Transcripts For CNBC Squawk Box 20130301

Good morning and welcome to march. Stocks try to finish the week with a climbing to record highs after, oh, a brief weakness yesterday into the close. The sequester deadline finally arrives with no compromise in sight. Plus, in Corporate News, groupon out. Its ceo and in an unusual cliff, wait until you hear the email that andrew mason sent to employees announcing his own firing. Ill ask ben white if politico got this email, too. Its friday, march 1st, 2013. Squawk box begins right now. Good morning, everybody. Welcome to squawk box here on cnbc. Im becky quick along with joe kernen and Andrew Ross Sorkin. Our guest host this hour is zach carabell. Also ben white who is politico chief economic correspondent. Gentlemen, welcome to both of you. Thank you for getting up early. It is a grait great day to have you both with us. Were talking about the wall street situation and washington. We have stocks and the sequester, the s p coming off its fourth straight month of gains. If you take a look at the markets, highlights over whats been happening as we get ready for the first trading day in march. The dow and the s p 500 rising more than 1 in february. The dow transports, this was an amazing month up by more than . The best performing sectors last month were consumer staples, telecom and industrials. And at this hour as we await to see what happens with the sequester situation, the dow futures are indicated lower. Theyre down by about 17. 5 points. S p futures and the nasdaq are slightly lower, as well. The dow about 20 points within its record high yesterday. Now at some point before midnight, president obama is expected to sign the order that will slash the congressional budget. The house went home for the weekend yesterday. That means theres virtually zero chance of any lastminute deal to avoid cuts. House Budget Committee chairman paul ryan squawk box yesterday. I dont think the president was ever interested in a grand bargain deal. Hes unwilling to publicly put out idea toes save these entitlements from bankruptcy and hes been more focused on campaigning against republicans on these issues. On the other side of the aisle, white house pretty secretary jay carney on todays meeting. There are no preconditions to a meeting like this. Any topic is up for discussion. And in an interview with the wall street journal today, bank of americas Ceo Brian Moynihan says the economy would take off if politicians would just solve the sequestration. We wont see any more. Its sort of over and done. Theres the photoop thats coming up. This is a photoop, theres no chance anything is happening. This is the leadership showing up at the white house. Its over. Two or three more weeks for then something to be hashed out. Yeah. Any furloughs would take 30 to 60 days. Any real impact on peoples lives would take that much time. So the planes are not going fall out of the sky later today because of this. And i think thats the risk to the white house is they cried wolf and nothing big happens. If thats the case, its a problem for them because then republicans say we could cut a lot more and nobody is going to squawk. The stuff that ive read, the seas opened and then one of the actual quotes was actually taken directly from the administration officials. I like this in your paper . Do you know her . I know her, not very well, but i do. Boehners call to stop fiscal halts cheers the gop. Even if youre not way on the right where they say are the people that need to leave the party to come into the 21st century, even if you say theyre gone, the ones clinging to religion and guns, there is a core saying you got what you wanted once. Dont bring it back. I think its the lowest stake for them to go over. Its just 85 billion in cuts. Boehner needed to say im not negotiating with obama and no tax hikes. In the woodward controversy, i was reading what the new yorker says that woodward through an interception or Something Like that. But i did read that initially they say woodward was right on the first account, that the president had, in fact, suggested the sequester. But on the second point he said there werent supposed to be revenues included, that the president said it was always going to be a balanced plan. But that was before the fiscal cliff. You got your balance. Where was the spending cuts on the fiscal cliff deal . Now you say, object, give us something and its like, no, were going back to the point is, obama wants 1. 332 trillion in tax increases. And the inside basis is not woodward at all. The fact that were sitting here on a much domestic day. Its a right column of the New York Times. A nun with the bird is the main toto. Knot, oh, my god, washington is shutting down. Its cliff fatigue. And theres a degree of washington has locked in its own passion play and thats it. But its a fast val on what everyone else is doing. Clearly, at least not what has been what the rhetoric has suggested for the past year. One question on the woodward thing. This is not inside basis. This is Robert Redford played this guy in a movie. A, if i knew i wouldnt tell you and, b, i dont know. Do you think it made sterling look better or i think it made sterling look better. But it looks like what happens every day at the you cant realize where politico got those emails . I think other people in the white house say, look, im having this conversation and somebody else decided, you know what this means . I think its uncouth is sperling is the one sending out the emails. Im not going speculate, but it was with his blessing. And woodward says you never have to apologize . By the way, i thought woodwards answer was great. You did . You didnt sthp. Which answer. You never have to apologize to me. I love a spirited conversation. Yeah. It was fantastic. He went on fox and knocked down some of the others. He went on with glenn beck. Hes a hero to republicans now and to the right wing. Hes probably a hero of yours now. You threw him under the bus so quickly. You love him so much when he hammer i lot of how you personalized this. You started the personalization. I the guy who brought down the Nixon White House and now youre going to enable the dirty tricks in the obama white house. Theres a nice back and tworth between we have to see weather woodward gets audited every year for the past years. Meanwhile, you tried that shiyi. Now its unanimous. I got so many positive emails about this shirt. Oh, bull. Youll be very happy to know that get us thats the front door. I picked up some new shirts yesterday. So you had some you could have worn. Alexander nash. Meanwhile, you and zach are dressing out of the same closet. Its the reason were across the table from one another. In Corporate News, groupon has fired andrew mason as its ceo. Hes known for his atypical sense of humor and i have to tell you, his letter to employees, his departure letters was one of the more amazing departure letters ive ever seen. He writes in part after 4 1 2 intense and wonderful years as ceo of groupon ive decided id like to spend more time with my family. Just kidding. I was fired today. If youre wondering why, you havent been paying attention. He also said says my biggest regrets are the moments that i let a lack of data override my intuition on whats best for our customers. This leadership change gives smu breathing room to break bad habits and deliver sustainable customer happy ps. Dont waste the opportunity. Its amaamazing letter and sease wishes the best for coupon and it is refreshing from what you usually get in these corporate titles. Did he sell much already . No, no, no. Still not so bad. And he has even more controlling shares, right . Yeah. Which i dont know if its a good thing or a bad thing when use you leaving the company. When a founder leaves, do you still want them to have these special schars . The interesting thing, first of all, this would be the first multibillion Dollar Company that went the zero, from zero to round trip to zero. Its been on that trajectory. But, you happen, you read a letter like this, this is nonwall street, nonsilicone Valley Vision for a company. Do you give credit to google for not doing the deal . Do they look like idiots now . Im still thinking back to 210,000. In the past, we have people that started things and got like 50 million and you were disappointed for him that it was not more or who was that . Well, we dont need to say who it was. Hes been a guest hold on our show. Got it. Baseball thats all right. Thats all right. They know who wears the fake rolex in the afternoon now, too. But this guy at 30 on groupon, he was worth 1. 3, 1. 4. So 210,000 is better than any i dont know about that. So you feel good for him or you still wow . No. I feel good for him. 32 years old, i think thats a pretty good group for the 210. He went to college with my wife. What could have been. For her, not for me. Shes beside herself. She left you. Shes not even around. Leonsis, too, right . Yes. We should have ted on the show. Tell us what the heck he is thinking. You know who is else is on the board of that company . Melanie hobson. And you know who else used to be in the company . Howard stults. Before he got one over. You wouldnt to be a director. Not now. Melody, youre talking about . Yes. Yes. The guardian, about the outlines, you said. I think thats what it was. Thats because george lucas didnt make it. Oh, thats right. I forgot about that whole thing. Im with you. Best buy is going to report Quarterly Results today. The New York Times reports the talks between the retailer and founder Richard Schultz have added the whole idea of coffee and flat screens. Ive never understood. Theyve ended discussions about a full takeover by schultz, said to have broken down about a week ago, but recently discussed adding shae to the company. Bestbuy is expected to give an update when it reports Quarterly Earnings and that will come before the bet bell this morning. I happily said this was fake when it started, its fake now and thank god we dont have talk about it any wore. It was so made up. This is commentary. We should be commentary out there. Part of it was journalism, but at the same time, the realistic chance of anything really happening was always, at least in my mind, minor. Best buy has been a grit extensive learning company. They have an awful say and they are a Failing Company because they have an awful business model. A big box model selling electronics that can be bought elsewhere does not have a future that is viable. Although the geek squad, great idea, but if youve ever tried to get those guys to do anything for you on running computers, it doesnt work out that well. And im not sure theres anything you could have done great from their property, thats not working out so well, either. I dont know what they could have done been thats the story of a lot of retail. Lets take a look at the global markets. Kelly evans is standing by the london. Kelly, weve talked about how the month has been a very good one for the dow. It was up by 174 . S p 500 up by better than 1 . What about whats happening today in europe . Starting with china and continuing through europe, the message pretty has been weak. Thats dealing a blow to sentiment. Coming back and making this at least in the u. S. Will be tough to flip back into the green. Generally speaking, the emi held citi steady. The uk came out and is shows surprising declines. The periphery taking it on the chin today, as well. Take a look at the impact we saw on starling in particular. We havent been focused until very recently on sterling. Over here, you can see 1. 5028 so were just 30 basis points away. 30 away from falling below that 1. 50 level. Were already at a 2 1 2 year low. This hats fallen almost 0. 9 after this trading session. After we saw it fall below the 1. 55, is 1. 54 level. There wasnt much to keep it from falling further and thats exactly what were seeing here. The euro dollar is falling below that level. We can flip through and show you the performance of sterling over the past year. Its only down about 4 . Fast forward to what weve seen recently. You can see the sharpness of this selloff. While over in britain, interestingly, to contrast this with america, policymakers still generally top up the weaker pound. Whether its the bank of england or people in parliament, they actually like to talk about how this will spur the economy. But, in fact, all its really done is spur higher import prices robbing consumers or purchasing power. Some weakenness, some concern about the british economy. Today thats dealing a blow to the economy, i would argue more than the sequester. We know the first day of the month often sets the tone for the rest of the month. It could be a weak one. Back to you guys. Kelly, thank you very much. Were watching sterling very closely, but also ben whites glasses because joe is convinced theyre google glasses. And you just said youre watching porn through the whole show. Which was very funny. We are all riveted. Youre making this up as you go along. What is your favorite saying . This is all politico stuff thats coming in and emails are beamed right to my glasses. Youre getting dnc stuff right to the glasses. Excellent. Rnc. How do you click . You blink. And you look in Different Directions to see what you want to click on. The big article is they just cant make them look good. That was a really good article. What . What . Its hard to get them to look like that when youre doing all that stuff. Well, thats true, but they managed it. Well done. Well done. Its friday. Rand and ron paul feud on the left. When we come back, they are hartley household names, but leaders are gathering in istanbul with a unique take on the economy. Hey, becky. Were at the ypo. The average Revenue Per Company here, 2 billion a year. To get a great sense of whats happening in the Global Economy, we have a great guest on after the break. Stay tuned. Well give you some insight on where in the world are things growing right now and where anterior they . Right after this break. Stay tuned. Announcer before you hit the road, here is your travelers check. When it comes to loyalty programs, hotel chains are getting back. Take hilton, for instance. The worldwide change raised award prices by some 9 . Which other programs are cutting back on reward programs. 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. Welcome back pop lets get to the national forecast. Im interested to see how hes going to outdo you oh, man. Yesterday was a lighter gray. Now hes just this is good. Yeah. Looks like james bond. You do. Look at the stance, too. He knows it. Guys, i was thinking about going the direction of the pith helmet and the grass skirt, but decided to keep going with this. Thats something to look forward to next week. Weve got time. Weve got plenty of time. Right now, time to talk about the heavy snowfall were seeing in parts of maine. Maine, believe it or not, had up to a foot of snow in the last 24 hours. Scattered snow showers into the eastern great lakes and into the midwest. Its pretty quiet, but were having the beginning of another storm system thats going to ramp up for parts of the plains. But today, tranquil along the eastern seaboard. Snow showers in chicago. Kansas city had rain early. St. Louis, youre going to deal with the rain, too. Dallas, 56 degrees and is relatively quiet out towards san francisco. L. A. , breezy conditions. That will make it tough for firefighters. Expect scattered showers in seattle. Possibly snowfall in the high elevations outside of missoula. That rain could cause you some backup at the airports. Especially in seattle. But in nashville, a wintry mix as well as in cleveland. Minor delays possible. Back to you guys. Reynolds, thank you and we look forward to that grass skirt next week. Careful. Pith helmet, careful. Peek a boo. Reynolds, well see you next week. The economic recovery on china, whats on the minds of some of the most part frl ceos right now . We are live in istanbul, turkey. Michelle crusoe cabrera is there. Good morning, michelle. And it is a great event, buckeye, because it gives you this wonderful view into what is lapping in the Global Economy from people who are running businesses all over the world that are really granular level. One of those individuals sitting next to me tceo of the eye group. This is a European Based Company that has Investment Funds and also anastasio is greek so he has a shipping company. Great to have you here. Its great to be here. Its sequester day. It is. Is that an issue . It is, but i think the europeans have a time more issues at home. Theres a lot to divert their attention to. So youre saying between the sequester and the italian election hes, the italian election res more impactful . Its closer to home, so yes. Youre greek. Yes. Are you shocked to see the rise of an antiestablishment comedian in history . No, im not. I think it has to do with the people saying austerity is one thing, its good, we need to do it, but we still need growth at the same time. That is i think the message coming out of the italian election. Speaking of growth, where in the world are you seeing . This is like davos and you see the buzz and you instantly know, this part of the world is growing and this part of the world is suffering. Compare this year to last year. Its remarkable. We are looking at companies every day, but what were seeing here compared to singapore is the u. S. And our european counterparts are back. Theres a lot of discussion. Remarkably, below the rate a screen area thats picking up is africa, infrastructure, energy. So for a change, its not just all about asia. Ceos are talking amongst themselves and is looking at the next space. In a way that hasnt been true over the next several years . Absolutely. 100 so. The buzz is there. Youre in the front line. Youre talking to ceos that are leading roughly 10 of the World Economy and theyre there. You said youre looking at the periphery of europe to do deals. That is correct. So basically what were doing is were avoiding countries like the u. S. , france and germany and were looking at Eastern Europe. In our global powers only a couple of months ago, Eastern Europe is the most vibrant areas. The ceos there are looking ahead to groekt. Theyre seeing their numbers to pick up and theyre seeing the potential to grow their businesses and we want to be there. The shipping business, what is it telling but the world right now . The shipping business is telling me on the surface theres a great mismatch between demand and supply. What its telling me is this opportunity and with the Global Economy picking up, i think okay. Theres a little bit of a problem there. Now i believe it is a symbol, because for a while, looking at that room didnt look anything like it could be anywhere. We did lose the satellite feed so its we were thinking paramus, right . It could be anywhere. I think it actually was you know who michelle is going to have later. Tony blair. T. B. Tony blair will be with michelle at 8 40. So she went from rome to istanbul to hang with tony. Does she back to rome . I was thinking its not a business story, but you look at what the network it is a business. Very wealthy. And theres drama to it and the black smoke, the white smoke, you know, all the pomp and circumstance. All the horse race coverage we need in terms of who is up and who is down in terms of the cardinals. And politico, have you seen the brackets, dude . This week, 15. The sweet 15. Were going to and for you, a major tutorial spender. But no, theres some theres new uniformity to it. You see, andrew just recuses himself from any talk about the pope. Why would you recruise yourself . Hes challenging me. Its an arms length. I admire him. The first pope was oh, thats a myth. Ive heard people say jesus was jewish. Come on, lets get real. Lets get real. He does wear a yamaka. When we some thought he was god. When we come back, some more pope jokes, maybe, but facebook lays its attempt to take on google plus. Well talk markets for a man who sees 450 billion, rates more than fivestar questions. Hes going to be with us live from squawk monday morning on omaha with barack obama first, we hoed to a break. Take a look at yesterdays winners and losers. [ male announcer ] how do you engineer a true automotive breakthrough . You give it bold styling, unsurpassed luxury and nearly 1,000 improvements. The redesigned 2013 glk. The next great advance from mercedesbenz. Starting at 37,090. We dont let frequent heartburn come between us and what we love. So if youre one of them people who gets heartburn and then treats day after day. Block the acid with prilosec otc and dont get heartburn in the first place [ male announcer ] one pill each morning. 24 hours. Zero heartburn. Welcome back to squawk box. The dow looks like it would be off after we got close to those fiveyear highs yesterday and we got close to an alltime high on the dow. What did i say . Fiveyear high. Alltime high. Facebook saying its buying Advertising Technology from microsoft. The technology will be measuring the effectiveness of ads on the social networks website. It should help facebook with its fight with google for Online Advertising revenue terms not disclosed and worth mentioning, of course, that microsoft has a stake in facebook and this is part of this strategic battle against big google. It is the first trading day of the month. Markets have been on a tear with the dow still within striking distance of that alltime closing high. Why dont we find out why our next guest is putting money to work right now. Collin moore joins us on set. Columbia management. He oversees roughly 450 billion across more than 54 and fivestart rated funds in the u. S. Alone. The market is having to be very worried about the sequester. You dont seem very worried about it, either. Its death by a thousand cuts. Youve got some good things happening in the economy and then you have the sequester, takes a little bit of it away. In bernankes testimony the other day, there was the discussion about the qualified mortgage rules and maybe that cuts a little bit away. Italy wasnt a big deal in itself, but does that remind people about the european problems . Were worried about how that cumulatively adds up to a problem rather than one cumulative issue itself. There are some good things happening in the economy and that is what underpins it. Yes. I think its going to it stopped progress in the markets. Its going to cause a pause in that i think in january when you took that sort of velocity in the market, people thought all the problems were behind us. Its not that were not making progress. Ive just been reminded recently that some of these big issues are out there. How do you look at Asset Allocation at this point . A lot of people are worried about higher Interest Rates that have come down the road. Weve had naturally low levels for quite an extended period of time. How do you protect against that . Are you worried about it yet . Yeah, were worried about it. You cant have the last 30, 40 years of changes in Interest Rates. Were trying to allocate a little more based on risk profiles rather than trying to maximize returns. I think people are making the mistake of chasing returns, almost jealous that somebody else made 10 and they made 8 . Can we find a way to profile that where you take a level of risk thats acceptable to you and is people are still too generic about investing things like its emerging markets versus the u. S. Poland isnt the same as indonesia. There isnt that generic emerging market approach. So were trying to disaggregate it a lot more into structural areas of change and growth in a lowgrowth world. Like what . How does that development of emerging market consumers is different than investing in emerging markets. Health care in the u. S. Given whats happening with aging populations is different than the growth of health care in emerging markets as people demand more of that. But if you can find those longer term trends, excuse me, then thats really something author exciting than will the u. S. Economy growing at 2. 5 this year . So whats your favorite trend that you think is next in . I think health care is big. Emerging markets and in both. Thats the interesting thing about health care. You know, some of us are getting older. And theres certainly a level of problems that come with that. Thats a european u. S. Issue. If you look at emerging markets so its the first Time Development of that. And not just by investing in emerging markets. Its the companies that will supply that mri machines that they can afford to buy is an interesting sort of twist on that. So i wouldnt just do it in the traditional way. I think youve got to consider risks and desegregate into these trends that are occurring. How do you do that, though . Do you look at stocks that really play into that . Do you find five or ten that you like and go with it . Yeah. I think a lot more of it is that bottom up approach. Maybe talking about ted policy, it has that you know, did rising tide lifted all the boats and weve had that for the last year or so. I think now youre going to have to get a lot more into finding the company, not just on the equities, but in fixed income, as well, through the Corporate Bond markets that actually begin to exploit that. Global infrastructure, a lot of infrastructure is financed through the debt market as well as the equity markets. Were just approaching it by thinking about equities is not going to really get the job done. What is an investor supposed to do when they look around, though . Those are, a, difficult trends to try and predict, and b, very difficult to try and find companies that are the biggest beneficiaries within those trends. Actually, i think the trends are recently easy to predict, but they get popular at times and get overvalued and get undervalued and getting caught up in that. I think the argument that i would make is obviously you dont have to overpay. But if you overpay, you would make that mistake, but into a riegz trend, that can perhaps save you. If you try to invest in a downward trend, i remember a lot of years ago, a big debate about kod kodak. Should we invest in that . If you get the timing of that wrong in a generally declining business, youre going to get left behind. But if you can find those structural growth trends, youre going to get a benefit in the end. In the end, do you see the most growth come from the u. S. Markets or from some of these emerging markets that youre talking about . If i was thinking generically by market and still in the ee emergencying markets, probably not a great brisk expression, but we think of the u. S. As the glue factory. Also, the global you could do meatball kitchen. Keep it current. Sorry. In the uk, theyre all worried about horse meat. Thats where thats come from. But we will do, i think, better than europe and japan, but its still not a great growth story. Our biggest fear is the policy here is being set based on futures and its really a structural change in how the u. S. Will grow. Not that it wont grow. Its just a change in how it will grow. Were getting older. We need to change things a little bit. Collin, thank you very much for coming in today. Youre very welcome. Probably dont want to leave her with the most apparently youre going to get an email from did you see that . No. Youre going to get an email and youll regret taking that off. Our viewers are very good, arent they . Youre watching. Great shot. The jacket you took off, could you put on . Do you think cover up . Are you going to talk about this shirt the whole show . Why paulson and Company Plans to vote against the metro pcs team mobile deal. Plus, hostess confirms buyers for a number of its businesses. Its twinkies next, right . I hope. Did somebody buy it . They were so out until we i hadnt had a twinky in over ten years. And you thought you could die from taking a bite of one. Now the idea that they would be gone and keep questions coming for buffett. When do you leave, sunday . Sunday. Just you . Yeah. No, im not bringing kyle. Youre not bringing its one night. Its too hard for him. Thats starting at 6 00 eastern. Its not what you think. Its a phoenix with 4 wheels. Its a hawk with night vision goggles. Its marching to the beat of a different drum. And where beauty meets brains. Its big ideas with smaller footprints. And knowing theres always more in the world to see. Its the allnew lincoln mkz. No two people have the same financial goals. Pnc works with you to understand yours and help plan for your retirement. Visit a branch or call now for your personal retirement review. Welcome back, everybody. U. S. Equity futures at this hour are indicated lower. Down by about 34 points. Again, this comes after some pretty big gains, not only for the week but also for the month. Dow up by about 1. 4 or 1. 6 . Close to 1. 5 for the month of february. This is the first trading day. Its the first day the sequestration is going to kick in. Right now xhkts seem to be calm. Paulson owns 9. 9 of metro pcs. That makes him the companys largest shareholders. Theres been a number of investors who have come out of the deal of 1. 6 . We will see whether this deal proceeds the pace or whether the terms have to be renegotiated . And bankruptcy hostess confirms that Flowers Foods is the winning bidder for the majority of the bread business. Including wonder. And the price tag, word bread. Another one. We thought years ago that you had to eat. Is that sawdust . Remember all that crap you heard about wonder bread. They have a wonder, like, wheat. Meantime, groupo bembo. Not bimbo. Bimbo is a male in italy. Groupo bimbo was selected as the winning bidder for the assets related to hostesses beef steak business. For 31. 9 million and beef cake would be a beembo. I dont want to go anywhere near that word. Hostis, dolly madison, drakes sweetheart, eddies, and grandma emilys. Ben is debuting these google dlags glasses today and hes looking at a i dont know. I see him looking all around while hes surfing the web. But we got a close up of what hes lets just zoom in. Yeah, yeah, i dont know. Im not loud to look at my well, i guess you are. But its like in the lower righthand side, its where youre able to control where youre surfing and do you think im zooming its not at andrew. But they notice ta because we cant see everything thats going on. In the control room, the director noticed that. The whole show youve been reading email . And it looks like youre participating in the conversation. He did. Thats why hes been distracted at times. Not at all. Im waving my focus on the impact of the markets, which is none. It wasnt on zach. It wasnt on you. Ive been here for an hour and weve talked about it for maybe two seconds. I love the journal. 2. 3 . The republicans are saying, please, mr. President , we will give you a way to target these cuts. And its like the democrats voted that down. It would give him a way to what they wanted to do is now youre talking trojans. Make him do a deal which did not include any revenue and the white house is not going to the cuts are there. Why . Would it kill him to cut 2. 3 of the budget . It would be difficult for him with his base. The world is going to end, he says, based on these. Why not do it so the world doesnt end . Do it so you dont furlough air Traffic Controllers . Do i have to worry about this on sunday . None of this stuff happens right away. Paul ryan is right, hes still campaigning. Nothing big happens, we dont have any disaster, theyre going to look like they crawled wolf. Its going to be very bad for them and good for the republicans. The republicans will say, look, we can do this. Its a tiny 2 cut. The air Traffic Control person said well be just fine. He said, actually, we look forward to the furloughs. Really . I kid you not. I think most people are prepared for the show. And i hope that is the risk. You know, youve got a year in your second term and you hopefully arent you know, its something. He wants to do gun control, he wants to do immigration reform. If we go a big blow upover this and theres not the big consequences and his credibility is reduced, that makes the rest of the legislative agenda difficult to push through. Sequester, stocks and much more. Stick around, squawk will be right back. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, Global Economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. The last word from ben white and zack. You expecting new highs, and then pushing through and going even further . Based on some of the commentary, even in this hour, you have a world where United States, europe, japan, are varying levels of slow to stagnant to zero growth or even some tracking. Youve got an emerging world thats incredibly vibrant, and you have a climate where Companies Really are the only kind of innovative dynamic horse going along that is tapping into that world. So i think stocks, in my view, are rising and markets are doing well, because they are tapped in to that asset for this global system thats doing well. Its not because the fed is printing money. Its not because theres just like liquidity finding little bubbles and pockets. There may be inefficiencies there. Were moving into the future where the world, the middle class grows. We have a lot of things to sell to the middle class, and vast numbers of the companies that trade every single day, tap into one formula or another. Well groupon. We paid our dues in terms of multiple contractions. Yeah, we talk about this, because its a good news for a financial channel the dow hitting alltime highs. But the fact is, were still 35 below the nasdaq in 2000, 13 years on. We are barely back to the highs that were reached five years, six years ago. Weve got a lot of activity in the markets without getting giddy about this. Its not been a oh, my god the last 11, 12 years. You want to use your remaining time to show your email in case the white house has any other emails theyd like to send out . Theyve been sending some emails to you. So people know how to reach him. Ben white. Bwhite politico. Com. All right. Did you want to talk about sequestration at all . We can in reference to whether the market can do well under, you know, losing a half a point or a point. What are we going to lose . 0. 6. And thats the big question. I mean the question is, does the sequester hit and do markets ever react to it . Is there fallout from this . If there isnt were not going to get rid of sequestration. The housing rebound can take care of 0. 6. And some of those other positive tailwinds seem like we can counteract. Although more growth would be a good thing. Might cause people to think there would be more growth. Doesnt look like theres a consumer freakout fthis. You look at Consumer Confidence numbers. Theyre not tanking. Staying pretty solid. If that continues to be the case i dont see a reason why the market would necessarily sell off at any point during the sequester, which means maybe we get more cuts when the continuing resolution funding the government. Ben smith is different, right . Ben smith is a different person, he works for a Different Company called buzz sprup he was at politico. He was at politico. Youre ben white. Thats right. Thats what they tell me. For the past hour. Mike allen. What is mike allen . Something in the mornings. Weve got to run. Thank you both of you gentlemen. Coming up, vulture in the house. Wilbur ross. 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. 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 pull out the paper and what . Another article that says investors could lose tens of thousands of dollars in hidden fees on their 401 k s . seriously . Seriously. You dont believe it . Search it. 401 k hidden fees. Then go to etrade and roll over your old 401 k s to a new etrade retirement account. We have every type of retirement account. None of them charge annual fees and all of them offer low cost investments. Why . Because were not your typical wall street firm thats why. So you keep more of your money. Etrade. Less for us. More for you. Good morning and welcome back to squawk box here on cnbc, im Andrew Ross Sorkin along with becky quick and joe kernen. Here are your morning headlines. At some point before midnight tonight president obama is expected to sign the order that will slash 85 billion from the federal budget. Congressional leaders will head to the white house today for a lastminute meeting but the house went home for the weekend yesterday, so that means theres virtually zero chance that any lastminute deal to avoid cuts, house Budget Committee chairman paul ryan spoke to us here on squawk yesterday about the situation. I really dont think the president was ever interested in what i call the grand bargain or a big budget deal to deal with these entitlements. Hes unwilling to publicly put out ideas to save these entitlements from bankruptcy and hes been more focused on campaigning against republicans on these issues. In an interview with the wall street journal today, an article worth taking a look at, bank of americas Ceo Brian Moynihan says the economy would take off if politicians could just solve the sequestration. Either way the markets have not paid much attention to todays event. The s p coming off its fourth straight month of gains. Lets recap the Market Highlights for a moment as we get ready for the first day of trading here in march. The dow and s p both rising more than 1 in february. The dow transport nothing more than 3 . The best performing sectors last month, consumer staples, telecoms, and industrials. Take a look at futures this morning and see how the market is setting up. Not well, actually, at the moment. Dow looks like it would open off about 30 points, the s p 500 off about six points. Also, shares of herbalife jumping after the nutritionist Skin Care Products Company Announced it will increase the size of its board of directors. The catch is that these two representatives who will be chosen by activist investor carl icahn. That will increase the board to 11 members. Icahn can increase an existing stake of 13. 6 to as much as 25 of the company. He has previously suggested he might push the company to go private. Though the 25 ownership cap makes that option less likely. So, shares of herbalife did jump on this news yesterday. Right now you can see they closed yesterday up by about 7. 6 . Probably heard by now that groupon fired its founder and ceo andrew mason. Shift at the top of the company is effective immediately. Executive chairman and vice chairman were appointed to the office of chief executive while the Company Searches for a replacement. Groupon stock rose nearly 4 in after hours after having a rough session for some wild earnings. You like the letter where he says i want to spend more time with my family. Just kidding, i was fired, right . Because you always read that. Its just refreshing. Refreshing the amount of candor in the situation. Not to mention that he wishes groupon very well. Hes still a huge owner of the company. And says that i deserve to get fired. Really, he went through the metrics and said, like i really screwed this up. But then he says like the equivalent of playing some video game for the first time and making it up to the 11th level or something. But still as the founder it was my idea, im, you know if youre wondering why i was fired you havent been paying attention. From controversial metrics in our s1 for Material Weakness to two quarters and missing our own estimate and stock price hovering about one quarter of our listing price events of the past year and a half speak for themselves. I thought that was honest, good hes 32 . 23 years old. Who knows what hes going to do from here on out. You got 210 million to play with. You dont need to do much. No, but he could use that to do a lot more, i think. Reinvent. Who knows. He could reinvent who thinks of this . This was originally started via a charitable website that had nothing too do with what it ultimately became. Totally different thing. I mean look at you. A book, a movie, a book, and now and becky as well. You decided to focus on me. Which youre making me feel better than ben white who was staring at me. Well, someone has to make sure that youre focused. Ben was not. He was not staring no, he was not. You didnt see like we would do anyway. Lets see. Does that look ah you were in there . The whole time . No. Thats fake. Weve got two new ghost hosts, raring and ready to go. The market marched to new highs, is the story. The fundamentals behind the rally, is it real for the byproduct of investors starting to move out of the bond market, and fixed income and other investments. Were examining that question this morning with our guest host, cohost rebecca patterson, managing director and chief Investment Officer at bessemer trust, and ed, quantitative management Portfolio Manager and our guest we also have whos not going to be with us for that long so we want to focus maybe on wilbur to start with. Wilbur ross, chairman and ceo of w. L. Ross and company. Good morning to everyone. Hey, wilbur, we sort of assumed that we were seeing some move out of fixed income, and that was responsible for the new highs in the equities or the new fiveyear highs. But then we hear from other people that we really havent begun to see that, phil gross and others said thats not what happened. I hope its not. Because i hope we have that to look forward to as the rally picks up steam. Well, i think its a little bit of both. I think a lot of the Corporate News has been coming through okay. Stocks arent all that expensive. People are feeling even with italy that perhaps the european thing is gradually getting safe and the market clearly is not paying allot of attention to sequestration. So i dont see great huge clouds over it nearterm. What do you make of you always have some insights, wilbur. What do you make of the whole saga of this sequestration . Once again its hard to talk about it without talking about getting down into the mud of partisan politics. But, kind of fun to watch, isnt it . Watching the these two sides not sure how its going to be taken by the public, and trying to stake out the high ground. Well, whats sad is that they seem to be more in to trying to figure out who to get blamed than they do trying to figure out how to make it have the least effect on the economy. I was astonished to hear the goaround yesterday where the republicans were prepared to give the president flexibility in how to implement this, and he, in effect, said we dont want the flexibility. I want it to hurt. Right. Its because if theres no revenue it would be the journal attributes it to that it would be saying yeah, we can cut 2. 3 and im not even going to admit we can cut 2. 3 . I want to show people that we can cut 2. 3 and the world wont end. I think we should pass a new law that requires us to do with iowa euphemisms. I think we should call taxes taxes. I think we should call them not revenues but taxes. I think we shouldnt call cuts things that still lead to higher budget than before. I think we need a grammatical yeah, youre right. Because theyre not cuts. Youre right. Its slowing growth in spending. Let me ask rebecca, i mean, do you, have you done anything with your you on how the economy fares if given sequestration . Well, i mean, i think the market right now is assuming that at some point later this year were going to get some revamp of it. Either it will be reduced or pushed back or reshaped somehow so it will hurt in a different way, maybe less. I do worry a little bit about that because i dont know that thats a given. Im certainly not being complacent about sequestration. At the same time it does look like theres enough momentum behind housing that the increase to gdp this year from housing, maybe half a percentage point, can offset the hit from sequestration. Maybe not exactly, so, at the margin, where does that leave us . Subtrend growth and a fed thats still very nervous and easy. Do you look at 2. 3 of Government Spending as something that the economy needs to not take a hit . I dont think its going to be that big a deal. It is clearly a headwind so the expectation why isnt it a tailwind if we have a trillion dollar deficit, were borrowing almost out of it to subsidize, why isnt it a positive that we can cut you reduce Government Spending you reduce gdp to some degree. Just math. But spending is not worth a dollar of private spending, isnt it having a federal approach than a sequestration. Trying to get to that but he wont take it. Both sides are arguing about it. So i think the reality is underlying strength of the economy is actually getting better. So the first half is going to be a struggle because we have the tailwind already, the headwind already, taxes weve already had, and sequestration. But i think the progress in the housing market, employment is steady, i think youll start to see more traction. Okay, let me ask you. You said its the meat ax that you dont like. So if you could do it in a surgical way with waste and things that needed to be done would you do it just with cuts or would you demand, as grover likes to say, would you demand revenue . Just look at it from a Research Point of view. Maybe say about twothirds from cuts, and a third from for even the sequester . We just raised taxes. The sequester is already old news i would suggest. Now the next question is can we have some kind of sensible policy that really is a grand bargain . That both sides can live with that reduced the government in a way that makes sense, that reduced entitlements in a way that makes sense, and in some cases, taxes are raised again. I think were getting less likely were not cutting on this, i dont think anybody is counting on it. It was a pipe dream, wilbur to think simpson and bowles would ever happen but the way i recall we were going to trade in these loophole getting rid of the deductions and all these these things that were talking about now, we were going to do that as we tried to lower marginal rates. Now weve already raised marginal rates and now were bringing them in. Thats why people look at it and cant really understand how thats, you know, how thats part of simpsonbowles or part of keeping your side of the bargain on what were going to do to try and get things in order. We raised the marginal rates and now were getting rid of all the things we were going to trade to lower imagine nal rates. I can see why were getting further and further apart and thats where ashley whats her face wrote this thing in the New York Times. Boehner sooner or later is just going to, you know, and hes going to have support from the rank and file to say were going to stand pat on this and the rest of us are going to suffer. No . Wilbur . Well, i dont think were going to suffer all that much. And i think theres a very easy, private sector solution to the little hit that were taking from the cuts. And that would be there are 16 applications pending, natural gas export terminals that the president would let those go through, let keystone go through, it had plenty of capital spending, and plenty of job growth that would more than offset this whole business about the sequestration. Wouldnt take one penny of federal revenue, federal contribution. And, in fact, it would produce some taxes. So, i think theres a very simple private sector solution to getting the economy moving more rapidly. I dont see that i think thats a great point. I mean, it takes tells us that we need to look away from just the politics and keep looking at the big picture. If china had some unsettling data last night but if china can do better, the second biggest economy in the world. Japan looks like it has momen m momentum. Europe, well see what goes on with italy. The rest of the world is at least less bad. Its stabilizing. Gives the u. S. A lot more cushion to deal with some fiscal tightening and get through this. This is a gdp revision we got in the u. S. This week one of the biggest lifts to it was trade, right . And we need a weak dollar and we need the rest of the world doing less badly. Better is too strong a word. And that can help us, too. Wilbur, just in closing, what country are you looking in to right now . Is it here . Is it abroad . And what sectors do you think, regardless of what happens . Weve been looking a lot more at greece. I met with the Prime Minister and a number of his ministers a couple weeks ago, im very impressed with him, and the reforms that hes putting in. Hes put all new people running the cabinet, the finance minister, the deputy finance minister came from private sector accounting. Theyre doing a very interesting experiment to get tax compliance. Theyve hired 1,000 forensic accountants who are now going to be comparing peoples Bank Remittances to their tax return, and seeing whether or not theyre consistent. Wilbur, youre looking at greece. Would you look at italy, too, with the selloff in the markets there . Or, is italy less stable to you right now than greece . I think italy may be less stable politically than greece right now. I met with even the opposition party, and they werent talking about leaving the eurozone back to the drachma. In italy, my worry is you have the choice betweenwo clown, one an acknowledged clown and one maybe an inadvertent clown and until that gets resolved theres a great danger that the nice reforms that mr. Monti put in will just get rolled back. Wilbur, did did you put an addition on your house behind you on the right there . Is that what when did that i dont recall that last time. What is that . Boca beach oh its a boca beach thats not your house. No, im trying to off set defense spending. Yeah, hes the house is on the left. And thats okay. Beach towers. Good view of what goes on in your backyard, wilbur. Be careful, buddy. Good to see you. Thank you. Hes offsetting the sequester basically. He could do it. Up next, the dow approaching an alltime closing high. Were going to head to chicago to hear what traders are going to be watching this morning. As we head to a break, take a quick look at a stock to watch. Gas, which reported ernst after the bell. 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[ male announcer ] get a 4 week trial plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. Welcome back, everybody. Stocks reversing early gains in the final minutes much trading yesterday getting within 16 points of an alltime high. The s p 500 logging its fourth straight month in positive territory, and all other averages actually finishing higher for the month. Joining us right now from the cme in chicago is the founder of tra traders dotcom. If you look at january and february, pretty strong start for the year. You think this sort of trend can continue. I dont know that it does in the shortterm, becky. I mean im really not participating in the last couple of days of up moves. I dont like the price action yesterday. I dont like the way the dollar index has been behaving. Ive been looking for a correction since the middle of february, beginning of february, somewhere in the around of 1463 to 1478 to give the markets some pause and get some more volume in there. Get some of these buyers in the initial move that didnt believe the rally from january. But the last couple of times the dollar index has spent any time above 81, 82 weve had pretty significant s p declines from about april to august of 2010, and then about may through august of 2012, again, double digit declines in the s p when the dollar index is up there. Essentially what that means is the fed is printing but were losing that race to the bottom as the dollar strengthens, and just doesnt bode well for stocks, gold, or anything in the shortterm. I agree completely with you. Normally if you see a stronger dollar that reflects money coming back to tbills and out of stocks. This is more of a euro story than a dollar story . The euro has been weakening because people are now starting to think the ecb might cut Interest Rates at its meeting. I believe its next week. So the dollar index is heavily influenced by the Euro Dollar Exchange rate. If thats whats driving this it might not be a flight to the dollar, just a flight out of euros. Do you think that could be going on. I think it absolutely is. I dont disagree with that at all. But i still think thats going to take 25 to 30 of the long volume out of the s p. You know, the rally that weve seen in january has been a light to medium volume rally. The high volume days of the last six or seven days in the s ps have been selloffs. Thats been confirming to me that a correction is imminent. I still believe 2013 is going to be an us an up equity year in the u. S. I think high single digits, low double digits by the end of 2013. But i think thats probably going to take hold again somewhere in the start of the Third Quarter and rally in toward the end of the year. I think the rest of this year is going to be on shaky ground for the longs, lower volume on the upside, higher volume on the downside. Again the less we can base somewhere around that 1478 area, only because i think its needed. You see these low volume rallies. Weve seen them before. They tend to correct. Then they pick up some steam with volume, i think that could happen. Just dont think it happens in the next couple of weeks. All right. Bob, thank you. Have a great weekend, okay . Thank you, you too. Coming up, john harwood is going to have some explaining to do, not only about the sequester but about duke. Were going to speak to him in just a bit. Up next, how much would you pay, i would pay a lot for this, i think, to cut your wait time at the airport . A new service being rolled out by united. The details are next. I wonder what happens if the sequester makes that work better or worse. Anyway, getting ready for your final trading day of the week. Also sequester day. 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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. Also, United Airlines has a way to cut the time that it takes to get through the airport but it will cost you. The Worlds Largest airline offers something it calls premiere access for a minimum 9. Customers can purchase access to expedited checkin at security checkpoint lines, along with priority boarding. United says that it will limit the number of people who can purchase the benefit to ensure its elite flyers dont get held up because of all the other people who are trying to crowd through those doors. And i know youre skeptical. Im a million mile flyer. All those Early Morning flights to chicago, the International Flights overnight, i want to keep those lines short for me and my fellow frequent flyers. How do they limit it . Where is the cutoff . If andrew and i are in line together does he get it and i dont and then we have a big fight and air rage . If you dont have it, nine bucks to get it seems like a great deal. If you already have it keep the riffraff out of your way, right . Yeah, right. Other airlines have this same thing . For nine bucks southwest do something the end of the they already offer a faster this is just the way the airlines are going. You have to sell anything. Also means all the programs are a little less loyal little less valuable. Comments, questions about anything you see here on squawk, including getting through the airline lines, email us squawk cnbc. Com. Follow us on twitter squawkcnbc is the handle. When we return today is the day. At some point the president will sign the order to slash 85 billion sad again . Im always sad. John harwood is going to join us after the break to discuss. Also just pointing us out, the euro just fell below 1. 30, too. And dont forget a very special monday on squawk, we have the one and only Warren Buffett, email us askwarren or askwarren. Well be right back. 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. Welcome back to squawk box. Bertelsmann is buying out kkr and bmg. The Purchase Price is reportedly between 700 million and 800 Million Euros including debt. Bmg manages the rights to more than 1 million songs including works by artists bruno mars, johnny cash and will. I. Am. And bank of america confirms the new York Attorney general is investigating the bank of its purchase securitization and underwriting of home loan. The third known bank to be targeted by the attorney general over how banks bundled loans during the housing boom. Also the pentagon has cleared f35 fighter jets to resume flight operations. The jets were grounded a week ago after a crack was discovered in an engine of the test plane. Joe . Thanks, beck. Virginias 16th consecutive home victory came with style and paul jones arena was rocking as the cavs knocked off number three duke 7368. Junior guard joe harris had a career high 36 points, an interesting nugget. The last time virginia beat a top five team was 11 years ago to the day and the team back then was duke, also. And it was only a couple of weeks after maryland beat duke so i dont understand the whole number three thing. Lets bring in john harwood now. Right now were going to talk sequester, we did that for you. I know you did. How do you feel about miami, tomorrow . I mean you must be scared yes, i am scared. Thats the test for us. Look, virginia, theyre good. Joe harris is really good. So, you know were just back were lost on the road but the most important thing psychologically for our team is being able to compete with miami on our home floor, and then next week hopefully we get ryan kelly back. Were good but were not great. Were back to where on any given night, depending on who is at home and that makes the brackets so difficult to oh, yes. Which makes that there was a kid who is on the the autistic kid who did the entire bracket got every single one right. How that could happen is almost you know that happened a couple years ago which is just beyond belief. Never happened to me. No, its difficult. Heres what i want to talk about, john, hopefully you read the wall street journal, the lead editorial today, because i want you to make the change dont you threaten me, joe. Dont you threaten me. Because theres some i want you to make the case to me that it makes sense that okay the republicans are saying heres a surgical scalpel. Well allow well give you a way to do this so that its less harmful so you can do less harm. And the president is saying i will veto anything you do because theres no tax increases. Number one, can you really make the case for that, that thats an honorable, and a good thing to do . And then number two, i got here, youre probably going to say that the journal is just that this is an untruth, mr. Woodwards sin was to report that the sequester was mr. Obamas idea, number one, in 2011, and that the terms did not include a tax increase. At the time. You would just say thats felacious, i guess . No. Its irrelevant, though. No but what theyre saying is that the what happens when someone actually points out, when woodward a beltway person actually points out mr. Obama, president obamas habit of dissembling about what he wants committed to they get thrown woodward is thrown under the bus by his biggest fans on the left. No. Okay explain to me how im wrong. Well, the reason youre wrong or theyre wrong. Is that we had a titanic clash over the budget and the debt limit in 2011. The two sides have big, sincere disagreements on that. The sequester was the way to bring that to a conclusion. Lets assume that the administration put it forward. It was agreed to by both parties. The Congress Passed it. The president signed it. Everybody owns it. Yes, it included no tax increases. Of course. We know that. We knew that from day one. But we also knew from day one that the president was going to try to replace it with a different mix. Hes not been able to succeed in that. No, but that was before that was before he got his tax increase with the fiscal cliff, john. He got it there. He got what he wanted there only half of what he wanted he got a tax increase joe but not a tax increase that was adequate to what he considered necessary. So wasnt weve got is still going on and thats why on the other point, on easing the sequester, the president is resisting that because he sees it as counterproductive to the longterm battle that he had with republicans, which is 2. 3 of the budget, to not show its almost like he he just will not show that its possible wont show the American People its possible to cut 2. 3 without doing any harm. Which makes and with a trillion dollar deficit, the idea that we cant even just cut just slow the growth of government after weve grown 18 in four years part of it no joe, thats also wrong. Why . Its wrong because everybody agrees, and republicans agree with this, too. That they have focused on a narrow slice of the budget and pretty much reached the end of the road, not entirely, but pretty much the end of the road. The ish sue what to do about entitlement growth. I know. That is their theres different come to an agreement on which includes both taxes and some cuts. The 4 trillion we were trying to do with simpsonbowles, the reason you got away with the writeoffs and deductions and loopholes was so you could lower the marginal rate. You werent supposed to raise it first and then get rid of all of that. Thats not what simpsonbowles decided to do. But hold on a second. On simpsonbowles, when they talk about getting the rate down to 28 . Right. Theyre talking about eliminating loopholes on a scale that no republican is proposing. Right . So i dont know how you do it. In theory, everybodys got to give, a lot of sacred cows would have to be sacrificed. Thats true. But the other thing, john by the way, joe, did you read the emails . Do you get that my threats to people dont begin with, i apologize for raising my voice . No, no, no. I think the whole thing is funny. John, who do you think i think its the white house. You kidding me . It wasnt one word because it made them look bad. Right, exactly. The other thing i heard yesterday, were trying to get to 4 trillion. Thats the grand bargain. Yeah. A lot of people are saying were at almost three. I saw some numbers because thats including the trillion for obama care which is not going to cover obama care. Studies show its probably going to be twice as expensive. With the sequester were at only 1. 2 trillion out of that four. I dont get your math. I will send that to you from someone who is in a position to know, too. So whats your number, 2. 6 or something . Something like that. But look, im not like wedded to any particular number. It doesnt matter. We do have a problem. Were borrowing all this money from china to fund all of this and its not fair to our children. No argument from me, pal. The whole question is how you resolve it and you have a very fundamental split with republicans who believe in a much Smaller Government than democrats do, want to do it by spending cuts alone, and democrats want to preserve government in roughly the shape that its in, and that requires more taxes. And until one side shows that they can take the ball to the hoop and dunk it on the other, were going to have this standoff. And its, i dont know when thats going to be. I dont think its going to be by the end of march madness. Joe, we will not get 2. 5 trillion. At best it will be 1. 2 trillion. If sequester holds and 620 billion in new taxes come in, because you cant consider the 1 trillion dollar increase from obama care, because already we know its going to cost twice as much, that cant be used as deficit if thats your assumption, sure you can come up with a different number. Well we got a lot of work to do still. The intransigence on both sides is boehner, he is so dug in and i think hes getting rewarded for being dug in, that the revenue issue is off the table. At this point look a republican member of Congress Told me the other day if john boehner pushes a deal with a second tax increase hes gone. Hell get fired as speaker. Thats senator johnson said that, too. Yeah. All right. Well more importantly, at 6 30 tomorrow night or 6 00 or 6 30 tomorrow night. Is it in duke, is it its at cameron. What is your forecast for that . Im going to go with get my expectations in the right place. Im going to go with duke for that tomorrow. Thats how miami get beat by an average team you know who had a good night last night . Howard matheson. Oh, yeah for virginia. And hes also got a big night coming up. Because hes going to be a coanchor of the new npr. I saw suze was that a segway or what . That was you know what i call that . Symphony which is what were trying for here. I am excited. I love npr and the idea that its going to be cnbc, too, is great. All right, john. What about the pope . You hear what were calling that, right . What . The sweet cyst even because theres 16 guys brackets for whos going to be the new pope did you come up with that . No, i dont come up with anything. Was that on the interweb somewhere . All the different popes. Some from africa. The sweet sistine. I thought we had a contender. Yeah, could have been a contender. I dont know. Okay. You want to take it away. Im being told to take it away. All right. Coming up next we ask our guest hosts whats working now. Stock ideas and areas of the market that you should be investing in. Monday weve got Warren Buffett live from 6 00 to 9 00 eastern time. In his first interview after releasing his annual letter to shareholders. It comes out tomorrow morning or this afternoon after the after the market. After the market today. Buffett will be answering not only your questions from us but our viewers, as well. Email us with some questions or you can tweet us, include the askwarren. We will try to have the oracle of omaha answer as many as we can. Cant catch squawk box on television . With just a few key strokes away. Find the show online and on mobile. Our twitter handle squawkcnbc. Like us on facebook. And visit our show page walk. Cnbc. Com. [ indistinct shouting ] [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. [ construction sounds ] [ watch ticking ] [ engine revs ] come in. Got the coffee. That was fast. Were outta here. [ engine revs ] looking at futures, down 49 points now, as we pull back from some people say if we dont do it that it would be a disappointment. That we got so close. We got within its so close. So far away. And i keep seeing it, a fresh alltime high. Isnt an alltime high an alltime high . I agree. I decent see why you need an adjective. Is it a smelling alltime high . A rotten . An old . Its just an alltime high. Its redundant. It is. And thats the exact same thing im trying to say right now. Okay, well, the dow has joe was just saying trading near an alltime high, fresh alltime high. You do this for your benefit. I know you were. Where investors supposed to look for value in the next big opportunity . Rebeccas here, as is ed. Weve talked to both of you about what is working, or whats we know whats not working for the most part. Ed, youre mr. Merging markets. Is there anything working . Emerging markets to debt is working better than emerging markets to equity. Interest rates around the world actually rotating within fixed income what kind of yield are we talking . Depends on the quality youre looking at. But youre getting 200, 300 basis point spread to Higher Quality instruments from established markets, and in a world where people are searching for wreeld what markets do you like . Well we work with broad asset classes. So were not buying countrys debt were buying across the whole emerging markets. Our fixed income guys pick 9 instruments and thats done pretty well. The other thing is were a kwaunt shop. Its really worked well the last couple years. So were more quantitative disciplined approach to investing is actually working pretty well the last couple years. Youre not a quant. Im just quant enough. Whats working in your mind these days . I think small and midcap has been doing relatively well on the equity side. Id agree with emerging markets. We have equity exposure and debt exposure and the volatility the debt tends to outperform the equity. Im not the one picking the exact bonds were buying but in terms of countries i think interesting he mexico has been one of my favorites. The fundamentals in mexico, whether youre looking at the current account, the budget deficit, debt makes the u. S. Looks like the third world. And the government has a long way to go in terms of reform, but theyre making some progress. And so you get a 4. 5 yield on the short end. So big yield pickup, better fundamentals. And i think theres a lot of opportunity. Thats just one but theres a lot of opportunities like that out there. Mexico looks like it could get put on upgrade watch this year which would attract a new flow of capital. On the equity side, youre talking about whether well be fresh alltime highs, joe . Yes. I mean one the nice things about being on the buy side is i dont have to put out a number forecast anymore. God im so happy about that. Because its very, very hard to get that right. But i do think over the course of this year we are going to see higher stock markets. And i think part of that has to do in the u. S. Especially with the fed, if the fed stays on the qe track which i think it will, youre getting a bigger yield, all in field from stocks than bonds, which is an anomaly. Right now if you look at share buybacks and dividends the cash return to shareholders, 3. 7 . Stocks above 5 . Normally its the other way around. So, from that perspective alone, people staying in cash saying maybe its time to go back a little bit. I think theyre more likely to go into stocks or put money into both at a minimum. To the extent that you all believe that at some point the fed is going to have to shut the spigot off, how many months in advance or even a year or two in advance, that the market will 6. 4 months. No, no. The reason i ask the question is because you said you said were in for the next year. Yeah. And then theres this making im sorry. Very briefly, i think the feds gotten smarter about this. They realize they have to jaw bone. They dont want the market to say here forever because they dont want to see covenant light issue bubbles coming back so theyre going to verbally intervene to remind us that they will take the punch bowl away. The actual punch bowl i think is going to be there for awhile. They just want to get the market a little more two sided. The other thing, if you actually looked at the relation between fed policy and the stock market over long periods of time, it isnt just as tightened the market is down and loosen as the market goes up. What wellry matters is whats happening to the underlying economy. When the fed eventually goes back to a more normal policy as they will and they must, we want them to because we want the economy to be more normal, that isnt necessarily the end of the world or the end of the round. What will be tricky is making the transition. Thats not going to be easy to do. If they can successfully do that if the economy continues to grow, inflation, i think well be fine, even if the fed does start to tighten. I feel like i know a little bit more about whats working. Thats good. You guys are going to be sticking around for a little bit. Also in the next hour we have david walker and the taxes ranger whos going to be joining us. Everything from the economy to budget cuts. Theres not much he wont talk about. Well get into sequestration whether it matters and what happens with the continuing resolution when did washington actually get things in order. And then former uk Prime Minister tony blair will be joining Michelle Carusocabrera from the Global Economy to the european debt crisis. He will tell us what needs to be done to start 9 recovery overseas. Revolutionizing an industry can be a tough act to follow, 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. Lets look at you know, this is you know the name of the song is forest whitaker. Who had his own issues recently at a at a place in new york, shoplifting, which he wasnt. Anyway Darden Restaurants downgraded from neutral to buy. Ubs affirms higher bonus payments to employees and the margin impact of increased value oriented promotions, target has been cut to 47 from 52 by ubs. Gap is reporting Fourth Quarter with 73 cents, two cents above expectations. And the company had talked about 70 to 71 cents so that was above their internal guidance, as well. And then sales force. Com, Fourth Quarter was 51 cents a share versus an estimate of 40 cents. Revenue was 834 and that was also above expectations, and the guidance goes to 40 to 42 cents which is slightly below. And do you remember either of you, andrew, crm, i think they need to change the symbol. Blackberry is finally called blackberry. Not called rim anymore. Nobody even knows some people know they do i know what it means but i dont know what it actually stands for. What does the c stand for . I dont know. Customer. Customer Resource Management or something . Relations managementment so its software that allows you to never mind. Yeah. Anyway, all right. So we have some final comments. Ed, youve been, i dont know you really never change much over the years. I do change from time to time. Well i am bullish by nature. Bullish by nature. And nothing to change that in your mind at this point right now. And you think the dow will hit, will finally after all these years, not just in 2007, when it hit the alltime high, it barely exceeded the previous alltime high that weve been waiting around for for 10, 12, 13 years. This time, are we in the start of a double from 12,000 eventually . I think were in the beginning of a bull market. Were going to be complacent. Theres still a lot of things that could go wrong. But i do think one of the most important things for investors to understand is what kind of environment youre in. I think were in a bull market. I think it will last for awhile. The recovery from financial crisis, and the horrible downturn, and the global markets, i think that has legs and were going to start to see a little bit of improvement in some of the slack of the u. S. And the Global Economy put to work, second half of this year and into next year. In fact, why shouldnt i dont like when my dollars are worth less. I see what happens to other countries when they cant get their way out of debt, they just, you know, they cant get austerity so they cut the purchasing power of the entire population in half and say hey, youre doing fine. Youve got the same amount of drachmas. I think its more emotional than it is real for financial markets. If you live in the United States, and you spend most of your money in the United States, you shouldnt care what your dollar is worth overseas. If youre a global person and you have homes in spain and italy, and you know, and jeevs is flying you around the place then you care more. Im not, im not. I didnt say your name. But, but so expectations the risk is if the dollar if the dollar falls so much it starts creating inflation fear then the weak dollar is a problem for our economy. Other than that you like it for mtving. I like it for exports i like it for manufacturing. Grovers plan about energy and energy is going to change dramatically. If we dont mess it up. Tremendous opportunity. Thank you, guys. Appreciate it very much. Coming up david walker founder and ceo of the comeback america initiati initiative. Hes going to talk sequester and beyond and then former uk Prime Minister tony blair. Monday on squawk box, the oracle of omaha live for three hours. Answering your questions. Markets, the economy, and where Warren Buffett is putting money to work for investors. Email your questions to ask warren at cnbc. Com or you can tweet us squawkcnbc is our handle. Askwarren. Always an event and never disappointing. Its our annual ask warren show and it all starts monday at 6 00. Stamps. Com is the best. I dont have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps. Com you can print real u. S. Postage for all your letters and packages. I have exactly the amount of postage i need, the instant i need it. Can you print only stamps . No. First class. Priority mail. Certified. International. And the mail man picks it up. I dont leave the shop anymore. [ male announcer ] get a 4 week trial plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. The sequester is on. Deep cuts in defense and furlough programs will begin to kick in as the deadline to reach a deficit deal expires. Who is sequestering who . Im pretty sure i had a sequester lance up my leg last month. How will sequestration affect equestrian . Is it effective to call someone a sequester even if they possibly deserve it . No. Well ask david walker how soon well feel the impact. The dow and s p up 1 in february but still shy of record highs. Will government uncertainty halt the rally or will the bulls find room to run . All that plus a cnbc exclusive with former uk Prime Minister tony blair. The third hour of squawk box starts right now. Welcome back, everybody. Best buy is just out with its earnings. The company came in with an adjusted number of 1. 64 a share. Street had been looking for earnings of 1. 54. Of course without the adjusted numbers when youre looking at this it was a loss. But these are better than expected results, and the company is pointing that out in its commentary, too. Talked about how they were able to do all of this. These better than expected results. They also increased their adjusted free cash flow. Reached 1960 million for the year as they aggressively reduced inventories and focused on working capital and cash flow management. To reach these better than expected results they renewed momentum in the domestic business that more than offset continued softness in international business. The stock at this point is still trading down by about two cents. Trading a little lower in the last few seconds. Well see how people continue to read this. They talk about Fourth Quarter domestic Comp Store Sales up 0. 9 . Thats the bright spot in your quarter, remember increase of 0. 9 , overall ten basis point decline in the gross profit rate. Sounds like they had to offer a lot of sales. They do say domestic online revenue increased by 11 , and they talked about a lot of different categories, including increasing trading in higher Customer Engagement but obviously somebody still has some work to do at this point the stock is trading up. Among the other top stories were going to be watching today, u. S. Equities, the dow pulling back slightly yesterday, but still within striking distance of its alltime fresh closing high. The dow and s p both rising more than 1 in february. The dow transports jumping more than 3 . U. S. Equity futures at this hour, not the best way to start off the day. That will give you february in front of us but red arrows across the board. Dow looks like it comes off about 58 points. And overseas in asia, youre seeing things down slightly, shanghai composite off just marginally. And in europe, we have some red arrows, the cac down 1. 4 . Back in the u. S. , the big news, of course, the sequester is on. Sometime today president obama is expected to sign the order that will slash 85 billion from the federal budget. Congressional leaders are heading to the white house for a lastminute meeting but that isnt likely to be much more than a photoop. The house went home for the weekend so the odds of a lastminute deal are virtually nil. In Corporate News this morning, groupon has fired andrew mason as its ceo in a very candid letter to its employees mason admitted he failed in his role as a leader and he writes in part one of the best letters youll ever read about 4. 5 intense and wonderful years as ceo of groupon i decided id like to spend more time with my family. Just kidding i was fired today. If youre wondering why, you havent been paying attention. Shares of groupon rose in afterhours trading following news of masons firing. Its up almost 5 in premarket. All right. February was a strong month for equities. But will sequestration cuts derail the rally . Joining us right now is Abby Joseph Cohen Goldman Sachs senior u. S. Investment strategist and a member of the prestigious bar rons roundtable. Weve been watching this rally, a lot of people trying to figure out if its real. What do you think . I do think that this rally is real because its supported at the end of the day by improving fundamentals in the u. S. Economy, and very importantly valuation. Equities at 14 times earnings are just not expensive. But we are concerned as are many others about the shortterm outlook we do think that the sequestration process and the fact that our congress and government is having difficulty coming up with a more sensible or thoughtful approach is problematic. Lets not forget there are issues in some other nations as well. The picture in europe, for example, remains troubling, and that, of course, afflicts the United States through weaker than expected exports. Lets talk about that valuation. Are they fairly valued, still can cheap . We think that equities are inexpensive. You can always find a valuation model to prove what you want to prove. We think the most important models are the ones such as discounted cash flow, dividend discount and the ones that look at more factor, return on equity pricetobook. Our model suggests that fair value is 1575 and other models including the fed model that show fair value as high as 1700 or 1750. On the s p 500. So were just Getting Started . That could very well be. But lets not expect a straight shot upwards. The other thing to keep in mind is the longerterm perspective. The first time we were at roughly these levels on the s p 500, the p e ratio was double what it is right now. So another way of saying that earnings have doubled during this period of time, and of course, since the last time rather the first time we were at these levels on the stock market, the economy itself has grown 65 . So valuations are dramatically better than they were then. What do you think about from a technical perspective . We keep getting to the point where were almost hitting new highs, and yesterday within less than 20 points for the dow hitting a new high. How important is that . Im not a Technical Analyst so im not really the right person to answer this question. We believe that on the intermediate and longterm basis, which is what most investors should be focusing on, you really need to look at the fundamentals and the valuation, and they remain in good condition. Other people can talk about the impact of flows and so on. Our general sense is that there is a lot of cash on the sidelines. Does it mean it has to come in this week or this month . That cash has been out there for awhile. Its in the form of investor reserves, its also in the form of company reserves. Very strong balance sheets. Lots of cash. That could come in to the market in the form of merger and acquisition activity, and continued share repurchases, and dividend increases. Waiting for fixed income to switch to equities, its been i dont know, longer, ten years weve been waiting. But recently weve been waiting like its happening. And then you see bernanke, and hes so, i dont know, he makes the case so much that this is going to continue for a long time. That it almost seems to me like it may not really get going for much longer than were thinking. We think its going to be imminent. If its not imminent, doesnt that hold back gains in the stock market . Because you really are not looking for an alternative as much as you would be if bonds were falling. There are really several issues that you raise. First of all, we do believe that it will be a long time before the fed assertively raises shortterm Interest Rates. But that doesnt mean that the intermediate long yields cant rise in the interim. You can apply valuation techniques to fixed income the way you can to equity. Different models, of course. And there are very few approaches that suggest that Interest Rates, intermediate and longs, are where they should be. Most everyone believes that the equilibrium level will be somewhat higher. Point number one, the fed could keep those short rates low for a long time as our Economics Team expects. But intear made atand longs could begin to shift somewhat higher. The second very important point here is that equities can perform well in almost any environment given the valuation level. Now let me hesitate here and stop for a moment and explain what i mean. Right now equities benefit from low Interest Rates because they help stimulate the economy, Economic Growth from what it otherwise would have been but professional investors also look at the mathematics evaluation and some people say well what happens to equity valuation when Interest Rates begin to rise . All of the things being equal, equity valuation looks less comfortable. However, it would take a dramatic and sudden upward shift in Interest Rates for there to be a real problem. And, in fact, every bull market typically has an extended period of time in which Interest Rates are rising gradually, and equities do extremely well. Because that rise in Interest Rates is the flip side of the coin that says that the economy and profits are also doing well. Well, it sounds like a lot of things are setting up for something that could be, you know, that ive been waiting for, you know. You watch what happened in 1982 to 2000 and you think its never going to happen again. And the buy and hold mantra is dead. No, people dont even adhere to that. We have a generation of people in the workforce that dont think you make money when you put money in the stock market. And some day that maybe thats going to change. That just i hope i live to see it. I dont know. I think we all will, and what i worry about is there are so many investors having been hurt in the equity market, that believe that fixed income is a safe place to be. Well, it depends upon the level of Interest Rates. Bonds may be safe but theyre particularly attractive when yields are high and heading down. Even if it takes a long time for Interest Rates to rise from these levels, we dont see them going lower from this point, and equities, we believe, in the United States, and most other developed markets, are, in fact, the better assets. And abby, where in the u. S. Market in particular do you think investors should be focused . Are there specific sectors that you think the valuations are more attractive or just better risk return . Our teams certainly do think that the focus should be on those sectors that benefit from ongoing Economic Growth. Right now, domestic Economic Activity is looking much better than global. But we recognize that u. S. Multinational companies such as the ones in the s p 500 are effective not just by advocate gdp around the world, but they have significant market share, value added goods and services, so they have done a very good job navigating a difficult global environment. So the bottom line for us is, wed be looking for those securities and those companies where there is an economic sensitivity. We dont see recession returning in the United States. We think this is going to be a longlasting economic expansion, and we think that over the next 6 to 12 months well start to see things look better in europe elsewhere. Asia is already beginning to look better. If i can follow up real quick, what would make you change your view . Is there one catalyst in particular that keeps you up at night that you say gosh, i really hope this doesnt happen . Well there are several different views that weve expressed thus far but i think one thing that were all focused on, and you guys have done a great job focusing on this, as well, has to do with government policy. What were all looking for is thoughtful government policy, and policy that investors and Business Leaders know how to run their businesses on. Abby youre expecting rates to rise over time, the tenyear is under 2 . How long do you think it will take to get to say, 3 . There are other people at Goldman Sachs who do those forecasts. And so what we are advising people is to prepare now. It shouldnt be one day you flip the switch. But rather, making a gradual adjustment in Asset Allocation, again we would be shifting out of longer fixed income in particular into equity and equity light investments, those things that benefit when Economic Growth continues. Abby, thank you very much for joining us today. Pleasure. We need to get where abby cant leave her house. Remember in the heady days and i dont know. Maybe some day. Be good for everybody. Rising stock prices. Rising wealth effect. Rising right . Trillions. Coming up the sequester. Will take effect. But how long will lawmakers allow it to continue. Former u. S. Comptroller general david walker will join us next. Bottom of the hour dont miss our cnbc exclusive interview with former uk Prime Minister tony blair. Were going to ask him about the impact of uncertainty, and the Global Economic recovery, maybe the moodys downgrade of the uk. As we head to break, take a look at the best performing s p effecters in the month of february. Stamps. Com is the best. I dont have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps. Com you can print real u. S. Postage for all your letters and packages. I have exactly the amount of postage i need, the instant i need it. Can you print only stamps . No. First class. Priority mail. Certified. International. And the mail man picks it up. I dont leave the shop anymore. [ male announcer ] get a 4 week trial plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. But we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box everyone. We told you about best buy coming out with earnings just about 15 minutes ago. The company also saying, though, releasing a statement that says the deadline has passed without an offer from founder richard schulze, something weve known and been expecting. The Company Confirming that. You do see that stock trading up by about 6. 5 . Thats largely because of the earnings that came in better than expected. 1. 64 versus the 1. 54 the street had been looking for. They also talked about comps that were a little better than had been expected. Joe . Some guy says i use the f word. I say were talking trillions. And he said i said its blanking trillions. 21 years, im going to say that . I said were talking were talking trillions. If the market slshs you may not enunciate clearly. If i ever decide to say that word, you will know. And youll remember. Washington trying to reach a compromise on deficit reduction in time to avoid the automatic spending cuts known as the sequester. Joining us david walker, founder, ceo and president of thecom back america initiative, also former comptroller general of the United States. I wish you were here you got to come in and you got to be here for a long time. But just, we havent talked to you in awhile. Sequester, hell, what do you make of all this, david . Its more of the same. Its frustrating and disappointing. Well, youve got the slogan rise above. Our political system has sunk to a new low. Lets call this what it is. The sequester is due to a failure of the president , the senate, and the house to reach a reasoned and reasonable approach to deal with deficit reduction. It needs to happen. It will continue to happen. Unless and until there is a bigger deal thats agreed to that will involve mandatory spending, more intelligent Discretionary Spending reductions and comprehensive tax reform that will generate more revenues. Believe it or not, the first meeting between the president and congressional leaders is this morning. And the house is not in session these people arent working fulltime. Its time to get serious, no deal, no break, dotnet. So is this a footnote though thats our website. Nodeal nobreak. Net. The sequester is a footnote to our bigger issues, right, david . I mean shouldnt the president take them up on some surgical cuts and not just be so sub storn about if theres not a tax increase he wont even consider them. Look if im a chief executive i want to get all the discretion i can get. I would like to be able to have more discretion to be able to decide how to take these cuts. How should we take that . Shouldnt someone call him out on that . Well, i just did. The fact is the president needs to be able to have more discretion. The governors need to have more discretion. This is an example of how people are looking at this politically rather than governing. Dont you think theyre going to get that discretion in the next couple of weeks . Right now the president says he will veto it. He should not veto Something Like that. Basically its people dont want to have their fingers on having to make the tough choices on where to allocate the cuts. Thats a political issue. Were now into the governing time. Its time to get serious. I think we also have to realize were not dealing with the three drivers of our structural deficits. Were not dealing with the need kor comprehensive tax reform. Youve got to deal with those in order to be able to put our finances in order. And its time to do it. Heres the question, david. The question is, if youre playing politics, which we all know they are playing politics, which, you know, is upsetting as it is, how do you make how do you make this politically palatable. Youve come on this show for so long and made the argument to an audience that i think gets the joke and agrees with most of the things you say, and yet, frankly, all very sensible things, and yet nobody in washington wants to do it. Heres what ive recommended to the white house, and to congressional leaders, they immediate to take a page out of president bill clintons book, 1998. They need to take a page of what we at the Comeback America Initiative did on our 10 million tour. We need to have three to five represent town hall forums involving the president or the Vice President and congressional leaders like clinton did in 1998, with electronic confidential balloting with people like myself and others who dont have plans named after them, who know the facts, who know the options, and listen to the American People. They can handle the truth. Theyre willing to accept tough choices. Theyre way ahead of the politicians. And then to bring the media together on the facts of the truth and the tough choices so that we can get a reasoned and reasonable solution this year. Thats what we need to do. We need more president ial leadership. We need that forum, and we need we the people to put pressure on our politicians to make tough choices and to kick them out if they continue to fail to do their job. But, david, do you think that the people are going to put the pressure . I mean the polls suggest people are okay with some tax increases and some spending cuts. But the same time we do see less ticket splitting. People are voting for the same party for congress and president. Were seeing more selfselection, people live in neighborhoods where people think and act like them. And thats part of the reason were seeing this polarization. So, have the people also been part of the problem to a degree . And then if thats the case, will they put pressure for compromise . Two things, one, 97 of a Representative Group of voters think that putting our finances in order should be a top priority. 85 believe that its more spending reductions and revenue increases but you need both. And minimum, 77 support for a range of reforms, in defense and taxes. So the people are there. The political system is broken. We have a republic that is not representative of or responsive to the public. We need redistricting reform. We need integrative local primaries. We need Campaign Finance reform. We need lobbying reform. And we need term limits. But we dont have time to do all of those right now. We need to have a game plan that will achieve that, some of which can be done at the state level, some of which will require constitutional amendments. But yes the political reforms are critical to restoring a better future. All right, david. You got to really say what you mean next time and well give you even more time. I love to come in. Come on in. We see you on some of our sister stations over on morning joe and you got the same story, and i just one of these days someone is going to listen. Anyway, thanks. Thank you. All right. Coming up, personal income and spending numbers hitting the tape at 8 30 a. M. Eastern. Forecasters expect personal income to drop 2. 5 after rising more than 2. 5 the previous months. Were coming right back. 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. announcer at scottrade, our clto make their money do more. Re ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Ranked highest in Customer Loyalty for brokerage and investment companies. Still to come this morning, breaking data on the consumer. Were just minutes away from personal income spending numbers for january. Steve liesman is going heres right here offset. We have more on best buys quarterly numbers. [ kitt ] 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 . Welcome back to squawk box this morning. Were just seconds away from personal income and spending numbers for january. Sick santelli standing by at the economy in chicago. And Steve Liesman in the studio. Rick, were about two seconds away. The numbers, please, sir. And the survey says january personal income fell more than expected. Down 3. 6 . No revision. Our last look. We were expecting about 2. 5 lower. Lets look at the internals. We look at just the spending, its actually right on target. Up 0. 2. Last month was split in half. Up 0. 2 in december. Its now up 0. 1. The deflator, unchanged. Thats on a month over month on a year over year up 1. 2. You know, i can go through the rest of the internals. Nothing jumps out at me. Lets look at this for what it is. Everybody, you know, especially at the fed, i would think, wants to see the spending. Id rather see the income. But income down, spending up a bit as expected. I guess whats most note worthy today isnt necessarily this data, although interesting. Its whats going on in the Foreign Exchange markets. And believe me, when you have Central Banks doing things, whether you like them or not, it gets difficult with thumb of the scale. Where you do see the Interest Rate differential in fullblown trade, really is in the currencies. So whether its a triple dip recession in the uk after bad data, boy theyre really plummeting, 1. 50 handle. Under 1. 30 in the euro. And it seems kind of ironic that the end right now basically unchanged is about the strongest currency against the dollar today. Back to you. For more on the data lets get to steve, crunch the numbers here. So, the big mishere, everybody was expecting the 2. 5 decline. I think the reason is because you had that surge in dividends, and to an extent now incomes in the prior at the end of the year, people try to get ahead of the tax increases that everybody knew were coming. And then you have the falloff in january. But the big miss here is in wages and salaries. There was an expectation youd have a half a point increase and turn into a 0. 6 decline and i have to just sit here and guess that maybe they were a lot of bonuses paid ahead of december, more than anticipated. And that that came off im not sure where were in an environment of declining wage and salaries. I know were not in an environment of surging wage and salaries. Consumption up 0. 2 . The expectation is given the payroll tax increases that number comes down and maybe even sharply in february. Thats one of the big debates out there right now. And then the savings right, of course, plunged to 2. 4 from 6. 4. I think you may have to probably average the data is the best way to think about this. I wouldnt take this as the calamity but i would sort of say, you know, im going to put a footnote next to that wage and salary number and make sure that that number holds up because its critical to the outlook for spending going down the road feeling bad as we do sometimes. Can i just ask you about this thing about private versus Government Spending. And been thinking about it. Ive been thinking about it. The notion that you are correct, or at least i agree with you qualitatively that you do want more private sector than Government Back to yesterdays conversation . Just this morning he mentioned it again. Because the government is out there spending doesnt mean that the private sector cannot be out there spending. I know. Preclude each other, and if you look there have been studies that have said that the public spending can crowd out can but are we in that that isnt even what im saying. What are you saying . By definition, if its at all possible, i like to leave capital to go to work in the private sector. Because i just dont think its wasted but the government is not extracting capital from the private sector to make to do its spending. Im not saying its a zero sum game. Im saying when you are able to cut spending at the government that i would be i feel better about not spending in than the effect that cutting it has on the velocity of money so the benefits of cutting outweigh the cost. I think were way before where we should be. What i think is happening right now, republicans are arguing the level and democrats are arguing the change. What happened is you have this spike up in spending, 08 and 09, you have that stimulus bill come through, which, by the way, was not that stimulative compared to other theres spending, and and and revenue right there. Huge plunge in revenues surge in spending 08, 09 and thats what the republicans are saying theyre looking at the blue bars saying you brought the level up and the blue bars to the right of 09 thats whats happened to spending in the prior three years. Democrats say what are you doing . You essentially brought things down to a very low level, but the republicans say you havent brought it down from the level that you ratcheted it up to. Then this is the chart that i think is really interesting. This is Government Spending including government federal and local spending after each recession. Right. So what you come up with, the blue bar is a year after. So, the recent recovery were in line with prior recoveries. But the green bar is two years out. And the orange bar is three years out which says to you that on net you have not had the kind of government stimulus to the economy two and three years out that youve had in prior recoveries. Thats the feds whole excuse for being in. Because they fiscally bernanke argues that youre going to get 1. 5 points of gdp subtraction this year because of all the difference fiscal tightness. And thats okay. And theres whats happened, joe, to federal spending as a percent of gdp. Reached a high. And now its on the way down. And i guess the argument were having is the slope of the decline. But its not back all the way. No, its not. If theres an argument that government should spend more in times of distress to carry people through but it doesnt mean it should be expanded indefinitely. Theres a time where you have to pull back down. It is coming down and how quickly we get there. Part of it is natural, becky. And another part of the spending is natural because you have had 10,000 baby boomers retiring every day. So thats going to be part of it. And i think what dave walker said is right. We can fund the sequester. Its laughable in the sense that were not dealing with the entitlements, the medicare and the stuff thats really taking money from the government. And now im done. Okay. Thank you. Thank you for inviting me back. Rick you were very quiet. Everything es okay . You know what, joe . Joe three years ago, four years ago the debate on the floor was only in government could a cut in the rate of growth and spending actually be called a spending cut. Its nice everybodys in the same chapter today. Just trying level versus change. If this is the best we can do its the best weve got. We just want to match up revenue with spending. Right. And were going to borrow people that are hacking in to our trying to shut down our grid borrowing all you know giving them money to do all this. Then what are they going to do . Anyway coming up, were going to dig through best buys Quarterly Results because this is coming. Buy some bottled water. Results. And still to come cnbc exclusive with the former Prime Minister of the united kingdom, tony blair. Jump into the fall with him. [ male announcer ] this is karen and jeremiah. They dont know it yet, but theyre gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married, theyll find some retirement people who are paid on salary, not commission. Theyll get straightforward guidance and be able to focus on other things, like each other, which isnt rocket science. Its just common sense. From td ameritrade. Welcome back to squawk box best buy reporting Quarterly Results earlier this hour. Joining us now break down the numbers is michael lazaro, hard line analyst at ubs. Michael i guess that we still have hardline retail analysts, i mean, best buys whole business model, can we just talk about whether does it have a chance going into the future . It does have a chance going into the future. I think a lot of the issues that have been talked about have been overstated. Theres a lot of different factors that are weighing on bests buy. What they show in the Fourth Quarter was that they put forth a good first step in whats going to be a very long transformation process from a new Management Team that seems ave it understand where the problems are. I have, michael, gone to apple. And whenever i need anything, theyre amazing. In those stores like they have their own version of sort of the geek squad but it works. I dont think best buy really, wasnt managed properly. That could work. Couldnt service combined with selling something then you could differentiate it from ordering it on amazon if you would help with, you know, the, you know the whole experience of buying electronics. But they never got that down, did they . I think its taken them awhile to figure out what they want to be and how to transform into the future of retail. Youre totally right that services are going to be a key element of the shopping experience, and the future. In fact in the Fourth Quarter they showed that their Service Business in the domestic segment was up 6 . But again, thats a good first step. I think what were going to see from best buy over the long term is an evolution where their stores become a focal point to launch their Online Business and really have a true omni channel offering for consumers. What were also going to see and you bring up apple which is a good point, but you know, theres a possibility that apple wont drocontrol the universe i perpetuity and thats going to play well for best buy. I want to go for the deal for a second or the nondeal. A did you ever think it was going to happen . And b is there any chance that either it comes back or somebody else shows up in another form in the next 12 months . No. Theres no chance. I never thought it was going to come through. Because, what Financing Partner is going to give up, is going to commit capital but yet give up economic and managerial control to, you know, arguably a person who saw a business erode under his watch. And even with the best intentions, its a really tough proposition for Financing Partner. I think the challenge here is that, the founders still own 20 of the company and theres a chance that hes not going to walk to stick around without managerial or economic control. And in which case thats right. And so, it could be disorderly if it happens all at once but it could be kind of a perpetual pressure on the stock. You dont think it turns into the pipe that you find from investors to sell it off to . Its a big pipe. And you know i think theres a lot of uncertainty here. And its unlikely that will be the case. Okay. All right, great michael thank you. Now you will you you just found out about this stuff will you send that off to dealbook and theyll put all that its already there. It is already there, right . I mean is there a conflict with you from my mouth i know. Actually from the screen squawk box 100 of your best do we get your best stuff here or does somebody go to dealbook or the column . 120 . Okay. You believe him . I do. All right. Because you got a lot going on. I mean this was a dealbook story today. It was. Symphony. Except we dont own any of it. You also loan me and dont forget that. Lets get down to the new york stock exchange. Jim cramer joins us right now. And jim hes at thestreet. Com. What do you think of the prospects of best buy . Is this a retail format that can survive . Yes. I like the last quarter which was perfect. And they extend the erosion. Theres room for one hard goods player. I think you guys had a great discussion, they get the cost down, theres still a place that you need this. By the way, i think the hidden story is that its a housing comeback. As more household formation, as more house is bought best buy does better. I dont want to write these off at all. I think people wrote them off prematurely. Some of the other moves in the markets, futures have been weakening. Euro was trading below 1. 30. Gold was down 10 earlier back up about 6 now. Whats really moving things today . Oil, i think, looks interesting. Looks like it could break below 90. Maybe break the hammer lock that it has had on the american consumer. This endlessly rising gasoline price. I think people are looking at a strong dollar, everythings bad from it. If we could get oil down it would be a major spur to the consumer. That would be good news. Actually helpful. I mean, isnt it amazing yesterday at this time we were talking about going to a high and today its like oh, my, everything is so horrible. Weve got to get away from the bipolar nature of the argument. Jim, we have heard more people kind of echoing your thoughts about the market today. That its a strong market and its there not just because of the fed, because you really see some things happening in the economy. Ive been surprised by how many people have echoed that. I know its been something youve been saying for awhile. Seems to be a message thats picking up traction. The profits have been amazing. People keep acting as if the top line wasnt that good. Top line was okay. Bottom line was better for most companies. You always have to come back to Something Like the gap stores. A lot of people were betting against gap. Believe it or not the chart looked bad. I absolutely loved that moment where abby cohen said im not a chartist. Its incredible how many people are. Gap delivered. Salesforce. Com. Looked like it was rolling over and it absolutely delivers. I want you to get negative listen to liesman. Guess everythings pretty bad. The fed takes away the socalled punch bowl. Look, i dont care about the fed if companies are making a fortune. It just doesnt fit into my world. Jim, you can tell people more about that world view in just a few minutes. Thank you. When we come back we are just a few minutes away from a cnbc exclusive with former uk Prime Minister tony blair. Stick around, squawk will be right back. Monday, a squawk box fan favorite, back by popular demand. Its your chance to ask Warren Buffett questions about his investments, and the broader markets. Three hours with the oracle of omaha. Starting at 6 00 a. M. Eastern. Send your questions to askwarren cnbc. Com or tweet us with the askwarren. S to generate income . 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Is investigating the company and ceo audrey mclyndon. The company says it was advised in december that an informal inquiry was continuing as an investigation. The investigators are looking into controversial programs. Our exclusive interview with former uk Prime Minister tony blair. And make sure you also tune in on monday. Warren buffett is going to be our special guest at 6 00 a. M. Eastern time. 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. We are waiting for former uk Prime Minister tony blair. Heres the bad news. Hes stuck in traffic. The worst news is hes stuck in traffic in istanbul. We dont know if hell make it or not. We hope he does. In the meantime, we get back to our guest hosts, rebecca and ed to get the last word going. You dont know this. I dont know if you saw the show yesterday. You were talking about the uk and how it should be a model for the world. Maybe a model in what not to do. You told me that the uk you mentioned some specific things. Im talking about the food, dental work no, no, no, you were making some financial no, you were saying they split the chairman and ceo positions over there. We say we do plenty of stuff over here that, im not looking to the uk for a primer on anything. Especially she has a primer for you. I think its what not to do. We got the coalition uk government a few years ago that put together an incredible deficit reduction package. But then they didnt carry through on it. Part of it you could argue it wasnt their fault, europe was dragging down their economy. But they didnt follow through. But when they did put out that package, it was backloaded, but it was credible enough and detailed enough that they got takeoff ratings watch, and markets rallied. Five years later, europe dragged them down. The uk cant extricate itself from the rest of europe. Whether it likes it or not, its part of europe. Great news, traffic got good. Ceos are gathering in istanbul. Michelle carusocabrera, you have him set up for 8 50. Istanbul, i think its glad hes here at all, michelle. I know. I agree with you completely, joe. Hes cool as a cucumber. We dragged him on the stage and he grabbed the mike. Here he is, former Prime Minister of the united kingdom, tony blair, joining us. Good to have you here. Thank you. Lets get right to it. John kerry, secretary of state, in rome, to meet with the friends of syria. The u. S. Has decided theyre going to provide nonlethal aid to the Syrian Rebels. Is the United States making a mistake . Should the u. S. And should the International Community be arming the Syrian Rebels . I think what secretary kerry has done is right. I think it indicates a shift, a step forward. And i welcome that. I think weve got to do what we can to help the Syrian Opposition. I think the question of whether you arm them, you know, theyre going to keep that issue under review. What it indicates is a desire to step up the support for the Syrian Opposition and try to bring this ghastly conflict thats now, i think about 70,000 people have died in it, try to bring it to an end. Get a new government, new constitution for syria. The rebels are deeply unhappy with the decision. They think that the war is prolonged due to a lack of arms being supplied by the United States. Theres a case for it, ive said it before. I think weve got to keep looking at it. But i dont think we should underestimate for secretary kerry, and the u. S. Government to step forward. People obviously worry if they put arms in syria, who gets hold of those arms, and to what end are they used. At the same time i think theres a genuine desire to help the Syrian Opposition in order that they can defend themselves against the scuds being fired on villages and the atrocities being committed by the assad government. The uk recently downgraded in its credit rating. If youre david cameron, what do you do at this point . I dont think that in the end affects the economic policies. All countries are trying to cut their deficits. How do they cut the deficit without destroying the prospects for growth. That is a the uk government has put austerity at the forefront of its programs. I think this is really a right wrong judgment, right left judgment. We have to reduce our deficit that keeps our growth rates up. That obviously impacts on our deficit, a