Transcripts For CNBC Squawk Box 20140116

That apollo group will buy chuck j. Just. And then with citigroup, now sayingite going to replace all customer debit cards involved in data breaches at target. The New York Times reports that the bank did not place the cards sooner because it warchblted to minimize disruptions during the Holiday Season. Yeah. United health is is tha jacket on . I think it might be at this point. Revenue, 3311. 2 billion. I dont have the right number to compare that to. Net margin, 4. 6 . Watch pretty closely now, given everything that is happening in health care. So the full year guidance that were getting must be for the next year. Which i dont have any right lane issues. The company said it was highlighted this quarter by the vong and consisteneeeen and its too early to tell what its going to do. Might be a 24 cents so or. We will look at the press release a little more deeply. Its a dow component, but we dont jump for this one like we do a ge or a is Comcast A Dow thats what i dont get. No. It is not a comcast component . Did you see the new building . I did, in philadelphia. You dont have any upset at i have this is skylion is beautiful will be liberty. And the fooufr of a gleebl mine of of this sli shroff. By the way, that is haunted. You know who else is there . Ben franklin. Also the liberty bell. Its not in good shape, part of the infrastructure. Cracked. Blackrocks chairman and Ceo Larry Fink is here. Larry is out with his better than expected quarterly reports today. Thank you for having me here. Joe, thank you for the geography question. Have you been to philadelphia . I havent. The bell is broken. I dont know whapt it broke, but during your lifetime. Dont start on me. I was just telling you to have company the size of blackrock. You really do. Yeah. The last few weeks, it has gone up in the high. But yesterday was not a new high. But were in the realm. In that case, if you look at what this stock has done since it became public and theres no reason to be modest here. Were here talking about its up 9. 90. Thats a new high, siptd it . I didnt see that. How much was the stock up since the ipo, larry. I had it at 14 on october 21st, 1999. But its up 21 times, even in the last its kicked into high gear. You were there to take all the business away from the people that we used to think of as the old wall street. Well, old wall street didnt manage money. Yeah, but they wouldnt talk about blackrock like they do now. Id say to say the financial crisis was good for you, but you are the preimminent wouldnt you . I would say we are a predimness i assume goldman was in a very good position for the fwurch. Morgan stanley has positioned themselves quite well. So theres some great institutions. But you had a unique become in the the big problems. My legacy was in the Mortgage Business and the jurassic make air what of obviously. Have a time . Vanguard is a preeminent mutual company. Youre not going to heir him id like to finish my sentence. Go ahead. Im just saying and investment, great investment firm, wellington, jpmorgan Asset Management. I could go on and on and on t. The. But hes will the forty quarter. But you obviously where people people are money their known. Byproduct, it was a very mixed picture. So throughout the year at atfs, we had about 74 billion of equity in inses in our mutual fund business, was our position in mutual funds here in the United States and throughout the world. Where we had about 38 billion worth of growth last year. We had about a mix of 14 billion in growth and bonds and growth in multi asset and growth in equities. And then a rally in december, it was really generated by the three balancing mechanisms. And i think i spoke about publicly that we are seeing companies who said such large profits and equities needed to ask themselves do they want to have such a High Percentage in Asset Allocation and equities and the answer was i need to be more balanced. So what role does that play . There will be a great rotation, but the great rotation will be in bonds. The problem with bonds, the core bond index, which is the barclays aggregates index, 85 of a Price Movement is based on duration. The problem is, do you want an interest so linked to Interest Rates . If you believe this Interest Rate is going to have higher, this is going to be a painful index to what were sitting in. But hear is lets say hooiked to essential vite mention into more importantly, into a new category which we call unconstraint, where the industry saw 60 billion of inflows, we had about 10 billion of inflowses. We believe this will be the Fastest Growing area. What is that, unconstrained. Last year, it was up about 2 . Our individual fun where the index was down 2 . So there is a good example of the opportunities you have in investing in things that are not tied to a duration of a core index. Larry, lets talk about what you see in the economy because youre concerned with europe, more concerned than you have been in some time. Right. Why is that . Well, i think that the u. S. Is going to get stronger and the u. S. Is getting stronger primarily because we more rapidly fixed our banking system. Were Getting Better because or companies are sitting in a lot of cash and i believe the outlook in the United States is stronger. So youre going to see more investing in Capital Expenditures in 2013 than you did in 14 than you had in 13 and 13 mvp. The cost of electricity, the costs are higher. Were in an intensely beneficial position. Europe, on the other hand, is still going through their third round of a bank stress test. In europe, youre still seeing banks deleveraging. Thats one of the problems. Small businesses are having a very difficult time in europe getting any type of loans. And then europes Energy Policies are just terrible. Natural gas in europe is 12 versus trading around 4. 30 today. Blackrock is a good example. We have disagreed to build a new data center. Were building et in corporation with new york state. Its going to be in buffalo. Its hydro electric so its grooerchb green injury. And were generating electricity. In germany, its 46, 48 cents a kilowatt. So the cost of manufacturing in europe is just so much more costly than what it is in europe. This is one of the reasons why youre hearing from many executives on looking to move businesses out of europe into the United States. And i think that trend will continue. In addition, you have chancellor merkel. She needed to what i would say move somewhat left to get her coalition. So this is not its a contract, but they have it finalized in germany. But germany, her coalition has agreed to lower iing retirement age and increasing minimum wage. Now, i pound the table about loj longevity and people are living longer. I believe thats going to be the major crisis worldwide. I dont think the trend of shortening retirement age is the right trend. If anything, we should be educating all of citizens about the benefits of longevity and the opportunity to work longer, to have a more productive life. And so i think its going to totally wrong way. What about the minimum wage . Youre someone who can identify lawmakers here in the United States. Theyre punching for minimum wage. You dont believe its the right thing to do in germ snee . I think theres other ways of helping the men and women who are in need of finding ways to hire income. The worries i have about raising minimum jobs, which something is taking away things regardless of what is on the computer. Well be eliminating quite a few jobs. Youre seeing in so many bitses job elimination that are low wages. We cant just say were going to raise wages without thinking about what the impact will mean towards acceleration in technology where low wages are. Weve already lost, you know, telephone operators. We can go on and on and on how we have evolved through technology. I actually believe and this gets back to my longevity issue. I believe we need to be we need to have a National Debate about a mandatory savings policy, retirement policy. And then such as the one in australia for the super Immunization Fund that companies actually contribute to the retirement. Parttimers and full timers have to have Company Participation in this. And so instead of focusing on maybe minimum wage, focusing on ways of building pools of money and saving for retirement. We probably would be a better longterm solution, but it would not stimulate the economy as well this year the. Okay. Many people could. I think youre right about companies leaving europe. I have to buy these things, these three prong things apparently. They still dont have normal prongs over there. If i were a company, i wouldnt do business. Joe, what is a normal plug in switzerland is a three plug. Thats what i mean. Thats not an this is why companies are leaving over there. This is why people live at home. They cant get normal plugs. They have no shower curtains and no plugs. They dont have plugs. O, if you go to our countries. Joe, today hotels provide those plugs. You dont have to buy one. No, mine is providing a few ton. No carpeting. Shower curtain . Whats a shower curtain. Gary hasnt been to davos. Are are you staying . A nice place. Would it matter if i put in a cot in your room . I think i have room to put in a full king side bet for you. Coming up, pe cant get it plugged . You would hear how each company has different plugs for their devices. If you bring the right one, you dont have the threepoint prong to put it in over there. At airports, they have those plugs, too, by the way. I know. Its 2014. I think you need a raise to pay for that plug. I will. Lets get involved with some retail results on amazon and Weather Channel. Plus, well get the Weather Channel for after this quick. For 54 a share in cash, theyre using those coins that you actually get at chuck e. Cheese. Squawk box will be right back. [ man 1 ] were now in the approach phase. 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. Welcome back into squawk box. Alex wallace here with your national forecast. Starting out this morning, more fog in the east. Fog advisories, including boston, visibility down to half a mile. Quarter of a mile in some spots, as well. That could make travel difficult this morning. Parts of the south, chilly times in florida. Were talking temps in the 50s and 60s. For folks in the sunshine state, it is chilly. We have windchill advisories. Then weve got clipper snows. Another fast moving system diving into the upper midwest. That will bring us slight snow showers. You can see the totals out there through saturday morning, generally going to be in that one to three inch range. Could see some higher totals in far southwestern parts of michigan. And behind this, were going to be bringing in some colder air across a good chunk of the midwest. That he is thats our national forecast. Back to you, becky. Alex, thank you very much. Lets check on the markets. Weve been looking at the futures. After yesterdays gains, theres a few red arrows. Dow fuchs down just about 13 points below fair value, s p off just by over 2 and the nasdaq is yielding. 89 claims. A couple other headlines, the house approved a governmentwide 1. 1 trillion budget deal. Also, the National Labor Relations Board has issued a complaint against walmart, arguing the retailer violated labor laws by taking action against striking workers. The nlrp is alleging that protest activity no, no. I think that does not i think that meant walmart. I have to get a new teleprompter guy. Blackrock is on the brain. And finally, my apologies, larry. Finally, an update to a story we discussed yesterday, a small group of workers at an amazon voting not to join a union. The online retailer has been opposed to any kind of thirdparty representation for its employees. We had that discussion yesterday about whether 30 people would do it. Were back with our special guest larry fink from blackrock. One thing ive always grappled with is where Interest Rates go and who really grapples with that. I dont understand why a if we see an improvement in the economy, people automatically assume its going to go up. If there was know inflation, is that true . And the other thing is there a can the fed, even though it only is im told that they can dictate the tenyear through their language about where theyre going to keep funds and short term rates. So i dont know how the gauge what the ten year is going to do this year, and people have been so wrong that when they automatically tell me its going to 3 1 2, or 4 , im not sure i really believe in this inflation number. Yeah. I dont see 4 at all. Do you see 3. 5 . It might. Were talking about a 50 basis point move. I dont think thats going to if were in a contained environment, between 2. 75 and 3 , that well, what controls it . Well, obviously, the i think whats going to contain Interest Rates, theyre going to continue to see large demand as Interest Rates right from insurance companies. If Interest Rates continue to rise, and if we continue to have a stock rally, you will see rebalancing into fixed income. Thats weird because people think the other will happen. But theyre going to come out of bonds in the stock. Thats the rally. Theyre going to take their safety and dhig but the real issue, as youre suggesting, joe, inflation is going to hold down Interest Rates. Yesterday, Christine Lagarde from the imf said my biggest worry is denation. And i have true worries that we have a Global Economy that is we have factory utilization below where it should be. We have Unemployment Rate at an unacceptable rate worldwide. But its not seeing a new robotic factory in china. Because of technology, Countries Worldwide are talking about how to create bigger job pes. How are they going to find jobs that technology is aggressively transforming their workforce and their factories . I would counter that thinking that we went through an Industrial Revolution which was much more disruptive now. To take people off the assembly line, to do all these things, there are far fewer people in the world back then. Ra r and people moving int s intots. I think interest is rates will be more muted than probably sensitive. People think. And the reason why is inflation is going to which be careful what you wish for. When you look at our other countries have ton that. To the japanese Prime Minister abe saying i want 2 inflation, thats my target. Like a pipe dream. Even when they had a hyper economy in 87, 88, they didnt have 2 inflation. But i believe this is going to be one of the great risks of europe is high Unemployment Rate. I think europe is going to continue to see lower inflation. I think unlike the flexibility the fed has, mario draghi and the ecb has quite a lot of flex bl bltd. I dont know, befb the risk is to deflation. Especially in europe. Youre seeing deleveraging happening in europe. As you continued to do that, globally, until we find new job creative that will satisfy all the unemployed, i think were going to have contained inflation at best. Well, good. At least we can keep our housing. Any housing recovery that were seeing, we dont need to say, well, its cut off at 4 on the tenyear. Support an 8 to 10 equity market this year. Now, if rates go above 3. 5 , and im wrong related to inflation, then you would have an equity market response that would fall. Were going to have much more with blackrocks larry. Thanks for coming up next. Plus, fortune reveals of its 100 next. Coming up, we have citigroup and gold mran sax on tax as soon as rear relieved. 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Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick and Andrew Ross Sorkin. Making headlines, jcpenney is closing 33 stores and cutting 2,000 jobs. Theyre trying to win back shoppers after a failed attempt in 2012 to go up market with ron johnson. Aol is handing majority ownership of its network of local news websites, what it called patch, to turn around specialist hail global and analysts have long urged oiaol to stop pouring funds into patch. To the extent you believe this is the great white space of the internet, maybe theyll get something out of this. And a number of homes in foreclosure process fell last year to a sixyear low. Listening from realty track, of course, the number of homes that entered foreclosure declined 33 from a year earlier. We really, for as much time as we spent on not getting back to december 31st levels, we havent spent of time. We did it yesterday. People at home, i said 1848 so many times. We were only 11 points away when we gave it a couple of extra days. And then we had that horrible 170 point on drop. We got it almost all back yesterday. So your fears, the global or the goldman call about, you know, that such a stupid call. All they really said was that multiples might not expand in a rising rate environment so youre going to need Earnings Growth for any they get paid for that . Thats what everybody has been saying for the last six months. But at this point, we dont know yet. Now were just flat. Were flat on 2013s close and is well see. Now well really see. Larry says 8 to 10 . I will back larry. Thats a pretty consensus number. Lets get back to larry. Larry fink is our special guest this morning, blackrock chairman ceo out with terrific earnings this morning. First, i want to ask you, i dont know if you had a chance, politico has been wrote a piece about the real shift in how wall street has changed, in part because of regulation. The old traditional, the Investment Banking business, but the one piece of the business that has not been regulated yet, really, is the Asset Management business in a meaningful way. Theres a big question mark about how much well, will it deregulate and how much . Whether firms like yours will be deemed systemically important and what does that mean . What do you think it should mean and how do you differentiate what you do in terms of what others do . So were regular hated by the Federal Reserve and because we own a nondeposit trust bank, were regulated by the occ and were regulated in every jurisdiction in the world where we operate. So we are regulated. The question is, today, what do we need to protect society . Last week, the fwnl stability board in europe came out with a guideline to think about how nonbanks should be looked upon related to global sipis. And they had a section on Asset Management. And for those home gamers, thats systemly important financial institution. Thank you. And so what the framework we believe regulators should be looking at is regulating more tow product level. And this is a position that i think the framework, the Financial Stability board suggested. Lets talk about longterm capital. They almost blew up the whole system, and it was about a 100 billion hedge fund. If you now look to the genesis of the most recent financial crisis, it was a huj fund. And then if you look at the company that actually blew up the money market business, it was the ninth largest money market fund. And the reason why, to compete with the large scale players, it was offering one, two, three basis points higher and they were buying all this risky stuff. So we believe there should be greater scrutiny on investment products. And it could be done through a the Financial Stability board or it can be done through the fcc. So we believe leveraged products should be reviewed, leveraged entities should be more scrutinized. How about if your product is leveraged . Your 4. 3 trillion. Which is huge. You can understand why people would say well geez louise. 4. 3 trillion dollars, one company has it. Yeah, but that could not happen because each of our clients some may want us to management emerging markets, some may want us to manage stocks. So within the large skam of assets, its a very diversified group of on inputs. And so that doesnt move the market. Now, one of the things that people want to look at is inner dependsy. We need to have a debate, what does inner dependency mean. They are inner dependent. But i dont know what that means. Cnbc is interdependent. Bloomberg. So how to we look at ive never heard of that company. Yes, yes. What im trying to suggest is there needs to be a good, wholesome review, but i would imagine the system that blew up. It was leverage that caused these prices. We are suggesting a deeper review of all leverage entities. Wouldnt va have been a simpler rule to write . Well, most of the leverage through hedge funds is through prime brokers. There are many ways to navigate leverage. So to me, there needs to be a good guy log. We are very open to have that open dialogue. And we are a part of the open dialogue. If society deems we need to have hundreds more to be part of the competition, well live with that. Do i believe that was the intention when Dodd Franklin was created . No. So well see where this all works out been but we are working with our regulators on this. Let me ask you two other risks, system, microrisks and macro issues. One in puerto rico and what is going on there. There any Ripple Effect from whats happening with the bonds there . Sure. The Ripple Effects, new york state and new york city bonds have rallied a lot. Keep in mine, puerto rican bonds are triple tax exempt. Weve seen people run away from puerto rican bonds. Theyre looking for our tax exempt items and run back into nr estates. New york state were going. The difficulty we have for puerto rico is large. Ive had conversations with the government related to these issues. Puerto rico, after we changed the tax code, there were some tax incentives for companies to have that. About eight years ago, that tan incentive was away. Its very unfortunate. Every has been has a population export. To me, the puerto rican situation is very precarious because of that. And the second thing is, i would think we already have a precedent. We didnt see any governmental bailout of detroit. I would be surprised if there was something more federal related to puerto rico. We have to go, but one last thing, overnight, i dont know if you saw this, the treasury boston some day something today. Ever of it increased to a record of 3. 31 trillion in december. It will now come out at 9 00 and is were reporting it now. Are you surprised at the chinese have continued to buy our bonds, as you would say, given all of the question marks about what was going on in washington . During our terrible debate in october, the chinese did not change at all. I actually had conversations with people in washington, they were asking what type of activity we saw. We did see the japanese panic a lot. Because there was one area in the world where we saw a wholesale of treasuries, their 8 but i must credit the chinese. They were pragmatic. They believe in the u. S. System. Theyre not happy with our open narrative about default. But no, im not surprised at all. Thank you. Thank you for coming in this morning. Congratulations on the earnings and we to do who model have you ever had a hand shower . Dont answer that. I dont know what that means. If you look it up in the urban dictionary, im sure you get a different answer. Its when you use the keep it here. Thats one version. Joe looking forward to davos. When we come back, well have more of todays top stories. Plus, citigroup and Goldman Sachs are both getting ready to report. [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to your authorized mercedesbenz dealer for 1. 99 financing during our certified preowned sales event through february 28th. Welcome back, everybody. S p off just over 3 points, dow joint off 19 points and nasdaq off 5 points. You are looking at markets that are flat for the year. Coming up, our friend andy serr is going to join us with the list of the 100 best companies to work for in america. See for yourself if your employer made the cut. And then later, the rise of the machines. The debate joe and i have been having, the next generation of robots and Super Computers designed to help our lives. Danger, will robinson. [ male announcer ] this is the story of the little room 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, everybody. Do you ever wonder where the best place to work would be when it comes to perks, opportunities and benefits . Wonder no more. Today Fortune Magazine is releasing its 17th annual list of the top 100 companies to work for who all happening to be hiring right now as well. Joining us now with the reveal is andy serwer. Hes managing editor at Fortune Magazine. Thanks for being here today. Youre welcome. Best place to work once again is google. Why is that . Everyone talks about the perks and the food and all that. But i think what it really is, is that it attracts the best and the brightest people. And thats because of all the things that theyre doing. They just bought nest. Theres driverless cars, theres google glass, search, they dominate. They continue to attract the best and brightest people. If you want to work in that kind of environment, thats the place you want to go. How do you put this list together . We were trying to figure that out earlier in some of the commercial breaks. It seems like a squishy sort of math. How do you figure it out. We work with the outfit called the great place to work institute. Theres two parts of the survey. One is a questioneer that the employees themselves do, another is kind of a peer review that the institute does asking other companies about the companies themselves. It is quantitative and qualitative admittedly. The companies do focus on this. Some companies devote time to make sure they do things to help them get better ratings, right . Its an investment, yes. You have to make sure your employees do it. I think it speaks to the fact that you care about your employees. You want to attract good employees, keep the employees happy, retain good employees. Its an investment, sure. Lets talk about some of the new comers to the list this year, sheetz, Wellstar Health care system, cheese cake factory. What theyre doing is paying attention to employees and paying attention to, you know, the workplace. You know, cheesecake factory, for instance, there are a lot of restaurant chains but if you sort of troy and make sure your employees are happy, reach out, ask them about conditions, whats going on, seek input. I mean, its amazing how few companies do that. I think cheesecake factory, for instance, theyre great at doing that. We looked at at list of the top five. Maybe we can walk through some of those. Two is sas, three is boston consulting group, four is edward jones and five is quicken loans. Sas, they have medical and support staff who can help people. Thats got to be an important part of it, making sure you can aggression all aspects of things you might be concerned about outside of work . Thats right. Sas, a North Carolina software company, a private company. People say its almost like a cult working there. They take care of your kids. Its one of those places you can stay there 24 7 which, of course, is something every employer likes, right . Right. They keep you there. People are happy. When you have a place like that thats kind of not new york or san francisco, youve got to be able to attract and retain topnotch employees. You have to be able to do that stuff, becky. Whats the weirdest perk that jumped out at you this year off the list. Its at Goldman Sachs where they have the dragon boats. I dont know if you read about that. Its like what . I was going to call lloyd up and ask him if he was on there doing some of this stuff. I think that would be a great picture. Unfortunately we dont have one of those. If it exists, id like to see it. Its interesting. We talked about google earlier, becky, about attracting the best and the brightest. Think about it. You go to harvard, youre phi beta cappa, join the marine corps, go to stanford and get an mba. Where are you going to work . It sounds like youre going to Goldman Sachs to me. These type a people have to go to places like google and Goldman Sachs to work with other type a people. The comment sags at goldman doesnt hurt. The average comp is about 400,000. That includes everyone from the ground floor up to blank find. Its skewed by the people at the top. Thats a lot of money. All that added together, youre working in a type a environment and people like that. Right. Thank you so much. You can find the complete list on for tune. Ctune. Com and the i hits stands on monday. We have the countdown to what well see with markets waiting for news from citigroup and Goldman Sachs. Making our way to the set now is christie hefner. Id do a show from canyon ranch. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. To get our adt Security System. And one really big reason. Our neighbors house was broken into. And since we cant monitor everything 24 7, we got someone who could. Adt. [ male announcer ] no one looks out for you like adt, with Fast Response monitoring to help protect you from burglary, fire, and more. Starting at just over 1 a day. [ man ] and after buying two of everything, it was nice to only need one Security System adt. [ male announcer ] get adt installed for just 49. Adt. Always there. Its up about 21 times. Up next this morning, Quarterly Results from Goldman Sachs and citigroup and theres no stopping this machine. Im the borg. From selfdriving cars to robotic factories, advances of today, what to expect tomorrow and how the world could be turned on its head, squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernen and Andrew Ross Sorkin. The futures giving back a little bit after big gains yesterday. The dow futures down by 18 points, s p futures off by 3 points. The tenyear meantime is yielding below 3 . Right now sitting at 2. 879 . In our headlines this morning, it is earnings season. Things are heating up with prominent financial names among those reporting. Weve already heard from black rock which Beat Estimates and raised its Quarterly Dividend by 15 . Well hear from Goldman Sachs and citigroup later this morning. American express is set to report after the closing bell. Chuck e. Cheese parents, Cec Entertainment will be bought by Apollo Global for 54 a share. The stock closed at 48. 43 a share yesterday. It had jumped last week on reports that cec had been considering stric alternatives. American airlines is ending yearround Daily Nonstop Service between Washingtons Reagan National Airport and 17 cities. Its all part of the agreement reached with the government to approve the merger of amr and u. S. Airways in december. You didnt tell me, sorkin, to buy best buy at 8 and now you didnt tell me to sell it. It close at 37. 57. It just turned. 33 today. Its getting crushed on a samestore domestic decline of 0. 9 . Total revenue was below, 11. 45 billion versus 11. 75 in the yearago period. Total holiday domestic, not the first number i gave you was not domestic. 9. 75 and the yearago period was. 9. Someone is disappointed by a declean of 0. 9 for best buy. Youre saying it was price competitive, too. The ceo is saying that when we entered the Holiday Season we said the price competitiveness was table stakes at an intensity promotional Holiday Season, thats what unfolded. Thats what walmart said they were going to cut prices. They took competitors by surprise. They had to catch up. Walmart knew it would be offering those discounts. When youre competing against amazon thats the story with walmart. Walmart, i believe walmart years ago took over as the Top Electronics retailer. Right. It was probably over a decade ago. People say best buy competes against walmart. We always talk about amazon. Walmart is the Largest Electronics retailer in the country. You can almost say that about almost any category, food retailer, magazine book retailer. Largest employer outside of the u. S. Government. She doesnt need an introduction. In tech news, yahoo s chief operating officer is out. It was a blunt memo were calling it to staff. The ceo said she fired enrique de k dekatherine. It was her first major hire. A 42 million mistake. I was wrong. The original deal was for 62 million. He walks away with 42 million. After not a year, right . 15 months. The whole argument for hiring him was that he was somehow responsible for the display advertising at google. He was more of a mckenzie consultant. Which is what yahoo really needed. Therefore, here we are. He was great organizationally. Not so much elsewhere. Presumably she thinks that the cost of keeping him is much greater than the 42 million. Right. Thats sometimes the hardest decision to make is when youve made a big hire like that in a public way and you think its not working out. You want to be optimistic. I actually give her credit for saying i have to cut my losses. The one suggestion, you know, dan has not been outspoken on this. I would argue one of the reasons that dan and that group left yahoo is because they saw the writing i think they saw the runup in that stock and they saw the runup in the alibaba valuation. Underneath this all is lurking challenges for this company that are starting to get exposed and the honeymoon may run its course best. People are at like plus 2 on comps instead of down 0. 9. Thats a little different than people thought. Apple, i listened to this last night. Brian williams talked about this, has agreed to refund 32. 5 million for kids purchases. The ftc received tens of thousands of consumer complaints from parents. The Government Agency concluded that parents were often caught unaware that by entering a password they were authorizing purchases. Of things like virtual pet treats, coins or perhaps a way to advance to a games next level. Cost money. You put it in. I see things hit my iphone all the time, im buying things i didnt know i was buying. I mean, i found the perpetrators, identified them and there are applications and games that you buy. I find sony stuff, that i buy from sony comes in. Im not going to sue anyone. As part of im just learning. Im just learning. Its great. You know what i downloaded some stuff yesterday. Its the contemporary version. I remember years ago when the 900 business was starting. You could call for a horoscope or whatever. That used to be a problem with kids where they were doing it. Horoscopes . All kinds of crazy stuff. Didnt you run playboy enterprises. I was trying to be discreet. They used to have those ads. I didnt know what was in the back of those magazines. They had those numbers there for your horoscope. Only for your horoscope. Not for anything else. Call me now. I was calling miss clio was a 900 number. You find out what was going to happen. She didnt know she was going to be shut down. She could see the future but didnt see that coming. As part of the settlement, the ftc says apple must change its billing practices to make it more obvious that an actual purchase is taking place during the course of a game or app. No word yet on where apple will come up with the 32 million, whether they can scrape that together somehow. How much do they have now . About 150 billion. 150 billion. Billion with a b. Theyre laughing. Theyre saying youre kidding, right . We just made that now. Now. In two more seconds. Make it out for 40 million. Did you say 32 . Heres 40. Really. Im still reading. Jcpenney is closing 33 stores and cutting 2,000 jobs, trying to stem enormous losses who suffered as you know and win back shoppers after a 25 drop in 2012. Thats not normal. 25 . You have to do something wrong, right . You have to sell stuff nobody wants. Anyway, it was a failed attempt to go up market. For you know how we say Revenue Growth has been hard to achieve in this economy. Down 25 . Thats hard to achieve. Yes. It is. He was able to because he had those he basically what did he try to do. He stopped the sales. He had those pins. You know i cant say it. He had those buttons. He had those buttons. Buttons. I have i aproblem with my ts and ds. I say mountains. What is it . Mountains. Well be in davos. You better practice. Im working on it. Lets formally she doesnt need an inintroduction. But lets formally introduce christie hefner, former chairman and ceo of playboy, now executive chairman of Canyon Ranch Enterprises where we should go to canyon ranch. I first met the founders when i was thinking about location based entertainment for playboy. I thought some of the locations that we would look at for casino Club Restaurant might also be well suited for a spa. Im a big believer in knowing what you do well and partnering with people in spaces that you are not expert in and spa seemed one of them. In asking around everybody said 100 to 1 the best people who do spa at a whole other level thats about Healthy Living were canyon ranch. I went on their Advisory Board for a dozen years. I have a Health Care Question for you. Okay. I was thinking about this. We just did a list of the 100 best companies to work for. One of the things that most companies do is provide regular Health Care Insurance but increasingly to devote towards not necessarily spas at the canyon ranch level. Wellness and healthy programs. Yes. The argument is if you spend the money now, it will ultimately be cheaper now. The more i think about that, that doesnt make sense. It doesnt clearly make sense to me. Were extending life, which is a good thing. The cost has to increase, not go down long term. Am i wrong on that . I think you are, particularly if you think about it from the point of view of the employer. The employer has several different costs that theyre thinking about. One is just the literal Health Care Cost of insurance, whether they are paying for it, whether theyre giving employees, you know, a credit. But the other is absenteeism, whats called presentism, i. E. , i dont feel well but im coming to work, working at a less than optimal level. Hes been sick the past few weeks. Im always great. Im happy, im great, im good. When you add that up, it is a significant cost to an employer to have people who are not feeling their best. And i actually think one of the things that the Affordable Care act is going to cause over time that no ones talking about as much as they are about employers just opting out of giving Health Insurance directly is that progressive employers, were talking about that in the context of sas will see it as a competitive advantage to provide Onsite Health and wellness care. Im seeing it through my canyon ranch work where were going out and talking to employers about providing primary care physicians, nutritionists, all of that so employees dont have to leave work to go see those people, where we can shift the whole system away from what we basically have which is a sick care system to more of a Prevention Health care. I would think a bigger part of Prevention Health care is preventing things like diabetes. 70 of the costs in the country are preventible conditions if people made different lifestyle decisions. But theyre also working harder, so its harder to make those decisions if its not right on campus. Which is an argument for employers becoming more activist about it. We have to take a break. How do you feel about this Wearable Technology and where you think employers should force their employees to wear this stuff in terms of being able to track what everybody is doing or not . Generally speaking, trying to force employees to do things doesnt work as well as some combination of carrot and stick. I think the tracking device is an interesting one but i think data is not the same as empowering people to make changes. Its got to be beyond just giving them information. It has to be giving them motivation in programs they can follow. Christie will be with us for the rest of the hour. I want to talk about media with you as well. Well get to that. Within we come back, well get an update on best buy that stock is getting hit pretty hard this morning after it came in with holiday sales much less than the street was expecting. What is it like to work at a star wars building every day . Well which ek that out. Tomorrow, the power breakfast. The regancy is reopening as the place to be in new york. We have jonathan tisch, harold ford jr. , woody johnson, ray kelly, Roger Goodell and alan patricof. Welcome back to squawk box this morning. Take a look at futures, see how things are setting themselves up after a pretty good day yesterday. The dow looks like it would open 9 points off, the s p off as well. Analysts were looking for an increase of 2 . My apologies to you, joe, for not giving you the high sign. 29, andrew. 45 i was telling you, why didnt you tell me to buy . You could have said sell it now. You didnt say that either. I had a view that this was the library for amazon. You bought into it. I didnt buy into the stock. You know i dont buy stocks. You put into the idea. That concept. But its just the idea that the competitive they wanted to say they would have competitive pricing to do that, they had to slash prices. Watch that thing. 8 to 45, now its under 30 again. Right. Lets also talk about star wars. Star wars creator lucas film formally expanded its house today. The move is expected to bolster efforts in fastgrowing asia. This is a glassenclosed and horseshoe shape sand crawler building. It features a yoda fountain, a 100seat theater and production capabilities. The sand crawler is named after the original building. At the time it was so cool. It was mind blowing. I like chewbacca. I will say Harrison Ford as that guy was babelicious. I saw her in a skimpy outfit and she looked really good, too. It was the second one. Coming up, while youre here, we talk about playboy. We have to. You go there whether im here. That has nothing to do with christie. Youre right. The president of the center for american progress, well debate everything from the minimum wage to corporate taxes. Then the machines are coming from googles Autonomous Cars to the watts. Thats at 7 40 eastern. Time now for todays aflac trivia question. Which country imports the most scotch per capita . 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. Now the answer to todays aflac trivia question. Which country imports the most scotch per capita . The answer, singapore tops the list, importing 12. 76 bottles of scotch per person per year. The u. S. Only imports 0. 39 bottles per person per year. Aflac. There have been many debates about the merits of raising the minimum wage. Realistically can it address the problems of wage inequality. Im looking over some of your recent comments, i tell you, nira, in terms of raising the minimum wage, its the same thing we said here. Its 2. 5 of the workers and i think half of that half of that 2. 5 are 16 to 22 and they are stepping stones. Raising it 2 bucks or so compared to the vast income inequality isnt going to help that much. Maybe its symbolic but there are bigger issues that need to be addressed. We think raising the minimum wage is the right thing to do. Its the fair thing to do but its also the right thing to do for Economic Growth. We do have a big demand problem in this economy. We know those workers get wages, theyll spend it. It will help. It will have some stimulative effect. Not a transformative stimulative effect but some impact. But really, you know, no one things that the minimum wage is the answer to all income and equality or how to get shared growth going back in this economy but it is the right thing to do. To try and find Common Ground between you and maybe just to bring, you know, theres so Much Division and ideological differences in the country we see now. Im looking at some of your comments. I dont want to put words in your mouth but for raising tax on the wealthy, youre pointing out that is not necessarily to be done to narrow income inequality but pay down the deficit. Which we already spent. For income inequality, growth, things that stimulate growth is probably a better avenue to take . Am i right . Just the latest unemployment numbers tell us we still have drags in our economy. We still have a big problem with a slack labor market. Theres not enough jobs out there. We do need more Economic Growth. When we talk about tax policies or raising taxes on the wealthy, i mean, i think of these things as part of a deficit reduction strategy, if were going to ask cut services to low income people or look at entitlements, we should look at taxes. I actually think we need to move beyond these budget battles and this talk about austerity to an Economic Growth plan that will actually help create the jobs we so desperately need. Neera, we had larry fink on in the last hour. He made an interesting comment, perhaps even a suggestion, that rather than actually raise the minimum wage, what we should do is look at the model of australia and try to create some kind of forced Savings Program where you have the companies and individuals both contributing to these programs. Of course it would benefit blackrock and other Money Managers im sure. To the extent well have a longterm pension problem in this country, in part because of low wages, would that help you . Well, you know, even things that companies can do to just have employees opt out of savings plans. You just assume theyre going to do savings, put aside money for their retirement, but they can opt out of that. Thats shown to have tremendous benefits. I think one of the challenges we have right now is that people there are a lot of people really struggling to make it. People today are working 40 hours a week and living in poverty. And a lot of those people are using Government Services like food stamps, et cetera. So i think raising the minimum wage is a good way to create additional demand. It doesnt have a negative impact on jobs. There has been study after study about that. Some people may dispute that. The research is relatively clear. So i think its an important step. I think its a step for Economic Growth but also to ensure we have more fairness. Who is this guy, he got a big job. I heard of him. Thanks for appearing here today. Thanks for having me. Youre welcome. Still to docome, we have th financials in focus today. We will get the Quarterly Results from Goldman Sachs and citigroup, hopefully right after this. Stick around. 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. 7 30 eastern time. In the headlines, best buy shares taking a pounding this morning. Electronics retailer reporting domestic holiday samestore sales 0. 9 . Analysts thought best buy would post a 2 increase. This is the margin story across the board in retail. Also, United Health Group Reported profit of 1. 41 a share for the Fourth Quarter, beating estimates by a penny. United health had 88. 2 Million People enrolled at years end. Home foreclosures fell to a sixyear low in 2013. Thats the good news. According to realty track, the number of homes entering foreclosure fell 33 from a year ago. Lenders took back the fewest number of homes since 2007. Bring best buy up one more time. This is at 25 now. Down 12. You know, it doesnt seem like it was that big of a deal from what the news they gave. The samestore sales werent quite as strong as expected. They came in negative. Who else would you expect, because we now know this, who else should we be concerned about . This is across the board. I think walmart is a big competitor. Electronic retail or are we talking about all retail . I think you saw it with the specialty retailers in malls. You saw it with limited and some of the gap guys. Some of the people who really had to offer steep sales to get people in. As you were saying before, when you have the amazon ecommerce competitor for the bricks and mortar guys and their whole Business Model is not dependent on nearterm profit margins, thats incredibly disruptive. I would feel walmart would be down, i would figure the people they were in competition with would also i think there was a sense they were actually going to make it up both on volume and who, best buy . Best buy. They layer in so many new services. Thats part of what they said in the comments that they wanted to stick in the new services that the promises theyve made their consumers, made sure they kept the market share and did it at the expense of margin. Thats a drop of 30 . We dont know christmas yet, do we . We have december retail sales that were not all that bad. Those sales came at the expense of margin, just about everywhere. But i mean, i would even recalibrate do you recalibrate the whole notion for all retailers. What are they saying Going Forward . Theyre not. That may be part of the problem, the uncertainty is making people worry that theyre at some kind of Inflection Point and this is the beginning of a downward slide. Yes. They say a number of factors, the aggressive promotional activity in the Retail Industry during the holiday which we believe did not result in higher demand and had inflationary impact on our revenue. Significant store traffic decleans between power week and christmas. Thats got to be a concern, too, and a disappointing mobile phone market. It says looking ahead, our holiday performance rate reinforces our resolve and sense of urgency around transformation. Best buy has their own issues, too. They have had in the past. If you went into the Holiday Season expecting you would have to offer a Competitive Price point, thats with one thing. If you went in thinking that you could raise prices and you could get away with that, you got your hat handed to you. Is that a thing . Your hat handed to you . Isnt it your head handed to you . I like mixed metaphors. We were barking up the wrong neck of the woods on this one, i think. Dont you think . Potentially. Youre pulling the bubble, bursting the plug. Dont you think . Your hat handed to you. Hat hands. Your hat in your hand. Your head handed to your hands. You got your hat handed to you. I want to use that. I love those. Ill have a few more. Lets go from retail to the Housing Market. Our next guest has a good idea about whats happening there. Sean, how is the Housing Market hanging in . Whats real estate doing right now, are homes selling . Its a mixed market. It will be an uneven recovery. On one hand you have home prices that are increasing. Thats going to make housing less affordable. You have Mortgage Rates that have nowhere to go but up. Those are going to be headwinds for the Housing Market. On the other hand, as home prices are increasing, it will bring more inventory on the market. Your neighbor down the road sitting on a house that was below market, prices have gone up and theyre more willing to bring that house on to the market. And on top of that, 2 13 was a lot of investor demand. That will abate in 2 14. There will be less competition. Theres mixed signals as we move forward. In general, we see a very sustained recovery taking route in 2014. One thing weve tried to figure out is Mortgage Rates. Its been surprising. Joe had the early call on this. Its been surprising that the tenyear is still sitting below 3 even after what we heard from the fed, talking about tapering. Then you have signs of economic potential weakness. The jobs number we got last friday was a big kick in the shins. Was that an all right metaphor . You can use shins. There are other things that might be better with be that hurt even more. Go ahead. If you look at some of those factors, the good news Mortgage Rates arent as high. The bad news is the economy might not be as strong as expected. Which would you rather have . There are mixed signals. Take the job report that came out for december. Clearly disappointing. Theres a Silver Lining in it, particularly for the Housing Market. And the fact is that in the jobs report what you saw was employment amongst young adults. The 25 to 35yearold was up over 75 . And thats a terrific leading indicator for the Housing Market. Meaning those people are finally coming to market. The Housing Market is driven primarily by those young adults. Many of us know families where the kids have moved out and theyve moved right back in as young adults. Johnny is living in the basement and 2014 is a year where johnny will actually move out of the basement, get a job, get a rental apartment, which will body well for rental units, particularly in urban areas and over time, johnnys on his way to buying a house, which bodies well for the Real Estate Market over the coming years. Another positive connection between the Housing Market and the economy that Austan Goolsbee was talking about the other day when i was at a forecast lunch which i thought was interesting, they can see spikes in terms of Consumer Spending thats coming out of the refinancing. So the low rates and the growth in the value of homes is creating this potential for refinancing mortgages and that capital is going right back into the economy, particularly in terms of durables. I thought that was an interesting, since Consumer Spending is clearly where we need to get to if were going to talk about where the Economic Growth was coming from. If you had one thing that you had to peg for your forecast for 2014, is this a straight shot up for housing or more of a stair step. Its not a straight shot up. Its going to be uneven and fundamentally keep your eye on metros with job growth. All these other signals, Mortgage Rates, delinquencies, they matter but in the long term, the single most important factor here is job growth. And it will be uneven. So keep an eye on markets like houston and dallas and in the west, seattle, portland, san francisco, where this fundamental job growth and from the data we see, thats where we see the housing activity taking place. Its hard for a leopard to change its stripes. Thats good. Goldman has indicated higher, 179. 41 is up. In the good old days, goldman would beat by a mile. This is good. The estimate was 422. The high on the stock is 181. 13. That would be a multiyear high. Were just off a new high for Goldman Sachs. They beat by about a billion dollars, too. The estimate was for 7. 71. Did you say 8. 7 . This is a pretty easy report here. Its almost like shooting monkeys in a barrel. Thats good. Thats good. I have a list here. Im not making these up. You got anymore. A couple things. Mixed metaphors . I was going to tell you what lloyd blank had to say. We are working onned avoonsing our cost franchise, its the cost discipline you have to watch on this. Theyve done their costs are much lower than they were last year. Has allowed to us provide solid returns even what hes calling a somewhat challenging environment, he believes theyre positioned to provide solid returns even as the economy continues to heal. Institutional client services, fixed income currency, commodities, thats down in a meaningful way. 13 lower than 2012. Thats really sort of what maybe its an obvious why. Just whats happened. The other thing to look at, you know my favorite stat, right . I do. Where do you think im going with that . Compensation. Fat cats. People that move money around and make didnt found the company and they have huge paychecks. I didnt say that. I didnt say that. Compensation benefit expenses, 3 lower than 2012. The ratio Compensation Benefits at 36. 9 compared to 37. 9 in 2012. They increased their staff by the way by 2 , though overall costs for the group were down 2 . All right. Theyre paying them less. Thats what it looks like. You dont want to burn bridges before you come to them, andrew, i dont think. Up next look at all these, chris. You know what, everyone has you dont want to burn bridges until you what. Dont burn any bridges until you come to them. Its dont cross a bridge all of these are attributed to people. Rush limbaugh says button up your seat belts. Everyone is named for someone. That was al gore, the one who did the leopard can change his stripes was supposedly al gore. You next, a rise of the second machine age from googles Autonomous Cars to watsons ability to trounce humans on jeopardy. He did it with, you could see zeal. A new book on how technology is reinventing itself. Well have more on best buy. Retail analyst brian neagle will join us, maybe tell us whether there is collateral damage. I still cant believe the drop. Sharply lower. The turnaround is not working . Is this what people are convinced of. It was a tough season for best buy. People wanted the domestic comps to be up. They fell by 9 . [ tires screech ] [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to your authorized mercedesbenz dealer for 1. 99 financing during our certified preowned sales event through february 28th. Preowned sales event so i can reach ally bank 24 7, but there ar24 7. Branches . Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. 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 back to squawk box, the Industrial Revolution ushered in the first machine age, now were in the midst of the second. Once familiar only in the context. Scifi fantasies, the new technological revolution is transforming the world and perhaps the employment picture. Joining us now is the director of mit center for digital business, erik brynjolfsson. Hes also the author of the second machine age. Ive been making this argument, we could have an employment if innovation is as successful as we hope it to be. Make the argument. The first machine age unleashed tremendous economic opportunity. It also eliminated a lot of jobs but when we automated muscle work, it was mostly a complement for human labor. The second machine age is about automating cognitive work. Its not so clear thats not going to be as much of a substitute as a compliment for human decision making. Were seeing it in the employment data. Employment is falling off a cliff. Median income is lower than it was in the 1990s. There are troubling trends. Weve seen what innovation and technology has brought to our world as well. Just the thing about the smartphone. Think about where medical science, health pharmaceuticals, techniques in the next 10, 15, 20 years, advances in disease and things like that. My question to you, since you know youre an expert on machines, i always bring up the singularity. What i always bring up, when we get to the points where machines have a billion times the knowledge of all Human Knowledge. All Human Knowledge put together and they have a billion times that, do we have any idea what machines will be able to design at that point . No, i dont think we have any idea what machines will be able to design at that point. But i can tell you that over the next ten years, i expect the pace of technological change to accelerate. The economic disruption weve seen in the past ten years is a small glimmer compared to what well see in the next ten years. If we do it right, im with you. I think it should be mostly a good story. Well have much better health, well be able to solve economic problems that we couldnt have solved before. Its not going to be a smooth ride. Let me ask you about the smooth ride. We have a greater education, you know, these robots and other types of machines will take the lowend jobs. Well still need higher educated people to program these things. But part of what you suggest in the book is well get to a point with the technology where we might we might have the computers actually doing the programming themselves, too. They already do that. Absolutely. No. Thats whats interesting, exciting, its got a lot of opportunities. I heard you mention jeopardy in the leadin to this. We had the father of jeopardy come to mit. We took a team of our best students play against jeopardy. And jeopardy kicked their butts. Not like watson beat them on jeopardy but watson was able to beat the mit students in a whole set of wide questions. Now theyre using that technology for medical diagnosis, legal discovery, financial advice. Also areas that you never would have expected five years ago. Dave watson did it in a malevolent way, which is what scares me. He seemed to enjoy beating the humans. He was cold. He was cold and calculating. So cold. I didnt see the technological emotion. It seems to me one piece of this is that both in the first Industrial Revolution and now, there are two components to quality of life. One is your incomeproducing ability but the other is the cost. Everything should be cheaper. One of the big changes in the first revolution was how much lower food costs as a percentage of income became. Right. In this next revolution, it seems to me that we could potentially have vastly lower Health Care Costs. We could potentially have vastly lower energy costs. We could wind up in a situation where it isnt just the necessity of driving revenues, vastly lower education costs, all as a result of technological revolution which in turn is also going to impact at the end of the day, call it your happiness quotient as opposed to just the gdp. Eric, you buy that . Absolutely. We spend a lot of time talking about that. We calculate the value of all the free goods on the internet. Its about 300 billion a year. Also health care, other areas. It used to be about 90 of americans worked on farms. That was what it cost to raise all the food. Now its less than 2 . As you went through that litany, were seeing similar things happen in manufacturing and other areas where technology is allowing a much smaller number of people to produce all we need. Last question. As a big thinker, weve been trying for ai for a long time and we should have been there by now. Were nowhere near it. There are some people that say the evolution of the human brain gave it a builtin copyright or built in that its not going to be able to be figured out because of the way it happened. Is it possible that in 30 years we can crack that code and actually download someones brain or is that just Science Fiction . There are people trying to do that. Theres Amazing Research on mapping the brain. That still is pretty speculative. But we know that today, over the next ten years, there are a whole class of decisions that people have been making that can now be made by machines. I think well see area after area fall i used to teach my students a few years ago that we couldnt teach a machine how to drive a car. Recently i rode in googles driverless car. Were seeing more and more specific domains fall to machine intelligence. The book the second machine age. Thanks so much. Hell be in davos, too. He is . Good. I think he was more on my side than your side on this whole thing. Sounded like it. Hes much more nuanced than the world is coming to an end. Youre pessimistic. The house is always burning for you. Think of the wonderful good things that happen from all this. You cant sell the house did you know about this, Johnson Johnson announcing they officially signed a binding offer with the Carlyle Group to sell Ortho Clinical Diagnostics . Yes. If they accept the offer the proposed transaction is expected to close toward the middle of the year. Up next, best buy shares are trading sharply lower today. The retailer says Holiday Season domestic comps fell by 0. . Analysts were looking for annan crease of 2 . Well speak to an analyst right after this. At the top of the hour, citi will be the next big financial to report. Well have the numbers and instant reaction. Squawk box will be right back. 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. Wed like to thank our guest host for this hour, christie hefner, chairman of Canyon Ranch Enterprises. Thank you. We have citigroup getting ready to report results. Well get the numbers and market reaction. We welcome our guest host for the hour, scott sperling. Well get a 2014 outlook from the ceo of Cantor Fitzgerald as well. Squawk box will be right back. 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. Isnt it time you discovered the sleep number bed . The only bed clinically proven to relieve back pain and improve sleep quality. And right now, for five days only, save 300 to 800 on our newest innovations. Plus special financing until january 2017 on select sleep number beds. Ends monday only at a sleep number store, where queen mattresses start at just 699. 99. Sleep number. Comfort individualized. 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If you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a 30tablet free trial. Stocks rally. The s p erasing early 2014 losses as Economic Data and earnings continue to drive investor sentiment. This hour, citigroup reports. Plus, well get you ready for the championship weekend. New England Patriots president Jonathan Kraft previews the teams big matchup against the broncos and talks about the business of football as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc, first in business worldwide. Im Andrew Ross Sorkin along with joe kernen and becky quick. We have a new guest host in studio, sharing his thoughts for the hour, scott sperling, the copresident of tl lee partners. Before we do anything else, well talk about some earnings reports. Spit it out. Joe . 82 cents adjusted on citigroup. Thats versus 95 cents. The first number was a net number of 85. Calling it adjusted 82. Either one of those would be below the expectations of 95 cents a share. 17. 8 billion in revenue. We saw wells fargo and jpmorgan both make over 5 billion. In this case, its 2. 7 billion is the actual number were talking about. I cant see whether in commentary is it negative . We didnt finish the year as strongly as we would have liked. The revenue came in below 2, 17. 8 versus 18. 18. I didnt know the number. My machine is giving me yearly numbers instead of quarterly numbers. They say that they theyre still claiming they made substantial progress toward key priorities in 2013 but do admit it fell short of what they had hoped. Theyve talked about their accelerated their growth and capital into the Fourth Quarter with an estimated common ratio of 10. 5 , which exceeded their target. Trying to look through to find out why they fell short. Stock is getting hit pretty hard. Whenever i look at that stock, that stock to me is at 5 3 8. Stock is 5 3 8. Do another reverse split. The revenue miss primarily they say was because of lower u. S. Mortgage refinance activity. Probably in the a surprise to see refinancing activity drop. Weve seen that in every one of the big banks who have reported, including bank of america and wells fargo. They point out they had fixed income market revenues that declined in securities and banking. All right. Joining us to talk these numbers, also Goldman Sachs while we have them here is marty mosby, a banking analyst at guggenheim partners. Is this the worst weve seen with the wells, jpmorgan and citi, marty . Yes, on the surface, it would look like the core earnings for citi would have dropped below where we were expecting it to be, in the 90 cents to a dollar range. It is weaker. We were expecting a weaker earnings quarter out of citi. When youre looking at it, the losses in Citi Holdings continue to improve, capital continues to improve. It really is a turnaround story thats trading below tangible value right now. The earnings are less of a concern, more of the lost content. Well have to dig into the details as we get a chance to get to the Conference Call. Did you look at goldman by now, marty . We have. Goldman was shining out as we look at the Investment Banking increase as well as what we saw in the Capital Markets area. The Core Revenues theyre relying on they actually bounce back from a weak Third Quarter and showed a better than expected Fourth Quarter revenue side. Its interesting. Citigroup at this point, it doesnt matter. The story isnt the results from any given quarter. Its just where it trades relative to its peers. As it continues to deal with its sort of sordid past. Right. What it has to do is work out of the problems. I wouldnt be surprised to see if theres cleanup here in the Fourth Quarter as youre in these recovery stories and you get the year ends. What matters more is if you move forward. If youre looking at capital and the losses that were in Citi Holdings, that would body well to show progress with dividends and share repurchase. When do we decide that this is the new guy and not a i think the personality of the company has been changing as chairman oneill has been putting down through the organization more of a banking focus in the ability to look at returns versus transactions. So what were seeing is, you know, talking about how we can get to the profitability levels, dealing with the issues and trying to clean the decks so when you start to move forward you get a better feel for the ongoing profitability of the company. So that is what weve already seen. I think the personality and a lot of what were reflecting in the numbers is the fact that theyre trying to get the past behind and move ahead. You dont get held accountable for bad numbers because youre still cleaning things up. When is he accountable for bad numbers, corbett . As we get into the end of this year, youd have to start to see progress. The first thing is the c car. As you move through 2014 are you seeing efficiencies to work through and make investments and being more productive . Eventually you have to have the revenues come back which will probably be as you get into 2015. Okay. Marty, really quickly. The stock has been down by as much as 3 in the last few minutes. How many investors are willing to take a longterm view and how many investors will be people looking at Quarterly Results and shorter term results . Well, i think initially youll have a reaction to the Quarterly Results, obviously that thats what we prepared for coming into the quarter, this this was going to be a bank that would disappoint, given their composition of revenues and what was being pressured in the market on the fixed income and mortgage side. After you hit that next bottom you start to look forward and say what could the profitability look like Going Forward . Are they making progress . On the things that matter in the sense of dealing with the issues. Which is like what we saw with jpmorgan and bank of america, as you deal with your issues, typically investors take a much longer term view looking forward. All right, marty. Thank you. Nice talking to you. You, too. Lets take a look at shares of best buy. Theyre being crushed in the early trading. Down by 10 from where they started this morning. Joining us is oppenheimers brian neagle. Its down 30. 50. What happened and why are investors reabbing harshly to this news, brian nagle . Whats happened in a nutshell, best buy assumed an extraordinarily promotional stance in the holiday selling season. The impact of this was significant on their margins, at the same time, store sales werent all that great. Thats basically what happened. As i think of these results, its a challenging reporting season for retailers in general. I think best buy got caught up in that. This also shows the ongoing challenges in the Consumer Electronics business through the holiday selling season. The stock reaction today seems to be one that people are saying forget about it, you cant turn this thing around. Is that a view that you agree with . Or do you think there is hope, just disappointing Holiday Season . Frankly, im still mulling this over in my head. Where my mind is right now and the question im asking myself is, we look at these results. Did it show best buy was making a very expensive investment in its future or was it to simply highlight the vulnerability of this Business Model . I dont know the answer yet. Best buy, their Conference Call is on right now. Im sure they will try to say they did what they had to do to maintain market share. Scott, any thoughts on this . Scott sperling is here. You can pull together both of the companies youre talking about, the two sectors youre talking about, Financial Services and what youve seen with best buy. What it illustrates is were living in a world where theres an enormous dynamic going on because of evolution and technology and regulatory changes. If you look at what the banks have done, theyve been able to work through their Balance Sheet issues. But they face the issue put upon them by the regulators by what its abouts they can be in and whether or not they can continue to generate the levels of profitability they have historically from those Business Models. I think theyve done a remarkable job by being able to reposition themselves. If you think about the fact that theyve been told to get out of some of their most profitable businesses or deemphasize it, their results are amazing. I think youre seeing a reinvention that occurs because of the competitive advantages a lot of these major institutions have. If you look at best buy on the other hand, im not sure the fundamental of three years ago changed. The internet is going to eat away at a commodity product being offered about i this retailer, this brooks and Mortar Retailer. There was a rethought that what they could do is somehow work within that Business Model and be the showcase and people would come and they can offer products and people would buy them. I think what youre seeing now is the fact that in order for people to buy them, they have to price them in ways that are extraordinarily attractive to consumers but not so attractive to their Business Model when you have the cost structure of the bricks and mortar. Again, i think interestingly, youre seeing in these two different sectors, the results today are telling you a lot about the evolution of the u. S. Economy and the challenges and opportunities, i think we see out there. What does it say about best buy . To the extent this company was heralded as the great this was one of the great turnarounds of all time. It didnt die. It didnt die, right. Where will this be in two years . Again, i am not sure that theres a im not sure that the Business Model out there supports the cost structure that they have to sustain on the bricks and Mortar Retail basis. I dont know. But thats the question people are asking when you see a reaction like this. When you see these results, the expectations are, they figured it out and theres a new model out there. This is an example of the challenges that some businesses have. Right. Some businesses, Financial Services, i think some of the big players doing a great job of figuring out how to work within that and still propel a Business Model forward thats attractive to investors. Others, the challenges are pretty significant. Very quickly, would you tell people to buy at 27 or still so unsure you wouldnt jump in here . At this point, i have an outperform rating on the stock. Like i said before, im looking deeply at this right now. Im asking myself what does this really mean . I agree with what your guests are saying, a lot of the sentiment there. What does this mean . Is it a bump in the road or is this indicative of an extraordinarily vulnerable Business Model . Wow. Thanks for joining us. Thank you. Joining us now is shawn matthews, ceo of Cantor Fitzgerald. Larry fink was on earlier, he made some stuff that made sense. As the market climbed, there are still times where people need fixed income. They dont want to stay in a market that will not always climb. Theres always a fixed income there. It took a turn to albuquerque on the way to 4 , didnt it . Its logical. Think about normalized curves. Were getting back to a Business Cycle mentality at some point. If you look at a 2 fed funds, the normalized twoyear would be 2. 75, the normalized tenyear would be 4 . The market is predicting that the world will change. Thats going to happen over a couple of years but in reality we were waiting for that bond money to go into stocks to get us to about 30,000 on the dow. We may be waiting a while. You have an aging population. When you look at the demographics that are out there. Speak for yourself. Portfolio construction will have a component of fixed income, especially as you get older. Cantor, youre a guru there. What is cantors take on are equities the place to be . Is wall street gone forever . I think think equities are the place to be. Youll have zero Interest Rates or close to it for an extended period of time, lets call it a year, year and a half. Equity money will be out there enalooking for opportunities. What were starting to see is interesting. Assets were correlated for years. They move in one direction or another, just based on the correlation. Youre starting to see sector rotation in the marketplace, winners win and losers lose. Its becoming a logical marketplace. Youre starting to see long short equity funds are becoming more of a focus for people. In reality thats the world were going to live in Going Forward. What do you make of what does cantor think banks will be doing . Banks will theyre changing. Back to the Business Model of the 90s. Banks will act like commercial banks again. If you look at the leadership, commercial bankers will run commercial banks Going Forward. Capital markets participants ran banks for the last 20 years or so. That will start to change and has started to change. When you look at a bank over the next five to ten years theyll act like banks and youll see them do more of the traditional things. Investment banking women be deemphasized from an earnings perspective. Youll see a dislocation amongst the banks that actually are really Capital Markets players, the three or four at the top and all other banks will start to act like banks again. How was 2013 . 2013 was a good year. Compared to prior years was that your best year ever. No. Still not back . 2013 was a good year for us. Were looking at the marketplace as a place to build value for the cantor franchise. That means investing in business lines Going Forward. Were being aggressive. We think there is a lot of opportunity as banks start to look like banks again. Shawn, thank you. Scott will be with us for the rest of the show. You know on final jeopardy the category was u. S. Steers and they said this city has an airport named for a famous world war ii person and famous world war ii battle. You know what watson said . Toronto. I was thinking toronto is not a u. S. City. People think watson is stupid. Im looking at how this happened. And the guys that programmed him have a bunch of reasons why this happened. He didnt have a high level of confidence. It was only 14 . He wouldnt have rung in if it wasnt final jeopardy. There was a guy in toronto that was if it goes alice cooper, hed probably still get it but hed have to take a guess that alice was a man. You can get your hat handed to you. This is legitimate. I looked it up on word lizard. From the 1990s, the head handed to you but hat handed to you is in the 1990s. What does it mean . Its kinder, gentler. Heres your hat, get out the door. Okay. What will the world look like in 2039 . Michelle carusocabrera is going to join us with a few ideas and the Global Economic implications, thats ahead. 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 this magic moment so ally bank has a 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. Coming up within were kicking off cnbc 25 today, marking the 25th anniversary of our network. Coming up next, the look at geopolitics and the World Economic outlook. Find out which countries will dominate the world 25 years from now. A special report right after the break. 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. The tick tote davos is the number one ticket in the world. Where everybody is somebody. Weve never done it all together. Squawk box is the show to gets to do it with eric schmidt of google. Ray dalio. Goldie hawn who i live. And matt damon. If theres one event we can go to, i would think its davos. Im excited to go. 2014 is a special year for cnbc. This is our 25th anniversary. To mark the occasion, well be rolling out a full year of special events, guests and series. We kick one of those off today. Each month well be bringing you a look at an industry or sector or in todays case, the Global Economy. Well tell you what it will look like in the year 203. 25 years ago we couldnt imagine all the advances that are part of our daily lives and the changes that have taken place in the geopolitical landscape. Throughout the day today well show you where we could be 25 years from now. Michelle carusocabrera joins us now. Happy birthday, becky. Cnbc 25. I almost wore a hat. This list will look familiar to everybody. The current top five economies in the world, the United States, china, japan, germany, france still managing to hang in there. We asked pricewaterhousecoopers to do protections for 2039. They think this list will look substantially different 25 years from now. In 25 years, germany and france will be gone from the top five. Replaced by india and brazil. The u. S. Will no longer be first. According to pricewaterhousecoopers, the Worlds Largest economy will be china at 34 trillion. Quadrupling from its current level of 8. 3 trillion. However, the u. S. Wont be far behind at 29 trillion, nearly double the current level of roughly 1 trillion. India will be third, japan will fall from third to fourth and brazil will come in at fifth. Even though the u. S. Will fall behind china, in terms of gdp per capita, the u. S. Will be way ahead of china at 72,000 versus 24,000. When it comes to world population, india with 1. 6 billion people by then will overtake china which will barely budge from 1. 3 to 1 the 4 billion. The u. S. Will rise from 300 million to 400 million and in terms of which economies will grow the fastest in the next 25 years, pricewaterhousecoopers says nigeria, vietnam, india, indonesia and malaysia. Its important to note pricewaterhousecoopers caveats everything saying they use a static analysis of the policies in place in countries today. They could do other things that would change their placement in the rankings over time. Is there anything france and germany could do to stay in the top five . Its interesting. We have the conversation with pricewaterhousecoopers. What does the president in france do this week . It got lost in the whole issue of the scandal. The guy who campaigned on spending more, being socialist says he wanted to do tax cuts on businesses, cut spending, et cetera. That didnt get lost. Werent you watching us yesterday, i said even their guy figured it out before our guy. Yes, yes. I did the story that day and we focused mostly on he realized maybe the private sector might be something we need to help out. Its amazing. It may eventually come across and go into d. C. This is not a fait accompli. Are you looking at things like this when you decide about investments, how to do things . We may try but were not very good at it. As i was saying earlier, i think were living in an increasingly dynamic environment. The one thing i do think is i think the u. S. Is still going to be number one. I think the u. S. Will continue on gdp per capita for sure. Yes, right. If you look at china, thats the thing. While its number two, its number 47. They will be enormously poor. China has its own demographic challenges but i think the u. S. Is becoming increasingly competitive, largely because of the Energy Situation that were all aware of. It you look at whats going on in china in terms of pressure for wage increases, i think their ability to sustain an advantage on pure cost basis may dissipate somewhat. Its happening right now. The u. S. Has other advantages. I think its hard to call. You know, im not sure 25 years ago you would have said some of the japan would have been ahead of us 25 years ago. Exactly. Do we know that . I questioned that as well. Its hard to predict the future. Only climate can you predict the future. For sure. People accept that. People accept, oh, okay, i believe you. In no other context do we believe we can predict the future except those guys. Its enormously difficult. By the way, were doing this all day. On squawk on the street well take a much closer look at china 25 years ago, what we think we know about that. I interviewed a futurist, who is a marketer and is interesting. Marketer isnt quite the word. We have a long q a with him on the internet. 2039, im on this singularity thing. 2039 is an important year. We have a big event coming up with singularity. You do . Yes. Cpi and later, championship weekend, win with a trip to the super bowl on the line. Brady and the patriots handle Peyton Manning and the broncos. Well see what happens. Jonathan kraft will join us. Both started in garages. Mattel started in a garage. The ramones started in a garage. My point . You never know what kind of greatness can come out of an american garage. Introducing the 2014 motor trend car of the year. The all new cadillac cts. Aint garages great . Welcome back to squawk box. We are just a second away from the jobless claims number. Lets get straight to rick santelli. Lets start out with the inflation numbers. Cpi for the month up 0. 3. Strip out food and energy, up 0. 1. Pretty much exactly as expected. Lets look at the yearoveryear numbers, up 1. 7 core. Also as expected. As expected, thats a catch all. What was it last time . Up 1. 2 on the headline. Up 1. 7 on core. Headline moved up 0. 3. Initial jobless claims, well, the number now is 326,000. Last week, it was originally released to 330. Lowered to 328. So this puts this minus 2,000 from the revised number. 3. 03 million on continuing claims, a bit of a time delay there on the metric of continuing claims. We are hovering at the 2. 86 mark which is interesting. Were indeed, about 15 basis points lower than we closed last year. I find that very fascinating and open for debate. I heard you guys discussing it this morning. At least the treasury market still is moving to the notion that rates will go lower if the economy isnt buzzing along as expected. Or maybe theres questions as to regard economy pricing and stocks. Whatever that relationship is, im sure well spend 2014 stretching out the boundaries of how that metric or those two metrics interrelate. Back to you. Okay. Thank you for that, rick. Joning us now for reaction, jeff cleveland, chief economist at hayden and regal. Steve liesman is in washington this morning. You know what, steve, give us your First Impressions real quick. Well, it looks like it was probably gasoline they wrote up. I dont have the details in front of me. Let me kick it back to you and ill get the details. Im on a different computer system, not working quite as fast. I have other information i want to talk about global inflation in a second. Jeff, your thoughts, sir . I think going into this year, joe, everyone is set up for better growth and inflation stabilizing and possibly moving a bit higher. Thats what the treasury market was anticipating. Its interesting that rick points were hovering at 2. 86. To the extent that growth disappoints we certainly disappointed friday with the jobs number or inflation just hangs out, doesnt move higher on core measures. Bonds have room to, you know, stay where they are, even push lower over the very near term. Thats the most important issue we face right now in the bond market. Should we go back to steve . Steve, are you ready . Im good. It was gasoline on the increase. Apparel also up 0. 9 . Medical costs up. It was 0. 3, not terrible. Basically you had lagarde yesterday, head of the imf warning about global deflation, the deflationary risks out there. I want to show you some charts. I hope we have them there. I left them for you guys. About whats going on around the world. A lot of people say its a conspiracy out there. If it is, its a global conspiracy. You see inflation declining in all the major countries we follow. The u has been on the way down. I used headline here. I could have used the core, taking out the volatile food and energy. Its been down in the u. S. , down a lot in the euro area, 0. 8, 0. 7. Moving on, take a look at whats happening in china. Things are down there. Theres the uk around 2 . Thats why you have the concern, not necessarily the reality but the concern of putting it all together, you have the imfs forecast for 2013. Thats the overall, thats the 2010, 2013 declining down. The reason why they get concern when it gets down to zero, they have fewer tools to deal with it rather than dealing with inflation. They kind of know what to do there. Thats out there. Joe asked earlier, where is that 4 . You would think that lower global inflation would keep a lid on how high Interest Rates want to move in the face of no inflation globally. Based on that, jeff, based on what steve just said, what do you do about it . The biggest question, steve, people keep send heing me char s charts. Theres not a the Balance Sheets are a myth . Rick, the myth is the 4 trillion [ talking at once ] let me tell you what the issue is. Even people who are not as concerned about inflation as rick was, years ago i didnt say i wasnt concerned about inflation. I said the Balance Sheets are no myth. Dont put words in my mouth, mr. Steve liesman. I wouldnt want to put words in your mouth for sure. You certainly would not. Im trying to Say Something nice. It seems like you changed gears with your objective. Some people werent so concerned. Whos a lot of people. They would tell you they who . They are surprised by the lack of connection between the size of the Balance Sheets and lack of inflation out in the economy right now. And that this has caused a rethink of that connection between central bank Balance Sheets and inflation. Were not sure what the right model is because a lot of these models would have predicted lower inflation if you follow the output gap. Certainly those who looked at the Balance Sheets would have predicted much higher inflation. There isnt a good working model. Bernanke said it at one of his last speeches, i think it was dudley also in philadelphia, a couple weeks ago said our inflation models are not very good. Rick, what im trying to say, you had company in the Academic Community be concerned about inflation and everybody is trying to say you know what, we dont have a good grasp as to why there is not inflation. Rick . Mit models are fascinating. They created a lot of capital, which is what they were designed to do. Thats why the Federal Reserve used many of them but they forgot the Human Element that what exactly its done with the capital, where is it store, how does it move through the economy . That part of it didnt turn out well. The moral of that story is, that models really cant model the type of venues or behavior. Japan will learn that. And the middle class probably shouldnt be as frightened about a little less inflationary pressures, because in the grand scheme of things i would think its those who own the most that should be the most nervous. Rick, hold that thought. Scott . Part of what were seeing is that we focus on half of it. We focus on the monetary side. But we also have had this enormous fiscal headwind because of uncertainties due to government policy or policies that were antigrowth in many ways that have created a sluggish basic economy. So im not sure that what we arent seeing is the models dont work because were only looking at half of it and were not fully accounting for Everything Else going on in, quote, unquote, the real economy, particularly on the fiscal side and also when you add on to that, the improvement and productivity across so many different industries, im not sure the model is fully incorporated how productive business can actually be doing much more with less. Okay. Well leave the conversation there. Joe no ahead. Yes. I was going to say, for many investors to go back to your original question, models can be traps, models can be mental traps that they get stuck in. They refuse to look at the actual data because the model tells them something else. I think thats whats happened with inflation. I think its important. Yields dont necessarily have to jump significantly higher if inflation stays muted all over the world. That was andrew all along. All those brilliant questions. He was channeling me, i guess. They did sound pretty smart. He says that sarcastically. No, no. Thank you. Be the model. Andrew, in terms of what models work, the mod thatll worked the best was the one that said because theres a lot of slack in the economy well have low inflation rather than the model that said we have bloated Balance Sheets. No country should spend the more than it takes in in other than crisis times. Thats ridiculous, rick. Thats ridiculous. You do that yourself. You have 4 trillion reasons to say its ridiculous. Up next, tom brady and the patriots are getting ready for Peyton Manning and the broncos. According to the ticket prices on the secondary market, its the most expensive afc championship game in four years. Why are you mispronouncing his name. New England Patriots president Jonathan Kraft joins us after the break to preview the weekends big game. Before you settle for another ordinary mattress, isnt it time you discovered the sleep number bed . The only bed clinically proven to relieve back pain and improve sleep quality. And right now, for five days only, save 300 to 800 on our newest innovations. Plus special financing until january 2017 on select sleep number beds. Ends monday only at a sleep number store, where queen mattresses start at just 699. 99. Sleep number. Comfort individualized. 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. The new England Patriots are going to play in their tenth afc championship game this sunday against the denver broncos. Joining us to talk about this weekends matchup is Jonathan Kraft, the president of the kraft group and new England Patriots, j. K. Well have to talk about the stupid boxes you make at some point. Because we have to bring this to the economy eventually but i really dont want to. I do. How is tom . Why did he miss practice . Whats the illness he had. He had to stay home and watch you yesterday, joe. Very funny. Tom will be out there. Tom will be out there. They also say he has a scholler problem. Then i see that belichick has listed him with that shoulder problem for every game since 2004. Did you know that . I didnt. I always learn when i talk to you. That is insane. The thing that really gets many he, jonathan, is that how many more games did you need to win so i could have come up to this . Its not at gillette. Why is it in denver and how did you mess that up. We needed to win one more or the broncos had to lose one more. The broncos earned the first seed during the season. Da many. N. They were clearly the best team in the afc. Well go out to denver and see what happens. This affects me. Joe, youll be there in spirit. Theres nothing we can do about that. How do you think you know, bradys owned him in the past. Whats the plan for how to try to at least somehow make him not as peyton as effective as we know hes going to try to be. Bringing it back to business, if you had bill on, he could get into the technical details. The bottom line is, tom and peyton are exceptional managers. Theyre managing a business. Theyre managing its like managing a quarter in 60 minutes or three hours out on that football field. And all the variables they have to deal with, the personality issues, it literally is just like managing a company over a quarter. And both tom and peyton are great at it. You just have to hope you have to hope theres an intangible on one side or the other that swings it the right way. Tom has come out on top 10 of the 14 time. Hopefully we get the 11th this weekend. This is so much more expensive than any of the recent games. This is a dream game. 800 bucks for a ticket. You guys are lucky that it all worked out. Its weird that it all worked out. At the beginning of the year you probably would have said new england versus we didnt know peyton would have this kind of year. This is awesome for the tv networks and fans. This is phenomenal. When you watch tom and peyton, its not the two best of this time, its the two best of all time. That doesnt happen in any other sport like this, where each of them play the position that just is so critical. I think having been at all 14 of those games, i can remember all of the past games, i know were going to see Something Special on sunday. The people that get to go there, watch on television, you really should appreciate it, because this is truly the two best of all time. In a day and age in the game where the competition is so much greater than it was in the prior decades. These guys at 36 and 37 years old, its just amazing to watch. I think for the nfl, if it wasnt one of our teams and we couldnt be in it, this would be the matchup that i would want to see. Because its the right thing for the business. In the nfc, too. Whoever it is that wins these next two imga, it will be one of the really great super bowls. You make these boxes. There was a way your dad bought this team. He has business sense. Businesses in your view are going pretty well now, arent they. The end of the year, the corrugated box business is always a great indicator of whats going on. November and december were incredibly strong, almost abnormally so. We were up 14 on unit volume over those two months which seemed like an aberration. January has come back to flat yearoveryear. We could normally track gdp. Given all of that, the underpinnings of the economy are still strong with the one exception being were not creating the jobs. Thats still a real issue as we go out and talk to our customers in the small to midsize range. They are still unwilling to hire. I think until that problem gets solved, i dont know how the economy takes off for certain. Business at the you have a whole Retail Complex up there, too, at the stadium. How would you characterize that . Is it better than it was last year or the year before . Yes. Our volumes, our traffic counts from thanksgiving through christmas, even with the shortened shopping period was up almost 7 . And virtually every retailer and every dining establishment on property was up between like 2 and 10 . It was a good period for us. Jonathan, is that reflective of the fact that its an Entertainment Complex and can bring those people in . Weve been hearing from best buy where they had to offer steep sales to get people in the door and where that hurt profit margins. Clearly thats an enhancement. The people in the family that dont want to shop, theres something to do for the family to come down here, whether its to skate in our rink, go to the hall of fame, see a movie. We have a couple of live interactive experiences at a business called five woods. I think youre right, that helps drive it. The experiences all together were great. Bass pro which sort of mixes entertainment and retail, i dont want to get into their numbers specifically. Thats for them to do. I know they had a very strong christmas down here. They programmed that store in a way that theres a tremendous amount of entertainment to go along with the retail. Mile high stadium. Come on out, joe. A whole new connotation. Used to be a loud place. Im wondering if everyone is going to be like, whoa, man. What are the rules whos playing, man . I dont know. Beer sales are going down. You cant bring it into the stadium be 50 im told. This is a stadium that this is not the mile high club. Im asking a different question. Sorry. What is allowed to be brought into the stadium and what happens in the tailgating now . Tailgating, jonathan. Im glad thats the broncos problem and not ours. As long as they stay away from our players. Mile high stadium, you cant make this up, j. K. Youre right, joe. Scott should grab you, you and scott should come out. Its great to see all the boston guys. You have a jet . You have a jet . Guys, theres no seat for you. How could we possibly get a seat, though . Do you know anyone . No. Thank you for the offer. Best to your dad. Good luck. We cant i can say it, go, pats. I went to school in colorado. I love brady, hes anyway, im not going to say anything. Good luck, jonathan. Obviously well be watching. Thank you. Coming up, jim cramers take on this mornings earnings news and Economic Data. Then tomorrow, its the squawk box power breakfast, the re zbxt regency reopening. Our guests include jonathan tisch, harold ford, woody johnson, ray kelly, Roger Goodell and alan patricof. Lets get down to the New York Stock Exchange and jim cramer joins us now. Pats versus the broncs and seattle, 49ers. What do you think . The line is switching almost every day, having money going to the pats. Theyre begging to take the broncos. Im not going to go there, i think the pats can take it out there. The bronco d very soft. How about russell . Russell but that other guy, the way he can run, kaepernick. Percy harvin could make the difference there. I do think that were underestimating the grit of the 49ers. I know the 12th man up there is very powerful, but i really think the niners can stop the d as we saw it when they played the panthers, so ill go for the niners there. Really . Yeah. Give me any of these two in the super bowl, its the best super bowl in a while, dont you think . I think it will be amazing. I also love the fact its in new york. No, no, new jersey. New jersey, youre absolutely right. My bad. There was a 9,000 ticket quote this weekend for the best game, to actually go to denver. Look, i think peyton is great, omaha, omaha, but do you know what, theres no one as unflappable as brady and its because his offensive line loves him. I wonder what the he gives them for christmas. I bet its big. I bet youre right about that. Best buy i missed it at 8, i didnt sell it at 40, we dont do any of that. I didnt know it was going down from 45. Every analyst is going over the notes about what happened the last three days. All people thought this was going to be a breakout quarter. This was like gme, like gamestop, they were shorted, they were shorted, they were shorted, and it looked like all the shorts must have covered in the last minute because theres no bids down there. Im going over what best buy is saying and youre right back in them being amazon again, because the Gross Margins are bad. People are saying they will cut the cost of merchandise and people will flock, but they cut the cost of merchandise so much they didnt make any money. What about citigroup . What did you think . Short. I didnt like the fixed income trade. I didnt like the currency. Its really they had the misfortune of following what was an amazing turnaround which is bank of america, and i just didnt see a lot in citi that makes me excited, but the Net Interest Margin did go up. I think it will be maybe a second half 2014 story. Bank of america is the story right now. The other banks are going off citi. Thats as stupid as wood. We need some good mixed metaphors, stupid as wood is good. I am also a weyerhaeuser buyer. You are . Yeah. Well see you in less than five minutes. Thank you. Okay. Coming up next, were going to be getting the last word from our guest host scott spurling, plus well give you the stock of the day and make sure you keep it locked to cnbc because coming up on squawk on the street congressman barney frank is going to join the crew at post nine. That will be a lot of fun to see. [ male announcer ] the new new york is open. 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. 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 talk of the day best buy the company reporting a drop of 0. 9 of a percent in samestore sales, they were supposed to be up 2 so definitely not what people were hoping for. Its not. It wasnt. At all. Lets get back to our guest host scott spurling, we dont say does anyone call you tom lee . Not really. I call him scott. Yeah. We havent talked about private equity at all in any kind of real meaningful way. Are you buying anything right now . We have bought a few companies. I would say that weve been in an environment not just for us but for others where you have to wo pretty hard to buy something. The market has been not fruitful for us, maybe some others. But weve acquired five companies in the last nine months and i would say typically youre working anywhere from nine months to in the case of lps which has been announced, we worked on that for almost four years. And youre not going to follow some of your rivals join the Public Market . Either the Public Markets or even into broader Asset Management. We have a credit business, which is publicly traded, thats pretty close to our core business. I dont think were looking to expand beyond that into what i would say an asset broader Asset Management construct. We like being owneroperators of businesses, at least what most of the senior guys like. Okay, scott, thank you for being here. Youre welcome. Appreciate it. It was a lot of fun. Thats it for us today. Make sure you join us tomorrow. Right now its time for squawk on the street. Ill teach you teach you teach you yes good thursday morning. Welcome to squawk on the street. Im Carl Quintanilla with krim jameer and davjim cramer and sc faber at the New York Stock Exchange. Results out of citi and goldman and the bleak warning out of best buy. In the meantime futures are lower after the best two days for stocks since october. Tenyear note may react to bernankes appearance today over in brookings. Programs the last time well hear from him in that kind of setting begins around 11 00 a. M. And europe at this hour relative