Transcripts For CNBC Squawk Box 20140121

Account information stolen during the target Security Breach is now being divvied off and sold regionally. Two mexican citizens were arrested at the u. S. Border in connection with 96 credit cards. Federal Officials Say there is no connection between those arrests and the retailers credit card data theft. Lenovo has reportedly in talk toes buy ibms server unit. And an experimental roach schizophrenia drug misses two gomes in late stage trials. Its kind of hard to read serious stories as the Peoples Court theme is playing here. You have to keep your game face on. It was a test of your professionalism. Its the equivalent of playing the super bowl in 20 below or Something Like that. You really did well with that, i think. Thats why im here. Ive got to ask you, theyre beating on the revenues, but missing on the profits . I dont remember ever seeing that. Usually its the reverse, right. The top line has been weak, the bottom line has been weak. They do every to offset to the to the bien line. Theyre beating on revenues, its just theres more activity out there. But why theyre missing it, maybe, maybe theyre hiring folks. That has a tend to be a shortterm drag. And that will be good news for the economy, as well. There could be inflation out there. It could be theyre missing on execution. It could be 10 of the company is reporting too early to make any conclusions. From a macro and a market standpoint. People have been talking that the only way youre going to extend this rally and get Margin Expansion is by having top line growth. Weve been waiting years, havent we . It is finally arriving. Its important to point out. First of all, gdp was much stronger in the second half of the year. Theres more dp dp, theres more activity, theres more money to profit from. The percentage of total gdp is in Corporate Bond and a lot of analysts think it has to come off because it has been so high. On the other hand, one other quick thing, theres a thing called operating leverage. Should be should be exquisitely attuned to better revenue growth. It would mean operating leverage would suggest if they get more top line growth, profits would soar on ovunderneath. Last week was the kickoff. Lets see what happens this week. We have a huge amount of very important conditions. J j, texas instruments, imm, and those are just a few. Last week was mostly the banks. China, lenovo and the possible purchase of that division. Thats a big deal. We continue to see this wave of money leaving china to invest, whether youre an individual investor or youre a company that wants to diversify, the ministry of china in commerce thinks this is the firsts year where outpound is drik you knew you would see it that way, yes. But think about all these years where weve talk about so many right. Trying to invaeft est in chi. Now china is looking out wards overly and overly again. They have a ton of money. They want to diversify away from china. As individuals, i think a lot of them are frighten dollars about instability coming in the future, whether or not this is going to be issues like weve seen 20 some years ago. You had issues with corporate governance. By the way, have you seen the it sucks living there. It sucks living in beijing. Syria, ukraine, its great michelle is here with a ton of earnings, its great scott is here. What exactly im doing is the question. Its a natural segue which you just threw out. Liquidity makes the argument that its been dramatically undershipmented and no one is even passion attention to it. The pboc dumps money in. Asia is up as a result of that and everybody says hey, its fine. What happened happened in june, everybody wab terrified. I think its because maybe people think they know whats going on there now that this back and forth is going to map with the central bank easing atlant liquidity. I think theyre learning as they go. Scott asked me before the show began are we underestimating the risks . I said i dont see china poetsing some kind of banking meltdown. But it is a risk to investment and its a rifkt to Economic Growth. Isnt a china issue going to have if credit mass a major country size there are bearish people who look at that and agree with you and then there are others who say look at the entire country as a balance sheet. And i have more than 1 trillion to throw at the problem. The question is at some point do you want people to learn a lesson . Theres also an issue of interconnecting this. Are Chinese Investment and derivatives and loans so intertwined into the Banking System that fears of failure would create concern . I dont think so. And this is not meant to be an insult. They have an infantisle Banking System. The transmission mechanism from cutting rates and the impact on the economy, it is so not what we are used to in the United States. Its alps and oranges. So lets continue in the markets mow. Chbing with oil, 94. 67. Brent at 107. 80. Rbob, 2. 66. Well see if we get some relief on that. With a storm coming, we want to follow the natural gas futures, up just a little bit. 4. 34. Tenyear, 2. 86 . Something to watch. Its been right in the mid zone in the post taper world. And the dollar had been strong. It is up against the yen. Down against the euro. So 1. 35. The euro a little stronger against the euro, weaker against the yen. And checking gold, 1248, down 3. 5 bucks. Time for the Global Markets report. Ross westgate is standing by in london. Ross, theyre talking about Deutsche Bank over here, over there and it seems everywhere else this morning. Yeah. Deutsche bank surprised yesterday, came out with numbers ten days earlier than expected. They made up a quarterly loss. Even when you stripped out the exceptionals, only a very small profit from fixed income trading, as well. Basically, huge litigation rolled into that. They said 2014 is going to be fairly tough. They will hit their target in 2015. But look, its a bumpy road ahead for deutsche. Today we rebound from those losses, 6 to 4 at the moment. Advancers currently outpace decle decleaners. The ftse is barely flat. Got up 0. 4 for the ftse mib, as we well. Back of them expected. Unilev unilever, its competitor of procter gamble, of course, had come out in the Third Quarter with a profit warning, its first in ten years. Today, it was nice for investors to see something that was better than expected, stock up 3 . It will be interesting to see how this compares with procter gamble. One other thing to point out here, we didnt think it would happen this soon, but irish borrowing costs, 1. 64 on the five. Year that year, 1. 7 will so ireland now is revealing both more than the u. S. And the uk. Back to you. Ross, that is amazing. Irish yields, are they the equivalent of u. S. Yields . Crazy. On the fiveyear, theyre lower. Wow. Good restructuring will do for you. Thank you, ross. Yeah. The World Economic forum is being held in davos, as we mentioned. Joe, becky and andrew are there. Joining us to discuss the Critical Issues likely to dominate the agenda is charles dorva. Mr. Delora, good to have you here. Good morning, michelle. Its a pleasure to be with you again. I dont know if you just heard Ross Westgate reporting live from london, but irish yields are now lower than u. S. Yields on the five year. I dont know if youve seen whats happens with italian yields and even some greek yields. You were at the fer front two years ago. Now what do you think . Everybody is expert in europe, right . Well, i think, it is xwris i ive. There is a disconnect and Market Pricing and lift. That doesnt mean that these yields reflect fundamental improves in the underlying economy, does it . No. Especially if this starts to invert that the economy is not growing fast enough. In fact, theres concerns about whether or not theres a deflation problem in europe. Based on where you are, are you worried about deflation in europe . Globally, i do not think inflation is a big issue. I am worried about continued sluggish growth in europe. I do think the risk is quite high that we are embark on an extended period of sluggish growth. Everyone is talking about the bottoming out of the u. S. , of the European Economic situation, the modest improvement from the outlook. But on current forecasts, michelle, european unemployment in 2015, after another year 1 2 of growth is expected to be higher than it was in 2011. This is not a recovery story, certainly not adequately strong in order to boost the underlying prospects for these economies. Charles, Steve Liesman. Good to see you this morning. We were talking about global systemic risk. Is greece off the table as the kind of thing that could bring down Financial Markets globally . And what are your thoughts on whether or not we should be concerned about china from a global perspective . Steve, good morning. Good to see you, as well. I do think greece is off the table. That assumes, however, that europe is prepared to continue to support greece and be a bit more on generous in terms of the financial support. Greece has gone through a tremendously painful period of adjustment. I think its time europe recognized this. Theyve done a lot particularly on the financial front. Globally, i do not see china has posing a significant systemic risk, but i do think that china has the potential to lead to instability in Global Markets this year. Not enough to destabilize the Global Financial system by any means, but the fact is that most chienl auto chinese Financial Institutions went on road shows in the last few years, raised a good bit of stock in global market. They each have a cod berry of shareholde shareholders. It raises the question as to whether or not regulation has gone too far and banks, particularly in europe that dont have as much ability too spread credit like weve seen here in the United States and the capital markets, has it gone too far . Are we seeing now the results, the other end of too much regulation . Well, i think it has gone too far, michelle. I think the pace of it is a problem. Its not just the magnitude of regulatory reform, but it is the pace of on it. If you look at the reality of the credit markets in europe today, theres still very little significant credit growth, particularly into the small and medium sized enterprise sector. Its no wonder that the european economies, by and large, including large economies such as glance, remain so sluggish. Not only have they pursued an inadequately robust structural reform agenda, but they dont have credit moving through these economies and that is due in part to the substantial capital. Capital are to be ranked, but why is that cost . There has been deleveraging and shedding of assets, trults of which are that borrowers in the european economy are still struggling for credit despite the relatively low prices. In that environment, its not surprising that growth has been virtually stagnant. Absolutely. Thanks for joining us, charles delora, who we saw so much during the greek banking crisis and thou with a private equity firm out of europe. Good to see you this morning. You know, one more note on Deutsche Bank real quick. Well have been worried about Deutsche Bank. Steve, you know this, as well. For a long time, and if they didnt have enough money to set aside litigation risks which seems to be fairly substantial and large shareholders of that bank have been worried about it for some time, are increasingly worried about it now because nobody ultimately knows what the risks are going to be. If you look at jpmorgan and the types of fines that theyve had to pay, the libor litigation risk is significant enough that people are worried about it. We have to go, but i want to ask you on the other side of this if this is something that you may be concerned about u. S. Banks or if u. S. Banks have been there, done that and Deutsche Bank yeah. So its not an issue to be of course aing u. S. Banks and their stocks . I dont think so. Coming up, windows 7 back by popular demand even as microsoft pushes windows 8. And bridgegate taking its toll on new Jersey Governor Chris Christie. What will this mean for 20 16 . First, the National Forecast from the weather channels reynolds wolf. Absolutely. Were going to see lots more. A surface low is going to be developing. Well have quite a bit of upper level energy. The Atlantic Ocean is going to play a part. With the overriding moisture, well have meant of snow in the capital. Some places up in boston, perhaps by cape cod, maybe even a foot. This will cause all kinds of travel headaches. More coming up. Youre watching squawk box. [ 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 to squawk box. Bec becky, joe and andrew are on the ground in davos. We have quite a best list coming up. Matt damon, lloyd blank fine, it all begins tomorrow on squawk. We can confirm that joe has arrived in davos, green hat and all. I want to keep that on tv for a little wile. Thats a heck of a very fashionable. Does that look worth it for joe, do you think . I dont know if its its like a grinch green. It covers up his hair which he considers to be his most important aspect. In other why is this other Washington News . There is no other Washington News. New Jersey Governor Chris Christie is taking a hit from brid bridgegate. There were a couple of stories over the weekend that was a complaint from the hoboken mayor that the Governors Office held some relief money hostage and then there was a denial from the Governors Office. A strong denial from not just the governor, but the Lieutenant Governor who is the one who supposedly had this conversation. This is more difficult to ais sess than the bridgegate revolutions. This shows what happens when theres bloots blood in the water, youve got a lot of people coming forward. When she was asked a couple of weeks ago about this, she said i hold aid wasnt with held for this reason. Now shes saying it was and shes offering to take a lie detector test. With all the subpoenas facing Chris Christie, were going to find out. More stuff is likely the come out. More allegations likely to comp out. Its a big mess for him. John, i was trying to think over the weekend ma maybe the Bigger Picture story is here. Here is my thought. Its almost impossible for a local politician to mistake it out of the new York New Jersey area and with stand the National Scrutiny that that it takes to be a i dont think its impossible, although if youre in the Republican Party, youre talking about a party in new york and new jersey that doesnt look like the Republican Party everywhere else. And one of the concerns for the christie people is a guy who was possible an earn certain fit for the Republican National party is hes going to look even less attractive to your republican primary voiters in maces like south carolina, iowa and other places to decide the nomination process. The governor has a speech today. Ex spets are out. Were going to see how will he can pull it off. John, the hoboken situation, it seems to me, just gives National Voters another reason to question the credibility of christie and his administration. Because this story does seem to have some legs. Was on the evening news forecast last night. No question. And because of what happens with the bridge disaster, there is a presumption that christies administration is not playing straight. Because remember, we had these traffic jams, there were these aggressive denials, Chris Christie made fun of the allegations and then it turned out they were true. So that puts him back on his heels in trying to defense himself against these allegations. Can i just point out one thing, though. Sure. We dont know that the truth is. Thats right. But the history of hoboken is not clean. They had to bring in bus toes take away corruption, there was a rabbi involved selling organs. New jersey politically, you know, its jon stewart would say we dont know what the real story is here, okay . As jon stewart would say, youve got your hoboken, youve got your new jersey, what do you pick them . Thank you, we have to go. Thanks for joining us. Notorious. Im sure in current mayor is 100 clean. I think this issue of getting out of new york and new jersey politics to the National Stage is really whats at play here. I think what it because its real, okay . Theyre real. At this point, the truth may matter more in new jersey than it matters nationally. People just question the credible of a well known public political figure. Next on squawk box, putting the markets to the test. More squawk, next. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. 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Serious side effects could include increased risk of prostate cancer, worsening prostate symptoms, decreased sperm count, ankle, feet or body swelling, enlarged or painful breasts, problems breathing while sleeping and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about axiron. Good tuesday morning. Welcome back to squawk right here on cnbc. Im scott woman nwapner along with Steve Liesman and Michelle Caruso cabrera. Andrew kicks things off with Andrew Liveris and ken rogoff. Inbev is repurchasing oriental brewery. That deal worth about 5 billion but sold the company to kkr about five years ago. Did i wake you up . Anchors make money every step of the way. Have you ever had an ov beer . No, i have not. I have. Is that the leading south korean beer . I think it is. Its good. Its good. Yeah. Yeah. But dont you see the irony in it . You take them public, take them private. You need to be vertically integrated. Horizontal. The Postal Service is set to reopen centers in dozens of staples around the country. The move is being met with threats of boycotts by the agencys unions. The outlet is staffed by staples staff, not postal workers. Demand is likely to outstrip supply. Lets show you whats going on with the Global Markets this morning. U. S. Futures, well start there. The dow will open higher by 68 points. The nasdaq higher by 19. In europe, we see the dax higher by 37 points. The cac 40 in paris higher by 15 and the ftse 100 is higher by roughly 14. Shanghai was very interesting. We saw a gain of 1 as a result of intervention by the central bank of china into the shortterm Interest Rates markets. Hang seng positive. The nikkei was higher by roughly 1 . The price of oil is higher across the board. Brent is trading at 107. 87. The tenyear yield, my grand mystery, my object session, is that an eighth of a point . Yield of 2. 86 . Why, oh why, steve . Doesnt it cross above 3 . I have a lot of answers for that. We have economists coming up the. We have an economist coming up. I think that the level of the tenyear is commensurate with the underlying growth and inflation. You know what . Were going to say that. So this fear that the fed was not going to once they started tapering, whatever the hell it is, that they were going to see Interest Rates but remember, theyre giving stronger guidance on the back end. Theyre going to keep rates lower for longer. Low inflation plays another part in it. If you had growth take off, maybe a different story. If you were doing it two if you had underlying 3 growth, i could see a case for higher wall street, we get into the holiday shortened trading week tid, follows the dows first weekly gain of 2014. So the entire year is not a writeoff. Joining us now is anthony chan, david blitzer, chairman of the understandsy necessary new york, antho anthony. Lets start with you. I am going to throw to you michelles question. Why arent we at 3 or higher on the ten year . Well, i think the reason for that is that right now the central bank is going out of its way to say that shortterm Interest Rates are going to stay low for an extended period of time. Remember that longterm rates are really an average of a lot of shortterm rates. And if you keep those shortterm rates low for a long period of time, that can hold down the tenyear treasury rates to this is levels. But make no mistake about this, steve, we are going to see higher rates in the next 12 months because as the economy starts to pick up and aspectations start to come into the picture that the Federal Reserve is going to raise rates, that long end will rise to 3. 5 or 4 within the next 12 months or so. The key, i think, of what you just said is that it comes with stronger growth. It doesnt come because the fed is pulling back. David, do you want to take a crack at that at what higher rates, if anthony is right, will mean for stocks . I think it will worry people a little bit. But i think the basic conundrum is to surround. That is if you dont like the stock market or youre not in love with it at this point, where do you put your money . You put it in tenyear treasuries. With 2. 8 today, but its a losing proposition. If it goes to 3. 5 or 4 at the end of this year, i cant do the arithmetic, but you roughly break even, i would guess. So you still have that puzzle. That part is what got everybody into the stock market last year, especially the beginning. They kept pitching themselves to figure out why it was going high. David, are you a believer in the growth we had in the second half of the year . Yes. I think the growth is largely rare. I dont do a point to point forecast of the economy at this point. But i think the growth in the second half was real and well see some more of it in 2014. And for the economy, i think this will turn out to be at least a reasonable year. And given where we came from in the financial crisis, not too disappointing. The stock market, on the other hand, im a bit nervous about. Well, thats weird, right . And maybe, anthony, you want to pick up on that. We just read a story earlier this morning, revenues beating profits. Anthony, if the economy is doing better, Profit Margins have been at alltime highs. Why wouldnt the stock market do better . Well, i think the stock market will do better. Remember, the stock market anticipates improvement. Last year, the s p 500 gave you 29. 6 . You add in dividends, that pushes you above 30 . So to some extent, the stock market anticipated the improve this year. Im looking for Economic Growth to get very, very close to about 3 , which is an improvement from last year when we were closer to 2 . But remember, much of that improvement has been anticipated. So this year, the stock market will just give you the organic growth out there. And that means that if corporate profits grow at 6 and dividend is around 2 , you can get 8 to 10 . Not 29en 6 or 30 including the dividend that you got last year. That was built in and baked in the cake. The journal with a story that i dont think should surprise too many people, weve been talking a lot about it. The issue of the fed continuing on track despite the jobs report to taper in january. Whats your expectation for the full year, anthony . Well, i think the fed will continue to taper. About 10 billion or so every single meeting. They have another meeting coming in at the end of the year. And remember, theres that exciting study that came out of the bank of england that says that somehow quantitative easing is not as effective when Financial Markets are normalized. Its more effective when theyre dysfunctional. That means it was very effective during the financial crisis. But the good news, steve, is that the when the Federal Reserve starts to taper in a more normalized market, the positive impacts of quantitative easing werent that great, the other side of the picture says it wont be as disruptive. So it really gives the central bank a free pass to go ahead and taper and continue its tapering while keeping shortterm Interest Rates low for a little longer, its not going to hurt as much. That will give more encouragement to the Federal Reserve to continue to do that. Certainly, hildengrafs article supports that, also. David, you used the word nervous when describing how you feel about the stock market. On what measure . What are you looking at to make you nervous . Valuations . I think two things. Valuations, definitely. Pe. The longterm socalled tape. Price, all those measures are pretty extreme. Profits is a percentage of just about anything are very extreme. I dont think on a historical basis you could make the argument that valuations at these levels are extreme. I think youre looking at pe around 17 times trailing earnings. Youre looking at tape at 25. And youre looking at profits, as i mentioned, as a percentage of gdp at record and near record levels. And on top of that, youre looking at this fantastic run on the stock market. So its not that its going to dive or anything like that. I think youve got to see a pullback, correction, adjustment, whatever you want to call it. The order of 10 sometime in 2014. Anthony and i think it could make a few, you know, 5 to 8 on the year. Anthony, we have to go, but i want to ask this question. If we end up profits end up being lower because companies are hiring more people, investing more in r d, higher incomes, that is good for the economy which should be good for the stock market. I dont want to make it out to be a total winwin situation. But if profits are lower because wages are higher, that would seem to be a healthier balance than we have in the economy right now. No, thats absolutely correct. All that will do is perhaps temper the activity. We may not get the multiple expansion. We may, instead of the upper end of the range of 10 , we may be closer to 8 . Bit sets up up for a much better 2015. Keep in mind that i think were in the mid cycle of this economic expansion. So i dont think the recession is coming anytime soon. But even if we get something close to the 8 in 2014, if your scenario comes through, we do a lot better in 15. Anthony, david, thank you very much. Great discussion this morning. Thank you. Have a great day. Coming up, back by popular demand, windows 7 . But microsoft is up to windows 8. Find out what is going on between pcmakers and the software giant. Kech oleary will be here to celebrate pit for my birthday. Squawk box will return after this quick break. 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 fifteen minutes could save you fifteen percent or more on Car Insurance. Everybody knows that parker. Well, did you know auctioneers make bad Grocery Store clerks . Thatll be 23. 50. Now. 75, 23. 75, hold em. Hey now do i hear 23. 75 . 24 hey 24 dollar, 24 and a quarter, quarter, now half, 24 and a half and. 75 25 now a quarter, hey 26 and a quarter, do you wanna pay now, you wanna do it, 25 and a quarter sold to the man in the khaki jacket geico. Fifteen minutes could save you. Well, you know. Welcome back. U. S. Equity futures at this hour suggest a positive open. Dow jones would open by 69 points high he, nasdaq 19 higher and s p within 7. Jpmorgan has stopped working on a chinese firms ipo amyself priceling probe. This is the second time the bank has stepped aside from an ipo candidate while securities regulators look into whether jpmorgan violate onned federal law. At issue is whether the bank hired relatives or with the sole purpose of gaining business from them. Hp is going to start shipping computers with windows 7 again due to popular demand. This is not a good sign for microsoft. No kidding. Some analysts said problems with windows 8 have contributed to the pc market decline. The ive got to tell you, its a pain. I wish we were still at windows 7. I cant find anything any more. Am i the only one that has this problem . I bought a mac. My kid has vista, i think, still. But what about this Richard Sherman thing . Are we going to talk about in this morning . Theyre calling tilt best worst interview ever given in the history of sports. There were some, boxing interviews right up there with it. This is unbelievable. Apparently this guy goes into a tirade and the reporter has no idea whats going on. And then she a great followup question from erin where shes like, im sorry, what . I was getting vilified after that. Because he had taunted another player. Is that the first time thats ever happened . He said send a receiver like crabtree at me again because and he used a really negative term to describe crabtree. And im the best cornerback in the nfl. However, it looks like he went to stanford. Oh, yeah, hes very bright. Clearly a communications, major, right . Stared straight in the camera, never actually swore. To america. What was weird was actually getting some information or any kind of real reaction from a player at a postgame interview. Theyre mostly just nothing, right . The reaction to what he said was so unbelievably negative, i thought, that at some point i tweeted out yesterday, okay, the guy plays human crashup derby for six minutes. And Everybody Loves the big hits. And if you watch the broadcast of the game, you know, theyre slowmoing the trash talking between people. And people love it. Everybody loves it. And then a guy pops off after the game after he makes his first super bowl and were suddenly all appalled . Come on. I thought it was funny. A lot of people were killing this guy. Its a little over the top. But we can confirm now, speaking of over the top, that the entire squawk gang is on the ground in davos. Yes, we have landing. Becky, joe and andrew are on the ground in davos. We have a picture of joe with a jeanion kind of Seattle Seahawks looking hat. Good observation. And what theyre calling the legalized marijuana bowl. We havent talked about that yet, denver, and seattle. Right. Coming up theres the green hat. That will be the davos motif, i think. Is that a seahawks hat . Do we know if joe is a seahawks fan . Becky, being a hat, she doesnt put on a hat. I dont blame her, neither would i. Andrew, being a man, doesnt need a hat. Squawk is coming right back. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Mayo . Corn dogs . You are so outta here aah [ female announcer ] the complete balanced nutrition of greattasting ensure. 24 vitamins and minerals, antioxidants, and 9 grams of protein. [ bottle ] ensure®. Nutrition in charge™. [ male announcer ] what kind of energy is so abundant, it can help provide the power for all this . Natural gas. More than ever before, americas electricity is generated by it. Exxonmobil uses advanced visualization and Drilling Technologies to produce natural gas. Powering our lives. While reducing emissions by up to 60 . Energy lives here. 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. After a record year for the markets its bonus time for hedge funds on the street. Which types of funds scored the biggest payout and which ones fell flat . Join is us now is adam zoia. Good morning. By and large, hedge funds underperformed the s p. What kind of bonuses are we expecting to see. The bonuses this year are up about 5 to 10 on average. Theres a lot of variation as you say between the different strategies. So, for example, equity long short, where a lot of those firms did outperform the market materially, you would have seen much larger increases. Macro funds saw a small increase to no increase whatsoever. It was difficult to short the market last year. Right. The firms that have a larger exposure to short only, if you will, or those strategies will see smaller bonuses . And mack rose aros as well, what about hedge funds overall . Up. For two reasons. One is the total assets in the space is up materially, about 2. 5 trillion. In 2008 it was 1. 5 trillion. Its a its at a record high. That drives management income in general and bolster to bonuses. Compared to private equity, for example, where it was flat according to our report or banking, where most reports are that its down slightly to flat, its doing better. Banking bonuses are down, right . For obvious reasons as the Banking Industry shrinks or for whatever reason bonuses are down there. Private equity flat, why . Theres been very little growth in asset under management. Its also just recently this year where theres starting to be liquidity event which is help to drive Incentive Fee income. What drives annual bonus ins in private equity is Management Fee income. That means that you look at the assets under imaginement. Assets under management in private equity have not increased and are below their peak. I dont know if you can comment on this. A source of mine in the Hedge Fund Business says not only was it hard to short the market, did those guys do poorly, too, those guys that advertise themselves as net Market Neutral . They had a significant long bias. They were basically riding the beta being generated in the market and presumably adding alpha on top of it. The true Market Neutral funds at best were typically in the teens. The story there is when the market is going up 25 , 30 , its hard, even to make the investments that are offset without dragging you down. Virtually impossible. No one does it successfully. Is there one thing that looks like its a great strategy for this year . Its been two bad years for macro funds. Maybe this is their year. The breakdown of actual jobs at hedge funds and how much bonus theyre likely to see . Theres been an increase in employment in the Hedge Fund Industry primarily driving by the growth in the size of the industry. In addition, its more competitive and theres been an addition to back office staff related to the requirements. All those factors together have increased employment in the sector. Adam zoia at glocap ceo. Thank you. The shark tank cohost, kevin oleary is making his way to the set. Well take on the economy, politics, Small Business and more when squawk box returns. Its shark tank tuesday on squawk box. Theres blood in the water. Todays guest host, shark tank cohost kevin oleary. And hes ready to sound off on the economy, washington and the markets. Plus, it pays to be loyal. The ceo of loyal three on his crew yad to bring investing to the masses. And the fifth rolling stone. Chuck lavell gets down to business before the next tour. Start me up because i cant get no satisfaction. Squawk box begins right now start me up ill never stop start me up thats a heck of a lineup. Welcome to squawk box here on cnbc. Im Michelle Carusocabrera along with Steve Liesman and scott wapner. Joe, becky and andrew are making their way to the World Economic forum in davos. Well have Andrew Liveris and ken rogoff in the 8 00 hour. The tenyear yield, comfortably below 3 , 2. 85 . Slightly higher this morning but still, weve been puzzling over why it hasnt moved higher. Here are your morning headlines. Travelers, the Insurance Company earned 2. 68 per share, excluding certain items. That was well above estimates of 2. 16 with revenue also above consensus. Among the factors helping the results, stronger pricing and better retention levels in the companys Business Insurance unit. Ibm is reportedly in talks with lanovo. More talk about chinese purchases ever overseas assets. New Jersey Governor Chris Christie remains embroiled in controversy. His administration is denying accusations that it held back Superstorm Sandy money from the city of hoboken pending approval of a politically connected development project. That comes shortly after the controversy over whether lane closures on the George Washington bridge were politically motivated. Joe, becky and andrew have made their way to davos, switzerland for the World Economic forum. Andrew joins us from there right now. Glad to see you got there safely, andrew. You have a great lineup, coming up, starting today. Yes, scott. We are in davos. Very excited for a huge week, of course, the biggest names in the world of business, politics, the regulatory world, all converging here in davos, switzerland. Among the big issues on the table this week that we should note, by the way, senator kerry hes the secretary of state kerry is going to be coming to davos. Thats throwing a couple things up in the air because the president of iran was supposed to be here. There was a conversation to be had, potentially, unclear now whether it will take place. Also given what happened with the u. N. Yesterday, so thats going to be a big issue. Well see what happens throughout the week. Also, a lot of people are trying to get here today from london having a bit of a tough time, because theres been fog over heathrow. Thats been a bit of a struggle. I should say, i think we have video of it, becky and joe who took one flight over, a plane over, got here this morning. I got here just prior to that. We had a couple of theres the shot. They have us walking into our hotel. I dont know how happy everybody was with the rooms. Hopefully they were happy enough. A couple interesting sightings on the flight, al gore traveling in the front i was going to say the front of the bus. But the front of the plane. Thats what we have on tap. Andrew liveris will join us in the 8 00 hour. Also, ken rogoff. Well be talking about the economy and where things are headed. As the week progresses, the names dont get bigger. Youll be talking to lloyd blankfine, roy dalio, a tremendous week. Eric schmidt on friday, richard branson. So i cant even get over all the people that well be seeing. An exciting week ahead. For now im just going to throw it back to you guys. Back to new york. We cant wait to see it all. I would have loved to have sat near al gore on a plane, andrew. Enjoy davos. What would you have said, michelle . You can imagine, andrew. All right. Thanks. Yes. Well see you in a little bit. Shark tank tuesday on cnbc. Our guest host is none other than mr. Wonderful himself, joining us is kevin oleary, chairman of the oleary funds, cohost of shark tank. Hes also the author of cold hard truth on men, wom women money. Great to have you here. Thank you. Thank you very much. How is the economy looking to you . I think its looking pretty good. We focus mostly, particularly here, the s p 500 is what people try and make their measure on, earnings, et cetera. Heres my beef. Ive been investing through shark tank for five years in Small Businesses. There are 6 million of them in america. They provide pretty well 50 of the jobs. We dont use them as a litmus test. We should. We have anemic growth in employment issues is that these businesses arent hiring for a whole host of reasons. I think its worth starting to ask them how they feel about this. Why arent they hiring . Heres an issue for me. Im not going to debate the merits of regulation. Last year, the feds put out 2,800 new regulations, thats just federally. Then the states put regulations out and locally, for example, new york put their own. New york city has regulations for Small Business. Youre not saying thats a bad thing . Even if we dont debate the merit of those 2,800, well leave that aside for a moment, what do you think the cost of compliance is. Horrendous. Beyond horrendous. Probably about 10,000 a year for each employee. If youre only paying 40,000 or 50,000, thats 20 of the value evaporating for something that were not sure adds value. Those regulations are there to help people, kevin. Youre suggesting theyre not helping people. I sense your skepticism. You do . Really at the end of the day, am i the only person that sees this . I dont think so. Its just that we dont focus on it politically. Theres no advocate in washington for a guy with 2 million in sales. He cant borrow any money or she cant build her business because shes got two outside source people just worried about regulations. In a way its kind of unamerican. Its not what made this economy work. I say its a problem. Id like to focus on it. One of the things i want to add one other thing, kevin. Sure. One of the reasons it can be harder for Small Business is the money that big business has to come in and basically close down markets and create either monopoly or oligopoly situations. Or get out of the regulations themselves in washington. Some of the regulations exist because big business comes and supports them. Right. To keep out the mom and pop businesses. When people say what is a mature market . Its a market thats mature enough for existing power structures to come in and make it difficult to have new businesses. If youre a km company in california and youre a part of the s p and you dont like the Regulatory Environment in san francisco, you quietly move your business to mexico. You dont have to worry about it. You can afford it. You can also afford to lobby in washington. You do that also. Right. If 50 of our economy and employment relies on the backs of the Small Businesses, how do we give them the power to do what they want to do, grow . Im an advocate for them, because im personally investing in them and seeing the atrocious environment they have to work in. Imagine if youre trying to grow, hire 20 people and you spend 15 of the day with your compliance officer, trying to figure out if youre in breach of state, local and federal regulations. Theres a particular difficult place. Some of these guys are not under the radar but not so much in the spotlight. There are the guys who can afford nice radar. Theres the guys in the middle who i think youre talking about, the ones that cant afford to really be that kind of scrutiny in regulation. Look at the numbers. Theres 500 s p companies, largest market caps in the world, wonderful. There are 6 million Small Businesses in america. Theyre the future. Theyre going to be the next growth companies. We are absolutely screwing them. Thats my message. What are you hearing from them in regards to the Health Care Law and what that now means . I cant find one that tells me this helps them grow their business. All right . Im going to stay out of the politics of it. I think health care is important. Theres debates going on simultaneously. There are two lightning rods occurring in Small Business right now. Minimum wage debate. I cannot find one that tells me that helps them grow their base of employees and health care. I cant find one that likes this law. But those are i thought youre staying out of the politics debate . Sorry. Youre in it. You just entered in it. Those are two Critical Issues. It doesnt work. Your starting point is wrong from their point of view. Why . Those laws werent designed to help business. They were designed to help protect people, right . The fact that it hurts or screws businesses, you say, they dont care. Its a form of redistribution of wealth which may not which they like. No, no. Heres the thing. I love to support people and so does every other american through the creation of a private sector job. Thats the best form of social welfare there is. To get a job. Of course. If you have a company that wants to hire 20 more people and ive got one in my portfolio, listen to his story of the hell on earth weve created for him to create 20 more jobs in america. He wants to employ them, give them a future, help them become wealthy. No, no, no, lets screw him over. Thats stupid. I need to say a word here about this. To me, i dont know the answer to this. But there must be a way for workers to get more of the share of whats happening out there. We have deunionized the country. I know michelle wants this to be a free market situation. As a result, the last ten years you have a stagnant Median Income in this country. Who should decide that. It would be great if it were the market. It would be great. Are you telling me that the market is doing that . Look at the returns to capital. They have been out of control, the returns to capital. The way the market does that, one form of taxation, redistribution is minimum wage. Which we havent raised practically in this country in many decades. If i give you 6 million reasons not to do that, would that sway your thought on minimum wage. 6 million. 6 million businesses saying youre not helping me with this. Youre not helping me create jobs. I can give you 300 million, maybe, reasons to do it. The 6 million and the employees that work for the 6 million and multiply that. Youre suggesting america is uncharitable . Im not suggesting what is redistribution of wealth. Im advocating for a higher minimum wage, im saying its something to talk about in fixing what is a persistent problem in this country. I want you to help me find one Small Business owner that wants to increase the minimum wage. I could help you over two hours. You can help us. More from kevin throughout the show. Coming up, Morning Money with politicos ben wyche to bridgegate. We have something for everyone. Tomorrow, matt damon will be one of the many big names joining joe, becky and andrew, big names themselves, in davos. Were coming right back. [ intercom ] drivers, to your marks. Go [ male announcer ] its chaos out there. But the mclass sees in your blind spot. Pulls you back into your lane. Even brakes all by itself. Its almost like it couldnt crash. Even if it tried. The 2014 mclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. 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 futures suggest a positive open right now. The dow would open higher by 63 points. More snow headed to the new york city area. We are edthnocentric since we live in new york. Lets get the forecast from reynolds wolf. This is bad stuff. We have a variety of things coming together to give us an epic situation, headaches for people trying to get from point a to point b. You have the jet stream, this developing surface low, upper level energy coming through, the Atlantic Ocean, a lot of stuff. And the cold air coming in, too. Overrunning moisture in all of this gives you one giant weather burrito that spells out the flavor of trouble. Were talking nasty stuff. In terms of snowfall totals, it depends on where you happen to be. From the nations capital, 5 to 8. S of snowfall. I have to tell you, in some of the suburbs you might as well have 10 inches of snow. Farther to the north and new york city, id say 8 to 12 but theres a pocket out near yonkers and also along the parks of long island where you might see greater amounts than that. Boston, looks like the bigger day could come together. Parts of cape cod and nantucket, some locations up to a foot. Mind boggling stuff. A lot of delays to be expected, headaches on the roadways, a lot of people will be suffering from those. Back to you in the studio. Weather burrito. That was the best Weather Report i ever remember. That was fun. Not going to be fun around here. Thats true. You were making fun of it. A little bit. I thought it was hysterical. Thank you. Remember the l. A. Story, the weatherman. That was like throwing you under the bus. Yes and running me over. Weve been talking about a number of political stories, joining us is ben wyche. Good to see you. The aftermath of obama on the nsa, that was making the rounds on the talk show and obviously christie in this ongoing saga. The ongoing tornado of controversy, if you will, to play off the weather. What story are you focussed. Christie today. Hell apologize about 15 more times, i think for bridgegate and try to move on, blame the media some more, blame msnbc a little bit more. Strong denial on the hoboken thing. I dont know if hell get into this in this particular speech but he has to turn the tide and see if he can move beyond the scandals and get the focus on his plans for new jersey going forward. Its going to be difficult for a while, particularly as new things start to come to light, like this hoboken story. You have carl lewis and the press saying he felt he was intimidated by Chris Christie running in new jersey. The thing about christie, his favorables are staying where they were. People who didnt know him before, dont really like what they see. Folks who liked him from the start are sticking with him at this point. I think they will until theres an indication that he directed this stuff himself. Isnt that potentially as damaging as the new folks that are getting to know him . On the national scene, yes, if he wants to go to iowa, New Hampshire and start running for president , which i think he will do. Thats problematic, folks who are just learning who you are, not thinking youre the greatest guy in the world. The base of the Republican Party is not inclined to love him anyway. Thats true. Being a centrist republican. I dontny hes as centrist as people make him out to be. You have to be a centrist in this next election. If you want to win on a national level. What people are realizing with christie at least on social issues, hes not as moderate as a lot of people thought he was. This idea that hes a new republican moderate on abortion rights, on other issues, not true. Hes very conservative guy on all that stuff. You know, add that into all these scandals that are coming to light. His being the ideal republican for the National President ial election in 2016 is getting knocked down a little bit. I think thats why you see, at least on wall street, a lot of stuff for jeb bush. If you get your patina and callous from being a new jersey politician, youre an even better president. Youre tested. Or the other way around, kevin. My point last hour, theres not been a politician from the new york, new jersey area thats made it to the National Stage, not counting senators like bradley, quote, unquote, from new york. If you can run the gauntlet, he might make it. Why didnt mario cuomo ever run for president ial office. You go through tough stuff to get there. Chris christie certainly has. I dont think the things weve seen so far are deadly to him, they are challenging for his longterm ambitions. I think he has fortitude. The people who liked him already say we know this guy. This is the guy we already knew. Wasnt on my radar screen. Front page story in the journal. Is the senate in play for rains to take control . It absolutely is in play. Democrats have tough seats to defend, more open seats than republicans. You have obamas Approval Ratings down considerably. They had hoped to be running on a stronger obama economy. They may get the stronger economy a little bit. Democrats will, obama will not be a plus for them given where his Approval Ratings are and where obamacare is right now. Republicans have a chance to pick up the six seats they need to run the senate. They have to run the table but they can do it. That follows a cillizza piece over weekend. Take a page from the democrats playbook in the last cycle and that put a credible candidate up there who can raise cash, sort of just in case. Right. I mean, what republicans have to do this cycle is avoid what they did last cycle, get a lot of folks from the tea party base who upset people with comments on abortion and legitimate rate, that kind of thing, todd akins. If they can avoid that, get candidates amenable to the base but attractive at a statewide level, they can make it to the senate. They have to avoid a debt fight if they want to take back the senate. They have to show they can govern. And if youre involved with the budget and the senate, that youre not going to crash the economy. I totally changed my opinion on him. I didnt like him before. I read his piece. All right. Activist investor nelson peltz has been added to mondelezs board. Peltz criticized them saying it did not generate as much profit as it could, arguing it should be acquired by pepsi. Andrew ross sorkin will have more in a half an hour. A ceo that entered the shark tank and lived to tell. Well check out his cool app later this hour. Harvard economist ken rogoff will be showing up at 8 40 eastern time. Plus, if you like the Rolling Stones and who doesnt, dont go away. One of them, right here in studio its all right now. Time now for todays aflac trivia question. Sony has a new pocket analogue radio. Known by the model number srf39fp. Who is its target consumer . The answer when cnbcs squawk box continues. Yeah, hes clean, boss. Now listen to me, duck. I have an associate that met with, uh, an unfortunate accident. While hes been incapacitated, somebodys been paying him cash. Now, is this your doing . Aflac . Now, if i met with some such accident, would aflac pay me . Nice. This is your stop. [ male announcer ] find out what aflac can do for you and your family. Aflac . [ male announcer ]. At aflac. Com. For you and your family. Aflac . Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Now the answer to todays aflac trivia question. Sony has a new pocket analogue radio known by the model number srp five 39fp. Who is its target consumer . The answer, sony manufacturers it for prisons. Fp stands for federal prison. Aflac. Headlines this morning, were waiting for a ceo announcement from microsoft, rico reporting bill gates will be more visible, predicting he could be more active in microsoft. Were doing this now . Yes, we are. I went to take my jacket off. Were here with jack lavell. We know youre a hardworking guy. Its hard to get a rock n roll start up early. You came in, you have a lot going on, environmental stuff, businesses, all kinds of things going on. Tell us about your major product ekt right now. Mmn. Com, its an environmental website, now getting 10 million visits a month. He we have 15 seconds to break. Two, three, four. Obviously waiting on a friend. Love it. Coming up, a shark tank survivor will get into the shark tank. He transforms photos from your phone in a photo book. Another ceo on set, Barry Schneider of loyal three. Find out how his company is using social media to bring investing to the masses. Squawk and more music, coming right back. All right. Welcome back to squawk box. Lets check out Market Reaction to some of the earnings reports that have come out already this morning. Dow component travelers beat street estimates on both the top and bottom lines for the Fourth Quarter. Take a look at what that stock is doing in the premarket, up 0. 75 . The Insurance Companys results were helped by Strong Performance in its Business Insurance unit. Another early winner is drugmaker forest labs. That Company Earned 27 cents a share for its Third Quarter, excluding certain items. That was well above 4 cents, revenue also beat and the company upped its fullyear forecast based on a jump into sales. Oil Field Services company, baker hughes reported Fourth Quarter profit of 62 cents per share. That Beat Estimates about i a penny. Revenue also beat with the Company Getting a boost from businesses in the northeast and africa, that stock is up nearly 1 in the premarket. Other corporate news, were looking over verizon numbers just out. Mondelese, its being argued it should be acquired by pepsi. Made its first Public Comments in july. Andrew is in davos at the World Economic forum. Even there youll have to do reporting, andrew. Even here i do have to do reporting. These are fascinating news to come out this morning. Irene rosenfeld, the ceo of m mondelez will be here. Possibly, i want to track down both of them. Try to understand what this all means. To the extent that you might think that this would give mondelez a better opportunity to merge with pepsi, unclear. You should know, mondelez is a much Smaller Company than pepsi. 62 market company. Pepsi is 125ish. Its a totally different scale. Having said that, the big issue is could pepsi ultimately break itself into two and would one of those pieces then go to mondelez . The other big issue is what this means for irene rosenfeld. You know, nelson peltz had been critical of her when he talked to us publicly at the delivering alpha conference. Does this now mean that hes been brought in under the tent as a way to shut him up or does it mean now that hes in under the tent he can make even more noise . Thats what well be watching to try to understand over the next couple of days. Well be doing some more reporting. I already called in to nelson peltzs house this morning. I think i might have woken him up. Well try to find out what this means in a little bit. In the meantime, let me tell you whats going on here. A lot of people just arriving. Most of davos does not begin until tomorrow. Like i said at the start of the show, we have a huge lineup throughout this week. Later in the 8 00 hour, Andrew Liveris is going to join us from dow chemical. He has a lot of interesting things to say about the economy. Hes also involved with the sochi olympics. Given the security concerns, well want to talk to him. And then we talk with ken rogoff in the 8 30 hour. The man told us what to believe after a financial crisis. Hes doing a panel tomorrow on the future of europe. Well get his views and in the meantime, im going to send it back to you, becky and joe just got here with me a little bit ago. Were all sort of i think we might have video of that. Im now sort of having a lunesta hangover. I havent done that one. I always take ambian over there. Talk about the new star in the chess world. Well do that. Good. You have to jump in on that interview. See you later, ars. Lets talk about verizon. Verizon is out, deltas out as well. Lets take a look at verizon. Beat by a penny, revenue in line for verizon, correct . Yes. Looks like a modest beat on both the top and the bottom, at least i had. Was it in line on revs . The big thing to watch subscribers, obviously. Subsidies when it comes to what they are paying to get subscribers for apple and all the smartphones and everything else. They was a story recently about cutting data plan prices. Thats high margin. We want to Pay Attention to the margins. And then the tmobile competition. In the last couple of weeks, tmobile has really upped the ante in the wireless business. And the pricing and the contracts. Well pay you to leave at t or whoever theyre really trying to compete more heavily with. Verizon is in the game as well. The other thing thats attractive as a parent of overusing data children, the single plans that i think some of these other competitors are offering that allow you one price. Tmobile tmobile was a brain dead company two years ago. All of a sudden they come out of nowhere as the major competition. Werent they going to be bought out by someone . We never talked about them encroaching on customers. Now all of a sudden youre more invested in tmobile but at t. Does it work . Do they have enough of an infrastructure . Theyve been stealing customers. Theyre real. Exactly. On price. At some point you have to perform on service. Delta 65 cents. Is that what you have . I havent seen it on the screen yet. 65 versus an estimate of 63. I was going to stay, i would be surprised if delta wasnt positive given the momentum behind the airlines. Given how much were all paying in fees to travel on their airline . It cost money to do everything. I wonder when the weather will take a nip out of these quarters . Were having a snowstorm every two weeks. I heard this morning that theyre upping the fees again, going to be charging more for oversized bags. Delta made it tougher on the frequent flyer mile thing. I love that. Thats fair cash flow. Whose side are you on . This is a beaten down sector thats been abused forever. Theyve never been profitable. I want them to make money. Pay a fee. As a customer you hate the airlines. As an investor you love them. The game has changed. Right now im an investor. Ive been loving them. Youre always an investor. Thats all. You wake up in the morning this investor has brought a guest, Barry Schneider, chairman and ceo of loyal3. Like that cutoff so we could finally get to you. I sure do. Let me explain what i think your business does. Amc went public, 21 million shares they were going to offer to the public. They put aside roughly 300,000. You put those some were on a platform so the people who liked to go to the movies could buy shares and some employees could buy shares, right . Absolutely. Normally if im a client of jpmorgan i have to have a big account if im going to get close to having a piece of that ipo . What if i wanted to buy those shares, what do you need to put down. 100 minimum. And i have access . If you care about the amc brand, why shouldnt you have access. Youve done two companies this way. And a third one we cant speak about. Its in the quiet period. Maybe you love amc but shouldnt be investing in the stock. Maybe the Retail Investor who has access to what youre doing doesnt have all the knowledge that they may need to make a smart judgment on whether the ipo is worth getting in on or not. Very fair point. I think you look at the legendary investors, Warren Buffett says people should invest in what they know. Lets look at metrics. In 2013, ipos outperformed the s p with 40 returns, s p at 30 . Why should americans be locked out of ipos . They have been locked out of ipos by wall street, right . So how are you able to break the mode . You have a software platform, a, right . You must have to do deals with either the companies that want to go public or the wall street houses. The ceo drives it, tells the buck runner were giving 3 to these guys. It has to be that way. Its both. Its ceos that really have a passion toward the people that care about their brands and want to allow them to have access at the same price as institutions. But its also wall street. We have very advanced social technologies. We have the ability to lower costs and provide access at small amounts. So were getting good support on the street and were getting great support from the issuers. Goldman sachs says, you matter because the ceo says give this guy 3 of the float, right . Goldman sachs says you matter because we see that every day people should be given the opportunity. Hard core capitalist kevin, why would a ceo do that . Where is the financial interest . The stock is sticky, steve. I love amc. I love the movies. I love this guys deal. Youre asking for altruism from the ceo. Im not finished. Heres my question that really matters. How do you make money . Let me answer his first. Theres no answer to that . We make our money through charging issuers fees and by having a disruptively low cost platform, which allows us to charge no fees to the investor, 100 of what you invest in our platform goes toward buying stock. Define your shareholder. Do i get 3 done to me as part of this vindication. Our shareholders get the return for our Company Based on what we generate in revenues from shareholders. Why is it altruistic . I didnt understand the motivation. I was half being sarcastic. The amc share holder who likes to go to the movies is less likely to flip the stock. At least thats the theory. Exactly. You get stickiness. Thats the point i wanted to make. You get two things. As a company you get amazing brand engagement. Thats a buzz word today. Number two, you get investors that are totally thats cool. The first day trading with amc, 98 of the people held their stock. You see why he won shark tank . Hes a shark tank winner. I want to know how you get around the regulators . Well talk about that during the break. He is out of control this morning. Its unbelievable. Shark tank contestant and cofounder of an app from groovebook. Check it out. And chuck leavell, the fifth rolling stone, getting ready to hit the road again. Play us out, chuck. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. 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 is your tv powered by coal . Natural gas . Nuclear . Or renewables like solar. And wind . Lets find out. This is where americas electricity comes from. A diversity of Energy Sources helps ensure the electricity we need is reliable. Take the energy quiz. Energy lives here. Welcome back. A shark tank survivor is swimming on the squawk set this morning. Groovebook is an app that transforms photos from your phone into a photo book. The Subscription Service gets you a customized album every month for 2. 99. Joining us now is brian whiteman, the cofounder and ceo of groovebook. Interesting business. Tell bus it. We have an incredible app. The app is free. You download 100 photos from your iphone and we ship you a beautiful found photo book for only 2. 99 a month, including shipping and handling. We have one here. Very cool. Youre taking the photos you shoot on whatever phone you have. Yes. The app is free. The app is free. You download the photos and you can pull out the pages. Theyre perforated for easily removal. There is a monthly charge. Its 2. 99 a month. If you go anywhere else on the internet, its 14 to 30. It turns out he has a patent, a groove that allows these to be shipped as a magazine. This is a big technological advance. It bends like a magazine. You pay 78 cents to ship it. Thats the eureka moment. How did you come up with that . I was my wife lost her cell phone and lost 2,000 photos of our three kids. She was devastated. I decided to make her a photo book the following month so she wouldnt have the same issues and problems. So i printed a book out for her and she said, wait a second. Every single mom in America Needs to have this. I had to figure out how to get it so cheap they could afford it every single month. I went to work and one night i couldnt figure out how to get the book flexible. We got the book flexible. For the groove. Hence the name of the company. I assume the vast majority of your customers are women. 09 of our customers are moms with younger children. Were finding out now its not even women. Its mothers. 90 of your customers are mothers. Yes. Now Small Businesses can order groovebook. They put the photos of whatever product they want to sell, for 3 a month they have a builtin catalog. They can order 1, 20 or 2,000. The greatness about the show is the drama thats created. Can you describe the feeling of pitching your idea to in the tank . And what its like to come out on the other side. My wife and i went in, we were obviously a little nervous. We knew we had an incredible product. We knew once the sharks saw what we had they would all be interested. It turned out to be incredible. Before airing on shark tank we had 35,000 paid subscribers. Today well hit 100,000 subscribers. Now youve been on squawk box, youll double that. Exactly. Moms with children are a big part of our viewers. I think the Customer Base is incredible sticking. Youre archiving your photos in the cloud at the same time while you keep your account open. Its the best of the old world, a frf yphotograph you can touch the digital delivery. Look at this, you rip it right out. Its so easy. I did it last night, the second i heard about your company. Thank you. Not only did you get money from the shark tank guys, youve invested significant dollars out of your own pocket. Ive spent about 400,000 on the app so far. Is this not the essence of Small Business in america and success . How many people have you hired in the last couple of weeks. In the last ten days weve hired 19 people. How are you loving the environment . Whats it like to run a business in california . Tell us the truth. Dont hold back. Its very, very difficult. The rules, the regulations, the taxes. Its just very difficult to do. How do you feel about minimum wage and Health Care Reform . I dont believe in it. The less regulation Small Business has, the easier it is to grow and to, you know, as a business owner, i like to spend my time growing, being passionate about my business and the government says theyre defending your employees. Theyre not. Theyre not. I relate it to my kids want to start a lemonade stand. And if we gave them the rules and regulations, if they knew what they had to do to open up a business they wouldnt open it up. They wouldnt even try to open it up. I think the politicians need to look at it, not like big business, need to look at it as if theyre opening up a simple lemonade stand. If i explain to my kids what they had to do. They wouldnt try. This is criminal, its criminal. I agree with you. Youre preaching to the choir here. Yes. Thanks, guys. That was so fun. I cant wait to get my book. Speed up the shipping, please. Congratulations. Thank you. Brian whiteman, groovebook is the name of that app. Shark tank airs tonight, 8 00 p. M. Eastern on cnbc. Steve . Here we go, still to come, dow chemical chairman Andrew Liveris live from davos and the World Economic forum. Johnson johnson, posting earnings of 1. 04 a share. Up next, Rolling Stones, ready for 50 years. We are here with stones keyboardist chuck leavell. Im beth. And im michelle. And we own the paper cottage. Its a stationery and gifts store. Anything we purchase for the paper cottage goes on our ink card. So you can manage your business expenses and access them online instantly with the Game Changing app from ink. We didnt get into business to spend time managing receipts, thats why we have ink. We like being in business because we like being creative, we like interacting with people. So you have time to focus on the things you love. Ink from chase. So you can. Next week, the Rolling Stones set to begin rehearsals for concerts around the world. Chuck leavell, best known as the fifth rolling stone. Founding member of the allman brothers band, author of the greatest piano solo in american history, founder of Mother Nature network and a tree farmer. Did we miss anything . You do more than just play piano. You do the set list. Tell us what you do for them. Its been 32 years now, steve. The role has morphed over all those years. When we do rehearsals i take notes and i have these two ensiens encyclopedic books, its more of a reference, if they want to do something in particular, i have it right there. You mention the set list. I have fun drafting up the set list for the guys. Whats it like working for them . Are they business guys, having fun . Give us a mix of business and pleasure. Its a pretty cool gig, man. Its so much fun. Its the Rolling Stones. The music speaks for itself. Its amazing playing all those songs, honkytonk women, jumping jack flash,. Tell us about Mother Nature network. We realized there was a void out there for people who wanted good information about environmental subject matter. My partner, joel babbot and i launched it, put it together. Were getting 10 million visits a month and 30 million page views a month. Thats big time. Thats not just a little tiny environmental website. Were very, very pleased. Michelle has a question. Did you want to ask chuck the question about his oped. You had an oped in the wall street journal several years ago. You were a tree farmer and you were frustrated by all those emails that said please save paper, encouraging you to not print everything. We have to have a reason to grow trees, make products, whether were talking about paper products, lumber, packaging, whatever. Its a bit of a misunderstanding for people to say were going to save the planet by not printing an email. What happens . What are you going to do with that land if growing those trees is not profitable. I could wind up a parking lot. Selling it. Concrete, asphalt, development. In order to keep our Natural Lands natural, we need reasons to do that. Awesome. Print. Check out chucks website, mothernaturenetwork. Com. Mmn. Com. Check out his books, cds, check him out on tour with the Rolling Stones. Now were going to end with a song that you wrote. Its not a song i wrote but its on my latest record, its called low down dirty dog. Goes like this. Sound goods. Isnt it great, i love it. Coming up, Andrew Liveris and harvard professor ken rogoff, plus earnings reaction to Johnson Johnson. Squawk will be right back i brought you home on my pay i work hard mama brought you home on my pay cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. That its given me time toabout reflect on some of lifeseen biggest questions. Like, if you could save hundreds on Car Insurance by making one simple call, why wouldnt you make that call . See, the only thing i can think of is that you cant get any. Bars. Ah, thats better. Its a beautiful view. I wonder if i can see mt. Rushmore from here. Geico. Fifteen minutes could save you fifteen percent or more on Car Insurance. [ male announcer ] a car that is able to see, to calculate, to think and can respond to what it encounters. Even if that means completely stopping itself. Its the stuff of science fiction. Minus the fiction. The 2014 eclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Where does the United States get most of its energy . Is it africa . The middle east . Canada . Or the u. S. . The answer is. The u. S. Most of Americas Energy comes from right here at home. Take the energy quiz. Energy lives here. Verizon and Johnson Johnson out with quarterly results. We get the streets reaction. Investing with attitude. Shark tank cohost kevin oleary shares his ideas and talks Small Business success. Plus, we head to the alps where Business Leaders are looking to reshape the world. Andrew is joined by dow chemical ceo Andrew Liveris. Plus, economics professor ken rogoff helps kick things off as the final hour of squawk box begins, right now. Welcome back to squawk box here on cnbc. We are first in business worldwide. Im Michelle Carusocabrera along with scott wapner and Steve Liesman. Joe, becky and andrew have arrived in switzerland. All three will be together in the alps, talking to some of the biggest names in the business, live from the World Economic forum going on live in davos. Andrew joins us with a preview and breaking news. Andrew . Thank you, michelle. We do have breaking news as we talked about in the last hour, nelson peltz joining the board of mondelez and the ceo of that Company Coming to davos. Also, pindra nooyi will be here as well. I got off the phone with nelson peltz. Heres the headline. As part of his agreement to join the board of mondelez, he will not be pushing for a merger between mondelez and pepsi. Thats an important distinction. A lot of people waking up this morning scratching their heads, looking at this announcement that hes joining the board of mondelez thinking this means a deal with pepsi is in the works. That is not the case. Hes actually, as part of his agreement to join the board, said he will not be promoting, pushing or advocating for sux a transaction. Instead hell continue to work with pepsi. I should also note one of the funny things he mentioned when we were on the phone, the last time we spoke, he had tried or at least talked about wanting to change the name of mondelez. Said it he thought actually the value had gone down simply because of the name. He has now said hes going to work with irene, try to stick with the name at least for now and we will see where that goes. Worth noting by the way, that he did work with irene when she was at kraft in breaking that company up and in increasing the companys margins. Youll see a pop on that stock today. But in terms of what it all means to pepsi, a little bit of a different story. We are, of course, in davos, switzerland. A lot of big names going to be here, including indra and irene. We will be talking to Andrew Liveris in just a couple of moments. Later in the hour, we talk to ken rogoff and that gets sta started. As the week progresses we have a huge lineup. In the meantime, ill send it back to you. Well come back in just a little bit live from davos. Well see whether the stocks start to move in light of the news youre just breaking here on cnbc. Steve . I dont have the earnings yet. Both are moving. Yes. Because there was a belief that peltz was going to push and push and push and push for something to happen. Now if, you know, andrew is reporting thats not going to happen, both pepsi shares and mondelez shares are down. Right. Travelers earnings and revenues topping consensus this morning. Verizons earnings beating the street by a penny, revenues also topping estimates. Earnings and revenues at Johnson Johnson better than analysts were expecting. Well talk to analysts in just a minute. Stocks rose in china after the Chinese Central Bank offered emergency funds to ease the latest cash squeeze. The central bank pumped 42 billion into the financial system. Money market rates fell sharply as a result. Two people meanwhile have been nabbed at the texas border in a credit card fraud case. Police in south texas say account information stolen at the target Security Breach is being divided up and sold off regionally. Two mexican citizens were arrested at the u. S. Border in connection to 96 fraudulent credit cards. Federal Officials Say there currently is no connection between the arrest and the retailers credit card data theft. They got 72 million cards and they only got 96 . I hope they didnt pay too much. This is not related to the target credit card fraud subis that what youre hearing . I noticed a second ago the stock got downgraded. The headline was buy, buy, buyback. They dont think a buyback is coming as a result of whats been happening with the situation. The stock is not reacting heavily to that news but nonetheless, it is down this morning in the premarket. We look at Johnson Johnsons shares. Here to break down the numbers is damian conover. It looks like a beat on the top and bottom line . Yes, it looked like Strong Performance being led by the pharmaceutical division. Devices, a little bit weak. I dont think people were expecting a turnaround there. I think the strength in the pharmaceutical division will continue for several more quarters. That should body well for the company. I think a lot of people, general viewers might think this is about baby shampoo and things like that. The vast majority or more than half of the revenue comes from pharmaceuticals, right . Yes, pharmaceuticals is driving the engine there. From the profitability when you sell a drug, its much more profitable when you sell consumer products. Thats driving the profits and growth, especially recently. What about guidance for the future . You happy about that . The guidance lower than what we were anticipating. Not too much difference. The other thing we might being here is conservative. Management might want to set the barlow so they can meet it, potentially beat it. Stock in the premarket is a little higher, whats your price target on the stock . We would have expected the stock to be trading a little bit heighter based on the news. Its a little bit better than what we thought. Guidance, look for strength in the stock. From a fair value target were looking at something around 90. Thats lower than where the stock is at. We think theres been a lot of enthusiasm in the stock. We think rightfully so. We dont see upside to the name right now. Do you have a sell on it, a hold . Its kind of in our band thats still called neutral. We wouldnt be buying or selling it. No stand. Got it, damian. Thank you. Thank you. Help us figure out the Johnson Johnson earnings. Verizon earnings also out. Joining us now on the squawk line, Hudson Square Research Managing Director and senior analyst, todd rethemeier. What would you take from the earnings . Youve had time to take a look at the release. Good morning, everyone. Generally pretty good. The wireless business at verizon continues to roll. They added 1. 6 million new postpaid customers and perhaps even more importantly, the average monthly bill was up 7 yearoveryear per account. Customers continue to upgrade to smartphones. Fourth quarter is usually a weaker quarter on margins because there are a lot of smartphones sold. Those are expensive, as you know and theyre subsidized. The margins were pretty good in the wireless business. I saw a note from socgen this morning. What sort of followthrough would there be to verizon on that . I didnt see a number in the Verizon Press releases. They had another good quarter on smartphone sales. Its hard to read too much from verizon into the rest of the u. S. Industry and its even harder to read into the Global Smartphone market, though. What do you make about what tmobile is doing and getting so aggressive on pricing . Is that going to hurt verizon at some point . I think verizon is more insulated from that than the other two in the industry, at t and sprint. Why . I think you eluded to it earlier in the hour that verizon is perceived as the quality leader. If you want the best network you go to verizon. Thats the perception in the marketplace. Until somebody comes in with the heaviest hand whos willing to cut prices, more than the others to steal away business. And then all of a sudden that affects your margins. Yes. Absolutely. Its something to watch. I think verizon will be less affected but certainly theyll be affected by things that tmobile does also. Look at what the stocks are doing. What about the issue of subsidies . Weve been saying for more than a year, the Wireless Companies will fight back on the subsidies. It hasnt happened. Is it going to . Tmobile is trying to sell phones to customers at a full price and pay on an installment plan. The biggest challenge, i think to the subsidies is the secondary device market. People are starting to sell their used iphone when they upgrade. That could have an impact. All right. Todd, thank you. No problem. Previous analyst he didnt have much of a take. That wouldnt fly in the shark tank, would it . The number im an investor in verizon. Most of the tel cos. I would like to know what the churn rate is. Customer acquisition cost is very high. The trouble with verizon, maybe one of the reasons the stock has slowed down and why its gone neutral, their churn rate is creeping up to 1 . At 2 3re , you have a problem. If its creeping up, thats not good. It could have a lot to do with what tmobile is doing. I never consider them a valid competitor. Now i do because of what you talked about earlier, steve. Package up all the data, come on, you want that for kids. If you can get the data. The challenge is to find a business kevin does not know something about. I think youre 5 for 5. Im an investor. Youre an animal when it comes to business. I have a simple philosophy, i want to go to bed richer than when i woke up. Thats not right. You shouldnt want more money. Lets go back to davos. Andrew is there with some news and many great guests ahead, andrew. Thank you. When we return to davos, switzerland, well have Andrew Liveris, the ceo of dow chemical. Hes going to join us to discuss the state of the Global Economy and why hes come to davos and what he hopes to accomplish over the next few days right here. First, heres a quick look at how joe, becky and i got here. 4,000 miles from new york city is davos, switzerland. Europes highest city, no, not that kind of high. Davos is over 5,000 feet above sea level. Its also the birth place of modern winter sports, including sledding. The town has a permanent population of 11,000. Come january of every year, many of those residents bolt. Making way for some 2,500 participants of the World Economic forum who come adorned with furry hats, puffy jackets and boots with good traction. At least they should. They arrive by train, car and even helicopter for the most elite. From more than 100 different countries, heads of state, Business Leaders, celebrities, and, of course, the media. The mission of the annual meeting, saving the world one problem at a time. This years theme, the reshaping of the world, consequences for society, politics and business. T 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 to appreciate our powerful, easytouse platform. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. Just set your start and end price. And let it do its thing. Wow, more fan mail. Hey ray, my uncle wanted to say thanks for idea hub. O well tell him i said youre welcome. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. Yea, and these ideas are across the board bullish, bearish and neutral. I think you need a bigger desk, pal. Another one . Traders love our trading patterns, now with options patterns. Whats not to love . They see what others are trading like the days top 10 options trades by volume and get ideas yea i have an idea how about trading that in for a salad . [ male announcer ] so come trade at the place thats all about options and futures. Optionsxpress. Open an account today and get a 150 amazon. Com gift card when you call 18882800154 now. Optionsxpress by charles schwab. Were live at the World Economic forum right here in davos, switzerland where one of the main topics of discussion will be manufacturing and global Economic Growth, of course, always the big issue. Joining us now, though, Andrew Liveris, the chairman and ceo of dow chemical. Thanks for being here on this cold day before things get really started. Happy to be here, andrew. We were just joking, we should say. What is her name . There was a woman, we talked about this on the air last time, looked like Angela Merkel on the plane with me last time. Shes not her. No, shes definitely not her. Thats carol williams, my executive Vice President of operations. She is here. Lets start with the Global Economy. When we were here last, you were remarkably optimistic, i do think, that was a good thing. You were right a year later. Are you in the same place . I am. I think 13 and 14 are going to lookalike, a little more tail wind, especially coming out of the United States and china. The trouble spots are still there. The conference, what its being called this year, the cautious optimism, the unknowns, the known, i think we know the unknowns. Selfhelp and what we can all do to actually get more out of this economy, i think productivity is still going to be the mantra of Many Companies like ours and remember, what weve been anouna announcing lately. Thats what the geopolitical thing will be this year. You have been announcing a number of things. Yes. What were you thinking of . The decommoditization of our company. Competitiveness through innovation is the way weve been moving. 13 billion of revenue of businesses weve sold over the last four years. Dows original business, chlorine, selfhelp, getting out of commodities and investing in our good businesses. If you look around the globe right now, biggest risk for dow . Without a question is political uncertainty. Where . Everywhere. I would include the United States. There is no functionality in government. And frankly, because of that, Companies Like mine are engaging governments all over the world like never before. I flew in here from saudi arabia where were investing in a very big way. How to derisk that is put local people on the ground, work with governments as partners and figure out how to create the win win solution by country. One of the big issues here always is the environment, Climate Change. I was on my flight, al gore was on the plane. He always talks about carbon. Right. You just signed on to a letter to the eu, just last week. Yes. About what the policy should be in europe which people think is going to be much more aggressive than whatever is going on in the u. S. Yes. Clearly, the u. S. Has taken a lead and were all for Climate Change policies that make sense. They have to hit that sweet spot between economics and environment, right . To put in place a top of the house emissions target without taking into consideration the economy, taking care of manufacturers and rendering them uncompetitive. How worried are you about that . Ms im quite worried about that. This goes back to your question of political risk. Thats an uncertainty. The european manufacturers will go to lowenergy jurisdictions. You have to get that sweet spot between environment, energy and economics. Id like to keep dwelling on the selfhelp. Okay. When you think about it, Companies Like mine have doubled our share price in the last two years. What weve done, weve reimproved our share price because weve been our own best activists. We have worked on the cost line to release value. Selfhelp is this a nice way of saying, nelson peltz, please dont call us. We should all be thinking like the nelson peltzs. I have no problem with people saying heres better ways to get things done. What you have to do as manage mts is thinking about those ways. If you look at my balance sheet, which is the best its been in about a decade, we have the expensive items like the preferred from Warren Buffett. Thats where i was going to go. Look at the things weve been announcing year in, year out since december. The share Price Performance means its in the money. You know what, these have been great instruments for us. As we keep doing the things to perform, we dont need to negotiate and pay them at a premium. When you talk to Warren Buffett about that, he says what . Warren buffett, he is who he is, right . The sage of omaha, all the things he is. Hes made a lot of money out of the vert converts. Hes happy either way. Is there a deal in the works. Very simple, keep performing, get the share price up. No deal with him. No deal in the works. Final question, what is going on with this name change . Everybody says you want to change the name from dow chemical to dow. Is this real . The dow diamond is the dow brand. Great Companies Like ge, ibm, 3m brand themselves on their future, not the past. Well always be dow chemical but the brand dow, i brought you an olympics pin. I know why are we an olympic sponsor . Because of the bran and what it means. Youre going with dow. It says dow. Thats for you. What does that mean then . Are you going to change the name. No, not legally. Were changing the brand. Great companies have a brand, a brand promise. We have a brand compromise. Sustainable solutions at the intersection of sciences and markets. Which is why were proud to partner with the olympics. We have a lot of security around here. Its amazing how much security. How worried are you about the security of the olympics . Look, if i worried about security anywhere, including the olympics i wouldnt be going anywhere, including here. I just came from saudi arabia. The ioc works with everyone, including the host company, the host city. Ill be there at the open with customers. Were going. Andrew liveris, thank you for joining us. We appreciate it. Have a great davos. You, too. Coming up in the next half hour, harvard economics professor ken rogoff will join me live here in the alps. We certainly look forward to that and all the other interviews for the next few days. Checking the futures at this hour, lets take a look at how your trading day is shaping up. It certainly looks, at least right now, that it will be a nice open on the street. The dow with an implied open of 77 points. The nasdaq, tech is going to stand out. Nasdaq up 20 points off the open. Among our stocks to watch this morning, delta airlines. Earnings beating the street by 2 cents. Among the catalysts, fuel costs drop from a year earlier. The company sees both trends improving. Squawk will be right back. Squawk box is headed to davos, switzerland for the World Economic forum. Joining us will be ray dalio, james gorman, matt damon, larry summers, steve schwartzman, lloyd blankfein, eric schmidt and more. The biggest names on squawk box, only on cnbc. Welcome back to squawk box. Were watching shares of Mondelez International and pepsico this morning. Mondelez has added peltz to its board. Andrew ross sorkin as part of the deal, peltz would no longer push for mondelez be acquired by pepsi. Peltz will not push for a name change for mondelez at this time. Mondelez is former kraft foods. Im dizzy by all this. They buy, they sell, they sell, they buy. That business operates under the Kraft Foods Group name. Peltz will continue to push for a split of pepsis beverage and snack business. Of course. Thats an effort thats gone on for months. So far, unsuccessfully. We see mondelez not moving a lot in premarket and pepsi is lower by a quarter percent. Are they going to spin this off or not. Nelson peltz is not going to indra nooyi has said repeatedly, no. The last bit i read made me think it may be under discussion. Shes been steadfast if saying shes not going to do it. We head back to davos, switzerland where joe, andrew and becky have arrived. Ken rogoff will join andrew live in just a bit. As we head to break, check out the squawk box indicator. Well be right back. Passenger road trip buddy. Lets put some music on. Woman welcome to learning spanish in the car. Passenger youve got to be kidding me. Driver this is good. Woman vamanos. Driver passenger vamanos. Woman gracias. Driver passenger gracias. Passenger trece horas en el carro sin parar y no traes musica. Driver mira entra y comprame unas papitas. Vo get up to 795 miles per tank in the tdi clean diesel. The volkswagen passat. Recipient of the j. D. Power appeal award, two years in a row. Welcome back to squawk box. A few stocks to watch this morning, forest labs earnings beating the street by 23 cents a share. Results were helped by higher sales of drugs for hypertension and alzheimers disease drugs. The company also raising its fullyear forecast. Halliburton earnings topping estimates for Strong Performance mans of businesses outside north america. Irshaz of burger king, Goldman Sachs shares of burger king higher, Goldman Sachs adding the stock to the conviction buy list. They expect the fast food chain to recapitalize in the next year or so, believing it will unlock meaningful amounts of shareholder value. Was there a miss this morning . It seems like everybody beat. Or are we just reporting the beats. I dont remember a Major Company missing this morning. Thats why the market looks like it will open higher t. Was up 50 and last i checked it was up, what it was higher. Lets see what happens when the ibms of the world come out with that later. Stuff matters. These matter. I think the markets anticipating softness there already. You should look at the market this way, 2. 3 dividend, Cash Distribution on the s p 500 and 6 earnings growth. 8 would be great this year. Thats what im betting. Especially with a 1. 5 underlying inflation rate. I think well be in that zone, give or take 1 . Well have political turmoil. Theyll tax it away. Is that a competitive return if i give you a 3. 5 on the tenyear treasury . You still like that, that risk adjustment basis . I do. I have to time it perfectly not to get damaged on the way to 3. 5 on the tenyear. This is one of the the Duration Risk in peoples personal portfolios is perhaps the biggest land mine in this country. They dont know it. The average mutual fund has 42 off tenyears in it. Youll get brain damaged on the way to 3. 5 on the tenyear. People should be going back, scrutinizing their holdings for Duration Risk. Heres the one thing. For 15, 20 years people have been saying dont own the long end of the curve. Even now, the fed will start to taper the long end of the curve. The long ends are moving. A bank today take your cd or deposit loan it out with a floating attribution. Say 4 over libor. Thats what you want to own. Thats the answer. Capitalist animal. On that note lets go back to davos where andrew is. Andrew . Thank you for that, scott. The worlds most powerful people gathering here in davos. Big issue is security. Its always an issue. This year its not just physical security. Its also tech security. From snipers to swiss army checkpoints, in davos, security is no joke. With heads of state and heads of businesses all in one location, the visible security is reassuring but according to Security Consultant and former fbi agent edward strauss, theres one risk that virtually no one can prevent. I think all the security you see is part of a comfort level, absolutely. But it can be a step in a direction that doesnt take you as far as you think it is taking you when it comes to your information security. Thats emails, phone calls, Text Messages and computer files. People have to work an you have to be realistic. The fact that they are located in a single location, they can be targeted. Targeted through wifi and usb thumb drives. With hen they get a thumb dr think of it as a syringe or needing. Its possible there is a code on that thumb drive that is going to be loaded into your device and could have unintended consequences. Just last year, unconfirmed reports surfaced out of the g20 summit that participants were given thumb drives bugged by the kremlin, something russia denies. This is a major area of Business Risk to an operational level. We employ Encryption Technologies where required and subject ourselves to external and internal audits. There are steps you can take as well. Strauss says start with the basics like passwords and having your i. T. Team check your device before you plug them in back home. He also suggests bringing secondary devices, ones with the bare essentials in terms of whats loaded on to them. That way if its compromised, the data accessed is limited. Even for smartphones, youre in meetings and they are confidential, perhaps put them on airplane mode. This way they are less likely to be activated for the microphone to be turned on, camera to be turned on. Reporter small steps that can go a big way in terms of protecting your information. A lot of people will be focusing on their phones and whether theyll get into Wifi Networks and how theyre working this time at davos. A little bit of a change. In the meantime, we get back to scott who i though has breaking news back in new york. A lot of news developing this morning. David faber has some right now in fact. David . Thanks very much, scott. You know what, you might want to get Andrew Liveris back on the show, the ceo of dow chemical has a new large share holder in the ranks at dow and active shareholder at that. Dan lobes has taking a 1. 3 billion position in dow. On this new investment site, called the harvest exchange, hvst. Com, hes released his shareholder letter essentially where hes outlining the position that third point has taken in dow chemical and also going and more or less asking the company to move ahead with the consideration of a split of its petro chemical operations from its overall business, saying that to do so would of course add a great deal of value. We know mr. Lobe as an activist in sort of two ways, sometimes very nasty, think sothebys with the likes of the letters hes written there and more constructive, think sony, or even cf. This certainly would seem to be the case here. It is along the lines of the kinds of activist campaigns weve talked about a bit lately where even a large shareholder suches amr. Loeb is small in comparison to the market cap at company. Its still not large enough necessarily to sway a lot. The question is whether you can sway the top ten shareholders to your side and perhaps get management thinking this is something they need to consider. David . Yes. You were probably doing a lot of reporting. Did you see the end where andrew asked him and said we hear all these rumors you want to get rid of the name chemical from dow chemical . Is there any tell in that at all. Im not aware that there is. Typically mr. Loeb will have conversations with management although in this case im not sure thats extended to mr. Liveris. I would say theyre both there in davos. Loeb is there, we know liveris is there. This is interesting, its following that newer trend of activists taking large positions in Mega Cap Companies with t the we cant expect a proxy fight soon. The dead lien for nominations also passed. They are going to give him quite a bit of time, perhaps as much as a year. Then i think you have to assume if in fact they dont move down the recommended path and there seems to be shareholders behind them in that viewpoint, then you might see a proxy fight a year from now. David. Well see where it goes. Andrew is standing by in davos. David, you know, the thing that struck me is, if you listen to Andrew Liveris, just 20 minutes ago, he said two things repeatedly. He kept using the phrase selfhelp. At some point i said to him, we should pull the tape, youre trying to avoid a nelson peltz . He said, yes, i want to think like an activist to basically do what an activist would do before an activist would get to me. Thats one of the reasons they spun off or rather sold the commodity chemical business in december, at least announced they would be doing that. Its interesting here we are and as david just said, youre absolutely right, dan loe bext just arriving today now and Andrew Liveris here, literally sitting next to me moments ago. We will get a camera and we will follow them down the street if we can and try to get an interview. Andrew liveris sat with you, did he know about this dan loeb news . He did not know. I dont think he knew. Okay. I dont believe he knew either. I dont believe he knew. Just so you know, weve put calls out. We believe were going to try to get Andrew Liveris to come back and sit back here. I dont know if well succeed at that. We are on the case on that issue. What were you saying, david . Im pretty certain he did not know this was coming. Again, this has been released on that harvest site i referenced. One quick point here, of course, mr. Loeb and other shareholders will make the underperformance of the stock over a long period of time, talking about a generating return of 46 over the last decade versus 199 return for the s p 500. Chemicals index, 101 return for the s p. Stock price the same as it was in april 1999. Andrew we know he can do a lot with that, mr. Loeb. Its scott. For either one of you, you or andrew, the presence of buffett in dow chemical means what now that loeb has taken such a big position . You know, its interesting thats an interesting one. Go ahead. Andrew, feel free to go at it. They prefer the kuwaitis, i recall, or at least i do know theres an ability to convert if the stock price trades above 52 or averages that price for 20 days out of a 30day period. That would be favorable by the way. Maybe a force convergence of some kind. That figures into mr. Loebs thinking about where a favorable thing could arise. The history though is that Andrew Liveris has tried repeatedly to try to make a deal with Warren Buffett to get out of those preferred on some other kind of transaction. You know, there were transactions that buffet had with Goldman Sachs. I dont remember how the ge deal ended but that were clearly on beneficial terms frankly to accompany more than either buffett. And buffett obviously these deals were tremendous for him. But he took a longer term view. It is interesting to see, have we seen a company where an activist has gone off a company where Warren Buffett has been a major investor before . Thats a good question. I dont know off the top of my head, i dont know the answer, andrew. Id have to think about it. I mean, certainly warrens long been seen as sort of the halo effect of Warren Buffett. You dont go after companies where Warren Buffett is involved. Jim cramer is sitting to my right. He says peltz kraft. Weve been talking about nelson this morning with mondelez. Yes, it will be interesting to see what develops from here. Again, i think its important to say loeb in this case seems to be or wants to be viewed as constructive. Its similar to the letter we saw initially with sony, andrew, a story you broke, where it was not about attacking. It was much more about working constructively. And selling the Petro Chemicals business will do what exactly, he thinks, for them . It would create an enormous amount of value, they say, couple that with enormous cost cutting and operating optimization is what theyre talking about. He says you could see several billion dollars added to ebitda, michelle. They criticize the companys push downstream which they say has led it to use upstream assets to subsidize downstream derivatives. Liveris, andrew david, before david, i think we have a clip. I think were going to run it right now. We have the clip of Andrew Liveris when we talked about the issue of activist investors potentially coming. We should all be thinking like the nelson peltzs. I have no problem with this motion of people coming in to your stock saying heres better ways to get things done. What you have to do as management is thinking about those ways. What i think we at dow have been doing. If you look at my balance sheet, which is the best its been in about a decade, we have expensive items on it like the preferred from Warren Buffett. You say he didnt know. Now that im rewatching that video, im starting to think maybe he did. Uhhuh. Uhhuh. I dont believe there were any talks between liveris and loeb. Whether i believe there may have been generally speaking as you would as an investor between management. I dont know the answer to the question specifically, andrew. Its particularly crucial in the following regard, right . He just said i dont mind activist investors. Right . If he said that knowing it, it sounds like an olive branch. If he said it not knowing it, you wonder what he really thinks. The question, of course, will be, i havent had an opportunity, andrew, you may get it, to see what their response is to this strategic idea being put forward by one of their largest investors, namely splitting Petro Chemicals. I dont know the answer from dow, what their thinking is. Perhaps youve already discussed it with mr. Liveris. We will endeavor to find out, to find dan loeb as well as Andrew Liveris, so we can continue on this news. Thanks, andrew. Up next, professor ken rogoff, live from davos, plus a new meaning for fender bender. How is that for a tease . Squawk box coming right back. The equity summary score consolidates the ratings of up to 10 independent Research Providers into a single score thats weighted based on how accurate theyve been in the past. Im Howard Spielberg of fidelity investments. The equity summary score is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Welcome back to squawk box. Were live at the World Economic forum in davos where income disparity will be one of the major topics of discussion, here, of course, the economy as well. Ken rogoff is professor of at harvard university. One of the things, you sort of can tell us historically where we are. Where are we in the context of everything you did in that book . Were ding a little better than the average the United States is. Lets start with the United States. The United States is doing a little better than the average of countries that got hit with the systemic crisis. 12year comeback . Depends on how you define comeback. Six to eight years to get back to the per capita gdp you started. The u. S. And germany have reached that but a lot of other countries havent. Europe stands to have i arecession that by some measures is sad bad as the great depression. Its pretty severe. One of the things that makes me anxious, i remember looking in the book on this, you say your study shows 43 of the time after things get better, these countries actually fall back into recession. Thats our most recent paper. Thats the new paper . Yes, yes. This is looking before you climb back right. Double dips happen a little less than half the time. When you look at the United States, how do you handicap that . Its outside that, you know, place, because weve come back. Weve already come back. Theres no chance to i cant promise you that. You can only hope. I think the risks are balanced in the United States. Anything possible. Whats your sense when you lack at what countries are doing right and what they are doing wrong, you look at the United States and you say, things look great. They feel better than they did before. And then we complain and we say that washington is awful, awful, awful. How do you square those two circles . I mean the thing where theyve been unambiguously awful, no structure reforms, japan talks about their third arrow. Wheres our third arrow. Lets talk about that. Abe is going to be here. Is the third hour real . Theres a lot of talk about the third arrow. I dont know. I hope so. Im drinking the koolaid still. You dont think it ends badly . They have to reach a point where a point where people believe them that inflation will go up and when they do, oh, my gosh, Interest Rates will go up and that will cause all sorts of issues that theyll have to deal with. Do you have any hope that there will be any structural reform in the United States in the next two years . One can hope. Thats been the most discouraging thing and obviously fiscal policy with the sequester and the shutdown and having. I know youre not a market guy but one of the things i did notice is every time a new Federal Reserve chair has come in, within six months there has been a major pullback in the market historically. Its not your own research but its the research ive done that others have done. What do you make of janet yellen in terms of the policy . Do you think its actually going to be a shift at all . I think if you would pick someone to have continuity from ben bernanke, they did. They are similar in temperament, both academics, explaining things. She clearly has focused on unemployment as a lot of her research and you might think shes very empathetic. But shes been the vice chair. Shes been doing these policies. Any time theres a new chairman theres some uncertainty, even if its a clone of the same person, how do you know that the clone didnt have some environmental difference . Right. This is a much longer conversation and i hope we get to have it while were here and just not on camera. Thank you for being here. Look forward to seeing you a little bit more, in the meantime, ill send it back to you, steve, in hq. Thank you, andrew. Coming up Warren Buffett wants to give you a chance to win 1 billion. That story is next. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. [ 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 welcome back to squawk box. Warren buffetts reInsurance Company is teaming up, its a 1 billion prize yes with a b. The contest complete the perfect bracket in this march Mens College Basketball championship tournament. Any qualified entrant who predicts the winners of every game will share the total 1 billion prize paid in 40 annual installments of 25 million or winners may elect to receive an immediate 500 million lump sum payment. Berkshire hathaway is insuring the grand prize. And quicken is guaranteeing an additional 2 million in prizes for the most accurate brackets submitted, 1 million for funding of inner city educational efforts as well, as part of it. Cool. It will be exciting. Coming up a man and his folding digar, another kevin oherely investment who they are keeping will keep investors happy. 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. Afghanistan, in 2009. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. And because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome. We have thisfolding up came in this case. You made this investment in shark tank and you finally made a deal. Fender looked at the technology and put it into a fender. I call it the fenderbender. I was a shareholder. This is an incredible guitar, so is that one. This is the holy grail of guitars. 200 years theyve been trying to do this. Ready . Well do blues. Everybody wants whats it sell for . That will sell for about 600 bucks. And its called the fenderbender. No. But it bends. Take it off, steve. Take it off, steve. Ready . Unclip that. Right there. Pull that ledge out. Okay. Go ahead. Bingo. And it folds . That comes right off. Pull it off this way. And its going to go into this case. Im going to do it right now. Ready, bang . Its out of control. Now it will pick up. Amazing. Thats the electric version . Its never easy to do stuff on tv. And put it like this. 20 seconds left. Can i get it in the case in 20 seconds . There it is, boom. Lets get back so people can see the guitar. Look at it. It folds right up. Kevin, thanks for joining us. Fenderbender. Million dollar idea. Only on shark tank. Shark tank tuesday. It was great having you on. It was so fun. Make sure you join us live tomorrow from davos. Squawk on the street is next. Rocky Mountain High colorado rocky Mountain High colorado good tuesday morning, welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber at the new york stock exchange. Buckle up for a busy way, davos and the s p reporting and weve got it all today. The futures looking not too bad. The ten year is 284. Europe is mostly positive