Transcripts For CNBC Squawk Box 20130313

Good morning. The dow posting another record close but just barely. The s p suffers its first losing session of the month. A deluge of Economic Data and well get import prices and business inventories. Its wednesday, march 13th, 2013. Squawk box begins right now. Good morning, everybody. Welcome to squawk box here on cnbc. Im becky quick along with Andrew Ross Sorkin. Joe kernen is enjoying time off. Were joined by Halftime Report scott wapner. Welcome back, mr. Big. Lets start with markets. If you are a fan of numbers, today is your lucky day. We have all kinds of statistics to share on the recent rally as andrew mentioned the dow eked out a gain in the final minutes of trading yesterday. That means the dow has now closed at a record high for a sixth straight day. Blue chips index now up eight Straight Days. That has only happened eight times in the last 12 years. Every one of those times in the last 12 years the streak was broken after eight days. The dow will seek the nineday winning streak in 16 years. The dow has now risen nine straight tuesdays on top of that. That rivals its current streak of ten straight friday gains. If you look at it, we knew fridays were good days because every day in 2013 the dow has climbed every friday in 2013 when it didnt realize nine straight tuesdays now. If you look at just tuesdays and fridays and you look at those days together, they have made an overwhelming 87 of the dows gains this year. The s p snapped its sevenday winning streak yesterday. If you want a bullish start, the s p material sector has risen for 11 consecutive days tying its record streak set back in 2009 back in july of 2009. The nasdaq suffered the biggest drop in two weeks. Apple was a stock under pressure yesterday. Again, not a massive decline but the biggest drop theyve seen in a while as stocks around the globe have been moving up for about seven or eight days at this point. U. S. Equities future this morning are indicated i wouldnt call this weaker at this point. S p futures are down by less than a point. Dow futures down by five points and again anything could happen as we get into the trading day. We do have retail sales coming out. An important number for the market to watch. In asia overnight, nikkei off by 0. 6 . Shanghai composite down by 1 and in early trading in europe today you can see that there are some red arrows. Biggest losses coming in london where the ftse 100 is off by threequarters of a percent. Modest declines looking at france and germany. At 8 30 retail sales and import prices. Expecting a rise of 0. 6 of 1 . Same number is seen when you strip out autos. Later in the day, Pay Attention to business inventories at 10 00 eastern and update on the federal budget in the afternoon. Were tracking oil prices. The weekly supply report will be released today. Last week it said the nations supply of crude was more than 10 above year earlier levels. Oil production is at the highest level since the late 90s. Analysts expect todays numbers to show ample inventories. Despite those predictions, oil prices have been up for five straight trading sessions and thats where they sit right now. Lets get a check on broader markets this morning and look at the tenyear yield. Its sitting there still above 2 . 201. A look at the dollar today. A look at the dollar yen climbing back a bit from that 3. 5 monyear low versus the doll. Pound sterling just under 1. 50. Look at gold. Still below 1,600 an ounce. A twoweek high for gold. Very nice. Lets talk Washington News this morning. Today president obama is going to meet with house gop leaders on capitol hill. House Speaker John Boehner then expected to hold a News Conference at 1 30 eastern time. House Budget Committee chairman paul ryan outlined had his partys plans on the kudlow report last night. Hopefully we get a down payment on the problem. We balance the budget and pay off the debt in our budget. What we hope and what we think the republican majority is good for, if anything, is to get a down payment on the problem. Balancing the budget is not an end of itself. Its an means to the end. We want to revival upper mobility and growth in this economy. Senate democrats are going to release their own spending plan after calling the republican proposal unacceptable. It will call for about 1 trillion in new revenues by closing tax loopholes and about 1 trillion in spending cuts at the same time but no structural changes to medicare and the question is will that get do either of these plans get anybody anywhere or is everyone talking to themselves . Theyre talking to themselves. We discussed it yesterday. In the last negotiations you still have the fact there are republicans who think that the republicans gave too much and then there are democrats who think that the democrats didnt get enough. So you have those clashing interests. I think what happened in january kind of derailed everything because by having these incremental advances instead of a grand bargain throws off the possibility that you do get the grand bargain. You see both sides digging in making sure they respond to their base saying the types of things that their base wants to hear. Theres a good piece in politico. I dont know if you saw it that Michael Allen wrote that really sort of walks through why the grand bargain may never happen and i think i dont know if its bens line or whose but no longer a passing game. Its a ground game. Were just sort of incremental trying to get not as much fun to watch. Dont you think if you had obama and boehner in a room together just the two of them, they would hash out a significant deal. They dont like each other and dont trust each other. They were at that point a year and a half ago. Because of how things went badly, neither one of them trust the either to deliver. Without any constituents behind them if they didnt. They do. They do have to deal with all of them. If you say put those two guys in a room, they would come up with something. Who knows what private conversations are. Then they come out in public. I think it is difficult after they were so close to a deal and after it fell apart i think that they both feel burned by the experience. Understandably i think they both feel burned by the experience and have a tough time trusting each other again. Youre drinking just juice . Are we going to talk about this on the air . Heres the deal. Kenny is going to be on the show on monday. He apparently owns a stake in a juicing cleansing company. Hes talked about it on the show. He is coming on the show on monday. He apparently over the past two or three weeks, past 20 days, has not eaten any food at all. All hes done is drink this juice. So i was on the phone with him earlier this week. We were emailing. He said would you ever try doing it with me. Just do it for a couple of days before the show starts so we can have a conversation about whether it works or whether its impossible. Today is day one. This is juice press. That looks good. This one is called 14 hours. I talked to the head of the company two nights ago because i said i do this morning show. I normally drink a lot of coffee and other caffeine. This one is called 14 hours. It has an extract in it that is supposed to i havent started to drink it yet. What does it do for you for 14 hours . I dont know. Well see. Mr. Big can answer that question. Well see. Any way, this is the beginning of potentially the end. Watch to see if andrew falls apart on air today or tomorrow. Well see if we get to monday. One of the traders on the halftime show juices in the morning, juices lunch and then eats a regular dinner. That seems a little more realistic. You should know they did throw in two extra i also said i have a long day. You were basically crying and whining on the phone. I said, look, this is a tough thing for me to do to not eat food for the next couple days. I got extra juices. There are smoothie ones in there that look thicker and have protein. Feels like youre eating . Im hoping. Watch andrew closely over the next couple days. Thank you for outing this project for monday. Lets get back to news out of d. C. President obama will sit down with Corporate Leaders today to talk about efforts to improve cybersecurity. The conversation comes amid rising concern about hacking attacks that many say are emanating from china. The president is expected to discuss efforts to try to address the cyberthreat and to solicit ceos input on how the government and private sector can best Work Together to try to improve security. This meeting comes just a day after chases website went down on a denial of service attack. The initial Service Interruption lasted about 90 minutes. In a denial of service attack, attackers bombard the website with overwhelming traffic until it breaks down and cant handle any of it. It overloads the servers, causes Sluggish Performance or complete loss of service. The Hacking Group taking responsibility for chases attack yesterday announced intentions to try to hack a number of banks in this manner and has targeted bank of america, citibank, capital one and others. Scott . Boeing won approval from the faa to Start Testing a redesigned battery for the 787 dreamliner. The decision puts them one step closer to getting the troubled airplane back into regular service. In other boeing news, the company is reportedly close to signing a 15 billion deal to sell 170 single aisle 737 planes. Shares rising on that news yesterday. Look at boeing there up in premarket by threequarters of 1 . Discover financial says it will begin offer home equity loans beginning in the second half of this year. Its the latest move by the company to push further into direct banking. Discover acquired tree. Coms Mortgage Business last june and funded more than 2 billion in residential mortgages. The Company Expects to make fixed rate home equity loans between 25,000 and 100,000 to homeowners looking to consolidate debt. The National Consumer league wrote a letter asking for an investigation of herbalife. It may run afoul of pyramid scheme activity. The statement said we believe that a thorough investigation will reveal it to be a pyramid scheme thats harmed millions of consumers in more than 80 countries around the world. Before we go on, where are you on this herbalife thing . Youre the man on this. Is it a pyramid scheme . Im not going to comment. I dont have a view either on what it is or what it isnt. Its clear that bill ackman is not wavering one bit. The letter that was sent to the chairwoman emboldens his resolve in his case. Do we know if his campaign the one thing i havent figured out, has his campaign hurt the company . Earnings continue to be good. Last quarter reported good earnings. Are there not potential distributors and potential customers who are reading or hearing about this or maybe theyre not hearing about this because its just so in the financial world that it hasnt touched the Consumer Market that people say actually im not going to do this . I dont know if it filtered down to the consumer level. Theres been some impact on the distributor level because there have been changes to some of their distributors and some of their big ones. Everything pretty much hinges at this point on whether the ftc does something. Its whether you can get the government to do something or not and the question is what does the government do . The government doesnt shut down the business. The government fines the business. If the government does anything short of shutting down the business, does bill ackman lose . He bet the stock went to zero and he has said as much publicly. The stock hasnt been performing in the direction that he thought it would to the extent he thought that it would but theres still a long story to play out before we know ultimately what happens. Not only with bill ackman but karl icahn as well. A market cap of 4. 1 million. I dont know how much sway this National Consumer league has. Have there been congressmen and women and senate who have come out and said i dont think publicly. Thats what he needs if hes right. There may be problems there. I dont know. Its a tough one. Its a business in business for 30 some odd years. That raises in and of itself an interesting question of if the ftc and other agencies havent looked at it in the past or what would they do now . There may be problems at the company. Im not convinced that its a complete and utter fraud. The underlying numbers are right. There may be consumer disclosure issues and i think they are trying to address some of those. I just dont know if you ever get to zero. 52week range is 24. 24 to 73. Its in the middle of that right now. These companies are very difficult to understand from everyone. Theres tupperware that everybody knows. Theres the new skins of the world that have come under some sort of scrutiny from some hedge fund people. Long and short. And then herbalife seems to be the most recent and the loudest story of late. Lets talk about another loud story for a second which is dell. Also relating to karl icahn. In this case dell is rejecting a request for information leading to the buyout. A shareholders rights group wants to review internal information that led to the proposed 24. 4 billion sale. Dell argues the group hasnt met the Legal Standard for gaining access to that confidential assessment and earlier this week or late last week now carl icahn did get access to some of that information. Hes now under the tent. That may keep him quiet for a bit which is part of the dell strategy. They are also doing a similar thing with southeastern which is the other big investor. With mason hawkins. Upset about this transition. They brought them under a tent. Want to see a list of the shareholders, look but you cant disclose the information. This is a clever way of sort of making friends and keeping your enemies closer. Do you think this has played out any way that michael dell thought it would when they announced it . He had to figure there was some sort of opposition. I think management buyouts, people have a bad taste about them generally because they think there is something inside guys know that outside guys dont. They had to expect something. Icahn is a wild card. I cant manuel they expected that. I dont think they thought that was coming. Let me get to other quick news. To the fight for the right to snack. Twinkies are back. Did you hear about this . This is very, very exciting. Apollo Global Management and another company have made a joint offer to snap up twinkies. The two also reportedly enter the contest to buy drakes which would include devil dogs so you could get it going perhaps. All of the above. This does not go with the cleansing diet, right . Youre never going to survive. Youll never make it all day without eating a pretzel, a banana, something. You have to be honest. Ill be honest. For one day i can maybe make it. I thought you were doing it for two. At least two. Well see if we make it through the first day. If the offer poses a challenge to the maker of little debbie cakes hostess picked their offer as the bid for drakes and now that sets the floor for the auction. The deadline to submit competing offers was 5 00 p. M. Eastern yesterday. So apologies if you missed that. While were on the topic of sweet things. Big sugar set to be ready for a bailout. The department of agriculture is considering buying 400,000 tons of sugar. Enough for 142 billion hershey kisses. The goal is to stave off defaults by sugar processors that borrowed 862 million under another government price support program. The move aims to prop up tumbling sugar prices. I didnt know they were that bad. They had fallen 18 since the usda made the ninemonth operation financing loans beginning back in october. Do we get most sugar produced here in the United States . I dont know. Brazil maybe. I have no idea. You know who may know . Kelly evans. She does know. Thank you on the segue. Kelly evans is standing by. I bet she knows. Where is sugar made . Come on. Where is sugar made . Isnt it made on southern plantations where they grow its made in brazil. I know that much. Made in parts of the u. S. I wasnt paying a whole lot of attention. Well google it. You know what i was watching over here, guys, is whats happening on italys stock market. Were down about 1. 1 . Its basically been red across europe today. Ftse underperforming. Over here is italy down 1. 1 . The reason im watching this is we expect any minute now the results of the latest bond auction. This is the first one since italy was downgraded by fitch on friday. So theres been a lot of focus not of course just on rome where we have the chimney watch going on but also for the borrowing costs here. Apparently results still arent out yet. They are expected to pay more than last night around but not significantly so. Weve seen that spread between italy and sprain narrow. Lets flip over and take a look at the bond space where its not just italy thats been in focus today. 4. 675 compared with 4. 75 for spain. But ireland, 3. 7 or just about in the tenyear. The reason i mention this as well as ireland just has raised money Via Syndicate for tenyear debt at 4. 25 . More than 7 billion euros were attracted. Bottom line is that ireland is going back to debt markets and in doing so at levels which are below if you look over here, italy and spain. Interesting development in that story. Over here tenyear german bund is dropping below 4. 5 . Sterling, which had been drawing attention recently is trying to rebound. The question is whether after falling below that 1. 50 level it can reclaim that level or whether it is headed for further weakness. Some people on the street say 1. 40 could be next. People have thrown out calls that it could go to parity with the u. S. Dollar. 95. 8 for the dollar yen. That helped knock asian markets across the board. What was the yield . 4. 9 on the tenyear. Ill let you guys digest that news. Well keep an eye on Market Reaction in italy. An important gauge for the european debt crisis. Back to you. I was doing research. We in the United States produce both sugar beat and sugar cane and thats where we get a lot of our sugar. Apparently we import more than we actually we have to import because we use more than we develop. Hawaii, florida, texas and louisiana and puerto rico where they grow sugar cane. They grow sugar beat in minnesota, north dakota and california. Learned a little bit about sugar quickly on this. Apparently we eat a lot more than we produce here. I thought you were going to tell me you were doing research on the italian debt auction. I was watching that stuff too. I wanted to look up sugar production things. Now we know. I can rest easy. It is extraordinary. At the same time we talk about a ban on sugary drinks we talk about a bailout for the sugar industry. Interesting irony. We learned about italian debt and sugar cane and sugar beat production in the United States. When we come back, you have heard stories about chinese factories but few cameras have been let inside until now. We go inside an operation that makes clothing right after this. Were on vatican watch this morning. Day two of the conclave. And as expected day one ended without a new pope. Crowds are holding vigilance in st. Peters square waiting for news of a decision. Two votes in the morning and two more in the afternoon. Theyll look for white smoke coming out of that condominihim. Black smoke means theres still not a pope. Well be watching all day long and bring you updates as well. Welcome back to welcome back to squawk box. Look at how u. S. Equities futures are headed this hour. Not bad. Well see if things turn around. Dow looks off five points. Well call nasdaq and s p unchanged at the moment. Making headlines, this is interesting. Carlyle group can invest as little as 50,000 in a new buyout fund according to a new regulatory fund. Carlyle earliers minimum investment was between 5 million and 20 million. Private equity firms have been looking to widen the Customer Base in search of new sources of funding. Thats a huge deal. It really lowers the barrier to entry. The question is are the right people it used to be you wanted people at the highest number because they were much easier investors to deal with. It was a much less complicated situation. You start letting people in that only have 50,000 the rifraft. If you will. Lets get the National Weather forecast now from the weather channels reynolds wolf. Good morning. Good morning. A quiet morning across parts of the northeast where you will see a mix of sunshine and clouds. High temperatures in boston, washington, d. C. , even atlanta into the 50s. Youll get warmer farther to the south in tampa. Partly cloudy and 73 degrees. Great conditions for spring training. Nations midsection relatively quiet from minneapolis southward to dallas. Down to the west although it looks nice and dry for much of the four corners and into the rockies, seattle getting another round of showers with 54 degrees. It will be the raindrops that could cause backups and also coupled with snowflakes in places like pittsburgh and detroit. Detroit, much of the snow will be intermittent. A blast and then a break and then more from the lakes. Denver, although it was quite rough over the last 24 hours, right now expect no delays. Should be fairly nice day for traveling right through the milehigh city. Back to you. Reynolds, thank you very much. Great to see you. We go from iphones to clothing. You know about these stories. Factories in china are responsible for making many goods sold around the world. We visited one with a camera with which is unusual and almost never happens. We get the story from beijing. Eunice, good morning or good evening. Reporter good morning. Thats true. It is evening here. China is known as the workshop of the world but it could be in danger of losing that title because of rising costs. If your dress shirt has a Banana Republic or j. Crew tag, theres a good chance it was made at this chinese factory. This manufacturers makes one out of every six dress shirts in the u. S. But keeping prices attractive for its american customer is getting trickier. China has long competed with the world on cheap labor but with wages rising rapidly in factories like this one, chinese manufacturers are looking for ways to keep exports surging. Ceo roger lee says the biggest challenge is retaining workers. Every year the average increase in cost is 15 . We have to find ways to be more efficient in order to balance out that increase of labor costs. Reporter better education and the internet means workers are better informed leading lee to make factories more appealing than his rivals. This is one of our recreation centers. We have a few on our property. They can play pool and table tennis. Reporter a typical dorm room has eight beds but to keep it from feeling crowded, only six people stay here at a time. Reporte whats the mentality of the workers now . Before they wanted to make money and take it home to build a house. Now workers come here and they want to enjoy life. Reporter lee plans to keep factories here though challenges for exporters is raising doubts china can compete in labor intensive Industries Like apparel. It used to be one of the cheapest places and now definitely it is not. Were looking at different options. Reporter meaning that shirt could end up costing you more or may no longer be made in china. Now the vast majority of those jobs are not headed back to the United States but instead are going to even lower cost nations like vietnam and cambodia. Guys . Thank you. Its kind of amazing to see the changes as they take place and idea that Chinese Workers want to make sure they enjoy their life and that change in mentality. I guess a lot of them still even though they want to enjoy life while they are there want to save money to take home or send home. Reporter thats right. A lot of people do want to have a better life and what were really seeing is mentality is changing so people are much more aware of their rights. I was talking to one worker who was talking about how people are becoming more aware of strikes and concept of a union and thats really slowly developing here because the economy is improving, people are getting wealthier, they are starting to buy more iphones and phones in general, getting on the internet, they are becoming more aware of other patterns that are happening in the country. How does the new leadership in china handle this or deal with it . Are they prepared for it . Is there a game plan . Are they just making this up as they go along . Reporter i think that there is there was game plan that probably wasnt seen as a very positive one. It was muhas things changing in with leadership and the way they approach these types of protests. A lot of the people have been talking about one particular protest that happened in january and this involved a lot of journalists who revolted in a newsroom because of the censorship rules. In the past we could have seen those people disappear but now it looks as though they actually were able to negotiate a deal because they were able to talk and negotiate with the propaganda chiefs who they thought were just too strict with the censorship rules. You see a lot changes in the way that people approach censorship and also changes in the way that the leadership actually approaches these type of protests. Eunice, thank you very much. Its really great having you there and we appreciate all of your reports. Thank you. Coming up this mornings top stories including why the ftc say tweets need to include disclosures. Well get ready for the trading day ahead but first as we head to a break, take a look at yesterdays winners and losers. [ laughter ] [ female announcer ] each one of us is our own boss. And no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. 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. Good good morning. Welcome back to squawk box here on cnbc. Im Andrew Ross Sorkin along with becky quick and scott wapner. The judge is in the house. Joe continues to have the day off. A corruption probe. A Company Confirming the u. S. Government is investigating media reports that bhp was being probed for sponsorship of the beijing olympics. They supplied materials for gold, silver and bronze medals used in beijing. You wouldnt have thought bhp and olympics and you think of what they make and there it is. I wouldnt have. Maybe others did think that. I didnt. Somebody has april sure. Ftc says facebook and twitter needs disclosures including the average effectiveness of a weight loss shake or noting that a celebrity was paid to push a product in a twitter post. Basically marketing firms need to apply the same standards to online ads as they have to older media. How many characters do you get . 140. Makes it tougher, right . Disclaimer takes up the whole thing. What does it do to Kim Kardashians twitter business . Whenever they put out a twit to say i love this handbag or whatever it is. When they have to put an asterisk to say i am paid to say this. Disclaimer coming in next tweet . You can probably put that out in a separate tweet. In small print. We are also watching shares of coach this morning. Lets take a look here. The stock got upgraded this morning by citi to a buy. The stock had a lot of trouble, awful last quarter. Waiting on retail sales. Its relevant to look at this one. The stock is getting a nice boost up 1. 5 just shy of that in the premarket. Again citi upgrading coach to buy. The brand remains resilient and most interesting perhaps is they consider it a value stock now. No longer a growth stock. This stock faced a lot of competition. Were going to continue to watch that. They have a lot of lower price point items that they brought in and as a result we were talking off camera but my 8 and 10 year old want coach products. Their friends have coach products. I dont know what you do to the brand when you expand in ways like that if you squeeze out higher end people who have been watching it. Weve been watching stocks. Our next two guests are here to offer strategies and stock picks. We have managing director and principal at douglas and lanes. Weve been talking about eight sessions in a row. Its starting to feel like someone at a casino watching red and black come up on the roulette table. Wait a second. Black smoke. An indication that another vote has gone through this morning and they still have not been able to consolidate and identify a pope or elect a pope from this. The white smoke would be the signal along with the ringing of the bells in st. Peters that they have found a new pontiff. At this point this the second vote. Last night one vote was unsuccessful. First vote this morning unsuccessful. We are expected to see another vote this morning at this point but people watching very closely. This is the second time black smoke has gone up during this conclave. The first last night. The second this morning. And well continue to watch to see whats happening in rome. If intrade was still in business, this could become a financial story. And it would. You know they would have that on the boards. I bet theres a line in vegas. I dont know that. You can find people there who run lines on just about anything. Probably a few things. How long it would take to choose one. A lot of people run lines in vegas. And who would be the favorite. Lets get back to what we were talking about. Odds in vegas for finding the next pope or talk about the odds that the dow will end higher for the ninth session. Is there a point of a pullback here . No question. Such a good run. People have been waiting for a pullback for six months. November, december and then come january payroll taxes, et cetera. We believe the pullback will come. For us its more of an opportunity longer term. Things are in place when you look at Balance Sheets and you look at overall companies, you look at growth rates and companies are going to grow now. Topline Growth Companies who have restructured looking globally. Whether today or the next couple months, the market is at a high. Valuations at 14 times earnings. You have to dig down. Its not buying the market today. Its buying specific sectors and stocks within it. Waiting for the pullback is when is it going to happen . When it does, how significant is it going to be . Our view is sound like you dont think it will be big. Even if it is, if you look at the charts and you look over the last five or ten years, people who have made money if they stayed invested. Today you go back ten years and you have 10 annual return. You can do that. The question is if you listen to too many talking heads and they say now is a time to pull back and wait for it, you can wait for it all you want but you never know when it will be the bottom. Timing doesnt work. Find good companies. Invest in Companies Like googles and we talk about ford. Companies that will grow over the next three to five years. Put your positions in now or at least half positions and you get a pullback, you made more. If not, youre not in the game. Youre not going to win. People need to understand that you can hide and try to play it but the average investor never makes money because they are always on the other side. Tim, do you agree with that . Time in the market is a fools iron and to the other guests point were at 14,000 and change but weve gone sideways for 13 years so i think you can get too caught up in absolute price so were doing what we always do and focus on fundamentals and companies with a competitive advantage but more domestic facing and orientated toward housing and consumer finance. Finance is the one major sector nowhere near a fiveyear high or alltime high where we see fantastic value especially as the economy comes back and as a consumer and housing continue to come back. You focus on stocks and not the stock market. Lets focus on a couple stock picks. One of them is glacier bank corps. A neat Small Cap Bank out of montana. Fellow runs it. Been there over 30 years. Yield over 30 . Never took t. A. R. P. Never cut the dividend. Did the first open market acquisition since the credit crisis and one of the hardest hit markets from real estate perspective was boise and as that comes back and jackson hole, wyoming, comes back, the Credit Profile improved dramatically. That company has a market cap of 1. 3 billion. Weve talked to several investors who think Smaller Banks wont continue to exist. Is this a takeover target . I dont think so. I dont think you should focus necessarily on market cap but size of assets on Balance Sheet. Its a much more onerous environment from regulatory perspective and more expensive market to do business in. We think Bank Consolidation will continue but they have a fantastic currency in their stock. There should be consolidation. What we have focused on are better capitalized, better run banks that can buy and sort of gobble up their competition at attractive prices. Some stocks you like are ford and google. Why . Lets go to the auto companies. The oems are supplying to companies that are growing. This is one sector that if you look at the average car 11 years old in the United States, you have a big middle class internationally. Ford that exists in china and asia. They are growing. These are top line growers. Even if the market is at an alltime high, they just started but look at where else you want to be which are companies that are growing like google. Thats where you want to be. Tim, quickly, you also like carmax. Does that fit into the average age of the fleet being 11 years old for american cars right now . Carmax is interesting in that largest used car retailer in the country by far but they only have a market share in the mid Single Digits so consolidation potential down the road is fantast fantastic. Most people hate selling a used car or buying a used car and they took an unpleasant process and made it palatable. As the consumer comes back, they are pretty well positioned. A fantastic company and fantastic brand. Google is a perfect example of the kind of thing at that im talking about. If you look at a chart. Stock has had a run. Everyone is talking about a pullback. People are paralyzed for some respect about whether to get into a stock like this. 830 bucks, right. Or just wait for the pullback. How are people supposed to make that decision at 830 looking at that chart and the run its had since early winter, since late fall, what to do now . Great company. Very good question. What we look at is fundamentals. This company is still growing top line. Do i want to own this in the next three to five years . Absolutely. If i dont have a position yet, take half a percent position right now or half position i want to take. Whatever your interest is. Dont shy away from it because i tell you what. If they have a good earnings number next quarter, youll look back and stocks will be 1,000 box and you bucks and youll say i never got my position in there. Good talking to you. Well take a quick trip to futures pit to see what traders are buzzing about this morning but before we do that and take a break. If you are just waking up right now. Weve been watching the smokestack above the Sistine Chapel this morning. Black smoke a few minutes ago meaning no pope has been elected. Well continue to watch throughout the day. There could be a total of four votes before the cardinals recess until tomorrow. Someone wrote in there is a las vegas line on this. Pope favorites are scola at plus 315 and scherer at plus 385. Okay. There is an official line. Apparently. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. 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. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] welcome back to squawk. Welcome back to squawk. Joining us now, ben, nice to see you this morning. Good morning. What are you going to be watching today . Everybody still talking about that correction which theyre waiting on and were going to get retail sales. Well, i know a lot of people that have been trying to get ahead of that correction, if you will and theyve been paying for it severely for the most part. Becky mentioned earlier the dow continues to see higher highs, lows. It continues to be in the pattern to the upside. Certainly conviction associated with this trade. Today were going to look for the retail numbers. I dont expect to see any major Market Movers out of the retail numbers, jobless claims, cpi, ppi, Consumer Sentiment. Again, a lot of information coming out between now and friday. Were really focused on the fact we have rollover activity going on right now. The march contract is going to expire thursday and the june contract is the front month. That takes a little bit of focus, energy away. We also have options expiration, and the battle at the nasdaq around the 28 even level. But also multiple intraday divergence. Perfect example, yesterday as the s ps trading down lower. Breath was unwilling to get into new low levels. That difference between advancers and decliners of the new york stock exchange. Again, divergent type activity, low energy, very low volatility, but were seeing a lot of conviction to the upside. Yep, we certainly are, we see how it all unfolds today. Well talk to you again soon. Still to come on squawk this morning, smartphone wars. Samsung, apple, blackberry, who will be the ultimate winner . There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. I work for 47 different companies. Well, technically i work for one. That company, the United States postal service® works for thousands of home businesses. Because at usps. Com® you can pay, print and have your packages picked up for free. I can even drop off free boxes. I wear a lot of hats. Well, technically i wear one. 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Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. See your doctor, and for a 30day free trial, go to axiron. Com. Still to come this morning on squawk, well be talking tech. Bond bubbles and the fed exit strategy. But first, as we ned to a break, welcome, guys, its good to see you both. Good morning. Take a look at the u. S. Equity futures, they are indicated down. Remember, we have now seen eight days in a row of gains for the dow. Yeah, were going to keep an eye on this today. Stick around. Investor. Yeah, im a serious investor but im a busy guy. It used to be easier but now there are more choices than ever. I want to know exactly what i am investing in. I want to know exactly how much im paying. I want to use the same stuff the big guys use. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. Eight eight days of gains and trying for nine. A double dose of guest hosts. Business insiders both here to tell us where the markets are headed next. Turning up the heat on hand sets. Beautiful. Could the latest releases from blackberry and samsung take a big bite out of apples shrinking pie . Whats ahead for the fed . What it means for the economy and your bottom line. The second hour of squawk box starts right now. Good morning, everybody. Welcome back to squawk box on cnbc. Im becky quick. Joe is on vacation again today. Hes still skiing. Weve been watching the futures this morning and there are modest declines, but we should probably emphasize modest because every day weve been coming in, seeing modest declines in the morning and modest gains in the afternoon. Right now the dow futures down by about ten points. Its been a winning streak of eight sessions in a row now for the dow. We havent seen a nineday streak in years. S p futures down by under two points right now. In the morning headlines, the faa has approved boeings plan for the 787 dreamliner. That is the first step in returning the jet to service. Part of the solution involves a new enclosure designed to prevent fires. New figures show samsung spent 401 million advertising the mobile phones in the United States last year. That topped rival apples 333 million, and thats according to figures from cantar media. Outspent apple three to one the year before. Mitch mcconnell is also active in the ad market these days. Hes not up for reelection another 18 months, but his campaign made a sixfigure ad purchase. In washington today, president obamas going to be meeting with house gop leaders on capitol hill. John boehner is then expected to hold a News Conference expected around 1 30 eastern time. House Budget Committee chairman paul ryan outlined his partys plan on the kudlow report last night. We may not, you know, get the budget goals we want to achieve, but hopefully we can get a down payment on the problem. We balance the budget and ultimately pay off the debt in our budget. What we hope and what we think the republican majority is good for if anything is to get a down payment on the problem. Balancing the budget is a means to an end. And the means were trying to get to is helping people out, reviving mobility and growth in this economy. Senate democrats will release their own spending plan after calling the republican proposal unacceptable. Their plan will call for about 1 trillion in revenue by closing tax loopholes and about 1 trillion in spending cuts, but no structural changes to medicare. Scott . And becky, were also on vatican watch this morning, of course, in the last half hour, we saw black smoke rise from the Sistine Chapel signaling the cardinals had voted again, but not come to an agreement on a new pope. Todays the second day of the conclave. Three more votes are possible today so well certainly be watching it throughout the day. Now to the markets, all kinds of stats on the recent rally. The dow eking out a gain in the final minutes of trading. To close a record high for the sixth straight day, the blue chips index now up eight Straight Days in a row. The dow will seek the first nineday winning streak in 16 years today. That sounds crazy to me. Anyway, the dow now has risen nine straight tuesdays, that rivals the current streak of ten straight friday gains. This is all just the fact its tuesday, friday, who knows. Anyway, tuesdays and fridays have made up an overwhelming 87 of the dows gains this year, the s p snapped the sevenday winning streak yesterday. If you want a bullish stat, the material sector has risen for 11 consecutive days tieing its record streak set back in july of 2009. The nasdaq suffered, though, its biggest drop in two weeks. And our guest host this morning were thrilled to have at the table to talk about what the heck all of this means. The ceo of bny mellon Investment Management and editor in chief and ceo, we call you ceo of business insider. I know youre the editor in chief. Thats good. Are you going to argue . Its not an insult. No, no, no no, just a business guy. What were you going to say . Why would he argue with that . Should be very happy. Dont call me the ceo. Dont call me the ceo. Lets go to curtis first. You know something about markets too. What the heck is happening here . Has anything happened in the last seven or eight days that is supposed to make everybody feel so much better about the world than the eight days prior to that . Im not so sure. And by the way, then im watching what paul ryans doing in washington, what the democrats are doing today and theyre as far apart as ever. Yep. A month ago, we wouldve thought that was the end of the world. Now we dont seem to care. I think thats the whole story which is, you know, a month ago, six months ago, so much uncertainty, so many mine fields in front of us. And youre going to take risk, you want to pay a high return if youre taking uncertainty risk. Every time we pass through a mine field, whether its the fiscal cliff, the sequester, i think investors are saying, okay, i have fewer reasons to do nothing now. And the return that im going to get paid is going to potentially be less because of the fact there isnt as much uncertainty. I think if you look at the things we were saying why are things less uncertain today than they were a month ago . To me the sequester was a blip on the radar screen. I think the truth of the matter is, its behind us. We dont know the impact of it. We dont have taxes, we dont have all the things people were complaining about. I think the concept of i dont know. Theres a concept theres a concept of the idiot factor. When investors put money to work on december 22nd, and the fiscal cliff is just a handful of days ahead, who knew how it was going to turn out, right . New years eve, i know how i spend new years eve. What you guys were all talking about. But the reality of it is, if you put money to work and the market melts down several days later, youre like, you know what, im not going to go through that, im going to wait. With the major events everybody built all the hype around us, people are starting to focus longer term. Theyre not thinking about whats going to happen next tuesday, theyre starting to think about the next five to ten years. The discussion has made it had a more balanced not everybody will agree with that, but more balanced dynamic to it, which i think makes people feel like there will be some progress. Maybe not a grand bargain, but progress. The extremists in the Republican Party have become a little less insane. Right. Youre going to make this political, are you . Paul ryan debuted the plan. Its a joke relative to where we are now. Its a picture of how the world would be if i were king, there would be no social programs. But admittedly, paul ryan said this on Larry Kudlows program. What we are doing is laying out our plan. If we had our way, use it as a bargaining chip. But note that the republicans are not threatening to shut the whole country down in two weeks when we get to then continuing resolution phase. Weve moved out of the complete insanity of lets blow up the plane to, you know, heres where we would take things if we were in charge, but were not, so that sounds like gridlock. That sounds like were not going to get anywhere. Everybodys kind of entrenched. But gridlock if we dont change from the course Going Forward is very different than were going to blow up the plane, which was the position before with the debt ceiling. If i dont get what i want, im blowing up the building. The market doesnt care whats happening in washington. Thats right. Washington is making its irrelevant. The market has voted those guys irrelevant. Right. Why i think they do care. I think they were worried washington would do something even worse. And so i think getting through the mine field and nobody, nothing incredibly terrible happened. Actually is what is reducing the risk premium and causing the market not to mention the economy is improving, which means tax revenue is coming in and spending cuts have been made to this point that some people say are significant. The deficit has been reduced very significantly. Not in a way that anybody thought was particularly intelligent. But its happened. Youre starting to see capital expenditures. Capital spending even at that level, people, its Business Confidence. These events that were really scary are now behind me. What does it mean to me . Im going to go ahead and invest. The one and only question is for everybody who has been watching this sitting and waiting for the pullback, waiting for i dont know what theyre waiting for, but theyre waiting for something. Do you continue to wait at this point . No, i think investors because you have to think. Just what depose up always comes down. A little bit even. You think thered be a correction. Not if youre looking below 6,600 and youve been waiting since then. There are a bunch of dynamics here. Were all on an inflation adjusted basis, relative to the price of real assets. Were well below the peak levels that we reached. And i think that you have to think about there are traders and investors. If youre an investor, equities are a very Long Duration investment. You know, you have to have something to do with where you think trends in the overall economy are going. The big dynamics of, you know, were talking about the next ten years in the deficit. Years 11 through 20 really matter. And so, you know, probably my biggest concern is are we reducing the pressure on the politicians to get right whatever theyre going to do. Well, if the market was down four or five points, the pressure would be ratcheted up. And thats part of the point. So they feel no pressure. Is the only thing that can upset the market at this point the fed . I mean, the economy as becky said is getting better. The feds going to meet next week. So, you know, theres going to be a statement. I dont know if theres a News Conference or not, but there are going to be some sort of commentary about what theyre thinking inside the room. Whether the most recent jobs report has changed the way of thinking, moved some of the middle ground people to the hawkish side of the table. What is out there beyond the fed that could start the correction that everybody thinks is going to happen . Yeah, sure, so more obvious ones are the challenges in europe are still very real. We still have, you know, i dont think anybody completely knows how were going to pull together the sentiment of the european nations to really get fiscal union and banking union. There are a lot of great plans for it, but its not completely done yet. I think china is the data there gets better then it gets worse and sort of whats going on in china. I think there are things that theyre talking about. But if there are significant new news there, that could be a major issue. One question to ask. The biggest concern i have about the stock market is profit margin. Call up a chart, we are at record highs for corporate Profit Margins. Every time in the past we have gotten to this level or even close because weve never gotten here before. Profits havent stayed there, they have collapsed violently. And you get a huge correction. Nobody ever sees it coming, its not something you can predict. So when you look forward, how do you get around that . Are you saying that Profit Margins are going to be where they are forever . If equities were very expensive and, again, there are lots of ways to look at p e multipl multiples. But if you look at the earnings yield relative to the riskfree rate. Relative to where real yields are, equities are still. When people say where else are you going to put their money . What theyre saying is equities have a higher return than anything else. Which is perfectly reasonable if youre looking at diverse portfolio assets, but if you dont want to suddenly lose 30 in your stocks or youre waiting for that, a profit correction could do that. So do you think that for the next five years Profit Margins are going to stay at these record levels . Or are they going to do what theyve done in the past which is collapse . I do think Profit Margins are likely to decline, but i think in the context of earnings growing faster. Okay. I think thats going to be the offsetting factor. Okay, curtis and henry, were going to continue this conversation. Were going to be talking youre going to get in on this next conversation about cell phones i hope, right . And talking about google on the front page of the new york times. Theres stuff to talk about. Big news on the mobile phone front. Well get into all of that. Up next, the smartphone wars kick into high gear, can samsung or blackberry dethrone apple as the leading smartphone maker . That is next. But first, an alaska man and his dogs have made history at the iditarod. He covered nearly 1,000 miles in nine days, seven hours, 39 minutes and 56 seconds and at 53 years old, the oldest iditarod champion. Also the father of last years champion who was the youngest champ at 25. Comments, questions . Send them to squawkcnbc on twitter. Follow the show and look for updates from andrew, becky, joe and the squawk staff. Squawk box on cnbc. And on twitter. Welcome back to squawk box. Checking the futures right now. Were a little down. Dow looks like well be off about 16 points, nasdaq off about three points. Making headlines this morning, idc predicting the shipments of tablets running googles android will be taking over the ipad this year for the first time. Shipments are expected to keep growing. But idc says samsung and others have hurt apple with a combination of savvy marketing, greater variety and Rapid Technology adoption. And this gets us into this whole debate about apple versus samsung and all making me type on this new blackberry. Thats what i tried to type on the nonqwerty keyboard. Look at what it reads like. This is my issue. I have fat fingers. Tomorrow, samsungs going to be taking the wraps off the fourth generation of the flagship galaxy phone. To the blackberry z10, the battle of the smartphones is brewing and our next guest here to help us see how the latest gadgets match up. Bridget, thank you for bringing toys with you this morning. Good to be here. Its a little bit of march madness smartphone style. Exactly. Weve got the new z10. Thats the one we were playing around with. I will admit, im an idiot when it comes to touch screen. Always take a little bit to get used to. The preorders started on that yesterday on at t, and its going to hit at t stores next week. What does that mean . Thats a big problem, isnt it . It hurts blackberry when you dont have this unified launch day when its coming out. It muddles it and also samsung will be drowning it out because theyre announcement for their new phone comes out tomorrow. So were going to hear about what their big phone is. That just drowns out any other competition. What do you think of the ones youve been playing around with . Well, here i have the current Samsung Galaxy s3, and expect the s4 to look a lot like this. Just maybe a hair bigger. Also going to be made of plastic. And weve seen a lot of great phones out that are coming out soon, but it all comes down to the software, really. This is a war of who has the best new thing you can do with it. Not so much how it looks because were all kind of seeing the same look over and over again. Who does have the best software . Well, everyones trying to have a gimmick. Expect samsung to talk about Something Like tracking your eye movement. Eye tracking technology will help when youre reading so when you get to the body of your story or page, itll keep scrolling for you. Thats what i need. Do you need it, probably not . But these are the things everybody tries to do. With the blackberry, about typing faster, how you can swipe and learn what youre about to say before you say it. Everyones got their own thing. Samsungs using googles software, how much can it actually how much can they layer on top of that . About making the camera experience better. Theyre going to be doing different tricks with your camera. Because really in our market, thats what we care about, how fast is it, and how many Cool Pictures can i take . So this eye tracking thing, when i heard that, okay, now weve jumped the shark, nobody wants that siri revisited. You said its all about software, i think its the size of the screen. This is beautiful. This is an iphone 5. Size is becoming the thing now. I waited two years for this. This feels so puny and old now. Its 4 inches compared to almost 5 inches. The new htc one which hasnt come out yet, thats also 5 inches. That looks like a nice, big screen. Thats what htc really wants to sell you on. Theyre having delays in shipments, we thought it might come out next week, might not be until april because they have an all metal body. You can feel it has some good weight to it. Meaning heavier. Do you want it to have weight to it . Feels substantial, unlike samsung, which is made of plastic. And theyre hoping when you get in the store, oh, ill look at how big the screen is. That size and look might draw you in when the advertising dollars might not be there. And its interesting, weve been watching the advertising and i believe that samsung is now outspending apple in terms of marketing after getting wiped off the face of the planet the year before. Is that the key . Samsung deserves huge credit. They have come out of nowhere, and theyre now the biggest Global Smartphone manufacturer. One, they have great products, people love this phone. Its gone crazy. Yeah. And two, theyve made a huge bet on the marketing side and it has worked. Apple theyve been ambushed by samsung. Is apple is apple over . I still have an iphone, you have an iphone, game over yet . The big picture and im very much looking forward to hearing this. Competitors have caught up to apple. And theres a good chance that tomorrow apple is going to be leapfrogged. Thats a big problem for them. Theyre not out of the game. Were still in the early stages. We can release a much cheaper smartphone, apple has been protecting this huge profit margin. Will they get there . This is the year where if you look at their pattern, you know, with the iphone 5 came out, theyre going to have another iphone come out that looks the same but probably has a little bit of an internal boost. Right. And thats what you say boring, i think people are kind of getting bored now. And they go well, the phone can do the same thing, cant it . And theyre not seeing the rush like they did in the beginning. Its not the rush to upgrade your phone. This is samsungs time to really wow us. And if they can, they can scoop in when apples going to have their year where its iphone 5s and maybe its not all one practical question, battery life. For those of us and most business people, cant get through a day on an iphone. Can you on a samsung . Yeah, really, it really is like tweaking all the settings. Sometimes they have so much software its running in the background and that becomes a problem. Its about that balance. Yes, you can if you know how to make sure your wifi isnt running all the time. Im shocked were having this conversation that eight months ago apple was the greatest thing on the planet. And now were talking about their potential demise for what sounds to be a lack of innovation more than anything else. They have let the others catch up because they havent innovated fast enough beyond their products what they have now. That is one big key as to whats happened. They let the competitors catch up. The other thing is, they didnt release a cheaper phone. And most they would claim they are getting copied left and right, which is what all of these lawsuits have been all about. Apple does it right. You can always trust their phones to work. When it comes to the new samsungs and everyone else, theyre trying to throw a new feature in there to kind of go, oh, this is so cool, apple doesnt have it. Im sure apple will have it later but they try to take their time with it. Dave evans is correcting me, i keep calling them qwerty key boards, theyre all qwerty key boards you would get over that no, i switched to an iphone for a few weeks, but i had to go back. I dont know what it is with my fingers. Next month, thats the expected time when blackberry will have the physical keyboard the q10. Im waiting to see if i can do that or need to make the switch. Thank you very much for coming in. Great to see you. Coming up, the exit strategy. Who, what, where, when, and why . Well talk about the fed and the eventual end of bond buying. Stay tuned. Come on, nowadays lots of people go by themselves. No they dont. Hey son. Have fun tonight. Back against the wall aint nothin to me aint nothin to me [ crowd murmurs ] hey [ howls ] at optionsxpress were all about options trading. We create easy to use, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius strategies, chains, positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Open an account today and get a free 13month e ibd™ subscription when you call 18882800149 now. Optionsxpress by charles schwab. Coming coming up, the crazy things happening here when cameras are off. Anyway, stocks have been on a hot streak. Youve been missing out on the rally so far. Have no fear, three stocks were buying now, well tell you about them next. And joining us to talk about the Central Banks exit plan and what it means for the global markets. Stay tuned for all of that. Tomorrow tomorrow on squawk box, portfolio strategy from squawk market master jay jordan. Plus, House Minority whip on the budget battle shaping up in congress. Squawk box starts tomorrow at 6 00 a. M. Eastern. Welcome back welcome back to squawk box. Its about 7 30 on the east coast here. And the headlines this morning. A busy day for a Government Economic report. Were about an hour away from retail Sales Numbers for february as well as the latest on import and export prices. Later on, were going to also be getting january business inventories and the federal budget statement for last month. Also on the news, Mortgage Applications fell 4. 7 last week. Thats according to new figures from the Mortgage Bankers association. Comes about that comes as 30year Mortgage Rates rise to the highest level in more than six months, up 11 basis points in a week to 3. 81 . Also, president obamas going to be meeting with Corporate Executives today to talk about improving Cyber Security. That comes amid increasing concerns about hacking incidents, especially those emanating from china. The Cyber Security has become, of course, an increasing stumbling block to improving relations between the u. S. And china. Over to you, becky. Thank you. With the dow finishing higher for the eighth straight session, we are focusing on large cap stocks. Joining us with his strategy and picks is dan varo. Thats a firm that manages money for five of the top public Pension Plans in the United States including general electric. Dan, thanks for coming in today. My pleasure. We have been trying to figure out whats going on. Were looking at large caps. Youve also been looking at small caps as a place where youve seen lots of acquisitions. Thats pretty big news. Across all of our small midcap portfolios, weve had more than 30 Companies Get acquired over the last two years in one quarter. And thats because Large Companies are struggling to grow organically. One of the ways they do it with a liquid, strong Balance Sheet is by buying companies that do Something Different that have something unique that they do. And they can bolt those on to their existing portfolio of businesses. So is that an argument for focusing on large caps . Or focusing on small caps that you think will continue to get taken out . Well, a little bit of both. When looking at large cap companies, we have to identify some agent of change, some catalyst thats going to make that stock go higher to unlock the value thats in that large organization. My preference would be really on a relative basis is small caps likely are going to continue to outperform large cap. I heard you guys talk earlier about Profit Margins while theyve somewhat peaked in large cap companies, theyre nowhere near prior peaks in the small cap space. Theres a lot more room to run on the margin side. You have to look for Something Else when looking at large cap companies. Is there a sector or a few names you can throw in the small cap that are companies that do offer Something Like that . Becky, this is an environment its all going to be about stock selection. I dont care if youre looking at large cap or small cap. We do it bottom up centric and look for something thats going to unlock value in a company. I know one of the stocks you like is a megacap, pfizer, what is it that you see in pfizer right now . And i was kicking and screaming among my colleagues to put the statement in the portfolio. I really was very resistant about it as the next health care analyst, i didnt see a lot of growth. But then you look at pfizers done with zoetis, thats a company that its largeness and clearly a mind set at the top thats clearly changed to unlock value. When that Company Opens up a closet, 1 billion asset falls out and theres probably a lot more, maybe not to the size of zoetis, but other things they can do to reposition the product portfolio. People assume that the portfolios not going to grow of new drug introductions anyway. So theres other things they can do, including monetizing their consumer business and other things. Is this something thats also a dividend play. I believe barbara marsen was here this week and also recommends the stock. She runs the growth fund, similar thing where youre looking at dividends coming through . Dividends are a key component. You have to look at things from a return standpoint, more than 3. 5 dividend yield with pfizer, massive share buyback. So perhaps this correction were all looking for, pfizer would be a great name that probably holds up relatively better than Everything Else because of the defensive characteristics, yet its outperformed the market this year. How do you think about the Global Dynamics in terms of large caps versus small caps, a lot of people like the mid caps, because the u. S. Growth story is better. The energy story is a bit of a u. S. Strength story. On the other side, we have clients nervous about getting to the equity market at new highs that like large caps. You have a bit more of a safe haven status, they arent likely to be as volatile. How do you think about all those dynamics . Its funny, we had a client many years ago Say Something that always resinated with me. Said i dont like the market here, ill wait until its higher. People dont feel good about getting into a market thats right on its bottom, they like to buy the momentum. I just came back from korea last week and generally in asia, theyre overexposed to the emerging markets. They look at our political system, feel its somewhat broken and they cant disconnect the political system from the economy. Yet we all know what companies are doing to improve profitability and to reposition their product portfolios. You know, i just think what gets missed a lot in small cap companies, you know, is the perceived risk. Is perceived youre taking this huge risk by buying small cap companies. Again, were buying companies that are established players in their respective market niches. That doesnt mean that, you know, these stocks collapse. And i think weve gotten too much into the market is either going up or going down. It cant just go sideways or just progress in a more slower environment. The fact of the matter is in a slowgrowth recovery like were experiencing now, small caps tend to outperform large caps unless youre focusing on large caps that are doing something to reposition their portfolio businesses. And going to the point that becky made about m a, obviously if you get a small cap you own taken out, its a nice overnight bonan bonanza. Are you starting to see finally the Big Corporations being more willing to use the huge cash piles they have to make risky acquisitions . Corporate ceos are no different than mrs. Jones who shops at walmart. Its Consumer Confidence the way i think about it. And i think theyre doing and shopping and theyre looking for companies to get a return. Again, in a slowgrowth environment, these companies are struggling to grow organically. So what theyre going to do is bolt on companies they like and, you know, i think theres a lot of pent up demand in merger and acquisitions. Remember, weve seen this huge amount of m a within our smallcap portfolios and in an environment where m a was purported to be dead. Thats why its surprising to hear what youre talking about. We have not had a lot of people bringing up these things. Because the way everybody focuses on it from the standpoint of the total dollars of m a. Our deals are smaller deals. Theyre 1 billion, 2 billion companies. The number of transactions is up considerably. Its the dollar amounts. I dont think were going to see that, you know, mega i dont think were ever going to see the mega deal again. No, what created value by exchanging and youll know best, exchanging aol for time warner . Thats just paper. I mean, these are companies that are these deals were predominantly done for cash, at least in our portfolio, very few of them, most of them were corporation a buying corporation b, and by the way, the average premium was 88 . We dont buy companies because we theyre takeovers. Buying companies that do something unique and different. Those the companies that get coveted by bigger companies. Dan, very quickly, just to mention one more stock, devon energy. Yeah, predominantly domestic play. I got a sense on the last Conference Call that theyre almost desperate to make the stock go up. One of the things theyll be doing is taking public their Master Limited partnership or their midstream businesses, but theres phenomenal assets in this portfolio of energy. Of energy of properties they have. Dan, thank you very much for joining us today. Thank you very much for having me. Appreciate your coming in. When we come back, well talk about much of the world watching the roof of the vatican for white smoke. The sign the new pope has been chosen, already this morning weve seen black smoke. Fed watchers are also watching for Smoke Signals. That the central bank will begin to scale down asset purchases. Up next, well talk to the u. S. Economics editor for the economist. When you miss squawk box, you fall behind on Global Business news. When you fall behind on Global Business news, you make bad investment decisions. When you make bad investment decisions, you lose all your money. When you lose all your money when you hatch an illegal ponzi scheme, you end up with this guy as your cell mate. Nighty night, boys, dont do anything i wouldnt do. Dont end up with this guy as your cell mate. Watch squawk box. Welcome back to welcome back to squawk on this wednesday morning. Checking futures right now. Dow looks like it would open off about 17 points right about now, s p 500 off about 2 1 2 points. The federal reserves exit strategy could be tricky to execute in a major challenge facing the central bank. Joining us now is the u. S. Economics editor for the economist and more from our guest host curtis artledge, as well. The ceo and editor in chief at business insider. Good to see you this morning. Good morning. What do you think the fed is thinking about right now a week ahead of the meeting . I think next week will be interesting. I sense the possibility for a head fake. Weve heard a lot of chitchat both from the minutes and fed officials talking about the potential costs of all the bonds theyre buying. Not costs in terms of inflation, but in terms of the Financial Markets getting overheated. Too much reach for yield. And im wondering if in the statement that comes out from the coming meeting theres going to be a reference to there being carefully monitoring those costs and that has the potential, i think to wrong foot the market and make them think, uhoh, theyre getting ready to stop qe. I think that would be a wrong interpretation. We havent seen yet, enough improvement in the labor market to bring that about. The most recent jobs report better than a lot of people expected it would b. Has that changed the opinions of the middle of the road voters inside the fed . I think its starting to meet some of the necessary but not sufficient conditions to end qe. Janet yellin gave an interesting speech a while ago. To conclude shooees getting wh she wants to see. She also wanted to see declines in the Unemployment Rate that were not due to participation people looking for work. She also wanted to see a pick up and growth hiring. We havent seen that yet either. So i dont think were there yet. We could be there six months from now, but were not there yet. Greg, when the fed started buying assets back during the financial crisis to try to stabilize the economy, big group of very vocal people said this is going to destroy us. The dollars going to be completely destroyed. Now theyve been focusing on the fact that some day the fed will have to unwind the Balance Sheet and thats going to be an absolute apocalypse. Is there a possibility that, in fact, this is a nonevent when the fed stops . It could be. I mean, one of the reasons of hearing so much chitchat about costs and not just from the usual hawks, bdovish people, theyre trying to game this out several years in advance so when time is right to start exiting from the strategy that theyll know what to expect and they can warn the markets well in advance. They are not complacent at all about the possibility of things going wrong. It could be very disruptive to the bond markets and so forth. Thats one reason theyre talking about it now. At least for bernanke and the leadership is as follows. By our view is that when it comes time to exit to start raising Interest Rates, the l be because the economys doing so much better and whatever negative disruptions be offset by the improving outlook to the economy. Thats the ideal situation but, of course, you know, reality has a way of not going how people planned. Hey, greg, its curtis, you talk about the cost dynamic. Theyve been asked a lot about bubbles they might be creating with their Balance Sheet growth. I think another cost that they might be thinking about also is what its doing to savers. You know, you look at pension fund dynamics, individual investors, very low yield environment. How do you think they factor that into their thinking . I think they think about it a lot. And theyve gotten the question a lot and im very confident that is press conference after the next meeting bernankes going to get that question again and hes going to answer that again. And his answer has been relatively consistent. Monetary policy is a pretty blunt instrument. It cant try and distribute the cost and benefits to those policies according to peoples particular needs. The point he tries to make is if they were to raise Interest Rates now as some sort of gesture to help savers, the economy couldnt stand it. It would sort of crumple again, and theyd have to bring Interest Rates back down again. Hes saying sorry, savers, please bear with us, we think the policy in the end is one that will give better returns on your money. What happens if rates just start to rise . Right, that could potentially be a big challenge for the fed itself. Well, if rates start to rise, absent a fed decision to get those rates and i think thats what im alluding to, right . If they start to go against the feds wishes, that could be a real problem. Thats a huge problem. I think that is kind of the outlier case that they do not have a good plan b for. All of their modelling, it seems they have good control over not just the shortterm Interest Rate but the bond markets expectations. If you get a violent selloff because theres disruption in the market, thats a difficult situation. I think its one reason why they keep a close eye on the fiscal situation in washington and you keep hearing bernanke banging on and on and on about how they need some kind of a Medium Term Plan to stabilize the debt. Nobodys listening to them. You could be watching and you can be banging on the table to get these things if its not having any effect. Do they really have a plan for that . Well, its the same old story, right . They do have plans but cant agree on what the plans would be. We heard paul ryan bring out what his plan would be on the republican side. Today, well hear patty murray, bring out her plan, and i guarantee the overlap between those two plans would be approximately zero. If the idea is nothings going to happen, the fed if theres gridlock in washington, the fed view is life goes on. In the same way that the market thinks life goes on. Sure. The fed view is basically we take that as another input to our process, we cant change it, we can sort of stand here on our soap boxes and yell and plead and urge until were blue in the face. But ultimately, thats congress and the voters who decide what that policys going to be in and they take that as a given. Does the jobs report most recently and some of the data thats come out since, do you think thats had a terrible impact on the mind set of certain people within the fed . A real shift in the way theyre thinking about policy right now . No, i dont think so. But i will tell you what i think it does do, i think its a relief. Ive been to so many of these press conferences and you open up their forecasting materials and theyve taken their numbers down again. The economy not going to be as strong as they thought. And i think it would be a relief that next round of forecast they bring out, you actually wont see much change. And on the margin, i think they will have higher confidence that their forecast, which by the way has been on the optimistic side of things may actually be met. The economy is holding up relatively well given the head winds weve had from higher taxes and higher gasoline prices. I guess youd have two camps, right . Youd have the one group which would say its working, the economys starting to pick up versus those who would say, yeah, its working but its time to pull back a little bit with the other side saying, no, thats why we need to keep doing it because its working. My prediction is it is the second camp that it is the camp that says weve got to keep going on with it that wins not the ones that say we have to pull back. Because to say that our forecast is 2. 5 growth in gdp this year looks like its going to be met is a very far cry from saying that 2. 5 is anywhere near satisfactory for the longterm. Hey, greg, youve been in the News Business a long time and this morning weve been watching whats happening in the markets and vatican city with the Smoke Signals they keep sending up. We tease this up saying were watching the Smoke Signals from the fed. I mean, from your expectation, are we looking at months and months of black smoke going up before we see the white Smoke Signals that, hey, the fed is about to move . I think the vatican might want to take a few pages out of the federal reserves book. Its not like the first time the fed has struggled with how to communicate or signal to the market. Honestly theyve been struggling like this since you or i were in the News Business in the 80s and early 90s. They send out pink smoke, gray smoke, smoke of all different kinds. If you talk to folks in the market, they wish it would be more like the vatican and stop giving us different colors. Not the way it works. Its an open process. Greg, thank you very much. All right. Pleasure always. Well talk to you soon, greg. And curtis and henry are here for the rest of the show. Well have their insights, as well, as we continue on. Watch Smoke Signals. When we come back in the next hour, well continue with our whats working series. We have a list of names you need to know in the retail sector. And weve seen signs of life in the housing sector, but how fast are lenders making credit available . Were going to bring you an update on the terms on low down payment loans. Stick with us on stick with us on squawk box, weve got the premarket info you need before you make your trades. Stocks to watch are coming up next. [ 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 . Lets take a look now at the stocks to watch this morning. Shares of Spectrum Pharmaceuticals hit hard after the Company Forecast a steep drop in fullyear sales. It expects sales of the biggest selling product to significantly decline as cheaper generics reenter the market. See the chart there. That stock is down sharply. Boeing has won approval from the faa to Start Testing a redesign battery for the 787 dreamliner. The Company Reportedly close to signing a 15 billion deal to sell about 170 737 planes. There were a lot of people who said hold on and everyone else the stock has gone cramer said hold on. As much as people thought it would. And getting a pop in the premarket, in part, at least to sell planes to ryan air, the budget carrier out of ireland. Lets take a look shares of dole this morning, down about 8. 33 . The distributor reported Fourth Quarter results that missed street estimates. The Company Sites challenging banana market conditions. And oracle upgraded from buy to hold. The firm says oracles hardware revenues will begin to increase in the next quarter or two. Walgreens shares upgraded at ubs to buy from neutral. The analyst there cites recent weakness saying it provides good entry point. Like Banana Republic, what that made me think of that dole story. Sure. Other things, as well. Coming up, Market Strategy session, how long will the rally continue . Were going to ask david bianco and allison dean. Plus, a key read on retail. Were going to find out how the payroll tax increase is expecting shoppers back in february. [ man ] ive been out there most of my life. 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At a Hertz Expressrent kiosk, you can rent a car without a reservation. And without a line. Now thats a fast car. Its just another way youll be traveling at the speed of hertz. The dow the dow climbing in the eighth straight session. Can bulls make it nine in a row . February retail sales may test the rally. Well find out if the payroll tax increase has consumers scrimping and saving. Microsoft went down three points, weve got to save some money. The data hits the tape. And well bring you a list of winners and losers in the retail sector. The third hour of squawk box begins right now. Welcome back to squawk box here on cnbc, first in business worldwide. Im becky quick along with Andrew Ross Sorkin. Our guest host the ceo of bellin Investment Management. We will have more from these two gentlemen in just a moment, but before we do, the judge has your morning headlines. Thank you. The dow eked out a gain in the final minutes of trading yesterday to close at a record high for the sixth straight day. The blue chip index now up eight Straight Days, the dow will seek the first nineday winning streak in 16 years today. A key piece of data that could make orring bre break the streak. Well find out how it affected shoppers in the month of february. Forecasters looking for an increase of. 6 . Take a look at futures, looks like an implied open lower across the board, not large by any stretch of the imagination but certainly looks to be a negative open on the street. Overseas in asia, negative day for the hang seng, shanghai. Weaker erjs from important companies. Negative across the board. And the faa has approved boeings plan to test a proposed improvement to the battery system for the 787 dreamliner. That is the first step in returning the jet to service. Part of the solution involves a new enclosure for the battery. Meantime in other news, the company is reportedly close to signing a 15 billion deal to sell about 170 single aisle 737 planes to budget ryan air. That stock is up in the premarket. 75 . Held up quite well. Certainly i think its fair to say given all of the struggles with the 787. Were also watching oil prices tracking those across the board. Take a look, the Energy Information administration, last week said the nations supply of crude was more than 10 above year earlier levels. At the highest level since the late 90s. Analysts expect it to show ample inventories and despite the predictions, oil prices have been up for five straight trading sessions. Wti getting a little bit of a boost. Going the other way is brent and gasoline. Its been a longer winning streak for the dow which has been up for an eighth straight session. Rising to close at another record high. There are a lot of key indicators that strategists are trying to decide. And joining us onset is alison deans, senior adviser, and also david bianco at deutsche bank, hes been right about every day lately. A new high every day. Thank you. Whats going on . You expect this to continue . Or do we have to see a pullback at some point . I dont think the markets going to go up every day. Itll take some days off. Many strategists are in the pullback camp, im the straight up camp. I think at least the s p will get above 1,565. If its not momentum that does it in the next couple of weeks, i think its going to be First Quarter earnings that show again earnings are pretty good, not gang busters, but good enough to and thats all it takes at this point youre saying . Yeah. Well, the february jobs report, the february manufacturing, some pick up in Business Confidence and spending activity, particularly Industrial Capital goods, a little bit of signals of technology, like to see some more. But, yeah, i think the path of least resistance is up and the record high for the s p is acting like a homing beacon that will bring us there in the coming weeks. Standing at the roulette table where you see red coming up again and again and again and black has to come up at some point. Youve been surprised we havent seen a pullback. Just because the sequester, i thought the market would pull back from that, negative news which seems to happen every spring. I feel that the psychology of the markets post 2008 has been locking in gains as quickly as possible. All this bad news coming out, which hasnt been really, really bad, but something that would make people gun shy. So my sense is maybe the events are less bad than people anticipated. Washington, which i think has been incredible disappointment is less disappointing. They seem to be more willing to negotiate and meet in the middle. Are they really . I think theyre not. You think they are . I dont understand whats happening here. No question. The republicans have dropped were going to blow up the building rhetoric. Its good. Its an issue where washington is less of a factor, is that what youre saying basically for the markets . Theyre just not messing up the entire game. They dealt with the debt ceiling before the last hour of possibilities. That showed were antagonizing the american public. I think they realized theyre losing a lot of confidence so the outliers, the extremists have been down a little bit. Although theyve also come up with the resolve. Were not going to back and say were going to take the plan the administration laid down. Seems to me theyve toughened their resolves in terms of saying what they believe. Thats a reasonable position. If we were in charge, this is what it would look like. But the American People elected us to come do a job. Were not going to stand in the way and derail the train, which is what they were threatening before. So its much more reasonable, very encouraging. And to your point, now theyre not in the way anymore. Life can go on as usual. Washington in general. Can i make an argument that maybe they werent in the way that we were using it an excuse that the whole uncertainty argument basically the economy has continued along despite washington and maybe we figured it out for the first time . Can i make that argument . There was a risk they could do the wrong thing. I agree. 10 risk or 90 risk. But everyone says washington is so much better. Im not sure were disregarding washington because somehow washingtons better. I think were disregarding washington because the economys better. Theyre in the rearview mirror. Washington was washington two years ago itll be washington two years from now. But there were these dates that were absolutely in the way. And people didnt want to invest in front of them for the reasons we talked about. And those dates that could have been very harmful. I mean, not paying off our debt would have been a big deal. There are fewer of those events where they can get in the way. I think Corporate America now is like washingtons not going to make things so judgmental that we can make Strategic Decisions and not worry about washington pulling the rug out from under us. The only thing that can put washington together is a market upset at this point . I mean, is it the only thing that can force those guys to really make a deal . Theyre under no pressure. The market yawned at the sequester. The market keeps going higher. The volatility that we saw around the fiscal cliff has been nowhere to be seen in this present time. So what do we thats a good point. And i think whats interesting is rather than having markets discipline washington, which investors dont like, we see some degree of republican resolve, not on the debt ceiling, but importantly on see quest train stati sequestration. And thats why we saw it as a positive Going Forward. They sidelined the risk of a rating downgrade. They sidelined the risk of a disorderly jump in Interest Rates. And i think a lot of people thought one of the big risks for early this year was in 1994 style dislocation of bond markets that would knock down all asset classes, not likely to happen now. Well, the good news is, it must have been 5 1 2 years now that wall street has been completely focused on washington and seeing whats there. Now what do we watch . Well, gridlock is fine. Its economic terrorism that is not. And thats the situation we were in. We were in a situation where a big block of people in the government were threatening to shut everything down and not pay the debts and they were being taken seriously. That was a reasonable position. Weve moved past that. What do you guys watch right now . Whats the thing . If you cant turn to washington say heres the latest thing. Are you watching earnings or economic reports as they tick in . Yep. What gets im watching the global economy. Taking confidence and some degree of acceleration of asia, business spending in particular, important for s p profits, the momentum looks upward for earnings. Some dynamics that were watching now including the continued disappoppoient out of europe are currencies. And the dollars going to strengthen over the next couple of years versus euro, yen, most currencies, thats a bit of a head wind to earnings growth, i want to see what that does to commodity prices. One of the reasons im underweight energy, we could be surprised with oil price softness. Youre not at all worried that momentum which you cited earlier in your very bullish call has been too fast . That sentiment is too bullish . That people are too complacent . Look at where the vix is, for example . Well, theres a bunch of things that could be said. The p e of the s p 500 still below 15. I think earnings and you hear people talk about margins and earnings, are they sustainable . Margins and earnings have proved resilience time and time again. The profits recovered rapidly after the recession, profits withstand europes double dip, profits withstand the soft patch in the global economy. We have profits withstanding the fiscal drags. Profits are sustainable, i think the focus should now be on Interest Rates, and if they only go up a little bit. Thats the key question. What happens if the economy starts to improve enough that rates start to go up faster than we want. Then what do we do . A bit of a risk for the market. The market has been very strong. The market still does have evaluations, but theyre going to worry about inflation and that is one of my views the risk to the market. I think the key things to look at. Corporate spending Consumer Sentiment could be very big drivers of the market, reinvestment activity and spurring Stronger Economic growth. And retail numbers at 8 30, people watching to see whether or not the consumer is hanging in there. I want to mention one of your calls. Its an interesting call. Going out on a limb here and saying there are eight Enduring Technology stocks. Bigcap stocks, some of which have not gotten a lot of love in a long time. Cisco, emc, hewlettpackard, ibm, intel, microsoft, net app and oracle. Well, these are eight stocks more business spending exposed and Consumer Spending exposed. One of the big exposed names has been weighing on the technology index. These are very low p es, all companies around for 20, 25 years or more, theyve proven their ability to at least survive. And i dont think growth is the question given the valuations. The questions are the survivorship. And we think they will. They tend to be well entrenched. Global operating footprints are valuable asset. I think these big cap tech stocks exposed to business spending which i think will improve during 2013, 2014 are one of the few attractive windows of entry into this market right this moment. Anybody else have thoughts about that around the table . Well, one to pick out is hewlettpackard, there are a lot of Strong Companies in that group. The air going out of the balloon. The stocks had a wonderful run. But every business theyre in is shrinking even with the business spending. Looks like a business in decline, but with the p e and the Free Cash Flow yield, is this company here in three or five years, we think so. And i have to say, we want them to make the call a more thematic basket call. We didnt want to exclude a name, make it about one name. Bu you know what . Youre being nice to hewlettpackard . Turns out that stock is actually great stock. Exactly. So sometimes its just about stocks and we have to put the fundamentals in perspective against the valuation. All right. David, alison, thank you both for coming in today and, of course, curtis and henry are sticking around. Coming up, recent improvements in the housing market, but will lenders start to relax requirements . We are going to get a reality check from dana olick in just a bit. And retail Sales Numbers at 8 30 a. M. Eastern time. Well find out if the payroll tax increase puts a damper on Consumer Spending. And finally, our whats working series with portfolio picks in the retail sector. Right now, though, as we head to a break, check out the squawk box market indicator. With fidelitys new options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. I know what youre thinking. 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. Backelcome welcome back to squawk box this morning. The futures right now, they are not looking so hot. Not horrible, but not great either. Dow looks like it would open off about eight points, and the s p 500 off marginally. Lets take a quick check of shares. Its named chief operating officer its a tough name. Andre good luck. Who wants to try to pronounce it at the table. Calantzopoulos. No. Im going with curtis. Calantzopoulos. Wed love to have you on the show. The current chairman and ceo, lewis camiliare is going to remain chairman. Lets talk about mortgages and banks. Are bankers loosening up the pursestrin pursestrings . Lets get a reality check from diana olick who joins us now from our nations capital. Good morning. Reporter good morning, andrew. Thats right, just in time for spring. Mortgage credit is finally beginning to thaw. It is the return of the low down payment loan. No, not just fha with the rising insurance premiums but regular conventional 30year fixed loans. Fannie mae. That was 15 of the last year but risen consecutively in each quarter to 17 , then 18 , and it could be closer to 20 now. Why . Well, fha loans are getting more expensive. Fha facing a 16 billion shortfall. It has raised its insurance premiums and will again on april 1st. Fannie mae does require mortgage insurance on these loans, but doing the comparison shopping, that insurance is just cheaper. And thats another reason the private mortgage insurers are loosening up, as well, after getting just slammed during the housing crash. They tightened up Credit Scores and other underwriting so much so that many borrowers just couldnt qualify. Now as home prices rise those standards are loosening. And there are just, you know, more buyers out there now, especially firsttime home buyers and theyre the ones that need that low down payment. The banks want more business too, the Mortgage Bankers Association Report rates hit 3. 81 , thats the highest in over six months, which means fewer borrowers are refinancing, and there had been so much refi business that the banks didnt need to do much else so they were doing much more conservative home purchase loans. Now they need to widen out that circle to get more customers. And well be talking more about which companies will benefit from all this and hint it would be the mortgage insurers, well talk about that coming up on squawk on the street. Back to you guys. All right, diana. Coming up, breaking Economic Data, well get a read on the consumer and an important one with a governments retail Sales Numbers, plus import export prices for february. And then were going to tell you whats working in the retail sector. Jpmorgan retail analyst matthew boss is going to join us. And were going to name some names, as well, when we come back. Welcome welcome back, everybody, we are expecting another vote this morning at the vatican to elect a new pope. We saw the black smoke earlier indicating the vote today ended with no chosen pope. We know that was the same story yesterday. We could see another three votes today. And by the way, we have an update for those who are interested in gambling on the papal decision. On the irish internet gambling company, the odds actually favor archbishop scola of italy. Omalley makes the top five and long shot odds at 1,000 to 1 go to bono. You know, 24hour coverage of the Selection Process for the new pope. A lot of papal trivia. For example, did you know and i bet you did, know a pope has ever in the history of the catholic church, no pope has been elected without carrying ohio. Im not religious, but should you be betting on this . Is there some kind of theyll run odds on anything and everything. Everything, right . I know, betting on the pope, i dont know. How else can you play . Im jewish, i cant comment on this. But i just figured maybe theres something. I say bet. You say bet . Yeah. Okay. Why not . Whats the over could be some bad karma. The days its going to take. If youre in vegas and you want to play something. Play it. How long does the black smoke actually come out of the stack. How long does the white smoke i mean, you can do a whole bunch of little side bets. Like they do on the super bowl. All right. This is getting weirder and weirder. Lets get back to Washington News. President obamas also going to sit down with Corporate Leaders today to talk about efforts to try and improve Cyber Security. The conversation comes amidrising concern about hacking attacks that many say are emanating from china. The president is expected to talk about efforts to address the cyber threat and solicit the ceos input on how the government and private sector can try and improve security. This meeting comes a day after chases website went down after a denial of service attack. The initial Service Interruption lasted about 90 minutes and in a denial of service attack, attackers bombard websites with an overwhelming amount of traffic. Overloading the servers and causing Sluggish Performance or a complete loss of service. The Hacking Group taking responsibility calls itself cyber fighters. Announced the intentions to hack a number of banks in this manner several months ago and has targeted bank of america, citibank, capital one and others. And we were talkingkingut some of these attacks off in the commercial break. This becoming more and more frequent. It seems just about every week there are big corporate sites or government sites that are getting taken over. Thats right. Its only going to become a bigger issue. And now that its become a geopolitical issue with china, its become that much more serious. If you have an organized attack on american corporations or the gof government, youre getting close to acts of war. And for corporations, youve got the nuisance attacks, the website goes down for a couple of hours or what have you, and then youve got the potential that somebody could actually get into the Banking System and start to move money around. And its only going to get more serious. The president s meeting with ceos today in the situation room. Right. That shows you sort of the level. I know a lot of thats for show and whatever, still, that shows you the seriousness of the issue. Not to mention the fact you have companies now willing to admit that they were hacked. And for a long time as all of this was taking place, thats about the furthest thing they wanted to do. They would run the other direction. I dont want to down play this, we constantly hear about hacking attacks. The next refrain is, but nobody got hurt. They say nobody got hurt. The passwords really werent stolen or the information wasnt accessed. Why is that . Why does nobody get hurt . Yes. Well, first of all, a Big Corporation site, especially an interactive site that customers use goes down for several hours, the corporation hasnt been hurt, the reputation has been hurt, business has been hurt. Somebody is getting hurt. We very rarely with the exception of maybe there was some of the bush family emails came out. Its rare where you see attacks and information distributed, though, in a broad mass way, am i wrong . Things are progressing. At some point. And theyre not going to release them. Im not going to down play it, im surprised we havent had a bigger incident. Or at least one we dont know about. Thats probably. If youre really clever, you will steal 1 trillion without telling anybody. When we come back, we do have breaking numbers on the consumer, we are a few minutes away from the governments retail Sales Numbers. Plus, we have imports and export prices for february. Right now, though, as we head to a break, take a look at the u. S. Equity futures. It was eight days in a row of gains for the dow. If its nine days, that would be the first time in 16 years. Right now those futures are indicated slightly lower. Dow futures down. Hey, this is challenger. Ill be waiting for you in stall 5. It confirms your reservation and the location your car is in, the moment you land. Its just another way youll be traveling at the speed of hertz. And his new boss told him two things cook what you love, and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. To welcome back welcome back to squawk box this morning. We are seconds away from retail sales and import export prices. Rick santelli at the cme in chicago. Rick . Whoa, here we go, stronger than expected headline retail sales up 1. 1, double the expectations. Lets do the take aways. Take away autos, still up 1 . Take away autos and gas up. 4 . No matter how you slice this, at least based on the part of the day that im observing, its strong data. There were revisions to last month. Positive revisions. Up. 1 . Headline stands it up. 2 . Up. 2 less or autos up. 4 . These are good revisions. Lets look at import prices, excuse me, yeah, import prices month over month. They are actually a surprising number. Im doublechecking this, up 1. 1 . The reason im doublechecking it, that looks a lot like the retail sales number, its up 1. 1 month over month. And its down. 3 yearoveryear. So, you know, a little bit of a surprise on the strength of retail sales in my mind, import prices are up somewhat makes sense. But we have to remember there was a lot going on in the energy complex. If i look up at the boards, looks as though the dow which was, you know, its definitely making a bit of a move here about unchanged now the dollar index up a bit. The euro versus the dollar below that psychological level of 130, i dont know, maybe im the only man in the room that thinks 130 is going to be frequently visited like another area, 2 , which we just sold off of in terms of price. Movement up. Thanks. Thinking the revisions a good thing, no . Yeah, its a very good thing, in fact. It really settles the huge debate that was out there over the consumer and the potential impact of the payroll tax increase. Now, i do see absolutely. A massive increase in gasoline station sales up 5 , but it was up at grocery stores, up at auto dealers, down at department stores, restaurants and furniture stores. That sort of discretionary stuff. What i am looking for and dont have in front of me is what they call the control group, an exautos up. 4 . Thats decent, rick, considering what was out there. There were guys out there predicting that would fall. The positive revisions to january tells us that was not a fluke. You know, i hate to say last month was changed up. 3 in that control group. What was the control group last month . Last month it was originally up. 2 , now up. 3 , and for this month, were looking for. 3 and its up. 4 . The implied open is now positive. This is game changer. If there was a doubt about where we were, the levels of the market, it was because of doubts about the consumer. And the effect of the payroll tax. There were guys that were saying and i was among them. Especially at the low and middle income groups and saying, you know, this doesnt affect the consumer. Especially after what we heard from walmart. That scared everybody. That was confirmation of what the expectation was. This says that housing trumps the payroll tax. And other things happening in the economy. I have a chart on this, scott, of course i do. And the consumer question was this going in. The payroll tax hikes, there has been some patchup, jobs market gains, housing certainly definitely should have been there, scott. Thats really what and i think the bottom three are trumping the top three at this point. And i dont know if i can give an allclear, always afraid to give an all clear on manager like this. But its hard for the guys who were negative on the consumer now to sap you know what just you wait now for march. Now the refunds have caught up. Two weeks ago they were running behind, now thing theyre caught up or maybe a little bit ahead. And if you can persist with these job gains and these income gains, i certainly think this backs up the market and where the market has gone here. I wonder what happens. Rick, like the dollar now, are we going to have to be cognizant of what the dollar is going to be doing every day if a stronger dollar will be in our future and what that means for everything, earnings for the market itself . Well, you know, i have two issues with the dollar. The first issue is ive never subscribed to the fact id like a lower dollar because it helps exports. Id rather have an appreciating dollar. I look at the dollar as kind of everybody in this room has stock in our country and its called dollar bills. The second issue is, we could debate it all day long, but i think the dynamic of the strongest dollar at least, for example, based on the dollar index going back to the summer is really more of a function of some of the anxieties in europe, the uncertainty in the uk economy, the japanese besting ben bernanke at his own printing game. I guess even the latter is still a positive. It underscores that things are wrong here, things are wrong here, things are wrong here. Less things wrong in the usa, and i think thats the dollar trade, i just cant get worked up over it. But things like retail sales being strong, legitimate positive, you know, well watch. And that is boosting the dollar and thats the kind of reason i like. I dont see any particular benefit to a strong dollar. I think what your basic story is this country wants a massive current account deficit that argues for me for a market based lower terms of trade, which means a lower value to the dollar. I think the dollar becomes this emotional issue, becomes a national issue. I think you should divorce yourself from those emotions and say you know what, it ought to be what its set at given our terms of trade. Whats happened is weve lost manufacturing to overseas competitors and that argues to me, ultimately the economy could benefit from a weaker dollar americans steve, the economy benefits manufacturing from energy. In part, in part and that would also, by the way, tend to boost the dollar if we export additional energy. The point, rick, i was going to make is that americans get by and large the vast bulk of what they purchase in the United States. French wine, a little bit more expensive, our terms of trade you think theyre fooled by the fact that the dollar gets weaker they dont notice it because they dont take vacations . Mostly not, mostly not, rick. The average american is not all that impacted by the dollar. Especially when you have a vast swath of the entire world pegging their currencies to the dollar. So, for example, changes in the value of the dollar do not affect the value of our imports to china because they essentially manage that Exchange Rate and vast parts of asia, as well. But, steve, the environment we are threatening to put ourselves in here is where the economy starts to pick up a little bit of steam. I know growth is where it is, its weak relatively speaking, but the economy seems to be picking up. The fed is going to be thinking about an environment where the economy picks up, rates start rising and what the dollar means and what this whole equation comes together and what the sum of all of it is. I wouldnt overstate the sensitivity of the fed near term. I think that they see a huge amount of slack in the economy, the jobs economy. I think they look at that u6 that looks at the participation rate, the work of parttime workers, and they see a lot of room for error also look at the inflation numbers, which they believe to be under control now and into the foreseeable future. I think as ive said for a long time, the debate is not about now until september or august. I think, again, were setting up for an interesting jackson hole speech by bernanke if we keep going at this rate. It always seems to work out that way. I think the issue is just the fed by 1 trillion, 700 billion worth of stuff. If that 300 billion is enough to make you nervous, then go ahead and be nervous about that. I think if they end up not doing 300 billion its because you have that additional stimulus or additional strength in the economy. Okay. Rick, thank you, sir. Steve, thank you, sir. Scott . All right. Coming up, were going to continue our whats working series with a list of stocks that could make you some money in the retail sector. And tomorrow on squawk, do you know what mine craft is . Your kids probably do. Youre going to talk to the ceo behind the viral computer game and find out what the company has in the pipeline. And as we head to break, look at futures on the back of that better than expected retail number. It is a different story than what it looked like a couple hours ago and implied open is now higher. Not huge, but nonetheless, a reversal as the dow has put together this string of gains and looks like its going to start this day higher. Twith blackberry hub10 and flick typing. Built to keep you moving. See it in action at blackberry. Com z10. 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 weve been watching the weve been watching the futures this morning. After those better than expected retail Sales Numbers, you did see a turn in the futures. Weve been looking by about down by about ten points or so from the dow futures for most of the morning. Right now, you can see they are in positive territory up by 15 points. S p up by 1. 5 . And yesterday was eight days in a row of gains for the dow. If it ends today in positive territory, that would be the ninth day in a row. And that would be the first time thats happened in 16 years. We got the positive retail Sales Numbers for february, we take a closer look at the retail sector. Our next guest calling the consumer fragile but resilient. At least he was before the numbers came out. Joining us now is retail analyst at jpmorgan chase. Matthew, welcome to squawk. Good morning, thanks. Fragile but resilient. You want to change that . No, i think were seeing underlying stability, but i think the consumer is susceptible to some of the head winds out there, whether its gas prices, the payroll taxes, or weather disruption. I think the consumers still in a fragile state, you know, remains very resilient, but with gas prices are coming down, right . These numbers would suggest that the payroll tax hike is not having anywhere near the impact that some people feared it would. Yeah, it mean so far yeartodate youve seen gas prices up little over 10 . But they are starting to come down, thats the point, right . Theres a little bit of relief at the pump and not as much pain in the pocket from the payroll tax. Apparently. Yeah, it mean, i think it depends which level of the consumer youre looking at. I think further down the spectrum at the low end, particularly at the Dollar Stores and even at walmart, i think youre seeing much greater pressure than you are as you trend toward the high end. Macys presented a couple of minutes ago. They were speaking to a healthy consumer further up the spectrum you go. I think youre seeing a different consumer at the high and aspirational levels than you are at the lower end. So you would advise people to go into a macys right here you think some of the gain has come because of jc penneys pain and some of the other problems going on in that mid tier . I dont think its as much jc penney, i think what macys has been successful at is broadening the Customer Base, thats the general theme across retail that i look for. If you walked into a macys tomorrow, you know, i think youd see a lowend, middle income as well as a higher as well as higher income shopper and i think theyve been very successful at broadening that Customer Base. You know, and i think theres very few companies who have done that. Obviously jc penney disruption over 3 billion in revenues lost, sure, you know, i think everybodys benefitting or has benefitted to an extent. And it looks like that may continue for, you know, for the near term. But i dont think thats really just it. Why is saks your best choice. I like saks because they are launching omni channel, its when nordstrom worked through a couple years back. The integration of online and in store inventory which i think can be really powerful. At the same time, theyve revamped their credit rewards. And saks also has the highest correlation to the wealth effect. If we do see a stable dow and s p here as we head into the back half of the year, i think that wealth effect could begin to kick in and saks would be the highest beneficiary with a. 8 correlation historically to stock market movements. Youre not willing to go as far as to say this is a game changer . Of a retail number. Thats the way it was characterized by our own economics guru steve liesman. Yeah, i mean, the trends weve heard out there in february are not as strong as this retail number for february would indicate. In fact, you know, what we saw from most companies was commentary that in the second half of january, the consumer pulled back a bit. Early february remains, you know, more in a fragile state as i was talking about. We did see some rebound toward the end of february as some of these as some of these refund checks have trickled in. I think the march data could even be better. I think with what retailers are up against is very positive weather last year as we saw a pull forward of spring weather. And so i do think as you get into late march, april may which were actually poor retail months last year, i think the data could get better. All right. Matt, good to talk to you. Absolutely. Thank you. Henry, did you have a quick question . Matt, stick with us. Very quickly, you mentioned jc penney obviously going through a horrendous period. Are they going to go bankrupt . I had a feeling we werent going to be able to get through this without a jc penney question. But you know, on penneys, i dont think they go bankrupt. I think the reality is this turn around is going to take a lot longer than the ceo initially thought and i think most out there. And i think, you know, you probably have the accessing of Capital Markets here over, you know, probably by the end of the first half of the year. I think trends remain very lackluster. For them today. And i think they have a really long and tough road ahead. Could they be a takeover target . I mean, is there anybody out there in the world that would want to take them out of their misery . Would they let them . Weve done the work on the real estate. I think at a high level, you know, you probably have anywhere from 12 to 15 of real estate. The problem is from a debt perspective, you also have 13 to 14 of debt. And so, you know, i dont know. I mean the question would be is could you put new management in . Could you go back to the old model. The reality is the old model was roughly 2 of earnings. So, you know, i think in a depressed multiple which youd be admitting defeat, im not sure how much upside there is to going back to the old model at this point either. Where does that leave you . I think it leads you to some type of a hybrid Going Forward, which i think theyre trying their best to do which is, you know, somewhat promotional model, trying to upscale some of the merchandise and doing the best in terms of driving traffic back into the stores and making the best of the situation they have at hand. All right. Matthew, thank you very much. Thank you. Okay. Coming up, dont start your trading day, of course, without jim cramers stocks to watch. Were going to head down to the new york stock exchange. Hes going to give us his picks. Storm on squawk box, portfolio strategy from squawk market master jay jordan. Hes chairman of notre dames endowment. Plus steny hoyer on the budget battle shaping up in congress. Squawk box starts tomorrow. 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. But at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. Welcome back to squawk box, everyone. Jim cramer joins us from the new york stock exchange. You caught me by surprise when you told people if you havent gotten into the stock market, maybe hold off for now. Eight is enough at this point. The last time it was 1996. No particular crisis, balancing the budget and Interest Rates going down, beginning of the internet, ascendance of the pc and it was as good as it gets and there are a lot of stocks breaking out. Im just saying, you know what . Its okay to wait at this point because when weve had the up Straight Days, 50 have been down and lets just wait its a better entry point. I like watching whats coming up at the rulette table. It hits black ten times in a row and you say hold off on black for a little while . We know from one of the greatest short stories ever that double zero does come up and wreck everything. As you mentioned, the retail sales number was a much better than expected number. Oh, its fabulous. Youve been positive on the retail names all along . Does this make you think double down or is this confirmation of what youve been saying . Walmart says things are good in the second part of february and costco says things are good and the Dollar Stores say its good and jc penney says its bad and why is anyone shocked at the retail sales when autonation says its good. The fact that were shocked is just antiimperical. There are enough companies out there that you can build a bottoms up that would have told you this is a great number. So im not so sure whether the market stays up on this retail sale. If youve done mois moss ache, you would have done this. What do you think of the coach at citi . Its a value stock. Its no longer a growth stock. Coach versus coors. When you get a stock down by coach down so, so much. Were down by 70 . People are rumored that theres private equity and i know when i speak with david that when you get a stock down this way you start getting a best buy feel which means it starts getting adherence. You begin to get some sense like bed bath beyond. Its a brand name, someone circles. Hey, jim, this is a weird one. Carlisle, i dont know if you saw in the news today. 50,000. It is the minimum amount from 9 million. As an investor, what do you think of that . I ran a hedge fund. The government always said youve got to be an accredited investor because these companies can do things that are wrong. I like that concept. Its fees on fees. One, they have the carry. Its 20 and its 1 1 2 and 1. 8, so its fees on fee, but theyre having a problem when it comes to the change in terms of defined benefit versus defined contribution. Thats why i was going to ask jim. You said you like the stock or at least you like the stock better. I like yield. I need to find yield where i can get it. These guys, the ipo market is getting very, very good. I feel if they have exit strategies, they can play. I like blackstone very much. I think blackstone is a dramatically underrated stock and i know we had schmarz on the other day. I want these higher yield look, Goldman Sachs upgraded big today with fortress investment. At that point, anybody can get upgraded. All right. All right, guys, well see you in just a few minutes. Look forward to it. Coming up our guest hosts this hour have been curtistis arledge, and Henry Blodget the ceo Henry Blodget and well give them both the last word squawk box returns. Ready or not, the stock of the day is coming up. Youre watching cnbc, first in business worldwide. I remember the day my doctor said i had diabetes. Theres a lot i had to do. Watch my diet. Stay active. Start insulin. Today, i learned theres something i dont have to do anymore. My doctor said that with novolog® flexpen, i dont have to use a syringe and a vial or carry a cooler. Flexpen® comes prefilled with fastacting insulin used to help control high blood sugar when you eat. Dial the exact dose. 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