear that. I just came back from a conference, you meet the companies, talk to them. Their businesses are doing okay, good news, bad news, bonds trade at 1. 08, 1. 09, 1. 10, not that exciting. Is it a bubble going on in high yield . I dont think were there yet. Certainly turning down a lot of it. We turned down threequarters of the calendar last year. You have to be selective. A bubble usually means leverage as well. Theres a difference between bubble and overvaluation. In high yield how do you say it . Its coming. Were getting to that point in the cycle more stuff comes more leverage. Look at the deals coming all mma deal. The dell deal doesnt have much leverage. A big company with a round to. Dont you think you will see a lot more deals with more debt . The seller really isnt there right now. The buyer is there. These guys would love to buy companies right now because the markets are open, coupons are low, costs are low. Leverage is the seller is not there because they dont want to sell yet. You have to get two sides of the story. Somebody has to take the Company Private and they want to sell. I think to your point about whether equities are a bubble, those boards have to get to the points they want to sell. We get more volatility, that happens. Quhep when do we have a wonb bubble . We heard others say theres a bond bubble. Do you mean high yield . I think hes talking across the board. I dont want to put words in his mouth. The only we see are treasuries, government debt. There is this treasury market. Theres direct intervention in the treasury market. Once you do that, is high yield a bubble or are investors reacting to incentives getting what is provided . Youre saying were getting what were paying for . Were getting the response the policymakers want. Hard to say a bubble maker in high yield. I feel very uncomfortable of risk curve and where treasury markets are. If the fed continues this policy and we see qe369 months the market will anticipate i had of that. You will see qe3 longer than that. But qe3 youre right, i think the point youre making investors will try to front run the fed. They wont wait until the fed makes announcement. They wont make because you have different classes of agents, hedge funds need to front run insurers and insurers need to front run the endowments, each class needs to front run the one before. When do you run . You look at 94, thats an instructive year to run back on, when greenspan turned hawkish, started raising rates consistently. An ugly year. An ugly year except for everything we ran the bell on yesterday, libor based, credit risk. Thats there. Often times youre raising rates because markets are getting better. Youre not doing it because you have stagflation, hopefully not. But certainly were in this period you have to look at 94, equities down, high yields down, ig down, treasuries down, loans were up. We have to leave it there. Thank you. Come on back. Ill see you soon. Have you been on before . Its been a while. On this show . Yeah. I must have been out. He must have been out. Was i out . You werent here. I wasnt here. I didnt forget you. I would remember you. Hes fantastic. Good. Do it again. Coming up, durable good numbe numbers. And on squawk box, on monday, your chance to ask a billi billionaire. Three hours with warren buffet, get to ask him your questions and everybodys question. Email at askwarren cnbc. Com and the askwarren. Pound sign askwarren and we can call it up and find your tweet tweets. Be sure to watch squawk box on monday starting at 6 00 a. M. Eastern. Your operations . Its not working yes it is. Welcome to tyco integrated security. With worldclass Monitoring Centers and thousands of qualified technicians. Weve got a personal passion to help your business run safer, smarter, and sharper. We are tyco integrated security. And we are sharper. How do you keep an older car running like new . You ask a ford customer. When they tell you that you need your oil changed you got to bring it in. If your tires need to be rotated, you have to get that done as well. Jackie, tell me why somebody should bring theyre car here to the ford dealership for service instead of any one of those other places out there. They are going to take care of my car because this is where it came from. Price is right no problem, they make you feel like youre a family. Get a Synthetic Blend Oil change, tire rotation and much more, 29. 95 after 10. 00 rebate. If you take care of your car your car will take care of you. announcer scottrade knows our 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. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. Welcome back to squawk box, everyone. Among the stocks were watching is target, reporting earnings of 1. 65, 17 cents higher than the street was expecting. Revenue was also slightly higher than expected. As you can see that stock has turned negative after being up much of the morning. Right now, down 2. 8 , 62. 22 was the last tick. And revenue in line with expectations on dollar tree an that stock is still up by 4. 3 this morning. When we come back, breaking data on the consumer and durable goods number for january. And take a look at the u. S. Equity futures. [ man ] ive been out there most of my life. You name it. Ive hooked it. But theres one. One thats always eluded me. Thought i had it in the blizzard of 93. Ha never even came close. Sometimes, i actually think its mocking me. [ engine revs ] what . quattro [ babies crying ] surprise your house was built on an ancient burial ground. [ ghosts moaning ] surprise your car needs a new transmission. [ coyote howls ] how about no more surprises . Now you can get all the online Trading Tools you need without any surprise fees. Its not rocket science. Its just common sense. From td ameritrade. Welcome back to squawk box. The data is out. Durable goods for january are down 5. 2 . This is on the order of expectations, maybe a little bit larger drop. Lets do the takeawaytakeaways. Take away transportation, up 1. 9 . Look at capital goods on the orders side, nondefense aircraft, Capital Spending, this number is very strong, 6. 3 . Thats following down. 3, and several sets of revisions. This is a good aspect of a weak durable goods number. Transportation made a difference because it turned positive when you pulled it out. Headline revisions looked to be 3. 7 and looked to be several revisions. We have new home sales, yesterdays home sales big. I heard you guys this morning. Definite advantages what we saw in terms of financing. And home equities, s ps were more in positive territory. Yields,s. Er, back in the 180s, the low end of a trading range, the real range has been 180 to 2 and back to the low end of it. Back to you. My computer crashed at the critical moment. What is nondefensible goods exaircraft. I have never heard of an increase like that. Since when . I know. Shocking. More than a year. New orders for machinery rose 3. 5 the best gain since 2010. When i came in this morning and calculated as i do. The three months annualized average of Business Investment were talking about, 21 . Somebody help me out. Are we having a major rebound in capital goods investment . No question. This is big. Durable side, housing, autos, unfortunately at the same time that the government is going the other direction and exports are struggling a little bit. Were operating on a different five cylinders than 12 months ago. The private sector is doing better. The consumer is doing a little better and a couple months running businesses are investing more. What happened to the lack of confidence from the sequester and uncertainty in washington and all these things we said on Cable Television in washington. Part of it is the base is so low. Capital spending last year didnt keep up with depreciation. Now, were talking about Capital Spending adding meaningfully to gdp. It will be adding yes for the first time in a while. This changes the debate a little bit. Maybe a lot. The question joe has been harping on whether the government could cut 3 and washington in a tizzy what you cut and economists only care that you cut. If there is offset in the private sector to a point, right, heres what we want to do. We want to do about 2 1 4, 2 1 2 growth. Why do we want to do that . That level brings down unemployment rate. If we get below that the estimates are 750,000 jobs would come from this 3 percentage point decline in Government Spending. If we can do 2 1 2 because the private sector will step up in growth anyway, i think this 3 will be a net good depending how you do that. Am i crazy, dino . Youre not crazy. However, we have had three years running in winter cold months private sector improves and fades into spring. We dont know whether seasonal problems. It has caused concerns of ceos. We had a bunch of three years running, you get into april and numbers seem to slow dow down. Thats why the guidance has been lousy. The ceo of caterpillar said were not going to get too far out. A bunch of bellwethers not send out positive signals. Theyre worried. Theyre worried and not seeing it in the order books. Even the craziest in the darkest hour admit a dollar of Government Spending is not as good as a dollar of private sector spending. Youd have to get to the end of the road to get him to admit that. We do know that otherwise we wouldnt need a private sector. On average, we could have the discussion online. It would be much better. I dont know what a dollar of Government Spending is worth. Anywhere from 1. 07 to 1. 57. Theres different dollars of Government Spending. A dollar of Government Spending given to a poor person is likely to be spent and dollar of tax cut to a wealthy person is a little different. A dollar of Government Spending that i had no idea you would weigh in on this, rick. Im not going to weigh in. Forget it, joe, you will never change his mind. If he was right, europe would be telling us how to fix our economy. You know what, rick, thats the kind of dogmatic ideological, whats the wort im looking for, monolithic thinking. Its a mix. Theres stuff the government does the government needs to do thats good. Theres no Multiplier Effect of government. Im glad you settled the debate raging among economists for years. Just like that, a wave of a hand, no multipliers, go for it. 92 theres never been a debate about that. Really . No debate about a multiplier of Government Spending. Get art laf fert to debate krugman and get five people to carry away why would we do that when theres me and you, rick . Why would we get krugman to debate laffer when theres krugman v leisman. Thats why we have the program we do. Every now and again you do hit a home run, steve. I have to agree with you on that one. Thats unfortunately not enough. 70 cents on the dollar, you want to get away from that stuff. In the near term, Government Spending will detract from gdp. Over the long term getting more private sector involved in the economy especially when you have a competition for funds you dont have now, rick. Theres lots of excess funding out there, lots of money available to lending and Interest Rates very low. Hard to argue theres a reason to bring down Government Spending. There was a miscalculation. They have their econometric models and plug it in and if we do this we will generate liquidity and theyre right but Human Behavior isnt modelled well and piling up. Once again, flawed strategy. Judge, i cant believe you let him call you a harpy. A happy. Said i was harping on it. I harp. You play the harp . Im okay with that. Lets go to mouth harp. Harmoni harmonica. Do you agree with my call you should randomly cut 3 of your hair. You pretended i would have a problem with that and want it done in a surgical way. What about yours . Thats what im talking about. In this economy on the top of my head much less to give than joes head. A flowby cuts it 3 everywhere. Thats a perfect trim because you have it to give. I do. We have a little bit of news. Before we go to break, take a look at shares of coach right now. You will see it moving up markedly in premarket action close to 4 1 2 right now after an unconfirmed report. Let me say it is an unconfirmed report by a trade publication called deal reporter that says the company is exploring a sale. One of the things worth noting, if you were to sell this company at 48. 70 or 10 or whatever premium you want, it is still far from that high for the yearoveryear, looking at a Company Trading close to 81 at one point. Unclear to micoach would want to sell itself at this point in the ballgame. Crazier things have happened and we will keep our eyes to see whats going on with this and see if we can confirm or report that the report is right or wrong. Snoop a report over the weekend suggested the stock was bargain. That was said before. Wednesday, barons, if it had any effect. You look for news. The publication says its exploring a sale of the company. Id be more inclined to think its possible private equity players have come to coach looking at it as a bargain and coach is forced to try to figure out what to do about it. We will see and do reporting on this. Do they make man bags, do you know . I do believe they make man bags and they also make coach leather baseballs. You ever seen those . Yeah, theyre pretty cool. Yeah. Okay. Couldnt get dont get me a man bag, right . A leather fannypack . Yeah. No. Coming up, new home sales jump 16 in january, the highest level in 4 1 2 years. The chief economist of the National Association of Home Builders says the economy wont pick up momentum this year. David crowe will join us next. Hs on their 401 k to hidden fees. Is that what youre looking for, like a hidden fee in your giant mom bag . Maybe i have them. Oh thats right i dont because i rolled my account over to etrade where. Woah. Okay. They dont have hidden fees. Hey fern. The junk drawer . Why would they. Is that my gerbil . You said he moved to a tiny farm. Thats it, im running away. No, no you cant come [ male announcer ] etrade. Less for us. More for you. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. Welcome back, everybody. At this point, futures are flat lining. Red arrows these are barely bulging. Well see whats happening to move investors interest today. We have been watching a lot of Retail Stocks and another out with quarterly reports. Tjx post iing 82 cents a share, roughly in line and a hike in the dividend and 1. 1 2 buy back. Guidance is light. Looking for 6963 cents a share. It is slightly lower. The Housing Market appears to be on the mend but our next guest sifted through the data and says the recent pockets of strength are largely pentup demand, not a bad thing. Why is that a bad thing, david crowe, chief economist of the National Association of Home Builders . Not a bad thing at all. A good thing we are finally seeing people come out and start buying houses after three or four years of waiting. Why does it make it less positive or less relevant or does it . It doesnt make it less relative. By saying were not going to Gain Momentum this year, i mean that we will continue to grow but you cant quite get that spark going until you solve some of the other problems still out there. One of them being its very difficult for buyers to get a mortgage. Another one is that appraisals are often below the actual asking price. Finally, we still do have in some markets competition from foreclosures. Right. Interesting. On the other side, we are seeing theres a lot of investment going into houses at certain places and theres 20, 30 investors lined up for single properties. If you add everything together were much better off than we were a year ago, but youre saying theres some systemic things that need to be addressed . Right. Righ right. Certainly, were much better than a year ago. We increased about 25 , 11 over 12. And im expecting the same percentage increase in 13, continuing to grow but isnt gaining the momentum we usually see in a recovery. We also are starting to face rising prices. Some of that investment furor will dissipate as prices continue to rise and those distress properties arent bargains anymore. Yeah. What do we do . What do we do about making its easier for people to get mortgages . What can we tell the appraisers to do . The National Association of Home Builders has been working on that. Dont use distress sales. There are a sufficient number of arms length consumer to consumer sales, so that they can be used as comparables. Use appraisers that know the local market. Follow some of the prescriptions that are in the appraisal guidelines often not used because basically were looking for cheaper and cheaper provider in that service. Okay. The fed is weve been at zero, qe3, what do we do to make its easier for people to get mortgages . First of all, we need to clarify what some of the regulations are going to be out of the statute. A few of them have come out but we dont know what all of them are going to be. That leaves Mortgage Originators in the dark as to exactly what will be considered a safe mortgage, where can they avoid potential lawsuits afterwards. We need to clarify what were going to do with fannie mae and freddie mac. Right now, thats completely unknown. Will there be one . Will the government participate at all in the Mortgage Market or leave it to the private market . Those things left undetermined will leave enough uncertainty out there that those willing to lend for mortgages charge a premium, if its not in the Interest Rate, its in the higher thresholds. What would your organization do if we decided to end the Interest Rate mortgage deduction . We would fight it to the tooth and nail. We havent at what rate . For everybody or for for theres no level where we could do it . No. I think our members right now believe thats not a way to either save tax money or help cure the Housing Market. But a Million Dollars, 800,000, half a Million Dollars, theres no number . I think there are other ways to address budget deficits without attacking the Tax Advantages to homeownership. Everybody thinks theres a different way to do it. It shouldnt be their constituency thats touched. Thats right. And you think its not your constituency that should be touched, too. If were talking about compromise in washington and everybody putting something in, is it a nonstarter to say homes or mortgages over half a Million Dollars shouldnt have the same taxexempt status. There is a counter to every proposal. If you reduced the cap almost all that pain would come from the high cost market so you would hurt the markets in california and along the east coast and virtually no one else. You can say that about every tax policy out there. You can twist and turn. Is there anywhere you can give or bend anywhere on this . Thats not what our members tell us, no. David, have you studied what happened in canada . Canada has a lot of different policies, not just that they have no mortgage interest deduction, they dont have nearly the taxation at the local level the u. S. Has and they have a process for that being their case a long period of time. Our tax system has allowed this to be in effect since the tax system existed. In the uk they faced it out over a period of 1012 years. Noy yes, they did and now their first time homeownership age is older than it used to be, harder for younger people to get into homes. Do you think there are other areas that should be attacked . What about Charitable Giving . Were not ready to bargain with other sectors of the tax system. David, thank you. Is that another thing the uk does better than us . I brought up the uk. Canada, uk. Canada seems to have some i understand not wanting to hurt the house iing market but you want to get to a position you are talking about a massive overhaul of tax effort. I asked it because you can imagine what the National Association you know what its going to be. That points out how dark there are a lot of constituencies who would not like to see it made purchases like that. If you take massive chunks off the table, you probably wont get to a tax overhaul. You could do it 1020 years. Or grandfather people already in. Im not talking about raising revenue, i want to cut if you overhauling the tax code, thats not raise them and then get rid of them. When we come back, weve got Retail Stocks that are on the move ahead of the opening bell. Well check in with jim cramer at the new york Stock Exchange. Stick around. Tomorrow, Budget Committee chairman paul ryan returns to squawk box. Well ask him about the economy, the fed, and the impact of the automatic sequester cuts. Plus, a flood of retailers set to report. Squawk box starts tomorrow at squawk box starts tomorrow at 6 00 a. M. Eastern. Streamline th . At fidelity, we do it by merging two tools into one. Combining your customized charts with leadingedge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. We like this idea so much that weve applied for a patent. Im colin beck of fidelity investments. Our integrated Technical Analysis is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. This morning. Lets get down to the new york Stock Exchange. Jim cramer joins us now. Jim, you can talk target. Maybe we should talk a little coach. I dont know, faber is sitting right next to you. I would like to hear what he has to say about the rumors going around. From post 9, this is our first anniversary. So im thrilled to be coming to you from there. Congratulations. Thank you. Coach is one of those stocks that it just seems to go down constantly. It is easily rumored up. People will be able to say its louis vuitton. This market has been so crazy, i think someone i think its easy to rumor a stock up or down. I dont put too much credence with it. Target, those comp sales were so bad versus walmart. Dollar tree literally does not disappoint. Therefore, it goes higher. Operating margins going up. People thought they would be down. Its a very mixed picture this morning. What else do you like this morning . Well, Merrill Lynch raises googles value. Bingo, they say googles a lot more than we thought, because of the multiple expansion. I dont like multiple expansion, i like real earnings. Apple, fren et iks won a big judgment in texas, 3 million plus judgment against apple. Im watching that because its a cookie off the radar stock. They also beat microsoft in a similar case. Jim, real quick, do you care about disney . I dont know if you saw that they said theyve got to split igers job. I care about people who make us a lot of money and whose stocks go higher. They should give iger the cfo job and make him treasurer. Like apple, theyre up 6,000 . Ive got 2,000 companies that are down 6,000 . Take a couple of those, right. Jim, thank you. Well see you in a few minutes. When we come back, our guest hosts this hour will give the last on the fed and the market. [ male announcer ] you are a business pro. Executor of efficiency. You can spot an amateur from a mile away. While going shoeless and metalfree in seconds. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. Now this. Will work. [ male announcer ] just like you, business pro. Just like you. Go national. Go like a pro. You name it. Ive hooked it