Transcripts For CNBC Squawk Box 20140114

The next week or something. You didnt say i want this to be for the next seven months. No, not seven months. Its only been two weeks. It has not been two weeks. Three weeks. 3 1 2. 2. 85 . I am so in the money. I couldnt have bought an option any shorter. You could have changed the terms of the deal after we got into the deal. You cant do that. You were right the idea that rates could go lower. Now we have to figure out the market. Yeah. Its concerning, though, i guess this is really the market sitting and taking a look at the jobs number that we got on friday which is well below what had been expected. And taking all this into account with are we ready for tapering and is the economy really there . Youve got goldman. Already were going to be talking about lets keep in mind oh, god, i sound like phil. At the enof the day, 257 is where the dow is. If we build up a lot of fear, and were still above 15,000, thats the way these markets move when theyre in a long when theyre going to keep advancing. Its that slow, sickening decline that you dont notice. If it gets people bearish, thats thats the positive. That was an ugly day yesterday. It was an ugly day yesterday. Europe and asia have been taking their queues from wall street. If you look at the major asian markets overnight, youll see at least at this point the shanghai did okay, but japans nikkei, that was down by about 3 . It was a declose to 500 points. European stocks at least in the early trading this mother are indicated lower. The biggest declines coming from germany dax, dour by 55 points. Dow futures up by about 36 points above fair value. The s p futures are up close to 4 points and the nasdaq is up just over 7 points. As for todays market tests, we have earnings season officially open for play. Jpmorgan and wells fargo are set to report Quarterly Results before the bell. Analysts are looking for jpmorgan to post earnings on revenue of 23. 7 billion. In the meantime, the consensus calls for wells fargo to earn 98 cents a share with revenue of 20. 7 billion. As for the economy, we do have a few reports of note today. At 7 30 eastern time, the nfib survey of Small Business sentiment. Then at 8 30, we get december retail sales. At 10 00, we get December Business inventories. The markets will be taking queues from both earnings and the economy. That it is. We had a bit of a merger monday, and this is the deal to kick it all off. The soap opera begins now. Charter communications taking its bid from Time Warner Cable directly to investors. It offered to acquire its rival yesterday for a reported 132. 50 a share in cash and stock. You can look at that stock, by the way, over there now trading above that price. Time warner cables board rejected the bid as grossly inadequate. David fabers reported that charter was told they would enjoy a 160 bid share and they want cash. Watch for the Parent Company of universal comcast, as well. Google buying thermostat and smoke alarmmaker nest labs for 3. 2 billion in cash. Its the second largest deal in the tech giants history. We had the ceo of this company on a while ago. They make some really cool devices and suggest where google unlike apple and yahoo and so many others may be going. Samestore restaurants in china rose a lower than expected 1. 2 . The country accounts for more than half of yums operating profits. Joe. Actually, they didnt make that offer yesterday, i dont think. They did that offer came yesterday morning and the letter came out yesterday afternoon. Because it said there was an additional bid that came in december. Right. Charters latest proposal, which it made to time warner in december, was its third private offer to buy the new York Based Company the plans to go public with it maybe is the way to put this. The plan to go public with it happened yesterday. Right. And charter made the offer back in december and then they came the board, you know, looked at it and said no and then time warner went or time warner went public with it yesterday and time warper said no, probably back in december, dont you think . I do not believe that time warner, a, publicly said no, thats not why theyre going public. Its a private offer. No, i just think they didnt engage completely. Well, i dont think theyve engaged at all, which is part of the problem if youre time warner. Time warner says thats not correct. The offer yesterday was made in december and it was the third offer since june. Going back and forth on this. About 20 million directv customers nationwide are without the Weather Channel this morning. They could look out the window. Although its much better to know what is going to happen. Yeah. You want to know whats happening throughout the day and tomorrow morning when you get up for work. You have to have a leap of faith to believe everything. But this is the best of all the weather forecasters. Do we own we do. Okay. It is the best. The midnight eastern deadline for recent negotiations without an agreement. And apple has lost its bid to launch the. The Company Plans too peel and it argued the monitor was aggressively trying to interview top executives, even though his mandate called for him to review the companys antitrust policies 90 days after his appointment. Apple complained about his proposel hourly fee rate of 1,100, arguing it gave him an incentive to push a broad and intrusive and lacy plan investigation, i guess. The other thing is that my real what im thinking is have you noticed how everyone is saying, well, were at three and then were going to 3. 25. Then were going to 3. 5. Its the people that come in here and say rates are headed up. Its the same ones that said for five years it set rates have peaked and then theyre going back up. Theyre always wrong swb so to act like they know and its going to be this orderly move higher. And then this other thing that worries me is the notion that the fed orchestrated this beautiful thing that warnings perfectly. What would throw a wrench in the works is if theyre unable to keep tapering and if we start questioning whether theyre successful. And that would mean you see rates lower and that would be like, oh, my god. More pushing on a string. The economy maybe the Unemployment Rate doesnt continue to go down. Why did it come down with 73,000 jobs . Because more people are out of the workforce. Which is not the way you want it so work. The 7 4 ,000, that was a different survey, too. Both surveys showed some concerning trends. I would say you were right on all of this and for that i would give you a mini bow. Thats a shih tzu bow. You love the bet. Whats her name, the one from Golden Globes . Her name is jackie i thought you watched the entire thing. Jacqueline said some people you didnt read about this yesterday . It was on the nightly news last night with brian. She said a lot of people have done good things in their life and a lot of people gave me a lot. And brian noted last night youre talking about the language. Anyway, she yeah. She noted even even brian noted last night it slipped by the nbc sensors. The same word i just used. I know. But i was missing i got it. And then the other thing, 1900 for the s p. We said, well, who wants that . Some people might sign up for that. Were still okay. The s p where it is, what is it, below 1800 . We wanted 1848. There may come a time where we think, wow, 1900, we might sign up for 1900. If the market consolidates and goes up another 50 points, maybe that would be good. You see, im changing that was an ugly day yesterday. Combined with the jobs report and combined with the first seven days of the month, and combined that none of the people that used to come in saying we need a 10 correction, none of them were taking that any more. Did you notice . They all stopped and they were all saying high Single Digits to low double digits for the year. Now youre ready for your so . I dont know. Well see, right . There is good news out of washington. Congressional negotiates have unveiled a spending bill aimed to prevent another Government Shutdown that bill boosted levels for military programs. But it did not add monies to obamacare. Lawmakers now face a midnight wednesday deadline for new spending authority. They are still meeting a stopgap funding extension. They need to that just to ensure that theres enough time for passage of the spending bill this week because it is expected it could get through by saturday. Right now, its time for the Global Markets report. Karen cho is standing by in london. Good morning, becky. A bunch of global m a deals across the board. Most of the major indices trading in negative territories. The financial sectors, the worst hit this morning. The german stock market, the worst performing industry here in europe. Down 6. 5 . On the french market, down just slightly about 0. 3 . But the International Press is gathering today to listen to what Francois Hollande is going to say about the Economic Strategy for france. Theres been concerns that france is the man of europe. But theyre going to be asking more about this alleged affair with actress julie gayet more than the economic environment in france. Necessarily hy nestle has basic said it left out affluent customers in its strategy and focused on those spending small changes on sweets. So sales in india were growing at about 20 odd percent per year in the past three years. Third quarter last year, sales were growing just 8 . Thats how much nestle has been trading in terms of its strat by. But the link today proving there is money in that premium segment. Take ta look at the performance of the company so far today. 1. 3 higher and this on the news that it grew market shares in all project categories. North america are proving one of the sweet spots for lindt today, sales climbing 8. 6 and on Foreign Exchange markets, a bit of attraction in the sterling today. 1. 6402. We havent held some of the highs of the session. This on the back of inflation, hitting that 3 target that the central bank wants. There is a feeling that Interest Rates will stay lower for longer. Perhaps we wont be the first ones to hike here in the uk. It might be up to janet yellen, guys. Karen, thank you very much. Well check in with you again tomorrow. After fridays disappointing jobs report, will u. S. Employment trends ton a downward slope . Joining us right now with his expectations is lauschman achitan. Weve been with all watching all of this. What about you . Sure, im concerned. Just to get this out of the way, weve made a call and were not budging from that call. 2014, 24 months later now. You have to hold. You have to hold. These economic guys well, im a student of the business cycle. And so i understand that there are major revisions coming. Looking at the data at face value today, if you look at the half a year period from q4 2012 through q12013, you would realize gdp right now is at 0. 6 . And that is only because of a freak boost in agricultural inventories that had to do with the earlier drought. Knowing what the revisions are to gdp data over the last few recessions, theyre on the order youve seen gyrations in gdp data in the revisions that come in the benchmark revisions years later, but on the order of 2 full percentages points to the order of 4 percentage points. Here we are at 0. 6 on face value and if you get rid of agricultural stuff, its at 0. 25 . That is so easy to get revised away. So the epicenter of the recession was at the end of q4 20112 into q11 2013, i know thats not unusual, but what is bothersome is that right now, the consensus is, hey, were taking off, right . Were approaching the velocity. Were going to be growing at 3 or something you were saying in 2014. We just dont see that when were looking at the data, even the december jobs pretend that didnt happen. Its still not there. Are you saying that we never got any of the good growth that we think weve gotten over this last year and a half or two years . No, no, some of that gdp after that may be positive. But the epi center right now looking at the data on face value is that q4 2012, q1 2013 i think thord those will be revised down and youll see that is the epicenter of the recession. So you think the epicenter has happened, we just dont realize it . Yeah. You have jim bullard on sometimes. Recently he put out a presentation talking about 2008, the last recession, and how in august of 2008, from the feds perspective, things were pretty good. It didnt look like there was a recession. There wasnt any negative gdp and the outlook was fairly good. Only now, when you look backwards, do you see the recession began in december of 2007. Thats a point that ive been making for a while. But we knew that a lot sooner. Youre talking about we knew that by 2008, that there were some serious, Serious Problems out there. When . I would say by the fall of 2008. After lehman blew up. I think it was before that. No. Actually, right before lehman blew up. In august of 08, q2 gdp was revised up and the dow rallied. Yeah, but there were plenty of people who say that there were big problems coming. The fed didnt. Look, i dont want to relitigate the recession of 2008. I have a different question. You look at whats happened over the past few years. Fin vesters followed what they said, they would have made a mistake. Was there anything that you look at in your models and say now it depends on which market. In bonds they wouldnt have been as bad why dont you just i dont accept the premise because typically off a bear around the session and 20 of the time you dont have a bear market around sessions. If the fed is targeting the markets as a policy tool, then who are you to fight the fed . And if you look backwards at past recessions where the stock market has gone up during a recession, you see very simple, not exactly great ones, theyre roller coasters, so 1926, 27, you have a recession, stocks go up 30 . Why dont you just go back to a more normalized Participation Rate . Instead of all this, why dont you say if we go back to a normal Participation Rate, wear another 12 unemployment. I dont need i would more or you usic. Lets be even planer than that. We have a jobs report. It gives you a payrolls number and a household number. The two surveys of how jobs are doing in the economy. Theyve been there for a long time and we should look at them. Now, i know a lot of people dont want to accept the december jobs number. Thats fine. Lets pretend it never happened. Look at the trend in jobs on and the prior 12 months. And what you will see is that payroll jobs, youre making 194,000 per month for the prior 12 months. On households, youre making 101,000 jobs per month for the previous 12 months. So household is selling you that you made about 1 million less jobs in the previous 12 months. And so, now while im young. I just had a birthday, i dont want to get another birthday before you get this out. Were getting wrapped in our ear and youre giving me an economic dissertation. Because this isnt straightforward. Youre going to need to hear this. So when you look at the data thats going to get revised, the payroll data will get revised towards the household data. The household data is is showing you a deceleration in jobs growth. Its not what you think it is. So if the consensus is looking for acceleration here, its already not happening. Are we at 6. 7 . No. Because you know people dropped thats the point id make. I would make that the Household Survey is telling you if you look at the households ajusted to be the payrolls, youve lost jobs since the summer. This is all a cyclical comment. Happening inside of a secular weakness, which is going were below we have not made back the jobs. Were not to the peak employment of 2007 yet, right . Are we a million and a half below . Larry summers came out in november and dropped a bomb, right . He says, hey, weve got secular stagnation here. Thats a point weve been making since prelehman that youre not going to get business as usual. And i think a lot of people are hoping that that is about to occur and im afraid in the forwardlooking indicators, in the coincidence data on jobs, its not there. Its just not there. And the fed is stepping back and not going to be artificially juicing things and this Economic Trend continues, you think the markets will fall lower . You know, i dont know because i dont know the i dont know that the fed will be able to pull back as much as they want to. They might have to quote unquote taper, but they might do something else. Following the recession, you had two years going back to andrews point, you made no recommendations about investing in stocks two years ago . You didnt say do or dont . I mean, i would have not invested in stocks based on your forecast. You had neal tescari on here and said, area, theyre targeting the market. If someone like that is targeting the market in 2012, who am i to argue . He doesnt even manage any more. Im not talking about his performance as a manager. Im talking about barging the stock market what did you do with your own money . I managed riskings. So i mean, it sounds like a cliche, but you would be defensively long. You were defensively long honor in this period . It doesnt mean anything other than you try to participate and were watching for the down turn. And if youre a business manager, they dont have demand. Why do you think that prices are so inflation . Why are prices so low . Why does walmart, which sells a tv for 150 last year sell it for one word answer. When can we judge when youre right or wrong . When the data gets revised. Benchmark revisions come in every year. Were two years later, so im just trying to figure out when we can you can check it right now. Look at the household data. Look at the jobs data. You have somebody out there, are they getting a raise . Ask them. Thank you. Thank you for coming in. We look forward to having you back and figure out whats going on. In the meantime, mandatory timeoff apparently trying to a tracked towns to the Financial Service industry. But first, lets get the National Forecast now from the Weather Channels alex wilson. Hey, guys. We have to talk about rain along at this95 corridor. We have form action towards north florida. Heavy showers. Savannah and charleston beginning to move offshore. Youve got more on the way up towards philly and new york. Same story there. Rain going to cause some slowdowns for that morning commute, even around boston. We are talking about wet weather today. Today, best chance of rain along that 95 corridor. Showers, even a wintry mix back into interior parts of the northeast. By tonight, its wintry mix for northern sections in new england, close to the coast, still going to be dealing with the wet weather. And in the south, could see a bit of a wintry mix tonight. Into parts of central alabama, closer to the atlanta area tomorrow morning. Well be back after the break. Mine was earned orbiting the moon in 1971. Afghanistan, in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back, everybody. Right now, its time for the executive edge. Another bank is telling junior bankers to stay home on saturdays. Bank of america and Goldman Sachs are taking similar steps. Global bonuses and stiff competition, gentlemen, is banking not necessarily a place where the younger people want to go these days . I dont think were putting in context what happened over the summer. And people, you know, what happens over the summer is this young man in london and bank of america passed away. You cant really say what causes and thats what im going to say. You cant say whether it is connected, but there is a view that it could have been connected and that that undo itself is making people nervous. I think this has more to do with this in terms of policy. Shorts and, you know, its kind of but remember when people could wear shorts and no ties and they wore that whole dress down situation. If i go a memo, dont come in on saturdays, im going to be okay. Its good. Youll live with it when it comes here . Yeah. Im going to live by what management dictates. Thats good for me, good for them, good for everybody. Yeah. Youre a company man. What about a europe what about 30 hours a week . Did you see what james of Morgan Stanley said . No. He said he wasnt necessarily on board with this policy just yet because what he was worried about was that some yum young people were going to lose opportunities because of this. If they have this real mandate that says you cant work, maybe a deal is not live. They say when a deal is live, you should be in. When something comes up, all of a sudden you i know a lot of people who cant schedule anything on a saturday or sunday. Their whole life, this is what it is. So maybe this is a good thing. I dont know. Where are you on this . There are times. What i did was not Investment Banking. It was telling. Stock brockers are well, you saw the movie, what you think all stockbrokers do. Its not what i think all stockbrokers do. Especially in the 80s. You got a manufacturers directory or dunn and bradstreet. You were working. This cant be good for the economics of the business. The whole economics of the business is that we have a senior guy. If you have a deal youre working on, then youre loud to it seems to me this is a pendulum. My guess is that this is not a oneway direction. I would say your bosses still want you to bust your [ expletive ]. Yes. Pretty much. The white house releasing age and gender breakdowns for more than 2 million americans who enroll ld in obamacare by tend of december. 33 were adults age 955 to 64. Young adults age 18 to 34 made up 24 . Experts say that the younger demographic should be making up closer to 40 to help control premiumes and that spells not only political trouble, but just trouble with what you do with pricing and how rates are going to rise from here. Im not sure theres much to say. The most worrisome thing is when it stays like this, the Administration Says its going to get better, whether it doesnt, theres too big to fail with health insurers. Its going to be more expensive. Whatever it costs, were going to pay for it. So we probably should hope that it you know, that young people do sign up. I agree. Theres big trouble times to come. But if youre a person opposed to hollande one way or the other, you hope that i dont think its going to cave under its own weight. It probably should, though. If you let it happen, it would. But they wont let it happen. When squawk box returns, taxing times are on the way for corporate america. Would reforming the codes for clothing economy . Thats next. Plus, they were in the shark tank and they survived. Now they are expanding into new jersey. Meet the founders of tom chee in the next hour. And in the next hour, David Rubenstein will tell us where hes seeing the best deal making opportunities. Right now as we head to break, take a look at yesterdays winners and losers. Well another great thing about all this walking ive been doing is that its given me time to reflect on some of lifes biggest questions. Like, if you could save hundreds on Car Insurance by making one simple call, why wouldnt you make that call . See, the only thing i can think of is that you cant get any. Bars. Ah, thats better. Its a beautiful view. I wonder if i can see mt. Rushmore from here. Geico. Fifteen minutes could save you fifteen percent or more on Car Insurance. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Theres nothing like being your own boss and my customers are really liking your flat rate shipping. Fedex one rate. Really makes my life easier. Maybe a promotion is in order. Good news. I got a new title. And a raise . Management couldnt make that happen. [ male announcer ] introducing fedex one rate. Simple, flat rate shipping with the reliability of fedex. Of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. And the little room above the strip mall off roble avenue. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment welcome, everybody. Yesterday you saw the major averages closing at their lowest levels in three weeks. Stop it, joe. Right now, you can see dow futures are up by about 40 points above fair value. People are going to think that and it almost blew up. During the commercial break, we had a bit of an event. That was unbelievable. Ive never heard these things make any sound. No. Maybe if youre lucky it will happen again live and scare us. Oh, quick no, that was the audio guys having fun. Lets talk about taxes our next topic is one of the most important on the agenda for corporate america. It is tax reform. Jeffrey joins us now, the vice chairman of u. S. Practice at kpmg. Good morning to you. Thank you. What is the chance in 2014 we get any type of tax reform that changes the game for the way you do business . Andrew, probably very small. Honestly, its Corporate Tax appointment has been talked about for quite a while now, but it doesnt seem to be the agenda item that this administration would like to go after. So i think with so many other things on the agenda down in washington, i think that the likelihood before more Congressional Elections in november, the likelihood to get any type of tax reform is probably pretty small. Right now, if you were a u. S. Company and you wanted to find a country to do business in that will lower your tax rate, what is the easiest way to do this . Theres really no easy way to do that. I think it really depends on where your Business Operation res going and what youre looking at doing in terms of expansion and things like that. If i come to you and i say im a Manufacturing Company and i say, look, give me sort of five countries, five choices that are going to be economically i mean, one of the arguments is people dont want to do business in the United States because they say the taxes are too high. Tell me where else im going. The obvious ones will be ireland and singapore and other places. Sure. Theres certainly Holding Companies areas you can go to set up your operations in. Theres areas like the uk which has a favorable tax regime in a number of different areas that you could base your operations out of. It depends on where youre selling this stuff, too, right . Sure. All around the world. Put something over there if youre selling it over there. Put something over there if youre selling it over there. If youre selling it here, does it make sense to go over there and bring it back here . Normally you would set up your operations for things youre selling here to wait until shale gets going. Then well be doing it here again, right . Yep. Was going on globally, though . Were having this conversation in this country globally, but this conversation is happening in other countries, as well. Yeah. And its a great question. Because the Big Conversation thats going on globally is the transparency and morality debate. You know, we see you, we feel you every day. Youre a big company, youre doing business in our country and other countries. But when we look in the fiscal coughers, theres not a lot of tax revenue in there. So whats going on globally around that issue is for companies to be more transparent about where their tax obligat n obligations are and if theyre paying their fair share. If not the United States for tax reform, what do you say to your clients, this country used to be attractive, but we think over the next two years, it may get worse. Weve seen some proposed changed in ireland, some proposed changes in swit zerlan. And saying, you know, maybe theres ways to bring it altogether. The oecb tries to put programs out to harmonize tax systems around the world. They have some tax proposals out there that would bring do you think thats ever going to happen . They put an action plan out. I think as countries start to take their own measures and maybe take things on their own agenda, i think youll see more activities like that in the u. S. Because the u. S. Doesnt want to get left behind as the rest of the world moves around doing things that will harmonize the system doing better. I hope youre right. Makes it easier for everybody. Thank you for having me. Thank you. When we come back, pizza hut trying something out to take on the competition. I miss pizza hut. But look how long its been. Were going to talk about it next. There must be reasons that they didnt do it before now. Yet being a new yorker, youll see what im talking about. Its a good piece. Talk about it after. Also, rts shark tank tuesday here on cnbc. Surviving the hostile environment is one thing. Thrive sg another. We will meet two entrepreneurs who are getting a taste of success. From cincinnati. Just like joe. As we head to the break, check tout price of crude oil. This is interesting because crude oil prices were under pressure again yesterday. It settled the day below 92. Today its up about 12 cents, 91. 92. Welcome back. I think its a good idea for becky. Were going to lead every half hour with the tenyear. Tenyear note today is 2. 854 . It has been amazingly under control. You know, id like to say, wow, thats great, but i dont really think its great. No. Its a reflection of the jobs picture and the economy and underlying economy. Oil is not oil will tell us something, too. And that was another thing. At an eightmonth low right now. And everybody at the beginning of the year, oh, its stuck between 190 and 110. Really . With shale . With all of this stuff that you do per btus . I dont know. This is the biggest news of the morning. I want to be clear. Andrew, the other day you dissed me on my burrito story. It was the biggest story of the week. Pizza hut now is going to start offering pizza by the slice. I knew you would like this. Its in two test locations this week. Theres a lot of places where you cant get why cant they do that . Other places seem to be just fine making whole pizzas, leave it there, put i tell in the oven for a while and give it to them. They have not done this. You can get your personal pan pizza for five bucks. But you have to wait for that to be made. A slight will cost between 2 and 3. Takes three to four minutes to heat up. The new york city way. How many famous rays are there . 30. What was that movie, the guy is moving to new york. Number one, oh, yeah, number one dont pick the gum that you see on the subway railing is not free candy. Dont crew it. And there are more than 42 rays and theres only one thats the ill take you to famous rays. I think ive been there. Which one . Exactly. Everybody else does it at the new york style pizzas. One test location is in new york, nebraska. The other is in pawtucket, rhode island. These are two places they dont care whether it works or not. No, this is why. Theyre going to be spinner pies. Theres all kinds of ones. I think of it as a deeper dish unos. What going to do with the slices. Thats amazing that that is brefkts. Coming up, getting in the shark tale and living to tell about it. Meet tom and chee. All of the great food innovations come from cincinnati. Im talking about chili, skyline, they specialize in Grilled Cheese sandwiches and tomato soup. They have made it into the new jersey. Theyre going intooth squawk tank naked, next. Tomorrow on squawk box, rahm emanuel and steve forbes joining forces to reinvent america. They both join squawk box at 8 00 a. M. Eastern. Conquer the morning, conquer the day. Tdd 18003452550 at schwab, we can help turn inspiration into action tdd 18003452550 boost your trading iq with the help of tdd 18003452550 our live online workshops tdd 18003452550 like identifying market trends. Tdd 18003452550 now, earn 300 commissionfree online trades. Call 18886282419 or go to schwab. Com trading to learn how. Tdd 18003452550 sharpen your instincts with Market Insight from schwab tdd 18003452550 experts like Liz Ann Sonders and randy frederick. Tdd 18003452550 get support and talk through your ideas with our tdd 18003452550 trading specialists. Tdd 18003452550 all with no trade minimum. And only 8. 95 a trade. Tdd 18003452550 open an account and earn 300 commissionfree online trades. Call 18886282419 to learn more. So you can take charge of your trading. So ally bank has a raise your rate cd that wont trap me in a rate. Thats correct. Cause im really nervous about getting trapped. Whys that . Uh, mark . Go get help i have my reasons. Look, you dont have to feel trapped with our raise your rate cd. If our rate on this cd goes up, yours can too. Oh that sounds nice. Dont feel trapped with the ally raise your rate cd. Ally bank. Your money needs an ally. Any excuse to show a clip from jaws. It is shark tank tuesday on cnbc. Catch it at 8 00 p. M. And midnight eastern time. Tomorrow, shark tanks cohost, kevin oleary will be our special guest. 8 40 eastern time tomorrow. Lets get over to joe with a couple of shark tank survivors. I look forward to oleary. He blew me away last time. Treat us on capitalism and entrepreneurialship. Tom and chee mastered the art of the classic comfort, Grilled Cheese and tomato soup. Their success is spilling into the east coast. Theyre here now after landing a deal with barbara corcoran. The Company Opened its first location on the east coast in freehold, new jersey. Joining us to kick up their signature specialty is Grilled Cheese and doughnut. Corey ward and trew quackenbush, the founders of tom and chee. If i was wasted, i would want to eat all this stuff right now. Were working on a deal in colorado right now. Honestly . A Grilled Cheese doughnut. Sorkin, a Grilled Cheese doughnut. Im sitting here, im having trouble. Its a warm cheese danish, a little sweet, little salty. You start Fountain Square is a place in cincinnati right in the center of downtown. You started how, with a 2009 in a ten by ten tent. We sold Grilled Cheese, the Grilled Cheese doughnut and hot chocolate. How did you get on shark tank . How did that work. From the time we started the tent i was emailing them. Some emails were very much about were two families from the midwest trying to achieve the american dream, the next email would be hard numbers. These are our sales. This is what were doing, this is how were growing. Youre kicking butt but youre running out of money. You get on shark tank when . Last year . In may, yes. What happened . You go on, they look at this, theyre considering other things but they say this has potential. Is that how it works. One point we had four of the five sharks in on the deal. Who put in money. At the end of the day, we did a deal with barbara and mark and kind of going through the Due Diligence we ended up walking away with a deal with barbara. You opened up new places . How many now . This is our ninth location. We just opened in freehold. Before that we opened in lancing, michigan and next month atlanta. Who thought of tomato soup and Grilled Cheese . It was interesting. Corey and his wife came over for a cookout. We were talking about downtown and not many lowcost options when youre on the square watching music. We started bouncing ideas around from meatballs to pierogis to whatever. Grilled cheese came up. Ive been in the business a long time, executable, simple and everybody has a connection to it. We just went forward. Cincinnati, big german heritage, they have octoberfest but they have the skyline chili, the gold star chili, a certain kind of chili. They have the montgomery inn boathouse ribs. Its an innovative place for food, isnt it. Its a great food town. One thing i came from seattle before i got to cincinnati. And thats one of the things i found there, everybody is adventurous. People want to try new things and they get behind any new startup in cincinnati. You guys are going to be moguls, you think . Is this going to work . Most definitely. Thats the plan. Weve sold 27 territories so far. 150 locations right now. Thats going to happen. In the next five years. Youre doing a franchise model. Correct. Were always looking for things to do. My wife thinks she wants to have i affranchise. How much will it cost me. The licensing fee is 35,000. You have to have the money you have to build a restaurant a after that. And hire employees and do everything else. Andrew i need to get in on this. You should just come over. The tomato soup does not look like campbells. Its all made from scratch. You do gazpacho in the summer. Yes. Im dying. Try a Grilled Cheese doughnut. This is it . Yes, the Grilled Cheese doughnut. You have some with ham on it, too . The barbara blue, we call it. We made that for barbara cochran, our investor. Its brie cheese, ham and a blueberry compote on top. This is awesome. Its a little sweet and its not overwhelming. No. Its not overwhelming. You really are going to colorado . Oh, yes. You have to do that. As we mentioned, i love when Cincinnati Companies are doing well. Shark tank is unbelievable, tuesday night, it willing on at 8 00 p. M. Again, becky. I mean, it works. Crazy. Thanks. Smells really good. You are going to bring some over. Andrew obviously enjoying himself. When we come back, though, the official start of earnings season, dow component jp morgan about to report results. Well have them after the break. And David Rubenstein will be our guest host. Hell talk to us about why the private equity join the has been so busy in europe. More squawk box right after this. Stacys mom has got it goin on stacys mom has got it goin on stacys mom has got it goin on [ male announcer ] the beautifully practical and practically beautiful cadillac srx. Lease this 2014 cadillac srx for around 319 a month with premuim Care Maintenance included. Good morning. Welcome back to squawk box on cnbc. Jp morgan just out with earnings. The headline number theyre flashing, 1. 30, a nickel below expectations, 5. 28 billion dollars worth of net income on 24. 1 billion. That looks above. I think people are looking for 23. 673. So thats a little bit above. It says that the Fourth Quarter, there may have been some Legal Expenses. Stop the presses. There may have been Legal Expenses in the Fourth Quarter. Thats not a headline, obviously. Its 27 cents a share. Analysts probably knew about that. I dont think that excuses the 5 cents miss that the company reported. They say thats an adjustment, too. They have significant items disclosed in the Fourth Quarter. Adjusting for that it would have been 1. 40. If they say that, then they are going to Great Lengths to say that. Actually the Fourth Quarter was cut by 32 cents a share or 1. 2 billion after tax, up from other items. This is where you need to know which things analysts put into their numbers and which things they didnt put into your numbers so you can do an apples to apples comparison on whether its above or below expectation. This is significant, jamie diamond, making comments about this. Were pleased to have made progress on our control regulatory and litigation agendas and put significant issues behind thus quarter. We reached several important resolutions. Global rmbs, madoff, it was in the best interest of our company and shareholders for us to accept responsibility, resolve issues and move forward. This will allow us to focus on where we are what we are here for, serving our clients and communities around the world. It sounds like this is them saying, okay, we have dealt with the issues that were outstanding that we needed to deal with and from this point we can move out of the shadows. The stock market has been strong. You look at jp morgan, it hasnt been this high in i dont know how long. This may be an alltime high of where it was trading at 58. I dont remember it being above there. 59. 47. Given all the headlines, you have to see through the headlines in a way to get to the stock price. If you look through this by the way, Corporate Investment bank number one, global Investment Banking fees, syndicated loans, just about every category you can be in jp morgan is number one or number two. Even look at june of 2012, which was when they were starting to, i guess, im not going to say get shaken down but thats when regulators say this is right. Theres mortgage stuff here were going to get money on. And its gone straight up from 32 all the way up to 58 or so in the middle of doing all that. And people, they criticized jamie dimon, why are you rolling over . Some of the issues you didnt get total closure even with the settlement. We havent properly introduced him, we will in a second. J David Rubenstein is here. What have you made of what has happened over the last several months, as a client, a member of the citizenry as opposed to a shareholder, which you may be. I dont know. Jp morgan have done a great job for clients like us. The fact that they could pay 23 billion in fines and levees and still be as strong as they are shows how good the Company Really is. Its not going to affect our ability to work with them. Were they involved in 23 billion worth of bad behavior . Thats in the eye of the beholder. 23 billion 23 billion worth of bad behavior, the mortgage language left out. Im not an expert in what they paid the fines for but theres no doubt that when they have as much money as they have, regulators ask for it. If the regulators thought that 23 billion would put them into a financially precarious situation, they wouldnt ask for that much. Jp morgue has the money, they can afford to pay it and not adversely affect the company. 23 billion would break most companies but wont adversely affect jp morgan. Are there times when the government didnt have to back people out because jp morgan was there to backstop it . Maybe they are looking for things they werent focused on before. Jp morgan is as strong a bank as we have in the United States. We have Strong Financial institutions that can overcome this. If they were looking for a big thank you from uncle sam, this is a how do you do. Thank you, sir, may i have another . They are able to move forward and not have to address these problems forever. Do you think it was a shakedown . Im not going to use that word. I would say theres no doubt that government regulators want to get money where there is money. If jp morgan didnt have the money they wouldnt be able to get this kind of money. Jp morgan had the money, they could afford to pay it. Its not going to adversely affect the operations in the future. Its a great reminder to be successful. And do well, because the government will come after you. When you go after somebody in such a strong way and you put them out of business, its not a good thing for the country. If you put jp morgan or equivalent business out of business, thats not good business. Is there any way they could do it where they didnt indemnify them for the bad behavior of the companies they acquired . Did they get enough buying those troubled companies for making up for taking on all their liabili liabilities . I think in the future when you have problems like this, an organization like jp morgan is asked to take over for the federal government, they will probably get indemnification. You cant have subsequent regulators coming along saying that. Life is unfair as we all know. This was probably not the fairest case of the government regulating a financial institution. No doubt jp morgan would not have bought, i believe, bear stearns had they known this was going to happen later on. Lets talk about the broader economy. The market in the first eight trading days of this year is looking at things differently than last year. Part of that was because of the jobs number we got last friday. Where do you think things stand right now . After seven years of recession, were finally emerging from it and having the growth we should have. People are thinking well have close to 3 growth. A couple months ago, people thought 3. 5 . Wed say somewhere close to 3 . The jobs numbers were not good and people were concerned about it. Its one number in the scope of many different numbers that you should consider. I dont think people are all of a sudden saying the u. S. Economy will be in trouble for 2014. I think the job numbers could have been better. I think we should look for more indicators before we look at the economy. The u. S. Economy is doing well compared to almost every other economy in the world. I think its the safest place to invest. I think we are dramatically increasing our investments here. You didnt mean seven years of recession. Seven years after recession. Okay. Normally you have a recession and two or three years after recession youre back above where you were. This was so deep, its taken us six or seven years to get back to where we should have been. Youre buying now . Some people think as Goldman Sachs would say, were overvalued. In certain sectors there may be overvalue. Generally we believe this is the single best place in the world in which to invest and we are looking for investments here. We think china is attractive, too. Some people are upset about the fact that chinas growth might not be 10 or 9 a year. We think china is a good place to invest. We think europe has been overlooked. Its the biggest economy in the world but its been overlooked a bit. The United States is not overbought in my view. Are there particular areas, regions, particular sectors that are most attractive . We are attracted to carbon related energy. We think the Energy Revolution is for real and it will go on for quite some time in the United States and spread to other places of the world. We think Financial Services, has not been adequately invested in by firms like us. And health care. When i worked in the white house in the 1970s, health care was 3 of the gdp in the United States. Its now 18 . A large area. Baby boomers are retiring and will spend money on health care. I like the idea of europe as an emerging market. Should we assume its going to emerge and what gives you confidence . Are they taking steps for their structural issues that will allow them to eventually emerge . The gdp of europe of eu is bigger than the United States. Its a gigantic economy. They have 500 million people. Theyre not going to disappear from the face of the earth. Only 300 million are working. I dont think thats the case. They obviously have higher youth unemployment than we have in the United States and clearly Southern Europe is not as strong as Northern Europe. I wouldnt discount 500 million people, what theyre going to do or an 18 trillion plus economy. There are pockets of problems in Southern Europe, portugal, italy, spain. But Northern Europe is doing reasonably well. Remember, just a couple years ago, people thought the iuorio would go out of business. Now the euro is going to be around and europe is coming back. Three or four years from now, people will say why were people able to sell things to carlisle at such a cheap price . People were nervous. Things bought in the last couple of years will look attractive in two to three years from now. When you say there are other indicators we should be watching, we watch the tenyear note, the yield, the 2. 85 surprised a lot of people. What happened . I think some people are still wondering whats going to happen with tapering, what are the effects of it. People dont know what the impact will be. My own view is that janet yellen will continue and the fed will continue largely the policies in place. I dont think things will change dramatically. Meaning a taper. There will be a gradual tapering. The fed recognizes its probably the only game in town. They have the greatest ability to affect the u. S. Economy in washington. Congress will not do much more than pass this appropriations bill and congress probably wont do anything significant for the economy this year. The fed has the capability of adjusting things and doing thing. People believe and i believe the fed will not do anything that will harm the economy. I dont think theyll taper at such a large rate that it will slow down the growth weve had. Do you think theyll come up with another tool . People have speculated if they dont think qe as effective as it was theyll come up with a new tool, some other way of supporting the economy. I dont know. The fed feels theyve got a bigger responsibility than maybe the fed did 10 or 15 years ago to deal with growth. The fed wasnt set up to deal with growth. It was set up to deal with Interest Rates. The congress has abdicated its role as generator of jobs in the United States or Economic Growth. God help us if congress is the generator of jobs. Hopefully we never get to that point. Congress has to get out of the way for the private sector to create jobs you mean . Congress can have a big impact on the private sector. Congress isnt doing things to stimulate the economy. I think the best thing they can do is pass the stimulation bill. We havent had these for quite some time. Finally having an appropriations bill even though its four months into the year is still a good thing. David rubenstein is the cofounder and coceo of the carlye group. Didnt you invent beats . You and dr. Dre invented it. I did meet with dr. Dre when we were looking at the investment in it and hes a very interesting person. And you rap per se. Did you know who dr. Dre was before you went in the meeting. I was well briefed. I cant say i listened to a lot of his records but im familiar with what hes done. Do you walk the streets waring your beats. I have a hip hop instructor whos teaching me how to get better in that area. Will you do rhyming later with some of your forecasts . At the kennedy center, at the honors we had snoop dogg come. He was quite unusual. He did a great job. Im now very involved in understanding this part of the music. Do you refer to them as head phones or cans . Head phones. I guess im a little old. Do you have a pair. Id like to see you hes going to be listening to beethoven on them later. There they are. Look at that. Do you have a pair . I dont. We have many pairs. Yes. There you go. Those are different. Those are the executive version. Wait, wait, wait. Private equity special version. The noise cancelling ones. As we mentioned, earnings season has officially started. Take a look at shares of jp morgan right now, the banking giants reporting moments ago. Well talk to the analysts about those results within we come back, mr. Rubenstein wearing his cans. Well be back in just a moment. M in tallinn, estonia and the southbound bus barreling down i95. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment everything looking good. Velocity 1,200 feet per second. [ man 2 ] your looking great to us, eagle. 2,000 feet. Still looking very good. 1,400 feet. [ male announcer ] funny thing happens when you shoot for the moon. Ahh, thats affirmative. [ male announcer ] you get there. Youre a go for landing, over. [ male announcer ] the all new cadillac cts, the 2014 motor trend car of the year. And youre like. A good deal or not. Looking at truecar. Com. Theres no buyers remorse. Save time, save money, and never overpay. Visit truecar. Com welcome back to squawk box. Jp morgan chase releasing Fourth Quarter earnings moments ago. We have marty mosby from guggenheim partners. Whats your takeaway in terms of a headline for us. The takeaway really is looking at the fact that core profitability still running in the 135, 140 range which is what youve been seeing the last couple quarters, that puts the profitability still squarely 3 to 4 above cost of equity. The profitability is still intact as it has been throughout the year. Theyre dealing with the sett settleme settlement. Theres Legal Expenses. Theres offsetting gains so that noise pretty much gets washed out as you kind of go through the numbers in what theyre reporting today. To the extent theres anything that gives you anxiety it would be what . No, theres not anything in the sense that theyre bulling their capital. If youre able to take these settlements and still improve capital ratios on their estimate tier one common, they went from 9. 3 to 9. 5 this quarter. Theyre continuing to build that Capital Stock even though theyre going through and settling issues outstanding. If you look at mortgage banking you saw a bounce on the mortgage banking revenues. Youre seeing some of the surprise on the revenue side. If you looked at their profitability, while revenues are down in mortgage banking from last year, the actual profitability is higher because the lower expenses and credit losses. So youre seeing some offsets to the refi that we were looking for in that business. What do you think about the Investment Banking business . In general were starting to see some pickup there. It was up 12 from what we saw in the prior quarter which is a positive sign for the money center banks, especially jp morgan and Goldman Sachs. Theyre looking for that Investment Banking business, kind of starting to perk up as the economy starts to show momentum. Marty, whats your price target on the stock . 68. What were looking for is as these settlements really resolve some of the uncertainty and the pressure on the stock price, you should be able to trade at about another 10 to 15 premium to tangible book value given the core profitability of the company. Its all about resolving these issues, building capital as youre doing that, because youre paying for it with your earnings each quarter and starting to clear the clouds off. As that happens, you can see them priced back to above 60, which is what we think is a relative price for core profitability today. Really quickly, what was the number you were expecting . There were a lot of moving pieces in this one. 130 was the headline number but if you strip out adjustments it was 140. Where should we be looking . The 140 if you take out the unusual items, the items it hit were gains on the Positive Side and, you know, increases in recapture of allowance as the quality continues to get better. Those are things that typically jp morgan is pushing against the Legal Expenses and the other thing that came through was the dvas. The Legal Expenses like you all were talking about earlier were talked about but the madoff settlement came very late. Sure. Thats where that probably incorporated into the core number that the street was looking at. You know, in that 135. Fair to say that both revenue and earnings were a little better than the street had been expecting . I think that is fair to say, yes. In terms of headline risk, how confident are you that all of the legal issues are behind us or embedded in the numbers already . I dont think you can say the word you just said all is not going to be. When youre forecasting and looking at the reserves you have to build it in a sense of what you know the losses are today. So there are things they still have to reconcile and resolve as we saw with this last piece, there were increased reserves as they settled the madoff case. Theres things youll see. When you want to look at it, if you want to say the majority or bigger issues they have to deal with, theyve been successful at being able to put those aside and now they have other things to work forward with with the regulators. But in general, theyve handled a big piece of what they had to deal with in the Fourth Quarter. Okay. Thank you for joining us this morning. Appreciate it. I dont understand why the stock is off marginally in the premarket. Its right off a high and off 10 cents, 15 cents. Okay. Leave it there. Theyve had earnings power of 1. 35 to 1. 40 in recent quarters. Its a money machine. Apple has a lot of money for regulators. Im just saying. They are so ready to pony up a little. We could find that. Theyve probably done something wrong, havent they . They already went after them for the taxes. Lets go. Gravy train. Big huge amount of money for regulators. In an interview with becky earlier this week, target ceo promised to make significant changes after a huge data breach. You were all over nightly news again last night. Up next, eye number of other retail ceos speak out to cnbc about everything, from security to the state of the consumer. Stay with us. Time now for todays aflac trivia question. What is the estimated total cost of the sochi olympics . The answer when cnbc squawk box continues. Yeah, hes clean, boss. Now listen to me, duck. I have an associate that met with, uh, an unfortunate accident. While hes been incapacitated, somebodys been paying him cash. Now, is this your doing . Aflac . Now, if i met with some such accident, would aflac pay me . Nice. This is your stop. [ male announcer ] find out what aflac can do for you and your family. Aflac . [ male announcer ]. At aflac. Com. For you and your family. Aflac . voseeker of the sublime. Ro. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. And only national is ranked highest in car rental Customer Satisfaction by j. D. Power. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. Now the answer to todays aflac trivia question. What is the estimated total cost of the sochi olympics . The answer, 51 billion, making it the costliest olympics to date. Aflac. A number of retail ceos gathering in new york last night, among the topics that were discussed, data security, cnbc caught up with a number of industry leaders. Certainly the Consumer Needs to be protected and feel safe when theyre giving their information and making purchases. So whatever we need to do to do that, we have to. I think that this is probably the beginning of it. But i know smart people are doing a lot of things to prevent it. I think well all be carrying chips someday anyway. May as well do it now rather than wait. Retailers are using old technology, and the thieves are using new technology. We have to get ahead of them. Its very important. So i think a lot of companies, i know a lot of companies are going to be focusing on that. I think the federal government needs to get involved. Thats how big it is. This whole thing with cyber, you dont know where this thing is going and its going to be its a major issue for not just retailers but for banks, everyone institution, manufacturers. During the 8 00 a. M. Hour well be talking to one of the largest suppliers of credit cards with embedded security chips known as emv cards. Up next, well find out how the Small Business world feels about the economy right now. Plus, a disappointing start to the year for equities, down nearly 2 since the beginning of the year. Is this part of the pull back theyve been expecting . We put the selloff in perspective in the next half hour. Fifteen minutes could save you fifteen percent or more on Car Insurance. Yeah. Everybody knows that. Did you know there is an oldest trick in the book . What . Trick number one. Lookest over there. Ha ha. Madeest thou look. So endeth the trick. Hey. Yes. Geico. Fifteen minutes could save you. Well, you know. Welcome back to squawk box this morning. In the headlines, were watching shares of dow component Jpmorgan Chase this morning. Revenue topped street estimates. The Bank Reported quarterly profit of 1. 30 per share on a gap basis, 1. 40 per share if certain items are excluded. The expectation was 1. 35. The next notable Earnings Report coming at the top of the hour when well be hearing from wells far fargo. Theyre expected to report 98 Cents Per Share on revenue of 27 billion. Analysts are thinking that the overall retail sales were unchanged compared to a rise of 0. 7 the month before. We will see what happens when we get those numbers. Joe . The nfiv is out with the latest Small Business optimism index. Steve liesman joins us now with a guest. No report. I have the numbers, joe. What about dunkleburg . Well bring dunkleburg in. Ill give you the report first. You do have a report . No. Im going to ad lib it, up 1. 4. Up is good. Its a niz. What is the story with nfib . Yellow levels. The level remains below prerecession. Its a positive report. Let me bring in bill dunkleburg. I have a personal bone to pick with him. Bill, bill what did i do . What do you mean . You dont know what you did . Were going into the jobs number, everything is looking good. Nfib comes out with the best jobs component since 2006 and i go hog wild on the jobs report. You guys say best numbers and the government says 74,000. You led me astray, bill. I feel bad about it, bill. I had a lot of company. Everybody was up there with me. Seriously, this is a pretty good report. Its not a bad report as they go. Yes, it does have good pieces in it. We see that the job market numbers are staying better, plans to create new jobs didnt fade. The job openings number stayed up there, which is suggesting the Unemployment Rate will stay in this lower range that were seeing it running in now. Thats not bad. They really did hire people. That was not bad. The government will catch up with us. This has been something thats been a missing component of the recovery, which is youve had Large Businesses hiring and Small Businesses left behind. It felt a little bit, when i saw that december report and whenever i got your regular report, the full report, that Small Business was catching up, the Capital Spending plans were doing better. I also like, bill, the unfilled job openings looked pretty good. Yep. Those all look good. Thats highly correlated with the Unemployment Rate. Id like to see that unfilled jobs openings number going up. That means the Unemployment Rate will keep going down. That will be nice. We dont have the fundamentals in place. We have 8 percentage points, more saying sales are trending down than trending up. We need more strength in the Sales Numbers and retail sales and so on to give these people reasons to hire more people. It is true that manufacturings are a strong sector. Thats where were doing lots of our hiring and professional services. The nonprofessional services are still trailing kind of badly. Look at that chart. Wed like to see that pick up. Before they take it down, thats the chart that says what you just said. The only thing annoying about it the whole thing is annoying. What do you mean. The guys are never unanimous on what it is. Theyll say they dont like regular but its 14 or something. You never get anything where you can hang it on definitively say this is why theyre negative. Why are they negative . There are a number of things. It depends on what kind of business youre in and where you are. The firms in north dakota are still optimistic even though theyre buried its mostly demand. We cant settle the big argument we have about whether its demand or an activist government . We never settle that with you, whether its regulation and high taxes. You know, the Corporate Tax rate in an unfriendly Business Environment or whether its demand, weakness left over from a terrible recession. You cant tell me that now, can you . The answer is for 20 , the top problem is taxes. For another 20 , the top problem is regulations and red tape. They can only pick one. For only 14 , which is continuing to trend down, thats good, its weak sales. Were down from a couple years ago 33 said weak sales. One in five, we cant draw conclusions on one in five, bill, can we . Dont make the perfect the enemy of the good. If its a problem for one in five, you should address it for one in five. But i want 51 to say so. Thats never happened. So far, the forecast for third and Fourth Quarter are running much stronger than the first half, 3. 5, 4 . Is your survey in line with that level of gdp . No, it definitely is not. We might have taken hope from the huge jump in the firms that reported making capital expend tours. Thats what we like to see that coming back. Thats a nice one. We think that was a tax phenomena. Section 179 expired for the 500,000 expensing option went down to 25,000 on 12 31. I think a lot of people rushed to get their Capital Spending done ahead of the end of the year. Im afraid that that will slow back down in the first half. So we wont get any umph from that either. Inventories are terrible. They dont plan to add inventory. Not good. Could you take a step back and give us a broad overview of the state of Small Business right now . How are they feeling . How are they in this recovery relative to 2007 . Relative to 2007, were still kind of below where we were in the peak in 2007. Optimism has improved over the last two months. It could be the beginning of a trend. There were three months in 2013 where the index was higher, over 94. We need to get to at least 100. Thats average before we can kind of feel like were doing well. If we really had a recovery wed be looking at 103, 4, 5, 6, 7 for the index. Were way off the pace here. Things are headed in the right direction. Every year we seem to get a bump, things look good and it falls off and slows down. Lets hope that doesnt happen. The Election Year with all the nonsense, congresss inability to do anything. Theres a lot of stuff, a lot of clutter in the way of getting the economy moving. David, this sounds different than what you had been talking about in terms of your perception of the economy. Maybe im wrong. Maybe you still see deals out there because there are uncertainties in the economy. If the economy was firing on all cylinders it might be tough for you to find deals. Its never easy to find deals. Last year it was a much smaller amount of Global Private equity deals and deals in the United States than 2007 or 2008. Were still only 50 of the dollar volume in 2007 or 2008. Its not easy. I think its picking up a bit. Financing is readily available on attractive terms. Maybe im saying it wrong. In terms of things you think are attractively priced . Theres no doubt things are not cheap. Right before the recession in 2007, 2008, the average ebitda multiple for a buyout was 9. 7 times. Today the average for a buyout is 9. 7 times. So its come back to where it was. It was as low as 6 or 7 a couple years after the recession. Its now exactly where it was in 2007, 2008. Things are not cheap. You have to be judicious in looking for things that you can make a return. Did Health Care Show up at all in the survey . Is obamacare part of the feelings of Small Business right now . Yes, only a little bit so far, steve. For the last two months we saw a bump up in the percent of owners who said insurance was their top business problem and i would assume that that all really resolves around trying to comply with obamacare. Well see more of that in 2014. Now the small firms will have to think about what theyre going to do come 2015. Theyll be looking forward either to find something they can afford or abandoning what they did offer and sending their employees over to the exchanges. Bill, thanks for joining us this morning. There will come a day when joe will not know what the story is. Thanks, everybody. Thanks, bill. 20 . Regulatory impact of many things that happen in washington really good adversely affect disproportionately Small Business rather than bigger businesses. Smaller business will have problems dealing with the regulatory problems and it may take a while for them to adjust. Also credit is not available for those people the way its available to you, david. Its not as readily available. Up next, earnings season is here. What should investors be watching as Companies Report . At the top of the hour, wells fargo will post results. The numbers plus the reaction to wells and the jpmorgan numbers we got this morning. Squawk box will be right back. Mine was earned orbiting the moon in 1971. Afghanistan, in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back to squawk box this morning. The futures have picked up some steam. The dow futures are about 55 points above fair value. The s p futures are up by over five. Well continue to get earnings coming in over the course of the morning. Were awaiting wells fargo at the the top of the next hour. Astrazeneca, 2017 revenue is likely to be broadly in line with the 2013 level. Lets get a check of the markets now. Earnings season, its officially under way but we havent gotten many. Were at less than 1 right now. Our ghost host is David Rubenstein. Hes also with us. Do you get the feeling this is going to be something when were finished when people say, wow, thats not bad, this is enough for validating where stock prices are . Or will it be wow, what happened, we didnt see this coming, it was worse than expected. Before heading into every singles earnings season theres a growing course of nerves out there. In the end if you look at the Economic Data weve had over the Fourth Quarter it wasnt that bad. I suspect Earnings Growth in the mid Single Digits and it will be similar to last quarter. Jpmorgan is a pretty good proxy. Financials will be theyve been in a range of what theyre able to earn for the past year or two. I think financials broadly speaking will do quite well. You have higher Interest Rates and steeper yield curve. Improving Balance Sheets not only in the household sector but also in the private sector. Of course looking around at the pace of the Economic Growth. Things are improving. You have increased household wealth, loan volume is picking up. All of these things body well for financials. That would body well for consumer discretionary, i would think, too. Absolutely. What about caterpillar, industrials have had some trouble recently. As the pace of Economic Growth accelerates is that happening . Theres signs of it. If you look at economic momentum the last couple of months of the year, things were improving, getting a little better. Even abroad, europe, things are improving. I wouldnt want to say fantastic but improving. Is it a rising rate environment. I think were getting there. Back to 2. 85 on the ten. Thats what worries me. Wonder if thats a canary in the coal mine. You saw the jobs report. Yes. People are writing it off. The economy can have a little swoon at any time. Maybe weve seen the best well see for the past six months. Well continue to take two steps forward and one step back. Youll have headlines hit the fan, if you will. As a result of that youll see yields back up. But i do think that broadly speaking youve got a treasury which is essentially put us on a path back towards normal. I think well continue to slow down the pace of these purchases and by some point i think well be done with qe. I suspect you have to look at the flow of capital. Weve only begun to see this rotation from investors around the u. S. Out of fixed income and into the equity markets. As that continues to follow through, youll see Interest Rates higher. The one thing ive said for a while, the notion that the fed orchestrated this just beautifully and that theyre able to exit, just how they said they would. And the economy goes to 3. 5 and the Unemployment Rate drops below 6 and the Balance Sheet, we get out and everything, does that ever happen in the real world where its just perfect like that . Probably not. I dont think so. Do you think they can do it, david . And were just all happy and it all works. Its what lawyers call a case of first impression. This has really never happened before, weve never had a qe problem like this or a program as big as this. Nobody at the fed really knows what the impact of tapering will be. I doubt theyll be out of the program by the end of the year. I expect it will go on for quite some time. If the economy shows weakness, i suspect theyll slow down more of the tapering. The project has generally worked. It was an experiment. I think people conclude its time to end it over a reasonable period of time. If you wanted to support a scenario where the bears were right about qe, it would be that the economy doesnt cooperate and that like were in a roach motel. Then again, you have the Participation Rate. We get 70,000 jobs and were at 6. 7. If we get 0. 3 and dont get any jobs, is that success . You cant look at one months job numbers. You have to look at a couple months to know where the trend is. Theres no doubt the bears argument is correct that weve spent money and havent gotten as much job creation as wed like. I think its too early to know. We are showing growth, maybe approaching 3 . So i think the program has history will write about it, worked better than people thought it would be but wasnt perfect. I still dont get the conclusion. Do you think the stock market will snap back from what seems to be this mini slump. I think so. Literally in the next week or two in or do you think well be here for a while. Im not one to say whats going to happen in two weeks. Directionally over the course of this year, i would view these dips as buying opportunities. I think the underlying fundamentals remain in place. You have oil prices contained. Its a good thing for the consumer. You have improving Balance Sheets, Economic Growth not looking too bad. You have a fed moving us along the path to normal. I think all of these things are supportive of risk. I wouldnt call it a mini slump if the stock market is down a couple days. Were only a couple days into the year. Were talking about this as a turn. I dont, were not. We may be at this table. I dont think anyone else. If it were up every single day this year, youd be saying were in trouble because the stock market is going up. You had a 30 whammy from the stock market last year. If we did stay at 2. 85 instead of 3. 5, that helps. People are already saying the Mortgage Market is showing signs of not being as strong. That would Lower Oil Prices and the tenyear staying under control might be positive. Whats the markets multiple right now based on 2014 earnings . I think right now hovering in the 15, 15. 5 . Not 17 or 18 . If were looking at this years earnings. We have to do better. Probably around 15, 15. 5 times. The fear i think many people have, were hovering around the average, does that mean this is it . Is the party over . I think you have to recognize markets arent necessarily stop when valuations hit average. They continue to move. There has to be some count of catalyst. We have certainly going into the year. I think well have an appropriations for the first time in a long time. The vocal rule after four years we finally know what it is more or less. While its 1,000 pages and more complicated than paul volcker ever anticipated, at least the banks know what it is and can plan. When we come back, Charter Communications offering to acquire the nations second largest cable operator. We have those names and others in stocks to watch right after this. Later, target ceo Gregg Steinhafel telling us the importance of Chip Technology. How difficult is it to switch from magnetic stripes to this technology . We have a company that works with some of the worlds biggest banks. Squawk box will be right back. Where others see fads. 0 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. Of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. And the little room above the strip mall off roble avenue. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment this magic moment i just knew from the getgo that i was. Flat out getting a good deal. When youre ready to buy a car, save time, save money, and never overpay. Visit truecar. Com lets look at some stocks to watch this morning. Jpmorgan weve been talking about, 1. 30. Is including some ims, maybe a back amount. You get somewhere around 1. 40 which would be a nickel ahead of expectations. Revenue did beat and Ceo Jamie Dimon said the company is making progress on its control regulatory and litigation agendas. And that is a current quote youre seeing there. After all was said and done and all the analysis, its a penny ahead of where it closed yesterday. Time warner cable rejected a merger proposal. This was like a bear hug. Charter came out and said we did this, were taking it public now. Theyve done it a couple of times. What does time warner want, 1. 60. 160 and 100 bucks in company. 132. 50 in cash and stock, they want 160. We were talking about john malone. Hes back. Hes within influential for 30 years in the industry. Probably something will get done when a company is saying we need more and they give a specific number, you can probably guess something will be done. If you can save x amount of dollars and do the same thing, it may happen. Its a dance. Something will happen in this company. Time warner cable is not the most well run operation in town if i can say that allowed. Is that your cable provider. They are but im not even saying that as a customer. They lost 500,000 customers in the last quarter. Thats crazy. It sounds like its about your own service. Some of it is knowing the industry. Youll have an analyst on later that would be pleased to say the same thing. Did you get blocked out of the girls premiere or something . Was something not on your set. Nope. That would infuriate you if you couldnt watch girls. I was able to view that as well. You have the dvds as well. I dont own the dvds. I know what to get you for your birthday. Pfizer has three interested in buy iing its branded generic business. Coming up, Quarterly Results from wells fargo. Well get the numbers and Market Reaction in the next hour. Well be right back with wells fargos numbers and maybe girls from hbo. Welcome back. How is everything . Theres nothing like being your own boss and my customers are really liking your flat rate shipping. Fedex one rate. Really makes my life easier. Maybe a promotion is in order. Good news. I got a new title. And a raise . Management couldnt make that happen. [ male announcer ] introducing fedex one rate. Simple, flat rate shipping with the reliability of fedex. Stacys mom has got it goin on stacys mom has got it goin on stacys mom has got it goin on [ male announcer ] the beautifully practical and practically beautiful cadillac srx. Lease this 2014 cadillac srx for around 319 a month with premuim Care Maintenance included. Earnings central. Wells fargo ready to report. The numbers and street reaction just seconds away. The cable wars are heating up. I feel good about this. A closer look at what charters bid for Time Warner Cable could mean for more consolidation in the industry. Protecting your plastic, the target breach calling into question the credit card security. We have one company with the knowledge to make a difference. Live it love it all righty then. Welcome back to squawk box here on cnbc, first in business worldwide, im joe kernen along with becky quick and andrew ross sorkin, in studio, sharing his thoughts on the market, the economy and more with saved rubenstein, cofounder of the carlye group. The thing about david, we have a parade of people who just talk. They tell people what they should do but then they really dont have to say anything or do anything. Hes got his money. You are the opposite. I dare say exact opposite. I think in this your money is where your mouth is. In this day and age, people like david, schwartzman, black and others are probably more powerful than any of the bankers. The wells fargo numbers are in. The anchors of this show, thats where the power is. Thank you for that. Lets talk about wells fargo. The numbers are just in. The company came in with earnings of 1 a share, street was looking for 98 cents. It looks like revenue came in just about in line with expectations. The Company Making some comments, just looking through at this point. Looks like the commercial and industrial i dont know. Its a jumbled mess at the top of this. I havent gotten into the release yet. Youre never good at the jumble. I beat you yesterday. I put the wrong letter down. Youre not very good at the jumble. Just looking through this. It does look like the stock is indicated potentially just below where it came out, the same thing we saw with jpmorgan, trading after its earnings came out today. 963 million in net chargeoffs, which has been trending lower, i think. Right . Wells, if theres any bank that will be affected by mortgages, its going to be wells. They originate about a third of all mortgages in this country. Total loans 825. 8 billion. You know what an efficiency ratio is . 58. 5, up 30 basis points, net interest income, 10. 8 billion. If you talk about, from the time of the Great Recession today, which bank in the United States advanced itself the most . Obviously jpmorgan was always strong and its still strong. Wells through the wachovia acquisition probably did more toen hato toen to enhance their standing. I think the wachovia acquisition made that bank stronger than it ever was. 20. 692. They did 20. 67. Right. Within a very close point. I would call that roughly in line. Right. The company also making some comments, the chairman and ceo john stump saying that strong earnings power on capital levels and improving Economic Outlook are the major reasons they look ahead to 2014 with optimism. Thats key. Theyre still looking at improving Economic Outlook as well. Theyre saying the credit performance continues to be strong. That means they take care of nonperforming assets decline. Is that what you said before. We talk to an analyst in a couple minutes. They made 5. 61 billion. They made more money than jpmorgan. 5. 3 billion, 5. 61 here. Wachovia, while they had problems, no doubt, ultimately that really enhanced wells position. By contrast, the acquisition that bank of america made in the mortgage area really turned out to be one of the worst acquisitions in the history of finance. Its still hurting them. Theyreple coming bought but it was a bad acquisition. Wachovia, one of their big mistakes was golden west, though that probably wasnt as bad as some of the other. Countrywide turned out to be the most expensive acquisition. It probably will cost bank of america 60 billion plus while they thought it would cost them 6 billion. The mortgage banking, you mentioned andrew, this is one of the biggest Mortgage Originators in the country. During the Fourth Quarter Residential Mortgage original nations was 50 billion, down from 80 billion in the third quarter. They said Noninterest Income from mortgage banking was 1. 6 billion, down 38 billion from the third quarter, too. Okay. These are examples of banks that have strong ceos. The ceo of wells, jpmorgan are two of the best bank ceos in the country. When you have good leadership at the top, it really can help. Before we go on to jpmorgan, is there a reservoir of good executives that can succeed some of these guys . Theres been an argument made over the past year around jamie dimon, around other banks, that theres somehow no bench. I wonder that. Charles seagal said cemeteries are filled with indispensable people. The truth is, there will be somebody to succeed me and do a better job than ive done. There will always be good people coming along. Organizations like jpmorgan and wells to get good people. Somebody will rise up. Jamie is an unusually talented banking executive. Jpmorgan posted a quarterly profit of 1. 30 per share on a gap basis, 1. 40 per share if certain things were excluded. Revenues topping estimates and dialling into the squawk news line is paul miller of fbr Capital Markets, head of the financial Institutional Research group. Paul, whats your take on the report this morning . Should we be happy . Its okay. I view it as hohum. The issue is with all the banks that have been beat up because of higher rates, lower loan growth. They are left with liquidity. It was up slightly but nothing to really get excited about in my book. Do you cover wells fargo as well. Do i cover wells fargo. Im looking at the numbers. I havent gone through it with a fine tooth comb. Wells fargo is one of our favorite picks. It has a high evaluation. Its just a basic clean bread and butter bank that continues to meet their expectations. Invariably with jpmorgan theres been a legal cloud thats hung over things. How satisfied are you that theyve taken all the reserves theyre going to need to take . You know, theres probably more coming. But the issue is these guys make 23 to 25 billion a quarter on top line revenue. Theyll be able to earn through that. I dont think youll see this company get beat up because of it. I do i am getting concerned about the amount of reserve releases from their asset quality portfolios. Theyre down to 1. 8 reserves to total loans. I dont i wouldnt be comfortable with them getting much lower than that. If we do run into an economic type of hiccup, theyll have to reload on those reserves again. This stock is trading at about 58 a share. Whats your target . Were at 55. We think given the volatility and the trading portfolios, ten times earnings is a good valuation for this company. Well a little bit overheated. Real quick, for wells fargo, whats your target. Its closer to 50. Its 45 now. Okay. Very good. Paul, appreciate your time this morning. Youre welcome. Bye. One of the problems when you have these large litigation reserves its a target for prosecutors. The second you say you have 23 billion was that a strategic mistake. The accountants require you to do that. You have no choice. Once you do that, government regulators say they have 23 billion, they can afford it, why not take it. The Willie Sutton school. If they had a litigation reserve of a billion, thats all they could afford, fines probably would have been lower. I have no money saved. Do you think they had to go public with that number . Generally the accountants require you to do something thats close to what your lawyers think you might have to pay. And theres no real ben knit in having a lower number. You generally are benefiting by having a higher number. The higher the number, the more they ask. How much did you make on that book. Not 23 million. Nothing. Youre talking about if you have it, they come after it. If anyone is watching the three of us on this show, seriously, 500,000 copies. Im an llc that protects me. You do . What country is that based . Thats a chaayman islands thing theres a new one. Coats. Thats the island i took all the money over there. Okay. David and i are just manhattan, isnt that good enough . Theres the tax issue and de blasio. David is being quiet about having serious dough. You dont have any either. Im giving mine all away. Its in the Washington Monument right now. Did you think about leaving the scaffold up . People like the scaffolding more than they liked it without the scaffolding. Well take to make a way that the lighting which was very good when the scaffolding was up, when the scaffolding is completely down. The people that did the lighting for the statue of liberty might be providing the lighter later on for the Washington Monument, making it much more attractive without the scaffolding than it had been before. Look at the eiffel tower. We could have neon signs on the Washington Monument. That would play down the debt. Ill be on squawk box. Right. Some of the other headlines, Charter Communications is taking its bid for Time Warner Cable directly to investors. Offered to acquire its larger rifle for share and cash and stock. Time warners board rejected that bid. David faber reports that they would accept a 160 share bid. Charter communications ceo tom rutledge will join squawk on the street, coming up at 9 00 eastern. Yum brands say their samestore sales in china was weaker than expected. The country accounts for more than half of yums operating profit. A 1. 1 trillion spending bill has been unveiled. That would fund federal agencies through the rest of the fiscal year and avoid sequester cuts. It would give workers a 1 raise. When we come back, reaction to quarterly wells fargo results. Well get december retail sales and import export prices as well. Squawk will be right back. And truecar users. Save time and money. So when youre. Ready to buy a car, make sure you. Never overpay. Visit truecar. Com today. Welcome back to squawk box, everybody. Weve been watching the tenyear yield. The yield is sitting at 2. 854 . Theres been a lot of pressure on yields particularly since we got that lousy jobs number last friday. In the headlines, the head of the uaw says hes convinced the union will be represented by volkswagens plant in chattanooga, tennessee by june. Volkswagen has called for a formal vote by employees. Joe . Wells fargo out with quarterly result earlier this half hour. Joning us now on the squawk news line is scott siefers. The stock is down 20 cents or so. I imagine that means it was pretty much in line with what wall street was expecting, scott. Any surprises of note . No, no, i think youre pretty much spot on. Anytime a stock is up 30 in the last 12 months largely on multiple expansion you can expect a little profit taking on a pretty much inline quarter. One thing i would say, though, simply the reported number of 1 did beat consensus by a penny. At the very least, despite anything we come up with, they can say theyve generated 16 straight quarters of eps growth. Thats a pretty good track record. This is 240 billion company now. I guess jp is 217. Amazing how similar the bottom line was at 5. 6 billion for one, 5. 2 or so for the other. Luckily, none of these banks are that big anymore after the crisis . Right. Exactly. A couple are still pretty big. Wells and jpmorgan are two of them. Thankfully theyre turning out pretty impressive profitability. Nothing to shake a stick at. I saw something on i dont know why i look at huffington post. Basically it said wall street wins again in terms of allowing bulk Commodity Trading for all these banks. The attitude in the country is its not a good thing to have banks doing well or viable Banking Sector because its almost a zero sum game at the expense of others. Should we think of wells fargo and jpmorgan as doing i dont know if theyre doing gods work but arent they essential kpon ens of a Capital Market or a country that works this way . Oh, yes. I dont think theres any question about that. You know, gods work or not, call it what you will. Theyre providing an essential service. Allows people to buy homes, borrow money, grow businesses, you name it. Despite the vilification of the last several years maybe theyre right about that, they shouldnt be so big that they have an implied government backing that allows them to do things in a more competitive way. If you take a wells fargo, for example, its probably not good to pain the it with such a broad brush. You look at profitability overer in period of time for wells, theyve done such a nice job of managing their company. Its enormous, yes, but they have the acumen it demands. Chargeoffs are less likely so theyre big reserves back. That wont last forever. No, it wont last forever but its lasting for now, which is important for today. Wells released about 600 million of reserves this quarter. At the very least we know its a tough revenue environment. Drawing down the reserve, in other words, providing less than they charge off in an improving credit environment, it provides a bridge until the revenue environment becomes easier. Perhaps not the highest quality earnings in the world but i will take it, no doubt. David . I think hes a smart guy. He obviously knows what hes talking about. We are an investor in sandler oneill. If our banks shrink and we have Smaller Banks and maybe some people would like that politically, banks around the rest of the world are not going to shrink. The banks in asia and europe are going to be the dominant banks if we allow our banks to shrink. Would people be happy in the United States if our loans and mortgages came from foreign banks . I dont think so. I dont know where i come down on it but ken griffin would come down on that. I remember having a conversation with him a couple months ago. He said red herring. One bank will be able to handle your mortgage. The distinction will be whether verizon when buying vodafone needs to go to ten banks or jpmorgan. That may be may be the issue. You might be able to find a syndicate where farms like yours become the bank. Right . When there are problems in the banking system, do you want the decisions being made in new york, san francisco, frankfurt, london or hong kong . I think its better if theyre made in this country. We have to say goodbye to scott. Retail sales. Is that an important number . The holiday season. Yes. The governments december retail Sales Numbers will give us an indication of how retailers actually fared this holiday season. Credit card security in question after that major breach at target. You heard about Neiman Marcus over the weekend. Well talk with a Technology Company that makes credit cards more security. Around here you dont make excuses. You make commitments. And when you cant live up to them, you own up, and make it right. Some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where its needed most. But i know youll still find it when you know where to look. Over the pizza place on Chestnut Street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i95. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment. Welcome back to squawk box, everyone. New Jersey Governor Chris Christie will deliver his state of the state address today. It comes as more scrutiny surrounds the governor and the bridge scandal. A judge found the company conspired to fix ebook prices. His mandate parentally called for the judge to review the companys antitrust policies 90 days after his appointment. Apple also is now complaining about apparently the way his hourly fee rate is set. Its 1,100 an hour and apple is arguing that it gives him an incentive to push a broad and what they call intrusive investigation. That sandy thing is old. It was settled. The white house signed off on it. The new thing is that he paid a million more because he wanted to be in it. 2. 2 million more. He wasnt the first choice to be in it. They tried to get bruce to be in it and asked bon jovi. The question is 25 million. Pallone. Hes totally conflicted in trying to go youre going at me like i wrote the headline. Im not. If you want more information on it, its over 2. 2 million that was paid to the ad agency that was paid. I saw a totally balanced report on this, how it was they had the same ax to grind six months ago. That has been Christies Office and said this was interesting timing. Microsoft reportedly cutting its losses on windows 8 jettisoning the brand. The london times says the Software Giant will announce a new operating system code named threshold. The news is expected at an event in april. The paper says microsoft will eventually call the system windows 9. I dont know how much that costs. Very clever. Very expensive, consultants and fees. Meantime, citi downgraded microsoft to neutral from buy. The analyst says there are High Expectations for the new ceo whenever he or she is named and that the company will be relatively slow to implement the changes. Maybe the stock, maybe theyre saying its a little bit ahead of themselves. Pizza hut plans to offer pizza by the slice. It will cost between 2 and 3 and take 3 to 4 minutes to heat up. One test location is in nebraska, another in rhode island. The 2014 and theyre now thinking about rolling you talk about a monolith iic bureaucracy. Maybe we should offer slices . After all this time. They would offer you to get in and out with the pan pizza. Get a personal pan pizza. Must be a reason they didnt offer slices. Every local one does that. In the northeast. If you buy a mini pie, its 4 to 5. The slice is 3 to 4. You have a 6 pizza, you sell them at 3 a slice. Whats six times 3 or eight times 3. Deliver one slice . You cant deliver one slice. Thats next. Breaking economic Sales Numbers in just a moment. Thats next. vo you are a business pro. Seeker of the sublime. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. And only national is ranked highest in car rental Customer Satisfaction by j. D. Power. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. Stacys mom has got it goin on stacys mom has got it goin on stacys mom has got it goin on [ male announcer ] the beautifully practical and practically beautiful cadillac srx. Lease this 2014 cadillac srx for around 319 a month with premuim Care Maintenance included. [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. Welcome back to squawk box, everybody. Were a few seconds away from december retail sales and import export prices. We have joel naroff standing by as well. Steve liesman is here. It comes in a little better than expected. Plus 0. 2. Last month was revised to 0. 4 perfect 0. 7. Exauto, 0 the. 4. Last month was revised from 0. 1 to 0. 4. These are decent numbers. The question we have to ask ourselves, is the data all week going to be enough to provide is clarity . This is the first step and this is a decent deal. Import prices came in at 0. 0. To minus 0. 9 from minus 0. 6. Import prices lower than expected. Import prices negative 1. 3 from an expected negative 0. 6. Last months revised to negative 1. 9 from negative 1. 5. The retail sales the big thing to look at here, that came in better than expected. Thats a good sign. Back to you, becky. Excellent. Stick around. Lets talk more about this. The whole operation didnt fall apart. November was revised down by 0. 3 as jim reported. December coming in better than expected. It looks like october was revised down by atenth. Whats happening here is the calculation of gdp and spending in gdp, i guess i have to look at the control number. Do you have a feel yet, are we still going to do a 3. 5 number in the Fourth Quarter. I think what may power it, as strange as this may sound is the services component. What were not seeing here is spending on things like utilities. Given the winter weve had so far, that may give us that number. I dont think were quite as strong outside of utilities. I think the slowdown in vehicle sales means that durables will be up but not that strongly. So i dont have a 3. 5 to 4. Im probably 2. 5 to 3 on Consumer Spending. The core number, the reason we follow this, thats the number that feeds into the gdp calculation, which is exautos, gas, building terms and food. The ones were xing out the government gets elsewhere. I still think it feels like to me, given the guys were at 3. 5 to 4 on consumption, i think theyll still be there. Theres not enough change in this number, the give and take between the two. The reason why we spend all this time on this is this upward recession to the second half of 2013, i think remains intact now. We did 4. 1 in the third quarter. I still think theyre going to go, youre saying 2. 5, 3, i think the street will be around 4 for the Fourth Quarter. I think thats distinctly possible. And i think what were really seeing is the fact that this economy is starting the process of shifting gears. The only thing that we have to ask ourselves is whether the Consumer Spending that we may get being solid in the Fourth Quarter is sustainable without better gains and wages. We can talk about and argue the Unemployment Rate but if it is coming down, well get those wage increases this year and that will allow us to get stronger Consumer Spending. Becky, can i guys 3. 5 to 4 is not sustainable. Becky, what is your assessment of how the retailers have reported christmas . You know, i think its a mixed bag. I think there are some who have done phenomenally well and some have done phenomenally poorly. It doesnt necessarily speak to consumer strength. Theres a conundrum out there which is that the problem im having, guys, we keep talking about this, we ignore the big deal. Theres no clarity here. After fridays number you should have heard the Trading Floor after we saw the plus 74 print. Its like all the things we thought we knew have been completely pushed aside. This is a wonderful number. The reality of it is, there is lack of clarity. Look at the way the markets traded yesterday. The stock market got pummeled at the same time the dollar got hit, rates went lower meaning were taking out some of taper, but not enough to see confidence. We have to see better numbers than just this one, no . I think people were looking there were a whole school of people that said throw out that friday jobs report. They didnt give good reasons to throw it out. Sure they did. What were they, steve . The reason was that every other jobs indicator was doing well, including nfib, including the ism, including claims, including the gdp numbers were all on the Positive Side. Its impossible every single model thats out there, for what its worth i like liesman, becky, youre a woman, how was the Christmas Shopping season . For three years i sat two cubicles away from becky at the wall street journal and she covered retail. Thats your explanation. Can i Say Something here . Can i Say Something here . But steve and i have battles. For 15 years weve been talking about retail. Becky, you shop. Joe, go ahead. Given all the black friday sales that started before halloween, why are we necessarily worried that much anymore about december sales . I mean, we have to recognize that this season has been stretched so far at this particular point that i think december is just not that important anymore. And what weve also recognized is that the post christmas sales take on a much greater importance. Thats not reflected in these numbers at all. So weve got to settle down on the retail sales on a monthtomonth basis at this point. I think consumers are spending. Theyre just not out there being exuberant. Joel, thank you for joining us. Great job for the numbers. Thank him . Were thanking him for the gross generalization. Youre totally twisting it. She just came back from covering target. Why was she drawn she did target. Okay. You always have an answer. This is legit. Weve been arguing retail for 15 years, since 98. 99. 99 . Yes. Okay. When was the last time you were in a retail outlet. Over the weekend. I regularly wander the halls of home depot. Guitar center, orvis, home depot or cabell laas. Were at bed, both and beyond. Looking at the satin sheets. Duvets. Are you sharing a room. Were thinking about it. Chip Tech Knowledge may be the next big thing to replace magnetic strips on credit cards. How fast can the Tech Knowledge be implemented . Well talk to a company who has the experience doing just that. Were back in a moment. So ally bank really has no hidden fees on savings accounts . Thats right, no hidden fees. Its just that im worried about, you know, hidden things. Ok, whys that . Well uhhh. Surprise um. Well, its true. At ally there are no hidden fees. Not one. Thats nice. No hidden fees, no worries. Ally bank. Your money needs an ally. Welcome back to squawk. Were in the cnbc newsroom. I want to show you a quick snapshot of the revenues for the quarter because this was a big focus, the underlying businesses arent doing that well this quarter. People are waiting for the economy to recover. Thats why the company had to sell a bunch of assets to bolster the bottom line Going Forward in light of litigation expenses in the quarter. That was one of the main focuses of this conference call. Cfo said we are reserves alined to the issues as we know them. Of course these can change and these expenses are lumpy and unpredictable. They should normalize though she did not say when. The other issue was the capital return, whether this will have implications for the companys ability to buy back stock and issue dividend. It has 1. 5 billion in stock it could buy back. It didnt do that. Lake said at minimum, the bank will at least be able to buy back enough stock to cover employee compensation, though she wouldnt go further in saying what theyre submitting to the fed this time around. The other question was for Ceo Jamie Dimon. At the end a reporter piped up and asked in the wake of this litigation, have you considered resigning . He said no, no and its up to the board. He did make a few comments on the economy. He said hes not as worried about rising rates as some of his peers are. It sounded like you said the company is explaining a bad quarter. The stock is up 30 cents after an alltime high. Were there things they had to explain in this quarter or was it a good quarter . Joe, it was a fairly good quarter when you look at Asset Management they had net flow, a lot their net income on the Investment Bank was down 57 . They released reserves on the credit card side and the real estate side. There are questions on is the economy Strong Enough to do that. There was a lot of reserve release that supplemented this quarter, the sale of the visa stock, the sale of chase manhattan in downtown new york city provided a boost to the bottom line. Theyre trying to offset some of the Legal Expenses. Theres not enough underlying growth to bolster some of the businesses. The one big thing people are excited about, though, is that the margin is starting to tick up, 2. 2 . Its not great but still better than the trend which is going straight down for the last 13 quarters. Kayla tauche with the jpmorgan news this morning. Charter sent a letter to its rival proposing an acquisition for a price reported to be 132. 50 a share in cash and stock. Media analyst Richard Greenfield joins us on the squawk news line. Give us perspective. You say this deal is going to happen but at what price . I dont know whether this deal will happen. I think theres the chance you get new bidders. Comcast could come out of the woodwork. They could certainly finance this transaction ate hi a highe level than charter. It wants to stay within the 132 bid, gets them somewhere around five times leverage. They may use their currently pending acquisition which liberty is pursue. Comcast could come in and do this at a substantially higher value. Time warners cable result are getting better. When you look at the fundamental performance its going to warn the a higher bid than 132 by a wide margin. In the past hour we were talking about this company and i said this company has been undermanaged. Maybe thats a euphemism for worse than that. Am i wrong . Look, the results certainly in 2013 leave a lot to be desired. I mean, i think thats being kind. The reality is, that you cant really see a loot of the Management Changes that were put into place. They went to war with cvs. We can debate the longterm benefits or problems that that created. But that has obscured the underlying trends that youre seeing. I think its been going down substantially. They worked hard on getting retention under control. I think when you see those efforts, which without the problems created by cnbc, where you had that large drop of subscribers, what youll see as you work through the first couple quarters of 13 youll see the numbers getting better. I want to talk about comcast, Parent Company of this network. Your sense they try to buy the whole thing or wait for charter to buy and come in behind them and purchase some of the assets that actually make sense for the portfolio . They could certainly help charter do a deal at a higher price or simply buy the whole thing. Look, for comcast they have 22 millionish subscribers, adding another 11 million subs. There is no 30 cap. There used to be a 30 cap. That doesnt exist. They could sell off a few million subscribers after the fact to charter or somebody else. The real question is, is having new york and l. A. Something that is really important to Brian Robertsons team. It would seem like the assets would be important. Now that theyre in play and youre starting this process with john malone launching the first grenade, why wouldnt Brian Roberts want to swoop in and take advantage of it . He has a Balance Sheet that very much could handle this and it would be i think a very, very attractive deal for comcast. Rich, we have to go. What price does this ultimately trade at . Weve said even before time warner laid out the 160, we think this thing should trade to 160 over the course of the next year. Stock at 134. 26. Were going to talk about another subject in an exclusive interview that becky had, target ceo Gregg Steinhafel said he sat down and said for now, the time for banks and retailers to embrace a more modern Security Technology is now. Theres a better way and its called emv technology. Is that the chip. Thats the Chip Technology thats pervasive and its a well established standard globally throughout the world. We think its time for america to make that commitment to get to that standard. Is 2015 that time horizon realistic . Joining us now is martin ferenczi, ceo of oberthur technologies. When are we going to see this . It has been already happening. Our company has delivered to major Financial Institutions in the u. S. Chip cards in the millions for use overseas, because as you may know, overseas cards are not always accepted. Why have the u. S. Banks and retailers been so reluctant to install this technology . How much does it cost. The cards themselves cost a multiple of the mag stripe cards. Two, three, four times . What are we talking about. Between four to five times. And then the installation of what i imagine is the reader, how much more is that than the current readers. At this point in time, the differential is relatively limited. The difficulty for the readers on the readers standpoint is that some of the merchants need to replace existing readers. I assume the reason nobody has done this thus far, the cost of leakage from fraud and similar things and attacks like target, they felt that the losses werent big enough. Now they think the losses are big enough . You are absolutely correct. The issue is overall the security levels and securities based on Different Levels led to limited fraud. However, the world has moved to Chip Technology. So by definition, if the u. S. Is not with Chip Technology it becomes the weakest link and the criminals focus on this geography. Isnt there another technology that will come along sooner than later thats going to be better than this chip . This Chip Technology has been around for over a decade. Youre absolutely correct. However, ive been in security for the past 25 years. And it is proven that Chip Technology substantially reduces the level of fraud at the point of sale. Therefore, we believe that security is layered security but Chip Technology is a very, very significant layer. Okay. Thank you for your time. We will be watching a number of companies. Is leakage different than shrinkage . Theyre both sort of similar. Leakage, shrinkage. Shrinkage is retail. Both of them are horrific, obviously. They have terrible terrible sou leakage is a lien . No, im thinking shrinkage is much better. Jim cramer chimes in with time warners bid. I need proof of insurance. Thats my geico Digital Insurance id card gots all my pertinents on it and such. Works for me. Turn to the camera. Ah, actually i think my eyes might ha. Next Digital Insurance id cards. Just a tap away on the geico app. Could save you fifteen percent or more on Car Insurance. Everybody knows that. Well, did you know that when a tree falls in the forest and no ones around, it does make a sound . Ohhh. Ugh. Geico. Little help here. Lets get down to the New York Stock Exchange jim cramer joins us now. Big earners today wells fargo and jpmorgan, they both made over 5 billion. Im happy and cheering and i think its a good thing. Is there something wrong with me . No. I think it is very hard to decipher these quarters. In the end all people seem to care about is the net interest margin, how little they pay you on their deposit and how much they can invest on it because of the yield curve. I think theres much more to it than that. I think some of the companies are doing incredibly well. Jpmorgan lets take that, they had such a decline in mortgages and yet it doesnt matter, people like the riskfree trade they can do off their deposits is very strong. These banks are okay here. The world is a better place if the banks are well capitalized. Can i at least say that . Yes. Lets put it this way, if you care about the stock market. If were just about hanging rich people, i got to tell you, theres a very bad hang rich peoples number. Earnings per hanging, not good. But, i mean, we want people to be able to buy houses and get Business Loans and expand businesses and get credit, right . Not if they make money. I mean, dont get it wrong. I do believe there should be some clawback of bonuses. Im there on that. But the whole notion of Companies Making money, joe, its such a throwback. We get thrown back, its, like, ive seen this movie before. I think there will be a lot of sequels and the longer we live, theyre not only sequels, theyll do a reset. Spiderman is a new one, they can do three or four more sequels with that. It will never go away. The market, when do we worry when were going for our first 10 break of more than a couple years . I keep coming back to the employment number on friday. Geez, it was a bad number. We were all stung with that. Becky knows retail sales. She shops a lot. Holy cow, lululemon, bed bath yod, mag nola, lbrands, if it sells, its not selling. I would like to say you do have a body for lululemon. Am i allowed to say it in a positive way . Lululemon in summit, i got joined by some very attractive other people there. You can wear it. Thanks, jim. Youre welcome. Well see you in a couple minutes. When we come back well talk private equity with David Rubenstein. 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[ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Lets get back to our guest host David Rubenstein who has the last word for us. Real quick, i want to talk about private equity and the transformation of private equity to become a much larger asset gath gatherer, if you will, and some people say the new bank. They were very small, they managed a few people. When kkr did the rjr deal in 1989 they only had seven professionals in the firm and they were relatively small. Today there are seven firms that have 770 billion under management and they are doing a pretty good job for their investors. The government is looking at blackrock and pimco and say they need to be considered systemically important institutions. Do they think theyll turn their eye to the larger assets gathers . I never know what congress will do or the regulators but we dont manage trillions of doctors. Block roc ak and pimco have trillions of dollars. Whats the vintage look like . Its been very good for private equity firms. Last year the alternative management firms, up about 68 for the year. A pretty good returns for the investors. Is it good private equity in your view . We dominate the global world. Private equity, venture capital, we dominate the world. Our companies probably employ 750 to 800,000 people. Wow. Real quick, banks, i dont know if you saw, they are cutting out saturdays for the young people. Are you making your kids work on saturdays . I dont make our kids work or not work any time. If you love what youre doing, its not work. Ill see you there. Thanks, david. That does it for us today. Right now its time for squawk on the street. Im going to knock you out im going to knock you out im going to knock you out good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber at the new york exchange. What a morning we have in store for you the ceo of charter will speak to faber on the bid for time warner. Big Bank Earnings and decent retail sales. Tenyear yield huddles around 2. 85 and europes largely in the red as the nikkei fell 3 overnight after our bruising here yeer