Transcripts For CNBC Squawk Box 20131021

As for earnings central, mcdonalds results will be in the spotlight. 8 00 well expect those numbers. It will be a busy week on the economic front. A number of key numbers. The september jobs report. Thats right, on tuesday we get that jobs report we were supposed to get a couple of weeks ago on a friday. Also, well get last months Consumer Price index and then september cpi on wednesday. Our economic newsmaker of the morning on squawk box, Charlie Evans will be joining steve leaseman in a cnbc exclusive. Joe. Thanks. Back to our top corporate story of the morning. Jpmorgan coming up with a settlement. This is mandatory reading. Im going to talk about it later. Well let you do your report and then well talk about what it means. And then we can go for it . Then we can go for it. After weeks of tense negotiations with the government, jpmorgan appears to be very close to a resolution to the tune of about 13 billion, which is a bit more than expected originally. In a phone call friday night Jpmorgan Ceo Jamie Dimon agreed to the elements of the pack with eric holder that would wrap up the civil phase of a Justice Department investigation into a number of its past mortgagebacked securities. The deal which would also settle outstanding claims by the federal Housing Finance agency and the new York Attorney general, eric snyderman, will carry a record settlement amount for the doj and would take an astonishing amount of money off of j. P. Morgues balan jpmorg Balance Sheet. The balance will go to the Justice Department along with a payment to new york state. A substantial settlement has been in the works for some time now. Something jpmorgan acknowledged by boosting its legal reserve by 9 billion in the recent quarter after what dimon described as escalating demands for penalties. So the magnitude of the settlement while high may not take investors by surprise. The problem is the continued uncertainty with what may happen with this criminal aspect of this suit. Thats something, joe and becky, they were not able to resolve as something they expect in the coming days and maybe even week. J. P. Doesnt have much choice as pointed out. If dimon were to fight the charges at this point the screws would get turned even harder. The journal makes the case that a lot of these banks are now really almost utilities and the real lords of American Finance are eric holder, jack lew, and the boss in the white house. Dick parsons wrote a piece, too. Dick parsons piece is that next time theres a systemic crisis, good luck asking some banks to buy the weaker players because of the liabilities they might incur. This was mostly bear stearns in the first place. Although there is some legacy jpmorgan that are wrapped into this. Well, who are we hurting here . The shareholders are going to lose half of the half of the profits that the bank made for an entire year. It will also be tougher to get credit. What it accomplishes, i like the analogy the journal is giving it, will put stakes on the head. The last guy andy brewer didnt bring any criminal charges. He got so much flak from the left theyre not bringing any charges against dont have any ceos so now well get it in money. See what you think of these, kate. The truth is lenny brewer didnt indict bankers because the crisis was a result of bank fraud. In fact, it was a result of classic credit panic caused by bad government and bad government policy coinciding with the rational exuberance, rational exuberance to bankers who were responding to the incentives forex ses sieve risk taking that the government created. If you want to get to the crisis, you have to arrest barney frank. The journal, a lot of times its called the morgan shakedown. A lot of times the journal doesnt pull punches, but in this case and then you have dick parsons, right, across on the other side of the fold talking about youll never have anyone help next time. I dont know. I know where youre coming from. Im trying to talk a lot. You know where im going to come from. I have a pretty good idea. I think theres no doubt that the government has jamie dimon over a barrel here, and one of the interesting analyses i think for us today is you saw a little bit of this in the new york time and in the journal he had to make a 180 from sticking it to washington, talking tough, to being more conciliatory. There was a call from him to eric holder in late september that reversed the situation. It was leading to a News Conference for public charges against jpmorgan by the doj. We had a truly devastating financial crisis in 2008. The American Public wants heads. I dont think its on the part of the regulators or the doj and eric holder to bring hard charges. Maybe its too little too late. These are astonishing numbers. Thats total crap. Saying that the mob outside the castle with the pitch forks deserves to go in and get the people that didnt do anything and tear them limb from limb because it feels good, thats ridiculous. Anyway well, in terms of barney frank here, heres the question. What about the derivatives that ended up biting us in the bottom in 2008 as well . There were attempts to regulate those time and time again and thats another missed opportunity arguably. He said it the best. He was surprised that they didnt use soarbane oxley. There would have been players more centrally involved. The entire government the entire government wanted us to give bad loans to people to build up d you know, to get to 70 on housing ownership and ironically jamie dimon saw this coming which is why he wanted to pay 2 a share for bear stearns. He thought the legal liabilities of purchasing a company with that much mortgage exposure meant they were probably close to zero because he would be paying out in legal exposure down the road. He was absolutely right. Poor fannie and fredie, they had no idea. They were shocked that some of those loans werent going to be paid back. They were setting the standards, thats for sure. They certainly were. Im not saying its one party or the other. It goes back to the clinton administration, the american dream, owning a home, and everybody using the piggy bank of the Home Equity Loan and flipping california real estate. Kate, thank you. Youre welcome. The wall street journal on the reporting side, reporter side. I was a wall street journal reporter. I know you were. I called you a rook. You might as well be at the New York Times. Lets bring in jacob frankel. He has an interesting perspective. Hes a former prosecutor and an sec attorney. Jacob, im really eager to hear what you have to say coming from the sec background, coming from a prosecutor background . Is this the right deal . The short answer, its absolutely preposterous. Its almost as if what were getting now, federal regulators, the Justice Department, sec, is a roulette wheel or whether he hit some kind of jackpot. How much can you jack up the fines. Fundamentally here you can understand if its about trying to make the mortgage holders whole or i mean, where theres a logic to the number. Here you have 4 billion to a plaintiffs claim that was brought on behalf of the federal government, 4 in collections to improve things Going Forward and 5 billion in penalties. At some point Corporate America is going to say, you know what, we just want to pdont want to the u. S. Capital markets anymore. Now what comes on the heels of a Government Shutdown, a 13 billion fine against one of the biggest banks which in essence is being penalized. Is it a shakedown, jacob . Theres no question. The pattern logically leads to that conclusion. The journal editorial is dead on. To say its a shakedown, the fact is you do have an agreement between the parties in the sense of jamie dimon and eric holder having negotiated a settlement. You do have very experienced lawyers on the bank side who really understand this process. Okay. I was going to say, what the bank needs is closure and unfortunately to get that closure it needs to write a really, really big check. This is unfair to wall street. Where is the money going to go . The journal also points out that the charges relate to the mortgage security. Those were the big institutional investors. Well see how many big buyers get any relief. The journal makes a point that we really want to see in the administration how many checks arrive from this settlement in swing congressional districts before the 2014 election in the house. But thats actually part of the problem. Advocacy groups, friends of the you know. I mean, unfortunately the shareholders of the large institutions themselves arent institutions so it really is this notion of heads on stakes public clam morgue. The cases should not be brought bus of public clam morgue. There is evident and facts and i believe that for jpmorgan writing this, they should have closure. They dont. Theyre not getting a nonprosecution agreement. I do think the lawyers are making a good assessment, that we are not going to see a prosecution of the banks. I think what you have is you have this perception being created although i think the cooperation has been all along to really root out those individuals. Ultimately when we talk about any type of corporate liability, whether it be civil or criminal, its because individuals acted a certain way. Its fair to say hold the individuals accountable but dont penalize the shareholders. Dont pemlize the corporations and dont incentive advise the government to continually raise the stakes and raise the numbers. It used to be on the pennsylvania turnpike they would say, okay, the fine is x if you speed. So, okay, its worth my while to speed. The fact is, thats not the case here. Now what you really have is creating a fear factor. I dont even think that analogy works because if you were speeding, you know the fine is going to be 200 of your money that youre paying. Exactly. If youre paying shareholder fees, thats not your money, its not going to start somebody from doing it again. I agree on you for going after the individuals. If you want to stop this behavior, go against the individuals that have done something wrong and prosecute that from something not happening in the future. And dont penalize the shareholder and the bank. Everybody is playing with monopoly money, too. I have problems with this on two counts. One in the idea that youre going after the money because you think you can get the money, whether or not you have the case. Second, with the penalty thats being paid is not something thats ever going to stop somebody from doing anything thats ever been done wrong because its not their money. Your analysis is exactly right. Joe, back to your point at the beginning as well, which is the journal item. It did not really hit the issue on the head. This is a bad precedence. Try fighting the government. I dont want to talk about this. If you get in an audit, try fighting them. Try saying youre wrong. You cannot fight city hall. Thats an old expression. If i were jpmorgan and had these guys in this position, id be going im afraid i would do the same thing. Its like arguing with a policeman on the spot. Right. See how that works for you, getting smart with a state trooper. Becky and joe, youre both making the exact same point, and its a great point. Which is fines like this create a disincentive. Its a disincentive to take away from fighting for a fares solution. Its not an evening playing field. At some point growing members cant do that. You have a Major Corporation saying, again, why should we be public . Lets go private and minimize the risk. Right. I think this is a dangerous precedent being set m washington. Jacob, thank you very much. We appreciate t. We will talk to you soon. Thank you. Time for the Global Markets report. Ross westgate is standing by in london. The nfl didnt play in london which you didnt have any college football. You didnt have any nfl. The world series, you didnt see any of the boston series or detroit. Was there anything on tv . Downing ton abbey, soccer . Soccer, futbol. I dont know how we get through the weekend. That was my point. Maybe you go outside and get activity. We had wow, what a weekend for us over here. Im not rubbing it in. You have a great country over there. Okay. We did okay. Were okay. We have some things to keep ourselves amused, joe. Thank you for the concern. I appreciate that. Yeah, here we are. First trading day of the week without nfl in europe, and we are going to get three regular home season games next year at wembeley. No major moves at the beginning of the week. Overall investors are fairly cautious. Like the United States, the s p is reporting big heavy earnings here. The footsie ftse down. Lets kick off with philips up 6. 5 on the dutch exchange. Ongoing head winds will affect sales growth but the key point is they beat expectations. It tripled its Third Quarter profit. S p, big competitor oracle stock giant stock up 6 in frankfurt. Net profit up 23 to 762 million euros. Mainly because it has declining costs. But this is another company, s p, thats coming out and talking about the strong euro beginning to be a head wind. Software Company Warning that Exchange Rate effects could hit its Fourth Quarter Revenue Growth to 5 . The dollar below the 137 level. There are companies coming out saying its a bit of a problem. Rbs, down 5. 28 . Seriously considering breaking up the banking into good and bad banks. Thats around about 3, 4, 5 years too late. Of course impacted by the settlements from jpmorgan as well. So the Banking Sector is extended to rbs today. Thats some of the key stories around europe. Back to you guys. Rugby . Rugby. Rugby. Like professional teams that people follow and have standing . Really . Yeah. Yeah. Let me ask you a serious question today. Do they wear those rugby shirts . Do they wear them . You know those rugby shirts that we can buy over here. Do they wear them . Yes. That is a tough yeah. I cant say i was a with less padding. I would get squished. Youd need a blotter to pick me up. They dont play on astroturf, they dont play on your collarbone theres one thing, joe, they play on artificial pitch. Your clavicle would be shattered. Yeah. Especially its a new type of artificial pitch. It has give in it. They dont wear equipment. They wear a jock, thats it, man, thats it. Never mind. Ross, thank you. People are called jocks when theyre sports greats. Nothing wrong with mentioning that. Just the image. Thank you. Thats your problem. Get your mind out of the anyway, stocks rally into the end of last week after washington took the Government Back to work. Joining us to talk monday morning strategy is david joy, ameriprise financial. Chief market strategist. Mark vitner is wells fargos economist. In retrospect, i like the way the market acts, david. I sort of feel the 85 billion. Is that it . I mean, its helping, isnt it . Money does find its way in the equities. Earnings are okay, but were talking about maybe not tapering now at all this year. Maybe not, you know, early next year. That helps the equity markets, doesnt it . Well, apparently so. I would have thought that there would be some ramifications to the economic shutdown. Obviously it has stinted Fourth Quarter gdp. The market seems to be looking right through it because the fed is still on the job and because weve bought a little peace in washington. I would have thought we would have had the trading opportunities. The market adjusted. We he did. Weve had nothing. The fullback to where people said if we get 5 or 8 , i want to get it. Then it looked like there was going to be a sell on the news the day after but that was mostly ibm. I think the s p was way up that day even though the dow barely made it back. We even get a sell on the news. No, we didnt. I think, you know, the lesson here is you maybe still get a trading opportunity at some point in the next few weeks, month, but if youre a longterm investor, clearly markts looking over this speed bump. I think you have to stay the course. I think equities will go higher over time, absolutely here. Mark, lets subtract some i dont know. How much do you subtract from what happened off gdp . Then thats sort of a Rearview Mirror look at gdp. Do we do 3 next year . I dont think we do 3 . We think that the loss to gdp growth is around. 3 . 3 . 3 . Thats the midpoint of the range we thought it would fall in. The shutdown began on the first day of the quarter. We have the whole rest of the quarter to make up for any lost activities. I dont think its going to turn out to be all that much. Next year i cant see how things are going to get better. The idea that were going to get a taper at some point next year. Then growth will ramp up to 3 . That just doesnt add up. I think somewhere in the 2 to 2. 5 range next year because the estimate is 2. 4. So what does that say about unemployment, mark, coming down . The more we its troubling. Its troubling in terms of parttime jobs getting so common and its also troubling if you look at how many people in the work force, what the Participation Rate is. It seems to be kind of a lousy job market which seems to indicate the fed needs to stay but might never be able to leave. 85 billion a month for a few more months and then beginning to taper. Thats a lot more. Were probably adding another 400 billion of bond purchases by this delay. Will we get under 7 and will it be a real sub7 jobs number . Not for a while. We will get under 7 . They have to back off the Unemployment Rate target, threshold, whatever it is because were going to get there a lot sooner than were going to finish tapering. Certainly well before we begin to raise Interest Rates. Its not that meaningful because we see a huge drop in the labor force interest rate. We are seeing a bit of a rebound for prime rates. They put off hiring late this year and get off to a real weak start next year. Mark, were going to lose you. David, do you have a year end target for the s p . Do you think it continues to go higher next year . Yeah. Ive been at 1650. It looks like that wont happen unless we get that trading activity. I think it goes higher next year. I think it ends up 1825, 1850. Your 1650 has been terrible. You understand thats 94 points . Yeah, absolutely. But ive been invested all the way through. Im at least enjoying the ride. Okay. Good. All right. David, thanks. Mark, like the races, you can all the count on him. I cant tell whats on today. Like bulls, maybe . Bulls. Making that up. When we come back, why some furloughed federal workers may get paid twice. First we have some squawk news for you. Peyton manning did not get the homecoming he wanted in indianapolis last night. They beat denver 3943 handing the broncos the first loss. Manning passed for 386 yards and three touchdowns but he threw a Fourth Quarter interception and he fumbled out of bounds. Now to the National Weather forecast with alex wallace. Alex, good morning. Good morning. Tracking chilly conditions plus the threat for some snow showers coming on in through the mid part of the week. Cold air across the upper midwest, great lakes. This system will dive its way in bringing a few snow showers across the dakotas. By tomorrow moves into the midwest. Wet snow mixing with rain across parts of iowa into illinois. Chicago, youre going to stay chilly. Its a chilly rain. No snow there for you. Check out the temperatures compared to average. A lot of 40s. That includes minneapolis. Thats 16 degrees below average. That colder air continues to sushlg towards the south and east tomorrow. The ohio valley, you get a chance to see sub60 degrees readings in louisville. Wednesday, hits the east coast. D. C. Expected to get up to 70 today. By wednesday, 57 degrees. Its one of those bundle up up and coming days across a lot of the eastern half of the country. Thats your national forecast. Squawk box coming up. More of that next. Welcome back, everybody. Right now its time for the executive edge. This is our daily segment focused on giving Business Leaders a leg up. Usa today is reporting that some federal employees will get paid twice for their time out on furlough. Several states are allowing those who got unemployment can keep their money and the back payment. Its a loophole. Its too complicated to get back some of the money. Forget it. It illustrates the stupid at this of the shutdown. We have these people and you lose the productivity. Then we issue back pay and you have the unemployment. If youre going to do a shutdown, say its a shutdown and not do anything. Keep the people coming in and keep paying them. The total of all of that money. It shows the stupidity. It slowed down the private sector. You couldnt get things like the irs to confirm they had the income they were claiming. It department happen in 95 and 96. They didnt get Unemployment Benefits . They did but they knew exactly they had to pay back the Unemployment Benefits. The law that provided them with the back pay, tvs workiit was w. 4400 filed for unemployment, 1300 took other steps needed to receive a week of benefits and then part of them will get to keep it because they cant go back and try to figure it out. Focusing on obama care and the website. Any i. T. People, they should be sent there . Wouldnt you . I would bring anybody that knows anything. I think they are at this point. They are. Boy geniuses, young people, hackers, all welcome. Come for a seminar. All come to washington and there will be a contest for someone that like facebook. They would sit around and have hackoffs. Supposed to be 7 million in by early next year. Yeah. Some of the state exchanges are running well. The state exchanges, not a single federal exchange is working. I saw some numbers yesterday of who had started. A lot of the processes. Theres Something Like three steps along the way. Right. First you have to sign up, then it has to be verified, then have you to pick the plan. When its all said and done well go and the postmortem is writt written, i dont mean the postmortem that it dies. The launch. How much pressure to make sure you had it there. Once you give something to someone, its hard to take it back. Its a signature deal. We have to get it rolling because once were rolling, then you will never get rid of it. I dont think thats the problem. Even if one person they laid out what he would have done if he were doing it in private industry. The problem is they werent doing it soon enough. A lot of this went live and that was the first they were testing it. Why . Im not sure. Incriminations are coming. It could have been done earlier. Aetna was warning, get your act together. They had been warning them for a long time. Do more. Not just do it, do more. You need to be doing more. They said, no, we havent. Then they roll it out because we want people the problems were earlier when they had time to fix it. They didnt have to launch it if it wasnt ready unless they wanted it there. Once you start it, you cant take it back. The president i think is going to be speaking about this today. We have that going for us. All right. Anyway, in science news, a biological clock finding the young at heart have new meaning because heart muscle, researchers report that most of your body is aging in a koof coordinated way. There are odd anomalies. Your heart may be younger than the rest of your tissues and womens breast are older. Tumors are oldest of all. This researchers might help scientists understand cancer and explain why Breast Cancer is so common. If you look at the way if you use methylation as a way of saying something is old, then you can see how old tissues are. Tumors are old because they grow rapidly and age rapidly . It looked like part of the way cancer is able to make a foot hold is by fooling the biological clock and it continues to thats why when you think about ways a couple of years back there was a way of making an individual cell live longer, the telomeres are like a little fuse that gets shorter and shorter. If you make a cell longer, that doesnt mean the organism lives longer. You make it easier to get cancer. Its tough. A difficult one. I want to see the twitter story. Okay. Everybody quits twitter. You havent quit yet . I kind of have. I only do one thing on twitter. You like to watch, too . You watch whats happening. Excuse me . You like to watch. I do like to watch. Mark cuban thats a news feed, but some people drive me crazy. Then i stop following them. Some people use it actually as work. Our final story on this, as twitter prepares to go public, youre getting more statistics. Some analysts are worrying about this. The twitter quitters. A rating poll says 36 who join twitter, they say they quit. 7 of facebook users say they dont use it. For those of us who use it for work, thats an indispensable tool for work. Facebook i never found anything for work. Rugby world cup season starts saturday. Times in u. K. Im finding that out on twitter. Its a useful news tool. It is. A lot of propaganda from other news shows. Dont you see a lot of propaganda . Yeah. I think if youre looking at reliable sources we do a lot. Its not propaganda. I have to squawk. You can block some of these people. Getting political. Well take a quick commercial break. When we come back, erngs season is about to kick into overdrive. Well look at some that have reported and come back later. Squawk box will be right back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Markets are gearing up for another barrage of Quarterly Results this week. Joining us is sharaz neon. Also the ceo and chief Research Advisor of cal research group. If i had to look back on what weve seen in earnings season, my thought is its been disappointing when it comes to revenue. Some of the top lines. Thats true. I dont think its as systemic as it was in the previous quarters. I think we have seen some decent top line growth with a lot of companies. Its not as broad based and as systemic as it was in the past with negative revenue. There have been some pockets of different strength. Were looking at 1. 5 Revenue Growth and 1. 5 Earnings Growth as of right now. Thats pretty good. Im thinking of big name companies, somebody like ibm who misses by a million. These are High Companies like Goldman Sachs came out with better than expected earnings per share. That stock was down. Cocacola, volume growth was down. More deeply. Thats true. Google on the other side. You have i think its been kind of split. If anything else, the Revenue Growth has been a little bit stronger than it has previous quarters. How would you quantify what weve seen and how would you quantify how the earnings season has gone . Totally uninspiring in terms of not much growth was expected to begin with. Expectations had sharply come down as the quarter evolves and it would be very easy for companies to jump through the significantly lower expectations. What we are seeing now, the companies are struggling with beating expectations. There are some pockets of strength, but in the aggregate what we see is that its tracking to be more than what we have seen thus far from the same companies in the last quarter and the average for the last four. So overall its turning out to be a weak earnings season. What are the pockets of strength that you both have talked about, sheraz . Google is good. Everybody is zeroing in on it. The investment side of ge bodes well for what we could potentially hear from others in the Investment Sector and there is some positive hope in the uptick in the pmi surveys, both here and globally, could potentially provide a tail wind for a group which has been hit harder in recent quarters. That categorizes it as a positive. Overall the trend at least at this stage, withhich is to a la extent leading towards finance is uninspiring. We have a lot of names coming up, 140 on the s p 500. A bunch. Dow components. Mcdonalds towing, boeing, caterpill caterpillar, dupont, all coming this week. Much better earnings this week than last week. Consumer spending up 6 to 8 . Oil prices, in the past a few Earnings Seasons weve faced a lot of tailwinds in terms of a lot of headwinds. I think well face a lot of tailwinds. This week financials are setting a solid mood with Goldman Sachs, jpmorgan the earnings werent as strong. This week you get stronger earnings. A few things to keep in mind, were still expected to earn over 100 for the s p for this year. Another 10 expected next year. I think you look at earnings in context, theyre not as strong as probably weve seen in previous earnings cycles but, you know, things are still starting to get a little bit better on the top and bottom line. Thanks for coming in today. Thanks for having me. Coming up, shares of earnings giant sap. Well talk to the companys coceo. Other corporate news, hasbro is up better than expected. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. 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Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. May, 2014. Thats good. Thats a huge company. Not always american. Will you be the First American to run the company . Yes, i will. Thats neat. Thank you. The worlds fastest data base. An island in hawaii. Just rocket fast and, joe, whats the big difference . It does transactions, analytics, machine to machine, mobile, social. So a ceo can take a complete realtime purview of how their company is running at any instant in any day. This is the bridge to the future that we built for our clients around the world. And youre moving away from fixed location hardware to the cloud . Yes, and i actually need your help on this. I told you everything i know. Heres why i need your help. The transition to the cloud is the move that we started making with the company in 2010. We are now the second largest Cloud Company in the world as measured by revenue. Salesforce, because they were the one in the cloud first and thats all they do. But we do everything now, including running entire enterprises in the cloud. So when i see you say revenue has slowed and your editors have said that. I want to clarify a few things. They know more than i do. So your revenues slow . No, our revenues up 13 yearoveryear. Yearoveryear. And what you see our cloud revenue grew 162 yearoveryear. So were taking the core, which will grow slower and were transitioning the company to be thee, thee Cloud Company. When you think of s. A. P. , youll think big data leader, cloud market leader, Global Market leader and everything runs on a consistent core so companies can perform better. Thats what were doing. Lets talk about just the environment for because s. A. P. Is one thing but the environment youre operating in is another. How is it in this country . Is this your most important market . Well, this, you have to have the United States. We grew 17 yearoveryear in the americas. What is that . Revenue . Thats revenue. 17 in the americas but, again, the transition in the americas to the cloud is unbelievable. Third of our revenue now is coming from the cloud in the americas. Three years ago, zero. How profitable is that . Thats a good question. In the early years, people say clouds are less profitable. You dont recognize it all up front, you recognize it over three years intervals. If you have high renewal rates with cloud revenue, the margins actually accelerate beyond year three. And are you seeing that . Yes. Were already seeing that. Were profitable in the cloud today, but three years from now, well be incredibly profitable in the cloud. Europe, very interesting with europe. We grew 10 in europe yearoveryear. As an example, oracle down five. We love throwing that in. The reason i bring it up is we are doing well even in southern europe, not just northern and compared to other large i. T. Companies, we seem to be doing better than everyone. Weve got to run, but your stock is going to have a big pop today. You close at 73, 75, its going to trade up around 77. 90 or so, its going to be up four or five dollars. I want to say thank you. I want to say we have a great strategy, we put it in place in 2010 and its now yielding all the dividends weve predicted. Because of your leadership, i think. And my coceo and your great friend. Anyway, Bill Mcdermott thank you for coming in. When we come back, two news making guest hosts, one runs a conglomerate with businesses in every part of the economy the other sends Warning Signals about the trouble in the world. Well welcome jim tisch and marc faber. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. Jpmorgan ready to pay. Jamie dimon cutting a deal with the doj to settle probes into the mortgage business. The details and the street reaction. Plus, marc faber and jim tisch, well talk about the debt ceiling and the impact on the u. S. Economy and get their outlook on whats to come. And then we huddle up and talk the economics of the super bowl. Jonathan tisch treasurer of the new york giants and former lineman sean ohara as the second hour of squawk box begins right now. Good morning, everybody. Welcome to squawk box here on cnbc. Im becky quick along with joe kernan, andrew is in hong kong this morning. Well hear from him in a few minutes. The futures this morning have been indicated a little bit down at least for the dow and s p. S p futures off by close to three. The nasdaq up by one point. Jpmorgan, close to a 13 billion settlement over financial crisis. Thats just its a big, big number. I dont care who you are. When it starts with a b and its in the teens, its amazing. Tell us more. Its the kind of headline figure that we used to say at the wall street journal causes yo uh to choke on your cheerios, joe. The 13 billion that jpmorgan is preparing to possibly pay would tie up a number of loose ends for it legally. Outstanding claims by the federal Housing Finance agency, the new York Attorney general and perhaps most importantly the department of justice over Mortgage Securities packaged during the housing boom. It would also contribute about 4 billion to consumer relief efforts. Just as notable is what the amount wont cover, namely the criminal aspect of the dojs ongoing case which reportedly involves a whistleblower cooperating with authorities who is familiar with the mortgage practices. Also leaves out the federal Deposit Insurance Corporation which at least as of friday was not involved in these settlement discussions. Although anything could change as this thing gets put together. The settlement now being negotiated between jpmorgan and the attorney general has been has not yet been finalized, rather, and a few Details Remain to be seen, including what some of the nonfinancial language is. However, it could be a watershed for regulators who have never leveed such a large fine on a corporation. Bps 4. 5 billion payment over the deepwater horizon disaster, for instance, was the dojs biggest penalty ever dwarfing a glaxosmithkline fine not long before. Bank of america it should be noted paid about 8. 5 billion to settle outstanding mortgage issues but that was not with regulators, joe, a group of private investors. Yeah. Its amazing. And then bank of america, man, i mean its what are we doing . Its a lot of money. I think we ought to, i dont know. We ought to be able to do something with all this. Can we cut the deficit or something . Or give the defense contractor some money . This is adding up isnt it . Reporter well, the doj money goes to the treasury, right . And were having issues closing the budget gaps here. I did want to Say Something to your earlier point when we were talking around 6 00 in terms of whether jpmorgan is being punished for helping the financial situation in the 2008 crisis. We were out here in front of their headquarters and someone muttered, bear stearns did this to us. Yeah. Dick parsons was on last week and then he said some of this and i think he thought about it even more and wrote a big piece in the journal today about how this could change the future behavior. I hope we dont need, you know, the banks to help again with to take over for the government. If we do, they may not be ready to take on someone elses liability. They certainly wouldnt do it without the liability. One said its like buying some property with environmental concerns. I dont think its the same because if youre buying a property with environmental conditions that you know are there, its one thing. And the government says please do this. So you will prevent the system from having major headaches. You do it over the course of 48 hours. Whats interesting is your Due Diligence is very limited at that point. We havent introduced you yet. It sounded like a voice in the wilderness. Jim tisch is here, we have marc faber. Very quickly in some of our other headlines, president obamas going to be addressing the glitches that have plagued efforts by consumers to try to sign up for Health Insurance under his Signature Health perform program. Hell do so in a white house statement. The governments going to begin to catch up on the economic numbers this week delayed by the recent shutdown. We have the september employment report. That was the friday number we missed a few weeks ago. It will now be out tomorrow morning, of course, this is a back ward looking number. Dow component mcdonalds among the Companies Set to Issue Company earnings this morning. We should be getting those numbers in an hour. Mcdonalds is expected to earn 1. 51 a share on a revenue of 3 billion. The economy, the markets, winning back the American People and in terms of the government and much more with our guest host. Jim tisch the ceo of lowes corporation. I cant see that tie well enough. But its heartwarming that the jets win and did woody ask you to thats really i know your cousin and you have your moments but this is this is nice that youre doing that. Arent you a giants fan, still, though . Im definitely a giants fan. Look at you, though, because of the patriots. Its like its christmas time here. Weve got a little red going and green. All right. And also in studio, marc faber, publisher of the gloom boom and doom report joining us with their economic outlooks. Jim, nobody has a better gauge on even, i think Global Economic activity because lowes ive got to ask marc to start with. I asked our producers to go back. And im not sure of the month and date when we talked about we were in qe1. And those were the good old days because when they did qe1, they said its going to be six months, this much per month and then its going to be done. And we talked to you about it and you said there would be a qe13, requeqe14. I said it would go to qe99. And this was like two years ago and then by the time qe3 came it was qeinfinity because they didnt put a time limit on it and you were absolutely right. Look, every Government Program that is introduced under urgency never goes away. And temporary measure is always permanent. And in my view, the fed has boxed themselves into position where theres no exit strategy. The question is not tapering, the question is at what point will they increase the asset purchases to say 150, 200, 1 trillion a month. That is the question. At some point, the markets going to react. Yeah, of course. Jamies right, the market has already reacted. At the press conference in september 2012, mr. Bernanke said the objective of qe3 which turned into qe4 was to lower Interest Rates. But what has happened the bond yield on the tenyear touched a low. July 25th, 2012, in other words, more than 12 months ago at 1. 43 . We went to over 3 . Now Interest Rates are easing again. I think we may drop on the ten years to 2. 2 , 2. 3 . Were not going to see new lows in my view unless we have a depression. But what would and jim, you can address this. Because, mark, you say some things from time to time that are incendiary. And its great for us. I like it. I like when you say 1 trillion a month. Just the idea of that. Im not sure that will happen. That would mean this economy is in really bad shape that they would have to increase it that much. And that what theyre trying to orchestrate in the unemployment numbers and Everything Else that theyd be ineffective in trying to bring down unemployment. In my view, he said ben bernanke is his hero because he stepped in definitely with very strong measures, with qe1 in 2008, 2009, in the early stages of the crisis. Okay. I can accept that view. But to have qe at the present time, i think is counterproductive. And they are statistics that actually show that the qe doesnt flow to ordinary people, it flows essentially to a very limited number of people. But they would say would you agree with that . No, i think thats totally but inflation has not been a problem. Why not do it if inflation isnt a problem and the economy too many people are still looking for a job if theres no negative effects we can see yet, you say there will be negative effects. One will be taking off quantitative easing. The fed Balance Sheet has gone from under 1 billion in 08 to almost 1 trillion in 08 to 4 trillion now. It could be taken back in, right . No, but when they take it the quantitative easing is wind at the back of the economy. But when they unwind the quantitative easing, which they will ultimately have to do, it will be wind in the face of the economy. And then it wont be so much fun. Yes. And by the way, when you said 1 trillion a month is impossible, i want to tell you something. I started to work on wall street in 1970. The total global stock market capitalization, all the stocks in the world was 740 billion u. S. , less than 1 trillion. The total capitalization was 780 billion u. S. A big bond issue in those days was 50 million u. S. That was a big bond issue. 75 billion was a huge issue, new issue. You remember. Nowadays, 1 billion here, 1 billion there is nothing. You know, were talking about big numbers today and if this continues explosion of money and you say there hasnt been any inflation in here, in this room, we are the inflation. We are the bubble. We have a colossal asset bubble in the world. Leverage, government, debt bubble. Just consider. The government spends every year in this country 3. 7 trillion. 3. 7 trillion. These are huge numbers and people say there hasnt been any inflation. All right. The other thing going on with qe, back in the 70s, we were worried about crowding out wh e where right. The Government Bond market was enjoying to crowd out all other investment. Well, today all that public money is going every place other than the Government Bond market. Thats whats helping to drive up equity prices and whats driving down Interest Rates. And hurting savings. Thats right. How is just with all your varied businesses at lowes, you would give the economy a i was going to give it a b minus, but ill give it a six or seven. Its okay. But your oil stuff thats going gang busters, does that make up for some of the weaker areas . Insurance is doing very well. The Hotel Business is not too bad. Not too bad. No, no. The rig is great. But you have to understand, its not lowes. Its Good Management of lowes. Its above the average of the economy. An old friend of mine, i can joke with you. Yeah. Thats right. This side of the business. Hows your cousin doing . Hes doing great. But hes a giants fan and not a jets fan like you. Well, well see if hes wearing a blue tie today. Tonight might be the night. I felt that yesterday about the redskins. About washington. I thought that might be and they did beat the bears. Anyway, well be back with these gentlemen in a second. Think of some crazy, i love when youre on. I love to be here. And i would prefer if it was in the evening and not so early in the morning. Normally i get up in the afternoon. I know you do. Lets talk off camera. Were counting down you live in thailand half the time. Yes, not half the time but when im not traveling, im in thailand or vietnam. We have to talk about vietnam. We are counting down to our big interview with Charlie Evans, the chicago fed president , the Economic Impact of the shutdown all the way to janet yellen taking the fed chair. And still to come, a big weekend around the nfl. The bengals taking control in the afc north and andrew luck stealing the show from peyton manning. The business of the nfl with sean ohara and giants treasurer jonathan tisch. Welcome back, everybody, take a look at the futures this morning. Weve seen things under pressure, not by a whole lot. Dow futures down by about 14 points. The maker of brands like north face and wrangler earn 3. 91 a share for the Third Quarter. Also approved a stock split and 21 increase. Were watching tellabs today. And Just Announced 891 million deal. Thats 2. 45 a share. Do you know Richard Parsons middle name . What does it start with . D. This is j. Parsons. Thats not dick parsons . Thats interesting because he said similar things. I know. This guy richard j. Parsons is a former bank of America Executive vice president. The author of broke. But dick parsons. Richard dean parsons. Our dick parsons said some similar things last week. Its funny, yeah. All right, andrew in hong kong today for the first New York Times book conference there. He joins us with highlights. Great to see you this morning. Hey, becky, i miss you over there. A couple take aways, given conversations ive been having around town here in hong kong. The first is for all the conversations weve been having around the table recently about our standing, the u. S. Standing in the world, the treasury and whether people will be buy treasuries and whether they trust us and whether the circus in washington has had any impact. Oddly enough or maybe not so oddly, it seems, actually, people in hong kong here, the Financial Professionals actually look at what happened in washington and dont think much of it which may come as a surprise. At least a surprise to me. That was a big issue here and i asked everybody and nobody seemed to bat an eyelash. The other big issue this morning, jpmorgan chase, the 13 billion settlement. One issue important in china, is the Ongoing Investigation by the sec into whether jpmorgan has hired the sons and daughters of politicians to gain business. Everybody here seems to think it happens a lot and maybe even more than you think. But they all think its not a problem. Wade christianson the ceo of Morgan Stanley china and heres what she had to say about it. First of all, the kids have to be confident. They have to have the right background, the right skill sets to be hired. Second, the process has to be followed. And it has to be transparent process. A lot of people have to interview them. There has to be a majority vote. And third, you cannot do anything specifically different and special for these kids. If you follow these rules and i think youre fine. When i come back in the 8 00 hour, im going to bring you comments from Hank Greenberg who had some very interesting words about the Jpmorgan Jamie dimon situation. This, guys, is an ad in the International Herald tribune for squawk box asia. Theres me and bernie lowe. And i will be hosting the show tomorrow morning right here from hong kong. So were going to transplant for the day. Apparently im told, theres im told theres posters and other things, someone said they saw a picture like this in the airport. I havent seen it yet. Im going to go take a look. Back to you guys. Is it in hong kong . Where does squawk box asia . We should know this. I havent been over. Its its in hong kong. And im going to do it with bernie lowe and do a couple hits during squawk and im going to be on their version of the call a little bit later with bernie, as well. Do you find that to be . Could you move there . Is it a livable city . Are you this is you know, keep my seat warm but not too warm, im coming back. I like it here. I also you know me. Im a new yorker. I know you. We had a great time here. And you got lets see, New York Times, international New York Times, deal book, New York Times, international, youve got wheres too big to fail . Maybe you could just hold the book up while youre well, no, and we cant we cant show you. Im told itll pixulate, but there are cnbc signs. Theyve been broadcasting this. All right. Youre with cnbc. And were proud. Were you know. Hes ours. Were very proud. Anyway, ill see you in the next hour. Coming up, dimons deal with the doj and street reaction and find out what it means for jpmorgan. And check this out. Its the huddle shuttle. The Super Bowl Committee recently kicking off a mobile tour in a new york, new jersey area. Jonathan tisch will tell us. Its in new jersey, im sorry. Its the new jersey super bowl. Im sorry. Time now for todays aflac trivia question. What does the word groke mean . The answer when cnbc squawk box continues. O run your lines . Okay, who helps you focus on your recovery . Yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. [ under his breath ] hate it. Helps you focus on getting back to normal . [ as a Southern Belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. Uh huh. [ under his breath ] i am so fired. Youre on in 5, duck. [ male announcer ] when youre sick or hurt, aflac pays you cash. Find out more at aflac. Com. With my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Now the answer to todays aflac trivia question. What does the word groke mean . The answer, to stare at somebody while hes eating in the hope hell give you some of his food. Okay. Up next, jpmorgan close to a deal with the government to settle probes into its mortgage business. Well find out what it means for shareholders. And then we add another tisch to the mix, jonathan will join us along with super bowl champ and pro bowler shone ohara. Well talk Business Conditions and football. Squawk box will be right back. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Welcome back, everybody. Take a look at futures. Dow futures down by about 14 points. In our headlines this morning, at t is on the rise in the premarket trading, up about 5 billion by selling or leasing. Its raising nearly 5 billion by selling or leasing 9,700 wireless towers. Upbeat on the economy but not so much unemployment. Thats how economists surveyed by the National Association of business economics are feeling these days. They say theres a good chance of Rising Economic growth in 2014. But only 37 expect to see more jobs at their companies that is down from 39 in the prior year. Gasoline prices down 2 cents over the past few weeks. This is the average price now at 3. 36 a gallon. The cheapest gasoline found in albuquerque, new mexico at 3. 03, the most expensive in San Francisco at 3. 81 a gallon. Oil now below 100. Wti. Wti broke 100 for the First Time Since july. Thats pretty amazing. Thatst going to be one of the tail winds that other companies see when it comes to earnings. But with the crude oil prices coming down so quickly, thats a stunner. Well the question is how far down does it go . My guess is it wont go much below 85 because production starts to dry up. It costs that much to find that next barrel of oil. Okay. I dont know what that says about the global economy. Sounds like we need more qe, doesnt it . More. It also means were finding more oil. Yeah. This is jpmorgan, theyve been inching ever closer to reaching a record 13 billion settlement with the fha. Joining us more to talk about it is eric robinson. And weve been trying to figure out, what does this mean . Should they sell at this point . Is it too late . What happens . I actually think that a settlement when its finalized to understand the parameters and the terms could be a cathartic event for the stock. Even if the criminal probe is not finished up at this point . They still have the option of taking a look at any criminal charges. Yeah, well, i think thats why its important to understand whats covered, whats not covered and what remains outstanding. Right near a high, right . Its 2 off a high. And thats a high is that an alltime high . I didnt go back far enough to see. Pretty close. Its pretty close. But also, this is a company with tremendous earnings power. When you backed out the charge, this was a company that earned north of 1. 40 in the quarter, heading towards 6. In an environment that isnt strong. I think theres a disconnect here between the underlying fundamentals which we see are reasonably good given all the challenges in the world today in qe and all the other issues. And this litigation issue which clearly is the major overhang which not only compressing the earnings, but also the multiple. But the risk isnt reflected in the stock. Is there any Reputational Risk to jpmorgan and jamie dimon . Its trading at a major discount to its peers. Where do you think it would be without this overhang . Well its about a two hch point discount, that kind of tells you to trade that level of a discount. It mean, the markets kind of telling you what theyre taking a point or two off for that. And what do you think the scale of the cost of some sort of criminal element could be . Id hesitate to speculate. Again, without knowing the parameters of whats left out there. We know very little of whats being investigated. Youre not sure. You have to get the details before you decide this is something that clears up the issues for you with jpmorgan . Yeah, i think the markets focused on two things. One is obviously the dollar cost. Six weeks ago we were talking about 4 billion, and two weeks ago, 11 billion, this morning were talking about 13 billion. That seems relatively well bounded by the 23 billion of litigation reserve they disclosed. Whats the criminal activity were talking about. The two bear stearns guys was that the most glaring possible criminal case thats already been brought . And what else is there . What are we talking about . Yeah, i mean, i wish i knew. Id have a better answer for you. I think the other issue the markets focused on is what is left out of this agreement. And to the extent we know very little about what that is, its hard to speculate. They tried to get the bear stearns remember, the mortgage guys, that was the most glaring thing. They were unable to make that stick. Yeah, i think why are people worrying about a criminal case theres nothing there . I dont know if there is or isnt. You dont know what area their business . No, all we know from their disclosure, its outstanding, being run by the, you know, the sacramento the attorney general in sacramento. I think the issue is, you know, what what remains unresolved and what time frame can it be resolved . What about other major banks . Should we worry theyll be the next one the government turns its sight on. Were hearing the fha wants 6 billion from bank of america, do you have issues or concerns about any of the other big banks . Clearly the industry is at some stage or another with settlement on some authorities. Either as a consequence or as a consequence of their mortgage banking activities. Should investors feel comfortable buying these stocks or not . Were broadly pretty neutral on this space because it looks fairly fully valued. But there are certain names where we think theyre undervalued and thats where we would concentrate. How would these settlements affect the requirements. The good news its massively overcapitalized by a standard to the extent thats still being sort of an evolving standard. Its less of a capital issue. Its much more of an earnings issue because of the continued payouts as we saw with jpmorgan. 9 billion took them down to about zero earnings but didnt affect the capital position. Eric, thanks for coming in today. Thanks. Coming up, two men who know a thing or two about super bowls, shaun ohara and jonathan tisch. The markets are waiting to hear from the fed. Well, wait no longer. Wow. Fiery and outspoken chicago fed president Charlie Evans will join us. I mean, all the fed guys are wild and crazy. These guys really wild and crazy. Squawk box will be right back. train horn vo wherever our trains go, the economy comes to life. Norfolk southern. One line, infinite possibilities. The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Help the gulf when we made recover and learn the gulf, bp from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. Checking the futures this morning, weve seen that, yeah, things are barely budging this morning. Dow futures down by ten, nasdaq up by 4 1 2. The Government Shutdown extracted a steep price from Industries Like travel and leisure, an estimated 152 million. Here now is jonathan tisch, cochair and chairman of lowes hotels, also the chairman of this years Super Bowl Committee and the treasurer of the new york giants. Also with us is shaun ohara, former lineman and an analyst at nfl network. You never met Vladimir Putin because you still have your super bowl ring. I do. I do. Youre going to have to pry this from my kung fu grip. Can i see it . No. Your reputation proceeds you. I know. Jonathan, thanks for coming in. Thanks, joe. One little correction on your numbers. Yeah. That was 152 million a day. Okay. 2. 2 billion during the shutdown. That doesnt help anyone. And tonight im hopeful. Were all hopeful. We are 06, it has not been a great start. But the team is very focused. The players are upbeat, great coaching staff. He worked for coach. You know whats going on. And some people dont like what you say youve been a little bit outspoken. Is it elis a great quarterback. Is it the line . Whats the real . I mean, of course its ease is sy have they called you . Im not going to say that. Im not going to say that. You know, its really just the ultimate example of how tough it is to win Football Games in this league. And weve all seen that, you know, they make mistakes, you know, and its easy to say its on eli. But i look at the defense too. The jets have a rookie quarterback and hes throwing interceptions and theyre finding ways to win games. Its a collective effort. Its never all on one guy. Its a team concept and you mentioned tom, hes one of the best coaches to coach the game. Its very frustrating, i know for myself as a former player, even more so to see this type of performance. But i think tonight, i think they turn the season around and get that first w against a team thats starting a quarterback in josh freeman. And your jersey im a jersey guy, yeah. Everything, new york its a little irritating, isnt it . They hate jersey all the time, make fun of it, but newark airport, oh, thats a new york area airport. The super bowl this year, its going to be in the new york area. Its in new jersey, is it not . Yeah, its in new jersey. Im shocked you were able to get john to come across i know. Both of these guys. Both of these guys. Both of us were born in new jersey. He breaks out in a rash every time no. No. Governor christie has been great, governor cuomo, mayor bloomberg. What have they got to do with anything . I just said this. Played in new jersey. The practices will be in new jersey but the hotels, the restaurants. The meadowlands, the game is being played in new jersey this year. Youre doing it again. Im not doing it again because were the people theyre going to stay everywhere. All right. I dont know where i am. The thing youre confusing is the fact theres a super bowl game but then the super bowl week. And i think thats really the biggest part of the super bowl. Everything leading up to the game. I mean, for the players, youre so focused on. You dont realize whats going on but for the fans and the teams coming out of state and coming in. They want to come to a great hotel. There are more of them in new york city. Is there is there a lowes in new york . Thats right. I forgot about that. January 16th, the lowes r e regency hotel. The huddle shuttle, thats one of the innovations the Host Committee came up with this year. Its going to travel to both states. This is a chance for the young people for fans of all ages to really engage with the game. The day of the game only 82,500 people are going to be able to sit there in Metlife Stadium and watch. Here they have a chance to look at the super bowl trophy, look at elis locker room, do some drills and theyre really engaging in our huddle shuttle. It has been very well received. I want to ask you about what happened with the Government Shutdown. You quoted those numbers, 152 million a day that ate into tourism and leisure. Did that come back immediate lip when the government reopens . Or is that going to take time . Its going to take some time because people are rescheduling their trips. The people that got hurt are the mom and pops who are operating hotels and restaurants outside our nations parks. Theyre the ones who took a big hit. Also, there was some International Press that hurt us. People internationally put off trips and that International Traveler is so important for us. They stay longer, they spend more money. It is going to take some time for them to say, okay, the government is working now, my trip can take place as i plan. Its going to take a little while to rebuild that. Particularly when you have the deadlines pushed off to january and february. Do you think itll come to the same sort of fed or are you convinced that washington will im not convinced about anything in washington. But for us to go through this again in two or three months is going to be a problem for our industry. Our industry created jobs faster than any other segment since 2010. And we still have the ability to do that and thats why the International Traveler is so important. We have to make sure they know government has reopened they can take their trip. You want to weigh in on that too. Its not just the Hotel Industry thats affected by the Government Shutdown. Its all industry. Its our Business Confidence and consumer confidence. Its a sense of not knowing what direction the governments going in what taxes are going to be, whats spending going to be. Creates tremendous uncertainty. Puts a big head wind to the economy. And i hope that they the politicians on both sides of the aisle decide to go with statesmanship rather than partisanship because thats the thing i really think is going to help us get out of this mess were in. Do you expect, either one of you that theres a big deal that will take place . The wall street journal points o out that the president could have trouble with the progressive wing of his party that they dont want to see anything done to Social Security or any of the other entitlements. Theres absolutely no reason to think theres going to be a grand bargain. Its been talked about for the past several years. Its never happened. Id just be happy with a small bargain. Something to get us through the next year. And then once confidence is built up among the sides, once the rhetoric comes down, then maybe they can sit in a room not on the stage but in a room and negotiate rather than giving speeches to their bases. Jonathan, youre the treasurer. And you you were right about the 150 million. Do you know like actual numbers about gambling and how much is done on the super bowl . I do not know that. The number that we use is about 500 million to 600 million. Thats just for youre not talking gambling . No, im not talking about gambling. Thats not my area of expertise. We dont use that word. I wonder per week, i wonder how much is legit in vegas and Atlantic City and other places. I wonder how much is done with youre going to have to do your own research on that. I cannot help you. Which would be another, you know, from what i hear about jersey, pretty good place for gambling too. You know what im saying. I do not. You do not. Youre speaking gibberish right now. Im speaking gibberish. Can you well, youre a jets fan. Do you youve had something to bet on this year anyway. I was going to say, is it gambling or betting . Is it gambling or betting . Depends on whether youre calling, you know, your bookie or placing a legal bet. I think denver is the favorite. Denver lost yesterday. I know they did. Ill take the colts. You want to bet . Im a bengals fan. I will bet against the bengals winning the super bowl, ive been a fan for long enough im not crazy at this point. Anyway, gentlemen. All right. Good. Are you crazy . Let me see that. That is cool. Thank you very much. Wow. And theyre all different im faster than i look. You are. I dont think you could take it back from me anyway, to be honest with you. Commercial break. Oh, yeah, there it is. Hes really a giants fan. Yeah. Thats right. All right. Guys, thanks, appreciate. Whats wrong with the lowes new jersey . There is land out there. We had one at one time. You did . Yes, your family comes, the First Business was in new jersey. Thats where we started. Started out in the pines. Wheres the attitude now . What do you mean . No, im kidding. Thank you, and jim, youll be here for another 20 minutes or so ten minutes. When we come back, well talk about marc fabers next big prediction. His final thoughts and well hear from jim tisch one last time. At the top of the hour, Charlie Evans joining Steve Liesman. Check out oil this morning as jim was talking about earlier. Back below 100, 99. 74 for wti. Well have more on whats moving this and more when squawk box comes right back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Joining us right now for the last word is jim tisch the ceo of lowes corporation, also marc faber. And jim, we have not talked enough about your business and what you see. Weve talked about the broad story. But with oil prices coming back down, what does that mean for the oil parts of your business . For the energy parts of the business, i dont think it means too much just yet. Oils been hanging between 100 and 110 a barrel for the past three months. Im not concerned its going to go down to 50. Is it coming down because of Economic Activity and concerns around it . No, i think its actually coming down because were so successful in generating new supply. So its not demand as much as it is additional supply coming on the market. But when we were off camera before, you said its what 85 a barrel and thats when the production here in north amer a america. 85 a barrel, youll see drilling start to dry up quickly. Can i ask faber one more thing . Do you think the wealthy people in the world will eventually lose 50 of their wealth . Yes, the question is from what level. You know, do you have 1 billion maybe goes first, 2 billion or 3 billion. What you have today you will not necessarily lose half of . I think its not likely but from a higher level. But you understand. Whats your basic reason . You said earlier there is no inflation. Inflation can be Consumer Prices, it can be in commodities, it can be in wages. It can also be in assets and we are in a gigantic asset bubble around the world with prices of real estate having risen a lot. I do not deny some property prices have come down in the u. S. We have a decline in 2007, since then we also have a recovery. In the hamptons, in london, hong kong, singapore, and we have a high inflation overseas so i think that one day this asset inflation will lead to deflationary collapse one way or the other. We dont know yet what will cause it. In 2007 that in spite of their easy monetary policies property prices in some areas would fall by 50 . Its like jamie said, oil has been down. I say oil is down maybe because in my view there is at the present time in emerging economies practically no growth. The growth has slowed down to trickle. And some sectors like tourism and asia is still growing rapidly. But other sectors are not growing. So if you go to hong kong where andrew is, he sees essentially a boon town but its not growing, its at the high level of Economic Activity. Same in singapore, you look at Global Exports theyre flat. So i think the demand for oil is weakening. Weve got 30 seconds. You cant give us the time frame or how high we will be when this happens . I dont know. Within was it within five years . Look, i can show you statistics from the Federal Reserve, the bottom 50 of the population in terms of wells. They have lost 44 between 2007 and today. This is the bottom 50 . If you think that high end will never lose anything. Are you listening, jim . High end. This is all the result of quantitative easing. The fed wanted to get the stock markets going. Thats what qe1, 2, and 3 are all about. Move people out the risk curve and so far its worked. All right. Weve got Charlie Evans coming up who will talk to Steve Liesman about it. Next time youre in, you come to jersey, you know, this horrible place we heard about again. Cnbc exclusive coming up. Steve liesman joining us with Charlie Evans, taper, Government Shutdown and the economic. Optios really appreciate our powerful, easytouse platform. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. Just set your start and end price. And let it do its thing. Wow, more fan mail. My uncle wanted to say thanks for idea hub. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a 150 amazon. Com gift card. Call 18882800149 now. Optionsxpress by charles schwab. Call 18882800149 now. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Outspoken fed president Charlie Evans joins us on a cnbc exclusive. Timing for the taper, economic head winds. Jpmorgan putting 15 billion on the table to settle some of the governments investigations. Well tell you what itll mean for jpmorgan shareholders. And mcdonalds out with Quarterly Results. The third hour of squawk box begins right now. Welcome back to squawk box here on cnbc first in business worldwide. Andrew ross sorkin is in hong kong. Hell join us a bit later. Mcdonalds is reporting. Came out with earnings of 1. 52. Revenue right in line at 7. 3 billion. The company also said its increasing its dividend of 5 to 81 cents for the quarter. If you look at what they expect for numbers coming out, they do say that they expect the current environment to persist. The dynamics of the current environment, it hasnt been a great one. They say the company is looking for global comp sales in line with recent Quarterly Trends with restaurant margin percentages expecting to decline at a level relatively similar to the first quarter. They say global comp sales for the month of october are expected to be relatively flat. Now, that may be why the stock has traded down a little bit. Its down by about almost 1 on some of this news. Yep. Even though earnings beat by a penny. Kind of in the middle of the range, 83 on the low, 104 on the high end. If you look just at the last two years or so, its right in the middle. Seen kind of mixed results. Theyve been in asia pacific and middle east and africa. Some of the challenges reflected weakness in china, japan and australia again in part to what theyre blaming on an ongoing challenging environment. Jpmorgan reaching a tentative 13 billion deal with the Justice Department and other government agencies. This will settle investigations into bad Mortgage Loans that the bank sold to investors before the financial crisis. The deal will not release the bank from any potential criminal liability. Well talk more about the jpmorgan settlement at 8 30 with an analyst that covers the stock. In other banking news, u. S. Housing regulators are looking to fine bank of america more than 6 billion for its role in misleading agencies during the housing boom. The fhfa is pursuing claims on behalf of the finance agencies freddie mac and fannie mae. Lets get a check on the markets this morning, again, the u. S. Equity futures are indicated down a little bit. Down a little bit by 16 points. Mcdonalds is a dow component. If youre reflecting overseas in asia, you can see how the markets closed there. A little bit higher across the board, shanghai up by 1. 6 . Nikkei by almost 1. 6 . A little bit of weakness in france and germany and the ftse relatively flat. If you take a look at oil prices this morning, wti dipping below 100 for the First Time Since july 2nd. Right now, 99. 79. All right. Lets get to Steve Liesman in chicago. He joins us with a special guest. Good morning, steve. Hey, joe. How are you . Joining me is chicago fed president Charlie Evans. Charlie, a lot of questions to get to. Lets start right away. All right. You were quoted last week saying october was going to be almost impossible for the Federal Reserve to taper. Is december possible . Well, sure. I said we would look at each meeting at what the data are and what the circumstances are. Given that in september we thought that it was much too close a call. We needed to see evidence of more sustainability of improvements in the labor market. And we havent had a lot of data since that meeting because they stopped publishing data during the Government Shutdown. So octobers a tough one, december. I think we need a couple of good labor reports and evidence of increasing growth, gdp growth and its probably going to take a few months to sort that one out. One of three reasons you gave in september for not tapering was concern about fiscal restraint. A three month on the debt ceiling. How can you feel comfortable in december that you wont have another bout of fiscal restraint come january and february. Its difficult to feel confident. Given were going to repeat part of what just took place in washington. Theres a lot of fiscal drama which caught everybodys attention, Business People that i talked to or, you know, still concerned about how things are going to play out. So december will be pretty tough. And we could, you know, in fact, get more restrictiveness. Weve seen the government lop off over a percentage point from growth this year by many estimates. And over the last couple of years, its been virtually impossible for the private sector to just plow through that in terms of accelerating gdp growth. Whats your assessment of the recent impact of the recent shutdown and debt ceiling debate had on economic growth. I dont have a great estimate. Ive seen a lot of assessments by people and it ranges from a couple of tenths to something more like. 5. Were just going to have to see, we need the data to start coming out. Why is there a disconnect between the Federal Reserve and congress right now . The Federal Reserve seems to be saying done cut deficit and resolve these issues of uncertainty and Congress Keeps doing the opposite . I dont know, were looking at the state of the economy and our inflationary pressures. Thats what were focusing on Financial Stability risk is all. As much accommodation as we have in place is going to be helpful for overcoming these head winds that every second half of the year, every few years we seem to be running is into. Congress and the president are focusing on something else. Were doing our best to keep things moving quickly. How would you feel about the possibility of more deficit reduction in january and february . Well, you know, i agree with a lot of analysts, the chairman has said this before. We need to address our fiscal challenges over the medium and longterm. Absolutely, but we also need better growth right now. Fiscal stimulus done smartly that could add to growth. If you go back to the early 80s. In the early 80s we saw a big downturn and we saw it ramp back up. We saw it close the resource gaps within a couple of years. Current periods very different. Why is that . Well, Government Spending at that time was adding two Percentage Points to growth at a time the economy needed it whereas now its subtracting one to 1. 5 this year and its been bad before. The other reason is that the fed at that time could lower Interest Rates until it knew the economy was back on track. Could you see the Federal Reserve doing more quantitative easing in the face of more deficit reduction. I think were going to have to go into every meeting and look at the landscape. I would like to believe that the outlook for the economy is stronger than what youre currently suggesting. The chairman in june pointed out the fomcs outlook was somewhat better than other people had been mentioning. Second half of the year would be better than the first half and then next year would be an acceleration. We thought that was possible. And the chairman pointed to if this outlook comes about, we need to begin to reduce our flow purchases. You know, if we saw a different kind of outlook or if inflation started turning down, wed have to ask ourselves whether or not we could add more accommodation. I favor putting in place as much accommodation as we need. Would you like to do more right now . I think we need to get other factors in the economy that are slowing things up to be quieter, to let the Business Community focus on what they do best. Everybody is primed to take advantage of the opportunities that are in front of them. Businesses have good Balance Sheets, theyve refinanced households have been making a lot of progress. Theres more hiring, more capacity. We need more customers walking through the door and anybody who can aid that by just calming down and getting things back on track, that would be the most helpful. In the fed is going to begin tapering later, it already has later than had been essentially forecast in june. Does that mean it will end later . The forecast or the con censs c seems to be a summertime ending to the tapering. Is that possible . I know everybody would like a nice time frame. Well, not everybody, just me. Youre not the only one. And i think the chairman has been very clear and saying its going to depend on the data. Its going to take longer, clearly, given the fiscal drama in washington, the already slight weakness that we were seeing relative to our outlook. So we could begin to reduce our flow purchase rate, you know, later, several meetings in the future, couple meetings, not sure. If things really started to take off. If various actors in the economy stepped back and let the Business Community really take hold and consumers too, we could see a big expansion in growth and then we could pull back that much more quickly, delayed at the beginning, but then we could do it faster at the end. I dont know what its going to be because i have to see the data. I have one more question for you. Which is i want the answer now. Is there any practical limit to the size of the feds Balance Sheet . Hold on, were going to answer that on the other side of the break. All right, steve, thank you. We will take that break and well be back with much more from the chicago fed president. Youve got your first question. I do. Steve already asked it. Hell ask that question too. We have some other questions for him. Well take a look at the shares of mcdonalds. Well bring you the september same store sales right after the break. Welcome back to squawk box, futures right now, have been flat lining the day. It was the fair value being up 17, which has us down, the futures only up three. Tomorrow is jobs friday even though its tuesday. Does the number matter this time . Its an old number. I think it does. Before the Government Shutdown. The state of, we never got that number. After it was a crappy number before that and we were already worried about the slowdown. Thats what Charlie Evans was talking about. The weakness. And the fed is supposedly the fed needs that and we all need it to gauge how the economys doing. This is the last jobs number. Zandi was the most popular girl in town. Yeah. Thats a sick thought. Anyway. We are watching the shares of mcdonalds. We mentioned the Third Quarter earnings beat the street by a penny. Were also getting september same store sales. The street was looking for an increase of 1. 2 . Sales in the u. S. , europe and asia, pacific, mideast and africa. All missed the mark. Well talk to an analyst about that in a couple of minutes. Lets get back to Steve Liesman and Charlie Evans. President evans, thank you for your time this morning. We were just talking about that friday jobs number that well be getting tomorrow morning. And you had said that the fed really needs more data. Its going to need more time to look at the unemployment picture, the employment picture. When you say its data depending, can you run us through two or three of the most important numbers youre watching. I think the labor report is important. Payrolls, we need to see numbers getting up to 200,000. Thatd be very important. We need to see the Unemployment Rate continue to improve. We need to see it improve because more people are actually turning up to look for work. I think the Labor Force Dynamics have been a bit unpleasant suggesting continued weakness. We need to see improvement there. We need stronger growth and, frankly, i think we need better consumer spending. One thing thats been discouraging is that outside of durables consumption, consumption growth has been weaker. And that is sometimes a harbinger. Id like to see better consumer prospects there. And steve, i know you had a question you asked before break too. You want to reiterate that . Does the fed have a limit to its Balance Sheet . Yeah. Charlie, is there a limit . Youre headed towards 4 trillion. Could it be 5 trillion, could it be 12 trillion . What limits the size of the feds Balance Sheet . And do you start to panic about the possibility of inflation . Well, i think the fed needs to do whatever is necessary to help meet our dual mandate objections. So if for some reason we thought we needed greater expansion because inflation was moving down. I think if inflation moved down and down around zero, that would be most distressing. I think if the economy turned the other way and it was very weak, that would also be distressing and we might need to do more in terms of asset purchases. Is there a limit . I dont really think about it that way. I think theres a tremendous amount of capacity. We could go on as long as necessary especially if we were in a period of falling inflation. Look, im not looking for that to happen. I think the economys going to do better, especially once, you know, a number of these head winds step down and stop causing trouble. But you know, if we had to, we could do that. I think we havent placed the Forward Guidance on shortterm Interest Rates that is capable of adding an awful lot of accommodation during those periods where things might be turning down because people would have confidence were not going to step back prematurely. Thats our number one risk, people think were going to step back and somehow add restrictiveness to the economy at all the wrong times. Weve already seen that from other people. We dont need that. Back at global headquarters. Yeah, thats where i am, steve, youre right. I love that. I love the global headquarters. You guys probably didnt have ifps in for marc faber. And the name of his report is the boom gloom and doom. And he says crazy stuff sometimes, incendiary. I dont know id say crazy, some of has come true. He thinks its going to go on for a while because he doesnt think theres any growth in emerging markets and were going to knee h neneed it. In his view, theres an asset bubble from qe that eventually have to be dealt with that will only get bigger from here on out. Since people are buying bonds necessarily because of the yield theyve moved out on the risk curve further than they should have and at that point, its inflated and only going to get bigger from here with a day of reckoning some day. Does the wealth effect, the positive wealth effect we see, t does that offset this hes talking about . Well, we look carefully at the concerns you just expressed. Were constantly thinking about whether or not our policies or any other events are causing risks of financial instability. I think that, you know, the runup in the stock market is explainable by the fact that, you know, corporations have been doing pretty well. Theyve been doing well on the basis of bottom line, you know, improvements not so much top line. We need more top line Revenue Growth. We need more customers walking through the door. I think that, you know, you can always look at stocks and ask whether or not theyre overvalued or undervalued and an awful lot of people who think theyre undervalued. We just sort of look at what were trying to do with quantitative easing and our Forward Guidance is to provide low financing costs for everyone so they can go out and make some investments, buy some durable goods, get things kick started because i think good things are going to happen once that takes place. But we look at financial instability risk, look at all kinds of data on markets and products and at the moment, i dont have a lot of concerns in tharea. Charlie, we just had an analyst on squawk box and he goes by the name of richard effen bernstein, thats his nickname. He says were in a classic mid cycle here. I started thinking about that and started thinking, you guys have promised to stay low look at the fed forecast 2015, maybe even 2016 and even when you begin raising rates, its a long way to a normal interest rate. Is this a mid cycle time in the Business Cycle or early cycle in your opinion . Well, thats a catchy phrase. Im not quite sure what it means. It doesnt feel like mid cycle in terms of Business Cycle to me. The Unemployment Rates too high. Normally, you know, when the economys doing pretty well the Unemployment Rate would be far south of where we are. Thats why 6. 5 is really too high relative to sustainable Unemployment Rates, a lot closer to 5. 25 . I would say. We still have an awful lot of room to grow once things begin to pick up and im not worried about inflationary pressures. You talked earlier that, you know, one of the biggest risks is people not believing in your Forward Guidance. But what you did in may and june, isnt that a loss of credibility for Forward Guidance from the fed . How do you get that back . Well, we have been i have been surprised that the markets have not been able to look at our separate tools of quantitative easing and Forward Guidance. Theres nothing we said that will cause anyone to step back prematurely before we hit 6. 5 and we might go on longer than that. But the markets have sort of only been paying attention to one element at a time, maybe half an element at a time. And theyd become entangled. Thats not the markets fault, charlie. The market is the market. Its the fed that communicates with the market. Wheres the fault in the feds communications. I take that point, people tell me when im speaking very clearly and people arent understanding me, then i have to take that point. We need to go out and communicate more. I think that the chairman did an excellent job during the summer. After the june press conference, he went to boston, he explained it more, things settled down and Interest Rates stopped going up. It settled down in september. We dont have enough data to make the assessment that the labor market improvement is sustainable. So far, that hasnt been proved wrong. How does policy change if janet yellen becomes chairman . Well, i think i think janet will be a great chairman. She has an awful lot of experience with Monetary Policy up close and personal. And i think well see a lot of continuity and, you know, well be looking at the Economic Situation and inflationary pressures as they present themselves and respond accordingly. Charlie, thanks for joining us this morning. Thanks, steve. Guys, charlies going to sit with me for another few minutes here and were going to do some stuff for the web on price level targeting, Participation Rate stuff. All the great stuff you know were interested in here. Youre going to do that and thats going to appear on the dot com later today. In the meanwhile, back to you guys at global headquarters. Faber said it could get up to 1 trillion a month. Id say hes a little bit hyperbolic. You should tell charlie that. Hes listening. It could get up to 1 trillion a month because its going to be so bad. Which im all for. I dont know where stock market would be by then, charlie. Great interview. Thank you. It was a good day to have the two. The two on. Our thanks to fed president evans. Charlie evans. For being here to answer all those. Jpmorgans 13 billion settlement, the tentative one with the govent. Well talk to at it means for shareholders. Up next, well dig through the mcdonalds quarterly report. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Mcdonalds out with earnings a few minutes ago. Lets get some quick analysis on the numbers. He is director and Senior Research analyst at the Advisory Group in new york. How would you characterize mcdonalds performance, peter, over the last year and the last quarter . Well, thanks for having me on. I would say its, you know, pretty challenged, theyre struggling to find any sort of growth and i think why you see the stock down today is not necessarily on the september same store Sales Numbers but more so on october. Theyre expecting october to be about flat on a global basis and theyre lapping the easiest compare from last year. Deceleration and traffic trends from september into october despite the launch and all the advertising behind that. I think thats whats concerning investors is regardless of all the advertising and the new products theyre trying to put out, nothing seems to be grabbing the traffic and driving it through the doors. Thats actually something Company Specific and it has to do with innovation and what mcdonalds has been pretty good at over the past five years or so. But you dont see it as a commentary on different regions of the world and how the economies there are fairing . It is. I would say overall economy is probably not so strong, the restaurant sales have not been across the board, not particularly strong, some operators are doing well. But generally speaking, mcdonalds has been struggling. And if you look at europe, the uk and russia business is doing well but the rest of europe is struggling. China continues to struggle, as well. It is about innovation for mcdonalds and trying to find that home run type product. And so far, they havent been able to nail it down. In the last six months or a year. They had consistently been finding some stuff two three years ago which got us all thinking. Was it the coffee . The coffee, apples. Premium wraps. Yeah. And rib thing. Yeah. No, i would tell you that the struggles theyre having is a function of their own success over the past five to ten years. The unit volume is well in excess of anyone elses qsr. Theyre driving on absolute basis a lot more traffic than any of the other competitors in the burger space. The problem is growing on top of that. Yeah, mccafe was a huge success and mcrib when they launched it and all the other products they have have been great successes. Its growing on top of that. Theres pushback from fran ch franchise franchisees. There are only so many items you can put on a menu. Yeah. The drive through speed standard is 120 seconds in this sector and, you know, the more items you put on, the more challenging it is in the back of the house. Youve got to limit the number of items on the menu for sure. Yeah. Thats true. Thanks, peter. Thank you. Were also talking this morning about jpmorgan. Another dow component and the record breaking 13 billion tentative settlement and what it means for jpmorgan investors. Joining us on the squawk news line is Raymond James Equity Research manager. The stocks not far from a high. Then we heard versus its peers, its still selling lower because of all this all this regulatory overhang. Does the 13 billion put things to rest . Or do people still worry about the criminal investigation after that . Well, good question. The stock is cheap as you said, 8 1 2 times earnings for a company typically trades at 10 or 12 times. The deal is adequate in removing the lion share of the residual mortgage risk. How long will it take the street to realize that . I think thats the key question. And also we dont know if the company has to admit to any wrong doing. And if they do, this could pave the way for subsequent losses. Yeah. Do you i was asking someone earlier, they went after bear stearns and those two guys and they were unable to make that stick. But then they got fab. Things have changed a little bit. It was the goldman situation. Do you think now they could make a criminal charge against something done at wamu or bear stearns . Its tough to say. Its hard to see it getting up to the level of the Bank Executives of jpmorgan being criminally prosecuted. But there could be some employees along the way. Now, supposedly Justice Department has a key witness. Well have to see how damaging that testimony can be. Most likely given the fact that jpmorgan has 23 billion in legal reserves right now, most likely for shareholders for jpmorgan its more of a cloud, more of an overhang than it is financial exposure at this point. We could probably damage the income statement as much as were going to have to. Okay. And when its done and settled, you figure that would be a time where youd buy the stock since its trading below what it normally would. Well if you have a longer term horizon, you have a Business Model that is well positioned for this challenging environment. Theyre growing revenues have an International Expansion program. Tops in the league domestically and m a. A lot of positives for the stock. We just have this residual mortgage exposure. And you can file it under the category of who said life is fair. But at the end of the day, this is an event for jpmorgan current shareholders right or wrong. And were close to putting it behind us. But we still have residual. You either think hes unfairly sort of targeted, thats probably some people think that and hes a good ceo and a good risk manager. Or youve already thrown him in the lot with all the bankers that cause the financial crisis is what the other side thinks. Has anyones opinion been changed . Certainly mine has. And i think he has the full support of the board. And i think wall street in general is on jamies side and hes been improperly villainized. Actions were done by a company that he basically rescued. Right. But knowing only the wall street Journal Editorial Board really can really take his side. Everybody else is scared theyll be next if they speak up which is a great environment to be in right now. Anthony, really quickly. Do other banks face a risk . We now hear about fhfa going after wells fargo or bank of america. Thats a good question, the fhfa if you look at the original filing, they basically had 17 companies listed, one of them is jpmorgan. Theres only three i remember settling, u. S. , citi and ge. B of a has the biggest exposure, even bigger than jpmorgan when you look at the numbers. And the fhfa has offered b of a a 6 billion settlement. Ironically, thats pretty much in line with their legal reserves right now. So there is a potential settlement with b of a looming or probably something in the 4 billion to 6 billion range. And good news for b of a shareholders is they have those legal reserves already set aside. All right, anthony, thank you. When we come back, netflix Quarterly Results due after the bell today. Well get a preview from an analyst in a few minutes. Plus, checking in with andrew in hong kong, he has comments from Hank Greenberg on jpmorgan. Also kate kelly caught up with jamie dimon as he arrived at work this morning. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. Welcome back to squawk box. Few stocks on the move, s. A. P. Posting earnings in line with estimates but then the Software Giant backed its fullyear foreca forecast. The stocks up. We spoke to Bill Mcdermott in the 6 00 hour, hes coceo, soon to be sole ceo. Earnings beating the street estimates by 13 cents. Also declared a stock split and raised the Quarterly Dividend by 21 . And at t is selling or leasing the rights to wireless towers for 4. 9 billion. Andrew is in hong kong today for the New York Times deal book conference. Cnbc has the exclusive broadcast partner and among the topics being discussed there, jpmorgan. Andrew, good morning again. Hey, becky. You just cant get away from me. You go around the globe and the only topic anyone wants to talk about is jpmorgan and jamie dimon. Spent much of the day talking about that issue. One of the people we spoke with was Hank Greenberg. Of course, former chairman and ceo of aig and he had some very pointed criticism of the government, not of jpmorgan saying this entire episode is unfair. Listen to what he had to say. I do. I think that thats colored everything. It really has colored hes not getting a fair shake. And what were going to do, were going to destroy not destroy, were certainly going to shrink a great institution. And i have to say, his view echoed by many other speakers and also just attendees, people i spoke to throughout the day talking about how they felt that jamie dimon was getting an unfair shake. You know, joe, i heard you talking earlier about how you say that, you think youre going to be attacked these days. At least in asia, theres a very high regard for jamie dimon. The other thing i wanted to bring you quick was Hank Greenbergs comment on obama care. As you may know, hes been a critic of obama care but he seems to have changed his tune. Take a listen to this. I think that we should stop talking about obama care. It passed, its law, the Supreme Court has ruled on it. Forget that. What we should be focusing on is making our industries more competitive. We have the highest tax rate in the world. You want to pay for obama care which is going to be very expensive, make Corporate America more profitable. Guys, thats the story from hong kong today. A lot of interesting perspectives on a lot of different issues. And im going to be headed back to see you very soon. As i said earlier, keep the seat warm, im not going to hang out here too long. Andrew, i guess its probably not a huge surprise to hear some of Hank Greenbergs comments about this. Hes taken issue with the government too for what it did to his company aig. He has. He has. And, in fact, he wrote an oped in support of jamie dimon just a couple of weeks ago. But when you put the 13 billion settlement and that number out there, he was even more vociferous about it as were other people here on this issue who felt but interestingly, one point thats worth making. I said to a couple of the ceos of foreign companies. I said does this make you less inclined to want to do business in the u. S. , do you think any differently about it . And they said, no. Take that for what it is. An interesting or different view from hong kong. Andrew, thank you very much, we will check in with you again. Andrew was there, hell be back here on thursday, though. In the meantime, kate kelly caught up with jamie dimon this morning. Kate . Reporter thanks so much. I managed to catch a minute or two with jamie dimon. He answered a couple of different questions about the supposed 13 billion settlement talks. Lets listen to what he said. Any chance of a quick comment on the discussions . You know, its were trying to get it resolved. The wall street journal. People coming in bright eyed and bushy tailed. And theyre not happy to see us. People doing a great job for our clients. Were gaining market share, doing great stuff, trying to get our product behind us. Im so proud of this company. I hear ya. These other things i know we have to fix. Reporter i hear ya. Do you feel this is a shakedown as the wall street journal says . Im not going to go there. I want to get our problems resolved. So we can focus on the main mission serving our clients. How worried are you about the ramifications of criminal charges . Were going to try to resolve every matter the best we can and then were going to move on. Ive got to go. Okay. Reporter so as you can hear, he is not going to get into the politics of this, becky and joe. He doesnt want to talk about the wall street journal shakedown story line. He also would not address whether or not these criminal ramifications that may be lingering even after this expected 13 billion lawsuit is finished. Hes just trying to move forward and highlight the companys business successes. Yes. I advise him to continue along his current path of the way that went, kate. Anyway, stop trying to get him to say more. I saw you trying to do that. Come on, jamie, shakedown. Could you imagine if he said, yeah, its obvious reporter i tried twice, joe. I had to get it out of jamie. Can you imagine if he said, absolutely, this is extortion pure and simple. I dont appreciate it and im only doing it because i have to. Could you imagine if he said that . Reporter then what would happen . I dont know. Make it 26 billion maybe. I dont know what that would be worth. Anyway, kate i think its nice, you know, i would have walked right by you at this point. He cant do that either. Thats gracious. It was gracious. Netflix shares have been on a tare in the past year. Company announcing Quarterly Results today after the closing bell. Up next, a preview of the report from an analyst. Im excited some day to have that as an icon on my xfinity thing. Crude is trading below 100 a barrel for the First Time Since back in july, july 2nd. [ male announcer ] the founder of mercedesbenz once wrote something on a sheet of paper and placed it in his factory for all to see. Four simple words where the meaning has never been lost. The challenge always accepted. And the calling forever answered. Introducing the allnew 2014 sclass. Mercedesbenz. The best or nothing. At bny mellon, our business the allis investments. Ss. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. Netflix is set to post Third Quarter results right after the bell this afternoon. Joining us right now onset with the preview is brett harris. And brett, i guess the big numbers got to be the u. S. Subscribers, paid subscribers coming through. Absolutely. Netflix is a growth stock. Trends at 77 times this years ebitda and 40 times next years ebitda. And everybodys going to be looking at the subscriber the Domestic Subscriber number. Its estimated they now have over 30 million subscribers to pass hbo as the most subscribed and most paid. And the number were looking for is 1. 3. A gain of 1. 3 million subscribers. The other thing people will be looking at quickly is 63 cents is the estimate on the street. What theyre guessing the company earned. What do you think . Were at 55. But the eps number for the quarter is going to be significantly less important than that Domestic Subscriber net edition and also the domestic the domestic segments margin expansion. Right now, theyre currently generating about 22 contribution margin from that segment. And in order for the company to justify the valuation, it needs to both grow subscribers and expand that margin. Is Reed Hastings plan with content, is that working . I think so. Certainly house of cards was a tremendous success. Orange is the new black is a tremendous success. Netflix originally made their money by having a better user interface. They had deep library content, but you could access it better. With the cable channels improving their interfaces, netflix needs to move away from the better interface and moving to original programming making it different than wheres the xfininty thing stand right now. Its been ruled out. Will netflix end up just being on your settop box . Well, we think it highly unlikely that netflix gets distribution on traditional cable networks. How would they count subscribers then . I have them already. If it got that easy to where it was just something on right. I mean, i think what reed. Which cable and netflix are natural competitors. Over the top and specifically netflix is the number one reason we have court nevers, which are people that come out of college and dont buy that off the bat. There is a natural competition there. The second issue is going to be what happens with the other pay tv providers. If netflix gets to be off and on the cable subscriber, they would want that as well. And that would facilitate a la carte. You dont think come cost and netflix become frenemies. I dont like what you are saying. Thanks for coming in. Thanks for having me. When you come back, start your week off with jim cramer stocks to watch. Were going to head down to the new york stock exchange. Tomorrow, the day is over. It is jobs tuesdays. Well get a read on september employment and inflation. Delta airlines ceo, richard anderson, will join us, first, on cnbc. Dont miss squawk box. Starting tomorrow at 6 00 a. M. Eastern. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. With fidelitys options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens, and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box. Jim cramer joins us from the new york stock exchange. We got the numbers back. Thats not what they were expecting. They were expecting a growth of 2. 3 . You cant have global be a. 9 or a. 7. How many boolly h how many ballyhoo initiatives do we have . Wen wendys is better. This is a tough time for this company. It is a tricky question. The franchisees are upset. You need new innovation. When you are a fran chai see and y you are expected to have 150 items on your menu and then the dollar menu, which some blame for not being able to sell more expensive food. Panera has too many simple things. Wendy, very simple. Chip po chipotle, very simple. Mcdonalds thinks they need a makeover. Come on, you are mcdonalds. Just gli just deliver. The new york giants, you are so good. What are you doing . Didnt you guys win the super bowl. We are struggling to try to figure out how to value this company . They point to a weak global environment. It sounds like you are not buying that. I am seeing too many other Companies Say good thing. I would ask, joe, joe, maybe if they moved to new jersey and get out of there. I live in jersey. I have never gone to metlife and found myself at 34th street. Im glad you are with me on that. Everything else. They snicker, they laugh with jersey until they fly out of a newark area network. They are talking about newark. I went to a giants came in the new york area such. The super bowl is in the new york air why area . Chris christie speak up and give us a google map. Wait until the president is from new jersey. See how they like that. Mcdonalds, disappointing. See you in a few minutes. Macoming up, several stocksn the move. Only one will be the stock of the day. Is it in your portfolio . Find out next. Serving you, the American People. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. [ male announcer ] and our priority is you. Peace of mind is important when so we provide it services you bucan rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Same store staales disappointed investors. That does it for us today. Right now, time for squawk on the street. Good monday morning. Welcome to squawk on the street. Im carl quintanilla, jim cramer and david faber at the new york stocks exchange. What a jampacked week. The s p at record highs. We have a flood of earnings. An apple ipad refresh. Take a look at the tenyear yield. We keep an eye on fixed income as well as equities. Look at oil falling below 100 a barrel for t